Food delivery apps have taken over cities across the world, promising delicious food at the tap of a button.
But is it really that simple?
In this episode we discuss what the rise of food delivery apps means for us, for restaurants, and for the people who do the deliveries.
[00:00:04] Hello, hello, hello, and welcome to English Learning for Curious Minds, by Leonardo English - the show where you can listen to interesting stories and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:23] I'm Alastair Budge, and today we are going to be talking about the hidden cost of food delivery apps.
[00:00:32] Getting takeaway food, of course, isn't a new thing, but a whole range of new apps and services have made this easier than ever before.
[00:00:43] Getting the food you want has never been easier. Just open your phone, choose a restaurant and half an hour later, some delicious food arrives at your doorstep.
[00:00:54] Restaurants sell more food, you don't have to get up off your sofa and everyone's a winner, right?
[00:01:01] Well, as we'll discuss today, it's not quite so simple.
[00:01:07] Before we get right into the main course of this episode, though, let me just remind you that you can get every single episode, including all the bonus ones, plus subtitles, transcripts, and key vocabulary over on the website, which is Leonardoenglish.com.
[00:01:25] Just listening to these episodes will be really helpful, but having all of the materials in front of you will help you progress just so much faster.
[00:01:35] So that's definitely worth checking out if you haven't done so already.
[00:01:40] The link to go to is Leonardoenglish.com.
[00:01:45] Right then, food delivery apps.
[00:01:50] Depending on the country you live in, you may know things like Uber Eats, Glovo, Deliveroo, Bolt, Wolt, Rappi, Ifood, Postmates, or GrubHub.
[00:02:01] There are some differences with how they work, but the principle is pretty simple - there is an app that is free for anyone to download.
[00:02:13] You go on the app, you see a list of restaurants that you can choose from, you choose your dishes and then, like magic, a person arrives at your door with the food ready.
[00:02:24] It's great for you, the consumer; you get lovely restaurant food delivered to your door.
[00:02:31] It's convenient, as often you can just pay with a card directly on the app, so there isn't the awkward encounter where you have to ask for change, or you don't have exactly the right amount of money.
[00:02:44] And in these past few months where people have been at home more frequently than usual, it has proven to be a very welcome convenience for lots of people.
[00:02:56] All for a small fee, sometimes even zero fee for you, or a fee that seems very reasonable for the service of someone literally delivering the food to your door.
[00:03:09] And the selling point for restaurants, the advantage for restaurants, is that they can sell more food and that they can make more money.
[00:03:19] Restaurants, being physical locations, are of course limited by the amount of people that can sit inside them.
[00:03:28] If they're full, they're full, and they have to wait until someone leaves a table until they can accept new customers.
[00:03:36] These food delivery apps promised restaurants that they would be free of their physical constraints, the only limit to how much food they could sell and how much money they could make would be how quickly they could actually produce the stuff.
[00:03:53] Plus there would be fewer costs, no serving staff, no washing up, no advertising to get customers, the app would manage it all.
[00:04:02] All the restaurant would have to do is concentrate on making great food and everything else would be taken care of by the app.
[00:04:12] What could possibly go wrong?
[00:04:15] Well, when these apps first started, in many cases almost 10 years ago, in some cases almost 20, everything was great.
[00:04:25] They were a welcome new source of customers and restaurants that partnered with them ended up being able to increase the amount of money they made, and in many cases becoming more profitable.
[00:04:41] Yes, these apps did take quite a large commission on the cost of food, often up to 35%, but that was sort of okay; they were doing the deliveries, doing the marketing, and that was a, just about acceptable percentage to take.
[00:05:00] The restaurants could still make more money through partnering with these apps.
[00:05:06] It was a win-win situation.
[00:05:08] However in recent years, how helpful these food delivery apps actually are has come into question.
[00:05:18] Firstly, there are some quite shady tactics that some of these companies have employed to force restaurants to use their service.
[00:05:29] One in the United States, Grubhub, was found to have created its own versions of websites for restaurants so that customers think that they are on the website for a restaurant and think they are ordering directly, but it turns out they are ordering through another company, which then takes a slice of commission.
