[colmvp]

How does anyone expect food delivery services to survive with only 5% fees? That's insanity. Uber has to also pay for engineers, sales/marketing to get customers/restaurants onto the platform, online infrastructure, customer service for both sides of the market, etc.

Delivery is expensive. It's time-consuming, and customers are rarely willing to pay the true cost of it.

Most of the restaurant delivery services were bleeding hundreds of millions of dollars last year. They've had a resurgence because of the Covid-19 but that's a blip compared to a normal situation.

If people think it doesn't cost that much money to operate, then all restaurants shouldn't have a problem having their own delivery service.

[malcolmgreaves]

Maybe food delivery services isn't solvable using the Silicon Valley method -- use insane amounts of rich people's money to subsidize product hyper-growth to only later monopolize said market to re-coop earlier losses.

If these businesses would grow more sustainably (i.e. slower), they wouldn't need such large sums of money to operate. They wouldn't over hire at sales / marketing / engineering / design / operations/ literally every role. In turn, they would be forced to set rates that can cover their actual costs while being a good business deal for restaurants, as they'd have to be around long enough for the delivery company to have any real growth.

There should be economies of scale wrt. a centralized delivery platform that services all kinds of restaurants. The fact that, say, Dominos has been offering delivery for _decades_ means that it's absolutely possible to have a sustainable national food delivery business on $8 medium pizza deals and $4 delivery charges. The tech delivery companies are just plain greedy: I surmise it's their quest for "f u" money that kills their business model right off the bat.

[kahnjw]

I'd counter that Pizza hut has a key logistical advantage of vertical integration. A delivery service is a very different business than a restaurant chain that does its own delivery.

I agree that GrubHub, Doordash, and to some extent Uber seem bloated when considering the sum total of the markets they play in. That doesn't mean these business models aren't sustainable, though. Some companies allocate resources to a few areas that turn into profit centers, some don't. The ones that don't will be sold off or parted out. And the cycle will continue. I'd wager that one of these companies will survive and turn out to be a profitable, healthy business in the next few years. The rest will probably be sold off or slowly downsized.

More broadly, to your criticism of SV's investment strategy, resource allocation is a hard problem. If you want to direct large sums of capital at certain business verticals, do you want to grow slowly and steadily over a 20+ year period only to find that the economics don't work, or do you want to fail fast with some extra waste in the middle? Failing fast has some upside to it, though I understand why I consistently hear this criticism on this site. It feels like the last decade has seen the pendulum swing towards fast money and back a little. I don't think were as far off from a healthy middle ground as some might argue.

[Apocryphon]

> If you want to direct large sums of capital at certain business verticals, do you want to grow slowly and steadily over a 20+ year period only to find that the economics don't work, or do you want to fail fast with some extra waste in the middle?

Maybe we'll eventually learn that artificially forcing business models to run at accelerated rates creates self-fulfilling prophecies of "fail fast."

[kahnjw]

Except for dozens of counter examples that make up for literally multiple trillions of dollars in market capitalization.

[mulmen]

Isn’t this textbook survivorship bias? Dozens of successes out of how many failures and how much misallocated capital?

[samatman]

Well, no, because for each VC portfolio, it's either profitable off the survivors, or it isn't.

The point is that from the perspective of investors, the survival of an individual startup is an irrelevant metric. What they're interested in is the profitability of the whole portfolio.

And so far, a 90% failure rate with <5% wild success is a profitable formula. As long as that remains true, they have no reason to change it.

[kahnjw]

Ask that to someone trying to find housing off Sand Hill Road in Palo Alto.

[scarface74]

What are those dozens of counter examples?

The big profitable tech companies today didn’t raise billions in VC money.

[pembrook]

Literally every single company in the top 6 of the S&P 500 was financed via private VC-style funding at the beginning.

Whether the numbers crept into the billions when the company was private or public is irrelevant. The point is that for a company to reach scale, they need billions in funding from somewhere.

Somebody has to take the risk, and all investors want returns for that risk. Public market growth investors want rapidly growing companies just as VC investors do.

[kahnjw]

Are we talking about investment strategy or cherry picking data for the sake of arguing?

1. There are plenty of companies on the path to IPO that didn't take 1B+ in VC money 2. The "sharing" platforms are expensive investments because there are so many players fighting for market share.

We're talking about a strategy of fast growth vs slow and steady. All the companies we've mentioned so far invested in fast growth early on, whether from VC or reinvestment.

[Apocryphon]

And how much money has been squandered funding the startups that do fail? Survivor bias.

