New recipe for restaurant, app contracts
A novel contract proposed by a University of Texas at Dallas researcher and his colleagues could help alleviate key sources of conflict between restaurants and food-delivery platforms.
In a study published online March 28 in the INFORMS journal Management Science, Dr. Andrew Frazelle, assistant professor of operations management in the Naveen Jindal School of Management, and co-authors Dr. Pnina Feldman of Boston University and Dr. Robert Swinney of Duke University examined how to best structure relationships between food-delivery platforms and the restaurants with which they partner.
Other platforms in the sharing economy, such as ride-hailing and vacation-rental services, allow people to sell access to resources that would otherwise be generating no revenue for them, Frazelle said. The interests of the resource owner and the platform are reasonably well aligned in that more transactions are good for both.
“However, restaurant delivery is different,” Frazelle said. “Delivery orders represent incremental business on top of the restaurant’s existing dine-in operation. More business sounds good, but it comes at the cost of a commission charged by the delivery platform.”
Platforms such as Grubhub, DoorDash and Uber Eats collect customer orders online, transmit them to restaurants and deliver the orders to customers. While this service helps restaurants expand their markets, the study found the relationship has inherent flaws.
The most common contractual relationship between platforms and restaurants, in which the platform takes a commission, or a percentage cut, of each delivery order, has two key issues, according to the study. More