This is how the likes of Deliveroo, Just Eat and Uber Eats work


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Planning a takeaway this weekend? Then the chances are rather than set foot outside your door, you'll pick up your phone - not to call and place an order, but to open up a delivery app. But could we end up paying an unimaginable price?

If you've not used the likes of Just Eat, Deliveroo or Uber Eats yet, the chances are you soon will.

Delivery and ordering apps has opened up huge choice for the end user
Delivery and ordering apps has opened up huge choice for the end user

Because their growth has been astronomical. From modest start-ups, they have become multi-billion-pound industries stretching around the globe.

And they’re not slowing down. Earlier this week, Deliveroo revealed it expects to raise £1billion when it floats later this year on the London Stock Exchange – valuing it at around £5bn. It only started in 2013.

With the lockdowns endured by so many restaurants and takeaways over the last 12 months, many have the platforms to thank for their survival.

But despite dramatically broadening the hungry user's options and ease of ordering, the benefits may yet come at a cost to us all.

Not only do the independent outlets you rely on for a Friday feed or Saturday spread pay a hefty price for every meal ordered through the apps, but some suggest they pose a threat too to restaurants we cherish and the high streets on which food outlets reside and give much-needed life to.

This could be yours with a few taps of your phone. Picture: Uber Eats
This could be yours with a few taps of your phone. Picture: Uber Eats

With progress, potentially, comes significant change to what we have come so familiar with. And the so-called 'ghost kitchen' may change everything. More on that shortly.

So how do these disruptors of the food delivery industry work? And why have they become so incredibly popular?

As with so many things, technology and mobile phones lie at the heart of their success story.

The restaurant or takeaway signs up, the orders come in on a tablet or app provided by the platform. Then, once the food is processed it can be collected by a delivery driver working directly for the Deliveroos of this world or their own team.

Sounds simple? And for the consumer it certainly is. That is, after all, the secret to its success.

Many of us now have at least one fast food app installed. Picture: Uber Eats
Many of us now have at least one fast food app installed. Picture: Uber Eats

You open the app, choose the type of food you want, browse those offering it and order it from the online menus, adding on a delivery charge. You can then monitor the progress of the order and before you know it, the doorbell is ringing and your pizza, panini, pasta or pork chow mein of choice is being handed over.

There's little wonder they are proving such a hit.

But on the other side of the equation is the restaurant. Perhaps unsurprisingly, the platforms tend not to shout about how much they charge from the rooftops - and commission rates vary.

To give a ball-park figure, Deliveroo, Uber and Just Eat charge around 30% on each order placed. That can be more than halved if the restaurant provides its own delivery driver (so, Just Eat, for example charges 14% if it’s not handling the delivery). But many will just look to tap into the delivery service's couriers - it's a handy way, after all, to avoid hiring them direct. In addition, all charge a fee to sign up that can run into several hundred pounds. And none of those figures include VAT.

While some are waiving sign-up fees in a bid to secure market share, you can expect those commission rates to vary "subject to a whole range of factors", according to Deliveroo. Those can include if they're working exclusively for the platform and if they market their association too.

Deliveroo is planning to float on the London Stock Market
Deliveroo is planning to float on the London Stock Market

It will be pretty safe to say the likes of McDonald's and Greggs don't pay the same percentage as your local Chinese to their platform of choice.

So, let's say you order a takeaway worth £20. The delivery company will pocket around £7.20 - that's 30% plus VAT. And that can have a massive impact on a restaurant’s bottom line.

"Most restaurants work on around 70% profit margin on the input costs - ignoring all the fixed overheads - so they're taking virtually half of their gross profit," explains George Shaw.

The marketing and PR specialist, based near Tunbridge Wells, has worked in the hospitality industry - alongside restaurants and caterers - for years and is alarmed at the impact the firms are having.

He adds: "Something has to give - whether that's employment of staff or the quality of the ingredients which drives down the quality of food.

"Not only are the likes of Just Eat fantastically expensive for restaurants - they own and keep customers' data, making it virtually impossible to communicate with them directly - other than popping something in with the delivery."

Deliveroo was only launched in 2013
Deliveroo was only launched in 2013

And while you, as the diner, may be thinking 'so what' databases are essential for restaurants to target customers for special offers and foster loyalty.

"That's the whole business model,” he adds, “Deliveroo and Just Eat do not want you to have an email address for your customer.