[kahnjw]

I'm not sure what you're getting at. Here are the facts: Companies following these accelerated growth trajectories now make up a total of 4 trillion in market capitalization depending on how you count it. That's really just the FAANGs, not the smaller companies that are profitable or on the road to profitability [1]. If you count everything you can safely say the number is closer to 8 trillion.

Every year, VC in the US _as a whole_ invests roughly 100B [2]. If you cut out non-growth and non-tech sectors I'd guess that number total goes to around 40B, and roughly 100B (very rough number) globally.

So yeah, some money gets "wasted" but it creates huge market capitalizations that are around two full orders of magnitude larger than a single years investment, and growing strong year over year.

[1] https://www.investopedia.com/terms/f/faang-stocks.asp [2] https://www.prnewswire.com/news-releases/us-venture-capital-...

[freepor]

There were two changes in the "Softbank model" -- first was investing at this scale without a real network effect or any sort of "moat," and the other was just the sheer speed of the investment -- an avalanche instead of a snowball. A company like WeWork doesn't have any real reason that it needs to grow hyper-fast -- it's a Ben and Jerry's.

https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-...

[Animats]

Doordash tried that, with Doordash Kitchens. Don't know why, but their pseudo-restaurants in Redwood City, such as Rooster and Rice, have dropped off the Doordash site.

[kahnjw]

Correction: Dominos not Pizza Hut.

[pj_mukh]

The traditional silicon valley approach would be to fund new ways of doing delivery. And behind the most click-worthy headlines, that is what is happening! [1].

[1] https://techcrunch.com/2020/04/09/starship-technologies-is-s...

[puranjay]

I also don't think that food delivery is something that needs to happen at a global scale. The market is local enough that you can have one player for every city or region that can grow organically, charge lower rates, and be beneficial for everyone involved.

[SilasX]

>Maybe food delivery services isn't solvable using the Silicon Valley method -- use insane amounts of rich people's money to subsidize product hyper-growth to only later monopolize said market to re-coop earlier losses.

I tend to agree, and also because I don't think food delivery can be easily decoupled from the preparation (for ready-to-eat orders). I mean, restaurants have done it profitably for ages, but whenever one of these SV companies tries it, I hear all kinds of stories about how, unless everything goes right, the whole process becomes tedious an frustrating.

Like, the order's wrong, and it has to restart through Uber's whole system. And the runners can't look inside to verify the order because (legitimate) health regulations. And it just ends with an unsatisfied customer who has some credit on the app.

But I do think there is a way to SV-ize food delivery, like if they could get economies of scale to work for food delivery. Imagine this:

A restaurant knows at least one customer needs their dish to start prep at 5:30pm. The website indicates they're starting one then anyway, so you get a discount for ordering the same food to start at the same time.

Meals can be batched easily -- it costs them much less than N times to scale up the order to N servings or customers.

Ditto for (in urban areas) delivering to the same building or block. If they only have to stop once, they can offer a discount to anyone ordering the same thing in the same building.

This is exactly the kind of thing where it pays to be a broad platform that everyone's on, and has kinds of monopoly profits, and provides legit consumer value.

(Disclaimer: I registered a domain name suitable for this kind of service but haven't otherwise advanced it.)

[slfnflctd]

> runners can't look inside to verify the order

I was an Uber/Lyft driver, and I tried delivery a couple times way back before covid-19. One pickup was 5 identical, unlabeled containers, two of which were special orders. Having worked in restaurants before, there was no way in hell I wasn't going to visually check them (also I don't recall this being prohibited before). Turns out, one was wrong-- so the other 4 got cold while that one was re-made and I sat for 20 minutes. All told, it took me 45 minutes to bring mostly cold food to an unhappy person and I made about $4. Not. Sustainable.

It sounds like you have some good ideas and are thinking in the right direction, though. Streamlining your whole operation to minimize the possibility of errors and reduce wait times is one of the most important things to focus on in my book. Give people fewer choices.

[pembrook]

In reality, there is no choice between:

A) Silicon Valley-style hyper growth

or

B) Slow and steady growth

Choice B is not actually an option if you want to change human behavior and actually benefit from economies of scale. This is because of the nature of competition and the power of habit. If it takes you 20 years to go national, then competitors will have cemented themselves in each region you try to operate.

And because humans are creatures of habit, it will be ridiculously expensive to get them to change their behavior even if you offer a comparatively better service.

[AlexandrB]

> Choice B is not actually an option if you want to change human behavior and actually benefit from economies of scale.

