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San Francisco permanently caps delivery app fees for restaurants at 15%

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Re: San Francisco permanently caps delivery app fees for restaurants at 15%

#81
post #29

How nonsensical to have this as a percentage. The underlying operational cost doesn't really depend on how much money you spent on the food. I don't see how delivery can be profitable on < $10 orders with a 15% cap.

Well, we have to compare against the practical.

I ran single digit labor in our restaurants, and this wasn't negatively affected by the number of deliveries because drivers contribute labor elsewhere.

If you think it's more cost effective to use a delivery service in lieu of staffing, then you'll need to compare against the cost of not having that staff and the sales volume increase having delivery provides.

During the pandemic, fewer family owned restaurants shut down than corporate chains in my county. When talking with owners, each said that delivery services had at minimum doubled their average dine in revenue despite fees. It was less expensive than employing the people required to run deliveries at their volume, and less costly than if they had attempted to do it with existing staff.

You don't want to fire people in a recession or a pandemic, and this was a way that many of those businesses could keep everyone on the schedule without taking on the risk and frustration of attempting to hiring new people who might not work out (or who might have car problems on the same day) or good people who they might not have enough hours to schedule.

Also, some fees are flat, and the percentages are there to compensate. There are also minimum pre-tax totals to qualify for delivery starting around $20-30, so your scenario of $10 delivery orders doesn't apply.

Re: San Francisco permanently caps delivery app fees for restaurants at 15%

#82

Earlier quoted context omitted.

As many are pointing out, this isn't about pushing prices down. They're free to raise prices as a way to take less from restaurants. You're making an implicit assumption that these companies deserve to be profitable, or break even. But they don't, and they shouldn't be allowed to abuse their position as a platform to squeeze restaurants who don't have a lot of choice. Food delivery for low prices is not a sustainable…

This is an extremely naive view of economics, and not how things work in reality. If they raise fees on customers that will reduce customer demand, which in effect “takes” from restaurants. Customers are price sensitive to the all in cost, not just the sub-total. Customers are paying for all of these fees in the end, irrespective of how they are charged.

This is an extremely naive view of economics, and not how things work in reality. Delivered food is a substitute good for take out or non-delivered food. Artificially cheap delivery services shift consumer preferences to delivered food. It is likely that losing 30% margin on restaurants is worse than the overall growth of the market. But if delivery apps distort the market, restaurants are forced to play ball or lose out to competitors in a classic prisoner's dilemma, bringing everyone down together. Regulation to limit the proportion of revenue taken from restaurants helps prevent cash flooded delivery companies from just burning cash to fuel their own growth while leaving the restaurants to eat shit and die.

Re: San Francisco permanently caps delivery app fees for restaurants at 15%

#83

Earlier quoted context omitted.

well, for starters, their telephone rates and electricity rates don't vary on the price of the order.

Of course they do. If I order a huge meal, they will use more electricity and gas (no matter how incrementally small). But the question remains: who cares? Their payment processor will charge by value. Do you demand to know who their payment provider is and what their terms are?

I agree. This is all a red herring.

I think the negative effects really come from the delivery suppliers also being the digital shop fronts, so it's not easy to just switch to another delivery company, nor to start a competing delivery company.

Re: San Francisco permanently caps delivery app fees for restaurants at 15%

#84

Earlier quoted context omitted.

Exactly the point - when apps charge too much, people will complain and alternatives will arise. From your second source: > "Dozens of locally owned services are proving there's a better alternative"

Absolutely, local platform competitors can pop up, but the network effects of national platforms is powerful and their influence and actions damaging in the interim. We may just disagree on this, and that's to be expected. As previously stated, I believe more regulation is required, even if that puts national platforms out of business.

In the interim is fine. They also provide a vital role in establishing how online shopping for food should work. It's easy to copycat after, as is evidenced by even local providers being able to do it.
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