Uber’s Restaurant Empire
bloomberg.com
bloomberg.com
- Tighter control over what you produce, so higher margins and potential differentiators(like the burger example in article).
- Acts as a defensible strategy for the aggregator if it can tie these brands with itself.
The only scary thing is when these marketplaces/aggregators just kill small businesses because of controlling the "storefront", discovery and leveraging economies of scale. Example search in Amazon: https://imgur.com/a/zHDueIk
In this case it's quite different, I believe, in that Uber will notice an underserved market and reach out to existing players/small business in that area to expand into that market. This sounds very different than Uber using their market knowledge to create a competitive advantage for themselves.
They should use the data from food delivery to find the most commonly requested items and then just have kitchens make “Amazon basic” versions with nice packaging/branding that undercut on price.
I think this could be a new type of fast food take over if done right.
So thinking that a small business could play in the "virtual restaurant" industry, is probably not realistic.
One possible guess is: in this very competitive market it's really hard/expensive to get new customers. But here, UBER had a big advantage.
Also, customers aren't loyal. But in the case of UBER, even if those customers change a virtual restaurant brand, they're very likely to stay in the UBER app, and UBER may have some power to guide them.
And if many "virtual restaurants" share the same highly-efficient commercial kitchen, and aggregate their orders from suppliers - they still get most of the efficiencies of a large commercial kitchen.
For a small restaurant to be successful, while quality is still a necessity, their pseudo "supply chain management" process needs to avoid as many bottlenecks as possible.
Article lead: As appetite grows for upmarket takeaways, delivery service is setting restaurants up with satellite kitchens inside metal boxes.
They’ve been around a long time
As I understand Etsy, you're ordering complete products
As you said, they are currently operating on the Ikea for food model.
"Hmmm... just finished following this freaking recipe to a TEE!... why do I have a slice of raw chicken and an egg left over?"
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Joking aside, I have also looked into renting a commercial kitchen to TEST out the market to see if people would buy my wares.
The problem is that the commercial kitchens that I called at the time wanted too much financial commitment to use their space than seemed reasonable for me.
I wanted a commercial kitchen which I could rent for a few hours to do a large batch of Deviled Eggs so that I could sell fresh deviled eggs of my various recipes that people seem to really really love, but the pricing was too high.
They wanted in total, about $500 to use the kitchen, deposit, etc... I still have this idea to attempt it - maybe its time is now more affordable to test out.
I don't think it is a matter of figuring out but rather legislation.
I understand you might have used homecooked to describe literally home cooked food but smaller mom and pop food prep places are really good. Personally I usually cook but a lot of friends use ready to cook places.
I wonder what the difference was.
I believe it also owns Seamless, and a couple of other services like Eat24.
I also had a driver drive close to my place and then steal the food - there was no ability for me to rate them and support was some call center that didn’t understand the issue.
DoorDash is a lot better.
Same here, although there's never been any problem getting a refund from Uber Eats in my experience.
My house is several miles out in the middle of nowhere. Someone went to the trouble of bringing my food within one block after a 15+ minute drive, and then they abruptly cancelled the order and disappeared from the map without a trace. I'll never figure out what the point of that was, but I hope they enjoyed my sushi.
At least I've never had a DoorDash driver cancel an order... I'd be pretty pissed if I had planned dinner for the family via delivery and gotten denied at the last minute.
I think that over time, the cost of delivered food will lower as restaurants that do it well (perhaps these virtual restaurants) become faster, optimize their production and optimize the handoff to the driver. Jimmy John’s subs is an example of a company that has done this with their own delivery drivers.
That being said, I agreed that the margin is huge.
It was actually crazy when Uber Eats appeared last year or so. In a few months they captured all the restaurants from Deliveroo and another truckload of restaurants/chains that never did delivery before.
That should be taught in business class. The power of a brand, destroy your competitors and double the market in a few months.
e.g. As if you need social anxiety to appreciate the vast convenience of ordering food to your doorstep.
I've began wondering if Silicon Valley is intentionally growing this demographic. If your customers need you because they are mentally unable to order food without you . . . well that's even better than a lifetime prescription of your medication or selling cigarettes.
