The Delivery Platform Dilemma: A Lifeline or a Threat?

So as I've been writing about the delivery platforms initially, I've been looking into some of the costs and how the delivery platforms have impacted the small businesses over time. Don't get me wrong, I have nothing against from UberEats or DoorDash or others, in fact, I've done my fair share! The convenience of being able to order food and have it delivered at a slightly higher cost can be very enticing.

However over the years, I've seen articles where small businesses have called out they are being run against the wall, and there have been a lot of noise about delivery drivers being gig workers and again not being treated in perhaps the best way.

This made me interested in the area and so decided to incorporate it into the novel as something to explore.

In chapter 41, Theo and Sarah starts looking into the numbers a bit more around the delivery partners, etc, but its still quite high level as the details weren't necessary for the novel, so I kinda summarised some of the stuff I found out in my digging and ran some scenarios to help demonstrate.

Again, just to reiterate, I have nothing against delivery platforms, there is definitely a place for them, otherwise why would they be companies that are worth billions of dollars. However for restaurants particularly the smaller ones, like any other tool they have available, it needs to be used properly in order to add value, otherwise it can very easily turn out to be a costly experience. Finally, I have no opinion and make no judgement on what others do, whether you use them or not, you do your own thing! 

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For small takeaway businesses across the United States and across the world, the rise of delivery platforms like DoorDash and Uber Eats presents a profound dilemma. The immense reach and ability to attract new customers are invaluable, particularly in a competitive market. However, the raft of problems and challenges these services pose can often catch small business owners unaware.

There are many stories of businesses who, after calculating the true cost, find they are actually losing money or breaking even on every order sold via a platform. Yet, they feel they cannot stop using them. American consumers have become accustomed to the convenience, and to switch off the platforms could mean losing a large and established customer base overnight.

This creates a highly imbalanced relationship between a local "mom-and-pop" shop and the global tech giants. The issue of a restaurant's hard-earned rating being damaged by a delivery service failure, a factor completely out of the restaurant's control, is a prime example. If you check the Yelp or Google Reviews for your favourite local restaurant, it's highly likely you'll find negative ratings that are due to delivery issues rather than the quality of the food.

With this complex and often challenging reality in mind, let's conduct a deep-dive analysis into the true cost of delivery platforms from an American small business's perspective.

Profitability Analysis: A Tale of Two Scenarios

Let’s say we used Maria’s as an example. We will keep the scenario’s simple purely to help illustrate the possible numbers, so keep in mind that each small business will have their own unique scenarios to deal with, it might be better, or it might be worse. The scenarios have also been highly simplified as I’m just trying to illustrate the high level points. Finally keep in mind, I don’t actually run a small business, so a lot of this is based on researching and just digging around for details. If you find this lacking in anyway, more than welcome for you to call out for discussion or correctness.

Here is the calculated breakdown of the costs and profits for Maria’s, using some simple numbers. A Maria’s chicken and chips plus a drink order costing $20 and we’ll use a nice round number of 1000 orders. Keep in mind that Maria’s, powered with +1 equipment has very healthy profit margins when compared to your average small business restaurants, so the numbers here are likely inflated.

The table below breaks down the finances for each scenario, showing both the core assumptions (as percentages of revenue) and the final calculated numbers.

The End-to-End Story: Understanding the Assumptions

This analysis tells the story of why profit changes so dramatically.

• Baseline (Scenario 1): A traditional takeaway business with a healthy 30% profit margin ($6,000) from its direct customer sales. For a Quick Service Restaurant (QSR) or takeaway model, this represents a strong, sustainable operation.

• The Trade-Off (Scenario 2): The business partners with delivery platforms only.

  • The Bait: Revenue increases to $22,000 due to a necessary 10% price hike. Operational costs like salaries and rent decrease as the business model shifts away from a large physical footprint, perhaps toward a "ghost kitchen" concept.

  • The Catch: This is where the true costs emerge. A 28% commission fee ($6,160) is the single largest new expense. In the U.S., commission rates from major platforms can range from 15% to over 30% depending on size and scale, making this a very realistic figure, particularly for smaller operations. To stay competitive on the app, an additional 5% is spent on promotions ($1,100), this is assumed . Finally, a 5% refund rate ($1100) accounts for orders that go wrong, where the restaurant bears the cost, purely assumed as there was no published statistics for this.

Final Assessment: The True Cost and a Path to Consciousness

The numbers paint a clear picture. Despite a $2,000 increase in top-line revenue, the business's net profit falls from $6,000 to $3,740. This is a $2,260 reduction in profit, or a 38% decrease. The takeaway business is processing the same number of orders but is significantly less profitable. The profit margin, once a healthy 30% of revenue, is nearly halved to just 17%.

This financial impact is only part of the story. The analysis highlights a fundamental power imbalance. The restaurant outsources its delivery and a part of its customer relationship, but it retains almost all of the risk. A late delivery or cold food, often the fault of the delivery process, results in a negative review on the restaurant's page and a refund that comes out of the restaurant's pocket, while the delivery partner carries on as if nothing ever happened with little to no consequences.

This is the challenging reality for many small American business owners. They are caught between the need for visibility in a vast market and the high price of participation.

So, the next time you order from DoorDash, Uber Eats, or Grubhub and experience an issue with the meal, it's worth taking a moment to consider the source of the problem. Try to differentiate whether the issue is with the restaurant itself or with the delivery platform. Either way, the small business will likely be impacted, but the fact that we as consumers are conscious of this dynamic is a crucial starting point. Where possible, ordering directly from the restaurant is one of the most effective ways to ensure your money supports the local businesses that make our communities vibrant.

As a final callout, it's important to recognize that this analysis only looks at the power imbalance between a restaurant and its delivery partner, and just at a very high level at that. There is a third critical component excluded from these calculations, the delivery drivers themselves. These gig economy workers also face a significant power imbalance against the tech platforms, often dealing with low pay, lack of benefits, and algorithm-driven management. It's safe to say that the business model of the tech giant delivery platforms often relies on squeezing value from both sides of the transaction, the restaurants that produce the food and the drivers who deliver it, which is a key factor in their billion-dollar valuations.