DoorDash Buying Caviar from Square for $410M
prnewswire.comThe price seems high for something Square presumably needed to unload. Who else would have been bidding it up? And why are food delivery businesses still in a bubble?
That's not a slam on businesses in a bubble phase, either. Many industries go through one before settling into a steady, sustainable state. Just surprised that delivery is still in one, while related industries, like ride-share are cooling off.
It's probably a mostly equity deal, i.e. most of the $410M is not real money. They recently raised $600M and I doubt they'd spend $410M of that on an acquisition.
It would be more interesting if we knew how much they actually paid in hard cash; the rest is effectively just promises of money in the form of a valuation that hasn't materialized in liquid form yet.
The same promises of money that their investors paid money to acquire, so it doesn’t seem right to just dismiss the equity value.
Sure, not dismissing it, but it's not the same value. It's not hard cash that the founders/employees can spend, so it's mostly useless in terms of value for research, charity, self-funding new ventures without VCs, investing in other companies, side projects, or whatever else you would do with hard cash.
If you're an early employee of Caviar and got $1M in AMZN stock or options? You could sell it for cash. DoorDash stock? It could be $0 in a few years for all you know, and you quite possibly have no avenues to liquidate it for anything now.
I'm guessing like most things in the US: investors are looking to consolidate so they can get into monopolistic positions and extract resources from the market once they have it cornered. The risk of legislative intervention into such anti-competitive market manipulations is virtually zero.
If they get big enough, next time they steal wages, they won't have to back down. Heck, if they get big enough, they can steal wages, drive the company broke, and then get a bail out to pay the higher ups that are making the decisions that drove the company into the ground in the first place.
We then have the gall to blame Adam Smith, who didn't even believe in separation of funding and management (i.e. he didn't believe in joint-stock companies)
I'm not sure why you're getting downvoted. The valuation of quite a number of hot companies doesn't make any sense unless they can extract oligopoly rents.
As an example, take Uber. The Economist recently asked whether it can ever make money. [1] And events in the months since don't make it any clearer. [2]
I think tech's wave of quasi-monopolies (Google, Facebook, Amazon) gave investors the notion that similarly dominant players could be established in non-tech fields if they were dressed up as technology plays. So we see absurd amounts of cash being poured into things like Uber and WeWork. Unlike the previous players, we also see them going to IPO while they're still losing money.
And sadly, I think you're right about regulatory laxness. Antitrust regulation has been out of fashion for a long time. And if we see it come back, it could well be more an authoritarian political tool than any actual attempt to ensure competitive markets.
[1] https://www.economist.com/business/2019/04/27/can-uber-ever-...
[2] https://www.economist.com/business/2019/04/27/can-uber-ever-...
> And if we see it come back, it could well be more an authoritarian political tool than any actual attempt to ensure competitive markets.
I think for there to be political will to redistribute the power that concentrates in monopolies, there needs to be a clear rallying cry.
When you look at the trust busters of the 20th and 19th century, they had a clear rallying cry from the masses: improve working conditions.
I wonder if with automation taking over, the new rallying cry will be UBI? I mean, to pay for such a thing, you need to redistribute social wealth, which is now concentrating in monopolies.
People notice the concentration of money, and the lack in other parts, more than the particulars of how markets work. Then the rallying cry brings about change in unexpected ways, maybe? I don't know, but I'm hopeful.
As to getting downvoted, I'm not surprised, my take: Many people in tech now are very idealistic and have a lot vested into the companies they work with. They truly believe door dash is about 'empowering small businesses' (or whatever pretty words their employer has on the about us).
And the thing is, doordash does do that. But the reason for it's valuation, and the ultimate purpose of the investors, is rent seeking. Providing service is the way to get people hooked, it's a secondary consideration for these investors. So anything that directly or indirectly highlights this discrepancy between what the workers are trying to achieve and what the ultimate company beneficiaries are trying to achieve, will be viewed with hostility by those who so truly want to make the world a better place. Which I think is the majority here. :)
What are you talking about? Its awesome
Intervention? The government only discourages anticompetitive practices. Literally buying a competitor is not one, its subject to approval at some amounts, but is not anticompetitive behavior, as in predictably by the rules.
There should be enough role models by now to dissolve whatever egalitarian promise you were fed in elementary school. Why even waste any breath on these completely ineffective set of rules, when you already know the playbook, you spelled it out! Play those cards man, generational wealth is knocking at your door
food delivery service is blowing up because it's still extremely inefficient in the USA. you can get _anything_ delivered in Hong Kong for about $1. some hong kongers don't even have kitchens and live like that for years.
travis kalanick is investing millions of his own cash into this space.
The density of HK is not comparable to basically anywhere in the US, except maybe just Manhattan. The labour sources are also a lot cheaper.
There's room to improve in the US, like making kitchens without the attached restaurant more prevalent, but as long as you have to get in a car to deliver the food, there's going to be the same problems the rideshare industry faces.
New types of restaurants are popping up:
1) Ghost kitchens that only serve via delivery apps. You can save on rent by setting it up in an area with no foot-traffic. You can also get economies of scale.
2) Restaurants with dedicated entrances for delivery drivers. Baar Baar in NYC has a separate place where delivery workers can wait. In other restaurants, they have to wait in the limited dining area. One hopes that the workers still get to use restrooms & get some water, etc.
> 1) Ghost kitchens that only serve via delivery apps. You can save on rent by setting it up in an area with no foot-traffic. You can also get economies of scale.
You can't. This is the kind of a mistake that all first time entrepreneurs make. Delivery costs too much money. Logistics of getting your labor force to your kitchen is a nightmare.
> 2) Restaurants with dedicated entrances for delivery drivers. Baar Baar in NYC has a separate place where delivery workers can wait. In other restaurants, they have to wait in the limited dining area. One hopes that the workers still get to use restrooms & get some water, etc.
This was tried in NYC during first dot com. Remember purple shirts? They had a competitor with green shirts. That's the unproductive spaces. Rent hikes wiped those out.