It's twice as good if I can slowly train my customers to develop social anxiety by removing transactional interactions with minimum wage earners. That sort of interaction would traditionally service as a stepping stone in developing and maintaining social skills.
Add in social media which constantly has self-condemning memes about social anxiety, embarrassing moments, and so on; and you've got an extremely fertile ground for social anxiety.
Just because you need to use 6 skills at the same time in a real game, doesn't mean there's no value in an exercise that only develops 3 of the skills.
1. Per hour cost of a delivery person is usually $20 after taking in to account vehicle, gas, down times etc. If you assume each delivery takes minimum of 20 mins (accounting for restaurant-customer-return hops), we are talking average of $6+ per delivery. Considering a cost of a meal is usually $10-20, this is significant barrier. My question is: Does these startups taking on losses to build customer base?
2. Cooked food is notoriously perishable. Think about eating burger lying around for 30-60 mins before you eat. This not only limits items you can deliver but also puts on pressure that you are always running against clock. One mistake and you are bound to lose a customer for factors not in your control.
So, food delivery idea is not new. It had been tried and failed to takeoff probably couple of dozen times mainly due to above two issues. What really has changed now to mitigate these two issues?
Uber then takes up to 30% cut on the food cost.
What's changed?
Consumers changed. People are paying $6 for delivery. They've grown accustomed to room service.
No one's taking 60+ min for food delivery.
What's next is taking India's lead and integrating ordering, prep, delivery all in one.
In my experience that food tends to absorb the moisture from the heat/steam it emits which gets trapped by the packaging and therefore makes it soggy.
For basics, there could be hot/cold pads at certain places in the packaging to condense the steam away from the food.
For advanced stuff, you could imagine certain parts of the meal actually being cooked on-route. For example, imagine a raw steak being shipped with two hot metal plates which spring onto the steak 3 minutes from delivery. As you open the package, the steak is still sizzling!
I don't understand. Why does the value of the thing being delivered make a difference to the value of the fact that it's delivered?
Should we expect it to cost more to deliver a more expensive item? I don't see why. Why should it cost less to deliver a less expensive item.
But the OPs point is valid if you think about the impact to your budget. Saying a meal delivered represents a 50% markup in your food entertainment budget is a legit consideration. Were we talking about a 5% or 10% impact to the budget it would less dramatic.
In a similar ways there was a study a few years ago that showed that people would be fine driving a longer distance to save $10 on something that's usually worth $30, but they won't bother to save the same $10 on something that's worth several hundreds.
Many low-margin restaurants wouldn't be able to survive without making that up somehow. I sometimes wonder why restaurants bother to list on food-platforms at all. Maybe they figure it's loss-leader marketing?
Or perhaps being that food markups are usually in the ~50%, and drinks are several hundred percent, they can afford to make less?
FTA:
>For restaurateurs, it can be a chance to spread their fixed costs over a higher volume of orders.
https://mobile.abc.net.au/news/2018-04-22/uber-eats-criticis...
It’s gotten better the past few years but Aus as always gotten reamed with a surcharge on anything tech related. Adobe was most famous, charging about 2x for the full Creative Suite. Apple too. At one point I emailed the CEO of the company I worked for at the time asking why Australia was charged 60% more for the same OS dvd, not even specialized for the market in any way (since all locales are built-in), and got a reply from an assistant about “taxes, supply chain, local markets” blah blah and wasn’t super convinced by the response. 10% for GST is fair but there’s no way shipping a container load of DVDs there, divided by the number of DVDs in the container, could possibly account for that difference.
If not on price, then availability was also inconsistent. Netflix and the local broadcasters had to learn this themselves when people setup US based proxy accounts, or just plain said ‘fuck it’ and went to the Pirate Bay.
Grubhub 27.5% if order comes from grubhub, it from restaurants website its 10%
Eat24 - 25%
- growing inequality: more people at each end of the spectrum; rich get richer (and have more income for food delivery), poor get poorer and lack full-time job opportunities (and are more incentivized to take low income, insecure delivery jobs) - it's expensive to be poor: working more hours means fewer opportunities to buy groceries or take time to cook.
https://delong.typepad.com/sdj/2009/02/changing-relative-pri... : "In Agatha Christie's autobiography, she mentioned how she never thought she would ever be wealthy enough to own a car - nor so poor that she wouldn't have servants..."
