For thousands of New Zealanders in the past year, food delivery has become synonymous with UberEats as customers love it for its simplicity and convenience. But what about the restaurants? What’s it like to be on the other side of the table? Jihee Junn talks to Auckland restaurant owners to reflect on a year of UberEats mania.
In March 2017, UberEats made its New Zealand debut by launching in Auckland. Central city workers and residents could order meals from more than 70 restaurants without ever having to leave the office or couch: fresh bagels from Al’s Deli, pork buns from Tucks & Bao, sweet treats from Miann and green smoothies from Little Bird were all on the menu as deliverable options. The hungry, lazy and frantically busy among us rejoiced at its arrival. The hype was real.
As the weeks went on, the service kept growing: more customers, more orders, more restaurant partners. By July, the service had more than a hundred restaurants on its platform and delivering far beyond Auckland’s cluster of central city suburbs. By September, UberEats expanded to Wellington. By October, it’d spread to Christchurch.
In the first month of UberEats’ arrival in New Zealand, demand was huge across the board. Boy & Bird Ponsonby owner Aari Puri commented back in April 2017 that his business was so busy they often had to switch off the app during peak times to cope, while Best Ugly Bagels was reported to be taking an extra 40-50 orders per day.
“It was a game changer,” recalls Conor Kerlin, whose company Mariposa Restaurant Holdings (MRH) owns popular fast-casual eateries Mexicali Fresh, Burger Wisconsin and Ha! Poke. “[With Mexicali], we saw a massive increase in sales, which was good for the business. There were a lot of people – especially in the city – that just didn’t want to get out of their desk to go and line up somewhere, so convenience was a huge factor.”
Jeff Kim, the owner of Japanese eatery &Sushi, experienced a similar situation as his small Newmarket eatery scrambled to keep up with the massive uptake in demand. “It was huge,” he recalls. “We were swamped with orders, and because they used us for their marketing quite a bit, we got a lot of exposure. People would recognise [our food] on the app and start ordering from us. We had huge sales at the start.”
Kim says the high level of demand carried on for at least a couple months, demand that he had neither anticipated nor prepared for. Orders from the platform were contributing up to 20% of &Sushi’s business, and it had gotten to the point where extra staff had to be brought in to handle the sudden surge in demand. Business was clearly booming, but when it came to making money, the service was barely lining the restaurant’s pockets.
“There’s nothing really in it to be honest,” confesses Kim. “[UberEats] charge a 35% commission on every order that we receive from them, which is quite a hefty commission. Their reasoning behind it is that we don’t have to buy more stuff, pay extra rent or hire new people… but since we had so many orders, we had to change things around to accommodate the orders, and it actually increased the waiting time for our in-store customers.”
For larger establishments like Mexicali Fresh which are generally better resourced, the need to make significant operational changes – like hiring more staff – was less pronounced. And while the relatively high commission fee means profits are still slim, Kerlin sees the orders his restaurants gets from UberEats more as “bonus sales” – transactions they wouldn’t have gotten otherwise.
To explain his thinking, Kerlin uses the analogy of a carpool. Say four people paid $10 to ride into town together in a five-seater car. On the way in, they end up picking up an extra person, but the extra person only pays $5 instead of $10 like everybody else. But you’re still driving into town anyway, so that’s an extra $5 you wouldn’t have if you hadn’t picked up the extra person.
For standalone establishments like &Sushi, however, which had to modify its operations to keep up with demand, the same principle didn’t quite apply. So in an attempt to mitigate the negative effects of UberEats, &Sushi slashed its menu offering in half, leaving only the items that were easiest for its chefs to cook. “That decreased the order amount by maybe 25% at least,” says Kim, adding that just 10-12% of its weekly business now comes through UberEats, which is a sizeable drop from the 20% it was initially getting. “But with 10-12%, we’re quite comfortable.”
While Kim’s attempted to negotiate with UberEats on a number of occasions regarding the 35% rate of commission, the service has repeatedly refused to budge. To date, only celebrity chef Al Brown (Best Ugly Bagels, The Fed) is known to have successfully negotiated a better deal, along with one other unnamed restaurant chain reported back in October (Uber spokesman Mike Scott also said at the time that the commission rate varied depending on the “volume and size of orders and marketing investment from restaurant partners”).
So with UberEats’ seemingly negligible effect on profits, the question remains: why stay on? Why keep using a service that only provides minimal financial benefit (or in some cases, financial detriment) to a restaurant’s earnings? Why not just leave?
