On-Demand Delivery Platforms and Restaurant Sales
Date
2024-10-16
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Management Science
Abstract
Restaurants are increasingly relying on on-demand delivery platforms (e.g., DoorDash, Grubhub, and Uber Eats) to reach customers and fulfill takeout orders. Although on-demand delivery is a valuable option for consumers, whether restaurants benefit from or are being hurt by partnering with these platforms remains unclear. This paper investigates whether and to what extent the platform delivery channel substitutes restaurants’ own takeout/dine-in channels and the net impact on restaurant revenue. Empirical analyses show that restaurants overall benefit from on-demand delivery platforms—these platforms increase restaurants’ total takeout sales while creating positive spillovers to customer dine-in visits. However, the platform effects are substantially heterogeneous, depending on the type of restaurants (independent versus chain) and the type of customer channels (takeout versus dine-in). The overall positive effect on fast-food chains is four times as large as that on independent restaurants. For takeout, delivery platforms substitute independent restaurants’ but complement chain restaurants’ own takeout sales. For dine-in, delivery platforms increase both independent and chain restaurants’ dine-in visits by a similar magnitude. Therefore, the value of delivery platforms to independent restaurants mostly comes from the increase in dine-in visits, whereas the value to chain restaurants primarily comes from the gain in takeout sales. Further, the platform delivery channel facilitates price competition and reduces the opportunity for independent restaurants to differentiate with premium services and dine-in experience, which may explain why independent restaurants do not benefit as much from on-demand delivery platforms.
Description
This article was originally published in Management Science. The version of record is available at: https://doi.org/10.1287/mnsc.2021.01010.
Copyright: © 2024 The Author(s).
Open Access Statement: This work is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, distribute, transmit and adapt this work, but you must attribute this work as “Management Science. Copyright © 2024 The Author(s). https://doi.org/10.1287/mnsc.2021.01010, used under a Creative Commons Attribution License: https://creativecommons.org/licenses/by/4.0/.”
Keywords
multisided platforms, on-demand platforms, on-demand services, food delivery, restaurants
Citation
Li, Zhuoxin, and Gang Wang. “On-Demand Delivery Platforms and Restaurant Sales.” Management Science, October 16, 2024. https://doi.org/10.1287/mnsc.2021.01010.