Sunday, December 11, 2016

Favour Food Delivery Between Abundance And Scarcity

I had to publish the in the Favor (or, more specifically, the now defunct Favour Delivery) before being done. I was stirred to finish this story by an article in The G&M on the subject, which chooses to go squarely against my title.
imageThe service launched back in August 2015 to some bellicose headlines (mn-war).

Toronto’s online food ordering and delivery market is “like the Wild West” and later this week, a big, well-funded U.S. player will be strolling into town.

Favour, a venture-capital-backed delivery company, will launch on Thursday — entering a very crowded and competitive market that has delivery services locked in a literal food fight. 

Favour employs more than 3,000 “Runners” in 10 American cities. They wear tuxedo-print T-shirts when they bring hot food — or anything else that can be picked up and delivered — to your door.

In the States, the service goes by Favor, without the Canadian “U.”

The company will specialize in restaurants that don’t currently offer delivery, including Khao San Road, Burrito Boyz and Pizzeria Libretto. But runners will pick up food from anywhere, said co-founder Ben Doherty.


Ben Doherty, a co-founder who used to be the CEO, was interviewed (cg-bd), but there is very little about Toronto specifically, the interview sounds much like a regurgitated press release (pr-fv).

In the interview, we learn that it had launched in 2013 and had just raised US$13 million in series A funding (cg-bd).

Favour [evolved] from an incubator program called Boost, where we just sold burritos and beer to college students at Cal Poly [California Polytechnic State University]. Users of this app could push a button for beer, a button for burritos or both, and await their deliveries.

The app was popular, but users wanted more. The beer and burrito service was an outgrowth of our original company, NeighborFavor, which gave people the chance to request favours, such as deliveries and rides, from each other.

Having started with a complex, high-concept model, then going to a stripped down food delivery service, the best of both worlds was found in between—today’s Favour app.

GrubHub CEO and co-founder Matt Maloney said in an interview with Closing Bell that the [U.S.] takeout market is worth $70 billion annually. They are the biggest player in the U.S., and on track to process $3 billion this year. It sounds like a big number [but] that’s only the existing takeout market. It’s significantly larger as traditional offline phone orders move online.

Approximately $600 million was invested in the delivery space in 2014, more than 13 times the amount invested in 2013. Rapid expansions are happening because the market is massive and largely untapped.

Over 250,000 customers have signed up to date [and] Favour completed more than 500,000 deliveries in the last year. We currently have over 3,000 part-time “runners” [the company’s name for its delivery people]. Our goal is to get to 100 cities, and we won’t stop until Tokyo.

A few problems cropped up immediately after launch. Some restaurants objected to such deliveries. There are a few reasons offered:

  • waiters and waitresses – waitstaff – not being tipped (rd-tip)
  • price gouging (prices in the app are higher than in restaurant)
  • poor communication (restaurants expected to be contacted first)

Sadly, food delivery companies do not tip because this is customary for food not consumed in an establishment, but communication could have been better.

On the other hand, it’s difficult to understand restaurants that refuse to get more customers.

Wan asked Favour to take down his menu and said he won’t accept any deliveries from Favour “due to their arrogant” management.

The move sparked a social media pile-on , as other restaurants, including Pizzeria Libretto and Porchetta and Co., quickly condemned Favour and asked for their menus to be removed from the app.

Keith Duncan, Favour’s senior vice president of sales, explained the company had added the restaurants menus to its app in order to attract customers.

“It is about building supply and demand in the marketplace, and making sure that we actually have consumers using our app,” he said. “We were just using content we found using services like Yelp, to find some of the key merchants in the marketplace that consumers potentially would be interested in.”

Duncan said the company did the same thing in all 13 American cities in launched in, and never had a problem.

Toronto has several food-delivery companies that partner with the restaurants in different ways. Some restaurants will typically choose to go with a few online ordering and delivery companies, but it is usually the restaurant's choice. 

In a previous interview with Metro, Favour co-founder Ben Doherty said the company had chosen to partner with the three restaurants because they don’t currently offer delivery.

He didn’t mention that there was, in fact, no partnership.

Favor replaced Doherty as CEO in September 2015 (bj-ceo).

A Favor board member since May, Jag Bath was previously the senior vice president of product at RetailMeNot, an Austin supplier of online coupons, and held several executive positions at the Gilt Groupe Holdings Inc., a New York-based online retailer.

Doherty became COO (msm-newceo).

“This is an exciting time for our company and we are incredibly proud to have Jag join our team,” Doherty said. “He deeply cares about the product, the customer experience and shares a common vision of becoming the number one delivery company in the world. I’m proud of how far we have come, especially as we fast approach 1 million total deliveries.”

Bath said his goals include adding delivery service in more cities. In addition to Austin and Toronto, Favor already serves San Marcos, Atlanta, Boston, Dallas, Denver, Fort Worth, Houston, Miami, Nashville and San Antonio.

