People forget that the reason these services showed up in the first place was that ordering from restaurants was an absolute mess. Most of them don't have websites, and if they do it likely doesn't work on phones. Menus are outdated or non-existent. Few of them have online ordering systems. There is no way to securely share credit card info. Phones are always busy. There is no way to know their hours, whether they deliver in your area, how long they will take. No way to easily customize or track your order. Delivery is slow and unpredictable (if they even offer it).
As the article itself states, restaurants don't like using these services but support them regardless, because the alternative is no orders.
I have a totally opposite experience. Before GrubHub et al, I frequently found and ordered food from restaurants, and never really had a problem (between 2000-2015 for example) finding their number or menu. Maybe because I live in well developed metro areas?
There is a local Thai restaurant that, for years, has had what I consider the best system available for takeout and delivery. The first time I called for delivery, they took down my address and cc info. Now, anytime I call after, they know me by the caller ID and already have all my information available.
It is easier to call and place an order than most any app or website for follow-up orders at least.
This should be a standard feature of any restaurant ordering system.
They also make it much easier to order for a group. Everyone can take turns on the computer and add the food they want.
You get a confirmation of what you ordered and a receipt for your taxes, and you don't have to use a phone. You don't even need to speak the local language.
Agreed. In my area, without third parties, the only delivery available would be pizza and Chinese chains. There was no serious delivery infrastructure before GrubHub moved in.
Yes, and times have changed, maybe because of the “market pressure” by those platforms or simply because they were just a minute ahead with their value prop for restaurants sleeping on the digital transformation.
Lately (new) restaurants in my experience just post delivery contact info and menu to their facebook page or instagram and cannot even be found on delivery service platforms.
Seems to work for them.
I struggle to empathize with your experience. I try to be a regular patron of restaurants, and so I find myself putting in emotional effort, although not much, to overcome the hurdles you mention.
I phone the restaurant, then walk to their storefront, and hand them cash or card. I know what I want to eat, where I'm getting it from, when they're open, how long it'll take to prepare, how long it will take me to walk there, how much it will cost, and how much I will tip. If I need customization, then I use my words when I'm speaking to them on the phone.
For some restaurants, particularly food carts, no phoning ahead is necessary. Yesterday I walked to get Italian food, and the chef was able to prepare my order interleaved with other orders that were going out for delivery, with only a 5min wait.
For comparison, I've tried Grubhub, Eat24, and others. I stopped ordering from them because they mistreat their drivers, delivery times are horrible, the fees are unreasonable, they don't put in the effort to learn the layouts of the cities that they operate in, and I'm pretty sure that they take their drivers' tips. I'm not willing to be a part of that sort of system.
From the conversations I've had with chefs and restaurant owners, they do not even "support" the delivery services; they all feel strong-armed into being customers.
I try the same. Usually these platform over change customer and underpay those that are delivering real value in the production chain. If you ever worked in a restaurant you would think twice when giving money to companies like Uber. They are constantly gaming customers, restaurants and drivers.
We bought Chinese the other night from a new place through Uber Eats to use my Amex CC monthly credit. We still tipped during pickup because I know the scam that is Uber Eats for restaurants (and how much they scalp from the order). For future orders, we’ll order directly instead of through Uber (menu on website, phone in the order).
Why is this article dodging the question of whether the restaurants are making or losing money due to food delivery apps?
> We didn’t have a choice, we caved. Revenue from these platforms made a difference for our business
Ok, I assume it's a positive difference...
> even more aware of the amount of money that we get withdrawn from our account just to have our name on their site.
Wait, so you're losing money? I don't get it.
I hardly ever use any of these apps because the mark-up is insane, and it's rarely quicker than just picking the food up myself. I also don't trust any of them after the doordash tipping fiasco. And, I have no doubt that choosing to order from the restaurant directly means more money for the restaurant.
But, either the apps are bringing in more sales than the restaurants can drum up on their own, and it's therefore mutually beneficial, OR the restaurants are losing money on every app sale, in which case they should pull out. Am I wrong?
