[goatinaboat]

Maybe the drivers are underpaid, maybe the restaurants are underpaid, maybe the food costs too much, but even if they end up charging more money, are they really going to go away like Groupon did?

There is this corrosive process of these gig-economy companies, they end up making life just a little bit more shit for everyone. You'll turn a blind eye to the desperate delivery drivers, to the stress of the restaurant owner as he struggles to make payroll (it's a hard enough business already) as the delivery company pushes him to lower prices with the threat of being dropped. Then you'll notice that the quality of the food starts to drop, or one day that restaurant falls off the app, huh, you'll think, wonder what happened to them, never mind. And the deliveries will start to take a bit longer and make more mistakes as the company squeezes the drivers harder and harder...

Try paying a fair price for fair value and taking pleasure in seeing businesses owned by your neighbours thrive. It really is a better way to live than spending your time on earth with your face buried in an app exploiting the poorest.

[novok]

Honestly I think a lot of things in life would shake out properly if Most Favored Customer clauses[0] were made blanket illegal by large marketplace aggregators. So that would be stores, visa, costco, walmart, ebay, amazon, uber, etc. I think they are the fairly key lynch pins that make these abusive relationships work with larger market players leveraging their position against smaller ones.

With no more MFC clauses, retailers can charge a flat out %3 tax to all credit card users and pass the fee down properly to incentivize them to not use credit cards. Restaurants can list on doordash with the extra fees baked into prices. A %10-30 discount might be enough to incentivize people to call in, etc.

I'm not a law maker, so I don't know how many industries would be screwed up by this. Does anyone think making MFC clauses illegal would screw over society or industries other than organizations that abuse them? Are MFC clauses needed because otherwise useful services would die from prisoner's dillemas? A classic one is the 'maid on order' or 'dogwalker on order' kind of startups because people collude and quickly just create a direct relationship to save money, and you lose benefits like getting ratings and other such things. It makes me wonder.

[0] https://en.wikipedia.org/wiki/Most-Favoured-Customer_Clause

[mschuster91]

> With no more MFC clauses, retailers can charge a flat out %3 tax to all credit card users and pass the fee down properly to incentivize them to not use credit cards.

The alternative to this would be to go the European way and cap the fees themselves - 0.2% for debit cards, 0.3% for credit cards.

As a result, we don't have these "cashback" programs that incentivize customers to go into debt and pay interest upon purchases, and cash-paying consumers don't end up subsidizing the CC reward schemes.

[Viliam1234]

Would it be possible to redefine "customer" to include the credit card costs? Then the MFC clause can remain, but it will have a different meaning.

Like, if the customer A pays me $10 in cash, and the customer B pays me $11 using credit card, and the credit card company then takes $1 from me, in some sense I have provided "the same price for each customer": each of them ultimately gave me $10.

[lmm]

I'm happy to pay a fair price. But I don't want to have to deal with the terrible websites most local restaurants manage to put together, and I definitely don't want to have to phone in my order. Using an app is absolutely a better way to live.

If you can make better food than your competitors, you'll thrive - the delivery services make that more true, not less. Stick to your USP and outsource everything else.

[TeMPOraL]

Then oppose businesses like DoorDash and Uber Eats! It's because they can get away with their abusive business practices that a fairer competitor can't exist.

> If you can make better food than your competitors, you'll thrive - the delivery services make that more true, not less. Stick to your USP and outsource everything else.

I'm not convinced this is true. IME, delivery-wise, most restaurants are pretty interchangeable, and people make the decision on price. So "stick to your USP and outsource everything else" means that you should outsource cooking to a ghost kitchen and just focus on maintaining a brand. Which is something we start to see happening.

I fear the end game is still going to be DoorDash & friends just contracting or operating their own ghost kitchens, and creating hundreds of fake "brands" that are all sourced from the same kitchens. Recently the online retail sector has demonstrated it's a very viable business model. See the countless noname brands on Amazon, et al.

[lmm]

> Then oppose businesses like DoorDash and Uber Eats! It's because they can get away with their abusive business practices that a fairer competitor can't exist.

I don't think buying stuff from someone who sells to the public is abusive. I don't think scraping is abusive. I do think workers' rights are important, but the restaurant industry (especially the mon-and-pop end of it) hardly has a great reputation on that front, so I don't think ordering directly rather than DoorDash sends a message there.

