If you’re a regular reader of the Buzz-it news blog, you will know that we developed it to answer the unfairness inherent in mainstream food delivery apps. The high fees, high commissions and sometimes absurd conditions they put on working with them.
This week we found another absurdity that shows just how far these apps have fallen.
A pizza restaurant owner in the US actually made money from the food delivery app DoorDash by selling pizzas for less than DoorDash was paying him.
It was an absurd situation where the food delivery app was listing his pizzas for $16 each and paying him the full list price of $24. As any entrepreneur would do, he began ordering them himself to make a little extra money.
More money than sense
The restaurant owner didn’t even know he was listed on the app and only found out when customers complained about slow delivery, even though he didn’t offer delivery.
When he investigated, he found he was listed on DoorDash without even knowing it. His pizzas were being advertised at $16 each. He sold them in his restaurant at $24 and that was what DoorDash was paying him.
They knew it too.
It was what the food delivery app calls a ‘demand test’.
The app adds a restaurant to its listings and runs it for a while to prove there is a demand for delivery. DoorDash would then contact the restaurant and say, ‘look we already have x number of orders for your restaurants, so there is definitely a demand. Why not join us to satisfy it?’
It’s an effective marketing trick but just how much money does DooDash waste in this way? How many other businesses could use such a profligate model to help generate new business?
Part of the problem is the business model of some of these food delivery apps. They are heavily subsidized by venture capital or investors willing to spend their way to success. They seem willing to burn through millions just to make their app popular.
But what happens when that money runs out and the app has to begin paying for itself?
All those restaurants that have adapted to rely on DoorDash for revenue will end up paying for it. It charges commission now and investors are still losing money. What happens when they want the app to become profitable?
We will all be paying for it in higher fees and commissions. You can almost guarantee it.
A quote from that original story sums it up nicely:
“They have a test period where they scrape the restaurant’s website and don’t charge any fees to anyone, so they can ideally go to the restaurant with positive order data to then get the restaurant signed on to the platform.
“Third-party delivery platforms, as they’ve been built, just seem like the wrong model, but instead of testing, failing, and evolving, they’ve been subsidised into market dominance.
“You have insanely large pools of capital creating an incredibly inefficient money-losing business model.” (Source)
Buzz-it is different. We don’t have investors. We don’t use faulty business models. We don’t even charge commission. It’s a food delivery app designed for food businesses.
Try it to see what a food delivery app should be like.