> But, either the apps are bringing in more sales than the restaurants can drum up on their own, and it's therefore mutually beneficial, OR the restaurants are losing money on every app sale, in which case they should pull out. Am I wrong?
You're not wrong, but you're missing some of the nuance to how the relationship has evolved.
Even if there's a benefit, a service like Grubhub can easily become parasitic as they grab more of the market. It's getting to the point that you'll get basically zero delivery orders if you try to go your own way and hire your own delivery drivers, and expect people to use your website or -- god forbid -- call you on the phone to place orders.
People very often to use these apps to figure out what they want to order. The other way around ("hey, I really want Bob's Pizza tonight, lemme open up Grubhub and see if they're on there") is becoming less and less common.
So restaurants are forced to be on these platforms to get any takeout business at all, but find that they have to work twice (or more) as hard to make up for all the fees the platform charges. And the platform can get away with it, because they've squeezed out the option of self-delivery for most places.
> I hardly ever use any of these apps because the mark-up is insane, and it's rarely quicker than just picking the food up myself.
I wish there were more people like you, but it seems like you're a dying breed.
Exactly, think of these apps as more of a lead generation service, or a search engine even, and being on their platform, even losing money, is akin to taking out search engine ads. Sure, perhaps the first few times people you lose money, but you might gain more long term by having repeat customers, who may even order directly once they see how much they spend in service fees at the end of the receipt. I know I definitely have.
I'm open to the possibility that GrubHub and others are a net negative for the industry on balance. But I'd still like to know what the actual margins are for the restaurants on app orders before I make up my mind about that.
> more sales than the restaurants can drum up on their own, and it's therefore mutually beneficial
while mutually benefitial, i can understand how a restaurant don't want to become a commodity in a platform they don't control.
The food delivery apps unify food delivery into a single platform from which the customer orders, and thus, every restaurant is now in heavy competition with every other restaurant directly. Customers comparing prices is the number one thing that decreases restaurant profits. Therefore, while the sales are up due to these apps, they cannot keep the same margins as before.
Being commoditized in someone else's platform is not a great business strategy.
Well... they can wake up and smell the 90s by spending the cash to have a website. I'll bet that one month of paying grubdash costs more than getting a website up.
Or just complain, like most of the places around me.
Even if they have a nice, modern website, there's still credit card handling. Many customers will be put off by having to enter their CC details into yet another website. Things like Stripe alleviate this to some degree, but it's still a hurdle.
And unfortunately people trust mobile apps more than they do websites, so unless you expect every local pizza shop to have its own mobile app (and expect customers to have enough brand loyalty to install it), that's not going to change.
This is why I use these services. I’d prefer to give my CC info to a single company and not trust it to who knows how many fly by night CC processing companies in use by individual restaurants
Funny thing is, if the website/app is crap, as a someone ordering, you will still want to use the food delivery service infrastructure from the app anyways because their system is likely to be better.
More than likely to be better IMO--if it's not better then the food delivery app is going to be out-competed by some other one that is better. Providing the app and its infrastructure is the app company's core business. It's not the restaurant's core business. And network effects mean the app has a strong incentive to be a centralized platform and to commoditize its complements, which are the individual restaurants.
what ought to happen is to have the ordering/delivery tranaction be under some open protocol (i.e., each restaurant runs their own ordering service/api that talks on an open protocol, pehaps even just delegate this to a B2B SaaS for a monthly cost, like a telephone line!).
Then you can allow open competition between different delivery platforms, which effectively makes ordering and delivery more commoditized. This will allow restaurants to run more efficiently - they only need to be good at their core competency of making the best food, at the lowest possible price. The delivery will cost the minimum (as each app that compete on price of delivery cost will get more customers).
The delivery part is where all the overhead occurs. Developers think these services are trivial and making a killing on the markup because they can imagine writing the app and backend themselves. That’s not the hard part!
The hard part is recruiting, training, and managing the drivers. This requires you to hire lots of employees to communicate with the drivers and support them in real time during peak periods (around supper time and weekend evenings).
You can’t automate this stuff away because the drivers are dealing with all kinds of complex, real-world problems. Stuff like addresses of houses that don’t exist, drivers getting lost trying to find apartment suites or even restaurants within a complicated building, aggressive dogs or angry/drunk people, people denying they ordered anything and their contact numbers pointing to a different city...
