Tech companies have long had moonshot visions for changing the way people eat and experience restaurants—some more dramatic than others. But recent signs suggest that the good times are over for these grand-planning tech disruptors: DoorDash, the restaurant delivery titan, announced on Wednesday that it was laying off 1,200 corporate employees, or 6 percent of the company’s workforce. And a company called Wonder, which collaborates with celebrity chefs to offer meals cooked directly from a truck parked in front of a customer’s home, announced this week that it has laid off a significant chunk of its staff. Instead of bringing a chef-cooked meal direct to diners’ front steps, Wonder seems to be shifting strategies to essentially become another meal kit delivery service.
During the pandemic, food tech companies envisioned that restaurants and food brands would change in favor of diner convenience and tech-fueled efficiency. But it seems some companies have fundamentally misunderstood the desires of restaurant-goers and home cooks alike. With business slowing and economic conditions worsening, these companies are making changes to save themselves.
DoorDash founder and CEO Tony Xu said in a blog post that the company grew too fast during the “sudden, unprecedented opportunities” of the pandemic. “We were not as rigorous as we should have been in managing our team growth,” Xu wrote. As a result, operating expenses grew too high, threatening DoorDash’s overall business. In short: The company got overly optimistic about its future, hired too many people, and now it can’t afford to keep them.
The staff cuts happened mere weeks after DoorDash executives offered a rosy outlook for its future. The company shared better financial results than Wall Street expected in November, and said its delivery business remained largely unaffected by inflation as customers continued to place orders, paying higher prices rather than give up a convenient meal.
DoorDash’s assumptions of a bright future weren’t unfounded. As many people dined at home during the pandemic, the delivery company profited as demand soared. It rode a wave of momentum, growing as fast as possible by branching out to new services like grocery delivery, and buying up companies to complement its business. In a deal that closed in June, DoorDash spent $8 billion to buy Wolt, a European delivery service based in Finland. The move boosted DoorDash’s corporate headcount, more than doubling from 8,600 at the beginning of the year to 20,000 recently. More countries, more cities, more restaurants, and more employees would theoretically make the service bigger and stronger. It also made DoorDash significantly more expensive to run, which would have been fine if it kept growing like crazy.
In hindsight, this was all too much, too fast. The company’s CEO claimed full responsibility for the business decisions that led to this week’s layoffs. And he assured current employees that the news wasn’t a sign of more cuts to come, promising to continue hiring, albeit in a “more targeted” way. That could mean focusing less on delivering from restaurants and more on places like convenience stores.
The tech industry has been plagued by layoffs. DoorDash is among the latest in a long list of big names including Meta and Netflix that have cut jobs after overhiring during the pandemic. Wonder, the mobile kitchen and delivery startup, this week confirmed layoffs of 7 percent of its staff. Tech news site The Information, which broke the news, estimated the cuts affected 130 jobs.
Wonder partners with big-name chefs like Nancy Silverton and Bobby Flay to offer meals for delivery that are cooked by a Wonder employee in a custom kitchen van parked outside a customer’s home. Dishes are delivered to their door just as they would come from a restaurant kitchen to a table, eliminating the delivery commute. According to Wonder founder Marc Lore, the goal is a pie-in-the-sky notion to somehow “completely change the way that people eat” by bringing restaurant-quality food to their front doors. (This sort of language is typical for Lore, who also founded Amazon competitor jet.com and sold it to Walmart for billions. He’s also planning a new, utopian city for 5 million people in the western U.S. as “a new model for society.” Seriously.)
But Wonder’s business is costly to run, requiring fleets of pricey vehicles and lots of repeat customers. The service is also only available in a few New York City suburbs. Wonder proves popular enough with diners who live within its small operating radius, but it could take years, maybe decades, to reach enough customers to make it truly viable. Wonder planned to expand across the country by 2035, but new data shows it’s been growing much slower than expected, with less than half the number of mobile kitchens Lore predicted on the road today. Its success also requires a lot of faith that enough suburbanites will pay for dinner from a van more than once or twice.
Now the company is reportedly trying to offload vans and kitchen equipment in favor of selling meal kits to places like bars and sports arenas—a significant change to its original business. The Information called the shift in strategy “a dramatic stumble,” a harsh but accurate assessment.
We’ve come to expect change-the-world narratives from tech leaders extolled as visionaries, and their huge visions for change and disruption have remained well-funded. The last time Wonder took investor dollars—$350 million in June—the company was worth a reported $3.5 billion. DoorDash’s stock took a hit after the company announced its layoffs this week, but it’s still valued over $20 billion.
But it’s hard to square these pricey visions for the future with what actually happened. When pandemic restrictions eased, people went back to restaurants. When it was safe, we again chose face-to-face human interaction over screen time. Some changes, like how much we’ve come to love the convenience of food delivery, will stick, along with more realistic expectations over how technology will change how we eat. Now that the grand claims of revolutionizing dining have largely come up short, we can expect to see plenty more of them dropping back to Earth. There will always be a way to get the delivery you love, but it probably won’t come with a side of total industry change.