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Daily news and analysis about the food tech revolution

third-party delivery

Troubled Food Delivery Service Waitr Shifts Drivers From Hourly to Contract Workers

Food delivery service Waitr said this week it is shifting its model so that drivers are classified as contract workers rather than hourly ones, according to KATC.

Under the new policy, Waitr drivers will get paid per delivery rather than by the hour. Companies paying contract workers aren’t legally required to offer benefits or withhold taxes, something Waitr must do under its current employee model.

For a long time, the service stood by its policy of paying drivers hourly and categorizing them as W-2 employees. Waitr founder and former CEO Chris Meaux was positive about the model when he spoke to The Spoon last year: “Efficient employees are much less expensive,” he said, adding that, “If you manage the driver flee right and you schedule the drivers when you need them, [you] can do it with a fraction of the drivers that [competitors] require.”

That tactic doesn’t appear to be paying off, however. KATC obtained an email Waitr sent to drivers that frames the change, which will take place in April, as a positive one, though it’s hard to buy that pitch looking back through Waitr’s activity over the last several months. 

The service, which went public in 2018, outraged customers and restaurant partners alike last year when it introduced a new “performance-based” fee structure for restaurants. Protests ensued. 

The company has also done three rounds of layoffs since June 2019, with the most recent one being last week. The company was for a time in danger of being delisted from the Nasdaq, and one report from October stated the company only has enough cash to run through March of 2020.

Waitr has seen its fair share of role changes, too. Meaux stepped down as CEO in August of 2019. He was replaced by Adam Price, who resigned at the end of December and was replaced by Carl Grimstad. Waitr’s CFO, Jeff Yurecko, also resigned, as have two board members.

Considering that glut of bad news, reclassifying its workers as contract rather than hourly seems less the positive change Waitr is trying to spin and more a desperate scramble to cut costs and try to save the struggling company. It’s doubtful that will be enough to save the company.

The switch also comes at a time when talk of how gig economy workers get classified is loud. California’s Assembly Bill 5, which reclassifies gig workers as employees rather than contract workers, was signed into law last year, though it’s getting significantly pushback from delivery companies. 

Burger King, McDonald’s Join Ele.me’s Food Delivery Initiative to Help Coronavirus Workers

Chinese food delivery service Ele.me has launched an initiative to deliver meals to medical staff working in the epicenter of the coronavirus outbreak. The company has gathered 100 restaurants, both chains and local establishments, to get meals to hospitals in Wuhan, China, according to an article in the South China Morning Post. 

The Alibaba-owned service has gathered major QSRs like McDonald’s and Burger King along with local Wuhan restaurants to supply food delivery orders to staff at more than 10 hospitals in the city. The Post reported that an Ele.me rider “safely delivered the first order to a frontline medical staff on Sunday.” Meal delivery to doctors and nurses on the frontlines has continued since.

Previously, Ele.me had suspended meal delivery services to hospitals in order to prevent the spread of the deadly epidemic. But businesses around China, many of them tech companies, are now upping funds and resources to help medical staff fighting the virus, and the various initiatives have become something of a team effort in getting aid to workers on the frontlines in Wuhan.

At last check, more than 7,711 cases of coronavirus have been confirmed and 170 people have died. The World Health Organization is meeting today to decide whether coronavirus should be declared an international public health emergency.

Which brings us back to food and food tech. A number of companies stepping up to help are focused on getting food to both workers and those quarantined. Besides Ele.me, Meituan, another food delivery service, has set up a 200 million yuan fund to aid staff and is also providing free takeaway meals every day for hospital staff in Wuhan. Travel service Fliggy, which has been refunding flights, has pledged to supply medical staff in Wuhan with access to things like fresh produce from convenience stores, according to the South China Morning Post article. And as my college Chris Albrecht wrote yesterday, a hotel in Hangzhou, China has dispatched robots to bring meals to quarantined guests.

As Chris notes, the initiative at the Hangzhou hotel highlights “how robots can be used in situations that are hazardous to humans and help save lives (everyone needs to eat).” The same can be said of food delivery, which happens to be one of those sectors of food tech that’s really easy to hate on. It’s ethically questionable in some cases. It may not be sustainable or profitable.  Delivery fees suck. 

But food delivery, with its streamlined model and technical logistics, is also an easier, arguably safer way to get a daily necessity — a hot meal — to people fighting a deadly crisis. In providing meal services to workers in Wuhan, companies like Ele.me are hopefully sending a signal to restaurants and food delivery companies around the world to step up and do likewise, whether it’s in the event of this virus spreading or at some future point, in the face of a different crisis. 

Deliveroo Introduces Dynamic Pricing for Delivery Fees — Much to the Dismay of Monthly Subscribers

Deliveroo will change its delivery fee model to be more dynamic, according to an article on Restaurant Dive. Beginning in February, the UK-based food delivery service will introduce a pricing model where delivery fees are based on a customer’s distance to the restaurant. A Deliveroo spokesperson said this sliding-scale model will make delivery fees lower for the majority of Deliveroo customers.

