Comment by imgabe
6 years ago
Just some back-of-the-napkin math if you wanted to do this "right".
Let's say you hire drivers as employees and pay them $15/hr plus tips and reimburse them for mileage. You charge a $4.99 delivery fee. Drivers work set shifts and are paid hourly whether they are making deliveries or not.
That means each driver needs to be making at least 4 deliveries an hour or you're losing money. That's not even really counting for mileage or any other benefits like health insurance or retirement (not that jobs like this usually provide this, but people seem to think that they should).
When I lived in DC, driving anywhere could take at least 15 minutes. Getting 4 different trips from a restaurant to somewhere reliably every hour would be difficult. Obviously, drivers can pick up multiple orders and take them in one round trip, but you're at the mercy of what orders happen to come in and where they happen to be located. It seems like it would be very hard to make that sustainable.
Of course, Domino's and lots of other places do it, but they probably aren't paying $15/hour and they also have one central location and more predictable demand. It's more feasible if drivers always go back to one central hub rather than having to get orders from random different restaurants all over the city.
I know you probably realise this but I think you missed a few important factors that can justify losing some money on deliveries.
- Takeaway/delivery food costs less to produce than dining in - no cleaning, no turning away customers who want to eat in because the place is full, no hiring wait staff, less fixed rental space cost, etc.
- Delivery reaches people who are too lazy to come to the restaurant. Ask most businesses if they will take a dollar or two profit less and make the sale, compared to losing it. Most will say yes.
- Delivery/convenience puts the brand top of mind for people feeling lazy (plus others see the car driving around). This is marketing.
- People are usually willing to wait for deliveries. At least here in Australia, if I order pickup it's ready in 15 minutes or up to an hour for delivery. This allows some flexibility with scheduling in the kitchen around the driver's schedule.
I think it is a lot more expensive than a lot of us give credit for (I visited Canberra and was aghast at the $9 delivery fees), but there are some benefits and savings to offset this.
> Domino's and lots of other places do it, but they probably aren't paying $15/hour and they also have one central location and more predictable demand.
One thing to note about Dominos is that people pay at the door, so they would need to look the delivery guy in the face as they stiff him on the tip. Not required for the delivery apps and fewer people tip there.Because people tip, you can pay lower wages.
I had a relative who worked as a Chinese food delivery guy for a while and he did it exclusively for tips. The restaurant did not pay him at all.
In the UK tipping delivery drivers is basically unheard of, except maybe if they're delivering on Christmas Day or something. Despite that people I know who've worked as drivers for Dominos say its one of the best unskilled jobs available, the pay is good, it comes with some benefits if you're working enough hours, and they generally take care of their employees.
> In the UK tipping delivery drivers is basically unheard of
For you it might be.
I tip delivery drivers and I received tips when I worked. Tips made up >20% of my pay.
Rich people generally would not tip, poor people would.
3 replies →
When ordering with the app, a lot of pizza places now (since social distancing started) allow adding the tip (or lack of) when placing the order.
I typically order from Papa Johns and their website/app had tipping for years. I never tip in person except on holidays. Just not a fan of cash.
As someone who delivered pizza for a long time, I can assure you that folks who don't tip absolutely do not care about having to look you in the face or not.
A bunch of delivery 'drivers' here in sunny Sydney just use a bicycle - and they're often just students or backpackers etc making a couple of bucks in the afternoon while getting fit. They're happy to make $10 an hour which would normally be illegal under Australian employment laws.
It's hard for a local pizza shop to compete with this kind of thing and the sheer scale of Uber Eats.
>It's hard for a local pizza shop to compete with this kind of thing and the sheer scale of Uber Eats.
I mean, Uber Eats is losing cash at a phenomenal rate. So, more accurately:
>It's hard for a local pizza shop to compete with obscene amounts of venture capital subsidised delivery
> they're often just students or backpackers etc making a couple of bucks in the afternoon while getting fit
I did this in lieu of going to the gym daily a while back ago. Adds a bit of gamification and social interaction, although takes a bit longer for the same intensity. I can't imagine having to live off that wage though.
Unfortunately in the US you get people screaming that those drivers are criminally underpaid and are being exploited by heartless capitalists. Because of course random Internet commenters are better able to judge the drivers' priorities and desires than the drivers themselves.
Are you seriously arguing that the drivers would rather be underpaid than get paid a fair wage?
The argument is not that these people shouldn’t be able to find work, but that they should get paid fairly for the work they do.
11 replies →
Restaurants have two advantages:
1) Drivers can do other work during down time (wash dishes, clean, etc.). I think some places don't even hire drivers, they just have whoever is free deliver the order.
2) They can eat the loss because it will be less than the 20-30% that delivery platforms take from the restaurant.
> Of course, Domino's and lots of other places do it
They kind of go into this in the article -- that since Domino's has made delivery work for decades now, it must be possible to do it sustainably; and that although most of the author's restaurant friends considered it "not worth the effort", individuals had managed to make the economics work for their very specific circumstances.
BUT -- that the fact that it can be made to work in specific circumstances sort of undermines the whole idea of DoorDash, which is a generic "food delivery wrapper" around any restaurant. DoorDash by definition can't do the kind of integration that Domino's does.
If it's an existing restaurant that has excess kitchen capacity they probably don't need that many deliveries per hour as he customer isn't paying for a table and that margin can go towards paying the driver.
$15/hr plus tips plus mileage is overkill. Let's say you cut out the awful feature that is tipping and make it $15/hr plus mileage, which is a perfectly good wage.
If I was previously paying $6-7 in fee+tip for a limited selection of restaurants, I'd be okay paying $10 for places that don't normally have delivery.
If that means two trips per hour, and you're not in one of the ten worst cities for traffic in the entire country, then that actually sounds pretty viable.
You forgot wear and tear on the car, and gas. 15/hr is decent without additional expenses. Take out gas and tires and brakes and maintenance and it's poverty level.
At least around here, nobody delivers by car, it's all on cheap motorcycles. In other cities I've lived in, bicycles were also common.
No I didn't, that's part of mileage.
1 reply →
The business model is to charge both a delivery fee and a commission on the sales price. That way, you can make it profitable, even when paying a fair price to couriers, as long as you can keep your business lean and your delivery routing efficient.
It's also 30% - 40% of the order not just a delivery fee