Way back when, maybe 10-15 years ago, I saw a book in a
bookstore [millennials, you may be confused by that term; look it up] that was
a collection of all the hair-brained schemes concocted to make millions of
dollars when the Internet became a thing. You know, a business with the
domain name “Spatulas.com” that was going to become everybody’s one-stop
shopping choice for utensils designed to turn food over. At the beginning
of the Internet age, it was believed that slapping a “dot com” at the end of
anything was the path to riches.
We are now in the next phase of business evolution, the
“gig” economy and its offshoot of streaming services that allow access to a
book, movie, or video game without the need to “own” it. A book titled
The End of Ownership by Aaron Perzanowski and Jason Schultz offered one theory
for the rise of “sharing” apps like Uber and Lyft, which allow people to
essentially share someone’s car, and Netflix, which allows people to share
movies and TV shows. Because Millennials are less well off than previous
generations of young people, with lower starting salaries, less job security,
and more college debt, they seek out ways to acquire what they need or want
without having to pay the full price of ownership. These businesses were
theoretically fiscally sound because they were based on the fact that young
people were less wealthy than previous generations (the fact that Uber
continues to hemorrhage billions of dollars since their IPO make this theory a
little suspect in reality).
Recently I saw an ad on TV for Taco Bell that included the
fact that you could get Taco Bell delivered to you through Doordash, and if you
mentioned the ad the first delivery charge was waived (or something like that;
I wasn’t fully attentive). It took a while to sink in, but after a while
I asked myself, “Is this actually a viable business model?” Can you
actually make a profit delivering Taco Bell orders to peoples’ homes?
I was immediately skeptical. Okay, you can do Doordash
with restaurants other than Taco Bell, but let’s focus on that. A typical
Taco Bell order for two people would total, what, $10? $15 tops, if you
really had the munchies. But instead of getting into your car and going
to Taco Bell, you are going to hire someone who own a car (and makes car
payments on it, as well as insurance and maintenance), ask him or her to drive
to Taco Bell (burning gas), pick up your $12.50 order, then burn more gas
driving to your house, drop off the goodies, and then go home (or to their next
delivery assignment). Let’s say the entire process takes 30 minutes (that
seems too short, but this would only work in a fairly dense urban
environment). How much would that driver charge you to make it worth his
or her while (of course a major issue is whether the driver has to be paid
minimum wage as an employee, or can be exploited as an “independent
contractor”)? The delivery charge would have to be more than the food,
more if you tip the driver (assuming Doordash isn't stealing the tip).
Okay, maybe you couldn’t cover your costs by charging enough
for each order, but it’s like the old joke: there are lots of people who want
to order from Taco Bell, so what you lose on each transaction you make up for
in volume. Obviously that isn’t a viable business model, unless you could
cut costs by saying your employees are not employees and are therefore not
entitled to minimum wage, workers compensation coverage, or any benefits.
But what is the quality of the work force you could hire willing to work for
peanuts plus tips (again, unless the company steals them)? If the
business isn’t covering the driver’s insurance as a business expense that means
the driver’s personal insurance would assume the risk, which would raise their
rates tremendously.
The bottom line is this: unlike Uber, Lyft, and streaming
services like Netflix, this is a business model based on affluence. You
are hiring a driver to go to Taco Bell and pick up an order for you because you
are too lazy to go in your own car. The delivery charge HAS to exceed the
cost of you going to Taco Bell. That means you have money to burn and
want to burn it by having someone else go through the Taco Bell drive-through
lane.
Full disclosure: I am not a business genius. I do not
live in a huge mansion with a croquet lawn and kidney-shaped pool. I am
not the CEO of a billion-dollar corporation. So take it with a grain of
salt when I say that I don’t see how Doordash can be profitable. The
whole point of drive-throughs like Taco Bell is that people drive there and get
food; if you can afford to hire someone to pick up Taco Bell food, you can
afford to eat somewhere nicer than Taco Bell.
Unless you waste your money hiring someone to pick up your
Taco Bell order and bring it to you.
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