What a crap business model these companies have if they rely on haggling over legal loopholes to operate. The business case, at best, is the status quo remains with material threats to their operations if these laws change. This is a lose-lose for everyone. Ignore the morality arguments, why risk your money on something with almost zero upside and all this downside? Suing the government is not a sign of strength
There’s a competitor in India called BluSmart right now that’s running all electric, fully owned fleets. The drivers are paid fair hourly wages and thus have no incentive to refuse rides or not wait. The cars are simply parked at earmarked charging spots in the city. Their own vetted drivers can unlock the cars at any point and start picking up passengers before dropping it off at a charging station.
The rides are somehow cheaper, have no surge pricing, and from some insider reports, has profitable unit economics.
Their app isn’t quite as snappy, but it works fine.
They’re eating Uber’s lunch in my city and makes me wonder how Uber is screwing this up so badly.
> ...fully owned fleets. The drivers are paid fair hourly wages...
> The rides are somehow cheaper, have no surge pricing, and from some insider reports, has profitable unit economics.
So a fleet of depreciating assets with a major infrastructure dependency, lower implied gross margins, and word from insiders of a positive bottom line without publicly disclosed financials to sanity check claims against. Curious to see what their balance sheet looks like.
The entire Asia Pacific geographic region, including India, accounted for 10.9% of Uber's FY22 revenue[1; p. 94]. It's likely more of an incidental snack than full lunch, but it would be funny if Uber lost out to what sounds like an upstart taxi company.
And electric, while it might not be as meaningful right now due to starting costs, the reduction in maintenance and operating costs might make the model more viable. And it certainly adds some appeal to environmentally conscious investors for them to be reducing the emissions in India which we know has many areas of poor air quality
> makes me wonder how Uber is screwing this up so badly
This is just guesswork. May it be related to the VC funding that holds them afload, where at every turn they need to think about the future (and quick-as-possible) 10x return on investment that is in the fine-print of the VC contracts?
Or they may be so imbibed by startup-culture "Greed is good" mentality from the very start, that it is unthinkable to consider not squeezing it, and shaving off for every penny.
People on the Y Combinator tech news site should know better than to think "raising money" is the same thing as "being profitable". (If anything, the two are often anti-correlated - funding rounds often happen before any profit has been shown)
That may be, but are they equal or more profitable than the Uber, et al model? I'm willing to bet if it were that they would be doing that instead. These companies are in the U.S. where maxing profits/shareholder value vs. taking care of employee needs (or any other need) is generally the name of the game for a major majority of companies.
India is not some unicorn where employee needs are prioritised particularly highly; there’s plenty of egregious labour violations that happen in India.
It’s just that Uber and co are overwrought beasts that never had a successful plan in mind.
> consumers and delivery drivers who will mostly pay for it
The players: restaurants, drivers (current and former), platforms and consumers. Former drivers, those who don’t make the new cut, will lose. Drivers who stay on will gain. Looking at leverage, consumers are less likely to bear the burden than restaurants. Given the new fixed cost of operating a delivery platform, the incumbents’ threat of competition from new entrants is reduced; that will help them.
If I were to make predictions, I’d expect to see some consolidation among the platforms with the winners squeezing restaurants and consumers waiting longer more than paying a higher price. (It is notable restaurants have virtually no representation in this debate.) The pie will be smaller. But the platforms’ role in it will be more stable and secure.
That seems more like an interim step to me. I imagine what will follow is one of three things:
1. An affected restaurant increases costs for online purchases to compensate.
2. An affected restaurant stops offering delivery. If it's not worth the money, why offer it?
3. An affected restaurant gets its own drivers. That's how delivery used to operate before the gig economy, and it allows them to control costs and fees.
I've already seen restaurants start putting on delivery charges, and often significant ones (a $6 delivery charge doesn't seem unusual where I am).
> But the platforms’ role in it will be more stable and secure.
I don't think it will be. The platforms currently offer discoverability and drivers. If platforms aren't willing to bear the costs of the drivers, restaurants will stop using their driver services. And if the platforms are reduced to just discoverability, it becomes much easier for competitors to enter the market.