The Google model of seeing customer support as a problem and automating it into nonexistence doesn’t work here. You’re dealing with hot food that’s cooling fast and hungry people who can’t wait very long and drivers who need to complete a bunch of deliveries in a night in order to make it worth their time.
> i.e., each restaurant runs their own ordering service/api that talks on an open protocol
> which effectively makes ordering and delivery more commoditized.
It would be great, but I'm not holding my breath for this to happen anytime soon, though maybe restaurants will be more amenable to something like this now because of the current investor/debt funded platforms.
At least in Jakarta, this is the opposite of the case. The big banks (and investors) have found out that its easier/safer to lend money to these delivery platforms who then pass on deals to people who buy from all the little shops (and big chains) on their platforms, than to all these little mom and pop shops, while still paying full price for the orders at pick up.
Before corona, me and my wife would be at the mall and order thru grab or gojek for the store 10 feet away because it was cheaper lol
How long has this been going on? Perhaps the delivery platforms in Jakarta are still running in 'land grab' mode? The situation you've described (selling to you for less than their cost) obviously isn't sustainable forever.
Business side it's 30% cost... so you pay 30% to Grubhub for that hour and they nickel the customer too... Honestly I've worked with someone who basically would put a card in each Grubhub order saying 'Call us for a 10% discount, use code "PHONE"'
I read it as using these service providers will make them loss less money comparing to solely relying on phone orders. If the restaurant has enough cash, they might accept a temporary loss to ride out the pendamic.
We’ve been ordering from one of the best fine dining restaurants in our town. Before the pandemic they were dine-in only.
They advertise their regular menu + specials on FB. To order, you send a text in the afternoon with your order + pickup time between 5pm and 8pm, in 15 minute blocks. The restaurant calls you a few minutes later to confirm and take your card.
This is a clunky process, but that’s fine - they’re new at this, and I’d rather them get the max amount of the sale than have fees drained by third-party apps.
But it occurs to me that we’ve missed an opportunity in North America (and maybe elsewhere?) to build a platform that works like WeChat, where you could conduct this simple menu-selections-payment transaction, perhaps with some chat in between, using a ubiquitous interface.
Same scenario with booking a hair appointment, paying for small home services, etc. There is an interaction that includes chat, scheduling, possibly invoicing and payment, but this can involve up to one app per activity.
The channel is the unifying abstraction, it should own the entire interaction, including presenting the few widgets that are required to implement the workflow. I know that most chat apps have some variant of this capability, but the landscape is totally balkanized.
A corollary of this approach is that payment and workflow widgets should be commodified and thus extract a minimal amount from the transaction.
We have many apps per category, each with a special-purpose channel. We should have one channel with many possible simple interactions that can be delivered through it.
I don't understand it -- it is amazingly cheap (under $500/year, including hosting and support) and simple to get a great looking online store using a website builder app, including payments (OK, maybe not delivery pickup times, those would still have to go over the phone).
I can see a mom & pop store having some trouble doing that (but even they probably know a high schooler who could do it in a day). I wouldn't expect a serious fine dining restaurant to have trouble with something that basic, especially when takeout just became their only business.
I don’t think this opportunity is missed it’ll just come late. I believe the major platforms Google and Apple will do this by leveraging their payment solutions and app platforms. It’s just a matter of tying together the pieces like messaging into this. It’s mostly there. They have lots of products to surface this as well (maps, os, etc)
> The restaurant calls you a few minutes later to confirm and take your card.
This is really bad, and one of the reasons. For example, I would use Apple Pay only on platforms I don't trust, and giving a card/cvv over the phone is 10000% one of them.
Does it? I could just see two major platforms connecting business to their customers. I believe it’s similar in China. There is Alipay, Wechat and one more
Take your card? By phone? Isn't that one of the problem. I don't want to give my cc details over phone. 3rd party app does provide some value and that's why they are in business. They also provide an infrastructure for delivery which people keep forgetting about.
That (“card by phone”) is a problem of trust. Whatever happened to that concept?