Edit: Blind downvotes are laughable. Go walk into your local pizza place and talk to the owners. They will tell you why they are slowly dropping off all the apps. They are giving equivalent of a 20-30% discount in fees for the area they already deliver in.
Ghost kitchens are mostly scams. The ones that aren't are ran out of commissary commercial kitchens that cost an arm and a leg. The "ghost kitchens" are mostly not really legal, sometimes ran out of a house, marketing same stuff under different names. Most of the restaurant overhead for small places does not come from the rent of the floor space. It comes from the rent of the kitchen and compliance with the health codes. And, unlike say taxi commissions, health departments take no crap, which is why the ghost restaurants disappear rather quickly.
It is the "no one did it before" idea of people who have never ran restaurants. It always flops. If it did not, Union Sq Hospitality would have been doing it for years.
I'm not sure why you're getting downvoted. A beloved restaurant near my house is closing down, and the owner is pretty clear about how ugly the economics of delivery are: https://missionlocal.org/2019/05/custards-last-stand-mission...
Whoa, I had no idea the commissions were that high.
I'm not sure why all the downvotes here, either. In the SF Bay Area, several companies have tried to be "delivery only restaurants" and they've mostly all been failures -- some spectacular VC-assisted flameouts, some quiet fades.
Ghost kitchens may be scams but I know at least of one QSR in Manhattan that does them successfully. In some instances they are quite profitable if you generate the volume.
Your commission is also a bit off, perhaps you speak from full service experience?
While true that base comm is 20-30, those numbers are always negotiated down. Grub/Seamless will take as low as 12 from high vol regional leaders while UberEats made some deals that are supposedly really low (McDonalds). I don’t have exact numbers but from my recollection they mentioned it in their S1.
While Danny Myers is quite smart, USH isn’t a barometer for the entire industry as his focus is more on full service.
> Ghost kitchens may be scams but I know at least of one QSR in Manhattan that does them successfully. In some instances they are quite profitable if you generate the volume.
It is a temporary fluke. If Chinese take out operators that are able to do razor thin margins and nearly completely unpaid labor force cannot make them work then no one can make them work
> While true that base comm is 20-30, those numbers are always negotiated down. Grub/Seamless will take as low as 12 from high vol regional leaders while UberEats made some deals that are supposedly really low (McDonalds). I don’t have exact numbers but from my recollection they mentioned it in their S1.
It is a creative lie by omission. Same kind of lie that Grubhub had when it forgot about the $$ it charged restaurants for answering phones that Grubhub setup.
There are maybe a dozen chains (McDonalds/Burger King/Chipotle/Qdoba/Subway/White Castle, etc) that can negotiate $1 fee. Your pizza place, your taco place, your take out sushi joint don't have this ability. If they did then the VCs would not fund DoorDash or GrubHub.
> While Danny Myers is quite smart, USH isn’t a barometer for the entire industry as his focus is more on full service.
Have you heard of Shake Shack?
> It is a temporary fluke. If Chinese take out operators that are able to do razor thin margins and nearly completely unpaid labor force cannot make them work then no one can make them work
They can, and they do. One way some chains achieve this is by raising prices vs. in-store. By offsetting the cost, the economics makes more sense.
> It is a creative lie by omission. Same kind of lie that Grubhub had when it forgot about the $$ it charged restaurants for answering phones that Grubhub setup.
> There are maybe a dozen chains (McDonalds/Burger King/Chipotle/Qdoba/Subway/White Castle, etc) that can negotiate $1 fee. Your pizza place, your taco place, your take out sushi joint don't have this ability. If they did then the VCs would not fund DoorDash or GrubHub.
I personally know of chains that have less than 50 locations and have negotiated ~12-15% comm. I also know of a NYC deli with one location that runs at ~15-17 comm. Its about volume. You can negotiate anything with high enough vol.
Not sure what you meant by "creative lie by omission" or if you were referring to what I said.
> Have you heard of Shake Shack?
Shake Shack IPO'd in 2015. White Myers does sit on the board (chairman), they are different companies. Also, Shake Shack has only recently started going into delivery (check their latest 10-K) they are fledglings going from their own platform (OLO) to working w/Caviar/Dash/etc.
Again, successful, but not a barometer.
> They can, and they do. One way some chains achieve this is by raising prices vs. in-store. By offsetting the cost, the economics makes more sense.
That's not allowed by the contracts. In either event 50 location chain is HUGE. Olive Garden has less than 1000 stores nationally. If you have 50 stores your chain is in the real estate business and it happened to have food as an additional line item.
> I also know of a NYC deli with one location that runs at ~15-17 comm. Its about volume. You can negotiate anything with high enough vol.
Unless you happen to own that deli I'm going to tell you that you are being lied to. No one does enough volume to do it.
> Not sure what you meant by "creative lie by omission" or if you were referring to what I said
Something else is padded. Delivery services won't make any money off the 10% commission.
> Also, Shake Shack has only recently started going into delivery (check their latest 10-K) they are fledglings going from their own platform (OLO) to working w/Caviar/Dash/etc.
The argument was that USG type companies only do full service restaurants. That's simply not the case.
> Again, successful, but not a barometer.
It is because it has been around longer than most of the startups in the delivery space, not to mention vendors to the startups in the delivery space that do not have actual restaurants.
> Ghost kitchens are mostly scams.
They are not. They are just a different model than a standard restaurant.
What I have observed in my area (UK) is that instead of expanding by setting up a new branch in the costly centre of town, some chains work with Deliveroo to open a ghost kitchen in the industrial area.
That allows them to expand to a new town while saving on capex.
> They are not. They are just a different model than a standard restaurant.
They are not. It is called commissary kitchen. Has been around forever. Those are the kitchens that support food trucks. Or the kitchens that support prepared food not made on premises in supermarkets. They don't work for a-la minute production even if a-la minute is just used to load it into driver's gear.