I fully agree that these "blitzscale" business have a horrible business model that is not sound, both economically (depends on free funding) and morally (the goal is to corner the market or at least get an oligopoly and then exploit your position).
That said I don't think a win here would help the current workers. Like all minimum wage laws this will reduce demand (obviously people don't want to pay a 12$ delivery fee for an order of $20), push business towards even shadier employment practices and medium term towards automation / "self-service".
As much as I would want it not to be true, the low-skill end of the employment market will always be easily replaceable and consumers won't be willing to pay unlimited amounts for something they could easily do themselves. As such it would help people a lot more if there was an easy path towards acquiring skills, guaranteeing that these bottom-rung jobs will be only temporary.
> obviously people don't want to pay a 12$ delivery fee for an order of $20
I realize there's psychology at play here but to an extent aren't we already doing that through essentially obligatory tips?
> As such it would help people a lot more if there was an easy path towards acquiring skills, guaranteeing that these bottom-rung jobs will be only temporary
When the service industry worker has to spend all their time working in order to make even a marginally livable wage the path is to pay them more money, directly or indirectly. The problem is exacerbated in high COL areas, and sure you can say "ok well just move", but broadly speaking you still need someone to do these tasks and that pool is dwindling.
There are lot of think could be done not to pay $12 delivery fee over a $20 order. For example, the cost of delivering a $100 order is pretty close to a cost of a $10 dollar order. This could be used for subsidizing the cheaper delivery cost by the more expensive ones, like saying delivery fee is 25% of the order and no tip, but minimum $5 (or something). So you pay $5 for a $10, $5 for a $20, and $25 for a $100 delivery, which is way easier to swallow. But this is just one of the most primitive ideas to handle that, the point is the make companies to figure out what is feasible, instead of letting them run rampant with whatever shady sh*t they can come up with.
How about when SpaceX sued the US government because they were awarding launch contracts to Boeing without competing? SpaceX largely won that and they had a good point.
> why risk your money on something with almost zero upside and all this downside? Suing the government is not a sign of strength
Can’t say I agree with this logic. (Conclusion fine.) Apple didn’t sue the FBI from a position of weakness [1]. DoorDash et al, understandably, don’t want to be disadvantaged in their grocery business [2]. Reading between the leaves, I think that’s what they’re pushing for. They also don’t want to change the status quo, which is less reasonable, but not a sign of strength or weakness per se.
In any case, most small businesses in America operate on single-digit margins. Almost every restaurant would be wiped out by what, from a tech perspective, is a meaningless change in margins. There is nothing meaningful to conclude simply from the fact DoorDash is challenging the rule.
> what does apple have to do with this conversation?
It also sued the government. My point is “suing the government is not a sign of strength” or weakness. It’s a non-signal. I think DoorDash is wrong here, though they have a kernel of a point in why grocery delivery is not covered by the rule. But their suing the government says nothing about their strength or weakness.
Yea but Apple didnt sue the government because of some issues affecting the profitability of their main business model. This comparison makes no sense.
Companies that have made similar moves are Uber, Airbnb for example, but not Apple.
While I generally agree that suing the government isn't in and of itself and indicator of desperation, I also feel like there's a distinction between the lawsuits that are always immediately thrown around contesting government contract awards compared to lawsuits filed against legislation.
In the former, companies sue because it doesn't really cost them much to try and see if something works out in their favor, while in the latter they're suing because the legislation would have some negative effect on their existing business.
To be clear before I say anything: I think the entire food delivery app business model is bad for all parties involved and that these companies are bad actors.
But … I don’t think the cities are properly accounting for the ease of using multiple apps? If a driver is logged into Uber and Doordash and GrubHub on 3 phones waiting for a delivery they probably should not be accruing $17.96*3 per hour at that time. But it sounds like they might be able to under this new law.
> If a driver is logged into Uber and Doordash and GrubHub on 3 phones waiting for a delivery they probably should not be accruing $17.96*3 per hour at that time.
Why not? The entire shtick of Uber et al is that employees choose their hours and gain "freedom" from employees. This is what freedom looks like. Employers can't tell freelance contractors how they should behave. They decide a contract, they get a service and get their job done.
