A restaurant owner made hundreds by ordering his own pizzas through Doordash after discovering the platform had created a listing selling its pizzas for cheap
- Restaurant owners don't usually make money ordering from their own restaurants. But one
pizzarestaurant owner made hundreds doing so after discovering a Doordashloophole.
- Financial services and media executive Ranjan Roy detailed in a newsletter post how he and a friend who owns pizza restaurants made money by using Doordash's system to order from the restaurants in 2019.
- Doordash had started fulfilling
deliveryorders for the pizza restaurants without the owner's knowledge or consent and was selling pizzas for $16 apiece even though they cost $24 on the restaurants' actual menu.
- Roy and his friend started ordering pizzas from his friend's restaurants through Doordash. By ordering $160 worth of dough-only pizzas, the friends were able to make $75 per order.
- This apparent inefficiency in Doordash's system was actually part of a "demand test," where the platform fulfills delivery orders for a restaurant without its knowledge or taking a commission, and will present the sales data to the restaurant as a marketing pitch.
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Restaurant owners usually don't make money by ordering
On Sunday, financial services and digital media executive Ranjan Roy published a widely-circulated post on Margins, the technology and business newsletter he runs, along with product manager Can Duruk. Roy, a former trader, revealed that he and a friend had discovered a loophole last year that had enabled them to profit by ordering from the friend's restaurants through Doordash.
Roy's unnamed friend contacted Roy one day in March 2019 asking if he'd heard of Doordash. The friend had been noticing an uptick in customers calling in and complaining about the pizzas they'd had delivered. But none of his restaurants offered delivery, either in-house or through third-party platforms.
The friend realized that Doordash had created a listing for his restaurants without his consent or knowledge, and was taking delivery orders for them. The friend also noticed that Doordash's listing charged $16 for pizzas that cost $24 on the restaurants' menu.
This is where Roy saw an opportunity. If Doordash charged $16 but paid $24 to the restaurant, couldn't the restaurant make money by ordering from itself?
"My friend, as a
Roy and his friend put that theory to the test. First, they used Doordash to order 10 pizzas, costing them $160.
"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," Roy wrote in the post. Since each pizza cost the friend around seven dollars to make, he ended up making only $10 from the order.
Then, Roy and his friend decided to see how far they could take this game. Again, they ordered 10 pizzas, this time for just dough with no toppings. With this new reduction in costs for the restaurant, Roy's friend made $75. Roy and his friend repeated this experiment several times over the course of the next few weeks, expecting Doordash to catch on at some point. Doordash never did.
"I had visions of building a network of restaurateurs all executing this strategy in tandem, all drinking from the Softbank teat before the money ran dry, but went back to work doing content strategy stuff," Roy wrote.
Roy and his friend later found out that this apparent inefficiency in Doordash's system was part of an advertising-related "demand test" with a non-partnered listing. In demand tests, Doordash takes a restaurant's data, creates a listing for the restaurant on its platform without the restaurant's knowledge, and starts fulfilling delivery orders for it without charging it a commission. At the end of the test, Doordash presents test data to the restaurant owner, and voilà! The restaurant is wooed by the potential for sales and signs up for Doordash's services.
Doordash did not respond to Business Insider's request for comment on this story.
Doordash's demand test didn't quite succeed in this case. And Roy emphasized that his and his friend's experiment only worked because Doordash wasn't taking commissions for the orders and had priced the pizzas incorrectly on its site. For any other restaurant owner looking to game the third-party delivery system, Roy's strategy is most likely off the table.Read the original article on Business Insider
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