> What I have observed in my area (UK) is that instead of expanding by setting up a new branch in the costly centre of town, some chains work with Deliveroo to open a ghost kitchen in the industrial area
That simply means real estate has not adjusted to it. It will.
A standard restaurant must be located where people will walk in. It must be pleasant premises for customers.
If the target is to work only with Deliveroo or other delivery app then everything can be stripped apart from the kitchen and that kitchen can then be located where it's cheapest since no customers will ever walk in or even know where it is.
That's not a scam. That's an adaptation, an optimisation for a specific business model.
> That simply means real estate has not adjusted to it. It will.
Premium retail space is going to cost more than industrial space that may be located anywhere in a much wider area.
That's how people who do not understand restaurant industry think of it. It is wrong.
Restaurant wants to minimize dwell time, which is a time that the restaurant does not spend cooking food for a-la minute order. The closer the restaurant is to the customer, the smaller is the dwell time if the customer is always available. That's the reason why the restaurant wants to be where the customers are.
Delivery-only restaurants dwell time is always larger than the walk in restaurant unless the delivery drivers are immediately and always available when the food is cooked and the time to deliver the food to the customer is the same as time time to turn it over across the counter ( for the same type of food ) which means the restaurant will always make less money in the identical situations.
The only thing that the restaurant gets from the delivery only portion is marketing when its menu is available to people who do not know about it. And it competes with every single other restaurant available in the delivery order. All that for the 20-30% discount off every order. That's the math. It is groupon, all over again. And the arguments of those in awe of the business model are exactly the same. It does not work because the best slammed take out places have 20-30% operating margins.
Finally, there's a startup called Crave which is going to kill this entire DoorDash/Delivery/Deliveroo type model - it gives restaurants ability to dynamically price their checks via discounts ( think surge pricing backwards ) for a low, flat per sale price. Think of it as Yelp Cash, but more dynamic and less connected to Yelp.
This actually solves the problem of dwell time. By offering a dynamic discount based on how busy the place is the restaurant increases a flow of orders into the business.
Sounds like the aim of "Monday specials" and "Happy Hour" brought to digital age.
Can you elaborate on the delivery costs and employee travel aspect?
Surely by selecting a location that balances low rent versus proximity to residential areas you could lower operational costs while still ensuring staff could get to work and keep delivery costs low? I get that running a restaurant is a complex and risky business, but i dont think youve really addressed why a delivery only kitchen would fail consistently.
> i dont think youve really addressed why a delivery only kitchen would fail consistently.
It would fail consistently because it has a worse dwell time compared to a comparable restaurant that also does take out while providing no real advantages. There are just no margins for error in a restaurant business. If your competitors dwell time is 10 minutes and yours is 30, you are done.
Here's is why the proximity to the residential area is important: kitchens are staffed by the group of people on the lowest tier of the economic ladder. These people use public transportation to get to places, not cars. The industrial zones where the rent is cheap aren't accessible easily via public transportation which means the kitchen staff has problems getting there, which in turn means that it selects other places.
If an industrial area is easily accessible by a car from the residential areas which is what is necessary for it to be a good source for deliveries then the rent in that area is only slightly lower than the rent in the residential area so there's really no win at putting the kitchen there. To get a win on rent one needs to put it 20-30 minutes away where the rent could be significantly cheaper. Except that it means that it takes at least 30 minutes to get to the border of the residential area with the food, plus additional 10-15 minutes inside the service area, which means the delivery only saving money by putting the place in the cheaper industrial area restaurant has the following minuses:
1. Difficulty to get kitchen staff 2. 45 minutes of driving to get from its kitchen to an average customer if the driver is immediately available at the location [ the drivers is not at the location: the driver is probably at the transit somewhere in or around the residential area so the turn around becomes at best ~1 h ]
It's competitors located in the residential areas:
1. Don't have the logistical problem at hiring staff 2. Can get food delivered in sub 25 minutes of driving
The only positive for the outskirts kitchen is ~20-30% at best save on the rent.
Dismissing things in 2019 by referencing that they were tried in the dotcom bubble ... Two decades ago ... Is not a very powerful argument
> Dismissing things in 2019 by referencing that they were tried in the dotcom bubble ... Two decades ago ... Is not a very powerful argument
Cost structure has not changed in restaurants that do take outs.
Delivery services in the areas where they ( delivery services ) could be popular and are popular solve a non-existent problem for restaurants ( delivery ) by eating into restaurant's profit margins. Not only that, by longer-term delivery services are terrible for restaurants because suddenly every restaurant in 1-2 mile radius even in the most high density city becomes a competitor while the margin is lower.
Isn’t the whole point of history... to learn from it?
Are you suggesting that something changed to make this different? If so, what?
Smart phones (the associated app ecosystem, constant IP connectivity, GPS, and stored payment methods) and better computer mapping/route planning systems being ubiquitous.
I remember around 2000 in order to order ice cream for delivery having to call Kozmo (or maybe it was Webvan) on a voice phone and talk to a person like some kind of savage.
It seems like the smartphone and good map data could transform something that was terribly inefficient 20 years ago into something that's efficient enough to be profitable now.
> call Kozmo
Yes, those were the purple shirts! Thank you for reminding me the name.
The thing is delivery is not an issue. In the markets that have density, local places figured out delivery. My bodega will deliver whatever I order. For free. So will four other bodegas in the immediate area. The guy who owns the wine store will deliver for free. So will the taco joint. Or PR chicken shack It will be done by the kids of people who own those places. Or by their relatives. Or by their helpers. Yes, all of them would also try UberEats and Grubhub and Seamless and others. All of them will drop those services after a few month ( all of them did ) because they are in a real cut throat market and they know what starts costing them money.
