‘Vir­tual kitchens’ de­liver more op­tions

Ki­wis have a big ap­petite for Uber Eats, writes

Bay of Plenty Times - - Business - Ja­son Droege, UberEvery­thing (above)

It’s tak­ing off with din­ers, but Uber Eats is also tak­ing a hefty cut from small food out­lets, which feel they have to be on the plat­form to sur­vive.

Although it’s less than two years old in New Zealand, the food­de­liv­ery ser­vice could al­ready be earn­ing tens of mil­lions of dol­lars a year in fees from restau­rants.

Uber Eats launched in New Zealand in March last year, and now op­er­ates in Auck­land, Welling­ton, Christchurch, Dunedin, Tau­ranga and Hamil­ton. About 1100 restau­rants have signed up and thou­sands of Ki­wis use the ser­vice each month, though Uber won’t dis­close just how many.

Uber’s vice-pres­i­dent and head of UberEvery­thing, Ja­son Droege, says Ki­wis’ use of the app has sur­prised the San Fran­cisco-based com­pany.

“There’s no way I could have imag­ined it was go­ing to be as suc­cess­ful or con­nect with eaters or restau­rants in the way it has.”

Uber be­gan as a ride shar­ing busi­ness be­fore branch­ing out into food de­liv­ery. In this coun­try, it car­ries pas­sen­gers in the same six cities, as well as Queen­stown, where Uber Eats is also set to be­gin some time in the New Year.

Uber Eats started in 2015 as UberFRESH, a ser­vice that pro­vided lunch in a Santa Mon­ica, Cal­i­for­nia, trial area. When Droege joined the com­pany four and a half years ago, his job was to fig­ure out what other busi­nesses Uber could get into. “We ran a bunch of ex­per­i­ments in 2014 and one of them was UberFRESH,” he says.

“We found that food de­liv­ery was a very, very big op­por­tu­nity.”

To­day, Droege is fo­cused on boost­ing the size of Uber Eats, which is now in 298 cities in 35 coun­tries.

“We’re launch­ing in suburbs in Delhi (In­dia), small cities in Aus­tralia . . . we haven’t found a city that is too small to launch this in quite yet,” he says.

“Forty per cent of the new eaters that we get ac­tu­ally have never been Uber cus­tomers, so we’re find­ing them to be very com­ple­men­tary to the rides busi­ness.

“The most sur­pris­ing thing for us is the con­cept of get­ting food from a res­tau­rant you want in about 30 min­utes turned out to be a pretty uni­ver­sal need.

“Con­sumers want ac­cess to more and more restau­rants, they want it de­liv­ered faster and they want it at a lower and lower price.

“As those things get bet­ter, we see con­sumers us­ing [Uber Eats] less as a monthly treat and more as a dif­fer­ent way to eat or con­sume food from a res­tau­rant.”

Home de­liv­ery has proven so pop­u­lar that “vir­tual restau­rants” — with­out a ded­i­cated kitchen or din­ing area — are now pop­ping up all over the world to trade solely on the plat­form.

There are now about 1600 vir­tual restau­rants sell­ing via the Uber Eats app, with the con­cept par­tic­u­larly pop­u­lar in the US and Bri­tain. In New Zealand, there are about a dozen.

Auck­land restau­ra­teur Jasper Maig­not, founder of Royal Oak eatery Happy Boy, op­er­ates a stan­dard res­tau­rant, but he gets as many as 180 ad­di­tional or­ders each week thanks to three vir­tual restau­rants he op­er­ates just to trade on Uber Eats.

Maig­not says the ap­peal of launch­ing Don­buri Fury, Thun­der Burger and Kim­chi Power as vir­tual restau­rants was be­ing able to use the re­sources al­ready avail­able in the phys­i­cal res­tau­rant: man­power and prod­ucts al­ready on site which could be cooked in dif­fer­ent ways. “It’s [about] ex­pand­ing the catch­ment of the res­tau­rant in a way.”

Don­buri Fury, his first vir­tual res­tau­rant, started four months ago. Fol­low­ing de­mand, he de­cided to start two more within a month of each other.

Maig­not says the vir­tual restau­rants have hit ca­pac­ity in Happy Boy’s kitchen, so he won’t in­tro­duce more, but he is toy­ing with the idea of set­ting up a “satel­lite kitchen” ded­i­cated to vir­tual restau­rants.

On av­er­age, his busi­nesses get about 400 or­ders a week through the app — 180 of which are for the vir­tual restau­rants.

An­other vir­tual res­tau­rant owner is Conor Ker­lin, co-founder of Mex­i­cali Fresh and a se­rial res­tau­rant owner. “Uber Eats re­ally has caused a bit of de­struc­tion in the reg­u­lar sit-down restau­rants,” he says. “Peo­ple would rather pay a bit more and get it sent to their front door.”