"These are big multi-national corporations purely driven by the bottom line. They have no interest in sit-down restaurants. If they go bust and people's only option is to order a takeaway then they're happy with that. They won't boast about that, but that's their thinking. And why wouldn't it be?"

But he says the biggest threat comes from what have become known as 'ghost' or 'dark' kitchens.

You can't doubt the sense behind Deliveroo's development of the concept in what it calls its Deliveroo Editions.

Rather than each takeaway operating out of its own premises, an industrial space with excellent road links becomes a hub for various fast-food outlets - all using a dedicated separate kitchen space within one unit. The food is created through the online orders and a swarm of drivers wait outside ready to whisk them away.

Deliveroo say they are perfect platforms for takeaways to expand into new areas.

They're still in their infancy for now, with Hove and London being the closest sites to Kent - so your food won't be emanating from one for now at least. Deliveroo says it has no plans for such a set-up in Kent. Yet.

But George Shaw, who for many years worked with the Asian Catering Federation - which represents the nation's favourite curry outlets - doesn't welcome them and spies a threat.

"These firms don't need a plethora of Indian, Chinese or pizza places on every high street," he explains. "All they need is a single, multi-cuisine 'dark kitchen' in a cheap out-of-town or industrial location, within a short travelling distance of the customer."

Do delivery firms pose a threat to high street fast-food outlets?
Do delivery firms pose a threat to high street fast-food outlets?

The threat being that as we've seen bricks and mortar retailers selling up and becoming online only operations, the same could be said of the high street takeaway which, pre-pandemic at least, helped fuel the night-time economy.

However, while they have their critics, some of the biggest - and perhaps most unexpected - names in the business are broadly supportive.

Dev Biswal is the chef and owner of the multi-award-winning The Ambrette. It has outlets in Canterbury, Margate and just over the East Sussex border in Rye. He'd never entertained the idea of offering takeaways prior to the lockdown.

"We specialised in fine dining restaurants, where everything was well presented on plates," he explains of his celebrated fusion of Asian and British flavours. "In fact, I hated takeaways and would never do them.

"I didn't believe you could pack and send fine food.

Ambrette owner and head chef Dev Biswal. Picture: Manu Palomeque
Ambrette owner and head chef Dev Biswal. Picture: Manu Palomeque

"But circumstances due to the pandemic forced us to review it otherwise we had no other option as we were forced to shutdown.

"We started doing them with no access to the platforms so we did our own thing and created an online store on our website."

But he's now signed up to all three of the major players - Deliveroo, Just Eat and Uber Eats – and has no regrets.

He adds: "Restaurants go by their reputation and pricing. The way we position ourselves, sometimes people don't use us as they think we're too expensive. But these platforms open up a bigger market for us.

"They also give you very good exposure.

The Ambrette is famed for its culinary excellence - but has found itself reliant on a takeaway service during the lockdown
The Ambrette is famed for its culinary excellence - but has found itself reliant on a takeaway service during the lockdown

"We specialise in fusion Indian food but the last few weeks the biggest selling thing on the menu has been burgers.

"We do them with a difference of course, it's very much a gourmet burger, but, again, it's a different market and thanks to these platforms people know we're doing all that stuff.

"Has it been a positive experience? Yes, definitely.

"We have been in the business far longer than these platforms - they've just sprung up and rose to becoming massive companies, so they're quite inspiring how they have established themselves.

"Yes, the commission hurts and I couldn't say anything otherwise. However, if your product is good these platforms can become a very good launch pad. So if you're a chef starting up and you're not known then these allow you the perfect opportunity.

Deliveroo riders are a common sight due to the boom in popularity
Deliveroo riders are a common sight due to the boom in popularity

"There's a cost to it, but they are successful in reaching out to people with their huge marketing budgets.

"We will continue with takeaways after the lockdown is eased. A few months back if you'd asked me that question I would have said no, but with the uncertainties and variants of the virus, I think it will be a safer option to not put all your eggs in one basket. So we’ll keep the takeaway option open."

According to Deliveroo, restaurants that sign up to its service see revenues increase by up to 30% - and that is a figure not to be sniffed at.

A spokesman added: "That increase helps them and their suppliers grow and expand, creating thousands of jobs in the restaurant sector. We’re good for small businesses, helping them reach new customers, generate more orders, increase their revenues, all contributing to the creation of new jobs."

It adds that recent research by Capital Economics revealed delivery services protected around 100,000 jobs in its UK restaurant partners during the national lockdown. Again, not something to dismiss, especially when it says the sector supported turnover of £1bn for its partners while we were all confined to our homes.

