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Comment by doctornoble | Hacker News Reader

Perhaps Yum Brands has the data to back this up, but it seems quite a silly response that feels more political/ideological than based on sound economics.

BIL was COO of a pizza chain. The cost for a large pizza was around $1.50 - even for pricey toppings and gluten free bread. Labor is cheap at ~60 seconds per pie. Biggest costs was rent. A $5 raise could be absorbed across and then some with a 10¢ increase in price or adding an extra $1 delivery fee.

Strategically this makes little sense. A key factor of chain pizza’s business model is convenience & cost rather than quality. When faced with the inconvenience of not having delivery available or the extra cost associated with third party delivery services I wonder how many people will just opt for Dominos, Papa Johns or something else?

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I wouldn't be surprised if with the rise of Uber Eats / Doordash, they were wanting to get out of the business of first-party deliveries anyway, and saw the wage increase as a final straw. I can't imagine that these companies particularly want to be in the business of last-mile logistics, so much as that historically it was a very complimentary business to selling pizza. Now that companies have sprung up around a complete food ordering business, it makes sense to outsource that part to them and stick to their specialty, making and marketing food.

…but this is pizza, and pizza is a somewhat unusual food that is both commonly delivered and degrades quite quickly after being prepared.

So a nearby pizzeria with its own delivery drivers that has a degree of operational competence can get that pizza in a car immediately, which means that the customers get better pizza, which means they order more pizza from that store.

Uber Eats and DoorDash don’t seem to manage to get pizzas into a car immediately.

Pizza is also one of the only foods where the profit margins make delivery actually make sense.

What Uber Eats et al have done is normalize shitty cold takeout delivered unreliably. So now that the bar has been reset, Pizza Hut is trying to take advantage of reduced expectations.

I ordered pizza just recently and it was delivered by a third party DoorDash delivery person.

I was a little annoyed at the time, but now that you've put it like that, it makes a lot of sense.

This happened to me, and I stopped ordering from the restaurant because of it.

I went from hot pizza arriving in 15 minutes to cold pizza arriving in 40+ minutes, if at all. After a few times, I realized the delivery person was now a random doordasher that didn't know the neighborhood, and didn't even have the benefit of seeing my doordash instructions on how to find my townhouse since they were hired by the restaurant.

i can't wait until we're sharing articles on how to unlock our Domino Home Ovens so we can cook frozen pies delivered by other vendors

“…the wage increase as a final straw.”

This is what I was thinking. I don’t live/work in CA, but restaurants in NY who self-deliver also have to consider the high cost of Insurance for delivery drivers compared to the availability of third-party delivery agents.

> and saw the wage increase as a final straw.

...and saw the wage increase as a useful distraction to blame.

  > Perhaps Yum Brands has the data

This is a decision made by two large California franchisees. Yum Brands was quoted in the original BI article that they had nothing to do with this.

  > Pizza Hut, owned by the Taco Bell parent company Yum! Brands, said the company was "aware of the recent changes to delivery services at certain franchise restaurants in California."
  > "Our franchisees independently own and operate their restaurants in accordance with local market dynamics and comply with all federal, state, and local regulations while continuing to provide quality service and food to our customers via carryout and delivery," Pizza Hut told BI.

I had to look up whether PacPizza LLC was just a subsidiary of YUM for California or something else when I read the article. IMO pointing out that this is a franchise, even if it’s a big one, is probably significant information that shouldn’t have been left out of the article.

If rent is the predominate cost, why do pizza delivery only ghost kitchens not take off? Doesn’t matter where it’s made, just where the customer is. You could make them in a shipping container dropped in a big box parking lot with a roll up door for delivery drivers to load their trunk, like Spirit Halloween for pizza. What am I missing?

You don't need a robot pizza machine, you need an operating model where rent doesn't hold your bottom line hostage (based on my very limited understanding of the business fundamentals). Rent goes up? Class 8 Semi pulls up to pull the trailer to somewhere else with hookups.

Edit: thanks for the learnings y’all!

That's what Chuck E Cheese should be doing. They've got the playground/arcade business to be able to subsidize their pizza business to out-compete every other pizza chain out there. Instead, they're cutting costs on both fronts to have...two bad businesses.