It's mostly not whether they can contractually demand any one particular thing. It's the sum total of behavioral and financial control they exert. Exclusivity would be a pretty big ticked box.
If Uber/Doordash tick enough of those questions, then they are at risk of having to treat their drivers as employees. Which is more expensive.
How will they stay in business? Of course they would have to raise prices significantly, but people just wouldn’t order takeout anymore and would rather pick up themselves.
Other than the obvious authoritarianism, that would also harm the environment with people driving a lot more.
i think parent means that the company can stop them from working two jobs at the same time. not allowing that is still legal. illegal non-competes are only about switching jobs.
Yeah, that's what I meant. I wonder if it is even legal to work two jobs as an employee paid by the hour at the same time. Sounds like that might be fraud.
>To be clear before I say anything: I think the entire food delivery app business model is bad for all parties involved and that these companies are bad actors.
Funny I have the exact opposite opinion. I think it's good for all parties involved. Restaurants get a bigger market. Delivery people get more freedom at work. Eaters get convenience. Delivery apps get a piece of the revenue for efficiently routing drivers and customer service.
If it's truly bad for all parties, there'd be no Uber Eats, no one would order from Uber Eats, no restaurant would sign up, and no one would deliver.
> If it's truly bad for all parties, there'd be no Uber Eats, no one would order from Uber Eats, no restaurant would sign up, and no one would deliver.
What a strange take.
If I take 3 billion dollars and setup a company that flies in people from other parts of the country at a loss to do your job for half the money you get for it, and have everyone compete for it, then when you lose your job and the business you worked for gets dependent on a business model requiring cheap disposable labor and I own the market I then I jack up prices to more than you were being paid but take the difference as profit, would you consider that a win for all parties?
I don't think the moat for food delivery is big enough that capturing the market and hiking prices is a realistic option. Uber eats already has plenty of competition (at least in my country) from foodora, wolt and bolt food.
Are you arguing that Uber’s business model isn’t sustainable or that it’s bad for both parties? Uber being in the red doesn’t mean it’s a net negative for everyone.
Operating at a loss drives out anyone who doesn't have the money to burn forever to compete with you, and when the market is yours you can re-align prices to allow profit. This seems clear to me and the 'net negative' is that you don't actually have a free market anymore. Inserting yourself between product and fulfillment and taking the surplus value that would have gone to either customer or producer is not a gain for anyone but the people who invested in the rent-seeker.
- Drivers: clearly unhappy with their pay at least in NYC and other major markets.
- Restaurants: have been quite vocal about how they are in a lose-lose situation because they can’t afford to not participate but also have to give a massive cut to Uber.
- Customers: probably the happiest group but in general there’s a rising tide of complaints about the massive fees.
The entire model is unsustainable if everyone thinks their cut is too low. Regulation will probably fix it for one or two parties which will cause the others to opt out.
I disagree, the business model works out just fine for a lot of people.
At the core of the problem is the concept if a contractor. These cities are trying to go around a federally defiend concept of contracting. You agree, as a self-employed business operator to provide services and get paid for it. Employees on the other hand provide labour which means performing assigned tasks under a specific job title, typically under some sort of management with performance reviews and accomodations provided. Anyone from IT workers to general contractors contract out services as a business, not labour as an employee.
When you hire a general contractor to fix your roofing for example, they are not your employee, you don't have to pay them minimum wage, withold taxes or provide medical care and paid vacation to them. I have been a contractor and hated it but I know people who love it.
The scale and nature of Uber's business is no reason to treat them differently when everyone is supposed to be equal under the law. Taxii drivers were typically independent contractors as well unless they had their own medallion back in the day.
I have not read any argument so far as to why Uber and friends should be treated differently.
I would hate to pay more for their services just because a bunch of people who can't ger a job elsewhere want to force uber into employing them when it wants to contract them. Most people I have met who do this work have another day job and uber is extra income. If you wanna do it full time, you can pick locations like airports for uber and downtown areas for doordash and ubereats, especially in places like manhattan or miami and make much more than minimum wage.
