It looks like Menulog has started their mooted trial of the Menulog Delivery Drivers position in an effort to catch up to UberEats and Deliveroo. Recent ads on Gumtree suggests that they will commence delivery
Business strategy is about skating to where the puck is going to be, not where it is now. Is Menulog skating to where the puck is? We believe that there are a number of factors that will make it a challenge for Menulog to make this a scalable and profitable part of their business.
- Restaurant Disintermediation – More restaurants are starting to see disintermediation as a key way they can cut costs whilst being closer to their customers.
- UberEats and Deliveroo have a strong lead. The recent results from Just Eat and the Menulog investment writedown. There lead is in brand position, scale of drivers, restaurants and customers and in algorithms. Restaurant delivery aggregation is a 3 sided game, you need restaurants, you need customers and you need riders. Not only that
- UberEats isn’t playing in the food delivery driver game. UberEats plays in the restaurant delivery game. It may seems like semantics, but there is a big difference. At the moment, UberEats users riders as it builds it’s scale and algorithms. It will leverage the investments that Uber has made in self driving cars to decrease the cost and inefficiency of delivery massive and gain an unassailable advantage. Whilst Just Eat, the UK parent of Menulog has trialed delivery bots, they are a long way behind.
- 22% isn’t a lot of margin to play with to deliver a meal. UberEats usually charges 35% commission, compared to Menulog’s 13%, leaving 22% difference. Pricing details of the new service aren’t available, but it would be hard to image that Menulog would be more expensive than UberEats. That 22% margin will struggle to cover the costs of delivery, so it will be eating into the profit of the order only business model that they have now.
- Interdependent Contractor is a questionable hiring methodology. There is growing focus on if the independent contractor model is fair and legal with many complaints about unfair wages and conditions. This may not be sustainable for delivery companies in the medium term.
- Restaurants need control of the quality of delivery. More Restaurants are looking to insource their own delivery to ensure quality over the delivery people. Stories of long delivery times and food being eaten, with concerns around food safety are becoming more prevalent.
It will be interesting to see how the trial of Menulog Delivery Drivers goes. Building a 3 sided marketplace is difficult and it faces competition from UberEats, with a strong lead as the established incumbent and FROLO, the Free Restaurant OnLine Ordering system, which Restaurants are using to get closer to their online ordering customers and to save fees. With FROLO customers in the US, UK, and across Australia, there is a growing move to get customers to order direct and save. Restaurants doing $2,000 a week in orders can save $13,500 a year in commissions, which is a huge amount for many cash strapped restaurants.
One trend we are seeing is more Restaurants offering pick up only as an option. It means no delivery requirement for the Restaurant and some restaurants investing to build their own delivery capabilities.
If you are looking to build your database, not someone else’s and to cut the price of online ordering for your Restaurant, sign up today for a free trial of our free restaurant online ordering system.
Restaurants who are saving the commission have the choice of pocketing the savings, using the savings to fund marketing campaigns or to pass savings to their customers, or a combination of both.