Sharpe
3958
With those kinds of commissions/fees, I wonder if the delivery services actually yield a profit to the restaurants or if the restaurants consider having a delivery option as a necessary “loss leader” to keep their “face” in the market. I mean 15% to 30% commission fees - that’s greater than the margin for most restaurants is my understanding, given the low margins in the business (unless I’m wrong about that - hard info on restaurant margins is scarce.)
Timex
3959
30% is way above the profit margin of virtually any restaurant, but the fact that this is replacing the need to maintain your own delivery service, while greatly expanding your sales reach, that likely changes the calculus quite a bit. The delivery service isn’t simply an added cost for the restaurant.
Sharpe
3960
But isn’t that like the old “we lose money on every sale but we make up for it with VOLUME!”?
Nearly every restaurant that I’ve seen charges more on Doordash than they do in person. They pass on at least some, if not all, of the service charge.
Timex
3962
No, because the profit margin ends up being based on a lot of things, including the ratio of sales income to things like operational costs from things like rent.
Delivery food incurs an additional cost from the delivery service, but doesn’t require paying for facilities, servers, dishwashers, etc. that seated customers require.
Also, larger distributed customer base could potentially provide stability in sales volume, which is always a thing that is super hard to manage for restaurants. Buying fresh food that needs to be used quickly is a huge pain in the ass if your restaurant didn’t have a relatively stable number of customers every period.
Ultimately, to it’s a complicated calculus, but I doubt that restaurants are all choosing to lose money.
You don’t have to have much Google fu to find articles describing the struggle between restaurants and delivery service apps. It may well be the case that many restaurants don’t have any choice but to pay. In the hotel space, booking sites like booking.com can gouge big chunks of the apparent room rate, depending on the market, and the hotels often hate those guys, but the volumes of traffic they deliver mean the hotels have to tolerate them and pay.
Edit: A possibly extreme example I’m pretty sure we discussed last year:
edited to different snl skit, this one has the reference at 55 seconds in to how they make money, haha
Timex
3965
I’m not doubting that they may struggle with them, but if they were actually losing money in the process, they would go out of business.
Which is what it so fascinating about these zombies we’re talking about here, they don’t for the most part make money doing these delivery services. Doordash has yet to make a profit.
The days of simplistically waving your hands at the market and declaring it efficient and it’ll sort itself out ended a long time ago.
I mean, 60% of restaurants fail in the first year, and 80% fail in the first five years. It’s going to be hard to get any signal through that noise!
Timex
3968
Yeah, I’m aware of this, I’ve brought it up before when folks were accusing restauranteurs of all being rich fat cats who were exploiting their workers.
Irrelevant to investors if it gets to be a monopoly, or at least part of the cartel.
The one doesn’t exclude the other.
It would be nice if it didn’t feel like the mega-wealthy couldn’t just cut a check and be done with it,
Funny enough some folks I know switched their idle employees during the pandemic to an in-house delivery system and the costs weren’t terrible; I was surprised they got something up quickly and that it wasn’t a total bust. They were able to deliver booze too.
All the online services were scummy and took all profit. They also do sneaky things like offer to-go thru themselves anyways vs your in-house system and try and undercut.
The employees that like to work as servers/bartenders aren’t the same that like to be drivers, however.
Alstein
3973
They feel like they need the other places to remain visible, but they’d really prefer customers to call them direct.
I think our COVID relief failed to bail out small-time restaraunts enough.
Good thread on Starbucks’ attempt to thwart a union drive. Highlights include flooding stores with new employees to swamp the votes of current employees and comparing Starbucks’ philosophy with that of good Jews in Nazi concentration camps.
What if social democrats think that equality is great and all, but, you know, it should happen somewhere else.
