Portland approves 10% cap on fees that food delivery apps can charge restaurants • Hacker News Board

Re: Portland approves 10% cap on fees that food delivery apps can charge restaurants

#111

Post by vorpalhex » Thu, Jul 09, 2020, 2:17 PM UTC

jfengel wrote: post #53

andy_ppp wrote: post #27

So as I understand it Deliveroo and Uber eats charge 25% of the food costs, plus delivery fees on top. Uber eats I know is losing money and Deliveroo are losing a few hundred million per year on revenues of about $500m. Basically cutting the food percentage like this to 10% would imply delivery services are permanently unprofitable? Why have all these restaurants signed up if 25% is so unfair?

It's doubtful that these services are actually spending 25% of each food order on providing the service. The money goes to expansion, marketing, loss leaders, and other supposedly temporary overhead. They're hoping that when they reach scale and have eliminated competitors, they'll turn a tidy profit, the way Amazon did. It's not at all clear that they really need to spend that much money on their expansion or that t…

If you have nobody using your delivery service, you can't maintain deliver-ers. You're running a three sided marketplace in which you need to have both minimum wages and work for your delivery folks, enough orders for the restaurant to bother, and enough restaurants and ok enough prices for the consumer.

That's why it's expensive. That's why you need marketing who doesn't just take out a facebook ad but literally visits and calls restaurants, IT teams to literally teach the basics to restaurants, and an ops team who can assist your delivery folks when a restaurant runs out of onion rings or accidentally slips an allergen into an order. All of that adds up real fast because you need all of those services running at all the times the business is running.

Nobody is going to order from a delivery service that only gives you two options. Nobody is going to deliver for a service that only gives you two or three delivery runs a night.

> economies of scale if you're effectively sharing a driver pool and software development cost with all of your competitors.

The software is so cheap as to be fungible here. It's the drivers who have geographical restrictions, dynamic shifts (gig economy) and also the freedom to not take orders. If you're a runner and you know Chik-fil-a has horrendous lines all the time, you may just never want to run those orders - and in the gig economy, that's a viable choice for you. The delivery service still has to handle those cases (pay more on them, offer incentives, argue with the restaurant for a way to get orders to drivers more easily, etc).

> I don't know why the delivery services aren't forced to undercut each other's prices to get the businesses.

Delivery services don't generally struggle to get customers, they struggle to get and keep drivers.

Re: Portland approves 10% cap on fees that food delivery apps can charge restaurants

#112

Post by mehlmao » Thu, Jul 09, 2020, 2:17 PM UTC

cocoa19 wrote: post #93

I disagree with this move. Why should we force a cap rather than let market competition improve prices? I believe it's better to fix shady practices. If I pay 25% to Uber, I want to know I paid 25% to them and not the restaurant. Then I can decide if the time savings is worth that 25% or not.

What market competition? Uber is buying Postmates. Both businesses lose money. The only reason to do so is to decrease competition.

Re: Portland approves 10% cap on fees that food delivery apps can charge restaurants

#113

Post by spideymans » Thu, Jul 09, 2020, 2:17 PM UTC

jfengel wrote: post #53

andy_ppp wrote: post #27

So as I understand it Deliveroo and Uber eats charge 25% of the food costs, plus delivery fees on top. Uber eats I know is losing money and Deliveroo are losing a few hundred million per year on revenues of about $500m. Basically cutting the food percentage like this to 10% would imply delivery services are permanently unprofitable? Why have all these restaurants signed up if 25% is so unfair?

It's doubtful that these services are actually spending 25% of each food order on providing the service. The money goes to expansion, marketing, loss leaders, and other supposedly temporary overhead. They're hoping that when they reach scale and have eliminated competitors, they'll turn a tidy profit, the way Amazon did. It's not at all clear that they really need to spend that much money on their expansion or that t…

Also these delivery services effectively provide advertising for the restaurants. If you’re not on the platform, you might as well be invisible.

Re: Portland approves 10% cap on fees that food delivery apps can charge restaurants

#114

Post by [deleted] » Thu, Jul 09, 2020, 2:17 PM UTC

cocoa19 wrote: post #93

I disagree with this move. Why should we force a cap rather than let market competition improve prices? I believe it's better to fix shady practices. If I pay 25% to Uber, I want to know I paid 25% to them and not the restaurant. Then I can decide if the time savings is worth that 25% or not.

[deleted]

Re: Portland approves 10% cap on fees that food delivery apps can charge restaurants

#115

Post by delfinom » Thu, Jul 09, 2020, 2:18 PM UTC

chrisseaton wrote: post #42

brianlweiner wrote: post #38

Earlier quoted context omitted.