But there's little or no economies of scale in the delivery business. A citywide delivery service would be equally efficient whether operated by a local company or a multinational. The local company may even have an advantage in terms of knowing their customers better. The only economy of scale I see is access to cheap VC capital.

[Lammy]

The Bay Area’s dual refusal of housing and transportation made the delivery apps necessary in the first place, so I agree it may not be a great place to look for a solution. If housing and retail space were more abundant there would be more options within my immediate area, and if transportation were better my “area” would be even larger than it is now with what’s comfortable to reach on foot.

[thebean11]

Are you sure Dominos actually profits on the delivery itself, or do they just offer it at/below cost to sell more pizzas?

[tonyarkles]

Dominos is arguably quite a bit larger than the mom & pop restaurant I did delivery for, but... for us it was break-even or a very tiny loss. I don't remember exactly the number, but delivery was $5; $5 charged to the customer, $5 paid to the driver. I think it was waived for large orders (>$100?), but those were pretty rare. Tips were all for the driver as well. On a good night, you could make $20-30/hr; on a holiday night (New Year's Eve was my favourite), it'd be more like $40-$50 once you factor in the tips.

Was it overall a living wage as a sole source of income? No, not at all. There was usually only a small window every day when people actually wanted delivery. Was it good money for the number of hours worked? Sixteen year-old me sure thought so!

[bthater]

Delivery is profitable for dominos. But the real money, well that is in garlic bread.

[nerfhammer]

all restaurant business is just a ploy to get people to buy soda

[Mikeb85]

No, it's not. The most you can charge for a soda is $3 around here. Even if you make 95% profit ($2.85), pretty much every single food item will make far more profit. A $12 salad will net you $9, a $15 dollar pasta will probably net you $12, a $40 steak will net you $20, and so on.

Gross profit matters far more than profit margin. Also the best way to be profitable is to increase sales relative to fixed costs, rather than trying to squeeze every dime out of limited sales.

[godzillabrennus]

Alcohol and coffee are also helpful.

[strken]

Dominos is famous for charging more for delivery than for takeaway. Their "$4 delivery" is no more accurate to the true cost of delivering a pizza than the "delivery fee" of their competitors.

[2OEH8eoCRo0]

I think it's not solvable with human delivery workers. Hopefully someone tries to do it with robots when we get there.

[gamblor956]

Pizza parlors and Chinese restaurants have successfully been delivering food for decades with their own delivery staff.

It's only the Silicon Valley delivery services that are unable to profit from delivery, because they insist on paying executives and engineers 6+ figures when all of the value is in the delivery drivers, not the wasteful overhead.

[i_am_proteus]

This. I have a family member who runs a restaurant and employs his own delivery drivers, and has been profitable for decades. He lists food on GruHub as well, but charges all of the markup through to the customer. He includes a flyer with the delivery that says in large text "We have our own drivers! Call us with your order and save 20% compared to GrubHub!"

[syshum]

>>Call us with your order and save 20% compared to GrubHub!

He should probably invest in his own online ordering system, they are not complex is should not cost that much.

personally I hate calling in orders, this holds true even if I am just picking it up, I prefer to use an Online order system.

[ghaff]

I'm not sure what the big deal is in calling if I'm just calling in to order a pizza or a sub.

That aside, at least part of the value of the aggregators is a lot of people apparently want to just go to one place and order from a variety of restaurants. Personally, I don't really get it--I just have menus from the very limited number of decent takeout options around where I live--but setting up your own site doesn't help with that.

[bsder]

> I'm not sure what the big deal is in calling if I'm just calling in to order a pizza or a sub.

Because the dude answering the phone has a non-zero probability of being completely stoned off his ass. This is not theoretical. I am sad that we didn't record the worst one we ever had--it would have made for the absolute best YouTube video even though everyone would have been saying "That's so fake."

Phone orders are very error prone. Online orders help both sides of the equation. The customer knows exactly what they are getting and can verify it; the restaurant can say "We're happy to comp you for X because we're nice people, BUT this is the receipt THAT YOU ACKNOWLEDGED saying what you actually ordered."

[Leherenn]

A lot of people simply dislike calling, no matter the reason.

[syshum]

>>I'm not sure what the big deal is in calling

Because I have no desire to talk to anyone on the phone for any reason. if I could get a personal data device with out phone calling capabilities I would choose that. The POTS phone system needs to be relegated to the dust bin of history

The flip side of that as well, is often you can successfully up sell more items via an online system than you can with a phone order system. The number of times I have "add on" to my order due to the online system having options I did not even know was available is a lot higher than the normal "would you like to add" speech that the phone person gives you which is neither compelling and almost an automatic no as most people do not even pay attention to the offer

>if I'm just calling in to order a pizza or a sub.

