On-Demand Delivery Platforms and Restaurant Sales

Forthcoming at Management Science

48 Pages Posted: 29 Mar 2021 Last revised: 2 Jun 2024

See all articles by Zhuoxin Li

Zhuoxin Li

University of Wisconsin-Madison - Wisconsin School of Business

Gang Wang

University of Delaware

Date Written: August 13, 2020

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 vs. chain) and the type of customer channels (takeout vs. 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.

Keywords: Multi-sided platforms, on-demand platforms, on-demand services, food delivery, restaurants

Suggested Citation

Li, Zhuoxin and Wang, Gang, On-Demand Delivery Platforms and Restaurant Sales (August 13, 2020). Forthcoming at Management Science, Available at SSRN: https://ssrn.com/abstract=3813891 or http://dx.doi.org/10.2139/ssrn.3813891

Zhuoxin Li (Contact Author)

University of Wisconsin-Madison - Wisconsin School of Business ( email )

Gang Wang

University of Delaware ( email )

Newark, DE 19711
United States

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