What if a new law could make your favorite takeout significantly more expensive? Join us on this week's The Digital Restaurant as we unravel the profound impacts of Seattle's new delivery driver wage laws on local eateries. You'll uncover how a $26.40 minimum wage and additional mileage fees have led platforms like DoorDash and Uber Eats to impose a $5 surcharge, slashing delivery demand by half. We explore how restaurants like Bok a Bok Fried Chicken and Biscuits are tackling these challenges head-on by creating their own delivery services to manage costs and enhance customer experiences. Plus, we dive into the broader implications of similar laws across the U.S., revealing the uncomfortable truth about consumer benefits from low driver wages.
Peek behind the curtain of restaurant management as we weigh the benefits of employing W-2 hourly drivers versus 1099 gig workers. Learn why maintaining visibility on third-party marketplaces remains crucial, even when handling deliveries in-house. We also introduce you to the exciting world of dashboard dining through Maviio's On my Way platform, which promises to revolutionize pickup orders. Finally, see how Kura Sushi leverages cutting-edge automation to stay competitive amidst soaring labor costs and shifting consumer behaviors. Discover how effective marketing can make all the difference in communicating their value proposition without resorting to heavy discounts. Don't miss this insightful episode that navigates the future of restaurant delivery and the technologies shaping it.
Articles mentioned in the video:
Related Article: Delivery fee fallout: Seattle restaurants closing, drastically changing business model
Related Articles: New Yorkers see 58% rise in food-delivery fees
TRANSCRIPT:
Are delivery drivers breaking the law? Will dashboard ordering open up new channels of commerce? And how is Kura Sushi using robotic dishwashers to drive operating margins? That's all ahead on this week's Digital Restaurant.
The Digital Restaurant works like this. We're going to ask each other five questions about headlines that affect the worlds of restaurants, off premise and technology. But in some way, tie back to our book series, delivering the digital restaurant. Are you ready? Let's go.
Carl: Good morning, Meredith. How are you doing today?
Meredith: Very good, Carl. How are you doing?
Carl: I'm surviving the heat. I think everyone is surviving the heat, if they're living in North America right now, at least. How are you feeling?
Meredith: We have a little June bloom going on , and it's July and I'm I confess confused by that.
Carl: You've been away from California for a few weeks, but I can assure you that by the time it gets to midday, everything's going to be fine. The sun will have its hat on again. We've got a few articles this week. As ever, it's taken us a while to go through them. You're welcome listeners, but we've got some really interesting ones, hopefully a few different ones.
I'm going to kick off with you this week, Meredith. You've got the first question and you've been looking towards the Pacific Northwest and a few restaurants in Seattle that are turning their back on marketplaces. What's going on here?
Are Driver Protections Pushing Restaurants to Self-Delivery?
Meredith: Seattle was one of the first cities to pass an ordinance requiring minimum wage be paid to delivery drivers.
And it was a very extreme amount. Actually, they're looking at peeling it back because it was so high. The requirement was that drivers get paid $26.40 per hour, and an additional 75 cents a mile. So for anyone keeping track, 75 cents a mile is extremely high. That's like what it costs to drive a 18 wheeler truck.
$26.40 is also extremely high. Seems more than fair relative to some other jobs out there. But the challenge of course, was that somebody had to pay for that. What doorDash and Uber Eats did in response was add a $5 surcharge to every single order that went out the door in Seattle.
The impact of all of that, according to this article, is that demand fell by get this. 50%. What a huge decline. A huge decline. Right? So now you have all these businesses who during COVID probably built their businesses around surviving in large part on delivery and takeout.
Where suddenly a big piece of that business just went away. So you can imagine, let's say deliveries had gotten to be 30 percent of your business. And then overnight, because of this law change that declined by 50%. So now 15 percent of your business has just gone away. And it's not clear that consumers just replace that with going to get it themselves or with dining in.
That's a pretty significant change. There are a pair of articles here about Some restaurants' response to that either closing down altogether, or in the case of Bok A Bok Fried Chicken and Biscuits, owner and operator, Brian O'Connor talked about building his own delivery force and just taking it in house
He said there were two motivations for this.
The first one being to control the entire experience. He said the customer experience and the quality of the food are what mattered to him. And so by bringing delivery in house, he plans to make those two things better. The other one, of course, was cost. He said the cost had just gotten too high to use third party deliveries in Seattle.