Perhaps that is now reversing. Or the gap is wide enough to have a servant with a car.
2) For a larger group, consider the added cost of dining in - expectation of 18-20% tip, the wine (or other alcohol) is typically overpriced or there’s a $15-20 corkage fee per bottle. Transportation or parking is another potential expense.
3) Some foods lend themselves well to leftovers, so with marginal increase in price one might be buying a meal for the next day, too.
4) For family dining, this puts less pressure on kids and less stress on parents. Keeping the little rascals busy for 2+ hours that a typical dinner might last could get a tad hard.
We order in usually once a week - sometimes from DoorDash sometimes from the restaurant directly.
Given Uber's reputation for bucking regulation, I would be doubly-hesitant to trust meals from their kitchen.
No reason that the kitchens that food trucks use can’t support this as I suspect they dont have much demand for space around 5pm.
should we expect that the laws will be followed? Policing unlicensed taxis _should_ have prevented Uber from succeeding. I recall early Uber being a considered "ride-sharing" in attempt to avoid this problem.
How will unlicensed restaurants be enforced? Will people simply call the practice food-sharing or splitting-meals? Start from the same model: two friends living across the city but one didn't cook, the other makes large meals. Uber meals is just a delivery service. Combine with money transfer app: it's not a restaurant, is a group of friends pitching in for a good meal.
Uber successfully managed to get driver's to assume the risk when running unlicensed taxis. It wouldn't surprise me if they could reimagine that success here. The biggest hurdle I foresee: keeping the branding, and scale small enough to fly under the radar until it's well established
So it's pretty different from getting a fine which UBER pays.
Another problem is that health laws are generally stronger and better enforced than taxi law. See [0] for the definition of a Food Establishment for Washington State. Also there are generally tip lines for reporting restaurants and it only takes 1 person to have a bad experience to shut down a location.
[0]: http://apps.leg.wa.gov/wac/default.aspx?cite=246-215-01115
One story about a dead cockroach or rat feces making into a meal will let market forces take care of it. The story doesn’t even have to be true.
On the other hand, it's a virtual restaurant. So all you have to do is pay some kid on Fivrr five bucks for a new logo with a different name, and you're back in business!
It could be done using a decentralized platform, but any registered company attempting that sort of business model wouldn't last very long.
I've never gotten sick from home cooking but have from restaurants. I always hear horror stories about the conditions of restaurants.
Does anyone know why the risk rate of food production in a home kitchen thought to be higher? Can that be mitigated somehow?
Well then you and your family and friends happen to follow good hygiene standards... but plenty of people don't, and are even more incentivized not to if there's a buck or two in it. ("I think I can still use this meat..." "I'll just wash off this mold...")
I don't know why you'd trust random strangers cooking out of their homes with zero food safety training whom you haven't personally vetted at all. It's not to say commercial kitchens are perfect, but there are verifiable processes in place to try to hold them to certain standards and ultimately shut them down if they don't, which simply aren't scalable to apply to home kitchens.
Think about taxi drivers compared to Uber drivers. Uber drivers know a few bad ratings can be detrimental to their income, so they typically try to put their best foot forward. They push hard for perfect reviews, offer bottles of water, try to be extra considerate with the choice of music, air temperature, etc. Taxi drivers don't have the same incentives. They're not going to be fired if a few passengers feel it's too cold in their car.
I imagine the same would apply to home chefs. They know one batch of food that gets customers sick could leave them out of work, and cost them their entire reputation. A few bad ratings and they're dropping down the recommendation list and watching 80% of their business disappear. I could see home chefs trying to go above and beyond like Uber drivers to secure better reviews. Did you order 6 cookies? Well, they're going to give you 7, and a little note that says thanks, here's a free cookie just for you.