[00:05:53] With these websites and within their app, they use a different phone number, so that phone call goes to a centralised number that you or I might think is the number for a restaurant, but actually it belongs to the food delivery app.
[00:06:12] The reason that this matters is that these apps often charge restaurants just for receiving a phone call like this from a customer.
[00:06:24] There was a case in America where a restaurant was charged $9 by a food delivery app just because a customer called up to ask whether they had gluten-free pasta.
[00:06:37] So restaurants are paying these apps, even if they don't make any money from customers.
[00:06:45] The amount that these apps take in commission has also come under renewed scrutiny from restaurants.
[00:06:54] It can be up to 35%, which, on second thought, is an awful lot for a restaurant.
[00:07:02] Yes, there is no washing up, no costs for serving staff, and all they need to do is provide the food.
[00:07:09] But restaurants work with very small margins - they don't generally make much profit anyway, and paying a third of the money you get out to a food delivery app can make running a sustainable business very difficult.
[00:07:28] What's more, when these food delivery apps run offers, so $10 off or get 20% off today in order to entice customers, the commission that they take from the restaurants is often calculated from the normal non-discounted price, so it's the restaurant that is giving you the big discount - the food delivery app is still getting all of its money.
[00:07:56] To give you an idea of exactly how bad this can be, there was a photo that was shared by the owner of a Chicago pizza restaurant called Chicago Pizza Boss which detailed exactly how much money his restaurant really got after all of the fees that the food delivery app had taken.
[00:08:19] This restaurant had partnered with Grubhub, the food delivery app we heard about earlier that made the websites for companies without their permission, and out of a total of $1042 worth of pizzas that it had sold over 42 different orders, after all of the fees and commissions that Grubhub took, the restaurant was left with just $376.
[00:08:51] So it was left with $376 after selling a total of $1042 worth of pizza.
[00:09:00] So it received 36% of what it would have normally done.
[00:09:07] Obviously for a lot of restaurants, this just isn't viable.
[00:09:12] They can't continue like this.
[00:09:14] Especially during coronavirus times when lots of them have had to shut their doors to dine-in customers, it has been even harder. They have become even more reliant on these food delivery apps, and even if they hate paying the commission, having some money coming in is better than none.
[00:09:38] But despite the fact that these apps are all taking such high commissions, at least from the restaurant's point of view, the majority of them are still losing large amounts of money - they are not profitable.
[00:09:54] They are all doing basically the same thing - bringing you exactly the same food from the same restaurants, and the only thing they can really compete on right now is price.
[00:10:05] So they are running all of these discounts and promotions, offering incentives for both restaurants and customers to use their app, but they still aren't making enough money to be viable businesses.
[00:10:22] And this has led a lot of people to believe that this business model of instant on-demand food delivery just isn't possible at such low prices.
[00:10:35] At the moment it is being funded by the investors of the companies; they believe that if they put enough money into these companies, then eventually they will turn profitable.
[00:10:48] But in the meantime, there is intense competition, discounts and offers in what's called a race to the bottom of pricing.
[00:11:00] If you can get exactly the same meal delivered by three different food delivery apps, which one would you go for?
[00:11:09] Well, I know what I'd go for - I'd go for the cheapest of course.
[00:11:13] And this unfortunately is where the problem lies.
[00:11:17] These food delivery apps are incredibly convenient for us, for consumers.
[00:11:23] They are cheap, too cheap even, and the result is that the restaurants that actually make the food are being squeezed, they are suffering with these large fees.
[00:11:36] So if the current model isn't feasible in the long term, what will the future hold for restaurants and food delivery apps?
[00:11:46] One quite interesting development is something called dark kitchens.
[00:11:52] These are space normally in cheap industrial areas that can be rented by restaurants to have delivery-only kitchens.
[00:12:02] Instead of having all of the food cooked inside your normal restaurants, a restaurant can rent a fully functioning kitchen and have its chefs work in there, but only for delivery.
[00:12:17] This means that it's much easier to increase the amount of meals that a restaurant produces without taking on extra fixed costs.
