The owner of a small pizza restaurant chain made a profit by ordering his own pizzas on DoorDash after the service listed the wrong price by mistake, it has been revealed.
The incident occurred in March 2019, and was revealed on Sunday in an email newsletter from content strategist and writer Ranjan Roy.
Roy’s friend, whom he does not name, owns several pizza restaurants and had never offered delivery, and so was surprised to get calls complaining about pizzas being delivered cold, or the wrong order being delivered.
The restaurateur investigated and discovered that that a DoorDash delivery option had mysteriously appeared on their company’s Google Listing, even though he had never communicated with DoorDash or struck a deal to have them deliver.
The frustrated pizzeria owner also noticed something else: the price for his $24 specialty pie was mistakenly listed as $16.
A DoorDash delivery driver is seen in a file photo. A pizza restaurant owner has shared his story of how he profited by ordering his own pies on the service due to a pricing error
‘I knew Doordash scraped restaurant websites. After we discussed it more, it was clear that the way his menu was set up on his website, Doordash had mistakenly taken the price for a plain cheese pizza and applied it to a ‘specialty’ pizza with a bunch of toppings,’ Roy writes.
‘Cue the Wall Street trader in me…..ARBITRAGE!!!!’ he continued.
Roy says his friend set up an experiment, ordering 10 of the specialty pies on Door Dash for delivery to a friend’s house, charging $160 to his personal credit card.
The DoorDash delivery driver arrived and paid the restaurant $240 with a company card and delivered the pizzas.
‘Each pizza cost him approximately $7 ($6.50 in ingredients, $0.50 for the box). So if he paid $160 out of pocket plus $70 in expenses to net $240 from Doordash, he just made $10 in pure arbitrage profit,’ Roy writes.
For the next experiment, the pizza shop owner simply put dough with no toppings in the boxes, cutting his costs and netting $75 in profits for an order of 10 pies.
‘Was this a bit shady? Maybe, but f**k Doordash,’ writes Roy. ‘Note: I did confirm with my friend that he was okay with me writing this, and we both agreed, f**k Doordash.’
Delivery services such as DoorDash have come under new scrutiny during the pandemic over the fees they charge restaurants
Roy notes that he and his friend later discovered that the DoorDash listing was the result of a ‘demand test’ by Doordash.
‘They have a test period where they scrape the restaurant’s website and don’t charge any fees to anyone, so they can ideally go to the restaurant with positive order data to then get the restaurant signed onto the platform,’ he wrote.
The story comes as food delivery platforms come under new scrutiny amid the coronavirus pandemic, raising worries over the commissions charged to eateries by the third-party delivery companies.
Uber, which runs delivery service Uber Eats is in negotiations to buy Grubhub Inc in an all-stock deal, people familiar with the matter said last week.
Some small eateries have been vocal about their distaste for the services, which sometimes charge mom and pop restaurants – already operating on thin margins – as much as 15 percent to 30 percent commissions on each order while giving discounts breaks to marquee chains like McDonald’s Corp.
In March and April, as the coronavirus pandemic hit the United States, Grubhub added as many new partner restaurants to its platform as it did during the entire second half of 2019, Chief Executive Officer Matt Maloney said last week in a letter to shareholders.
It now has about 300,000 U.S. restaurants on its app, while Uber eats has more than 100,000 in the United States and Canada. Their merger would create the nation’s largest restaurant delivery company.
In April, daily average orders via Grubhub were 20 percent higher than the same month last year, Maloney said.
Andrew Rigie, executive director of the New York City Hospitality Alliance, a trade association, said consolidation among third-party delivery firms ‘poses significant concerns.’
‘You get nervous when you potentially have a provider that’s going to be over 50 percent of the market,’ said Robert Guarino, chief executive officer of 5 Napkin Burger, which has four sit-down locations in Manhattan. Most of his delivery orders come through Grubhub.
‘The big question is, what happens as all these companies are trying to reach profitability, where does it come from,’ he said.