Uber Eats is one of the big three fast food apps
Uber Eats is one of the big three fast food apps

Unsurprisingly, Just Eat agrees the benefits of what it has to offer outweighs any negatives.

A spokesman explained to KentOnline: "Working with a food delivery business like Just Eat has many benefits because restaurants can tap into its customer base and expertise. We have a track record of helping restaurants prosper, whether it's through access to more customers online that they may not otherwise have been able to reach, or our investment in technology and marketing to help businesses raise their profile, attract more orders and operate more efficiently. We’re constantly developing a wide range of products and services that ensure our restaurant partners can get even more out of working with us, helping their businesses to grow."

They cite examples of offers and discounts from wholesalers and utilities.

And they say it does share some of its data.

The spokesman added: "We provide our partners with significant amounts of non-personal data to help them manage their operations. For instance, we share information on customers’ food preferences in specific locations to allow restaurants to tailor their menus, and we provide data on order patterns that give real insight to restaurants when setting their delivery ranges or when considering where to open new outlets."

..

Just Eat, which admits it is more a marketplace for outlets than a delivery firm, saw its revenues grow 54% during 2020 compared to the year before, taking it in excess of a staggering £2billion. For its UK operation, it delivered 179m meals - up 35%. Helped no end by relationships with the likes of McDonald's and Greggs.

And that marketing Dev Biswal mentioned? Well, it certainly doesn't come cheap - the same presumably can be said of rapper Snoop Dog who appeared in relentless TV advertisement for the brand. During 2020 the firm doubled its marketing spend to £315m.

Deliveroo saw the amount of transactions processed on its platform rise 64.3% in 2020 over the previous year to an eye-watering £4.1bn.

Perhaps it's too easy to paint these firms as the bad guys. There's no denying that for many outlets, they are driving up awareness and trade.

Many also slashed commission rates and sign-up fees during the lockdown.

Uber Eats has proved hugely popular
Uber Eats has proved hugely popular

Adds a Just Eat spokesman: “We are only successful if our restaurant partners are successful. We believe our commission rates are aligned with the value we provide to our partners and we have a track record of helping restaurants prosper.

"Since the start of the pandemic, we have given well over £11million worth of support to the many thousands of independent restaurants we work with through a number of support measures including commission rebates on delivery and removal of commission on collection orders.

"We're committed to adding value to our partners’ businesses on a daily basis, and many grow and flourish through working with Just Eat."

Adds Deliveroo: “Throughout the Covid crisis we have invested millions in our restaurant partners, helping them increase their sales and creating new products to support both their dine-in and delivery businesses.

“We have also rapidly expanded our on-demand grocery partners, including: Aldi, Morrisons, Waitrose, Whole Foods and Sainsbury's. We now work with more than 2,000 grocery and convenience partners in the UK. This has been particularly important for the vulnerable and those self-isolating.”

Kate Nicholls, CEO of UK Hospitality
Kate Nicholls, CEO of UK Hospitality

In the same way our shopping habits were moving online pre-Covid, it seems the lockdown has accelerated not only that, but our growing reliance on food delivery apps. While some may dislike handing over a cut of their fees, our insatiable appetite may leave them on the sidelines.

UK Hospitality acts as the mouthpiece of the industry.

Given many of the delivery companies are among its membership, Kate Nicholls, its chief executive, was careful in her choice of words.

She told KentOnline: "For some businesses, takeaway has been their only option during the lockdowns and restriction periods of the past year.

"It has been a vital lifeline in many cases and delivery platforms have helped some businesses access this revenue stream.

Restaurants have stood empty during the lockdown
Restaurants have stood empty during the lockdown

"We do expect a healthy return of custom to venues after reopening, though. Initial booking suggest a strong demand amongst the public to socialise with family and friends after a difficult year.”

While few would bet against that, our new habits when it comes to ordering food in are unlikely to fade away fast.

George Shaw says restaurants had the chance to capitalise on the demand - but many waited too long.

He explained: "I've always said, if it’s possible, to order direct from the restaurant. But that's not always the case because some of them are too lazy to have online ordering or their own customer database. But where it's an option, people are better off, if they want to see a restaurant survive this lockdown, then order direct.

"For customers, spend it locally to boost your local economy. Do you really want to be supporting profits out of the area you live to a corporate headquarters? You should always support local independent businesses in favour of vast companies."

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