[00:12:28] The concept was made famous by someone called Travis Kalanick, who was the CEO of Uber, the ride-hailing company.
[00:12:39] But now these are all over the world, so you might think that you're ordering your food from your favourite restaurant, and you can imagine the people in the kitchen lovingly preparing your food, but in fact, they may be in a trailer in a carpark or industrial zone in a completely different kitchen, or even cooking beside chefs from other restaurants, making you the same delicious food, but from a place you've never been to.
[00:13:11] There are some serious investors betting that this is the future, saying that, much like people used to make their own clothes 300 years ago, but we don't now, in 50 years time the idea of making your own food will be equally foreign.
[00:13:30] I'm not sure I completely agree with that, and I, for one, think it would be a real shame if we lost the joy of home cooking.
[00:13:39] But food delivery is evidently booming and it is predicted to be a $365 billion industry by 2030.
[00:13:50] So it certainly isn't going anywhere anytime soon.
[00:13:55] One thing you can do, if you want to support your local restaurant, is to bypass the food delivery apps and order directly from the restaurants, if they offer delivery .
[00:14:08] Especially in times like now restaurants need as much help as their customers can give, and ordering directly is an easy and free way to help out.
[00:14:21] And as a final point, we haven't even talked about the delivery drivers, the people who are doing the often thankless work of actually going to pick up the food from the restaurants and take it to the person who ordered it.
[00:14:37] In many cases, the pay that they receive from the food delivery app is very low and unpredictable.
[00:14:46] It is coming under scrutiny in the UK where it has been shown that drivers are often earning significantly below the minimum wage and these delivery apps can just get rid of them with no reason.
[00:15:02] If they fall off their bike or they aren't able to work, then there is, in most cases, no kind of sick pay or anything like that; they are completely on their own.
[00:15:15] So yes, food delivery apps can be incredibly convenient, and for many people, especially over the past few months, they have been a great thing, but it is always good to know that there is a hidden cost to everything.
[00:15:32] And food delivery apps are no exception.
[00:15:37] Okay then, that is it for today's episode of English Learning for Curious Minds.
[00:15:42] I hope it's been an interesting one, and you now know something about food delivery apps that you didn't 20 minutes ago.
[00:15:51] As I said at the start of the episode, if you are looking for every single episode plus access to transcripts, key vocabulary, and subtitles for every episode, then the place to go to is Leonardoenglish.com.
[00:16:06] We also do special live Q & A sessions, the next one is going to be next Wednesday, which is June the 24th, and it's going to be on different accents in English.
[00:16:18] So, if that sounds interesting and you aren't already a member, then you can find out more at leonardoenglish.com.
[00:16:26] You've been listening to English Learning for Curious Minds by Leonardo English.
[00:16:31] I'm Alastair Budge, you stay safe and I'll catch you in the next episode.
[00:00:04] Hello, hello, hello, and welcome to English Learning for Curious Minds, by Leonardo English - the show where you can listen to interesting stories and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:23] I'm Alastair Budge, and today we are going to be talking about the hidden cost of food delivery apps.
[00:00:32] Getting takeaway food, of course, isn't a new thing, but a whole range of new apps and services have made this easier than ever before.
[00:00:43] Getting the food you want has never been easier. Just open your phone, choose a restaurant and half an hour later, some delicious food arrives at your doorstep.
[00:00:54] Restaurants sell more food, you don't have to get up off your sofa and everyone's a winner, right?
[00:01:01] Well, as we'll discuss today, it's not quite so simple.
[00:01:07] Before we get right into the main course of this episode, though, let me just remind you that you can get every single episode, including all the bonus ones, plus subtitles, transcripts, and key vocabulary over on the website, which is Leonardoenglish.com.
[00:01:25] Just listening to these episodes will be really helpful, but having all of the materials in front of you will help you progress just so much faster.
[00:01:35] So that's definitely worth checking out if you haven't done so already.
[00:01:40] The link to go to is Leonardoenglish.com.
[00:01:45] Right then, food delivery apps.