It could actually be a great business for more elderly people. We all love our grandmother's specialties, right? Imagine a grandparent that could prepare big lasagnas, soups, and chilis at home, and a driver could come pick up portions to deliver to people around the neighborhood. Feel like takeout tonight? Instead of Dominos, you can see Ruth down the street prepared homemade cabbage rolls that you can get delivered. I wouldn't mind supporting that type of business.
That was the original free-market rationale for not having food or medical regulation at all: reputation will take care of it!
Unfortunately, unsafely prepared food can literally kill you. So the country wised up and requires food safety certification.
Ratings are great for pushing up average quality. They're a non-starter when it comes to guaranteeing minimum quality, i.e. the product won't make you sick or kill you.
Honestly, I don't trust someone's grandmother who thinks it's fine to cut the cooked chicken with the knife she used when it was raw, because she was never certified in a food safety course, even if it only happens 1% of the time. It's not fair to make people get sick so enough of them leave 1-star reviews.
Because again, there's a world of difference between an Uber driver who doesn't know the route (minor inconvenience), and food that makes me ill for days.
There isn't a world of a difference here. They all present minor dangers, and I'm willing to take the risk of buying a piece of lasagna from my neighbor.
I do trust random taxi drivers and I do trust arbitrary individuals to cook for me (trust is a bad word to use here; rather, I think the positives outweigh the negatives, I'd rather pay less and take some small risks).
But regulation in these areas doesn't apply because I might get into trouble. With food it's about preventing illness outbreak, with taxis it's about preventing massive congestion. At least, that's the goal (in practice the regulation gets corrupted).
Do you though?
All the taxis you take are with licensed drivers. The government has already set up certification standards.
Likewise, how often do you eat a meal by an arbitrary individual? Generally it's either someone you know and trust, or else a professional cook under food safety certification working in an inspected kitchen.
Are you saying you'd get into a taxi driven by someone without a driver's license because you'd rather pay less and take risks? Or eat a hamburger made from ground beef sitting in a refrigerator for 4 weeks because the cook "thinks it's fine", and again you'd rather pay less and take risks?
Without going in to huge detail I'll just say that most of this is false. A few years back I went hitch-hiking around Europe, no licensing was involved, as far as I'm concerned my drivers _were_ randomly selected (if anything, _they_ chose _me_).
Your last sentence is essentially an enormous strawman.
That all said, this isn't about me. The point of regulation is to prevent tragedy of the commons style situations. One instance of someone buying a meal from a neighbour or paying a friend for a lift doesn't matter, the commercialisation causes problems.
I have, and I trust most of my neighbors to prepare a chicken cutlet with more care than any revolving-door restaurant I ever worked in.
Consider just restaurants of a rank <= Outback Steakhouse (where I was a line cook for three years). Pure minimum-wage apathy will be cooking your food. Almost anyone can do better than that, especially someone inviting people into their home.
I'm seriously having a hoot over someone on the internet using restaurant food/hygiene quality as a standard for any argument.
The regulator/IRS could go through some residential blocks in popular cities and find undeclared tenants in almost every house. AirBnB makes it worse and shorter term but it didn't invent any of that. It just makes it more visible.
In comparison, restaurants are rarely undeclared or illegal operations.
I think a very, very cautious person who carefully screened their clientele could get away with having one, maybe two small groups dine at their house a night. Probably not even every day a week. Suffice it to say that we're talking about a market so small it might as well be said not to exist, and by that point you might as well just call it catering or a private chef, not a restaurant.
Uber Eats will not have a reputation issue. Any given "restaurant" can be a facade easily recycled into a new brand name. Any problems Uber can pawn off as a problem with that restaurant and not a fundamental problem of Uber operating above the law and not having safety regulations on its "independent contractors".
As Uber has repeatedly shown a disregard for laws, we can expect it will continue to show a similar disdain for safety, including food safety.
Since 2011, Finland (and now also some other countries) has twice a year a special "restaurant day" food festival, when anyone is allowed to run a pop-up restaurant for one day, and serve food cooked at home.
https://www.theguardian.com/business/2017/oct/28/deliveroo-d...
Which talks about "dark kitchens" i.e. existing, well-known chain, having a branch that purely serves delivery services.
I think my threshold is $2.99 - in some scenarios when I'm extremely sick.