To be clear, under this law, the guy who hustles and makes $25/hr will get paid minimum wage just like the guy who takes a nap in his car near his house until he gets an order/ride. Essentially, in addition to other burdens, they want drivers to be paid for being available but also drivers would have to be told where to work and how to work, for example you can't park in the middle of nowhere, where you know you won't get any orders and get paid for it.
Doordash has been adding increasingly annoying penalties for rejecting orders, to the point where I doubt it would be worth it to run them alongside another app. I’ve done it in the past but I basically cannot anymore as I had a <30% acceptance rate due to low paying orders, and now I’d be stuck only getting bad orders for days to get out.
They can just gps log while the workers are clocked on and if they spend a significant amount of time taking random trips not part of a delivery, you kick the driver out.
That would be true if Uber didn't spend so much money subsidizing rides throughout its history. A customer would be dumb to refuse $2 of service for $1 of payment even if the system being created is going to lock them into an extractive duopoly later.
You can already see this at work as Uber tries to become profitable - ride availability, cost, and quality are getting worse but people continue to use them out of habit or because regional alternatives have been weakened by years of subsidies.
How does Uber doing price dumping (if in fact they were) lock anyone into anything later? Before Uber the options were "walk" or "call a taxi and pray".
The competition ceases to exist and the requirements to re-enter the market once the dumper is a monopoly (usually with the politics power that entails) is beyond the scope for damn near anyone to achieve.
> DoorDash argues in its lawsuit, however, that the law is improperly implemented, because it would force companies to pay workers for any time logged into the app, regardless of whether they were delivering or not, and that the DCWP ignored “mountains of hard data and analysis, and over emphatic objections from a range of constituents” in order to implement it.
I really wish companies weren't able to sue over this kind of thing.
The law is the law. The government should be able to create and update laws without getting mired in endless bureaucracy. If a majority of people don't like the law, they can elect different leaders, who should then be empowered to change the law at a reasonable speed.
Some number of restrictions on government power are of course healthy—I value the right to free speech, for example—but for goodness sakes, the government of New York City should be able to set minimum wages within New York City! This just isn't complicated.
I live in NYC, and there are a whole lot of layers to this onion. I'm advocating for safety improvements on a local road that people get hurt and killed on pretty regularly[1]. The DOT has a well-designed change that they've been working on for over two years, complete with community outreach. The change has broad community support, and every single elected official in the area is behind it, from the city council to the state assembly.
However, there are a few wealthy people against the change who can file lawsuits, pressure the community board, and donate to the mayor's office. That seems to have been enough to get the mayor to overturn his own DOT's plan[2]. The change itself isn't even a large-scale capital redesign of the street; it's entirely a plan using temporary repainting, movable barriers, and signal changes. It's exhausting living here.
Edit: If you live in New York and want to voice your support for the aforementioned road redesign, you can do so at https://www.safemcguinness.com
So I happen to agree with NYC in this case. But, being able to legally challenge a law is pretty fundamental to the US. For instance, in the case where this law is unconstitutional, or conflicts with a federal law, this is exactly how one ought to challenge it.
Right, so I agree those are examples of grounds on which you should be able to challenge a law (unconstitutionality, conflicts with a law of higher jurisdiction). It's important for those to exist, but they should be limited.
What I take issue with is quotes like the one in GP. "The law is improperly implemented, because it would force companies to pay workers for any time logged into the app." So what? If the city decides workers should be paid for time spent getting their phones repaired, the companies should have to do that to. I don't know what the legal process here is but there's clearly too much of it.
Another choice quote:
> For instance, why would the agency choose to purposefully exclude companies that only facilitate grocery deliveries from its study and rulemaking, when those that facilitate both restaurant and grocery deliveries from local businesses would have these rules apply to them?
I don't know. Why does it matter? People often complain that government regulations aren't able to keep pace with private industry, but it's because of this BS slowing everything down that they can't keep pace! Let's empower the government to actually make rules and give them responsibility for the consequences.
Yeah but you can’t leave the warehouse without being fired.
Gig workers can choose to only work when it’s peak hours then stay home.
That said, no one is forcing DoorDash to allow people to log in.