[00:01:50] Depending on the country you live in, you may know things like Uber Eats, Glovo, Deliveroo, Bolt, Wolt, Rappi, Ifood, Postmates, or GrubHub.
[00:02:01] There are some differences with how they work, but the principle is pretty simple - there is an app that is free for anyone to download.
[00:02:13] You go on the app, you see a list of restaurants that you can choose from, you choose your dishes and then, like magic, a person arrives at your door with the food ready.
[00:02:24] It's great for you, the consumer; you get lovely restaurant food delivered to your door.
[00:02:31] It's convenient, as often you can just pay with a card directly on the app, so there isn't the awkward encounter where you have to ask for change, or you don't have exactly the right amount of money.
[00:02:44] And in these past few months where people have been at home more frequently than usual, it has proven to be a very welcome convenience for lots of people.
[00:02:56] All for a small fee, sometimes even zero fee for you, or a fee that seems very reasonable for the service of someone literally delivering the food to your door.
[00:03:09] And the selling point for restaurants, the advantage for restaurants, is that they can sell more food and that they can make more money.
[00:03:19] Restaurants, being physical locations, are of course limited by the amount of people that can sit inside them.
[00:03:28] If they're full, they're full, and they have to wait until someone leaves a table until they can accept new customers.
[00:03:36] These food delivery apps promised restaurants that they would be free of their physical constraints, the only limit to how much food they could sell and how much money they could make would be how quickly they could actually produce the stuff.
[00:03:53] Plus there would be fewer costs, no serving staff, no washing up, no advertising to get customers, the app would manage it all.
[00:04:02] All the restaurant would have to do is concentrate on making great food and everything else would be taken care of by the app.
[00:04:12] What could possibly go wrong?
[00:04:15] Well, when these apps first started, in many cases almost 10 years ago, in some cases almost 20, everything was great.
[00:04:25] They were a welcome new source of customers and restaurants that partnered with them ended up being able to increase the amount of money they made, and in many cases becoming more profitable.
[00:04:41] Yes, these apps did take quite a large commission on the cost of food, often up to 35%, but that was sort of okay; they were doing the deliveries, doing the marketing, and that was a, just about acceptable percentage to take.
[00:05:00] The restaurants could still make more money through partnering with these apps.
[00:05:06] It was a win-win situation.
[00:05:08] However in recent years, how helpful these food delivery apps actually are has come into question.
[00:05:18] Firstly, there are some quite shady tactics that some of these companies have employed to force restaurants to use their service.
[00:05:29] One in the United States, Grubhub, was found to have created its own versions of websites for restaurants so that customers think that they are on the website for a restaurant and think they are ordering directly, but it turns out they are ordering through another company, which then takes a slice of commission.
[00:05:53] With these websites and within their app, they use a different phone number, so that phone call goes to a centralised number that you or I might think is the number for a restaurant, but actually it belongs to the food delivery app.
[00:06:12] The reason that this matters is that these apps often charge restaurants just for receiving a phone call like this from a customer.
[00:06:24] There was a case in America where a restaurant was charged $9 by a food delivery app just because a customer called up to ask whether they had gluten-free pasta.
[00:06:37] So restaurants are paying these apps, even if they don't make any money from customers.
[00:06:45] The amount that these apps take in commission has also come under renewed scrutiny from restaurants.
[00:06:54] It can be up to 35%, which, on second thought, is an awful lot for a restaurant.
[00:07:02] Yes, there is no washing up, no costs for serving staff, and all they need to do is provide the food.
[00:07:09] But restaurants work with very small margins - they don't generally make much profit anyway, and paying a third of the money you get out to a food delivery app can make running a sustainable business very difficult.
[00:07:28] What's more, when these food delivery apps run offers, so $10 off or get 20% off today in order to entice customers, the commission that they take from the restaurants is often calculated from the normal non-discounted price, so it's the restaurant that is giving you the big discount - the food delivery app is still getting all of its money.
[00:07:56] To give you an idea of exactly how bad this can be, there was a photo that was shared by the owner of a Chicago pizza restaurant called Chicago Pizza Boss which detailed exactly how much money his restaurant really got after all of the fees that the food delivery app had taken.
