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To Understand the Future of Food Delivery Services, We Must First Look at the Past

Honk if you remember Kozmo

Kozmo.Com Messenger Retrieving His Bike Photo by © Erik Freeland/CORBIS SABA/Corbis via Getty Images

“What will we do if all these delivery companies fold?” a colleague asked the other day. He’s a young guy, too young to remember the last time this all happened. He’s too young to remember

As the decade comes to a close, Eater San Francisco is taking a look back at some of the trends that defined the local food scene — for better, and for worse.

It’s the 2010s that are ending, not the 2000s as a whole, so it might seem a bit strange to bring up Kozmo, a delivery company that folded in 2001. Over the course of its life, which began in 1998, it burned through $250 million in venture capital and an additional $60 million in funding from Amazon. At the conclusion of those rounds, it considered — and discarded — an IPO. All the while, it promised free, one-hour delivery of “videos, games, dvds, music, mags, books, food, and more.”

No one really needs delivery of any of those things, save food, anymore. That’s one of the things that helps viewers of E-Dreams, a 2002 documentary release chronicling Kozmo’s demise, know that it depicts a bygone era. Other distinguishing characteristics are the lack of smartphones in the film, the fact that you can only watch it on DVD, and that the people who worked for were, for the most part, employees, not “gig workers.”

Gig workers and their plight are one of the most significant aspects of this decade’s breed of delivery companies, which again packed San Francisco (and other big city) streets with scooters and cars laden with insulated, food-stuffed bags as of around 2013. That’s probably not an accident, as the savvier founders of companies like Postmates, Caviar, DoorDash, and Uber Eats (all based in SF), as well as Chicago-based GrubHub (which bought SF-based service Eat24, then shut it down) likely staved off investor fears of a second Kozmo coming by touting the lack of employees (which are expensive!) as a way their companies would succeed when others failed.

It’s also what allowed the companies to deliver food swiftly and at a low price (or no price, as with Postmates’ “Unlimited” service, which for $7.99 a month offered free delivery for any order of $15 or more. And, at a certain point, that food didn’t even have to come from a restaurant anymore: “virtual restaurants” or “ghost kitchens” sprang up to prepare restaurant-branded food for delivery services without the overhead of a storefront.

But for every restaurant that bent over backwards for delivery companies, there was one that only begrudgingly participated in the new to-go economy. Restaurant owners say that the 15-30 percent cut that delivery companies take of every order make their businesses unsustainable, with folks like the owners of Mission Pie preferring to take their ball and go home if the alternative is to have their profits decimated by delivery.

That rising resistance isn’t the only thing that might sink this decade’s delivery service model, as soon these companies will have to make a decision on the thorny matter of employment. AB-5, the landmark California legislation that requires companies to transform their workforce of contractors into employees, takes effect on January 1, 2020. The law, which passed despite vocal opposition from companies like Postmates and others, means that these companies — few of which are even close to profitable — will have to provide their delivery drivers with standard labor protections like health care, minimum wage and overtime pay, and compensated time off, and they won’t be allowed to pocket driver tips or subtract their tip rates from their base pay.

So, as the new decade dawns, San Franciscans’ food will again be delivered by full-fledged employees (oh, you guys, what if they all unionized?) who work for companies built on regular infusions of venture capital and, as publications like Barron’s report, little else. Given how reliant on delivery services San Francisco and other large cities have grown over the past decade, it’s hard to imagine that they could all fail — but it’s happened before. And if it does, perhaps you’ll be reading a piece on how everyone started going out to restaurants again by this time next year.