In at least some cases ... the prices you see on grubhub may be higher than the actual prices the restaurant is charging. E.g $17.99 vs $14.99

So the restaurants are getting the option of delivery and the increased customer base and advertising... for absolutely no change to themselves? And the customers who use delivery are the ones paying for it? And if they don't want to pay it they can still go straight to the restaurant who will again make the same money? Sounds like a win to absolutely everyone involved. What is everyone's problem? Why do we want to i…

Actually many times it works agaisnt the restaurant. It misleads consumers into thinking they have high prices for real and many times their own reputation is harmed because these apps use call centers to place the orders and fuck up royally.

Re: Portland approves 10% cap on fees that food delivery apps can charge restaurants

#116

Post by BurningFrog » Thu, Jul 09, 2020, 2:18 PM UTC

airstrike wrote: post #86

Why does it have to be a percentage? Taking the food from point A to point B costs the same whether it's sardines or caviar. I never understood this... Seems like charging for the distance traveled and even the time of day would make a lot more sense

It's a symbolic gesture, not a reasoned policy initiative.

Re: Portland approves 10% cap on fees that food delivery apps can charge restaurants

#117

Post by SwiftyBug » Thu, Jul 09, 2020, 2:19 PM UTC

cocoa19 wrote: post #93

I disagree with this move. Why should we force a cap rather than let market competition improve prices? I believe it's better to fix shady practices. If I pay 25% to Uber, I want to know I paid 25% to them and not the restaurant. Then I can decide if the time savings is worth that 25% or not.

Most people couldn't care less how much the restaurant or the the driver is making from an order. Believing the market will regulate itself to a point where the restaurant and the driver receive a fair cut while the customer pays less and the gig app makes a profit is almost childish. The scales are not balanced in this equation. A company that has virtually infinite money to burn is in a position to burn the whole market to the ground and rebuild it on it's own terms if it wished. And in fact that's what has been happening.

Re: Portland approves 10% cap on fees that food delivery apps can charge restaurants

#118

Post by iso1631 » Thu, Jul 09, 2020, 2:19 PM UTC

falcolas wrote: post #46

iso1631 wrote: post #19

Earlier quoted context omitted.

I've had delivery takeaways in British towns and cities for 2 decades, well before the likes of ubereats and deliveroo. Those companies do their own deliveries and manage to make enough money to not even charge more for delivery (or offer a collection discount) - although usually a minimum cost of say £20. Why can't VC companies do it that efficently?

Honestly, those delivery companies are probably underpaying their employees for delivery. I've worked at a pizza delivery company, and including tips, I earned about $140 a day (inflation adjusted, post-taxes) for delivering pizza all over town. It was certainly not enough to provide for a long-term living, given the vehicle upkeep costs and gas.

When I think of "Uber", 'well-compensated employee' is not something that comes to mind.

Re: Portland approves 10% cap on fees that food delivery apps can charge restaurants

#119

Post by vorpalhex » Thu, Jul 09, 2020, 2:19 PM UTC

onlyrealcuzzo wrote: post #92

andy_ppp wrote: post #27

So as I understand it Deliveroo and Uber eats charge 25% of the food costs, plus delivery fees on top. Uber eats I know is losing money and Deliveroo are losing a few hundred million per year on revenues of about $500m. Basically cutting the food percentage like this to 10% would imply delivery services are permanently unprofitable? Why have all these restaurants signed up if 25% is so unfair?

Wait. So delivery apps pay restaurants 25% less for their food. Don't they also charge customers more for the food, even before they add on service fees, delivery fees, and a tip? At least this is what I've seen recently. I look at a restaurants menu, and it will have a dish for $9. When I try to order it, Postmates & Uber Eats say the same thing is $14 (though they both agree on the price). This isn't just one resta…

> So delivery apps pay restaurants 25% less for their food.

No, delivery apps charge you extra and pretend it's part of the restaurant cost. If you can buy your burrito at the restaurant for $8, the delivery service is going to show you a price of $10 on the order screen (and add in their $4 delivery fee, etc).

Re: Portland approves 10% cap on fees that food delivery apps can charge restaurants

#120

Post by delfinom » Thu, Jul 09, 2020, 2:19 PM UTC

castlecrasher2 wrote: post #78

bawolff wrote: post #68

Earlier quoted context omitted.

I dont really see why its my responsibility as a consumer to police if business deals resturants engage in are "fair". That is the resturant's job. Its part of running a business. Actually its the main part. If the deal doesn't make financial sense - then the business shouldn't make the deal. If the business cannot survive neither taking the deal nor not taking it, then the business is not viable and it should go out…

How would restaurants have a choice, here? As far as they know, Uber Eats/Doordash/etc are just "regular customers" but are really just scalping the restaurant's product.

Scalping product AND funneling all the blame on their fuckups onto the restaurants. It's a american rent seekers dream gig.