[00:08:19] This restaurant had partnered with Grubhub, the food delivery app we heard about earlier that made the websites for companies without their permission, and out of a total of $1042 worth of pizzas that it had sold over 42 different orders, after all of the fees and commissions that Grubhub took, the restaurant was left with just $376.
[00:08:51] So it was left with $376 after selling a total of $1042 worth of pizza.
[00:09:00] So it received 36% of what it would have normally done.
[00:09:07] Obviously for a lot of restaurants, this just isn't viable.
[00:09:12] They can't continue like this.
[00:09:14] Especially during coronavirus times when lots of them have had to shut their doors to dine-in customers, it has been even harder. They have become even more reliant on these food delivery apps, and even if they hate paying the commission, having some money coming in is better than none.
[00:09:38] But despite the fact that these apps are all taking such high commissions, at least from the restaurant's point of view, the majority of them are still losing large amounts of money - they are not profitable.
[00:09:54] They are all doing basically the same thing - bringing you exactly the same food from the same restaurants, and the only thing they can really compete on right now is price.
[00:10:05] So they are running all of these discounts and promotions, offering incentives for both restaurants and customers to use their app, but they still aren't making enough money to be viable businesses.
[00:10:22] And this has led a lot of people to believe that this business model of instant on-demand food delivery just isn't possible at such low prices.
[00:10:35] At the moment it is being funded by the investors of the companies; they believe that if they put enough money into these companies, then eventually they will turn profitable.
[00:10:48] But in the meantime, there is intense competition, discounts and offers in what's called a race to the bottom of pricing.
[00:11:00] If you can get exactly the same meal delivered by three different food delivery apps, which one would you go for?
[00:11:09] Well, I know what I'd go for - I'd go for the cheapest of course.
[00:11:13] And this unfortunately is where the problem lies.
[00:11:17] These food delivery apps are incredibly convenient for us, for consumers.
[00:11:23] They are cheap, too cheap even, and the result is that the restaurants that actually make the food are being squeezed, they are suffering with these large fees.
[00:11:36] So if the current model isn't feasible in the long term, what will the future hold for restaurants and food delivery apps?
[00:11:46] One quite interesting development is something called dark kitchens.
[00:11:52] These are space normally in cheap industrial areas that can be rented by restaurants to have delivery-only kitchens.
[00:12:02] Instead of having all of the food cooked inside your normal restaurants, a restaurant can rent a fully functioning kitchen and have its chefs work in there, but only for delivery.
[00:12:17] This means that it's much easier to increase the amount of meals that a restaurant produces without taking on extra fixed costs.
[00:12:28] The concept was made famous by someone called Travis Kalanick, who was the CEO of Uber, the ride-hailing company.
[00:12:39] But now these are all over the world, so you might think that you're ordering your food from your favourite restaurant, and you can imagine the people in the kitchen lovingly preparing your food, but in fact, they may be in a trailer in a carpark or industrial zone in a completely different kitchen, or even cooking beside chefs from other restaurants, making you the same delicious food, but from a place you've never been to.
[00:13:11] There are some serious investors betting that this is the future, saying that, much like people used to make their own clothes 300 years ago, but we don't now, in 50 years time the idea of making your own food will be equally foreign.
[00:13:30] I'm not sure I completely agree with that, and I, for one, think it would be a real shame if we lost the joy of home cooking.
[00:13:39] But food delivery is evidently booming and it is predicted to be a $365 billion industry by 2030.
[00:13:50] So it certainly isn't going anywhere anytime soon.
[00:13:55] One thing you can do, if you want to support your local restaurant, is to bypass the food delivery apps and order directly from the restaurants, if they offer delivery .
[00:14:08] Especially in times like now restaurants need as much help as their customers can give, and ordering directly is an easy and free way to help out.
[00:14:21] And as a final point, we haven't even talked about the delivery drivers, the people who are doing the often thankless work of actually going to pick up the food from the restaurants and take it to the person who ordered it.
