Ah lets talk food delivery apps. Right now its the pandemic, I’m jobless and I’ve got a lot of time to code and write. I can’t do uber or any one of these gig jobs right now as I’ve been locked out of my uber account and no amount of calls to support centre have helped me. But I’m taking this as an opportunity to finish coding up some apps.
First off I’m using Flutter. I’ve got nothing against React Native as it currently stands (they’ve improved it over the years), but I had concerns about it years ago. 2019 rolled around and I was looking into the concept (and React was looking FAR better) again and saw flutter. Damn I was sold!
This is going to be a multi series. I want to start with discussing the business concept and how everything works. Let’s talk unit economics and optimization. Let’s talk UberEats, Foodora, deliveroo and all those apps. What do they do and how do they pull it off? Let’s talk start ups.
So these apps work based off the concept that all three groups in the transaction (end customer, restaurant and driver) are essentially customers. Essentially the platform serves as a ‘service provider’ that has to optimize. The mathematical problem is what you would call a variant of the Vehicle Routing problem (VRP). In this case I believe it’s called a Meal Delivery problem with dynamic routing. Here is a journal article describing it and showing off the mathematics: http://www.optimization-online.org/DB_FILE/2018/04/6571.pdf
But before we dive deep into the backend of serving orders automatically and doing math, we need a front end UI. We need 3 apps to start- customer, driver and admin panel. Maybe more later. We are going to handle this solely with flutter- no php admin panels. why? Because uber has a restaurants app you know..they ain’t using admin panel- its a full app.
So I’ve started out coding up the customer front end. Take a peek at the github for all the code: https://github.com/iNeedHelpX/foodorderapp
There is a problem with these apps though- HOW DO THEY MAKE MONEY? In fact Uber itself has yet to post a profit- its in investor debt! These start ups attract crazy investment and its all speculation. The per unit economics make these apps very hard to deal with. They make their money in fees to both restaurant and to end customer. Usually this looks like anywhere from 20–30 % from the restaurant off the cost of the meal and anywhere from $0–4.99 fee to the customer. And YES I am aware that uber fees to customer are sometimes in that $15 range but understand that is only when demand is HIGH and UBER DOES NOT GO OFFLINE. Oh and basic economics says that the more you charge the customer the less customers you have. So be aware of that if you’re building your app- you cannot force all the fees on to the end customer. Restaurants however always complain that fees are too high, which do in turn mean most of their profits get eaten up. BUT many fail to see the value uber provides- they have customer base, brand recognition and plenty of great adverts. This here is my favourite uber ad as it brings up our 3rd party- the driver!
Ah the driver… such a very complicated part of the service. This is a human being and he/she (I’m a driver too) deserves to get paid well and on time. Uber has been really good about paying on time. Same with the other big ones. However some smaller apps have been horrible about this.
The fee to the driver eats up most of the fees a delivery app collects. It’s a huge reason why these companies struggle to produce profit. Drivers can be a touchy issue. Last year here in Toronto this happened:
my opinion is that this union served as “the straw that broke the camels back”. I don’t think the union was the sole reason why they left, but it’s certainly like throwing a rock at a down trodden horse….
I went to some of the union meetings and the things they were demanding were unsustainable. Things like $9/order… just lol. Believe it or not, but I voted YES and signed a card, but I was first to harshly criticize them. And yes I even told them that they were throwing a rock at a down trodden horse! I tried to teach them about unit economics, but of course they didn’t want to hear that. This video here pretty much covers how I interpret what happened. it covers the economic discussion.
keep in mind what I said earlier about the end customer- if you charge them more you’ll have less customers. Customers DO notice when fees are like half the cost of the food. You can’t just gouge the end customer.
Here in Canada most customers are willing to pay around $5 delivery, anything north of that and people will hold back. Not everyone, but again you’ll have less customers.
I’ll leave you with that for now, if you wish to donate here are my links
or buy me a coffee,