I think we'll see a lot more of this. Of course, we had Prop 22 come into effect in California. Last time we spoke, we talked about the settlement with the Attorney General in Massachusetts. New York has a similar law. I think as we see more and more of these, what I'll call driver protection laws. We are likely to see all of that affect how consumers perceive delivery. And, you know, maybe the little truth here that hurts for consumers is I think we all tend to want to blame big companies and say, Oh, DoorDash and Uber, they're taking advantage of these drivers and it's not fair. But remember, those companies are losing money.
And ultimately, it's the consumer who benefits from those drivers not getting paid very much, right? So, just a little harsh truth for all our consumers out there, if you value those services and you value the convenience of delivery, you should value the person who brings that to you too.
Carl: One of the questions that I think many listeners might have, Meredith, is, okay, well, What does my volume really have to be from a delivery perspective to really warrant having my own delivery force?
There must be some form of guidance. Have you got any thoughts around if some other folks are thinking about taking a similar direction, whether it's a certain level of volume that they need?
Meredith: I think that's a great question. I think that It depends, first of all, on how you structure the delivery driver pool.
If you are using a W2 hourly employee and all they are doing is driving for you, you need to be pretty confident that you're going to be able to utilize them continually, and that you're going to be able to forecast out sales and determine how many drivers you need at any given time so that you've got that order demand and driver supply in balance.
That's a pretty tricky thing to do, especially if you haven't been doing it previously. if you are in a situation where your drivers can swing back and forth and do multiple things for you, like maybe you're doing a bunch of catering at lunch. And so they go out and they deliver those catering orders and then they come back and do lunch rush and then they do dinner prep and they're multi purposed. Then I think you need fewer deliveries that you're executing because you're able to utilize that labor elsewise. If you are using a dedicated on demand delivery fleet, so meaning one that is 1099 gig working drivers, but dedicated to your restaurant, we would say at Empower Delivery, you probably need to be doing about 100 deliveries a day between third party and first party orders, catering, et cetera, in order to make that work.
Carl: Given the fact that we advocate for keeping marketplaces because they're a great place to build up your digital business maybe there's this piece around also thinking about when to include marketplaces based on when you're getting more first time customers come to you .
Meredith: Absolutely. This article implied that Bok A Bok was no longer going to take orders from third party as well. I would like to verify because that, that to me, I would say, well, why not take orders from third party? Just because you're going to execute the delivery yourself doesn't mean that you shouldn't be on third party being visible to consumers who are looking for food.
You can still execute it on the back end, which is a product that Uber calls "Bring Your Own Courier", or DoorDash calls self delivery.
Okay, next question for you, Carl. You always have like these cute little puns in your questions. Will Dashboard Dining take off? Tell us about, what the heck is Dashboard Dining?
Carl: I need a new career, don't I? Maybe I should go and work for one of those kind of red top newspapers over in the UK where they have to come up with these headlines depending on the story.
I feel there's a future for me there, Meredith. What do you think?
Meredith: One of the reasons we ended up writing a book together is because you told me about the children's book that you had written. And I thought, this guy knows how to write books.
Carl: That's right. I've still got to find an illustrator.
If you know anyone or any of our listeners, let me know. But, we'll talk about dashboard dining for a moment because you're right. It is a little quippy, isn't it? But we're talking about the dashboards of a car and dashboard commerce. We've spoken about Mavi. io before. Cynthia Hollen is their CEO. She joined us at Food On Demand and was recently interviewed about this on my way platform they have integrated into cars to enable commerce to exist into vehicle dashboards. It's a system that allows drivers to order food using voice commands or on the touch screen, therefore, just helping the convenience of when someone is hungry. They can order now.
You might go, well, I can do that today, right? In the article, they say 70 percent of new cars are rolling out on Google's operating system. So in many ways you might say, well, what is particularly new about this? And certainly what Cynthia is doing is she's speaking to every car company right now to try and get that connected car functionality in place
in at least 50 percent of the top vehicles of each of these big car manufacturer ranges. What she's also doing here is developing a marketplace to enable folks to be able to be on that marketplace as and when they are nearby to wherever the car is. And that's therefore also incorporating in things like real time inventory checks, being able to provide purchase recommendations like you'd see on a standard marketplace, but also making sure that then the recommended times Are linked based on where the driver is relative to where the restaurant is.