I’ve given away my CC details probably hundreds of times in the pre-internet era (travel agencies, hotels, phone-order, etc.), because I had the details of and trust for the opposite end. That trust is increased through a platform provider is a fallacy imo.
The only two times I experienced dodgy charges to my CC that needed refund were because of database leaks/breaches. Go figure ;)
Surely you recognize that this is anecdotal evidence, though? Are you suggesting that people are less likely to experience CC fraud if they give out their information to each vendor instead of using a central mediator like PayPal? The reason we used to give that information out so readily in the past was a combination of not knowing better and not having better methods, and it allowed for a lot of low-level financial crime, despite the fact that you were lucky enough not to experience it yourself.
Yeah I’m not calling this out as the ideal system - it’s the system of a restaurant that had to start doing takeout overnight in order to survive. That being said, I would be interested in the number of “card over the phone” transactions that still happen. I bet it’s huge.
The main point is that there is an opportunity to unify this experience over a ubiquitous channel that would include seamless menu, schedule and payment steps.
All it takes I one deviously altruistic group of hackers to build an online delivery market maker that links couriers to restaurants, and all of the GrubHubs and Deliveroos would collapse.
I feel like a lot of the work in something like Deliveroo is marketing, dispute resolution, money and payment management, inventory / menu tools (and transcription?).
If everyone paid cash, restaurants typed in their own menus, and left marketing to some other third party, is the rest just craigslist-for-food? “1995 ... written in Perl”.
I’m hesitant of coming off as “this could be built in a weekend” but the reason why most things cannot be built in a weekend is because they are the publicly visible front of a machine designed to be worth $1bn through analytics, marketing, ad tech revenue, content moderation etc. Drop all that and the front end is much simpler.
Sorry to not be clearer: when I talk about market making I meant for the restaurants to be put in touch with delivery people so they can negotiate that themselves, off app, rather than having Deliveroo involved in the process.
It’s not a very coherent idea other than the usual “crush the rent seekers! [Deliveroo]” I guess.
ChowNow and qMenu are apps that restaurants can pay a small fee to use, that provide a similar experience to users as the big apps. The selection of restaurants is more limited but there are enough options for me on there in the Bay Area. Some restaurants do offer delivery on these apps, although I’m not sure if it’s restaurant employees doing delivery or people hired by the app.
Yes you are right. Dont forget the time component either, when the profits become visible, there will be (already is) a multitude of companies based on cheaper regions that will compete with a nearly similar product but cheaper.
I feel like what's often overlooked is how much so many of these delivery services have lost money over the past few years.
UberEats is more popular than ever, but it's not even close to helping Uber as a company avoid mass layoffs in the coming weeks. The UberEats division was losing hundreds of millions of dollars last year. Likewise with DoorDash.
Restaurants complain about the fees which is fair but they've failed to mention how much money and time they would've spent on hiring multiple drivers to fulfill orders as well as a digital system to allow people to place orders online. By all means, if these apps suck, then hire your own drivers like restaurants have done in previous decades. Furthermore, platforms like this apps allow restaurants to be far more visible than if they just used their social media presence.
IMO, the biggest flaw with restaurant delivery is that it's hugely inefficient. You can't optimize it like UPS/Fedex can with packages, and people don't buy as much in one go as you would with a grocer. So companies like UberEats need these fees to allow them to actual remain viable and so that they can keep spending on things like development, marketing/sales, etc. Like it or not, delivery is expensive.
I think the issue is more that predictable, timely delivery is expensive.
When I was growing up we'd get pizza delivery from a local pizza shop. Depending on the day of the week and the time we'd call, our pizza could arrive in a half hour or two hours. Sure, a part of the was the capacity of the kitchen, but a big part was also their delivery capacity. They had two guys each driving a car. They could batch deliveries to some extent so each driver would drop off more than one before returning to the restaurant, but while that gave them better throughput, it gave them worse latency.
Meanwhile, with Grubhub, Postmates, etc., you have a fleet of always-ready drivers -- effectively an unlimited number -- who are ready to take a single order, go pick it up as soon as it's ready, and deliver it directly to you. That's terribly inefficient on a per-driver basis, but it's great for the customer.