> IME, delivery-wise, most restaurants are pretty interchangeable, and people make the decision on price.

Well, if that's true then why care which of those interchangeable restaurants succeed and which fail?

> So "stick to your USP and outsource everything else" means that you should outsource cooking to a ghost kitchen and just focus on maintaining a brand. Which is something we start to see happening.

> I fear the end game is still going to be DoorDash & friends just contracting or operating their own ghost kitchens, and creating hundreds of fake "brands" that are all sourced from the same kitchens.

Am I supposed to think there's something bad about "ghost kitchens"? If it means better, cheaper food, then surely it's a good thing.

If everything's being sourced from the same kitchens then that's a monoculture that's easy to compete with by offering something better. If those centrally sourced kitchens end up being so high quality that no-one can compete, well, mission accomplished.

[goatinaboat]

I don't think buying stuff from someone who sells to the public is abusive. I don't think scraping is abusive. I do think workers' rights are important, but the restaurant industry (especially the mon-and-pop end of it) hardly has a great reputation on that front, so I don't think ordering directly rather than DoorDash sends a message there.

I guess if that story works for you, you better stick with it as long as you can.

Some software developers it seems go to work each day thinking how can I put other, poorer, people out of work, and erode the pay and conditions of those that I can't?

[eru]

That's called the Lump of Labour Fallacy.

https://en.wikipedia.org/wiki/Lump_of_labour_fallacy

[goatinaboat]

That's called the Lump of Labour Fallacy.

What's the fallacy called of thinking everyone in the world can just retrain as a webdev?

The jobs of food preparation and delivery still need to exist, but we don't need to grind them into the ground, that's a free choice to do so made by VC-backed startups.

[Melting_Harps]

> I don't think buying stuff from someone who sells to the public is abusive. I don't think scraping is abusive. I do think workers' rights are important, but the restaurant industry (especially the mon-and-pop end of it) hardly has a great reputation on that front, so I don't think ordering directly rather than DoorDash sends a message there.

Agreed. But the sentiment within the Industry was that COVID gave an opportunity for the Industry restructure itself and repair the mistakes that were never addressed as things were always like repairing an airplane while inflight. The lifelines given to the Industry with PPP made it seem possible while allowing people to come back to work and the changing of menus to accommodate the seasonal changes as were the changes to make outdoor dining a critical part of the whole experience, but as those lifelines have diminished so have the chances of those reforms occurring gone with it.

And while I'm not in favorur of subsidizing noncompetitive Industries, the fact is the loss in sales for many successful restaurants is not due to a lack of demand but rather the imposition that legislative decree have made for those that are focused on menus that simply cannot accommodate a take out model due to shutdowns, limited indoor dining etc...

> Well, if that's true then why care which of those interchangeable restaurants succeed and which fail?

Because some have more contributions to the Community and Society as a whole, the last place I worked at sourced 60% of its seasonal produce from local and organic farms instead of the typical purveyors. It helped make learning gardens in many public schools thorough out the US making food education a real thing, it also helped make new young farmers to address the food deserts created from the last financial crisis left in its wake. And it had created a model to iterate upon to address how food production during Mars colonization would look like. Now all of that has been threatened as many of the establishments have had to close.

> Am I supposed to think there's something bad about "ghost kitchens"? If it means better, cheaper food, then surely it's a good thing.

Good and bad are subjective terms one should abstain from using in such a discussion, the focus should be more on the impact that this has and how its implications will ultimately re-shape the paradigm, and not just the Industry but the relationship many people have with food in general as diet based illness kill more in the West than anything else, including COVID.

If its quantified merely as a commodity with an impingement in economies of scale tied to the last mile logistics problem, then sure by those metrics these are all desirable things.

If, however, you value the whole process of how food is grown, raised, and prepared throughout the value system in order to nourish you and by extension your community then: No. Its horrible, the value system will be further denigrated more than what it already has and will consolidate itself into the hands of the few Megacorps that brought you factory farming and countless outbreaks and contamination and recalls of tainted and nutrient deficient, chemical laden, pesticide riddled produce and meat.