The number of times Humans have got my order wrong when talking them over the phone is High... the number of times the computer has gotten my order wrong with submitting it electronic is almost zero

>I just have menus from the very limited number of decent takeout options around where I live--but setting up your own site doesn't help with that.

I would love to see your data on where you believe having having your own website with electronic menus do not help

Hell even outside of COVID, if a place does not have their menu online I will not even go to it physically, I like to look at the menu's and prices before even stepping foot in the place. Gives me a good idea on if I will like it or not.

It should be standard for a place to have an electronic menu with online take out ordering, anything less is subpar IMO

[umeshunni]

> Pizza parlors and Chinese restaurants have successfully been delivering food for decades with their own delivery staff.

And if you want any other kind of food (or food from any higher end restaurant) delivered, you're SOL.

[gamblor956]

In LA at least, I can get Indian, Mexican, and Thai food delivered as well. And salads, if I really want to waste my money. In call cases, deliveries are by the restaurants own delivery staff.

And higher-end restaurants generally don't deliver at all, on any delivery service* because the quality of the food can be diminished during transit. Some have made exceptions during the COVID19 lockdowns, and some have simply closed down for the duration.

[Mikeb85]

Or you can, you know, get it yourself. Also, most high-end restaurants didn't do takeout nor delivery before the pandemic.

[flukus]

Not all food fits into the delivery model, burgers will get soggy, toasted sandwiches will get will get cold, salad will be cooked by the warm ingredients, ice cream will melt. For the most part if a food is good delivered then there were already restaurants offering delivery of it.

[SilasX]

I'm not sure that works as an explanation, because Pizza Hut executives are pretty well compensated too, and their app also shows all the signs of being overengineered (or rather, over rockstar ninja'd).

I think it's more of an issue of the (ready-to-eat) food production and delivery being too highly coupled for a third party to bolt on a profitable service, as in my other comment:

https://news.ycombinator.com/item?id=23093747

[take_a_breath]

Restaurants are outsourcing the delivery to these companies. Many of the restaurants near me never offered delivery until Grubhub, Uber Eats, etc. allowed them to at little cost. The reason they didn't offer delivery before these options is exactly because of the economics of doing so.

It may turn out that the economics of the technology-middle-man aren't sustainable either. In which case they will have to decide between managing deliveries in-house or stopping deliveries.

[JeremyNT]

My local restaurant has a couple of employees who own old beater cars. I call the restaurant, then they send out one of these employees with the food. The restaurant charges nothing extra beyond the tip, which I select on arrival.

This is how delivery used to work. The lie and promise of the startups trying to "disrupt" this is that it's somehow going to be better to proxy these interactions through a faceless megacorp rather than a small local business.

Well, is that really happening? If I use Uber Eats I get more expensive, worse service than calling my local place directly.

So maybe these delivery businesses shouldn't survive, at least not as currently envisioned, because they offer something that doesn't actually have that much value to most people.

[iphone_elegance]

It's funny, when I was a teenager I delivered Pizzas for a small local chain.

I'm pretty sure I made more money and service was faster; the delivery fees would a lot cheaper (though hard to mentally adjust with inflation in mind though)

Like I'd just relax at the restaurant, chat with the other drivers/cooks/servers until 3-4 orders were up and head out.. it was pretty nice

Now instead of things being mostly locally owned it's all consolidated, impersonal (I got to know the managers, the owner, other workers, slower and much more expensive.

prices are also so high I can barely leave a 'great' tip

it's hard for me to think of the most of these delivery companies as anything but vultures that just ended up injecting themselves into a business and reduce the quality of some folks working lives

a big part of me wouldn't mind some economic upheaval just to undo our mistakes

[BurningFrog]

I for one will pay extra to order from a nice web UI, and not have to make that phone call.

[JeremyNT]

A reasonable request! And if that's the primary value add of these services, I would suggest that a traditional non-unicorn SaaS company[0] could provide a very inexpensive web portal for restaurants that handles order processing, while leaving the logistics to the restaurant.

[0] https://en.wikipedia.org/wiki/ChowNow

[TylerE]

Something as simple sounding as a menu can be surprisingly complex.

A local burger place's burger has, I just worked out, 34,832,528,367,943,700 possible combinations. Some options are mututally exclusive, some add an extra charge. Etc.

