The biggest problem in the food delivery industry is the industry itself
New delivery services have not kept up to their promises
New on-demand food delivery services have entered the market in 2013. Their promise was to create a win-win-win situation for customers, restaurants and couriers. Restaurants could now reach out to a new group of customers and increase their profits. Employees were given the opportunity of an easily accessible job that could uncomplicatedly be done on the sideline. Customers could now enjoy high quality food at home. But the reality was and is very different.
Customers complain about long delivery times and cold and unenjoyable food. Restaurants are left with small profits that are barely worth the extra effort, while deliverers seem to bear the most disadvantages. Low wages, small or even no incentives to work during bad weather and a lot of time pressure. This can leave a bad taste in the mouths of customers. Especially as the main reason for this is caused by Deliveroo, Ubereats and Foodora themselves. Their margins of each order range from 25–35% leaving only a small profit to restaurants and a fraction of each deal to couriers. Bad wage and working conditions are a result of that, which leads to an unreliable supply chain that disgruntles customers. On top of that accident rates are significantly high among couriers. As of now, Deliveroo is in court in England, because they employ couriers as freelancers, although they can’t schedule their own working time and earn too less. Simultaneously, Foodora’s deliverers are protesting in Germany to fight for better working conditions and wages.
The root of the problem
But why are food delivery services taking margins that high? Existing food delivery services or let’s say old economy businesses, in general, are dependent of expansion and growth. Only expansion allows them to make up for the initial investment, only expansion allows to compensate the high fix costs and only expansion makes a business attractive to investors. This is especially crucial for this young market as it is currently highly competitive and the new on-demand food deliverers are in an all-out war over market shares. All this goes of course at the expense of restaurants, their staff and, the food couriers. Deliveroo built a 55,000 square foot office in 2017 in London with a cost of several hundred million pounds, which illustrates not only its high fix costs but also the exploitation of food couriers and restaurants.
The solution
ufoodo is not a traditional business. It won’t expand because it needs to. Rather, it will expand and grow as a platform and as a network because it will be useful and profitable for deliverers and restaurants alike. In order to run successfully ufoodo requires merely a commission of about 15% of each order, which means that there will be a higher margin of about 10–20% left for restaurants and couriers. This additional income will be put into higher wages for couriers and higher profits for restaurants. It even leaves the possibility for couriers and restaurant owners to invest some of their gains into the improvement of their service or advertising. Fair wages will lead to a reliable supply chain that customers will recognize and value.
Using ufoodo restaurants and deliverers will no longer be subject to decisions that bigger players make. Instead, they will decide for themselves and have a maximum outcome of their work. ufoodo is not a third party business, that restaurants and deliverers work for, rather it lets them run their own business.
Thank you all for your support and for making ufoodo happen.
Best,
The ufoodo Team
