Starting off with some news from myself today: You’ll notice this newsletter is coming from Substack. We’ll see how this goes! Right now, I have no plans to put Expedite behind a paywall, but am exploring monetization efforts so I can continue to give this project its due attention and care. Thanks for coming along on this journey! (If you like reading newsletters and reading about newsletters, check out this piece from Digiday.)
Uber Eats Makes Postmates an Offer
Late Monday, The New York Times reported that Uber had made an offer to acquire Postmates, an expected move from a company that’s been vocal about its plans to expand its delivery footprint via consolidation. Pretty much anyone who was paying attention could have guessed that, after a failed Grubhub bid, Uber would set its sights on the smaller hometown service. (Postmates launched from San Francisco in 2011.)The reported offer of $2.6 billion is slightly above Postmates’ most recent valuation, and (as of Wednesday afternoon) not much more has been reported about the talks.
Meanwhile in New York, Uber Eats is cutting fees restaurants pay, presumably in an effort to attract more business in a Grubhub/Seamless stronghold. Grubhub recently announced it would be acquired by a European food delivery company (the deal is expected to close next year), and Uber has been on a mission to make Eats the number-one or -two food delivery service in any market it operates in. It’s already offloaded business in places like India that have huge incumbent services, and while it’s highly unlikely Uber would ditch its domestic home turf, it’s already challenged by DoorDash’s rapid rise and, likely, Grubhub’s newly fortified status.
Ghost kitchens got the New Yorker treatment this week, as journalist Anna Wiener gives a good state of affairs in San Francisco featuring some of my personal favorites. Souvla! The Riddler! Douglas, the cafe around the corner from my house whose story is buried toward the end, but has done a true service to our little corner of the city by facilitating restaurant meal pickup from amazing places around town! (This is such a great model for an urban setting, by the way.)
The ghost kitchen model was legitimized well before the pandemic hit, though much of its promise seems to have hinged on educated guesses. Yes, Uber has facilitated the creation of thousands of virtual brands across the country and the world thanks to search and menu data. New brands can be spun up at a moment’s notice based on trends — but they might not have staying power. For example, one prominent chef associated with CloudKitchens left the endeavor, saying that virtual restaurant brands were too challenging to market. The story is different for existing brands that do a large delivery business, or ones that look to the sort of shared kitchen spaces that these ghost kitchens provide.
Also, consider takeout, which has been a higher proportion of orders for many places than delivery. An actual storefront might matter less when your food arrives by delivery courier, but if you’re picking it up from a soulless, windowless box you might think twice about visiting again.
I’m bullish on takeout for the long haul, and I’ll stick with a couple of San Francisco examples here: one location of Nopalito, a lovely Mexican restaurant with two locations in the city, just closed one of its restaurants in favor of a park-adjacent pickup window, though it’ll presumably do a brisk takeout and delivery business from its remaining restaurant. Charles Bililies, Souvla’s CEO is quoted in the New Yorker piece explaining 30 percent of Souvla’s business is delivery. A few months ago, he also told me that takeout and delivery together amounted to 60 percent of business, but as the city mandated that restaurants close, even that business dropped by half. A ghost kitchen is not a 1:1 substitution for pre-pandemic operations, but it’s a good representation of the emerging business models that could support existing businesses going forward.
What else is happening?
Chipotle inked a formal deal with Grubhub in the latest trend toward non-exclusivity. (Hopefully this goes better than that Yum-Grubhub partnership.)
Yelp discovered just over half of restaurants on its platform that closed during the pandemic are now closed permanently.
People still aren’t honoring their restaurant reservations. Surprise! (Not really.) The logical argument here is for restaurants to require deposits or prepayment, a la Tock. Charging a deposit as little as $5 “significantly alters behavior in a meaningful way that holding a CC number and threats of a no-show penalty does not,” Tock CEO Nick Kokonas told me on Twitter.