So therefore, optimizing the pick up nature of it. And of course, pick up is a big point. To your earlier point a moment ago, people are perhaps ordering less delivery because of the cost of delivery. So therefore, the idea of pick up as a theme right now is certainly important. The other thing that I think is quite interesting about this, and we talked about it in relation to McDonald's recently, when we talked about the voice AI aspect of the drive through, Maybe if you can avoid actually going to a drive through and having to voice AI your order directly, but actually do it while driving a few minutes out from before arriving to the restaurant, then you're removing that whole component of the QSR aspect, the infrastructure of a microphone and radios and listen into each other, but actually do it while driving on the journey and that you could say is probably a more convenient solution The only thing that I was a bit confused about is that they said they'd already have a million restaurants on the platform Which was confusing to me because I didn't think we had a million restaurants in the u. s So I'm not sure whether I I can't completely buy that number.
It's the big challenge on something like this is about having enough restaurants that want to be on that channel. Look, it's a great channel. I think having an ability to do this is great, but If I was sat over at DoorDash right now, I'd be thinking we could create the same channel ourselves, and have that access point in an interface that is optimized for a dashboard as opposed to a cell phone screen.
Meredith: Sitting in a drive thru, waiting in line to place an order, or even walking into a fast casual restaurant and waiting in line to place an order It's like, so 2004, why would you do that? It doesn't even make sense in this day and age. It's what Noah Glass would talk about was his primary inspiration for Olo, it's maddening that that would be a thing that people do.
What a waste of time. And to be able to order ahead is such a gift. Certainly doing on that on the phone is so amazing. I think consumers everywhere find it to be a boon to their time. And also you can't really press buttons while you're driving a car. So if you could talk to a car and say, Hey, get this for me.
I'm headed that way. That sounds amazing. But yeah, why wouldn't Google do it? Why wouldn't DoorDash do it? It is interesting. Maybe that's the angle here, get enough of it going that someone else comes along and swoops you up.
Carl: and if you can also then build in some payment component, right? Because that's the other side of this is how does payment work if you can build that aspect so that maybe it's linked to the car registration. So that would also add a lot of value again just through a simple drive through pickup occasion.
Going to the world of government regulation. You love these ones, Meredith. Tell us why we should be interested about how this government regulation world is going to affect delivery workers and delivery usage.
Meredith: It is so true. This is like an article custom made for Meredith. Like it's got data, it's got government regulation.
I mean, it's all of my favorite things in one place. The BK reader, which for those unfamiliar with it is Brooklyn's local news source, has come out with an article talking about a report put out by the New York City Department of Consumer and Workforce Protection. This report is full of every piece of data you would ever want on delivery, delivery drivers and what's going on in the world of delivery.
I absolutely loved it. The report is so detailed. We will put it in the links below. It's fantastic. The overall summary is that the New York department of consumer and worker protection put into place January 1st of this year, a driver minimum wage and Hey, great news.
It worked. Driver wages are up overall 56%, according to the New York city department of consumer and workforce protection. That's pretty exciting. They did what they set out to do, but the more you get into the details, the more interesting it is. So although total pay is up, tips are down 59%. And so what's basically happening here is in an effort to meet the minimum wage requirements, the, platforms are just moving money around from what used to be tips into a more standardized fee so that they will have money to pay the drivers.
So what you see here on figure one pay and tips per hour is that the pay- that dark blue -has jumped up tremendously. It was in Q4 right before the law went into effect, 8 dollars per hour. And now in Q1, $16.95. So more than doubled on the actual pay, but look at those tips.
They shrank. And why is this happening? It's happening because the platforms themselves are moving around money. And as they take fees up $2.30 per order to the consumer, the consumer acts pretty rationally and decreases their tips, although notably more than 2. 30, they decrease those tips by 2. 64.
Now this report says that the platforms themselves, the marketplaces, are actually making it more difficult to tip. They're doing it on purpose and swaying the consumer. I don't know if that's true. Have you noticed it getting more difficult to tip on any of the platforms?
Carl: I don't think I have to be honest.
But this resonates with me. I certainly feel that kind of pain when I'm seeing the cost these days. So I'm putting me in an uncomfortable position. I still like to tip Meredith, but I feel like you're exposing me. Luckily I'm not in New York.
Meredith: Final factoid in this article that was super interesting to me was that deliveries per hour completed by our delivery driver friends here, 1. 89. Oh, wow. That's pretty terrible productivity. 1. 89, less than two deliveries per hour they're capable of doing. So, all of this together, what this means to me is, again, maybe the same point I made in our last question, consumers, if you value this convenience, you got to pay for it.
Carl: That's, that's a crazy number. 1. 9 deliveries. And this is New York as well, of course, right?
