TASCHINGER: Waitr’s app is better than its business model

The smartphone app that allows you to order food from a smorgasbord of restaurants and get it delivered to your door is brilliant. It’s easy, fast and efficient. (It may cause you to spend too much on meals you could prepare for yourself instead, but that’s another column.)

Yet this killer app, and countless others like it, are running into an ironic problem: They’re better than the business model for the company that is supposed to benefit from them. To put that another way, there may not be enough profit involved. And whether you’re a scrappy startup or a huge corporation, the P-word defines whether you live or die.

Waitr isn’t dead yet in Beaumont, or anywhere, but you might want to take its temperature. Last week, Waitr laid off all of its 219 drivers in the Beaumont area as it plans to shift to a nationwide contract-only model for workers in April. The company’s full- and part-time employees will be able to apply to work as contractors.

The company cheerily notes that working as a contractor gives drivers more flexibility, allowing them to choose when and how long they work. That’s true, but we all know that contractors invariably don’t get guaranteed wages or vital benefits like sick leave or 401(k)s. If you make a ton of money driving for Waitr — or Uber or Lyft — you could afford to pay for those things from your earnings. But few people in the so-called “gig economy” make the big bucks. They may make enough to get by, but there’s no way to save up for a down-payment on your dream home or retirement.

Again, the contractor model is OK for some people at some points in their lives — such as in your 20s, when you might not need a lot of money, or in your 60s, when you’re financially set and just need a little icing on the cake. But plenty of people who have tried to get by with gigs like Waitr find out they’re just not making a lot of money — and depreciating theirs cars quickly.

Ironically, the people who run Waitr can sympathize. They too are finding out how miserable life can be when expenses exceed income. When Waitr went public just two years ago, it opened at $13 per share. Those shares are now worth about 34 cents.

It’s a common story in the app-driven gig economy. Uber lost a jaw-dropping $5.2 billion in just one quarter last year. Its main competitor, Lfyt, lost “only” $644 million — though that loss was more than triple its loss in the same quarter of the previous year. Lyft’s owners think it will make a profit sooner than Uber — by the fourth quarter of next year — but few analysts agree.

A big problem with ride-based gig jobs like Waitr, Uber and Lyft is that drivers for them are constantly discovering they aren’t making any money and quitting. Which means those companies are constantly searching for new drivers to replace the ones who just bailed — which costs money, which dilutes profits.

For a long time, these startups promised investors that they were building market share and getting closer to actual profitability. But while their usage has increased impressively, profits remain elusive. And they’ve been operating long enough now that the promise of these future profits might never be realized.

What’s truly bizarre is that when Uber unveiled its initial public offering last April, it noted that it expects operating expenses to “increase significantly in the foreseeable future” and it “may not achieve profitability.” Huh? Isn’t that the point of investing?

The only thing keeping many of these companies afloat so far seems to be — their killer app. It’s so cool and trendy, this ability to order food or a ride so quickly and easily. It’s just so frustrating that the hip concept is being drowned in old-fashioned red ink.