So we get to the areas with less density, which is the burbs and near rural. Such as, say, Bucks County in PA within a 20 minute drive of Doylestown. There are probably about 100 places total to get food from, including Wawa, take out places, casual restaurants and "upscale" sit down places. The issue there is that general delivery is not profitable, which is why none of the places deliver outside 5-10 minute drive. Their customers have cars and driving 10-20 minutes is not a big deal for a customer. The max time they are willing to wait for food is cook time + round trip time. Delivery services can't compete there because they can't beat the cooktime + roundtrip time ~ delivery is free option
HK was just an example. it's true for most/all chinese cities.
Most/all Chinese cities are denser with cheaper labor than any US city so the point stands.
Metro Manila is not as dense but delivery here is so cheap. Grab and Lala are huge in Manila.
Labor costs in Manila are much lower than Europe or the US.
I mean, that's already implied if you look at the comment I'm responding to.
Are you sure about the first point?
https://en.wikipedia.org/wiki/List_of_United_States_cities_b...
Neither Shanghai or Beijing would make top 20 on this list
Did you even click on one of the "cities" on that page? The size of Guttenberg is 0.196 sq. miles. It's a tiny part of a city in a small state. You're comparing apples to oranges. A more reasonable comparison would be all of New York City or all of Los Angeles to Shanghai which would be more interesting.
> HK was just an example. it's true for most/all chinese cities.
Chinese cities have access to incredibly cheap labor, far more so than most cities in the US or Europe.
Yep, where I am $15 meal on UberEats costs about $22.50 delivered as of right now.
Hong Kong is a cube and the US is a plane. Delivery costs are not comparable
The fact that Hong Kong is one of the most densely populated areas of the world does help in this regard.
I think you meant to say that Travis is investing millions of his fund's cash, NOT his personal money. Is that correct?
His fund is entirely funded from personal cash, so it's broadly the same thing.
Ah, I didn't know that. I thought there were other LPs in the fund.
A man gotta have a hobby I suppose..
Talk about a HUGE misunderstanding about a HUGE amount of the United States.
A variety of restaurants just doesn’t exist in many places. It’s fast food, fast casual, and maybe a couple of local pizza/taco places.
Beyond that, good luck.
Presumably we're not talking about Shoney's country, if we're talking about food delivery service models.
Incidentally, that was my first estimate for how far in the country I was when I travelled a lot for work: "How many reviews does {insert fast food restaurant} have on Yelp?"
Turns out, people only leave lots of Yelp reviews for Taco Bells when that's the only thing around.
They make a lot of profit, recycling it buy up and coming startups to maintain market share and the business model.
> They make a lot of profit
I have always heard food delivery as a business is a great way to lose money. Do you have any examples of companies doing it profitably?
Different market, but Gojek does it profitably. They do delivery, ride hailing, and a bunch of other stuff, and all of their segments are profitable, except ride hailing. They also have a slightly different model, which might not work in other markets. They don’t need to onboard merchants in the same way, because with them the driver pays for the order, and then the customer pays the driver, either in-app or with cash.
Interesting business model, but Jakarta is insanely dense (largest city in APAC) which is probably why its more profitable. In the U.S. you have urban sprawl and suburbs, which increase variable costs of delivery.
Jakarta has ridiculous urban sprawl, has worse traffic than any city in the US, and floods for months in the year. I lived there for years, it’s much harder to get around than LA or NY.
That probably explains why their model has the driver taking on the liability then.
The driver doesn’t take on any liability at all, it’s all backed by the company. I’m not sure why you’re so keen to shit on this business when you don’t seem to know anything about it or the market it operates in.
Relax, I'm not attacking you or the business - you said this: "because with them the driver pays for the order, and then the customer pays the driver" which seems like a liability for the driver. It makes sense in a region that floods regularly.
They just handle the transaction. The system is technically exploitable from a driver perspective. Earlier this year a group of drivers were arrested for defrauding the company with hundreds of fake orders.
Unit economics on food delivery sucks (if that’s your only business)...too many inefficiencies with travel to/from (time wasted w/empty hands).
Food delivery as part of a QSR can be profitable but most businesses don’t track margins efficiently enough to know the difference.
Every pizza chain.
They make money selling pizza (super high margin), not at delivery.
It's a distinction without a difference. It's not like they lose money by offering the delivery service, so they've found some model where delivering food is profitable, it's just that the model involves a tight coupling with the food producer.
It might be more accurate to say that food delivery as a separate business from producing it is hard to profit on.
Unless you’re Papa Johns and you tack on a delivery fee that doesn’t go to the driver.
Too late to edit my original comment to clarify: the incumbents are profitable, have enough revenue to recycle into buying up new competition in existing and different markets, keeping the their position and business model alive.
This is the kind of announcement where all three companies put out a happy blog post and no one knows the actual reasoning behind the acquisition or sale.
New business model for Square?: Acquire companies, onboard them onto Square's business platform, sell them
That’s not a bad idea.
I’m so confused by DoorDash’s sudden rise. I think I may have used it once. What is separating DoorDash from UberEats, Postmates, Grubhub etc?
What separates them is the ridiculous amount of VC funding they took and have used on a combination of marketing and buying exclusives. Every actual experience I've had with DoorDash has been rather poor though, and they've gotten in trouble many times (they even got sued by In-N-Out a while back when they re-listed In-N-Out against their wishes using a knockoff logo to avoid trademark infringement). The only reason I ever use them is if I really want something that they have an exclusive on, and even that is rare (usually I'll eat somewhere else rather than order from DoorDash).
> I’m so confused by DoorDash’s sudden rise. I think I may have used it once. What is separating DoorDash from UberEats, Postmates, Grubhub etc?
Network effects are pretty strong. Locally, I don't know anyone who uses anything other than SkipTheDishes.
How are there network effects in delivery apps? It's a bipartite graph, and the number of restaurant companies is tiny compared to the number of users.
Once an app reaches critical mass for a location, the restaurants all go where the users are.
So weird. I never even heard of that one. I've been using Seamless forever which was bought by GrubHub years ago but it has a strong brand in NYC.
