The Restaurant Delivery Market 2015Q4

In today’s restaurant delivery market in London and the UK there are a plethora of players competing for your dine-at-home desires. Some are exclusively in the food niche, while others offer a fetch anything you need service. Here is a summary of the key players in no particular order:

  • Resto-in (formerly Room Service) • Food [2016: No Longer in UK Market]
  • Deliveroo • Food
  • Quiqup • Anything
  • Jinn • Anything
  • Henchman • Anything
  • Take Eat Easy • Food
  • Dinein • Food [2015: Ceased Trading]
  • Feast London • Food (Late Night)

These are all delivery services which are not affiliated with their own kitchen (as companies like Deliverance are), operate in a wide geographic area (in some cases multiple UK cities) and are targeted at the general public.

New players come and go rapidly and it takes good capitalisation to stay the course. There has already been some M&A activity – Resto-in acquired Room Service and has now completed its rebrand. Volo was about to launch, then became Foodora, who then pulled out of the UK and transferred contracts to Take Eat Easy. Both Take Eat Easy and Volo are part of Rocket Internet’s ‘Global Online Takeaway Group’ which it is aggressively expanding according to recent press reports. Seamless are also present, though only in corporate markets but they are huge in the consumer market in the USA.

It is a fledgling market in the UK, but we are now seeing consistency in the mode of operation of the key players which leads me to speculate on the next trend for the market and what the future holds.

The Model

The model is essentially the same for each player:

  • The delivery company provides a tablet to the restaurant to manage orders (and usually a printer)
  • The restaurant pays a commission for every order received through the service (usually 25%)
  • The customer pays a small delivery fee based on their distance from the restaurant
  • The delivery company holds on to the money for 2-4 weeks before paying the restaurant (minus the commission)

Most services operate within 2-4 miles of the restaurant, though services which offer to ‘fetch anything’ do go further afield. Hot food does not tend to travel well, however.

The Future

Delivery charges will be reduced. This trend has already begun with small slices being taken off the customer’s delivery fee. Eventually, this will become fixed price, e.g. £2.50 per order.

Commission paid by the restaurants will be reduced. It’s an expensive business (logistics and marketing) but restaurants will insist on better deals with more providers to choose from, and when some providers start to disrupt the business by offering win-win models when the novelty wears off this will benefit everybody. This may be some time off as it’s still a new market, but more agile players are exploring pay-for-performance scales akin to Google (et al) pay-per-click model.

Restaurants will have to be paid more quickly. When a customer pays with a credit or debit card in the restaurant, they get their money in 1-3 days. Card processing fees are calculated monthly and invoiced to the restaurant and collected by direct debit, but they don’t have to sacrifice 2-4 weeks cashflow in the meantime. Delivery companies will have to adopt this model – and those who get there first will have the disruptive edge over their competitors. Restaurants will want to use that particular provider and promote them to their customers above all others. A 5-day reconciliation cycle will be the sweet-spot.

APIs. With multiple players, a restaurant has to choose to be on all platforms and end up with a ‘trading desk’ full of tablet screens and individual printers, or back only one or two players and potentially miss out on a slice of the potential order pie. With a direct integration into the major EPOS suppliers, orders could be processed directly, print directly in the kitchen, and give visibility to the front of house staff of the activity behind the scenes (so they can manage the floor better). If EPOS integration is not feasible, the simple API would allow a generic hub to be set-up which queues all orders from all providers to allow the restaurant one control device to accept/reject orders and mark them ready for collection. This means only one device in the restaurant, but said device would need to be developed by a consortium of all the delivery providers.

What do you think about this market, and what do you think will happen short- and long-term?