I personally don't mind the variability in timing in the old system all that much. Sure, there are some times when I really want food now (but even then, the fastest deliveries on these platforms is usually around 45 minutes), but for the most part I don't care if it's going to take another 30-60 minutes. But a lot of people really do value the speed, and, more importantly the predictability. If you want to eat at 6pm and know that the delivery time is nearly always 45-60 minutes, you can pretty much eat at 6pm. If the delivery times vary from 30 to 120 minutes, you order at 5pm and live with eating anywhere between 5:30 and 7:00. Yeah, this is seriously a "first world problem", but plenty of people have gotten addicted to the predictability and seamlessness of it all.
It's really unfortunate, because at the end of the day it means we value convenience over the health of our local businesses.
I feel like what's often overlooked is how much so many of these delivery services have lost money
If the restaurant is losing money because of predatory behavior by delivery operations, the fact that the delivery company doesn't make money either doesn't really help the restaurant.
The reason I don't order from restaurants directly is because I usually don't know what I want to eat, and those third party ordering services give me more insight as a consumer as to what's available to me and at what price. They also use payment processors that I'm already using and have a more browsable and legible menu with consistent layout across other restaurants.
Oftentimes the difference isn't between ordering through a third party and directly from the business, but ordering takeout at all.
There's too much benefit to me as a consumer to using third party services over ordering directly from businesses. You don't have a right to more of my money because someone else created value that you couldn't or wouldn't.
So the “too much” benefit you are talking about is aiu basically a) “consistent layout” b) “payment processors”?
Isn”t that just a single digit improvement in terms of convenience (aka the laziness factor ;)
In terms of “insight as a consumer”, it is the other way around where I live. Third party platforms almost always have only a stripped down menu available, because restaurants adapt and improve for meals that can be processed quickly and/or prepared in bulk in order to not pay up towards individual/labor intensive food on those platforms.
I switched back to order by phone and pay at the door a long time ago to get the true value out of the restaurants and not a platform, which’s value prop is to be a man in the middle with a web front end.
>They also use payment processors that I'm already using
What about good old cash?
>a more browsable and legible menu with consistent layout across other restaurants.
Couldn't you use these menus to decide what to order and then order by phone directly from the restaurants? Once I couldn't make an order at an online shop, so I ordered the things in my shopping cart via phone. It wasn't that fast because there were a lot of small things, but it worked.
If there is one new iOS API I would like to see in response to COVID-19, it would be direct integration with restaurants. It isn’t just a win for restaurants, it’s a win for users too. Right now I can’t figure out which platform or website I use to reach a particular place. Sometimes I want to search by item, so it would be good to index menus too. Throw in one touch Apple Pay, notifications to know when to leave your house to pickup the food, even a Siri shortcut so I can order my favorite dish easily again.
I don’t want these things to show up in aggregators. I want it built into the OS. With a couple of voice commands or taps I can be on my way.
I do feel like this will come. Apple has started an Apple connect program with some gyms. I feel they will do the same with restaurants. I’ve heard rumors about native applets that will load from QR codes. I can easily see “Apple Connect” certifications on restaurant windows and counter tops that lets you load the restaurant app quickly and easily, discovering it exactly where you use it.
This is an example of one bad thing about our convenience culture or expectation of infinite choice, delivered immediately.
It allows the middleman (who legitimately did some service by making so many restaurant choices available) to insert himself into every transaction, turn themselves the one you have a relationship with, and extract margins from the actual provider of the main service who becomes a commodity.
Ordinarily I would buy the theoretical point that certainly a service is being performed. But given the evidence and tactics about how much service is being performed versus being charged for -- that places like Grubhub/other platforms extract 20% commissions and put out their own phone numbers to masquerade as the restaurant's -- I would be glad to see them die a painful death as a result of this crisis.
Order directly from the restaurant, and be sure that's actually what's happening.
The problem is, if you order direct from a restaurant which takes orders from one of these platforms, the restaurant prioritizes the platform order, because the platform has reviews and ratings, which directly influences sales.
Your phone order will almost always be considered less important.