There is, however, a catch. Along with this new pricing model, Deliveroo also said it would charge a 49p (~0.64 USD) service fee for every customer, including those signed up to Deliveroo Plus, the company’s subscription service. 

Not surprisingly, Deliveroo Plus subscribers are none too pleased with the change. 

These users already pay a little over $15 (USD) per month to access the subscription service, which offers free unlimited delivery to its members. But most people willing to pay for a subscription are probably ordering restaurant delivery multiple times per month, and in some cases per week. In other words, that new mandatory fee, though less than $1, can add up pretty quickly, especially when it’s piled on top of the subscription fee itself.

In fact, the announced changes to the pricing structure have many of those who signed up for the subscription service up in arms and ready to boycott Deliveroo, as a recent article in The Daily Mail highlighted. “Signed up to plus on earlier this month. Cancelled it just now because of their new jazz fees,” one person tweeted. Another wrote via Twitter, “Your decision to put a minimum order on Deliveroo plus is appalling. As a single man, recently widowed, I liked the fact I didn’t have to over order. Will probably go elsewhere now and cancel my subscription.”

Subscription models aside, however, the move towards a more dynamic pay structure could benefit other Deliveroo users as well as drivers, to whom the company says it is offering “a different fee for every order and a fairer system, paying more for orders that take [drivers] further.”

Zuul Kitchens Acquires Ontray’s Online Ordering Technology

Ghost Kitchen network Zuul Kitchens has acquired online food-ordering platform Ontray, according to a Zuul press release. In addition to acquiring key technology assets from Ontray, Zuul has also made the company’s CEO and cofounder, Tyler Wiest, its Chief Technology Officer.

Zuul opened its first ghost kitchen facility in Manhattan’s SoHo neighborhood in 2019. The location serves as a place where restaurant chains like Sweetgreen and Junzi can rent kitchen space to fulfill delivery orders and grow their off-premises strategies. 

Philadelphia-based Ontray, meanwhile, has an online ordering platform aimed at smaller restaurants who might not have the cash or inclination to pay the massive commission fees associated with bigger delivery services like Grubhub and DoorDash.

Ontray’s software lets restaurants create a custom website integrated with an online ordering platform or add online ordering capabilities to existing sites. The idea is to let restaurants retain control over their own branding and, most important, customer data, two things they must give away when working with third-party delivery services like Grubhub. Restaurants can view sales and customer data, monitor SEO, manage multiple restaurants, and import menus with Ontrays system. Ontray also charges lower commission fees than a restaurant would typically have to pay with a bigger service.

Making delivery more affordable for all restaurants is a major concern right now, particularly with demand for off-premises orders rising steadily and ghost kitchens becoming the new norm in foodservice. By acquiring Ontray, Zuul will be able to offer its restaurant clients more options when it comes to fulfilling those orders.

That in turn could make Zuul a more attractive choice for a wider range of restaurants considering ghost kitchens — especially those with thinner margins who need more visibility into their customer data to stay competitive. “Joining Ontray and Zuul Kitchens is a natural move,” Wiest said in a statement. “Both companies share a similar goal: returning the power and purse back to individual restaurants.”

Zuul has said it will continue to open ghost kitchen locations throughout NYC. 

Newsletter: Consolidation Is Imminent for Food Delivery, Plus Customize is Coming to NYC

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If 2019 was the year restaurant food delivery companies went mainstream, 2020 is shaping up to be the year mergers and acquisitions whittle the competition among these third-party services down until just a couple companies emerge victorious.

Case in point: this week, Uber announced it is selling its Eats business in India to Zomato, a local rival that processes at least half a million more orders per day in that country than Eats does. Uber’s exit from the Indian market leaves just two major players: Zomato (which Uber will have a small stake in) and Swiggy, who also has access to deep pockets thanks to backing from investment firm Naspers.

And that news is just the latest in a series of announcements that all suggest acquisitions and mergers are the fuel pushing further consolidation worldwide in the crowded food delivery space. The ongoing bidding war over UK-based service Just Eat looks to finally be at an end, with Takeaway.com, who originally planned to acquire the company, coming out as the winner. The combined entity of Just Eat and Takeaway.com would form one of the largest food delivery companies in the world. In the States, Postmates has reportedly been exploring a sale instead of its planned IPO (which still hasn’t happened). A Wall Street Journal report from earlier this month said Grubhub had hired financial advisors to consider “strategic options including a possible sale” — though Grubhub denies the claim.

Uber’s motivation in the Zomato deal is in part all about cutting back on loss-making operations as the cash-burning business comes under increasing pressure to prove profitability over the next year. On that score, the company isn’t alone. Postmates shuttered its Mexico City operations in December. Deliveroo closed up shop in Germany last year. In 2018, Delivery Hero sold its German operations to Takeaway.com. And Uber itself ended its Eats business in South Korea last year.