[00:14:37] In many cases, the pay that they receive from the food delivery app is very low and unpredictable.
[00:14:46] It is coming under scrutiny in the UK where it has been shown that drivers are often earning significantly below the minimum wage and these delivery apps can just get rid of them with no reason.
[00:15:02] If they fall off their bike or they aren't able to work, then there is, in most cases, no kind of sick pay or anything like that; they are completely on their own.
[00:15:15] So yes, food delivery apps can be incredibly convenient, and for many people, especially over the past few months, they have been a great thing, but it is always good to know that there is a hidden cost to everything.
[00:15:32] And food delivery apps are no exception.
[00:15:37] Okay then, that is it for today's episode of English Learning for Curious Minds.
[00:15:42] I hope it's been an interesting one, and you now know something about food delivery apps that you didn't 20 minutes ago.
[00:15:51] As I said at the start of the episode, if you are looking for every single episode plus access to transcripts, key vocabulary, and subtitles for every episode, then the place to go to is Leonardoenglish.com.
[00:16:06] We also do special live Q & A sessions, the next one is going to be next Wednesday, which is June the 24th, and it's going to be on different accents in English.
[00:16:18] So, if that sounds interesting and you aren't already a member, then you can find out more at leonardoenglish.com.
[00:16:26] You've been listening to English Learning for Curious Minds by Leonardo English.
[00:16:31] I'm Alastair Budge, you stay safe and I'll catch you in the next episode.
[00:00:04] Hello, hello, hello, and welcome to English Learning for Curious Minds, by Leonardo English - the show where you can listen to interesting stories and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:23] I'm Alastair Budge, and today we are going to be talking about the hidden cost of food delivery apps.
[00:00:32] Getting takeaway food, of course, isn't a new thing, but a whole range of new apps and services have made this easier than ever before.
[00:00:43] Getting the food you want has never been easier. Just open your phone, choose a restaurant and half an hour later, some delicious food arrives at your doorstep.
[00:00:54] Restaurants sell more food, you don't have to get up off your sofa and everyone's a winner, right?
[00:01:01] Well, as we'll discuss today, it's not quite so simple.
[00:01:07] Before we get right into the main course of this episode, though, let me just remind you that you can get every single episode, including all the bonus ones, plus subtitles, transcripts, and key vocabulary over on the website, which is Leonardoenglish.com.
[00:01:25] Just listening to these episodes will be really helpful, but having all of the materials in front of you will help you progress just so much faster.
[00:01:35] So that's definitely worth checking out if you haven't done so already.
[00:01:40] The link to go to is Leonardoenglish.com.
[00:01:45] Right then, food delivery apps.
[00:01:50] Depending on the country you live in, you may know things like Uber Eats, Glovo, Deliveroo, Bolt, Wolt, Rappi, Ifood, Postmates, or GrubHub.
[00:02:01] There are some differences with how they work, but the principle is pretty simple - there is an app that is free for anyone to download.
[00:02:13] You go on the app, you see a list of restaurants that you can choose from, you choose your dishes and then, like magic, a person arrives at your door with the food ready.
[00:02:24] It's great for you, the consumer; you get lovely restaurant food delivered to your door.
[00:02:31] It's convenient, as often you can just pay with a card directly on the app, so there isn't the awkward encounter where you have to ask for change, or you don't have exactly the right amount of money.
[00:02:44] And in these past few months where people have been at home more frequently than usual, it has proven to be a very welcome convenience for lots of people.
[00:02:56] All for a small fee, sometimes even zero fee for you, or a fee that seems very reasonable for the service of someone literally delivering the food to your door.
[00:03:09] And the selling point for restaurants, the advantage for restaurants, is that they can sell more food and that they can make more money.
[00:03:19] Restaurants, being physical locations, are of course limited by the amount of people that can sit inside them.
[00:03:28] If they're full, they're full, and they have to wait until someone leaves a table until they can accept new customers.
[00:03:36] These food delivery apps promised restaurants that they would be free of their physical constraints, the only limit to how much food they could sell and how much money they could make would be how quickly they could actually produce the stuff.
