Winner Take Most
Hamilton Helmer's 7 Powers and the Nature of Power Laws
TL;DR
Power = Flywheel: The 7 Powers framework meets power law math to explain why the biggest players keep winning — and why it's so hard for smaller ones to catch up.
Platform Gravity: DoorDash, Uber, Toast, Square, Cava, and Sweetgreen show how powers compound. Scale leads to better economics, better tech, stronger brand, stickier users, leads to more more scale.
Restaurant Tech = Strategy Case Study: Toast and Square take opposite paths (vertical vs. horizontal) and both build power, just differently. One gets depth, the other gets network.
Shy Bird vs. Tatte: Our little 3-unit group is doing fine. But when mapped against a scaled peer like Tatte, the structural disadvantages of small operators become crystal clear. Not just size — compounding advantage.
All Hope Not Lost: Independents can build power — just need to think collective: local network effects, pooled infrastructure, cultural counter-positioning. There’s no moat like a third place.
Sobering Truth: Being good at food and service isn’t enough anymore. Power laws don’t care how delicious your rotisserie is.
Audio by Eleven Labs can be a little wonky
After last week's piece on DoorDash's quest for food system dominance, I've been thinking about how Hamilton Helmer's "7 Powers" framework intersects with power laws to create seemingly unbreakable cycles of market consolidation. I built myself a tool to help me analyze companies through this lens, and it does a decent job of showing how market power compounds - especially when comparing major players like DoorDash vs. Uber, Sweetgreen vs. Cava, or Toast vs. Square. It’s also interesting (and a bit sad…) to see how a business like ours, Shy Bird, fares.
Power laws describe phenomena where a small number of players capture a disproportionate share of the market. In tech-enabled markets, these effects tend to be even more pronounced due to network effects and scale economies. We see this clearly in delivery (DoorDash's 70% market share), reservations (OpenTable's historical dominance), and increasingly in restaurant chains (Sweetgreen and Cava's valuations versus traditional competitors).
The 7 Powers framework helps explain both why these power laws exist and how they create self-reinforcing cycles:
Each power tends to follow its own power law distribution, but more importantly, they interact to create compound effects. Running DoorDash and Uber through the GPT reveals how this works. I don’t necessarily agree with all the conclusions here but find it interesting and helpful nonetheless. Specifically, I question the scaling economy, switching cost and cornered resources scores.
Scale Economies: Uber (4/5) edges DoorDash (3/5) due to their global operations across multiple verticals. As volume increases, unit economics improve, enabling further price competition or margin expansion. This improved economics creates resources for strengthening other powers - better technology (Process Power), stronger brand building (Branding), and more sophisticated user lock-in (Switching Costs).
Network Economies: Both score high (4/5) but differently. DoorDash's network is deeper in food, while Uber benefits from cross-pollination between rides and delivery. These network effects follow classic power law distributions - each additional user makes the network exponentially more valuable. This increased value enables premium pricing or market share gains, funding further network expansion and strengthening other powers.
Branding: Uber (4/5) significantly outscores DoorDash (2/5). "Uber" has become a verb and cultural touchstone; DoorDash remains more transactional. Brand recognition follows power law distributions - the strongest brands capture disproportionate mindshare and trust. This trust enables expansion into new verticals (Scale Economies) and higher user engagement (Network Economies).
Process Power: DoorDash (4/5) leads Uber (2/5) in food logistics optimization. Their singular focus has led to better restaurant-specific operations. The power law appears in data advantages - more deliveries mean better routing algorithms, leading to faster deliveries and lower costs, attracting more orders. This operational excellence strengthens network effects and enables better unit economics.
DoorDash's recent acquisitions of Seven Rooms and Deliveroo show how well they understand these compounding effects. Each acquisition strengthens multiple powers simultaneously while denying competitors access to strategic assets. The Seven Rooms acquisition strengthens their Process Power in restaurant operations while building Switching Costs through deeper integration. Deliveroo expands their Network Economies globally while adding Scale Economies in technology and operations.
The battle between Toast and Square offers fascinating insights into how different approaches to scale and scope can create competitive advantages in restaurant technology. Toast, born from and focused exclusively on restaurants, takes a vertical-specific approach with deep industry integration. Square, meanwhile, has pursued a horizontal strategy across multiple small business segments, using its broader reach to build powerful network effects. While both companies are publicly traded with multi-billion dollar market caps, their divergent strategies reveal different paths to developing sustainable competitive advantages in the increasingly crucial restaurant tech space.
