Food delivery startups have been all the rage, dominating food tech investment for the last several years. In what has become an extremely crowded market, there are signs that the market is shifting, with companies like Square reportedly looking to sell off its food delivery business Caviar and competitors like Postmates struggling to raise more funds.
But even with the consolidation, food delivery startups have added a level of convenience to ordering takeout that consumers are now used to. But at what cost?
The New Food Economy, a non-profit publication that publishes long form pieces on the forces that are changing food as we know it, published a piece looking at the dark side of food delivery and the challenges it presents to small restaurant owners.
The business models of companies like Seamless, UberEats, Yelp Eat24 and Postmates goes like this: hungry customer goes online to order food. Instead of going to a specific restaurant’s website and ordering through their system or picking up the phone (an antiquated notion these days), they visit a food delivery website that gives them menus, pricing, online ordering and delivery options for all the area eateries. The GrubHubs of the world then turn around and charge said eateries 10-30% of each order. The lowered margins aren’t desirable, but the idea is that the increased volume from the food delivery site will make up for it.
Except that’s not always the case. Working with these services requires the business to have a tablet on site that takes orders and it can get overwhelming to track different orders from different services. And then there’s the matter of profit – when Teddy Roland, a restaurant owner profiled in the New Food Economy piece, tried to raise his delivery prices, Postmates and DoorDash refused.
“How is that different from the Mafia in the 70s saying, ‘I’m going to take 200 bucks not to break your legs?’” he says. “‘We’re going to take 20 percent of your money and you have to live with 80 percent.’ – Roland
The longer piece is worth the read. It’s not surprising that consumer appetite for more convenience comes at a price. Lower-priced clothing is made by workers making unlivable wages in deplorable conditions, cheap meat is produced by giant factory farms and quick food delivery services take profits from take out joints who are often small businesses.
Some restaurants are fighting back and using tactics to encourage customers to take the extra step and keep their money in the restaurant. Says Roland, ““I’m asking a little more out of my customers,” he says. “You want to be lazy and just use your thumbprint and GrubHub app, you’re going to pay more for it, that’s all.”
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