Chuck E Cheese runs a virtual brand for their pizza called Pasqually's Pizza

https://www.youtube.com/watch?v=7OTpHqq6bFg # Comparing Chuck E Cheese pizza and a rebranded CEC frozen pizza

https://www.lastsqueaktonight.com/ # Last Week Tonight's alternative episode when they discussed HOAs. it's a full and funny history of the pizza chain and includes the virtual brand

Yeah but it's lousy pizza and underadvertised. You get the feeling it was an employee passion project that management didn't care to nurture because they couldn't stick it on their resumes.

they did actually do that during the pandemic... operated under a different name and delivered

This is what pizza hut has become where I live. All the large locations with their iconic hat-shaped roofs have closed. Instead, they're all operating out of hole-in-the-wall sized locations in strip malls. Barely more than a pickup counter and some bar stool seating by the window.

They have retro versions now that they call Pizza Hut Classics, https://rolandopujol.substack.com/p/the-retrologists-guide-t.... None in California.

https://rolandopujol.substack.com/p/the-retrologists-guide-t...

> In 2019, Pizza Hut brought back its 1974 logo, banking on its nostalgic appeal. I figured that would be the end of it, just a simple marketing tactic soon forgotten. There were no plans announced to bring back the logo in stores, much less redesign the restaurants to look like old Pizza Huts from the chain’s heyday.

> But with no fanfare whatsoever, that’s exactly what’s been happening. Pizza Hut has been taking legacy stores and converting them into “Classics.” The formula includes ...

> So far, these stores appear to be limited to smaller markets, where these legacy stores have survived, the bones of the old buildings intact.

> They have generated incredible curiosity and fascination, and when I post photos of them on my Instagram page, they invariably lead to hundreds of comments and excitement and joy that’s impossible to measure. (Here’s a look at the phenomenon on my friend Heath Racela’s Substack.)

... but yea... for pizza, the dine in experience is almost completely gone. Dominos, Little Caesars, Gumby's (for the college town), Pizza Pit, Pizza Hut, Papa Johns. Papa Murphy's takes it to another level without even having ovens (take and bake... which incidentally _also_ allows them to qualify for SNAP https://www.papamurphys.com/faqs/).

You have to look for places like Pizza Factory or Pizza Ranch for a dine in experience (and many other local places that have only one or two places... but very few national chains anymore).

... And then there's Pasqually's Pizza which straddles the line. https://www.pasquallyspizza.com/our-story/ (CEC Entertainment, LLC is Chuck E. Cheese)

If you exist on real estate you're going to pay rent to someone. Even if you manage to find some parcel of public land to operate from you're still paying a lease/mortgage on your shipping container kitchen and all of its contents. You're going to have to pay insurance on the operation.

The best bet would be to pool resources to operate a single kitchen with multiple individual pizza companies as tenants. Each could run their own prep stations but use shared ovens. But you're back to rent dominating costs even if it's lower than having your own kitchen and oven(s).

They basically are ghost kitchens already. Who eats at a pizzeria? The last time I can remember doing so in like 2 decades was in NYC. They have the store fronts so people can pick up rather than deliver.

Dominos and PJ’s have more famously been known for counter service in the States. When I say counter service I mean that some stores will have some uncomfortable benches and tables but otherwise make little effort to cater to dine-in guests. Usually a dominos or PJ’s looks a lot like a little Caesar’s or your typical walk up takeaway restaurant in Europe, you’ll have a counter, a register, and maybe a table or two if you’re lucky. Always extremely bright angry lights as well.

Pizza Hut has for many years in a lot of locations maintained more of a restaurant focused approach, often serving AYCE buffet as a destination with proper booths and table service. They have a bunch of retro styled locations in the States that still offer that experience. There’s a pretty neat one that I like in Fredericksburg, TX. The full list of classic locations that I know of is here: https://rolandopujol.substack.com/p/the-retrologists-guide-t...

Ay least in Chicago, pizzeria pubs are pretty popular around the city. Never had NYC pizza but the Chicago variety has been very tasty to me.

I worked in such a ghost kitchen in the 1990s (we didn't have a license to sell food on premises.)

You want a gas conveyor oven which actually takes a lot of space and needs ~3 meters in front for assembly and 2 meters behind it. Walk in fridge and freezer are at least another shipping container in size. Then there's clean up and other prep space..

For us, wages were more than rent and probably our competitors rents. 2/3rds of wages would be drivers at slow times going to something like 4/5ths during the Superbowl.

> Doesn’t matter where it’s made, just where the customer is.

It does matter where it's made; a location more distant from customers will mean they get pizza that's less fresh.

