In the future, I suggest you distinguish gross from net profits when writing on this topic. Your article (and many others on this subject) make statements like "restaurants have famously thin margins" (typically on the order of 3%-5%). But this statement refers to net profit margins, after accounting for all fixed costs (which are considerable). If you're wondering restaurants can afford to pay 30% commissions to DoorDash when their margins are low single digit, you're comparing apples to oranges. The more relevant comparison to understand food delivery economics is what a restaurant's GROSS margin is. If you assume (as the delivery platforms want you to) that platform delivery orders are purely incremental demand (you already have the kitchen and staff in place), the ONLY expense to fulfill an online order are the costs of ingredients and packaging used for the meal, yielding incremental gross margins in excess of 50+%.
But in reality, kitchen operations are more messy than depicted above. During peak dining hours, it's not as if kitchen personnel are sitting around with lots of spare time to serve online orders that come through the delivery platforms. Trying to juggle orders from dine-in patrons (which can be predictably staggered by reservations and seating capacity constraints) alongside online orders which are stochastically highly variable is an operational nightmare. As a result, there is significant service degradation for ALL classes of diners, over and above potential price escalation impacts.
The platform delivery companies are bolting an inefficient, expensive convenience service onto a business category (restaurants) that was never designed to accommodate multi-channel operations. The predictable result is degraded service, higher prices and poor economics for all stakeholders.
In the future, I suggest you distinguish gross from net profits when writing on this topic. Your article (and many others on this subject) make statements like "restaurants have famously thin margins" (typically on the order of 3%-5%). But this statement refers to net profit margins, after accounting for all fixed costs (which are considerable). If you're wondering restaurants can afford to pay 30% commissions to DoorDash when their margins are low single digit, you're comparing apples to oranges. The more relevant comparison to understand food delivery economics is what a restaurant's GROSS margin is. If you assume (as the delivery platforms want you to) that platform delivery orders are purely incremental demand (you already have the kitchen and staff in place), the ONLY expense to fulfill an online order are the costs of ingredients and packaging used for the meal, yielding incremental gross margins in excess of 50+%.
But in reality, kitchen operations are more messy than depicted above. During peak dining hours, it's not as if kitchen personnel are sitting around with lots of spare time to serve online orders that come through the delivery platforms. Trying to juggle orders from dine-in patrons (which can be predictably staggered by reservations and seating capacity constraints) alongside online orders which are stochastically highly variable is an operational nightmare. As a result, there is significant service degradation for ALL classes of diners, over and above potential price escalation impacts.
The platform delivery companies are bolting an inefficient, expensive convenience service onto a business category (restaurants) that was never designed to accommodate multi-channel operations. The predictable result is degraded service, higher prices and poor economics for all stakeholders.