+1 for Seamless in the city, at least within my family/close friends. Might be because NYC has a strong fast delivery network within most restaurants and doesn't truly need a decentralized delivery network. The big draw to these apps to most of my friends has been the delivery of previously undeliverable food (Chipotle, McDonalds etc).
EatStreet or GrubHub here
I use doordash 2-3 times a week. It's convenient and cheaper than Uber eats with dashpass. Just remember that if your too amount is less than 6$ it doesn't go to the drivers. It's better to too them with cash
You don't feel upset about how they were, in my opinion, defrauding you and the driver of the tip money? After I learned about what they were doing with tips I decided not to use them again, and considering how much competition there is I really haven't lost anything of value.
This isn't meant to be a triggering comment. I'm genuinely curious to learn about other people's reactions to DoorDash's former tipping system.
Personally: having learned of their scummy practices, I will not be supporting DoorDash or Instacart ever again, regardless of whether they change policy now in response to being exposed.
Why so unforgiving? Because you can't deter unethical behavior by merely asking for a perpetrator to discontinue the unethical behavior if/when exposed. The expected value of a penalty needs to exceed the financial reward of the behavior it is meant to punish. Furthermore, I don't trust companies who are likely to be unethical the moment someone isn't looking.
By their scummy practices, are you referring to their tipping policy?
I'm not sure I fully understand the backlash. Yes, the tipping policy didn't meet people's expectations ... but it seems almost exactly the same s how tipping + wages work for wait staff in restaurants (where restaurants are allowed to pay them less than minimum wage, as long as the difference is offset by tips).
Why are we okay with this policy, which is enshrined in law, for restaurant wait staff but not for delivery drivers?
A reasonable argument is that tips should always go direct to the staff and they should also at least make minimum wage, but that'd represent a huge change from the status quo and people aren't freaking out about how restaurant staff are compensated, so it seems like this hits a different emotional chord for some reason. Maybe it's more evil-seeming coming from a large tech-ish company rather than SMBs?
Firstly, restaurants are not allowed to pay "less than minimum wage" in any US state, though some states have two separate minimum wage rates for tipped and untipped employees. (NB: all west coast states in the US have just one minimum wage that applies for all employees, tipped or not.)
But more fundamentally Instacart and Doordash deceived consumers in a way restaurants don't. Say minimum wage for tipped employees is $4, a restaurant pays a $5 wage and I tip $2, I expect that the staff gets the $5 wage and the $2 tip (whether pooled or otherwise). If the restauranteur uses my $2 tip to cut wages below $5, then that would be illegal and outrageous. The minimum wage amount of $4 does not even enter into the calculation in this example, except defining the floor for the restaurant to pay its tipped employees.
> Firstly, restaurants are not allowed to pay "less than minimum wage" in any US state, though some states have two separate minimum wage rates for tipped and untipped employees.
This is a difference without distinction. It is the separate minimum wage for tipped employees which allows the restaurant to pay less than the minimum wage. If the tipped employee minimum wage is $A and the untipped employee minimum wage is $B, and the tipped employee earns $C in tips:
The restaurant must pay $A. If $A + $C < $B, the restaurant must pay $B -($C + $A) more so the employee earns $B. Else, the restaurant doesn't have to pay anymore.
That's exactly how DoorDash works. They pay $1 (equivalent to $A), guarantee another amount (equivalent to $B), and if $A + $C < $B, they fill in the difference.
> But more fundamentally Instacart and Doordash deceived consumers in a way restaurants don't.…
How so? They operate exactly as restaurants do in tipped employee minimum wages states in regard to tips.
> Why are we okay with this policy, which is enshrined in law, for restaurant wait staff but not for delivery drivers?
Personally, I am not okay with the law. An employer should pay a living wage. That said, I'm biased because I would vastly prefer to avoid the anxiety I feel around figuring out the right amount to tip such that I don't feel scummy nor taken advantage of. I went there to eat some food, not feel anxious.
But this tip goes towards minimum wage is illegal in California where all these companies are based.
I just did the same with Amazon since they have the same tip practices as DoorDash. That and reading about the Ring Alarm system being sold by law enforcement it just put me over the edge.
Can I avoid AWS? No, but I can certainly not spend my own money directly on any of their services.
Have you been tipping on your AWS bill? Or the package delivery workers? (What does Amazon have to do with this?)
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I drove for DoorDash and I absolutely prefer the guaranteed amount with them keeping the tips.
First of all, people tip beforehand so it's not based on quality of service anyway.
Second of all, it makes DoorDash a steady stream of income instead of hoping that you'll be tipped enough. Most people don't tip and if the tip is large enough, you do receive the tip.
I think this wasn't really a bad deal for the drivers, but it was essentially a lie to the consumers: they think tipping will make a difference for the driver, but instead it only makes a difference to DoorDash. What's really needed is a minimum wage that applies to everyone, regardless of employee status.
I just give $0 tips through the DoorDash website (and you have to select $0 TWICE, at both the top and bottom of the checkout page, by the way) and give them tips in cash.
That way DoorDash provides at least a partial matching contribution to my tip instead of eating from my tip.
I don’t have a problem with it although I think it’s good that they changed it. If drivers complain “we’re not getting enough tip” and the company says “OK we guarantee your tips will be at least $5 on this order” that’s the behavior you get. The customer feels ripped off by a program that ostensibly benefited drivers to begin with.
They weren't "defrauding the drivers of tip money" they were normalizing the variance in payments across deliveries by not directly paying the drivers tips and instead guaranteeing a minimum payment amount which was above the delivery fee.
Once they modify their system and move to a system where drivers get 100% of the tips the drivers will probably see approximately the same payouts on average, just with higher variance across drivers. Basically what DoorDash was doing is the same as tip-pooling at a restaurant which isn't exactly a controversial practice.
Tip pooling makes sense because a restaurant experience is composed of the work of multiple players in the front/back of the house.
DoorDash drivers don’t rely on other drivers. So why should a good driver compensate for the poor tips of a bad one?
