Update (19/04/16): UberEats has launched in Melbourne.
Update (24/07/16): UberEats has launched in Sydney.
This month, ride-hailing startup Uber launched UberEats in ten U.S. cities including Los Angeles, New York City and San Francisco. As a standalone app, UberEats will allow meal delivery by an Uber driver from local restaurants and fast-food outlets. While there are no current plans for UberEats to launch in Australia any time soon, presumably the new service will roll out down under if it is a success overseas. In fact, Australians have already shown an affinity for Uber delivering Messina ice-cream, kittens and puppies. What is the state of food delivery services in Australia and the likelihood of UberEats entering our shores?
Appetite for Growth
For Uber, the launch of UberEats is part of a broader move to partner with businesses that will leverage Uber’s technology and membership of users worldwide. This strategy will further boost its revenue and justify its reported valuation of over US$65 billion.
Currently, the UberEats app will charge a flat delivery fee of $5 for customers and will also collect a percentage fee from restaurants for every order. While this model generates a percentage of revenue for Uber, it will benefit most from the relationships with its restaurant partners who will ultimately rely on UberEats as a round-the-clock food delivery service. Also, Uber have identified that its drivers ferry fewer passengers between 10 am and 2 pm. By introducing food delivery, drivers can deliver food during this off-peak period and maximise utilisation for Uber.
Unsurprisingly, delivering food creates new challenges for drivers. From picking up food to keeping hot items at temperature, Uber drivers face a sway of strict food safety standard laws in Australia, including food storage, food transportation and hygiene. Food Standards Australia New Zealand (FSANZ) regulates food standards. Uber will need to face the same regulations imposed by FSANZ on all other food delivery providers.
Delicious Market for Australian Food Delivery
As a foodie nation, it’s no surprise that the food delivery market in Australia already has a number of big players, including Suppertime (now Foodora), Deliveroo, Menulog and DeliveryHero. Suppertime and Deliveroo act as delivery services for takeaway restaurants. Both services charge users a flat $5 delivery fee for the service, and charge restaurants a service fee to handle the payments, logistics, delivery and marketing on behalf of the restaurant. On the other hand, Menulog and DeliveryHero act as an online marketplaces and link diners to restaurants. Food delivery services are provided by the restaurant directly, rather than the online marketplace.
The restaurant market in Australia generated $12 billion in revenue in 2015, with projected growth of 2.3% over the next five years. People are now leading busier lifestyles and food delivery appeals as an affordable and convenient alternative to dining out. Already, we are seeing many fast-food operators offering home delivery or partnering up with delivery services. In fact, latest data from Menulog reveals 51% of respondents preferred to order in than eat out, highlighting social trends towards “convenience food”.
While current food delivery providers hold a significant percentage of the food delivery market in Australia, Uber will need to leverage its brand, reach and driver base to break into the Australian market. Having clocked its 10 millionth UberX passenger ride late in 2015, Uber has a base of 20,000 drivers – more than all other Australian food service delivery providers combined. It’s inevitable we will see UberEats expand in Australia (in fact, Uber is currently listing an opening for a general manager of UberEats in France) – watch this space.
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