There are tons of places like this in the SF Bay Area and Singapore (these are just places where I have been involved in investigating them, they are in many more places than that).

There’s even a startup company that will rent you space for running it.

https://cloudkitchens.com/locations/san-francisco-bay-area/

You’re not missing anything. Just bear in mind that demographics drive restaurant delivery businesses intensely and a big part of the business is related to regional demographic trends (and those vary globally quite a lot).

I can guarantee you that business investors for a struggling franchise are not making financial decisions for political reasons. They're trying to make money.

Pizza places have been charging for delivery for a few years now. They don't just absorb it by increasing pizza prices anymore. My guess is their volume has gotten so low or extremely variable that it's hard to plan for the correct number of drivers each night, and the marginal cost of another driver is so high now that they can't just have extra drivers hang around doing nothing, and it's probably harder to keep drivers because they're being poached by all the delivery services.

Strategically, it makes a lot of sense. There are at least a half a dozen popular delivery services with thousands of drivers.

I’m not sure what the general impression of these companies is, but among the pizza chains (and none of them are good of course), Pizza Hut is, IMO, the most bad. At least Dominos has started drenching everything in garlic to hide their offense to the gods of pizza.

Maybe Pizza Hut has gotten out of the delivery business because nobody in their right mind would order delivery from Pizza Hut, since they almost always have better options.

Maybe they are focusing more attainable markets: people who wandered in off the street, people who wanted Taco Bell but were really high and forgot, third option not found.

Having been a pizza delivery driver, the $1 delivery fee doesn’t track. That assumes 5 deliveries per hour, or only 12 minutes per delivery. There’s transit time to and from the store plus handoff at both ends. If you live more than 5 minutes from the store, no pizza for you.

When I was delivering pizza, it was usually 30 minutes allotted for delivery: 15 minutes to make the pizza, and 15 minutes to get it into the customer’s hands. With transit time, I would have been doing good to get 2 deliveries an hour.

> I would have been doing good to get 2 deliveries an hour.

You didn't deliver multiple pizzas on a single trip?

Not to multiple addresses, no. It would only have happened for multiple pizzas to the same address. Having said that, I think it’s probably not the logistics win that it looks like. Unless two orders in the same area come in at essentially the same instant, your orders a buffering. It’s a coin flip if the closer address is for the first order, so there’s a cap on how long you can wait for the buffer to fill without breaching the SLA. And even nearby as the crow flies might not be nearby in a continuous trip (E.g. in my neighborhood, there’s only a short distance on a major street, and the rest is low speed streets with speed bumps).

$1.50 for ingredients, 1 minute of labor? I am skeptical of those numbers, and "my brother in law says" is not a reliable source.

Costco charges $10 for a whole pizza (which you pick up, no delivery). Given their business model, I suspect that number is pretty close to the actual cost of production.

I make pizza at home, to be honest with 10 euros i make 6-7 pizzas, and the issue would be just that the dough finishes, adding 1.50 euros for another kilo would make for another 6-7 pizzas.

now its italian prices so might need adjustments but lets see

50 cents yeast 1 euro flour 50 cents salt 2 euros tomato passata 1kg 50 cents basil

The rest mozzarella

Now you might want to go over budget a bit and get some olive oil that is expensive, but you just put half a tablespoon per pizza so…

Making pizza is really good business with high margins

Sure, flour and yeast are cheap. But then you're spending a lot more than 1 minute of labor per pizza. Maybe you could build a robot that makes it for you, but now you are spending a fortune on capital equipment.

Real-world cost optimizers like Costco have some robots (the pizza saucing machine is cool) and they still end up with a cost around $10 per pizza.

Making pizza has high margins when you charge $25 or more per pizza. Not $10. Pizza Hut charges less than $25 but that includes delivery. From a random web link (https://www.vettedbiz.com/pizza-hut-franchise/) franchises average around 15% margins, which is not great.

maybe they decided that they can squeeze an extra couple percentage points of revenue this way while keeping menu prices low. so exec comp can keep going up.

This reminds me when obamacare was being debated and the papa johns ceo said if it passed he will have to raise the cost of all pizzas by 25 cents to give his employees health insurance.

I'm like wtf, that's all? why haven't that been done already.

The scam is that you need to work a certain amount of hours per week to qualify for health insurance. Most workers you see don’t work enough hours thus don’t qualify for health insurance.

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