[rstupek]

and yet doesn't their pos terminal handle all of that already?

[TylerE]

It's all done on paper. It only gets entered into the POS as the total "Custom Burger - $17.95" soethign like that

[munk-a]

Hilariously that's not even part of the equation - both uber eats and skip the dishes (a canadian local company) have terrible UIs.

I do love ordering via the internet without having to talk to people though... the best time I've ever seen this done was through a local VT pizza shop and the UI was pretty much just an HTML form and it was so incredibly easy to use.

[SketchySeaBeast]

That's entirely the reason Pizza 73 became my goto pizza place - it rolled out online delivery in the mid 2000's and kept me from ever having to phone again.

[eddieplan9]

You know back in the days you can also go to farmer Joe and buy a chicken and pay no middle man. Jumping from that fact to the conclusion that food supply chain has not much value is, naive, to say the least.

[VLM]

His argument seems to be that unlike supermarkets and wholesalers which provide positive value from which some profit can be siphoned off, delivery megacorps provide negative value so there's not much profit to siphon.

Your argument seems to be that food middlemen should exist in some form, although you provide no reason; However, the existence and fetishization (for better or worse) of "local farmers markets" seems to point in the opposite direction.

My local pizza place delivers; there doesn't seem much room to create value to pay some engineer's salary and some VC profits a thousand miles away. Or rephrased, VCs and engineers are expensive, and their offerings can be undercut by every local restaurant in the country that has a phone and a teenager with a car, which is not exactly the strongest network effect or vendor lockin I've ever seen in a marketplace.

The delivery market seems to be of the form "We all need an offering in the market to stay competitive with everyone else losing money on every delivery".

The best possible exit for a delivery startup seems to be improving something in the already adequate infrastructure then pray Dominos Pizza acquires them.

The uphill battle is the main complaints people have about fast food is the cost is high, few choices, and the food is unhealthy. Nobody seems bothered by logistics problems like pizza taking a half hour to arrive or routes not being optimized to minimize gasoline consumption. Its true that customers are bad product designers, thinking of the anecdote of Ford's customers wanting a better horse, not a model T. However a business model of door to door horse feed delivery, logistics optimized by telegraphs in California, was also not a winner.

[ypzhang2]

It's obvious there is value, otherwise these companies wouldn't exist, no matter how much VC money is pumped in.

For consumers:

Ability to order from multiple restaurants through one consistent interface / payment flow. This cannot be undercut by every restaurant with a phone and a teenager with a car.

For restaurants:

A marketing / lead generation avenue that provides, ideally, incremental volume that is profitable. If it was not profitable, then they wouldn't do it, obviously.

Delivery itself, is just a method to deliver these value adds.

The argument can be made whether this value is worth a tech infrastructure and the human labor cost of delivery. It might be worth it in China, where delivery is actually more ubiquitous, but in America, where worker compensation / expectation / norms are higher, its debatable.

[AlexandrB]

> It's obvious there is value, otherwise these companies wouldn't exist, no matter how much VC money is pumped in.

Would you say this about WeWork a year ago? VC-style central planning has had a great distorting effect on the supply/demand information function of the market.

[ghaff]

Oh I think there was some value in WeWork. OfficeSpace-as-a-Service that was hipper than Regus and offered consistency across many cities. But obviously far less value than the money being pumped into WeWork would suggest.

[ypzhang2]

Yes there is value in the product, its like fancy Regus, which is a real business. Its not worth what it was worth.

[lovich]

You should add increased number of options there as well. I know there's a ton of resturaunts near me that didn't care to get into the delivery business but had no problem working with a delivery company like uber eats. This may be a much smaller niche though as I'm paid enough that the time savings I get from delivery are worth the extra 20-30% I pay from going to pick it up myself

[puranjay]

> Uber has to also pay for engineers, sales/marketing to get customers/restaurants onto the platform

I really wonder how much of this is a self-created problem. Would Uber really need that many engineers if it wasn't processing data at a massive scale to find the ideal surge price for every trip and maximize revenue? Maybe Uber would make less money without surge pricing (and the large scale data crunching it involves), but then maybe Uber also wouldn't need to pay for so many engineers.

Similarly, would Uber really need to pay for marketing if it attracted growth organically instead of trying to dominate the world within half a decade?

We live in rather strange time for business. It used to be that if you wanted to build a $100B company, you spent decades in the trenches, reinvesting profits and attracting growth organically.

Even a true "unicorn" (not that I care much for that term) like Microsoft was worth "only" $35B in 1995, 20 years after it was founded.