I think they should have to pay for any part of an hour in which they allow a worker to login. And additionally if they refuse a login, they must continue refusing it for a minimum of 1 hour.
This way they will be incentivized to create a core of real employees for the off hours work, and only use gig workers for peak times.
If you were sat at home playing video games but could conceivably go to the warehouse if they called but they didn't call, you would not be paid for your time playing video games.
Presume this is the sticking point for the companies as well since now they will have to actually manage their drivers to actually ensure they are working and not just gaming it.
So it will end up being the additional cost from the minimum wage plus everyone else required to police it.
This will essentially kill these platforms. I don't have the data but I can see how a delivery can take, on average, one hour. Between waiting for an order to arrive, accepting it, going to the food place, taking it to the destination, delivering it, etc...
$17 + fees + tips? => $20+ delivery fee.
Unless you are delivering for a well-off family of 5, it makes no sense.
> I can see how a delivery can take, on average, one hour
In New York?
> will essentially kill these platforms
It will curtail them. They will need to trim their driver network, which will reduce the number of drivers and increase delivery times. Restaurants and consumers outside high-density areas no longer make sense to cater to. Dropping restaurants who don’t meet minimums will also, likely, be necessary. In summary, this is entirely solved with densification—food delivery in New York predates these platforms.
Even in the kinda rural area I grew up in it was common for Italian restaurants to have their own delivery drivers. Many still do, because the customer experience of the delivery apps is often inferior. If we go back to a pre-food delivery app time, my general take would be "and nothing of value was lost." Restaurants will still be able to have their own delivery services, people will still be able to simply pick up their food. Getting your Hamburger from that special place across town (lukewarm) is nice, but it won't kill you if its not possible anymore.
If their existence is predicated on the exploitation of gig workers they should go under. The general demand for food won't be impacted by that one bit. Either people will be willing to pay more for their fancy burger or demand will shift to other businesses that can afford to pay their people a living wage.
EDITED TO ADD: Something that isn't often mentioned in these discussions is that the existence of businesses predicated on exploiting labour is narrowing the space for businesses that would be willing and able to compensate their workers fairly. Delivery apps are pricing out sustainable business models if they are allowed to skirt labour regulations, just like the common practice of Amazon and other companies treating delivery drivers as independent contractors.
I suspect if the loss of these delivery drivers had such an impact on this hypothetical special place, they would hire their own delivery drivers to compensate. Worst case, you have to a call a number or use a mobile-friendly website instead of using an app.
The OP was talking about uber eats and similar apps potentially shutting down in New York if delivery drivers have to be paid minimum wage. None of these apps currently have a sustainable business model if they have to treat their drivers as employees under the laws of the local jurisdiction. Maybe they will adjust their business model if forced to comply with the law. Or they will shut down. Either way is fine with me.
I can see it working in New York City (and closer denser areas) but these platforms operate in the broader US and other markets (which can have now laws influenced by the US).
Adopted nationally, this would absolutely kill the platforms as well as a number of restaurants. This law is particular to New York, whose density both makes it work and raises living costs.
> If it isn't profitable without exploiting workers
There are two classes of gig workers whose interests are at odds: the ersatz full time and true part time. The former, whom worker rights activists highlight, is being exploited. The latter, which companies like to talk about, benefit from a high-flexibility additional source of income.
The ratio of the former to the latter increases with density; there is more work to fill the hours. Below a certain level of density, the former cannot exist. It’s absolutely possible that the optimum for New York is not the same as in rural Kentucky, where outlawing the odd job an otherwise stay-at-home parent takes to earn extra cash does more harm than good.
Yep. Now do the math on living in NYC with a car payment making $7/h.
The alternative is restaurants hiring delivery drivers with reasonable ranges. There are a few of these in my area and I greatly prefer them. The food arrives on time and hot, every time.
> alternative is restaurants hiring delivery drivers with reasonable ranges
The next step would be restaurants near each other banding together to share a pool of delivery workers. In practice, I think that is what these platforms will become. The city divided into zones, each zone with a set of drivers, and consumers strongly encouraged to order from in zone.
It makes no sense relative to what? Is the idea that that is simply too much to pay for the service of getting your food delivered, that it crosses some line of economic propriety?
