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New Recipe for Restaurant, App contract

Pnina Feldman

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May 23, 2022

ScienceDaily recently published an article co-authored by Pnina Feldman, Associate Professor of Operations and Technology Management, on her recent research analyzing how to structure the relationships between food-delivery platforms and the restaurants that partner with them.

Pnina and her colleagues examined the challenges that restaurants face due to their partnerships with food delivery platforms such as Grubhub, DoorDash and Uber Eats. The researchers found that there are two key issues within the contractual relationship between platforms and restaurants: revenue sharing and the strain on restaurant operations due to high demand. In most cases, restaurants only receive 70%-85% of their normal revenue on each item sold based on the pre-negotiated revenue split between the platform and the restaurant. While adding delivery orders means more business, it could also hurt the dine-in experience by clogging up and slowing down the kitchen, causing a delay that could discourage higher-margin dine-in customers from buying.

To resolve these issues Pnina and her co-authors propose that for each delivery order, the platform should pay the restaurant a fixed fee and a percentage of the revenue. They discovered that appropriate values for these parameters yielded the maximum aggregate revenue, thus alleviating common issues and improving the coordination of the food-delivery supply chain.

Pnina Feldman is associate professor of operations and technology management at Boston University Questrom School of Business. Her research addresses supply-chain, service operations and pricing questions and focuses on how digital technologies enables business model innovation. She incorporates economic (game-theoretic) models as well as data-driven tools in operational settings that enable the analysis of individual and multi-firm decisions. She is especially interested in the impact of consumer behavior on pricing and operational decisions with applications in retail and services as well as on policy implications in the public and private sectors.