The 7 Powers framework highlights how these strategic differences manifest in their respective strengths. Square's broader approach earns them higher scores in Scale Economies (4 vs. 3) and Network Economies (4 vs. 2), leveraging their 4 million sellers and Cash App ecosystem across multiple industries. Toast counters with superior Switching Costs (4 vs. 3) through their deeply integrated restaurant-specific tools, making their platform stickier for operators who rely on their comprehensive suite of solutions. The stark contrast in their Network Economies scores (Square: 4, Toast: 2) is particularly telling - it suggests that Square's cross-industry platform approach might ultimately prove more defensible than Toast's restaurant-only focus, despite Toast's deeper vertical expertise.
Toast's recent expansion into retail through their 'Toast for Retail' product line can be understood as a strategic response to this network power disadvantage - an acknowledgment that while vertical expertise creates valuable switching costs and counter-positioning, true platform durability might require broader horizontal reach. This comparison raises crucial questions about whether vertical specialization or horizontal scale will prove more valuable in the long-term evolution of restaurant technology.
The 7 Powers and Power Laws are not purely a tech thing. They play out in brick and mortar businesses like restaurants too- large and small, chain and independent.
Scale Economies: Cava (4/5) has pulled ahead of Sweetgreen (3/5) through faster expansion and better unit economics. Their concept has proven more adaptable across markets and dayparts. The power law manifests in purchasing power and operational efficiency - larger scale enables better supplier terms and more efficient processes, funding further expansion and strengthening other powers.
Counter-Positioning: Both companies (4/5) have built strong market positions through sophisticated operations and compelling brand positions. The power law appears in technology investment - larger players can amortize tech costs across more locations, strengthening their Process Power and enabling further scale advantages.
Process Power: Both excel here (4/5) with sophisticated supply chains and tech stacks. The power law emerges in data advantages - more locations and transactions enable better demand prediction and inventory management, strengthening Scale Economies and enabling better unit economics.
Branding: Sweetgreen (5/5) maintains an edge over Cava (3/5) in brand strength, particularly with urban professionals. Brand power follows power law distributions in social media engagement and word-of-mouth effects, strengthening Network Economies and enabling premium pricing.
As a co-founder of Shy Bird, the 7 Powers framework provides a sobering but important lens through which to view our position in the market. While we've built a decently successful small restaurant group that, despite a lot of work to do, resonates with our community. The comparison to Tatte illustrates how scale creates self-reinforcing advantages in this industry. Tatte's scores of 4 across Scale Economies, Branding, and Process Power show how their 44 locations and $52M in revenue enable them to build compounding benefits - from supply chain leverage to standardized operations to multi-market brand recognition. Shy Bird's more modest scores in these dimensions reflect the reality of being a 3-unit independent operator. This isn't just about size - it's about how scale enables a flywheel effect where each power reinforces the others. Tatte can invest more in systems, command better real estate, attract stronger talent, and spread fixed costs across a larger base, which in turn enables further growth. It's a stark reminder that in today's restaurant landscape, even well-run independent concepts face structural challenges in developing lasting competitive advantages against larger-scale operators.
However, these cycles aren't unbreakable. Independent restaurants can build power through collective action that creates their own compounding effects:
Local Network Effects: While individual restaurants can't match platform-level network effects, local restaurant alliances could create meaningful networks at the community level, strengthening their collective Branding and Scale Economies.
Collective Scale: Joint purchasing, shared technology investments, and data cooperatives could achieve scale economies without sacrificing independence, enabling better Process Power and Counter-Positioning.
Counter-Positioning Advantage: Independent restaurants can offer authentic local character and personal connection that large platforms structurally cannot match. This advantage strengthens as digital experiences become more commoditized, potentially breaking the power law dynamics that favor large platforms.
Cornered Resource: Physical third spaces in communities become more valuable as remote work and digital commerce reshape cities. Independent restaurants have preferential access to this increasingly scarce resource, providing a foundation for building other powers.
The intersection of the 7 Powers and power laws paints a stark picture of where the restaurant industry is headed. As technology platforms and chains build self-reinforcing advantages through scale, network effects, and data, the structural challenges facing independent restaurants will only intensify. While authentic community connection, physical third spaces, and local character remain meaningful advantages, they may not be enough to counter the exponential benefits that accrue to the largest players. The hard truth is that being excellent at hospitality, food, and service – the traditional markers of restaurant success – no longer guarantees survival in an ecosystem increasingly shaped by power laws. Independent restaurants won't disappear entirely, but their ability to thrive rather than merely survive will depend on finding ways to build sustainable power in a landscape that structurally favors scale and consolidation. The future may well be one where independent restaurants become like independent bookstores – beloved community institutions that persist not because of their business model, but in spite of it.