> If everything's being sourced from the same kitchens then that's a monoculture that's easy to compete with by offering something better. If those centrally sourced kitchens end up being so high quality that no-one can compete, well, mission accomplished.

That is a rosy, and over-simplification (to say unrealistic) way of how economies of scale and consolidation of capital take place. One that will ultimately leaves you with the a very narrow set of choices that include large fastfood franchises on one side, and boutique exclusionary high end dining with large external investment on the other side with little to nothing in between as restaurants are no longer deemed commercially viable parts of the economy and capital and loans dry and foreclosure is the end result for those already within it and denial of access for anyone who dares to try their hand in making it. Its not beyond doubt that we are seeing the same model the telecoms used to carve out fiefdoms and provide worse and worse services all while charging more for the privilege simply because they know their is no other game in town.

Despite the tired narrative Monopolies are not formed through unfettered Free Market laissez-faire systems, they're made when power is consolidated through the use of arcane legal loopholes and large lobbying purchasing power in elections and the orchestrated consolidation of Capital. The use of all of these things are present in this situation.

Personally, I'm still optimistic about this existential threat to the Industry as it is being FORCED to have to re-invent itself. Something thought to be previously impossible from within. My most optimistic outcomes are based on if the Industry has the ability to make many necessary changes and still be competitive or will home cooking (and by extension private chefs to those who can afford it) make a massive surge as a result?

It was a pleasant surprise as someone who cooked professionally to see how many people who never cooked anything took to baking during the shutdown and shared it on social media in larger numbers than I ever expected. CSA and meat shares from local farms sold out in record numbers this year, I really do wish this momentum continues.

[TeMPOraL]

All agreed, except:

> Despite the tired narrative Monopolies are not formed through unfettered Free Market laissez-faire systems, they're made when power is consolidated through the use of arcane legal loopholes and large lobbying purchasing power in elections and the orchestrated consolidation of Capital.

I don't think it's a tired narrative. It's a recognition that monopoly is the end goal of every profit-driven company, and that economies of scale and compounding are purely free-market ways to reach that status. I.e. the more money you have, the faster you will make money, and the more you scale up, the less you spend per-unit. Of course eventually the organizational costs of scaling grow to compensate, but then there are many small people employed in inventing new business models and strategies that let companies get larger and larger before they become too unwieldy to keep the upstarts down.

Also: "arcane legal loopholes" are caused by accumulation of capital. Fundamentally, if you have a market and a government within the same light cone, they'll find a way to affect each other. Government officials participate in the market and want the money, so they can be influenced with money. You can't really treat them as independent entities.

Bottomline, though, all these elements are present here: DoorDash & friends are using everything they can think of in their fight to dominate the space.

[lmm]

> "arcane legal loopholes" are caused by accumulation of capital.

That's going far too far. Governments introduce legal loopholes for any number of reasons: personal favours, genuine good intentions. Capital is one reason among many.

[novok]

There has been, and they never really get anywhere (Ex: OrderAhead). They all seem to end up at the doordash / uber eats / yelp style locus point and there might a reason we are seeing the same pattern shake out globally.

[arrosenberg]

We see the convergence because the rules of the market encourage consolidation and a race to monopoly.

[goatinaboat]

If you can make better food than your competitors, you'll thrive

I have a couple of friends who have opened and run their own restaurants - there is an awful lot more to it than that and most restaurants fail for reasons that are nothing to do with the capabilities of the chef.

[lmm]

Sure. You currently need to be good at the many different things that make up running a business. But as the non-chef aspects (like your website and advertising, and hiring delivery drivers) become commoditised, that becomes less true.

[rdtwo]

Universally websites for restaurants suck. That’s why Uber eats is gaining so much market share (also the fact that they have given me over 100$ of free food this year). So it’s partially being better but also a whole shitload of load dumping or equivalent.

[CaptArmchair]

> I'm happy to pay a fair price.

But, that's the thing. Would you? OP's article is a follow up to an original that focusses on and explains price forks and how that affects these delivery services. [1]

[1] https://themargins.substack.com/p/doordash-and-pizza-arbitra...

Why would you - the customer - pay a restaurant 24$ for a pizza while you could get that same pizza for 16$ via DoorDash in a far more convenient fashion? How much do you care about the restaurant's business if the exact same thing is offered to you at 2/3rd's the original price just 2 taps on your smartphone removed from your door?

