The Role of On-Demand Delivery Platforms in Restaurants during Disruption: Evidence from the Coronavirus Pandemic
30 Pages Posted: 9 Sep 2020 Last revised: 2 May 2021
Date Written: August 13, 2020
The coronavirus (COVID-19) pandemic has interrupted many industries, with restaurants being one of the hardest-hit businesses. On-demand delivery platforms such as DoorDash, Grubhub, and Uber Eats have been a valuable option for consumers, but whether and to what extent these platforms benefit restaurants remain under-investigated. This paper studies the impact of delivery platforms on restaurant demand and staffing. Empirical analysis shows that restaurants that are on delivery platforms are less negatively affected by the pandemic: both consumer demand and restaurant staffing are higher than restaurants that are not on these platforms. However, such positive platform effects are substantially heterogeneous across different types of restaurants: the demand enhancement effect for fast-food chains is four times larger than that of independent restaurants. This disparity suggests that delivery platforms can widen the performance gap between national chains and independent restaurants, which may drive more independent restaurants to close. Further, we find that changes in customers’ price sensitivity may explain why fast-food chains disproportionally benefit from delivery platforms. While the use of delivery platforms increases during the pandemic, consumers on these platforms are more price sensitive as these platforms reduce geographic frictions and facilitate price comparisons. Therefore, consumers on the platforms are more likely to choose the relatively low-priced fast-food chains over independent restaurants. These findings deepen our understanding of the effects of delivery platforms on restaurants and have implications for restaurants and policy makers.
Keywords: On-demand platforms; on-demand services; two-sided platforms; food delivery; restaurants; demand; employment; COVID-19
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