USA
đIs âPizza Arbitrageâ Possible? Is Doordash Losing Money on Purpose?
In March 2019 a good friend of Ranjran Roy (the writer of this piece), who owns a few pizza restaurants called him â suddenly customers started calling in with complaints about their deliveries.
Royâs friend, for over a decade, says he resisted adding delivery as on option for his restaurants.
He felt it would detract from focusing on the dine-in experience and result in trying to compete with Dominoâs.
None of his restaurants delivered, nor had he ever spoken with anyone from Doordash.
Yet, a delivery option had mysteriously appeared on their companyâs Google Listing.

The delivery option was created by Doordash.
Doordash was causing him real problems â the most common being, Doordash deliver drivers didnât have the proper bags for pizza so it would inevitably arrive cold â leaving his employees wasting time responding to complaints and bad Yelp reviews.
But another, more serious problem quickly surfaced â customers were seeing incorrectly low prices.
A pizza that he charged $24 for was listed as $16 by Doordash.
This is where Royâs idea of âpizza arbitrageâ came into play:
What if someone could pay Doordash $16 a pizza and Doordash would pay his restaurant $24 a pizza? A clean $8 profit per pizza, they thought.
And so it was put to the test. The first order for 10 pizzas.
Trade 1
âHe called in and placed an order for 10 pizzas to a friend’s house and charged $160 to his personal credit card. A Doordash call center then called into his restaurant and put in the order for those 10 pizzas. A Doordash driver showed up with a credit card and paid $240 for the pizzas.â
Trade 2
10 pizzas, but this time, he just put in the dough with no toppings, where now each trade would net $75 in riskless profit -> $240 from Doordash minus ($160 in costs + $5 in boxes)
They did these trades a few times over the course of a few weeks to see if Doordash would catch up, but they didnât.
So whatâs the point of all this?
âJust think of all the meetings and lines of code and phone calls to make all of these nefarious things happen which just continue to bleed money. Why go through all this trouble?â
Doordash reportedly lost an insane $450 million off $900 million in revenue in 2019.
Uber Eats lost $461 million in Q4 2019, off of revenue of $734 million.
And Amazon completely bailed on restaurant delivery in the U.S.
The delivery business isnât flawed by nature, especially considering Dominoâs stock chart.
âThird-party delivery platforms, as theyâve been built, just seem like the wrong model, but instead of testing, failing, and evolving, theyâve been subsidized into market dominance. Maybe the right model is a wholly-owned supply chain like Dominoâs. Maybe itâs some ghost kitchen / delivery platform hybrid. Maybe itâs just small networks of restaurants with out-of-the-box software. Whatever it is, weâve been delayed in finding out thanks to this bizarrely bankrolled competition that sometimes feels like financial engineering worthy of my own pizza trading efforts. â
A note in the article later revealed that was all the result of a âdemand testâ by Doordash.
“They have a test period where they scrape the restaurantâs website and donât 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.â
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Stay tuned for the next edition of MRKTRS WKLY.
Want to offer some feedback or submit content? Email us at [email protected]