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📲 🚗 Doug Ford's Delivery App Ask
⛏️ Forget the Shovels: Let's Build Digital Infrastructure!
This is a newsletter about public policy and technology [regulation stuff] in Canada. 🇨🇦
🤡 This week’s wildcard was prompted by Jon Shell (@jonrshell), who is the Managing Director and a Partner at Social Capital Partners (”SCP”). SCP is building a more resilient economy through broad-based ownership and quality employment.
Jon and I were talking (*emailing) after I wrote about ghost kitchens and we tried to imagine a digital public alternative to Uber Eats. In happy news - we’re not the first people to engage on this, and we won’t be the last. As always, we look forward to your comment and reactions. 👇
Ontario is pretending it will or can regulate food delivery platforms. It should build one instead.
Ontario Premier Doug Ford has recently “asked” food delivery apps to cut their fees. Amazingly, Canadian food delivery apps Skip the Dishes and Toronto-based Ritual *actually* responded with polite time-bound discounts (!). These concessions are modest; and effectively business-development initiatives for the companies - allowing them to sign on more restaurants that will (in theory) eventually pay their burdensome subscription and commission fees.
Uber Eats Canada responded by reducing the “delivery-only” commission rate on orders restaurants process themselves using an online ordering platform. The commission will drop from 15 per cent to 7.5 per cent across Canada until the end of the year.
The company also extended a zero per cent commission on pick-up orders until March 31, 2021.
Instead of politely asking these firms to fundamentally change their business structure, maybe Doug should put them out of business entirely by investing in ethical digital infrastructure. Doing so would take courage, creativity, and a deep commitment to supporting the restaurant industry.
Let’s be real: to date, policy people have been pretty limited when it comes to helping restos. Despite their best efforts, decision-makers are working with limited levers when it comes to sufficiently supporting the restaurant industry. We’ve temporarily reclaimed sidewalks as patios, offered commercial rent assistance, extending the wage subsidy, and...not much else. Free heat lamps?
The government response has been a blend of federal support and municipal maneuvering. The role for the province hasn’t been clear - until now. Given that Doug and [the Hon.] Chrystia [Freeland] are BFF, they could consider allocating some of those sweet Federal infrastructure donairs towards an investment in digital public infrastructure. And this wouldn’t have to be limited to the province of Ontario, it could extend to all the provinces and territories. For once, California could look to Canada for some serious tech policy inspiration.
As natural champions of local businesses, politicians have been reduced to simply promoting curbside pick up as a technique to circumvent delivery surcharges. But ordering takeout isn’t [a] public policy, even though it lends itself nicely to virtue-signalling. 😉
The 30% commission from these apps is not a new problem nor is it particular to the pandemic. Some Toronto restaurant owners are even delivering their own food to save on hefty app delivery fees.
Ontario could (as ever) look to California for policy inspiration when it comes to taking on online delivery companies.
Just last month, Governor Gavin Newsom signed a Bill regulating food delivery apps. The Fair Food Delivery Act of 2020 prohibits food delivery apps from arranging deliveries without getting permission from the restaurant or store to take orders from there. While it’s definitely important for delivery platforms to obtain clear consent from restaurants to advertise their offerings, the Bill is silent on commissions.
California should also be a source of caution for Dougie. Gig companies Uber, Lyft, DoorDash, and Instacart have together spent at least $170 million USD to back Proposition 22. That’s a lot of meatballs! Early in the pandemic, Postmates, Doordash, and UberEats declined a plea from the Golden Gate Restaurant Association for a 50 percent rebate for restaurants.
Attempting to cap the commission could be another part of the province’s work to regulate delivery apps.
Policymakers in Los Angeles, New York, San Francisco, and Seattle, as well as Jersey City, New Jersey, and Washington, DC, have passed emergency bills capping the apps’ commissions. But the delivery services may respond to the regulations by raising prices to consumers, which could hurt sales. For instance, after Jersey City imposed a 10 percent cap on commissions, Uber raised local ordering fees by $3.
So the province could consider sinking some serious cash into trying to reign in global tech platforms that are dedicated to dominating the food delivery space. Or, it could take a perfect opportunity to consider building robust digital infrastructure as a substitute.
What would a food delivery app worth recommending to citizens look like?
A minimum, if not living, wage for delivery professionals - salary?;
What is the “commission” intended to cover - marking costs, logistics, and payment.
What if the province built its own distribution app that could ensure living - or at least minimum - wages, subsidization for main-street restaurants and some sort of safety standard for mobility and delivery? The province could also consider how dormant or under-utilized large-scale cooking infrastructure at convention centres and/or hotels could be leveraged by ghost kitchens during the fall and winter.
Building a public food delivery platform is not that radical of an idea. The reality is that these platforms are already heavily subsidized by VC capital and they (definitely) aren’t profitable(!), so re-imagining them as being *publicly* subsidized and structured as a non-profit or a co-op isn’t that big of a stretch.
🤷 Why not reimagine technology platforms as public goods?
🤷♀️ What if this was the infrastructure we built?
🤷🏿♂️ How many good jobs would that create?
🤷🏻♂️ Are we still a “roads and bridges” world anyway?
Doug Ford is right that food delivery apps gobble too large a margin. But he is wrong (albeit adorably optimistic) to imagine that the province can effectively regulate these platforms in the short term. Instead, it is worth talking about how food delivery could be subsidized, and what kind of unintended consequences could follow. There are also plenty of vetted and virtual Canadian technology companies that could be a productive part of this re-imagining, like sociovore and Kitchen Hub. Perhaps we are not as limited in our choices when it comes to delivery as we think.
🛍️ Even a simple advertising platform for local restaurants that facilitates directly ordering from them, for curbside pick up, would be a step up.
What else? It’s also worth remembering that COVID has changed the distribution of the population, and thus the geography of food delivery hubs may also be shifting. The state was a first mover in the business of delivery with Canada Post. Maybe there are lessons we can import.
In the interim we should remember that delivery apps are fundamentally a marketplace. It doesn’t cost anything for restaurants to be “on” them, in fact, it’s essentially free advertising (or “demand generation”) that can be a good way to convert customers. But right now, advising Ontarians to order directly from restaurants is the most responsible way to encourage take out. Here’s a tip: ordering the Ontario Digital Service to prototype an ethical alternative should be the bold next step to take on big tech. Making such an intervention “ethical” fundamentally starts with sustainable operations - an elusive goal for most of the apps.
While we’re at it, here’s another wildcard: imagine Ontario offering a digital business permit that gets a restaurant rent and salary subsidies and in return they offer delivery and pickup services on the infrastructure.
To truly support local restaurants across the province, Doug Ford should take delivery platforms out (of business).
💁 Could you see this happening in the province? Tell us in the comments!
*NB - Examples of ethical delivery alternatives (I am probably missing SO many):
A restaurant-run co-operative model, as being explored by here in Toronto by Roger Yang
Montreal’s Radish, an online delivery cooperative that is looking to bring forth a more equitable relationship between restaurants, delivery drivers and consumers.
Black-owned delivery startup Chewbox (US, LA-based)
Everybody Eats, customers who normally struggle to eat because of inaccessibility to affordable meals can order from the service at a discounted price.
🤓 Vass Bednar is a smart generalist working at the intersection of technology and public policy.