The dichotomy between this massive IPO making the founding team and investors rich and local restaurants shuttering in record numbers (partly due to losing 25% off the top to DD with no other options) is startling.
A small case study on how inequality is growing in our country and tech like this is pouring fuel on the fire
Alternately, you could look at this as a dichotomy between local restaurants shuttering in record numbers due to inadequate government support for small businesses during a once-in-a-lifetime pandemic, and tech like this providing some of them with a lifeline to stay open (while also making the founding team and investors rich). A small case study in how the world is not necessarily a zero-sum game?
It would be a lifeline if restaurants made money from Doordash orders. Some do and for them it's been a lifeline.
But many restaurants don't make any profit after the 25% cut. Pre-covid you could write it off as a marketing expense but when in-person dining disappears you're faced with option to close or keep open and make a loss or no money on every DD you get.
This is partly why 110,000 restaurants have closed since the pandemic
How exactly is tech pouring fuel on the fire though? If DD simply didn't exist, what better option would these closing restaurants suddenly have?
Like you said here, with DD around it does give some restaurants a lifeline they wouldn't otherwise have. Plus the government gets more tax revenue, over time some large percentage of the currently $60B valuation created by Doordash, which could be used to help the rest of those hit hardest by the pandemic if our democracy wasn't being held hostage by one Mitch McConnell.
I think the implication wasn't that DD was pouring fuel on to the fire of "restaurants closing", but rather that when they, a company that works with restaurants (many of which are closing) are doing so well that they can IPO to the tune of $60B and make their founders/investors VERY rich, this can pour fuel onto the fire of "tech companies making money at the expense of others".
I feel that regardless of your feelings on the truth of that last quote, the connection can still (and will) be made by many people.
If DD didn’t exist it’s be someone else.. but if there was no delivery most people would pick up take out like before. I don’t mind paying a delivery fee. It’s kinda like the tip when you dine in person..
The 25% fee goes mostly to DD, not to the driver who delivered. DD and other app's value is removing the friction of ordering and paying. Of all the participants in the supply chain- farmer, cook, business owner, delivery guy- the ordering app (tech) took the most outsized piece of the pie.
To be fair though, not all tech is similar. I don't think people mind Amzn charging the seller 5-15% and paying the delivery guys whatever it takes. I hope food delivery apps become more reasonably priced- or then maybe Amzn comes after their margin!
2 years ago, I could order 4 entrees from a local Indian restaurant for $50 + $20 tip. The same restaurant is DoorDash only now and the same order is $70 with no tip.
I don't order delivery anymore, for $20 I'll pick it up myself.
I'm not a fan of delivery apps (I prefer calling in my order and picking up), but I thought I'd investigate the oft-repeated refrain that restaurants either make no money or a loss. I think it depends.
From my back of the envelope calculations, it seems that the conditions necessary for a restaurant to break even or make a tiny profit with delivery apps that take a 30% cut exist but are narrow. For the restaurant to cover that fee, it would have to increase its online prices by 1/(1-0.7) - 1 = 43%, which would make it less competitive to a segment of its consumer base.
On the other hand, if the app's fee was 15% (which it is in Chicago, due to a city-wide cap), a restaurant only has to increase its prices 1/(1-0.15) - 1 = 18%, which is more palatable and less noticeable.
It does also create cash flow, and there are various things you can do with cash flow.
If you can increase sales velocity, the increased returns might be able to help profitability (though the counterfactual is hard to prove -- if you didn't have the apps, would velocity have been lower? Hard to measure).
This is the most insane comment I’ve ever seen on this site. Imagine the kind of insulated you have to be to think that “hating on wealth creation” is the problem at one of the highest points of wealth inequality and economic devastation.
Yeah I'm not sure this is a great example of inequality either. Most independent restaurants fail, I don't recall the exact stats off the top of my head but very very few last >5 years and the majority fail within the first year (this was before DD or any similar services) and yes maybe tech pressures have exacerbated that, but I'm not sure the stats on that are conclusive.
Anecdotally apps are how I and a lot of people I know have come to discover or order from many independent restaurants for the first time. Even with a 25% cut, without knowing the exact numbers of how many new customers these services introduce, its not that easy to say that big tech boogey monsters are destroying independent restaurants, especially since its a fairly risky venture to start with.
Small group of people (investors and early employees) pull in a ton of money while a big group of people (restaurant owners and employees) face worse economic outcomes.
Similarly, private mkt investors get insane outcomes while retail investors end up buying at peak prices and less information.
I'm not saying what DD did was unfair or unethical. We're just moving quickly to a very unequal society and this is a small ex of how that's happening
1. When this gets too extreme people start to ignore whether it is fair, logical or right, and respond with rage. People who have to close down, or feel poor, while they see a small group get crazy rich don’t care about economic theory, they just feel that something is wrong. Politicians use that rage to get elected and ‘fight for the people’, often implementing harmful policies to please angry crowds.
2. Australia has minimized this problem pretty well by having a pretty unregulated economy but a robust safety net.
"[a] Stanford professor posits that throughout history, economic inequality has only been rectified by one of the 'Four Horsemen of Leveling': warfare, revolution, state collapse and plague."[1]
You can hang on to imaginative phrases like "inequality of opportunity" or an economy that reliably delivers food. I think most people are going to go with the second option.
Seems like some people are more interested in using Doordash than getting the food from the restaurants directly. I think that Doordash provides a useful service that was not as present or not as good previously. What do you think?
I do not think Doordash is useful, I'm fine with picking up my own food. I also think that Doordash is an example of a business that is lowering the bar for what's considered entry-level employment and will result in erosion of the consumer base and eventual economic or social crisis. Only time will tell.
A small case study on how inequality is growing in our country and tech like this is pouring fuel on the fire