It was like the pizza place down the street if the pizza place made all their pizzas in the morning, put the into a truck and drove it around all day until they were delivered. Enjoy the pizza!
I can see how these businesses rationalize short term losses with a bet on a long term play that consists of one of the following outcomes:
1) Monopoly - If they can get enough lock-in on customers, they can outlast their competitors and then eventually move the prices up without losing customers (since there would be few viable alternatives).
2) Economies of Scale - In many businesses, the marginal cost does go down once you scale up significantly. They probably expected to cut the cost of food production significantly with volume pricing on raw materials and perhaps more automation of the cooking processes.
I think all of these services understand that this is a low margin business so you have to make up for it in high volume and short term losses are acceptable if you will win out eventually and increase the margins.
I have a hard time seeing how you can get a monopoly on restaurant food/fast food. There are few barriers to small-scale competition, and it's very easy for your competitors to differentiate their offerings.
If McDonalds were to buy up every competing fast-food franchise in an area overnight, it'd be just a matter of time before somebody would open a Kurger Bing across the street.
Speaking of economies of scale, those are the kinds of economies of scale you need to compete with to make it big. You need to own half of your supply chain - which seems to be an anathema to VC-funded businesses.
A better question to ask is: Why aren't established food franchises, who own their logistics networks, and can compete on price, not interested in getting into this game? Perhaps they are all missing the forest through the trees - or perhaps food delivery-as-your-core-business is a race to unprofitability.
Now, if you do think that they are missing the forest through the trees, why not have your startup aim for a partnership with Subway, where they handle the food, and you handle the distribution?
I thought DoorDash was trying to be the behind-the-scenes logistic network for handling distribution for chains like Subway, etc. It's a smart move, why not let the stores own their own brand but use a 3rd party for doing the delivery?
I believe this is Uber's strategy, no? Basically sell at a loss and force your competitors to follow suite (and lose money even faster) which in turn drives them out of business leaving only Uber as the dominant player in a market.
Yeah I don't get how you brand restaurant delivery is a tech startup. Absurd. I can understand a 'meal sharing' service like airbnb or uber, but not this.
Meal sharing concept is too finicky IMO. These places doing pre-made, delivered food are on the right track but I imagine the delivery component is a heavy cost.
I'd be curious to know if any of the food delivery apps have incentivised delivery to grouped buyers. e.g., $10 if someone buys, $8 if 5+ people in the same street buy, etc. Encourage delivery efficiency and also delegate marketing to word of mouth.
Delivery is not as heavy as a cost as running the kitchen itself. I think food production is so overlooked in these discussions. The operating cost for a kitchen is insane, labor, ingredients, storage, inventory, etc...
Peter Thiel always uses restaurants as a good example of a business model that is so costly that there's no margin left, combined with the impossibility of a monopoly. So you take something that's already tight on margins and you make that even tighter with delivery.