EATER STILL DOES NOT UNDERSTAND FOOD DELIVERY
by Andrew Chalk
If you are going to report on Doordash as a business, don’t hand the job to someone with two years in “Communications Studies”. That is the message for Eater, which continues its role as a perennial source of economic ignorance and misinformation with Amy McCarthy’s factually inaccurate account and totally wrong analysis of Doordash’s new financial initiatives. Restaurant owners should ignore the claims in that article and source their information from elsewhere.
First, let’s deal with the sophomoric factual errors. She claims that restaurants “ they’ve already been charged outrageous fees by the app for the privilege of facilitating delivery orders” . This is teenage emotion rather than rational fact but, assuming she is saying that DoorDash’s fees aren’t to her taste, restaurants can always go to other providers, or start their own delivery service but, judging from the number of restaurants using DoorDash (59,000 in 2017 to 390,000 in 2021) and the 369m orders in 4Q 2021, some consider it to be a valuable option to handle their delivery sales.
Plan B is for her to put DoorDash out of business by starting her own delivery business (AmyDawdle?) that undercuts them. She hasn’t, and won’t. If she does, see her outside the bankruptcy court as she learns with a harsh taste of reality: delivery is expensive to deliver!
Next, she claims that Doordash is “hugely profitable”. Again, the vagueness of the blogger. However, this is wrong again. Doordash has never made an annual profit (and just reported a 4Q 2021 loss of $155m). Apparently, McCarthy does not know the difference between revenue and profit (let alone EBITA). The lockdowns massively increased delivery revenues as people ordered in, but nobody made a profit. In fact, the food delivery business, which gets a bad rap from the whole of the bloggus ignorami, has been terrible overall. The industry has been a perennial money loser. Sharesof Doordash are down 36% so far this year, while the S&P 500 was down only 7%.
Third, she does not understand DoorDash’s finance offering. For years, there have been restaurant finance companies that lent money based on repayment by taking over the establishment’s credit card processing and charging a fee on each transaction that represented repayment for the loan. It has proven important, in certain sectors of the restaurant industry, because its genius is timing repayment to business volume in an industry where cash flow is really tight. Noted Texas chef Stephan Pyles praised the credit card receivables company that helped him in 2008 when the Great Recession devastated his business.
Doordash is proposing a similar idea. Borrow from them now and pay them back with a fee on each delivery. I predict that this is likely to prove popular with certain restaurants engaged in rapid expansion of big market brands.
But you won’t find any discussion of this in Eater, It assigns important industry economic issues to unqualified bloggers who spout unsupported opinions and non-existent 'facts'. Little wonder that Eater has already lost most of its opinion-maker readers to National Restaurant News and other, serious, publications and we can expect this to continue.