Just Eat 2018 First Half Results – Increased Revenue guidance – Menulog Revenue falls.

The Just Eat 2018 first half results have been released and there are some very interesting numbers to come out of it.  On the face of it, there was pretty good growth.

 

 

• Just Eat took over 104.4 million orders across the group (up 30% from 80.4 million in H1 2017).
• Revenue increased 45% to  £358 million (H1 246.6).
• uEBITDA up 12% to  £82.7 million. (H1 73.6)
• Australia revenue fell 2% at constant currency as Australia attempts to transition to a hybrid delivery model.
• The results state that it has served 24 million customers worldwide, however there were only 11.3 million active customers, up from 9.7 in H1 2017.  Just Eat describes an active customers as having ordered at least once in the last 12 months.  12.7 million customers have previously ordered from Just Eat but did not order in the last 12 months.
• 11,400 net new Restaurants, total Restaurants implied at 86,800, up from 75,400 H1 2017.

Analysis of the Just Eat 2018 First Half results:

• Revenue per customer     H1 2018       31.68    25.44            ↑ 24%
• Orders per customer          H1 2018       9.2      8.2                   ↑  12%
• Revenue per Restaurant    £4124             £3,270                      ↑   26%
• uEBITDA Margin                   23.1%                 29.8%                   ↓22%
• uEBITDA per Restaurant      £952                   £976                    ↓ 2.5%
• uEBITDA per customer          £7.31                 £7.58                   ↓  3.6%
• uEBITDA per order                     £.79                  £.92                    ↓ 14.1%

Whilst revenue and profit is growing, the worrying trend is in the decreasing uEBITDA margin and the fact that Just Eat is making less money per restaurant, less money per customer and less money per order.  Decreasing uEBITDA could be a sign of increasing competition and that Just Eat will no longer be able to raise the commission that it charges each of it’s Restaurants.

Analysis of the Australian – Menulog Results.

Australia was called out as being the exception to the internationally strong revenue growth.  A constant current basis saw revenue drop 2%.  Their seems to be a focus on growing the delivery service using the Skip the Dishes technology.  The end of June saw 7 delivery zones live covering 2 million people with the intent to add a new zone every ten days.

Figures for the Australian business were:

• Orders          6.5 million down from 7.4 million in H1 2017.         ↓ 12.4
• Revenue     21.6 million down from 23.6 million in H1 2017      ↓ 8.4
• uEBITDA     4.4 million down from 6.5 millin in H1 2017.             ↓ 32%

The report states that there remains significant further engineering work to create an outstanding customer experience.

The big question is if the drops seen in Australia are an anomaly or a leading indicator of future profitability.

The growing competition from delivery companies (with inherently less profitable business models) on the one hand and free online ordering services on the other could very well see increasing difficulty for Just Eat as it faces growing competition from FROLO, UberEats, and Deliveroo.

The decreasing uEBITDA is a growing concern and many investors and analysts will be keenly awaiting the full year results.

Increasing competition for Just Eat

We are seeing an increasing popularity in restaurant disintermediation where Restaurants use tools like FROLO, the Free Restaurant OnLine Ordering system.  With customers now in the UK using the system, as well as in our home country of Australia free alternatives are becoming increasing popular.   This is combined with the Restaurants that Just Eat are losing or sharing with UberEats and Deliveroo.  Many restaurants will use a combination of order and delivery aggregators and this decreases the number of orders.  Just Eat mentioned in the press release that an increasing number of their customer are in smaller towns, and this may partially be due to the fact that there is no competition in many of these areas from delivery aggregators.

Risks for Just Eat

There are 3 large risks for Just Eat in the medium term.

1. UberEats and Deliveroo moving to order aggregation.  Currently, most delivery aggregators only take delivery orders and then delivery the food themselves.  There is the risk that delivery aggregators like UberEats and Deliveroo will start to offer a service for Restaurants that doesn’t include delivery.  This is cheaper for the Restaurant and would remove the barrier to Restaurants who aren’t prepared to pay the commission which can be as high as 35%.  Order aggregation is a lot more profitable than delivery aggregation, so it would decrease the loses on these services and could significantly decrease the number of restaurants using Just Eat.
2. The failure of their trials with the Skip the Dishes technology.  Menulog in Australia is coming from a long way behind in respect to building a logistics and transport company rather than a simple order taking company.  This business is lower margin, but we believe that Just Eat is being forced to move into the delivery business because of the competitive advantage that UberEats and Deliveroo have when presenting to Restaurants.  This part of the business faces challenges on the legal front with more people thinking that the only real innovation that UberEats and Deliveroo has made has been in the ability to pay under the award wage.  Legal risk in this area is not insignificant we believe.
3. The rise of Restaurant disintermediation – Restaurants are wanting a closer relationship with their customers.  The latest move by Menulog to no longer provide the phone number of the customer has increased the frustration with a lot of restaurants looking for alternatives and especially cheaper alternatives to the Menulog / Just Eat platform.

What should you do in your Restaurant?

The biggest impact that Just Eat has had is that it has taken £4124  on average from each and every Restaurant that it has as a customer, for effectively only being an order taker.  This is on top of denying the Restaurant access to the contact details of the customer.  Without the email details of the customer, it is very hard to remarket to them and we don’t really think that the customer belongs to the restaurant.

This is why more and more restaurants are moving to the Free Restaurant OnLine Ordering system.  They get the benefits of:

• Online ordering decreasing the time spent on the phone
• Decreasing errors caused by phone orders
• Collecting the customer contact details including phone number and email address
• Building a customer database, highlighting repeat and best customers
• Saving on the monthly commission

We have customers who have saved over $20,000 in commission by using FROLO instead of Menulog.  They still use Menulog, but get 10x the orders through their own website using our techniques and the Free Restaurant OnLine Ordering system.

Marketing4Restaurant first built our Free OnLine Restaurant Booking system at the request of our customers. We built this and include it as a part of our online marketing packages, but offer it completely free for Restaurants around the world to use to help them grow their restaurant business.  FROLO came about the same way, with many restaurants desperate to find a way to go online without having to pay fees and commissions which are sometimes the difference between a profitable and non profitable business.  Many restaurants are now discovering the value of collecting the email addresses.  Slow nights can be transformed into very business nights by sending out an email to 1,000 customers how have ordered from your Restaurant previously.

If you are looking for a free and better online ordering system, contact the Marketing4Restaurants team.

We’ve done some in depth analysis of the online ordering industry on Secret Sauce, the Restaurant Marketing podcast.  If you’re interested, check out these episodes:

77 – Online Ordering Frenemies – How online orders is disrupting the Restaurant industry

46 – 7 ways to increase online orders for your Restaurant Part I

47 – 7 ways to increase online orders for your Restaurant Part II

 

 

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