We've all somehow assumed that this order of things is natural when it is far from how the rest of the business world functions

[usrusr]

> I really wonder how much of this is a self-created problem

It's part of the overfunding game: you can't just take the money and go "yay, 300 years of runtime because we stay lean". Investment is meant to be spent. Burning it all purely on buying market would also be a little too transparent, investors want to believe that they are getting more than that and they need others to believe that as well should they ever desire for greater fools.

But once you add an army of well paid talent to the mix it gets much easier to claim that there's more to your growth than buying market. Even if all they do is cosplay unassailable technological lead.

[Retric]

Delivery apps have a vastly higher overhead because the drivers are not based out of a single high volume restaurant.

With traditional deliveries operating over a tiny radius back to base. Drivers can do multiple deliveries at the same time. Pick up a new stack of orders and quickly be out the door again, this means they need fewer people during rush and thus much lower overhead.

Some people are willing to pay 10+$ an order to have a much wider selection of restaurants from a huge area. But, that doesn’t scale to the kind of volume these companies expect.

[c22]

For what it's worth, these ride-share delivery drivers also grab multiple orders at a time if they can. It's one of the reasons delivery takes so long. I've observed drivers putting in additional orders that just came in (and waiting for them) while they are picking up. I also think they'll swing by (and often wait at) two or three places to get orders before heading out to deliver.

[FartyMcFarter]

There's a limit to this though. If the food gets cold or otherwise bad due to waiting too long, people will ask for money back or orders will go down.

[munk-a]

Compare this to a restaurant running their own service that can chose not to prepare meals while waiting for more orders to roll in - so the delivery might not be as quick as it potentially could be, but the food is fresher.

[rightbyte]

The main edge the restaurants with their own delivery has. UberEats just black boxes the restaurant excepting it to treat the delivery guy as a ordinary customer. That process has to be so wasteful compares to bulk preparation and delivery.

[munk-a]

The high volume portion is an interesting component - uber eats and whatever else cast very wide nets of the restaurants they'll deliver for while, prior to the SV injection, only some restaurants could reasonably afford to sustain delivery drivers. Sure, being centralized allows you to allocate only a portion of a driver to a given restaurant but that comes at the cost of complexity and likely a reduction in either parallelized deliveries or quality of service.

[aeyes]

That was actually the first Uber Eats business model, sadly I can't find a source. They'd have a restaurant cook a couple hundred meals in bulk and then the drivers would bulk deliver them.

Letting customers order from restaurants they already know is obviously a bit easier to scale.

[dragontamer]

Foodsby has a cool model.

1. Set a time. Say 11:00 or 12:00. The food will be delivered at this time, no other time.

2. Set a location, a little table in the lobby of various buildings where the Foodsby driver drops off the food.

3. One driver goes to the various restaurants, and goes to the various dropoff points. One trip at one time can serve hundreds of customers.

-------

Every foodsby trip is synchronized to the time. As such, all orders and deliveries are batched together, saving time and effort on all parties involved.

[nathanvanfleet]

Weird somehow many restaurants did and do have their own delivery service. I have heard many pizza places do this

[gizmo686]

The question is, how much do those restaurants charge themselves in a delivery fee? It wouldn't suprise me if they spend more than 5% the value of the purchase on making the delivery; in the same way that I expect more that 5% of a typical dine-in meal to go to fund the in-restaurant eating space.

[Mikeb85]

> The question is, how much do those restaurants charge themselves in a delivery fee?

Usually not much, if anything. They keep the employees on the clock, and factor in labour cost much like a dine-in restaurant factors in the cost of your server.

[gizmo686]

They may not have a literal line item on an internal spreadsheet corresponding to how much of each bill goes towards delivery, but they are still paying for performing the delivery. When they outsource this service, they pay a third party for doing it, but save on the costs of doing it themselves. When you consider how expensive the third party is to the restaurant, you also have to consider how much they would be spending if they do it in-house.

[Mikeb85]

Yes, and 30% is way higher than internal FOH or driver labour cost.

[gamblor956]

The delivery driver is an hourly employee, so the % they pay depends on how many pizzas (or meals, if not a pizza joint) that driver delivers.

For this reason, most mom-and-pop restaurants limit their delivery radius to places their delivery drivers can reach within 10 minutes or less of driving (so the driver can make at least 2 deliveries an hour).

[ragebol]

> Delivery is expensive. It's time-consuming, and customers are rarely willing to pay the true cost of it.

I think that's the main problem. Delivery isn't free and so far has been subsidized by Uber's investors or draining the restaurants. Which didn't have a choice because they where being undercut.