Meredith: yeah, super dense, super easy to get around. They're not going very far to do the deliveries. 1. 89 per hour. Now of course, you know, Carl, I would tell you that on our platform at ClusterTruck, they are doing between five and seven deliveries an hour.
So there is a way to do this more efficiently and effectively for sure.
Okay, next question for you. Kura Sushi, really interesting company. A lot of people might not be familiar with it, so you might have to tell us a little bit about who they are. Using tech to help protect their value proposition. How so?
Carl: Sushi accessible for the masses, I think, is a way of positioning Kura because they certainly tried to make it a slightly lower price experience than typical sushi.
I think that's fair to say that you would, when you'd go to a standard sushi restaurant, you'd say, Oh, this is going to be a bit pricey. Well, They actually tried to do it in a slightly different way. They actually have 2000 or so restaurants, probably more than that over in Japan. And they have quite a large California concentration over here.
And over the last few years, as well as in their network over in Japan, they've been using a lot of innovation and technology to drive efficiencies into their operation. But the interesting thing about this is that their CEO in this article was likening a lot of what their efforts have been attributed to the way in which they've responded to the wage increases in California.
Now, what they're saying is that their sales have been impacted because now people are looking at dining out. And so therefore they're seeing the impact of price for dining out affecting them and their restaurant. But what they've also done is that they've tried to drive their margins more efficiently by bringing in a lot of automation.
So if you were to go to the back of the house, you'd see a lot of robots making the sushi dishes. They have this wonderful conveyor belt going around the entirety of the restaurant. They even now have these robot bussers removing a component of the labor. So that way bussers will either bring dishes to you or you can put completed plates that have been ordered specially or drinks onto those.
But the point is, is that it is a labor solution of sorts. And so with all that in mind, No surprise to see that they're investing more into technology, given the challenges to the environment from a labor cost standpoint, they've been putting more into ordering at table, for example. I was there only a few months ago myself, and you're able to have quite a interesting experience and using the tablet to be able to order different items. And again, sometimes it shoots down the shoot and arrives at your table. Other times it might arrive through, through one of those robot bussers.
They've also done changes in the back of the house with robotic dishwashers. So therefore helping on that particular component of the labor challenge. I also have to talk about this toy distribution thing, which I don't know where the Lincoln's ever gone to one Meredith, but it's kind of fun.
If you hit a certain amount of units. You get this little toy that comes from the top and it gives you some little play thing to play around with while you're eating as well. So it's quite an experiential, fun restaurant. And I bet relative to other restaurants of a similar type that are charging a similar price, their margins are pretty good.
And yet maybe part of the challenge I have with this article is that their CEO is suggesting that value proposition isn't necessarily understood by their customers because sales are down and traffic is down. So when I reflect on this, I think, well, good for them because they've really invested in technology and that's probably driven their operating margins to a really healthy level.
But similarly, You can't rest on your laurels at that point. You've also got to use that margin you've been able to achieve to develop a far more clear marketing value proposition to tell your customers that when you come to a place like Kura Sushi, you're going to see that we haven't increased our prices as a result of minimum wage.
So that value proposition is coming across in a rather compelling way. And that I think is an important one because anyone out there that is trying to make amends by not changing prices so aggressively, you've also then got to find ways to put that into your budget to tell your customer about it.
Otherwise, the macro effect could indeed be a reason why traffic isn't adjusted.
Meredith: Yeah, you would love to see the story here be technology enabled us to keep our prices low. We did not raise our prices and therefore consumers are choosing us over other things. You would love that to be the outcome and it's mysterious that it's not.
You were joking with me before this started that it's the weather and I feel like in California right now, everyone is like, it's the 20 an hour minimum wage.
Carl: Yeah, well, you and I have had plenty of experience in our multi unit days of folks blaming the weather until it's not the weather and it's the great marketing campaign that's done something.
Meredith: It's always the marketing campaign. When you're down, it's always an exogenous factor. Always.
Carl: Well, Kura has appointed a new vice president of marketing. I suspect they're going to be trying to focus in on that value proposition and try to avoid resorting to heavy discounting and large scale media campaigns.
Of course, in the news this week, there's been a lot of talk about McDonald's and their 5 menu actually starting to see some results in terms of traffic. There are different paths of being able to address these types of macro conditions, and maybe one is right for a quick service restaurant, but certainly driving operational efficiencies into the sit down casual dining environments. Those definitely seem to make sense for everyone and not just for folks like Kura.
