How Delivery Apps May Put Your Favorite Restaurant Out of Business (newyorker.com)

In a piece this month, The New Yorker argues that online food discovery and delivery platforms are bad for restaurants. From the report: In recent years, online platforms like Uber Eats, Seamless, and GrubHub (which merged with Seamless, in 2013) have turned delivery from a small segment of the restaurant industry, dominated by pizza, to a booming new source of sales for food establishments of all stripes. When the average consumer logs in to the Caviar app to order a Mulberry & Vine salad for the office or a grain bowl on the way home from work, she might reasonably assume that her order is benefitting the restaurant's bottom line. But Gauthier, like many other restaurant owners I've spoken to in recent months, paints a more complicated picture. "We know for a fact that as delivery increases, our profitability decreases," she said. For each order that Mulberry & Vine sends out, between twenty and forty per cent of the revenue goes to third-party platforms and couriers. (Gauthier initially had her own couriers on staff, but, as delivery volumes grew, coordinating them became unmanageable.) Calculating an order's exact profitability is tricky, Gauthier said, but she estimated that in the past three years Mulberry & Vine's over-all profit margin has shrunk by a third, and that the only obvious contributing factor is the shift toward delivery.

Comments

Re:Delivery isn't profitable, so don't offer deliv

[DarkOx]

Note i am not making any kind of moral judgement here. If what most consumers want is 'prepared food delivered to your door' and you are in the food service industry you'd better figure out how to meet that demand or you will be left behind by someone who does. Alternatively maybe you can carve out a niche space for yourself for people who still want to 'go somewhere' but a niche means exactly that, a small market where only a few of the best can thrive.

That said I understand the trepidation the middle tear restaurateur probably feels right now. Its not just the costs of delivery. Its the other higher margin up sells like, that second beer or another cocktail your wait staff convinces the customer, he'd enjoy it and after all he is celebrating! Or the the $6 2oz cheese cake in a cup that is decadent but not two decadent and hey girl your deserve it!

You loose the opportunity to make a lot of those sales with deliver and take out. My assumption is most restaurant dishes are not loss leaders but at least at a lot of the places I tend to each there is clearly more margin on some of those ancillaries than on the main plate items. Given a competitive market place you might not have the pricing power to raise tab on main plates either. You are competing with the places that have decided not to follow the new trend in the mean time, at least for the traditional portion of the business. Ultimately you might be re-aligning in the right way but that can mean some short term pain. Lots of restaurants are more or less hand to mouth, they may not be able to weather the changes at all and those that can might not be able to afford a misstep.

Re:they pay to outsource what they won't manage

[JaredOfEuropa]

That’s a large part of the problem. There’s this popular restaurant review and reservation site that’s been around for a good while. At first they were quite useful and charged only a small fee to restaurant owners. Then they started to charge a percentage for each reservation, and as the site grew in popularity, that percentage increased, by quite a bit. As did the terms and conditions: prices on the site must be the lowest, no advertising on competing platforms, that sort of thing. Some restaurant owners took their place off the site... and saw the number of diners plummet. But recently they banded together, and the Restaurant Business Association (of which most restaurants are a member) launched their own reservation site without reviews (which were useless anyway), with many members pulling out of the commercial site.

I can see something similar happening with delivery services. Already, many delivery boys will ask you to order direct from their own site next time, instead of one of the popular (and increasingly expensive) 3rd party takeout services. Per the terms and conditions of those services they are not allowed to do this, but they do so anyway just to keep their margins up... while passing some of the savings on to the customer. For small restaurants, these delivery services are very convenient but they are pricing themselves out of the market... as restaurant owners discover that they do have other options.