[00:03:53] Plus there would be fewer costs, no serving staff, no washing up, no advertising to get customers, the app would manage it all.
[00:04:02] All the restaurant would have to do is concentrate on making great food and everything else would be taken care of by the app.
[00:04:12] What could possibly go wrong?
[00:04:15] Well, when these apps first started, in many cases almost 10 years ago, in some cases almost 20, everything was great.
[00:04:25] They were a welcome new source of customers and restaurants that partnered with them ended up being able to increase the amount of money they made, and in many cases becoming more profitable.
[00:04:41] Yes, these apps did take quite a large commission on the cost of food, often up to 35%, but that was sort of okay; they were doing the deliveries, doing the marketing, and that was a, just about acceptable percentage to take.
[00:05:00] The restaurants could still make more money through partnering with these apps.
[00:05:06] It was a win-win situation.
[00:05:08] However in recent years, how helpful these food delivery apps actually are has come into question.
[00:05:18] Firstly, there are some quite shady tactics that some of these companies have employed to force restaurants to use their service.
[00:05:29] One in the United States, Grubhub, was found to have created its own versions of websites for restaurants so that customers think that they are on the website for a restaurant and think they are ordering directly, but it turns out they are ordering through another company, which then takes a slice of commission.
[00:05:53] With these websites and within their app, they use a different phone number, so that phone call goes to a centralised number that you or I might think is the number for a restaurant, but actually it belongs to the food delivery app.
[00:06:12] The reason that this matters is that these apps often charge restaurants just for receiving a phone call like this from a customer.
[00:06:24] There was a case in America where a restaurant was charged $9 by a food delivery app just because a customer called up to ask whether they had gluten-free pasta.
[00:06:37] So restaurants are paying these apps, even if they don't make any money from customers.
[00:06:45] The amount that these apps take in commission has also come under renewed scrutiny from restaurants.
[00:06:54] It can be up to 35%, which, on second thought, is an awful lot for a restaurant.
[00:07:02] Yes, there is no washing up, no costs for serving staff, and all they need to do is provide the food.
[00:07:09] But restaurants work with very small margins - they don't generally make much profit anyway, and paying a third of the money you get out to a food delivery app can make running a sustainable business very difficult.
[00:07:28] What's more, when these food delivery apps run offers, so $10 off or get 20% off today in order to entice customers, the commission that they take from the restaurants is often calculated from the normal non-discounted price, so it's the restaurant that is giving you the big discount - the food delivery app is still getting all of its money.
[00:07:56] To give you an idea of exactly how bad this can be, there was a photo that was shared by the owner of a Chicago pizza restaurant called Chicago Pizza Boss which detailed exactly how much money his restaurant really got after all of the fees that the food delivery app had taken.
[00:08:19] This restaurant had partnered with Grubhub, the food delivery app we heard about earlier that made the websites for companies without their permission, and out of a total of $1042 worth of pizzas that it had sold over 42 different orders, after all of the fees and commissions that Grubhub took, the restaurant was left with just $376.
[00:08:51] So it was left with $376 after selling a total of $1042 worth of pizza.
[00:09:00] So it received 36% of what it would have normally done.
[00:09:07] Obviously for a lot of restaurants, this just isn't viable.
[00:09:12] They can't continue like this.
[00:09:14] Especially during coronavirus times when lots of them have had to shut their doors to dine-in customers, it has been even harder. They have become even more reliant on these food delivery apps, and even if they hate paying the commission, having some money coming in is better than none.
[00:09:38] But despite the fact that these apps are all taking such high commissions, at least from the restaurant's point of view, the majority of them are still losing large amounts of money - they are not profitable.
[00:09:54] They are all doing basically the same thing - bringing you exactly the same food from the same restaurants, and the only thing they can really compete on right now is price.
[00:10:05] So they are running all of these discounts and promotions, offering incentives for both restaurants and customers to use their app, but they still aren't making enough money to be viable businesses.
[00:10:22] And this has led a lot of people to believe that this business model of instant on-demand food delivery just isn't possible at such low prices.
