The economics of food delivery platforms

How did we get to a place where billions of dollars are exchanged in millions of business transactions but there are no winners? My co-host Can and my restaurant friend both defaulted to the notion “delivery is a shitty margin business” when discussing this post. But I don’t think that’s sufficient here. Delivery can work. Just look at a Domino’s s... See more

What is it about the food delivery platform business? Restaurants are hurt. The primary labor is treated poorly. And the businesses themselves are terrible.

A lot of what you hear and read about the big delivery networks — DoorDash, Grubhub, Uber Eats, etc. — is that they’re a terrible economic deal for restaurants. It’s an especially tough tradeoff for neighborhood restaurants and startups, which don’t have much leverage or much profit margin to spare.

Yet, despite this new source of e-commerce demand, restaurants have struggled to keep up. The dominant reason is that restaurant demand is inherently “peaky.” It’s even more peaky now that delivery and pick up are turning restaurants into omni-channel retailers. Restaurants have fixed labor costs that do not scale up or down with volatile demand th... See more

If capitalism is driven by a search for profit, the food delivery business confuses the hell out of me. Every platform loses money. Restaurants feel like they're getting screwed. Delivery drivers are poster children for gig economy problems. Customers get annoyed about delivery fees.

For resilience in the future, restaurants are going to need to master takeout and delivery. The problem is those delivery startups like DoorDash, Grubhub, and Skip the Dishes take up to 25% of a restaurant's revenue. Restaurant profit margins are already razor-thin (3%-5% is normal). It's predatory for venture-backed delivery companies to be taking... See more