Companies like DoorDash are currently losing money and they are happy about it. Why is that?

It's a cost/benefit trade off. DoorDash perceives covering the remaining 8$ of that pizza as an expense. What they bank on is being able to buy an established position of dominance as a middle man on the delivery market.

Two things are happening right now. The first is a race to the bottom and drive other delivery services out of the market. That happens by accruing as many restaurants and their customers on their platform. The second is that restaurants get pressured over time to lower their own prices since they compete less with the menu's displayed in their windows on main street, but with the cheap offerings on DoorDash or GrubHub.

If and when the price gap closes over time, incumbent delivery services who remain get to flip their losses into a profit.

The societal cost? Keeping a regular restaurant open becomes prohibitively expensive (which is why ghost kitchens are becoming a thing), low wages for gig and restaurant workers, impact on the quality and diversity of the food on order.

[lmm]

> Why would you - the customer - pay a restaurant 24$ for a pizza while you could get that same pizza for 16$ via DoorDash in a far more convenient fashion?

Maybe some of it's unsustainable, sure. But why should the restaurant care? They're still getting their $24; they should make hay while the sun shines.

> If and when the price gap closes over time, incumbent delivery services who remain get to flip their losses into a profit.

Maybe. This has supposedly been the business model, but has anyone actually managed to execute on it? As soon as they started jacking up the prices it would be very easy for a competitor to enter.

> Keeping a regular restaurant open becomes prohibitively expensive (which is why ghost kitchens are becoming a thing)

As they should - it sounds like they're a more efficient way to do things all round. I'm not worried about regular restaurants disappearing though, because I still like them and am still willing to pay a premium for them.

> low wages for gig and restaurant workers

It's always had a reputation as a minimum-wage (or even below-minimum-wage) job, no?

> impact on the quality and diversity of the food on order.

Sounds like a self-correcting problem - as and when quality and diversity drop, an opportunity rises for anyone who can offer them.

[CaptArmchair]

> Maybe some of it's unsustainable, sure. But why should the restaurant care?

Many restaurants are small independent businesses having business owners taking a lot of financial risk and investing a ton of time to grow that business. They aren't interested in becoming de facto subsidiaries to delivery services. They want to serve their patrons directly while making a living in a sustainable way.

> Maybe. This has supposedly been the business model, but has anyone actually managed to execute on it?

Isn't this how Amazon entered and acquired the book market, by positioning themselves as a book broker at first and then gradually outbidding book stores?

> because I still like them and am still willing to pay a premium for them.

One swallow doesn't make a summer.

> It's always had a reputation as a minimum-wage (or even below-minimum-wage) job, no?

Agreed. Is it to the benefit of society at large if an existing socio-economic circumstances turn more precarious for an increasing group of people?

> Sounds like a self-correcting problem - as and when quality and diversity drop, an opportunity rises for anyone who can offer them.

Isn't that contradictory if the opportunity doesn't exist... because the expenses associated with investing in quality outstrip your competitive advantage with other low-cost competitors?

Sure, you could aim at a high-end niche of customers - e.g. four star restaurants - but those are small and the competition is murderous. That's why there's, comparatively, only a handful of Michelin star restaurants with chefs with a reputation.

Granted, everyone needs to eat. It's a vast market after all. I just do not see how this particular business model applied in the delivery business is a net positive for everyone involved in the long run... except for DoorDash and their ilk.

[lmm]

> Many restaurants are small independent businesses having business owners taking a lot of financial risk and investing a ton of time to grow that business. They aren't interested in becoming de facto subsidiaries to delivery services. They want to serve their patrons directly while making a living in a sustainable way.

Precisely because restaurants are already so risky, one more source of variable demand shouldn't be a problem. It's a rare restaurant that would want to turn down customers today because they might not be there tomorrow. As long as DoorDash are paying what you ask, take their money, just as you would if there were a bunch of people in town for a music festival or whatever.

> Isn't this how Amazon entered and acquired the book market, by positioning themselves as a book broker at first and then gradually outbidding book stores?

I don't think so, unless it was in the very early days? Certainly they were positioned as a mail-order bookstore long before they reached the size that DoorDash is now.