Meredith: And I'll tell you, I, for one, after that whole discussion have been convinced that I need to go to Kura Sushi. So
Carl: thank you.
Sure. It's fun.
Mhm.
Carl: Last stop this week. I remember probably one of our very first digital restaurants. We we talked about drivers at times maybe sampling one of the fries or taking a sip of a drink. Do you remember that? And we talked about the ways in which packaging had to change to accommodate that particular risk.
Well, now, perhaps we're seeing that drivers are breaking the laws in delivering people's food. What's going on with this?
Meredith: This is an article in fast company. There's been complaints from the city of Boston and New York City about driver behavior. Other cities as well. They said in the article, and there were 3 main issues.
1 was just dangerous driving, breaking of laws, doing things like Driving scooters on sidewalks and making things scary for pedestrians, illegal left turns, speeding, all kinds of stuff. The second was the use of unregistered vehicles. So when you become a driver, of course you have to say what what vehicle you're using to deliver and a bunch of deliveries occurring and unregistered vehicles.
And then the final one, and maybe the most scary one was what they called quote unquote. Shared accounts. I've got a lot of air quotes in this episode, and I apologize for those of you who are listening and not on YouTube. You can't see all my air quotes, but, shared accounts. And what is a shared account? A shared account is truly, it is when. There's an account that someone applied for, went through the background check, did the training, submitted all of their verification, said, this is the kind of vehicle I have.
And this is the kind of insurance, all the things we're supposed to do. And for some reason, someone else is actually delivering on that account. This happens sometimes because literally I had a driver when I was in Indianapolis, exact same car picks me up two trips and I was like, oh, you've picked me up before I've been in this car and he says to me No, I've never picked you up which is fair.
He probably picks a lot of people up and I said no I'm certain I've been in this car and he says to me Oh, well, sometimes my dad drives it and sometimes I do so they have one account They have one car, but the driver switches back and forth because they can't both be driving 24 7, right? That would be super dangerous.
That would put them up in the category of of breaking the laws so, that happens. You also see people sharing accounts in the sense that someone applies who can get an account, and then, lets someone use it, rents it, or sells it to someone who can't get an account. So they might not be able to get an account because of their traffic record, because of their Immigration status, all kinds of reasons why they might not be able to get an account. And these things really do happen. So DoorDash in response, they're going to start a real time selfie submission process where Like randomly delivery drivers will have to submit a selfie at that moment. And based on that selfie, they'll match it to who actually, registered for the account.
And if those two photos match, then they'll say, great, all good. And if those two photos don't match, then they'll be able to shut down the account. Wow. If there's that much going on you wonder like what percentage of the supply of drivers fall into this camp.
In the article, they said very specifically that DoorDash did not comment on how many accounts they deactivate per year, but out of all the drivers out there, and going back to our first article, they said that there are 99, 000 Active delivery drivers in New York in the boroughs.
So of those 99, 000, how many of them are in some way not supposed to be driving? How many of them are real? I don't know. And there's literally no way to know. There's all these shenanigans going on. I would say the shenanigans will probably only increase as the jobs become more lucrative. As you put in all these minimum wages and mileage reimbursements and what have you.
Carl: I wonder whether that's going to be Some level of data protection attributed to taking people's selfies. You've got to think I'm not sure whether that would fly in Europe.
Let's put it that way with GDPR.
Meredith: Oh, yeah, right. No kidding they would have to be looking at the metadata when the picture was taken and then using AI to do facial matching and it's pretty intense, right?
Carl: can imagine if you and I were a driver And I'd be so mad because I would be a five star driver and I bet you would be a four star and you'll take my rating down.
So that's not happening. Don't don't
Meredith: sharing your account with me is what you're
Carl: saying. Definitely not sharing your account. Let's ask our listeners. Who would you rather share an account with me or Meredith? Do you decide? Do you let us know in the comments below? But, anyway, that is it for this week's digital restaurant.
Thank you, Meredith, as always for your insights and thoughts. If you have any thoughts that you'd like to share with us for a future episode, do let us know if you are thinking about dashboard ordering on your car, what would you be ordering? And what do you think about those Seattle restaurants?
Are you going to be taking marketplaces and getting your own delivery force? Or is it somewhere in between?
The Digital Restaurant Podcast is available for you to follow and subscribe wherever you listen to your podcasts. Watch us, rate us, and subscribe to The Digital Restaurant on YouTube, and follow along on all our social media digital restaurant channels. Thanks for listening.
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