As public sentiment turned against Uber Eats, a new local operation emerged promising a more ethical alternative to help New Zealand’s struggling hospitality industry. But now Eat Local NZ has suspended trading after falling out with its Australian partner Mr Yum. So what happened?
A dispute between local hospitality platform Eat Local NZ and Australia-based start-up Mr Yum has resulted in the end of a partnership that could have delivered an Uber Eats alternative for New Zealand businesses.
Eat Local NZ first came onto the scene during alert level four aiming, once we moved to level three, to support struggling hospitality businesses by offering a locally owned platform that would allow venues to facilitate pick-up and delivery for a low commission fee of 5%. Other initiatives like “Local Legends”, through which those who lost income during the pandemic could make money by helping to sign up new venues to the platform, were also proposed.
Mr Yum is a small Australian start-up that offers pick-up, delivery and a table-ordering system for participating venues.
Eat Local and Mr Yum’s New Zealand platform – created by pooling their respective resources, which includes Eat Local’s venue database and Mr Yum’s technology platform – was set to be launched on June 8, with communications around what the product would look like already sent out to 800 venues.
However, on Friday morning Eat Local founder Tim McLeod posted an emotional message on Facebook explaining the end of the partnership, saying that he “felt like a total fool”. His announcement detailed how Mr Yum had decided Eat Local misaligned with its business values, and was going to enter New Zealand without McLeod’s business.
In a statement, Mr Yum said it’s “saddened by this response to what was two teams working in good faith and sharing learnings and information with each other”.
Eat Local has now suspended operations for the time being. “I don’t know yet [what will happen next] but as hard as this has been to write, I owe you all the transparency,” McLeod wrote in the Facebook post.
The Spinoff understands the main disagreement related to the branding and execution of the platform’s end product. Both businesses had conflicting understandings of their agreed-upon deal.
McLeod told The Spinoff that he understood the deal was for a consistent user experience and that customers would come through the Eat Local site and URL when scanning menu QR codes or linking to the platform, rather than being taken to a Mr Yum URL. Eat Local would be the brand, but “powered by Mr Yum”.
“We were always going to be leading with Eat Local. That was always what New Zealanders knew and expected,” he said, However, “Mr Yum said that wasn’t really an option they were going to consider”.
According to McLeod, there were also disagreements regarding the Local Legends programme and accessibility issues that would go against the idea of Eat Local being a “community platform”.
McLeod said he felt something shifted at the tail-end of their relationship, adding that he “honestly doesn’t know” what went wrong with the communication. “They said they didn’t feel that we were aligned to their business values, which we didn’t think changed at all. The only thing that seemed to be different was backing away from using the local brand and URL. They started talking about how they were already commencing trade in New Zealand and their brand looked to be resonating well.”
However, Mr Yum CEO and co-founder Kim Teo told The Spinoff it was understood that the Eat Local branding and URL was “always to remain as the customer-facing marketplace” but that McLeod did not ask until right at the end to “white-label” the product (white-labelling refers to the rebranding of a product to make it appear as if another company made it).
“We have never done this with international partners and would not have agreed to it,” said Teo. She added that McLeod’s original message to her on LinkedIn suggested he wanted to “expand the Mr Yum network in New Zealand, which is the entire opposite”.
Eat Local NZ and Mr Yum proceeded to attempt negotiation, right up until the Saturday when Eat Local was apparently locked out of Mr Yum’s platform. “We were feeling as though none of that was any different than two partners trying to figure out their footing. It seemed pretty positive,” said McLeod. When Eat Local NZ’s log-in credentials didn’t work, McLeod felt it was “an ominous sign”. He received an email regarding the ending of their partnership the next day.
Mr Yum has said that McLeod’s Facebook post misrepresented the facts.
In his original post, McLeod stated that Mr Yum initially approached Eat Local NZ to express interest in a partnership. But Teo refutes this, saying that it was McLeod who first reached out via LinkedIn on March 19 with the message: “I think there is an opportunity to both help small businesses and build a Mr Yum network in New Zealand”.
“I suppose it’s a bit of a ‘he said, she said’,” said McLeod, noting that Mr Yum wasn’t initially interested but approached Eat Local NZ after the public support the idea garnered when it was announced.
McLeod was searching for local collaborators but said most saw his business as a threat or had a strong business imperative that didn’t match up with Eat Local’s values. Meanwhile, Mr Yum had New Zealanders on the team, with a similar low commission rate and a strong “support local” narrative.
Mr Yum said that McLeod’s original Facebook post, which stated that Mr Yum offered to buy out Eat Local for AU$10,000, was also not entirely truthful.
“We gave Eat Local a couple of options to part ways respectfully,” Mr Yum said in a statement. One of them was to separate cleanly, with Eat Local free to build their own platform. The other offer was for Mr Yum to acquire the list of venues, which came with a 20% revenue share component, along with the $10,000 offer.
“That’s totally fair,” McLeod admitted and said he was happy to make the correction, but doesn’t believe it changes the nature of the post.
The original Facebook post also stated that Mr Yum had emailed Eat Local saying it was going to enter New Zealand independently, but Teo said this was not the case. She said Mr Yum currently has no plans to move into the New Zealand market beyond how it’s already operating – with Australian-owned hospitality businesses that have New Zealand outlets using its services – and that its only plan to operate in New Zealand was with Eat Local. “We’ve never contacted any of the Eat Local venues or customers,” Mr Yum’s statement said.
McLeod said although Mr Yum never explicitly said it would be entering New Zealand without Eat Local, he believes it was implied through emails.
“I didn’t think about selling Eat Local for a second,” McLeod said. “It’s become more than me. There’s a team of people that have uncertain futures and have volunteered their time with no certainty of being paid. The only certainty they had was this deal.”
“There’s definitely an element of guilt, of this turning into a really negative thing. I sort of felt like I was stuck in the middle of letting everyone down. There was a lot of expectation – I don’t even think what they did was evil or bad, this stuff just happens in business,” said McLeod, adding that he’s unsure of what will happen next.
“It was certainly never intended as an attack on Mr Yum. I was half thinking that if their platform came here anyway, that it would be a viable alternative for the businesses we were trying to help – that’s what this is all about.”
However, McLeod said if anything, the situation has highlighted the level of support there is for Eat Local. “I’ve got to take note of that. I don’t know how, I don’t know if I’ve got the energy left, but I’m an optimist and I’m hopeful that there’s a potential solution in this.”
McLeod said he’s open to working with Mr Yum again and that at the end of the day, food delivery apps need to work together to come up with a viable solution that can compete with Uber Eats
“We need a solution for businesses that work in this country,” he said. “I’ve got no freaking idea how, but there’s something in that.”
The Spinoff Weekly compiles the best stories of the week – an essential guide to modern life in New Zealand, emailed out on Monday evenings.