We'll end up with either paying a reasonable price for delivery or picking it up yourself. Or maybe robots, but those aren't free either.

[fock]

I guess, you can operate a very good and featureful food delivery SaaS for a lot less if you skip GoogleAds, ridiculous mid 6 figure salaries (for a similar job in every place except SV) and building an exploratory machine learning arm to compete with the adtech companies you're anyway spending money on in this scenario. If you then host your servers in some coloc (because you'll have what: a 4 times surge capacity on holidays compared to a regular friday?) you can even reduce your computing bill (given that without needless data collection for your analytics and ML efforts your computing power needs will shrink fast...).

Around here most restaurants still use this kind of service (often hosted by some lowly webdev).

[harryVic]

That sounds like a great idea. Why don't you do it?

[gamblor956]

You missed his sarcasm. It's what most restaurants are already doing: putting up a webpage and having customers call them.

Any restaurant worth its salt is already tracking what its customers order (on an aggregate basis) because that's how they now what supplies to reorder and when.

[freeone3000]

He says most restaurants are. There's no money in one-off webdev consulting for low-margin businesses, which is why you won't hear it as a pitch - it's solved with a single webpage with a phone number, or maybe a Google Sheets frontend. There's so much human in the backend there's not a ton of point automating the frontend.

[munk-a]

There might be some space in trying to tailor an out-of-the-box frontend framework to restaurant ordering. But honestly you might get out-competed by wix/wordpress/whatever if they ever invested a pretty trivial amount of effort into targeting you - it'd be a thin thin margin to walk.

[fock]

because it's not interesting too me currently. Also, the market is saturated and competing on such a market (especially if it's invaded by cash-burning startups) isn't fun for sure.

[kkotak]

No one expects them to survive. The business model is unsustainable on unit economy basis. Uber has always lived on borrowed time.

[megaframe]

Sometime back Uber added this $0 delivery for a set of rotating restaurants. In my mind what I figured they were doing was clumping orders together to drive down costs... in practice I don't know what they're doing, but I like that idea.

Maybe when this price war ends normal delivery will be something much higher and they offer some kind of flash or pre-order pricing deals on clumped orders. Like $5 delivery for pre-ordering a pizza for that evening from this one restaurant so only one driver needs to go out there. Uber-Pool for your food if you will. Or you place your order at a higher price and if some more people hop onto the order from the same restaurant they cut your delivery price a bit.

[Mikeb85]

> If people think it doesn't cost that much money to operate, then all restaurants shouldn't have a problem having their own delivery service.

Many already do and more are pivoting to delivering themselves. The delivery services are terrible and not worth their fees.

[mulmen]

Sounds like Uber has a bad business model then. Restaurants already offered delivery, it’s not like Uber invented that or even exclusively enables it. Somehow they invented a model where nobody is making any money and convinced investors to enable it.

[calvinbhai]

The cost for Uber is to process the cc transaction, cost of transportation (the close to minimum wage "net pay" to the driver).

I agree Uber has other costs, and I'm not saying it should act like a charity and not recover those costs.

So whatever is uber's costs + profit needed, add it as a fee for using the app.

Eg: If I order a 2 large pizzas at my neighborhood pizza shop, and on their printed menu it is $40 (assume including taxes), I'd like to see the same price displayed to me. Uber can charge me processing fee and delivery fee of say $20 or $30 on top of this (to recover Uber's costs + profit).

Sadly, this is not what actually happens. Ordering the same item through delivery app, I see that each menu item is costing $1 to $5 more already (happens with Instacart too). On top of this I pay a processing fee and a delivery fee. In addition to this, the pizza shop guy pays 40%.

Obfuscating price at every step and then proclaiming to be a saviour of my neighborhood restaurants, is exactly what ticks me off.

Again, I'm not saying delivery apps should be charitable. I just want some transparency. The reason I go to a local pizza shop, (in addition to satiate hunger and enjoy tasty food) is to support the local economy.

Uber can charge the same total amount to me while providing the same service, provided they clearly show how much goes to Uber and how much goes to restaurant and delivery person.

[Nextgrid]

5% fees on top of the true cost of delivery is enough for what is essentially an automated process.

Maybe it's not enough for "growth" and "engagement" and maintaining an engineering blog about their overengineered stack (I call those "engineering playgrounds") but guess what? None of those things benefit users.

[RoyTyrell]

f you can't provide a product or service to customers at a price they want to pay, too bad but that's capitalism. Not every business is viable even if the 'goals' are.