“Our plan is to accelerate the expansion of the service into new cities, both here in the U.S., as well as internationally,” he said. “As we do this, we will be heavily focused on perfecting our operations to ensure that we continue to deliver the level of service our customers have come to expect from us, at scale.”

Favor gets generally positive press in Toronto and not only, ranging from comparison reviews (nowt-compr, tlife-compr) to general presentations (billyytz, tl-persass, gu-app, js-fvhlp, tst-uberr) to review aggregators (gd-fvr, ind-fvr).

We get a few more numbers in May 2016.

The company runs different promotions for certain items, such as a $1 delivery fee for McDonald’s that is currently running.

Favour is prohibited from delivering alcohol, but it will buy cigarettes, though the customer must present identification to prove they are old enough to purchase tobacco. Boire remembers once picking up a $50 Cuban cigar for a customer.

Depending on how busy the service is, runners earn 40 to 70 per cent of the delivery fee, and keep whatever additional tips they get, said Katragadda. In Toronto, the 135 bike runners and 30 people in who are using cars are guaranteed a minimum $12 an hour if things are slow.

It is interesting to see how were accidents dealt with.

In May, a disgruntled blogger writes about a Favor Runner driver lack of insurance (zh-reckless).

My friend complained to favor’s corporate office about its driver’s illegal parking causing the accident, and also filed a claim with the runner’s personal auto insurance co.  The initial communications by Favor seemed to think the driver’s insurance co. should cover this claim.  Then the driver’s insurance company noted an “exclusion paragraph” that the personal policy does not cover “liability arising out of operation of a vehicle while it is being used for a fee” which includes delivery for profit.  

My friend immediately communicated this “exclusion” and how the driver was actually working for Favor without proper insurance, and if Favor has a corporate policy to cover its drivers on the job.  The subsequent communication from Favor simply denies any wrong doing, yet did not answer the very important question regarding its driver insurance coverage. (..)

Favor Delivery has no company fleet, and each runner makes delivery on the job using their personal vehicle without any company sign or logo. 

A Huge Liability Issue for Uber-like Delivery Business

This means there could be a whole lot of pseudo delivery drivers operating in the United States with a gap in their insurance coverage, i.e., they may think their employees have proper insurance coverage, when in fact these drivers are not covered at all for operating in their role as an employee for these Delivery Companies (For a Business) as opposed to covering normal driving activities of a personal nature. Once you cross the line of going “professional”, insurers have clauses to exclude their liability - so how many delivery drivers are actually insured?

This sets up a huge liability for the Uber-like delivery business, i.e., if fatality is involved while driving and delivering and they are found negligible and have no insurance, the trial lawyers are going to have a field day with these delivery firms.

Uber has already failed pretty poorly in the courts so far. I think ultimately these delivery companies that are springing up almost daily have underestimated the standard business practices and costs associated with running a fully insured, corporate enterprise and most likely could go bankrupt or litigated into bankruptcy from a liability standpoint.

In short, the writer is making the point that insurance for auto drivers is not sufficient.

So perhaps this next incident, with a bicycle rider being purposely run over by a taxi cab is most likely not news (toist-yt).

The collision happens in a matter of seconds. A courier cyclist riding north on Bay Street motions at a taxi driver, and bangs on his window. Then the driver veers right into the cyclist, and knocks him onto the sidewalk, bending his front wheel.

It’s a scene few outside of Toronto would know about had it not been filmed and shared with the world by a famous YouTuber.

Roman Atwood, an Ohio-based YouTube star known best for his prank videos and vlogs, captured the collision during a trip to Toronto this week. The video later shows Atwood rushing to the aid of the 31-year-old cyclist, who claimed he was okay, while a group of bystanders converges.

It is all based on the video showing a guy with a Foodora bag walking right next to the fallen Favor Runner.

While it may seem like a lot of food delivery services, most of them employ people as “contractors”, allowing for part-time work with no benefits and no insurance whatsoever. People make $12/h, very close to minimum wage, and then have to cover car costs, insurance and data plans for their cell phones in one of the most expensive markets for such in the world. Nobody with basic arithmetic skills could think that you get rich this way.


Clearly, this “pauperization” applies to both drivers and the services themselves, suffering from supposed insufficient density. 

Sources / More info: cbc-favclos, cbc-wages, fd-faq, mn-war, cg-bd, bfd-to, blogTo-launch, blogTO-upset, rd-tip, pr-fv, mn-angers, fb-fv, bj-ceo, msm-newceo, js-fvhlp, gu-app, tc-sh, nowt-compr, tlife-compr, billyytz, tl-persass, tst-uberr, gd-fvr, ind-fvr, zh-reckless, toist-yt, np-knocks, cm-rr

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