How Food-Tech Startups are (inadvertently) Killing Good Food
My wife and I straddle two worlds. I work in tech down in Silicon Valley; she is the manager & chef for our restaurant in the heart of SoMa, San Francisco — the latest iteration of Silicon Valley. The digital & the physical, though we both work with bites, one might say… (author’s note: only one pun will be allowed per article)
It’s not the cause of any strife between us, it just provides two very different perspectives. Her brick & mortar world is dependent on our droves of hungry and well-paid workers, but also endangered by the skyrocketing commercial rents we bring. On top of that, the tech world is constantly seeking out new markets to “disrupt” — sometimes regardless of whether or not a market needs disrupting — and the food world is the latest target.
Now, we’re no luddites. We’re a very tech-friendly business that prefers plastic over cash and posts #foodporn photos of our daily-changing menu on our website & social pages. We get “it”, and we get what the proliferation of food ordering apps are trying to do. They are trying to solve for the inconvenience of having to go to multiple restaurant websites, and then (god forbid!) talk to someone. That’s to say nothing of the convenience of having your credit card information stored so that you’re not wasting precious seconds accessing your wallet. I realize that the process can sometimes suck, but it’s usually not cripplingly painful.
However, that understanding does not seem to go both ways. These startups don’t seem to understand the restauranteurs. And because of this, I’m convinced that food-ordering apps are inadvertently killing good food.
First and foremost, these apps take anywhere from 10 to 20%. From our personal experience, as well as in our research before opening the restaurant, the standard owner’s margin is around 10% or less (and a decent restaurant will do around $1 million/year in sales… do the math, restaurants aren’t minting any millionaires, trust me). That means that any order taken via these apps will be taken at zero margin or a loss. Oh, and some of them don’t include delivery fees, which means the restaurant pays for that, too.
You could chalk this up to advertising costs on the assumption that this will introduce customers to your food and eventually net out to more loyal patrons. However, these customers become, by and large, loyal to ordering through the app (at least for takeout), which means you may have just won yourself a loyal, unprofitable customer. Hooray.
Thankfully, our restaurant is doing well enough for now, and doesn’t need to buy extra customers (entirely due to our incredible chefs). So, you might say, “fine, don’t join the apps, but don’t ruin their party”. Well, here’s the thing about tech. It can “disrupt” a market by sheer force (and sufficient VC funding), whether or not that market truly deserves it, and it can take down lots of decent participants in its wake.
We’re not talking about something like the rusty old taxi market here, run by warlord-esque dispatch companies and unaccountable drivers. We’re talking about the independently owned restaurants that the tech community supposedly loves, proudly waving their “foodie” banner.
However, if these food-ordering apps thrive and become table-stakes for takeout, then participating restaurants will be forced to raise prices (at which point they’ll get hammered on Yelp, a topic for another day) or lower food costs (which means food quality will suffer). Non-participating restaurants will sacrifice sales, which means they’ll need to consider participating, and find themselves caught in the trap above.
Hence, food-tech startups are inadvertently killing good food.
Hyperbole? Perhaps. Especially considering that high-end restaurants aren’t dependent on takeout and likely won’t be affected (at least, not by this wave of tech). Even still, it’s important for customers, as well as startups, to realize that the “marketplaces” that tech can create between the customer and the business aren’t always positively transformative.
Trust me, your favorite takeout restaurant would much prefer that you just picked up the phone and called them.