[00:10:35] At the moment it is being funded by the investors of the companies; they believe that if they put enough money into these companies, then eventually they will turn profitable.
[00:10:48] But in the meantime, there is intense competition, discounts and offers in what's called a race to the bottom of pricing.
[00:11:00] If you can get exactly the same meal delivered by three different food delivery apps, which one would you go for?
[00:11:09] Well, I know what I'd go for - I'd go for the cheapest of course.
[00:11:13] And this unfortunately is where the problem lies.
[00:11:17] These food delivery apps are incredibly convenient for us, for consumers.
[00:11:23] They are cheap, too cheap even, and the result is that the restaurants that actually make the food are being squeezed, they are suffering with these large fees.
[00:11:36] So if the current model isn't feasible in the long term, what will the future hold for restaurants and food delivery apps?
[00:11:46] One quite interesting development is something called dark kitchens.
[00:11:52] These are space normally in cheap industrial areas that can be rented by restaurants to have delivery-only kitchens.
[00:12:02] Instead of having all of the food cooked inside your normal restaurants, a restaurant can rent a fully functioning kitchen and have its chefs work in there, but only for delivery.
[00:12:17] This means that it's much easier to increase the amount of meals that a restaurant produces without taking on extra fixed costs.
[00:12:28] The concept was made famous by someone called Travis Kalanick, who was the CEO of Uber, the ride-hailing company.
[00:12:39] But now these are all over the world, so you might think that you're ordering your food from your favourite restaurant, and you can imagine the people in the kitchen lovingly preparing your food, but in fact, they may be in a trailer in a carpark or industrial zone in a completely different kitchen, or even cooking beside chefs from other restaurants, making you the same delicious food, but from a place you've never been to.
[00:13:11] There are some serious investors betting that this is the future, saying that, much like people used to make their own clothes 300 years ago, but we don't now, in 50 years time the idea of making your own food will be equally foreign.
[00:13:30] I'm not sure I completely agree with that, and I, for one, think it would be a real shame if we lost the joy of home cooking.
[00:13:39] But food delivery is evidently booming and it is predicted to be a $365 billion industry by 2030.
[00:13:50] So it certainly isn't going anywhere anytime soon.
[00:13:55] One thing you can do, if you want to support your local restaurant, is to bypass the food delivery apps and order directly from the restaurants, if they offer delivery .
[00:14:08] Especially in times like now restaurants need as much help as their customers can give, and ordering directly is an easy and free way to help out.
[00:14:21] And as a final point, we haven't even talked about the delivery drivers, the people who are doing the often thankless work of actually going to pick up the food from the restaurants and take it to the person who ordered it.
[00:14:37] In many cases, the pay that they receive from the food delivery app is very low and unpredictable.
[00:14:46] It is coming under scrutiny in the UK where it has been shown that drivers are often earning significantly below the minimum wage and these delivery apps can just get rid of them with no reason.
[00:15:02] If they fall off their bike or they aren't able to work, then there is, in most cases, no kind of sick pay or anything like that; they are completely on their own.
[00:15:15] So yes, food delivery apps can be incredibly convenient, and for many people, especially over the past few months, they have been a great thing, but it is always good to know that there is a hidden cost to everything.
[00:15:32] And food delivery apps are no exception.
[00:15:37] Okay then, that is it for today's episode of English Learning for Curious Minds.
[00:15:42] I hope it's been an interesting one, and you now know something about food delivery apps that you didn't 20 minutes ago.
[00:15:51] As I said at the start of the episode, if you are looking for every single episode plus access to transcripts, key vocabulary, and subtitles for every episode, then the place to go to is Leonardoenglish.com.
[00:16:06] We also do special live Q & A sessions, the next one is going to be next Wednesday, which is June the 24th, and it's going to be on different accents in English.
[00:16:18] So, if that sounds interesting and you aren't already a member, then you can find out more at leonardoenglish.com.
[00:16:26] You've been listening to English Learning for Curious Minds by Leonardo English.
[00:16:31] I'm Alastair Budge, you stay safe and I'll catch you in the next episode.