Could it maybe be the case that this service was previously undervalued, or is that somehow out of the question?
How does that compare with spending your time going out and picking up your food or taking your family to a restaurant? That has to be a minimum of 30-45 minutes of time spent traveling plus car or transit expenses. It might be more, but is it a lot more?
Even for the average person, a $20 fee might not seem that crazy. Imagine it's night time, you live in a not great neighborhood, and you're a young woman. How much would you pay to avoid having to get on a bus, ride twelve stops, pick up your food, then wait for another bus to get you home?
I think the higher fee will push out the boundary of where average, healthy people are willing to travel, but it doesn't push it out great distances.
That's nice, but the suburbs never had that unless you're ordering pizza or maybe Chinese food. A single restaurant needs a lot of volume to hire its own full-time driver. Amortizing a driver sitting on his couch to come to any restaurant in the area was a big change.
You could cook a meal for a family of 5 for ~ $20, likely way less. Unless its pizza, sounds like it'd be closer to $100+. Using these delivery apps feels akin to buying a bottle of water at a concert or alcohol from a hotel mini bar. One of the biggest rip offs out there.
It’s not a rip off, it’s the fact that having another person do everything for you is fundamentally too expensive unless there is a massive pay imbalance.
Unless you're loaded, its most def a rip off. After the restaurant gets their share, the government fee/taxes, employee wages, doordash fees, delivery driver wages ... 5-10% of the bill is actually food cost.
A rip off implies some kind of scam or unreasonable markup. Which isn't the case, it's just inherently expensive to have someone bring food to your door.
Presumably they would also have the right to CAP earnings at minimum wage. If you manage 10 deliveries/rides in 1h, and previously that was worth 100USD, you now get 7.25 (or 1425 for NY State, or 15 for NYC?)? And obviously Uber can require you to accept jobs.
DoorDash finds legitimate gripe with the arbitrariness of the scope: “why would the agency choose to purposefully exclude companies that only facilitate grocery deliveries from its study and rulemaking, when those that facilitate both restaurant and grocery deliveries from local businesses would have these rules apply to them” [1]. Otherwise, it seems like usual griping. Ultimately, these lawsuits tend to turn on whether the rulemaking process was followed.
Why do so many able bodied individuals pay at minimum twice as much for food to brought to them? I could understand a market need for the elderly or disabled, but why would a perfectly healthy 20 year old find this to be a reasonable cost to eat a typical meal?
I am too cheap to do this, but other people are too lazy to save money.
Plenty of people can afford this food and some luxuries, but then contribute 0 to their retirements.
Heck, as much as I like one of my best buds, he is a 6 fig earner and saves nothing. He buys niche cars, goes on soo many trips, orders so much delivery food, then complains how expensive his student loans are. Back in 2018 before he bought that car, I showed him he could pay off his student loans entirely before the end of the year.
You say lazy, I say time is money. Entry level jobs expect more and more hours out of young workers these days. Some people would rather pay for a meal and eat it in 30 minutes than spend 3x that time cooking and cleaning.
It’s more expensive but not THAT expensive. I don’t use adopt Dash/Uber Eats often but I live in the suburbs and my wife doesn’t drive so these are examples of when we use it:
I’m still sleeping and my wife wants to get donuts or breakfast burritos for the kids on a Saturday.
I am out at a basketball game and the wife wants food for the family that isn’t pizza.
We’ve been hanging out in the pool drinking all afternoon and we want an easy dinner that isn’t pizza.
Minimum wage wont help them out of poverty. It will just increase prices and they will still be price out. But now, you will have a group of ex-worker who not getting jobs because being price out also. Sounds great but implementaton is bad. It is better to subsidize these workers with skillset to find alternative and better jobs (yes something like learn to code mentality but more like German type of apprenticeship learn skill other than coding....e.g. plumbing). Singapore and Malaysia is a good example where min wage not practice in SG but in Malaysia. And yet SG wage keep on raising simply due to capitalism fighting for a limited labor resources and not artificially jack up the price of labor to make politician look like genius solving economic problem beyond their expertise.
