Home pizza delivery was a huge innovation when it was invented many decades ago. Business-wise, however, it made absolutely no sense for the business to take the risk – it was incumbent upon “independent contractors” to execute and pizza chains were all too happy to incur the risk, while there was an implied expectation by customers that delivery implied some sort of service charge. The business model for the contractors is simple – they got to take a depreciation and operating expense on their vehicles (at least the fraction they claimed as part of their business use) and who knows how much of their cash gratuities they actually declared to the CRA!
Fast forward to today, and we have services such as Uber Eats, Skip the Dishes, Doordash, Fantuan, etc., that all brutally compete against each other in a typical low margin race to the bottom. Needless to say, the value chain in this entire operation is terrible from any investor’s lens. I do get some amusement seeing people in brand-new Teslas driving with Fantuan logos on their vehicles – presumably their own calculations think that they are driving fuel-free while they take advantage of their 1-year Tesla supercharger subscription but are delightfully ignorant of other depreciation aspects of vehicles.
So imagine my reaction when I saw today’s news release from Goodfood (TSX: FOOD) as they desperately try to continue to diversify away from their nearly-dying business segment of semi-prepared food delivery:
Goodfood and PIANO PIANO Partner to Deliver Premium Pizzas Nationwide
Toronto’s acclaimed Italian restaurant group is partnering with a leading Canadian online meal solutions company to deliver premium pizza in first coast to coast distribution deal
TORONTO and MONTREAL, July 31, 2023 (GLOBE NEWSWIRE) — Goodfood Market Corp. (“Goodfood” or “the Company”) (TSX: FOOD) a leading online meal solutions company and PIANO PIANO the Restaurant Group (PIANO PIANO), a renowned Italian restaurant with five restaurant locations across the GTA and producer of premium frozen pizza are making it even easier to bring the restaurant experience into your home.
Goodfood members in Eastern Canada now have access to delivery of a party pack bundle of 3 of the bestselling pizzas from Chef Victor Barry’s PIANO PIANO Italian eatery which includes customer favourites: Sweet Hornet, Mushroom & Onion, and Pepperoni. Later in the summer, this offering will be expanded to Goodfood customers in Western Canada and the teams are working closely to add more menu hits to customers at home.
I see the logic in FOOD management trying to figure out how they can utilize more of their existing supply chain distribution, but something makes me think that picking up a fraction of sales from third-party distributors will run into a critical mass problem – you’re not going to get the Dominos, McDonalds, KFC-type volume. Instead, you’re only going to sign up a whole bunch of dis-aggregated niche vendors (probably ones that are disgusted with the fees of the existing offerings) and this is going to create huge fixed costs to integrate your logistical operations with each and every one of them. The other issue is that delivery logistic companies are a brutally competitive space. What makes their offering more cost competitive than Uber Eats and the like, especially considering a good portion of their (Uber Eats, Doordash, etc.) “independent contract” labour pool is likely grey-market?
The lower end of the labour market is not a friendly space to be in – in order to make any living, the people working in this sector are working brutally hard, but this is one of the signs of the new economic times that is a pretty good barometer of watching our collective standard of living decline further and further – long gone are the 1950’s to 1970’s days of a single wage earner being able to provide for the family and pay down the house mortgage. Now you need two people plus side gigs in order to just put that roof on your head.
About a month ago I took an Uber ride from Toronto downtown in Tesla Y. Driver also bragged that his monthly fuel expenses are ~ 100 bucks and that this is the best car to taxi.
I, meanwhile, was trying to estimate amortization expense of a taxi with ~65k book value, operating in accident-prone city center. Needless to say, the probability of a profitable operation of this “business” was concluded to be negligible.
At first I thought your device auto corrected pizza pizza to piano piano. When it continued, I did a Google search and yes I was the ignorant one haha thanks for the chuckle.
As far as the dual income part, the unpopular opinion would be women entering the workforce halved the value of labour. If you double the workers you halve the value.