Why do you expect bad delivery drivers to have poorer tips? I've never adjusted a tip based on the quality of the driver, because I can't measure that. Anyone can hand over a bag of food, so the only thing I see is how long they took. But whether they arrive quickly or slowly is probably the kitchen's fault, or luck of overlapping orders. Realistically, I have nothing to rate them on.
Maybe because the tip has at least as much to do with the customer as it does the driver.
There's not a lot of evidence that tips actually reliably vary in response to quality (easy to Google, but stuff like https://scholarship.sha.cornell.edu/cgi/viewcontent.cgi?refe... ).
Tipping frequently matters more about the tippers mood, the tip-receiver's race and gender, and (of course) order size.
This isn't like restaurant tipping where bad service gets 10% and good service gets 25%+ It's mostly bi-modal, drivers frequently don't get tipped at all. In this scenario reducing variance makes sense because (as many other commenters here note) unless the experience is overwhelmingly bad the tip generally has more to do with the receiver of the order rather than the driver.
The entire point of the tipping system is to have a high variance. The promise, but not guarantee, of tips is what is supposed to incentivize better service.
But in the case of the DoorDash, if you tip using the app, you tip long before you know what the service will be.
It's like walking blindfolded into a restaurant and putting your tip in the hostesses hand before you even see any of the staff, or have any indication of service.
I see, I've never used DoorDash and assumed it was like Uber and UberEats where you tip afterwards.
That's a pretty silly system.
That's true, although to be fair, there's only so much a delivery driver can do service-wise compared to a waiter. Your only interaction with the driver is picking up the order. The driver isn't responsible for the time the restaurant takes to get the food to them, and isn't even entirely responsible for the time it takes to get the food from the restaurant to you -- there's traffic, weather, and the possibility that DoorDash demands they batch orders (something I've heard but haven't confirmed). I'm not sure it's fair to hold a third-party delivery driver responsible for the correctness of the order, either, rather than the restaurant.
It seems like what you're arguing is that delivery drivers should not be a tipped class, but instead just guaranteed a higher rate.
Well, my actual thought was more that adjusting tips based on perceived delivery driver performance is somewhat unfair based on all the things beyond the driver's control. (I'm not sure if the downvotes I got are from people who think I was arguing "never tip drivers" and are mad because they think I'm a jerk, or people who realized I was more arguing "don't undertip drivers" and are mad because they think I'm saying undertippers are jerks, and fair, I am.)
Anyway, yes, actually: I think there's a good argument to be made for a higher wage for delivery drivers -- and all waitstaff -- that makes their earnings less dependent on tips. If people want to tip for exceptional service, that's fine, but there are a surprising number of people who treat tips today as if they're only for exceptional service, will cut tips in half or even to zero for things beyond the server's control (e.g., the restaurant will not accept your clearly expired coupon), etc.
I entirely disagree.
Things a dasher is responsible for:
1. The correctness of the order. Yes, it's fair to hold them responsible for this, because they have the order and they are at the restaurant. If the order is wrong, they can easily correct it then. If it's wrong at my house, now what? Probably I'm unhappy, even after Door Dash offers me credits
2. Keeping the food in good shape. That includes heat (some dashers use a heat bag), but it also includes keeping soup, chili cheese fries, and other things upright. (All things some dashers have screwed up for me.)
3. Paying attention to notes. I eat my Taco Bell with diablo sauce. Did he include the sauce I asked for in the notes? (Bonus points for including things like napkins and sporks without being asked.)
4. Polite behavior. Most are polite, but some practically throw the food at you and run away.
They just changed that in response to the backlash of the article from the NYT.
They just announced they plan on changing the policy. It has not changed yet.
Also they announced they were "investigating the issue" for 4 months before, and then didn't make a change. So let's not congratulate them until its been confirmed to be actually working as drivers and customers expect.
While this was definitely not clear to the consumer, it ended up being a preferable model for the drivers as they would get a higher pay on most orders. Not saying that it should be that way, but saying they did that just to steal tips is not true. It was used to guarantee a minimum amount on orders that don't make sense financially.
What the company should have done, ethically, is to just increase base compensation for drivers. You shouldn't be able to dynamically change base compensation based on the quality of the tip that the driver is rewarded, that is pretty antithetical to the entire idea of a tipping economy.
That's a very valid viewpoint and what's done by Grubhub or Caviar I believe. But it results in lower pay for the drivers overall because the guaranteed minimum is lower than the one DoorDash usually offers.
Honestly, more than anything it's just user preference.
There are some restaurants that are exclusive on certain platforms (UberEats for example is exclusive with McDonalds), so if you want that, there's only one game in town, but most people I know who use these platforms regularly (myself included) aren't using them for a specific restaurant. It's more like, "I want sushi! I wonder what is available on my platform of choice?"
Beyond they all have slightly different pricing models, but at the end of the day they all cost about the same.
The exclusive deal between UberEats and McDonalds is no more https://www.theverge.com/2019/7/16/20696711/mcdonalds-doorda...
Ah, I was unaware that that had changed
When Grubhub acquired Eat24 from Yelp and removed the group order feature in favor of signing up for a "corporate" account, it sent much of my business to DoorDash.
DoorDash offers a lot of coupons and promotions and allows as many accounts as you care to make.
Here's a recent article that shows relative marketshares:
https://www.vox.com/recode/2019/7/11/20688108/postmates-acqu...
Looks like Doordash doubled its US marketshare in the last year mostly at Grubhub's expense while others have remained more or less flat.
My understanding is that each service dominates a set of markets. Caviar owns SF, Postmates owns LA, Seamless has NY (to the best of my knowledge).
I dunno, compared to drivers dedicated to a specific business, I've yet to have an experience with UberEats/Postmates/Grubhub/DoorDash that wasn't leaving me with food that was cold, either because they did not use insulated bags, or they simply took way too long to get to me. When a joint is 15 minutes away, it'd take the driver a literal 60 minutes to drive from the restaurant to me. Your mileage may vary, depending on your region, but it's just a waste of money and time if you ask me.
I’m not an expert but I know that DoorDash partners with large established chains, they power Chipotle and Wendy’s delivery services. GrubHub is getting in in this too: they power Taco Bell’s new delivery service. I bet these deals lead to a more simpatico relationship monetarily. I bet it also avoids stuff like what is said in this comment https://news.ycombinator.com/item?id=20588348
My experience is that it's somewhat regional, but it doesn't feel sudden at all to me. I've used DoorDash for years, and it's because in my area they have much more selection of restaurants, and often faster delivery (which I assume means more drivers). Uber Eats doesn't even deliver to my house even though Uber covers my area.
I don't get it either. They're considerably more expensive than Postmates, and have consistently acted shady in my dealings with them.
Personally, Foodler had some nice features I like and Grubhub bought and killed them so I'm not going to be using Grubhub. Can't say I have a strong opinion among the others.
Foodler had some nice features such as not being completely horrible.
I miss Foodler so damn much.
For what it's worth, the general vibe I've gotten from couriers has been that Caviar is one of the best food delivery apps for them, and that DoorDash is among the worst.
As a user though, Caviar is the worst delivery service I have ever used though. Food is often cold & sometimes wrong across 3 cities. I have stopped using it, even when it is the only option for a restaurant I like.
Super interesting it varies by person. Caviar has had the best delivery experiences consistently and if I've ever had an issue like a squished pizza they immediately dispatched a new one or gave me a refund. Plus they are cheaper than Uber Eats (the consistently worst app for me) and Doordash delivering to Pacific Heights/Cow Hollow in SF.
Agreed, I've recently stopped using Caviar altogether after numerous wrong or undelivered orders in a row, all of which they failed to take any real responsibility for and blamed on the drivers. Adding insult to injury, Caviar seems to be more expensive than alternatives.
It's funny, I know almost no two people with similar experiences (user or courier).
For example as a user I have literally never had a good experience with Caviar. It almost always wrong in different ways.
As a courier one time the guy called and said that the restaurant was taking so long that Caviar would no longer pay him to wait so we ended up paying him out of pocket to cover it (he said we could cancel and get our money back but that he'd also get nothing after waiting for a very long time).
Uber Eats, as a user, has usually worked pretty well. As a courier one of them told us they constantly have out of date restaurant menus, people order from them, the restaurant substitutes or ignores it completely and now they have to deal with an angry person.
It really feels like restaurants are not equipped to handle these types of services and all of the services don't train their people if at all, as well as treating them kinda like crap many times.
I was a Caviar courier in a past life, it paid very well for someone with just a bike ($20-$25/hr before taxes).
That courier was full of shit. You get paid regardless of customer status, and you also get paid per minute over a certain delay threshold. Sounds like you just got a bad actor.
> That courier was full of shit. You get paid regardless of customer status, and you also get paid per minute over a certain delay threshold. Sounds like you just got a bad actor.
I mean, that's basically what he said but that it had been an hour and a half (IIRC) and he said Courier would stop paying him to wait.
I've never been a courier so I wouldn't know.
I live in a building that has a confusing relationship with it's name vs. the street its on. Uber (and Uber Eats) has never worked for me properly, and I always have to meet the courier at the door. Caviar always delivers directly to my door.
I hear you. It was so difficult for couriers to deliver where I live that I literally developed a single page website with pics and instructions. Now I just text them the url and access code.
I had to provide detailed instructions as well, and as soon as I did I never had another problem. But I don’t know why. My house isn’t hard to find at all. I even asked around and all my friends thought it was bizarre. (I moved here about five years ago so at the time ‘the first time’ was fresh in minds). I suspect they were relying on the map instead of address numbers because their map used to be off by two houses.
I also once opened the door after waiting about five minutes after getting the “driver is approaching” notification to hear two people bitching about “how ridiculous” it was finding my place. They were in my driveway but could not find the front door. My house is on a hill so the door is down a flight of stairs from the garage but it’s only about 20 feet away and plainly visible from the street.
The problem with where we live is more a circumstance of bad environment that messes with drivers, which upon realizing this, spurred me to make the website to include pictures.
The building itself looks like a garage from the road, so many pass by the unmarked door they need to enter the code on. Also, there's three consecutive lanes you can turn right onto, so when Waze tells them to turn right, only 33% of drivers get it correct else they get lost in a maze of parking lots and dead ends. This is also after the driver successfully navigates a roundabout (hard for some US drivers) and does not accidentally getting back onto the interstate because the lanes are not clearly marked.
Can I steal this idea? I have the same issue. I had been dealing with it via detailed instructions that I'd paste into any comment box possible thats not the restaurant one (postmates has two, at least)
Interestingly, that is exactly what Square planned to do with Caviar: integrate with Square POS so both use the same system and build a tightly integrated marketplace.
As a customer, I’ve quit Doordash. They used to have decent customer service, where, although your order was screwed up, they’d generally fix it. They had a weird habit of always offering a $5 credit though, sometimes even when the part of the order that was screwed up cost more. But you could reach a real person pretty easily.
A lot has changed since then, and we’ve had several pretty negative encounters with them including one where the CS rep basically accused us of lying about not receiving our food. (I suspect it was misdelivered because the map software they used put our address as our neighbors house two doors down.)
My last experience with them: The app told us to contact them for an ETA on our food. The actual status of our order wasn’t clear. We had a dasher and then we didn’t have a dasher. There was no way to contact them. We tried “Contact the dasher” and the number didn’t go through. We tried to use the chat functionality (which is ridiculously buried under four or five levels of clicks and even then not immediately obvious” when it used to be basically automatic if you clicked “help”) and it wouldn’t connect us. We tried another number which also didn’t go through. The website had a message about difficulty placing orders at that time but ours was already placed.
So there we sat in limbo not knowing if the food would ever arrive and no way to contact anybody. Should we just go out to eat? We didn’t know. We did use their web form contact them, but the response came way too late to not have ruined our meal time. Eventually our order was cancelled and to their credit they gave us $50 credits but meh.
This may have changed since I don't really use Caviar, but I'n not surprised since I think Caviar's delivery/service fees are the highest (which is why I don't really use it).
Perhaps keeping it separate is a good thing technically.
DoorDash app and website are a dumpster fire with usability and bugs galore.
The issue is as a user is if you bring this up to DoorDash support they have no internal process for handling reported issues with the app and website and letting the development team know.
Sounds exactly like the Cash app.
It's odd, in that I never really thought about Caviar as a competitor to DoorDash -- but that's because I know them mostly as the company that bought Zesty (just before Caviar itself was bought by Square). Zesty specializes in catered group meal delivery. The company I'm at now uses Zesty once a week; the company I was at before used them five days a week, and the company before that used a competitor (ZeroCater, I think) five days a week.
As far as I know, DoorDash wasn't in that space before; I wonder if that's part of the reason for the acquisition. (The alternative is that they may not be interested in that side of the business at all and shut it down.)
Everyone's seemed to gloss over this but this deal seems to be as much an acqhuisition as an acquisition. Do some research on who Gokul Rajaram is. He ran ads at FB and Google was a very significant leader. I don't think the margins of food delivery have changed. Remember Square couldn't get Uber to pick up Caviar for $100 million around the time Square had its IPO. Also I imagine the price involves DoorDash seems to be banking on a closer relationship with Square as well.
Question from someone that's not familiar with law, or I guess specifically antitrust (anti-monopoly?) law.
How are these acquisitions not in violation of these laws. Especially from the Big Tech Cos that slurp up literally any small competitor.
From the article:
"DoorDash's acquisition of Caviar creates a highly differentiated company with a unique brand and wide-ranging selection."
How is this not a play at eliminating competition?
It is not illegal to buy competitors (commenting only on US law). It can potentially violate antitrust laws if you eliminate all competition in a market by buying out competitors. But given the existence of Seamless/Grubhub, Uber Eats, and others, plus most of the restaurants still take phone & fax orders, it would be difficult to argue Doordash buying Caviar corners the delivery market.
IANAL, but as far as I know generally the standard is "is this likely to cause meaningful harm re: pricing/quality to consumers?" See https://www.ftc.gov/tips-advice/competition-guidance/guide-a... for a fair amount of context. Horizontal mergers happen every day in the private markets (like this transaction), and generally they're a good thing: you're likely to get a premium by selling to a strategic rather than a financial investor (e.g. private equity) since they can value synergy. And anyone who's taken an entrepreneurship course knows that having a larger variety of potential high-quality liquidity events incentivizes the creation of new businesses. The problem is when enough of a market is consolidated in a way that might allow the consolidator to adjust pricing in a consumer-hostile way, which isn't touched by this specific transaction.
To your more general question of "how is this not a play at eliminating competition" - consider it more "can we (DoorDash) make more money operating Caviar by finding synergies with our existing infrastructure, than we pay for Caviar based on a model that describes Caviar operating under Square without that benefit?" That's a question of efficiency, not competition, and it's generally a good thing.
Eliminating competition isn't illegal. Creating monopolies isn't illegal.
Using a monopoly in one industry to negatively affect businesses in another industry or gain a monopoly there is illegal.
In US law, eliminating competition is generally fine. It's only a problem when there is a monopoly or close to a monopoly. DoorDash doesn't seem close to having a monopoly on food delivery.
I'd recommend reading up on the Microsoft antitrust case. That's where most of us learned about antitrust law.
Because there is still a lot of competition? Grubhub, ubereats, and many others.
It would be very strange if all acquisitions of competitors were considered a violation of antitrust law. It's something that I would expect to be very common in a well-functioning, fiercely competitive market.
I think this is good for Square. Maybe not a good reflection on their previous, scattered product strategy but they appear to be getting more focus on fairly horizontal services for SMBs. Caviar was always a bit nichey for them.
I’m trying to figure out if their Developer API is a chasing-Stripe distraction for them or a good defensive move.
Just how much VC funding does DoorDash have?
$2bn I believe. You can tell because of how eager they are to throw money away to drive customer acquisition.
We're going to see more consolidation, but are any of these companies addressing the treatment of their delivery drivers, or issues that are starting to crop up, like delivery drivers eating food that they're delivering?
Howdy! Software Engineer at Postmates here. Our CEO has put forth an opinion piece[0] on CNN talking about his views and actions concerning this very thing. You might find it interesting:
[0]: https://www.cnn.com/2019/07/18/perspectives/principles-gig-e...
Imagine this headline 30 years ago: you'd think it was word salad from someone with mania (politically incorrect now but not then).
This seems like a smart move and a good thing for both parties, but Square’s trading lower on the news?
they released earnings simultaneously and those earnings lowered revenue forecast for the rest of the year.
https://www.cnbc.com/2019/08/01/square-earnings-q2-2019.html
Yeah a bit strange. They’re making about 300M on the transaction and it was never that clean a fit.
How much do you think Square invested into Caviar, though?
Was super confused for a while thinking this was about actual caviar...
I felt the same way about the name. I visited a coworker in 2014 and he was like "oh, hey, it's getting close to lunch, let's order some Caviar." And I was like, "uh, isn't that a little ritzy?"
Seriously, I don't know the logic behind behind that name.
Me too! $410M worth of caviar sounded like a lot of caviar!
A quick online search seems to show that 1g of caviar costs $7-$10 (presumably in bulk, not retail).
$410M is about 60 metric tonnes of caviar.
Still a better deal than buying a tier-3 food delivery company.
I'm so tired, I thought this was fish eggs.
Still cheaper than actual caviar
I wonder whether the timing of this is related to DoorDash finally backing down on handling of tips.
It takes longer than a month to finalize a $410M acquisition.
The other way around: if you're in the final stages of finalizing an acquisition, you might not want even a whiff of controversy tied to your company.