The problem isn't technology but logistics. How are you going to find a large pool of drivers ready to take food instantly from point A to B in the city at little/no cost?
Woops, I guess I was thinking more about ordering online and picking up the food myself. I usually just call the restaurants to place my take out order, but tend to prefer places where I can order on their own app or website, pull up and re-order the last thing I got, and then hit submit. Like someone else mentioned, there is a lot of friction with calling and placing an order, explaining the modifications, paying in the store, etc, etc.
I thought this was such a fabulous idea, I bought a domain name for it: https://inmytown.org/ As usual, I just haven't done all the other hard work. But, in the old days last year, I thought it would be cool for local shops to have an online presence so that online shoppers could see where to buy stuff and place orders and then pick it up. So, have an e-commerce platform for shops, restaurants, delivery would be great. Try and keep money local instead of shaving 10-20% off of all transactions and sending them to big tech. Does anyone want to help me build this? Totally committed to non-profit and great apps for local companies.
I mean, if I'm going to pick up food anyway I'd be happy to pick up someone elses food and drop it off if it was on the way. Presumably someone might do the same for me.
The middleman nightmare. Everybody wants to capture the middleman, which drains those that deliver value. That can be applied to Airbnb, Ubereats, car dealership, gig economy. These platforms have very low liability regarding labor cost and controls the access to the goods offered. This whole gig economy is putting small businesses and workers in a position where the information asymmetry is so huge that is putting them in constant price pressure, below the reasonable to be worth operating. It’s too much competition on small business and workers.
Convenience of delivery is a big point of improvement though, which the restaurants never used to compete on before. It's become commonplace to complain about the middle-men like Uber and seamless now, but before they came around the analog services that existed (taxis and restaurant delivery) were so much worse.
There's a pizza place up in the Tenderloin (SF) that I occasionally order from (I used to live a couple blocks from them and would walk in all the time). I would order on Grubhub because that was how they were set up to do delivery. (I believe they link to Slice from their website now for delivery.) The delivery person was always someone from the shop itself, not someone who worked for Grubhub. Now I wonder how much GH was skimming off the top, even though they weren't really providing all that much.
I've tried this multiple times, but in my experience, there just aren't that many restaurants that allow you to pay without giving a credit card number. That's a non-starter. Yes, I do give my credit card information to some companies, but only when I know said company would be devastated by a breach, and I keep it as limited as possible.
Then it’s time for restaurants to get apps or websites it’s easy to order on.
Is there a service provider that doesn’t try to be a lead-gen middleman for restaurants? Like a Squarespace or Wix or Shopify but for food stores that do delivery?
I feel lots of people realize they don’t need anymore to order. When do you need to order something? It’s either you have a party , people are gathering or you rushing back home from work and don’t have time for cooking. Non of this conditions exists anymore. I realize that plastic wrapped food from local restaurant is not as good as I can cook myself. I never cooked a lot before. But this time , you have time for yourself .dont get me wrong I want to help those people , but helping is not ruled by communists rules. Me and many of my friends just don’t want to order home even as much as before lockdown. It’s not about money it’s about time for yourself :) and those money I saved I usually donate.
My wife and I have been cooking at home, but last week we both had a busy, long day, and we were exhausted and wanted a good meal. So, for us, the reason we would have ordered takeout before is the same reason we ordered takeout that day.
We've been ordering a delivery every Friday from a different local restaurant every week. It's something to look forward to, but we also want to support the local places that we used to be able to go to until we're through this. If everyone stopped ordering and just cooked at home, there would be no restaurants that survive this at all.
And let's face it, small local food shops have the same problem as restaurants - they're too small to have their own websites for ordering. So everyone is ordering groceries from the big chain supermarkets - or Amazon Fresh. All of that money is going straight to giant corporations instead of local businesses.
This is a good opportunity for some small producers to keep going. We ordered from one place I saw on insta that had a stall in a food market hall which is closed, and now they're doing delivery orders from their flat. There's no way this person could organise relationships with drivers and payment processors all on their own without using a platform.
As the article itself states, restaurants don't like using these services but support them regardless, because the alternative is no orders.