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In March 2019 a good friend who owns a few pizza restaurants messaged me [...]. For over a decade, he resisted adding delivery as an option for his restaurants. He felt it would detract from focusing on the dine-in experience and result in trying to compete with Domino's.
But he had suddenly started getting customers calling in with complaints about their deliveries.
Customers called in saying their pizza was delivered cold. Or the wrong pizza was delivered and they wanted a new pizza.
[...] He realized that a delivery option had mysteriously appeared on their company's Google Listing. The delivery option was created by Doordash.
[...] Doordash was causing him real problems. The most common was, Doordash delivery drivers didn't have the proper bags for pizza so it inevitably would arrive cold. It led to his employees wasting time responding to complaints and even some bad Yelp reviews.
But he brought up another problem - the prices were off. He was frustrated that customers were seeing incorrectly low prices. A pizza that he charged $24 for was listed as $16 by Doordash.
[...] He called in and placed an order for 10 pizzas to a friend's house and charged $160 to his personal credit card. A Doordash call center then called into his restaurant and put in the order for those 10 pizzas. A Doordash driver showed up with a credit card and paid $240 for the pizzas.
We went over the actual costs. Each pizza cost him approximately $7 ($6.50 in ingredients, $0.50 for the box). So if he paid $160 out of pocket plus $70 in expenses to net $240 from Doordash, he just made $10 in pure arbitrage profit. For all that trouble, it wasn't really worth it, but that first experiment did work.
[...] But we did realize, if you removed the food costs this could get more interesting.
[...] The order was put in for another 10 pizzas. But this time, he just put in the dough with no toppings (he indicated at the time dough was essentially costless at that scale, though pandemic baking may have changed things).
[...] Note 1: We found out afterward that was all the result of a "demand test" by Doordash. 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 onto the platform. If we had to pay a customer fee on the order, it would've further cut into our arbitrage profits (though maybe we could've incorporated DashPass as part of the calculation).
(Score: 1) by Frosty Piss on Tuesday May 19 2020, @07:58PM (4 children)
He says the pizzas cost him $7 to make yet he sells them for $24?
(Score: 0) by Anonymous Coward on Tuesday May 19 2020, @08:51PM (1 child)
Go and factor in what rent, commercial power rates, etc are and that is not a lot of overhead, unless you're selling hundreds of pizzas a day (hint: most places aren't.)
Also 24USD is about what pizzas cost here from anywhere but the largest corporate chains (dominos or little czar)
(Score: 0) by Anonymous Coward on Tuesday May 19 2020, @11:46PM
That's insane. The most expensive place within 10 miles has some $20-30 pizzas, but most places are half that or less.
(Score: 0) by Anonymous Coward on Wednesday May 20 2020, @02:27AM
We are not in a high rent city. If you want to sit in a reasonable setting (not greasy spoon) and eat your pizza in, it will be in the $20 and up range. $24 for a nice experience is about right.
For take out we used to have a Pizza Hut around the corner that did a great job, but it closed last year (speculation--their expenses were high--using extra ingredients??) Their dining area was a pit, we never ate in there.
(Score: 0) by Anonymous Coward on Wednesday May 20 2020, @03:23AM
Then buy them frozen for $10.