> One swallow doesn't make a summer.

Sure, but I really can't see delivery putting restaurants out of business as a whole, can you? I can see some getting knocked out, I can see price rises, but I can't imagine the category disappearing. Restaurants have always come and gone; there are definitely some that I'll miss that have already shut for good due to the pandemic, but that's always been the way of things.

> Agreed. Is it to the benefit of society at large if an existing socio-economic circumstances turn more precarious for an increasing group of people?

I'm not convinced it will be worse for them, on the whole; DoorDash et al will do the absolute minimum they're required to by law, but they will know and follow the law in a way that existing players in that space often simply don't. It'll be bad for illegal immigrants and healthy young men, but it'll also eliminate some very abusive situations.

> Isn't that contradictory if the opportunity doesn't exist... because the expenses associated with investing in quality outstrip your competitive advantage with other low-cost competitors?

> Sure, you could aim at a high-end niche of customers - e.g. four star restaurants - but those are small and the competition is murderous. That's why there's, comparatively, only a handful of Michelin star restaurants with chefs with a reputation.

I mean, if you're a commodity you're in trouble, but if you're a commodity you've always been in trouble. If your business model is being the cheapest place to get food in town then yeah, your lunch may be about to be eaten - but your lunch was probably eaten by McDonalds decades ago. I actually think the big chains are far more at risk from DoorDash etc. in the long run, because the likes of say Chipotle have already commodified themselves to a large extent.

If you can offer quality that is recognisably a cut above the lowest common denominator then there's plenty of space for that, even at a higher price. Yes, the top end is competitive. But again, it always has been.

> Granted, everyone needs to eat. It's a vast market after all. I just do not see how this particular business model applied in the delivery business is a net positive for everyone involved in the long run... except for DoorDash and their ilk.

The way I see it, DoorDash won't change the high end, but it'll offer a smoother, more consistent, more reliably non-terrible experience at the low end, and that was already a commodified space where big companies had a large presence. Will some restaurants on the margins get squeezed out? Undoubtedly. But I don't think this is a threat to restaurants that actually offer some kind of unique appeal, and more churn as another chain moves into the commodity part of the market is something that's already been happening for years.

[Heliosmaster]

What about Just Eat (also known as takeaway.com)?

Restaurants sign up but they have their own drivers. A common interface / middleman for all restaurants. At least it was so in the Netherlands.

[disgruntledphd2]

Sadly they have no adopted the Uber/DoorDash model to compete. In the process, they went from being profitable to unprofitable.

Is there a Gresham's law for business models, something like bad business models drive out good?

[mytailorisrich]

If these apps effectively become mandatory for restaurants owners and start to squeeze them then it's a problem.

But regarding drivers I feel that we're confusing causes and consequences: If being a delivery drivers for these guys is so bad then why do they seem to still find so many people willing to do it? So it seems to me that these apps are not destroying anything there. The destruction happened before and these apps are picking up the pieces and providing jobs.

Also, it's not like being an old-style delivery driver for a pizza joint was ever a very good job...

[goatinaboat]

If being a delivery drivers for these guys is so bad then why do they seem to still find so many people willing to do it?

What jobs do you think those people would otherwise have? Very few are choosing between "secure job with a future" and "zero-hours contract gig economy" and preferring the latter.

I make an exception here for students and similar - when I was a student I happily worked part-time behind a bar for example, others did other dead-end jobs like stacking shelves. But that's not what's happening here that I can see.

[mytailorisrich]

> What jobs do you think those people would otherwise have? Very few are choosing between "secure job with a future" and "zero-hours contract gig economy" and preferring the latter.

Exactly my point. So accusing these companies is hitting the wrong target.

One should also realise that these jobs are very low productivity so cannot pay much. If for the drivers the choice is this or no job then people should complain about the economic situation not these companies.

[eru]

Local restaurants will always be just scraping by.

That's because people keep opening extra restaurants until that's true.

(That's doesn't mean restaurant workers will always be just scraping by. There lot depends on what other employment options are available.)

[Melting_Harps]

> Try paying a fair price for fair value and taking pleasure in seeing businesses owned by your neighbours thrive. It really is a better way to live than spending your time on earth with your face buried in an app exploiting the poorest.

I think I've seen this vulture capitalism self-cannablize itself in my Lifetime in the US in so many industries its become the norm and I not only expect it I plan for it: things aren't meant to last anymore. Everything is made to be disposable.

Industries and Communities alike are not immune, especially large urban sprawling ones and specifically speaking the tech based ones I've lived in the US where you have large swaths of diasporas coming in waves.

All of which is some how strongly encouraged in order to be a part of the 'disruptive wave' and make your mark for the entrenched players who benefit from this model, that is until you finally get fed up with overpaying for old, cramped and often poorly kept housing situations and you finally decide to return to where you came from in the East Coast, Rust Belt or Midwest where Life seemed more 'normal' only to see that too has been hallowed out and been devastated by substance abuse as a result of large amounts of displaced/under or unemployed workers.

This is now the norm, and while California is in a bad place many people who came to the Valley from outside CA and isolated themselves in its bubble are in for a very sobering realization of what many of their Industries have done now that they have the option to work from home and they return to their home states in most of the US.

I think this is the big take away from the article:

> When a multi-billion dollar tech company takes a hidden audit regulatory exemption, that's on all of us. They're going to keep doing it. Building a business model that relies on a permanent underclass under the doublespeak of "entrepreneurship" and "freedom", and then spending tens of millions to make sure that you will never have to provide health insurance to your workers will always continue on if it's allowed. As a formerly famous person once said, "they let you do it. You can do anything".

I've been in the culinary Industry in the US and in Europe, and sadly I thought prior to COVID the US was finally making significant inroads (outside of California and NY) to Asian and European standards of culinary culture, wherein a restaurant and restaurateur is a proud beacon of a vibrant community. A hub for locals to gather and enjoy each others company and patronage alike in a mutual beneficial manner that helps embody and nourish itself.

Instead, what has happened is that these low margin businesses that struggled to make payroll and keep the lights on unless they had outside investment(s)/investors are bending at the seams and the rest just gave way to the weight of well funded commercial chains and what I'm now convinced will be the re-structuring to make the Ghost Kitchen Model the new de-facto way most people get their meals when 'going out.'

As a former chef, biodynamic farmer and proponent of farm to table business models as way of making environmentalism viable (read: profitable) I felt we were robbed of many more years (possibly decades) of experimentation and progress, but the truth is that the model was always joined at the hip to a very precarious, exploitative and quite frankly unsustainable Industry: restaurants/hospitality.

I'm still close with my old Team and have many friends with (struggling) restaurants and while they were all apprehensive of the disruption they understood why I welcomed it and how it would be indifferent to their acceptance either way. And to me Doordash is just the 21st embodiment of the same model, the advent being logistics and supply chain management are sold as a SaaS business model via a horrible/buggy app and system, wherein its ok to lose millions.billions so long as you have access to untapped labor in an ever growing underclass that can attract another round from a VC like Softbank flush with cheap/hot money that seems almost eager to lose money so long as you structure it correctly to keep the illusion of infinite growth via multi-billion IPOs going.

I'm glad to have had the opportunity to step away from Fintech for a period and got to work and live through what now seems like an unrepeatable period in the culinary Industry that spanned everything from Michelin star, James Beard awarded restaurants as well as my primary focus in agro-tourisms and farm to table models. I think it is an end of an era as more restaurants are forced to close their doors forever and are giving way to a handful of well financed players with access to immense amount of Capital in a race to the bottom to capture ever thinner margins and displacing anything that poses a threat.

The model that Roy Choi created after the 2008 financial crisis, that disrupted the culinary World with the advent of marketing via social media and food truck distribution in lieu of brick and mortars, may be the only viable model that the most well funded and equally daring cooks/chefs will have to aspire to moving forward if they have any chance of being independent.

I can only hope that they too learn the lessons from Roy, and his imperative to be involved in locally based community investment as a measure of their success instead of what are now at best gilded awards like Michelin stars and James Beard awards now that so much of the competition has been unfairly removed from the equation due to COVID.

[rdtwo]

The food truck model is great in that it’s not tied to real estate as much. Still it’s vulnerable to Uber eats because once they lock down all the commercial kitchen space you will be forced into some sort of vertical integration contact where you get screwed on fees and on commercial prep space