Uber Eats joins the food shipping frenzy
This week, Uber Eats announced a new product for (some) restaurants: the ability to box up and ship food across the country. To start, 15 restaurants in Los Angeles, New York, and Miami signed onto the project; Eats customers in those towns can find the option in their Uber Eats app. The feature was a long time coming; I talked to one operator who was presented with the idea of shipping a few months ago.
One one hand it’s an unsurprising move for Uber; DoorDash introduced its own version of nationwide shipping months ago as it simultaneously expanded quickly into new verticals and services — delivery-only kitchens, restaurant operations, convenience stores, ultrafast delivery in New York. Before that, Goldbelly controlled the market, taking investment to help scale its business since before Covid, including a significant amount from Enlightened Hospitality Investments, Danny Meyer’s private equity firm known for investing businesses that share his own model of people-first, hospitality-centric operations.
Goldbelly’s roster is deep, including well-known national brands like Milk Bar and regional favorites like McLoon’s Lobster Shack in Maine. It was a slow but strong start, attracting attention and steadily growing. During the pandemic, Goldbelly saw the number of business on its platform double during the pandemic and, for some reason, launched a TV channel.
Except… everything about the economics of shipping frozen or otherwise preserved food across the country. And since then, supply issues have gotten worse, shipping costs have gotten more expensive, and delays have plagued literally every business that was built on some promise of speed and convenient execution.
A few weeks ago, Uber CEO Dara Khosrowshahi wrote a memo to staff, later leaked to the media. It said, among other things, that changing economic conditions dictated a shift in priorities at Uber; investors are now interested less in growth-at-al costs, and more in supporting a sustainable business model that is, at its core, profitable. (That is: profitable on a cash flow basis, not the adjusted EBITDA calculation that Uber shares when it reports quarterly earnings. It’s a way of measuring profit that excludes a lot of other costs.)
Given the rollout of Uber’s nationwide shipping program, it’s probably going to remain small and available to just a handful of restaurants that fit the bill. Uber provides restaurants with a shipping label and a postcard insert for the package, but restaurants are responsible for packing the food. It’s delivered via FedEx, a process that usually takes four or five days.
What are we solving for here? Nostalgia?
There’s a limit to how much demand there might be for these products. To generalize, prices on Goldbelly, for example, are high. The sticker shock might be worth it for a once-yearly shipment of Kansas City barbecue to my KC-born husband at our home in California. But it’s unlikely to cause the same repeat purchasing behavior that companies like to tout to investors when they quantify customer growth and the potential future of their business.
A recent piece in Insider explained, in somewhat dramatic but totally fair terms, the upcoming crunch of tech company valuations.
For the past couple decades, Silicon Valley's luminaries told us that money was just fuel for their innovation. What the market is showing us now — as once seemingly stable businesses degenerate — is that money was also the engine, the captain, and the destination. In the next few years, many of the hottest tech innovations of this market cycle will simply disappear. Consider this an extinction-level event.
The point is that even the biggest Silicon Valley giants have been selling their idea of innovation that will change the future to venture capitalists happy to pour money into the space for the future promise of changing the world. But plenty of companies found themselves instead reliant on the steady stream of cash flowing year after year as people who used their products continued to grow. Also from Insider:
For the past two decades the market has rewarded growth over stability, and the tech gods have played that to their best advantage. They could not prove that their businesses were profitable using traditional financial metrics, so they came up with their own metrics instead.
The issue here is far bigger than Uber Eats making a tiny splash with an announcement about shipping that will affect, at most, a few handfuls of restaurants that meet certain criteria. But I’d argue that offering itself is tied to the newly outdated thinking of let's-grow-at-all-costs even if it means supporting a small program that probably doesn’t have the best economics. (I’d also lump DoorDash’s ghost kitchen model into this assessment; as I said before, if it hasn’t scaled beyond a handful of locations already, will it ever? Or is it just one of those nice-to-haves that fits into the narrative that DoorDash is doing all it can to support the next generation of restaurant businesses -- whatever that looks like.
So many of the consumer-facing technologies were built on perceived need and disruption — sometimes for disruption’s sake. We saw how this played out for independent restaurants during the pandemic when consumer behavior moved online in the name of safety and convenience. But as investors and the market, generally, start to worry about the future success of large companies built on piles of money that were used to subsidize their growth, how will the companies that serve restaurants — especially independent restaurants — pull back? And if venture-capital subsidized convenience goes away, you won’t convince me it’s not those restaurants and their diners who are left to foot the bill to keep operating in an entirely different world.
What else is happening?
Seattle mandates higher pay for third-party delivery drivers. Under a bill just passed by the City Council, delivery platforms must pay drivers a set amount per minute they are involved with an order — 38 cents — and 64 cents per mile they travel for that order. It is formulated to meet the city’s hourly minimum of $17.27 and cover expenses, and does not factor in tips. DoorDash and Uber Eats argued that the bill will cause prices to rise for customers.
Tablz wants to redefine the future of dining. Having a reservation gets you a table, but that doesn’t mean it’s a desirable one. Enter Tablz, a San Francisco-based startup that has created a table reservation platform which allows diners to virtually tour a restaurant beforehand and select their table, for a fee. Investors, which include Branded Hospitality Ventures, restaurant advisor Steven Kamali, and Bbot founder Steve Simoni, have shown great excitement about Tablz potential to revolutionize restaurant pricing. Tablz technology, which is currently being used in a handful of restaurants, is compatible with reservation platforms like OpenTable and Resy. According to an early version of the Tablz pitch deck viewed by Expedite, customers can expect to “pay anywhere between 0-$50+ based on the restaurant table, location, and time.”
Reef Technology gets rid of top exec. The ghost kitchen startup is replacing its president of kitchens, Michael Beacham, with Kenneth Rourke, formerly executive vice president and head of enterprise brands. Beacham, who is responsible for many of Reef’s high-profile partnerships, told Insider that he is being forced out.
"It is regrettable that REEF is choosing to end my employment before I was able to fully complete the mission I came here to achieve. There is more to this story and to what happened to me, which will come out at the appropriate time," he said.
Snapchat will display restaurant recs. Through a partnership with The Infatuation, Snapchat users in New York, Los Angeles, Chicago, San Francisco, Austin, Seattle, Philadelphia, Miami, Atlanta, Denver, D.C and London can access restaurant recommendations for places nearby using a new map layer.
Grubhub shares details about its virtual brand. The delivery platform last week debuted MasterChef Table, a delivery-only restaurant with dishes like spicy maple bacon fried chicken sandwiches and Nashville hot shrimp tacos created by Masterchef winners Kelsey Murphy, Dorian Hunter, Gerron Hurt and Michael Silverstein. The concept is available in more than 20 cities including Chicago, New York City and Los Angeles.
Restaurants using Grubhub can sign on, with initial inventory covered, but they’re still on the hook for marketplace commissions and any promotional fees intended to place their MasterChef Kitchen location in a more desirable listing position — no Grubhub nepotism at play.
- by Danielle Hyams
Earlier this week, I moderated three panels at FAB, a women-only restaurant and hospitality workshop in Charleston.
It was so great! During one panel, meant to explain opportunities for automation in independent restaurants, I partnered with Back of House on a helpful graphic (displayed behind us, above). It explains — with a non-exhaustive list of examples! — how I think through opportunities to introduce new and helpful technology.
Paid subscribers can download the PDF here: