The Pauperization Of Toronto Food Delivery Scene

With news of Favor Delivery closing and Uber Toronto slashing the fees it pays its drivers, is there any future left for courier work or pleasant, cheap deliveries?

Unbeknownst to many of my friends, I have experimenting in the past few months with getting paid to exercise as a food delivery driver. I worked (as a contractor) for three companies, thus far: DoorDash, Uber(Eats) and Favor Delivery – actually, while in Canada, it seems that Favor got the Canadian spelling: it was FavourDelivery.

I have been planning a longer comparison of these services, but did not have time to finish it. However, today Favor has announced it’s closing down in Toronto with a terse message, texted to me and presumably all the other “runners” (favd-end):

12/5/2016

Toronto Runners,

Thank you for helping us delight thousands of customers across Toronto. We greatly appreciate all you’ve done to deliver joy and food to thousands of satisfied customers.

We regret to inform you that effective today Favour Toronto will be closed and you will be unable to clock in to the app to run Favours. We understand this may come as a surprise, but please know that this is a decision we did not take lightly.

We at Favor pride ourselves on excellent service, and it’s become increasingly clear that some of the operational dynamics of Toronto make it difficult for us to deliver on our brand promise.

I personally thank you and wish you the best of success in your future endeavors. If you have any questions, please reach out to Runner Success.

Sincerely,

Jag Bath, CEO

It’s a sad day, because Favor did quite a few things right.

Favor started in August 2015, with high hopes (fav-start), and went through a service interruption in Toronto over the summer of 2016.

"As a dense tier 1 city, Toronto does not fit the profile of our smart-scaling growth plan," said Favor's Uri Bogler in an emailed statement.

The shutdown leaves Favor's workers — known as "runners" — suddenly out of work. The Texas-based company was testing out Toronto as its first Canadian market.

"We will continue to evaluate expansion opportunities in tier 2 markets across Canada," Bogler's statement said.

In other words, Toronto was too dense (or too big and not dense enough?! – unclear.) for Favor.

Just before closing in Toronto, it “shuttered” service in five big other cities, citing the same tier-based argument (tc-sh).

Favor, the Postmates-esque on-demand logistics company that launched out of Austin in 2013, has today announced that it will shutter service in five U.S. cities: Chicago, Philadelphia, Atlanta, Miami and Washington, DC.

Before this announcement, Favor was operational in 23 cities, including Toronto, so this takes the company down to 18 markets.

Here’s what Jag Bath, Favor CEO, had to say in a prepared statement:

At Favor, we fully embrace learning about the communities we serve. After experimenting in cities of varying size, Favor is choosing to employ our smart-scaling growth plan in tier 2 markets. The company will be withdrawing operations in: Chicago, Philadelphia, Atlanta, Miami, and Washington DC.

At heart, Favor is a high-touch logistics business. That said, we’re a young startup – and startups need to experiment to confirm what works with our current technology and operations, as well as consider the unique dynamics within each market. Scaling a logistics company requires great attention to detail, and closing operations in these markets is a healthy thing for our business, as perfecting our service and delivering it at scale has always been our number one priority.

Moving forward, we’ll continue to invest in operations and technology so we can maintain our superior service levels in our current and future markets.

On-demand logistics businesses are already difficult to operate, both because of high competition and the general dynamics of delivering (usually restaurant-prepared food) in a timely fashion. That said, Bath told TechCrunch that the company consistently gets five-star ratings in tier-two markets like Austin and Dallas, and can ensure that the technology and service will work for both runners and consumers in those markets. (..)

Bath also said that at least part of the decision to focus on second-tier cities comes down to less competition.

Here’s a few more details (bk-abruptly).

Runners also received an email statement from the company, where CEO Jag Bath indicated that “operational dynamics” made it difficult for Favor to stay in Toronto. Former Toronto runners (who wished not to be named) said that there was no indication that the company was struggling in Toronto. In the last few weeks, Favour introduced an Uber-style surge model to delivery fees during peak hours and bad weather which runners suggest was too high. The regular delivery fee, which was $6, would be multiplied according to the surge, so if the surge was x2 it would be $12. The delivery fee could get as high as $18.

In a statement to BetaKit, Favour said that Toronto, as a dense tier 1 city (population of 100,000 and above), does not fit into Favour’s scaling plans of growing in tier 2 (50,000 and above) cities:

We do not differentiate tier 1 and tier 2 markets based on population, but rather on density, which drastically affects things like parking, traffic and restaurant wait-times. We will continue to evaluate expansion opportunities in tier 2 markets across Canada.

Favour notified all full-time employees in Toronto with ample notice before the market withdrawal. For on-demand contract Runners, who are not employees and work on their own schedule, we provided as much notice as possible, without compromising our ability to serve Torontonians while operational in the market.

The article gets a few things wrong, though. As I recall, the regular delivery fee was lower, but it increased slightly in the week-ends. Favour was competing with UberDelivery, DoorDash and others for Runners (or delivery people) as I am not the only one who was contracting for several companies.

A Runner made in the beginning $2000-$2400/month (toist-rnnr).

The Hours: Smithers works about 40 hours a week. Favour pays runners $12 per hour, which usually works out to $15 an hour or more with tips.

The Take-Home: $2,000 to $2,400 a month

I’m basically a personal assistant for someone new every day. I usually deliver food, but sometimes it’s random stuff. Once, I brought roses and fruit to a guy’s girlfriend who was having a bad day. Somebody forgot their keys at home, so I picked them up and delivered them to the office. I’ll never forget delivering $100 worth of McDonald’s for an office lunch. The manager of the store had to help me fill up all the fountain drinks.

Favor was rather small, but in the decimated gig economy of Toronto it may have occupied a disproportionately high place among young workers employment.

In a study released Monday that looks at changes in the youth labour market from 1976 to 2015, Statistics Canada said the unemployment rate for the 15 to 24 age group averaged 13.2 per cent in 2015, slightly higher than the rate of 12.4 per cent seen in 1976.

(..)

The overall result was that by 2015, young full-time male employees had median wages that were about 10 per cent lower than those of their counterparts in the early 1980s, while the difference was three per cent for females.

This is as far as I got before this postponed and scheduled article self-published.

That’s how many tabs I had on this topic.. Here’s the next installment.

Sources / More info: favd-end, tc-sh, bk-abruptly, fav-start, toist-rnnr

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