It’s often said that showing up is half the battle, and when it comes to restaurants in today’s competitive food market, being on UberEats is basically the ‘showing up’ part of it. “The restaurant industry is changing and you’re either on the train or you’re off,” says Kerlin. “If people don’t order from you, they’ll probably just order straight from your competitor. So for us, we look at it more like a marketing exercise. Get your food in front of people. Get them to like it.”
“With something like Burger Wisconsin, we had the highest number of orders in the first, like, four days when it launched (on UberEats). A lot of people knew the brand but hadn’t seen it in a while. All of a sudden, they see it on UberEats and they think: ‘Holy crap, I haven’t seen Burger Wisconsin in ages!” he says.
“You’ve got to see if there’s a way to make it work. People aren’t going to just stop using delivery. There’s a huge market for convenience, so where there’s convenience, there’s opportunity.”
Kim also echoes these sentiments, adding that &Sushi received a lot of exposure from just being on the app when UberEats first launched back in March. “There was hype around it, people wanted to try it and we were always on the top of the list [on the app].”
“For us, [being on UberEats] is more about us providing a delivery service for customers who can’t make it to the shop, rather than it being a profit-making practice.”Mimi Gilmour, however, disagrees. “I think a lot of businesses look at the marketing benefit, but actually, in the long run, I think it will change behaviour. People won’t come into the restaurants as much, you know?” says the Burger Burger CEO, whose restaurant doesn’t use UberEats or any other delivery service. “I personally don’t think we should be everything to everyone, and I think we just need to decide what we’re really good at and I don’t think that’s delivery. I think there’s a place for delivery, but I just don’t think it’s for us.”
Gilmour says there are two key reasons driving her ambivalence towards food delivery. The first is the commission rate UberEats charges. “Restaurants work on a pretty tight margin already. It’s not the easiest way to make money in the world,” she says. “So when companies like Uber come in and charge 35% commission, that just doesn’t make sense. It’s essentially daylight robbery.”
But the biggest thing for Gilmour is the uncertainty that comes along from working with a third-party service. At thid point in time, the customer experience – from pan to plate to mouth – is entirely in Burger Burger’s hands, something which Gilmour isn’t prepared to give up.
“[By using UberEats] we lose control of the delivery of our product in the best possible standard,” she says. “Our food is made fresh and hot. But when we have a third party involved, we can’t then guarantee the delivery of it. The chance of it getting delivered to the customer in an unsatisfactory manner means they then get a below par experience of Burger Burger and that’s what they hold on to.”
For other restaurants not on UberEats, they also have their own reasons for not signing up. Some fear it’ll diminish the dine-in rate (or at the very least, the dine-in experience), while others find that dealing with an international corporation like Uber cumbersome and exhausting. For Jasper Maignot, co-founder of Asian-inspired restaurant Kiss Kiss, the reason is simple: they’re just too busy (although his other restaurant, Royal Oak burger store Happy Boy, is on the platform). “Kiss Kiss wouldn’t be able to cater for it, [but] Happy Boy’s in a different location and it caters to a different crowd. We’ve also got the manpower to do it,” he says.
Nowadays, UberEats isn’t so much of a trend but a mainstay; it’s to food delivery what Uber is to taxis – a routine, habitual, natural thing. And while a handful of budding startups (DeliverEasy, LazyAz) have attempted to cut into the service’s share of the market, nothing has yet to come close to its crown (rather, it’s presence is pushing competiton out). Because while many restaurants are gunning for a fairer, more ethical service to take UberEats’ place, they know – as do the customers – that at this point in time, it’s the best that food delivery has to offer.
“If it gets bad, I’ll definitely pull out. But I’m still in it for now,” says Kim. “Obviously it’s a great service and a great concept with great execution. You can’t really beat it. The only thing is, it’s not leaving us much. They call us partners, but when you call someone a partner, it has to be a win-win situation.”
“I’ve had a couple companies actually approach me to talk about delivery systems and new competition to UberEats, but they really can’t beat the logistics, the number of customers out there etc. So it’s hard.”
Kerlin agrees, adding that UberEats is really the only platform out there that’s not just user-friendly for customers, but restaurants as well. “You can track everything, and the accessibility of all their drivers just blows everyone else out of the water,” he says. “A lot of these companies try but they don’t have the reach. They don’t have the drivers and the technology.”
The Spinoff’s business section is enabled by our friends at Kiwibank. Kiwibank backs small to medium businesses, social enterprises and Kiwis who innovate to make good things happen.