Ker­lin op­er­ates Hot Lips, which spe­cialises in Nashville-style fried chicken, out of the kitchen of his Pon­sonby res­tau­rant Ha! Poke. He has four more vir­tual restau­rants in devel­op­ment.

Cal­i­for­nia-born Ker­lin says it’s a good way to test new food con­cepts.

“With reg­u­lar restau­rants, you have to be staffed and have peo­ple out the front even if there’s no­body there . . . with vir­tual restau­rants, you can ba­si­cally turn it on and off when­ever you like, you have much more con­trol when you’re serv­ing, and it’s much eas­ier to man­age staff,” says Ker­lin.

“It’s a good test­ing model as it’s like: ‘Okay, be­fore we in­vest $400,000 in build­ing a res­tau­rant, let’s ac­tu­ally see if peo­ple like our food first’.”

Re­search by Mor­gan Stan­ley this year found that on­line food de­liv­ery was about 4 per cent of New Zealand take­away res­tau­rant sales. In Aus­tralia it was 10 per cent, and 34 per cent in the UK.

Andy Bowie, New Zealand coun­try man­ager for Uber Eats, says he ex­pects vir­tual restau­rants to take off here as they have in other mar­kets.

“We are ac­tively help­ing restau­rants fill spe­cific cui­sine gaps in neigh­bour­hoods around New Zealand cities, which also en­ables them to test new con­cepts with­out in­vest­ing in a whole new res­tau­rant,” says Bowie.

Com­mis­sion fees for vir­tual restau­rants are the same as they PHOTO / SUP­PLIED are for con­ven­tional op­er­a­tors — 35 per cent for most and 20-25 per cent for chains bring­ing in large num­bers of or­ders. As well, din­ers pay a de­liv­ery fee, typ­i­cally about $7, although that varies with the time of day.

But Maig­not says he does not be­lieve cur­rent com­mis­sion fees are rea­son­able.

“At this stage Uber Eats is dom­i­nat­ing the mar­ket in Auck­land . . . and that’s why they can put that mar­gin on the de­liv­er­ies,” he says. “Once you’ve got it as a source of in­come for the busi­ness, you sort of out­weigh it.”

Maig­not says restau­rants and hos­pi­tal­ity op­er­a­tors are in some ways forced to be on Uber Eats be­cause of its cult fol­low­ing. “Uber Eats has got sort of this brand [rep­u­ta­tion] like Ap­ple has, like Mac com­put­ers — very easy, very user-friendly.”

Uber says dif­fer­ent restau­rants pay dif­fer­ent ser­vice fees, “ad­dressed on a res­tau­rant by res­tau­rant ba­sis”.

“We do work with busi­nesses that are go­ing to pro­vide largescale or large ben­e­fit back to our busi­ness and how it grows the mar­ket­place as well,” says Bowie.

He could not say whether com­mis­sion fees would de­crease with time or com­pe­ti­tion.

“We def­i­nitely see that eaters are very much tak­ing to the plat­form by storm, we’re see­ing or­der fre­quency trends grow. Hav­ing said that, we’re also see­ing the same growth with restau­rants,” says Bowie. “Be­cause there are so many eaters jump­ing on board, th­ese restau­rants have an op­por­tu­nity to gain in­cre­men­tal sales and grow their busi­ness . . . they are see­ing value be­hind it as well.”

Sev­eral fac­tors go into the com­mis­sion rate, he says, in­clud­ing the need to pay driv­ers, as well as soft­ware en­gi­neers around the world who de­velop the tech­nol­ogy that makes the ser­vice pos­si­ble.

“Run­ning a full de­liv­ery fleet for a small res­tau­rant is a very com­plex thing to do, so we’re hop­ing to be able to pro­vide that plat­form to them at a rate that is able to com­ple­ment their busi­ness.

“[We be­lieve the plat­form] ac­tu­ally pro­vides im­mense op­por­tu­ni­ties for growth to th­ese restau­rants that they might not nor­mally have.”

Though it’s rel­a­tively new, Uber is al­ready earn­ing mil­lions of dol­lars from Kiwi busi­nesses. Given the 1100 restau­rants on the plat­form, and as­sum­ing Uber earns at least $100 a day per res­tau­rant, over a year that amounts to about $40 mil­lion.

"The con­cept of get­ting food from a res­tau­rant you want in about 30 min­utes turned out to be a pretty uni­ver­sal need."

Uber Eats is a way to test new food ideas, says Mex­i­cali Fresh owner Conor Ker­lin (right), pic­tured with Ha! Poke chef Mike Shand.

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