Are restaurant POS systems a potential buyout target for companies like Uber Eats or Doordash?
(TLDR: skip to the last 2 paragraphs)
When I was in grad school I drover Uber occasionaly for extra money, and out of curiosity to see what current big tech offerings were actually like on the ground level.
Recently, I began doing research on food delivery services to see if there were as many glaring problems as Uber had back then. Ex: Back then uber didnt even allow you to add on stops for drive through food when driving someone home etc among lots of other issues that have since been addressed.
The main opportunity I still see for Rideshare companies is getting longer distance travel working to the point that they can start competing reliably with short haul airline flights. This isnt what this post is about, so I wont get into the existing issues on that front.
First, these platforms are still filled with incredibly high severity bugs that are so extreme that they render the apps illegal in most states and open up the corporations to negligence lawsuits, but at least one of those has been fixed since I first spoke about it. The main issue is that their support channels seemingly have no means to convey important information like this to the parent corporation. Because of this, critical issues like this go unfixed for months.
The biggest operational issue I uncovered is that restaurants seem unable to communicate back with 3rd party delivery apps about how long an order will take before its ready. I wondered if this was just a case of me not witnessing the system under enough stress for something like that to actually make a difference, but after the recent halloween holiday, it is clear that nothing like this exists or is being implemented. What happens is that even if a large chain pizza store has a wait time of 45 minutes before the pizza will be ready, Doordash / the pizza chain will send a driver to sit and wait the entire time. This eats up available drivers, keeping other orders elsehwere from being delivered. I'm sure you can see how this will snowball into many chargebacks / discounts from customers due to food getting cold etc. I have personally witnessed a single McDonalds literally shut down all delivery for nearly half of a small city before. They are chronically understaffed for anytime after 10pm, and I have witnessed over a dozen delivery drivers waiting in the lobby for orders that take over half an hour. Thats roughly every DoorDash/Uber Eats delivery driver for that entire area. I'm no restaurant expert, but I find it surprising that giant corporations like McDonalds cant get accurate wait time estimates for orders and get that communicated to their 3rd party delivery partners. My experience with that understaffed location indicates that it would likely need some level of AI to be accurate since that can take in account issues like being understaffed etc. Large chains not having basic functionality figured out in regards to order wait time estimation seems like a huge problem, but once thats fixed, it should definitely be doable for them to properly share this with 3rd party delivery platforms.
The reason for this post though, is that you cant expect small mom and pop single restaurants to figure out AI order time estimation algorityms and utilize the 3rd party deliver API to properly share this information. This is why stuff like this should be implemented by the POS (point of sale) software platforms that these restaurants use. This is the first real hook for making one or more of these POS software companies a desirable buyout, being able to immediatly get "perfect" integration with the platforms used by many of these small non chain restaurants, which makes up a huge percentage of their business.
The other big reason for taking over some of these platforms is that Uber Eats/ DoorDash can also then offer POS software for a severely reduced rate or even for free, nearly completely entrenching DoorDash/Uber Eats into that restaurants operations. Even moreso since it will remove most of the issues currently associated with 3rd party delivery apps.
I aint reading all that
You can just read the last two paragraphs then.
Take a day off
Toast already does that, same for FOUR ig
That's good to know. I'm fairly ignorant about what is offered feature wise for restaurant POS systems. I just know what I've witnessed in my experience. I can't remember seeing features like this actually being implemented anywhere. I fear it's possibly a classic "tragedy of the commons" scenario. Ie, why pay for this feature that doesn't actually change anything for me? I'm guessing restaurants don't care if a 3rd party delivery driver waits in their lobby 45 minutes. It doesn't affect their bottom line at all, in isolation at least... But when you realize that most restaurants acting this way affect every restaurant, the impact is very real... Aka classic "tragedy of the commons."
Thought about this a couple years and considered whether reservation systems, delivery apps, and charging/billing should be rolled entirely into one. It seems like an odd combo of having opentable + ubereats/doordash/seamless/etc. + toast all separate, when I would think having everything together makes most sense and could allow for better timing of orders, not having delivery drivers wait, among other things. Throw AI on top of that and you have a real combo.
I found two issues involved in this:
Lots of thoughts but I'm at work and don't have time to write something shorter lol
Yeah, that makes a lot of sense. That's also a decent case for someone like Doordash etc potentially buying them out.
Fair point, but again Oracle owns an entrenched brand...as long as they can maintain it at minimal cost, what is their incentive to sell it?
Owning POS doesn't equate to throughput efficiency of the kitchen. I don't necessarily see how it makes it better. Nearly every restaurant has some POS system, but that doesn't mean the kitchen won't bog down, and I'ver never seen analytics around tickets/orders as it relates to timeliness of food prep. I'm sure it exists somewhere, but small restaurants won't manage it that way, even if they did have the data.
Pre COVID and pre 3rd party delivery apps making delivery available to regular sit down restaurants, what you said is largely true. They never analyzed it because they were limited by the seating capacity of the restaurant. Even with drive through, they tracked how long they took from receiving an order to handing it to the driver. Now with delivery, you order volume could triple your normal seated maximum volume without warning. Being able to effectively manage things as described previously makes a huge difference now.
Yes, that's largely what I'm getting at...kitchens have a fixed output, based on quality of talent/management and size. Even at perfect efficiency, they can only put out so many plates. The delivery apps have changed that dynamic.
I have a good college friend who owns ~12 restaurants, most in the city where we live. He and I have talked this over a bunch, particularly during COVID. Fortunately, his food (largely Mexican and pizza with a few other concepts thrown in) was very easy to do for delivery (shifted to more burritos vs tacos as they carrry better for the Mexican places), and they just shut down their dining spaces during COVID and went 100% carry-out and delivery at that time and did pretty well with it. He's been profitable in month one at every location and stayed that way across the board.
Edit: on second thought, it's been very important for many restaurants to be able to estimate food prep time for decades. Any place that does pickup or delivery will tell you roughly how long the wait will be. Even for pickup they don't want a customer to be standing around for 45 minutes. This has been the case at least since the 90s, but in the past it was probably just an estimation made by the person on the phone instead of their software giving an estimation. So, it's been important for restaurants to be able to analyze order prep time for the same reasons why it is important now for restaurants to be able to automate that data and send it to delivery apps.
Yes, a POS provider can be a buyout target. The value comes from real time kitchen status and order timing. Delivery platforms want that data so they can route drivers correctly and avoid refunds.
You need to check two things in a POS:
Large chains already use internal systems for this. The issue is with small and mid sized restaurants that still use older systems. If a POS can give accurate wait times and show current kitchen capacity, it becomes useful for Uber Eats or DoorDash. This reduces delays and lowers the cost of order complaints.
The integration is not only technical. It also requires commercial agreements and ongoing support. A strong buyer can manage this more easily.
Earum consequatur maiores iusto optio. Facere quia qui minus voluptatem eum. Earum eum nam sit temporibus. Facere autem atque dolorem reiciendis eaque magni occaecati recusandae.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...