[ApolloFortyNine]

Dining out is already a luxury. Paying 20% more just for someone to deliver the food to my door is even more of a luxury, and without the 'dining out' experience.

Honestly I don't expect delivery services to survive, and I don't think it would be a tragedy if they ceased to exist.

[ApolloFortyNine]

I can't edit my post any more, but it makes me sad that this is sitting negative, when what I did was point out that food delivery is a luxury. This whole business of delivering everything has only really taken off in the last 3 years.

If you want to create an echo chamber, this is how you do it.

[CamperBob2]

Everything beyond the most rudimentary food, clothing, and shelter is a luxury. It's not very insightful to stick your nose in the air and loftily proclaim something a "luxury," as if your opinion should be taken into account in the boardrooms and executive suites at Uber.

[ApolloFortyNine]

>Delivery is expensive. It's time-consuming, and customers are rarely willing to pay the true cost of it.

>Most of the restaurant delivery services were bleeding hundreds of millions of dollars last year. They've had a resurgence because of the Covid-19 but that's a blip compared to a normal situation.

>If people think it doesn't cost that much money to operate, then all restaurants shouldn't have a problem having their own delivery service.

This is the comment I was responding to. Someone was discussing how much it costs to deliver and why people should be willing to pay more than 5% fees. And my comment that it's a luxury on top of a luxury is nothing more than an explanation of why people aren't willing to pay more.

>It's not very insightful to stick your nose in the air and loftily proclaim

Honestly I'm not sure why you took a comment calling food delivery a luxury so personally, I'm sorry it offended you.

[CamperBob2]

It didn't offend me, no worries. But I do use these services quite a bit, I appreciate the role of the driver (and tip accordingly), and I would prefer that the companies in question survive and prosper.

Is it a "tragedy" if food delivery services cease to exist? Not to me personally, but it would be an inconvenience, and likely something much more serious to the people who work there and to those who drive for them. It's unlikely that those people appreciate being dismissed as unnecessary. In a capitalist society, the fact that they are a luxury doesn't have any bearing on whether they deserve to earn a living. I'm sure you indulge in more than a few luxuries yourself, just not this particular one, and that's OK.

(My comment was) nothing more than an explanation of why people aren't willing to pay more.

Except you went a bit further than that, didn't you?

Honestly I don't expect delivery services to survive, and I don't think it would be a tragedy if they ceased to exist.

You were probably downvoted for appearing insensitive. It happens. Take the 'L' and move on. I usually shoot for a long-term baseline of zero, myself, because I agree with your criticism that HN tends to sound like an echo chamber.

[chongli]

It certainly would be a tragedy for all of the drivers who lost work and may struggle to feed their families. Many of the drivers are immigrant men who have few other prospects for work.

[VLM]

If delivery driving is going to be socialized as a jobs program, is it the ideal jobs program? I think not.

There must be unprofitable business activities that would make better jobs programs. Student stipends, vocational training, teachers aides for natives learning foreign languages, subsidized English language lessons, almost anything would be a better investment for immigrant men than subsidization of unprofitable delivery services. Arguably just handing out money and skipping the unprofitable business activity would cause less damage and waste to the environment.

[WC3w6pXxgGd]

If something is unprofitable, that is a signal that resources are being misallocated.

[jimktrains2]

And maybe that's a societal problem we should be addressing instead of expecting people to give money to silicon valley companies.

Don't get me wrong. I've used and use these services at times. I'm not morally opposed to them. I just think that saying that telling someone by not using them they're hurting immigrants is just a whole lot of backwards.

[chongli]

telling someone by not using them they're hurting immigrants is just a whole lot of backwards

Backwards? What's backwards about wanting to inform people of all the consequences to their actions? Life is messy and complicated. Far too often people don't want to think about all the consequences to their actions so they can erase that complexity.

As an aside, not all of these companies are Silicon Valley-based anyway. SkipTheDishes, the one I use, is a Canadian company.

[jimktrains2]

You can say the same thing for every food truck or small restaurant you've ever passed. The simple act of ordering food from one place instead of another risks putting the other out of business and that family out on the streets.

At some point we need to fix societal issues instead of worrying that not consuming goods or services is harmful.

[chongli]

I'm not saying "don't fix societal issues." Some people lean on the "fix societal issues" line to the exclusion of all else though. They let the perfect be the enemy of the good.

[mpol]

If Uber cannot afford this, maybe it is not a viable business. If either the restaurant has more cost than income, or Uber has more cost than income, it seems not to be working really.