Consider all that activity the tip of the proverbial iceberg. Most delivery companies are currently in the same boat as Uber, where investors are applying pressure to show the food delivery model can in fact be profitable and not just burn through money. So it’s safe to say that many services will continue shutting down or selling loss-heavy operations around the globe over the next several months and opening the door to further consolidation.  

At-home Indoor Farming Is Suddenly the New Black

There’s a new trend afoot in the connected kitchen: vertical farms built specifically for the home and meant to be used by your average consumer. 

Ever since CES, when major appliance-makers like LG and GE showed off flashy vertical farming concepts for the consumer kitchen of the future, here at The Spoon we’ve gotten a seemingly endless series of pitches and news announcements about this indoor-farm-to-table concept. The idea is simple: make an indoor farm that ranges anywhere between a flowerpot and a bookshelf in size, outfit it with accompanying technology that automates much of the actual work around growing the plants, and sell the product to consumers for, in most cases, under $1,000.

In the last several weeks alone, Rise Gardens, the Planty Cube, Miele, and many others have shown off products that hit these marks. But while there’s a lot of excitement (bordering on hype) around growing salad greens in your own kitchen, the still-nascent market hasn’t yet hit the point where the questions start to sprout up. Are these farms really as easy to use and automated as companies say? Can they actually save people money? Can individuals with a terrible track record when it comes to gardening (me) grow something that actually tastes good?

The next several months should provide some answers to these questions. 

Customize Is Almost Here!

That’s a wrap for this week. But before I go, here’s a quick reminder that we’re gearing up for Customize, our first NYC event. Personalization is changing everything from restaurants to grocery stores to our own kitchens, so join the Spoon team and our amazing group of speakers on February 27th! Just use the special Spoon subscriber discount code THESPOON15 for a 15% discount off of tickets. 

Keep growing,

Jenn


Grubhub’s New Phone Order System Is ‘Insufficient’ in Addressing the Service’s “Bogus” Fee Controversy

In a letter this week to New York City Council members, Grubhub announced a new phone ordering system meant to address accusations of the service charging restaurants erroneous fees for phone orders. But NYC is not impressed, with Mark Gjonaj, who chairs the small business committee, calling the moves “insufficient.”

With the new system, which Grubhub has dubbed a “common sense step,” customers who call a restaurant through the Grubhub or Seamless platforms will be asked to press #1 to place an order and #2 for any other matter. The change is effective immediately, not just in NYC but nationwide for Grubhub/Seamless users. 

The change comes after Grubhub came under fire in 2019 for its controversial billing practice for phone orders. With the old system, the service would bill restaurants for any call made to them via the Grubhub/Seamless platform that was longer than 45 seconds, regardless of whether that call resulted in an order or was simply a customer checking the status of an order. Restaurants were charged anywhere between $4 and $9 per call. On top of that, when the NYC Council held an oversight hearing last June to address issues surrounding third-party food delivery, it was made known that restaurants couldn’t view phone-order charges made 60 days prior. 

While that look-back period, as it was called, was eventually extended to include charges made 120 days prior, the NYC Council wasn’t satisfied and in October threatened to pursue legislative action if Grubhub didn’t fix its phone order issues. Grubhub launched a task force in response meant to address the problems.

The new phone order system is part of the findings Grubhub released from that task force. The company also said it is doubling the number of account advisors who can “assist restaurants with phone order inquiries,” though no more specifics were provided.

The Council and others are not impressed, it seems. 

“There is nothing in the proposed changes that would make whole the thousands of restaurants that have already paid for what in many cases were erroneous phone order fees,” Gjonaj said in a statement on Thursday. “These are hard earned dollars that could mean the difference between a restaurant staying open or having to close their doors. This is money that Grubhub was never entitled to in the first place.”

Andrew Rigie, the executive director of the New York City Hospitality Alliance, said that “the burden should not remain on the restaurants to listen to messages to determine which fees are bogus.” He added that the major question remaining is whether Grubhub will pay back the money they owe on past erroneous charges.

With the new system, restaurants will now be allowed to listen to every phone order they are billed for, but the look-back period for phone calls remains fixed at 120 days. Grubhub said it would handle issues surrounding older calls on a case-by-case basis.

New Proposed NYC Legislation Takes Aim at Third-party Delivery Tipping Practices

A new NYC bill proposed this week is once again putting third-party delivery services’ tipping policies under scrutiny, according to an article from the New York Daily News. Specifically, the proposed law is aimed at transparency around how much of the tip on any given delivery order actually goes to the delivery worker as, well, a tip.

New York City Council member Richie Torres introduced the legislation on Wednesday that would, according to the NY Daily News, require third-party delivery services to “notify customers if gratuity is paid to delivery workers in addition to their regular wage – or if tips are put toward their base pay.”

Speaking strictly of third-party restaurant-food delivery companies, the proposed legislation seems aimed specifically at one. In July of last year, DoorDash received a storm of bad press over its then-tipping policy, which used money from workers’ tips to meet the minimum guaranteed base pay.

Though the company eventually changed that much-maligned tipping policy, D.C. Attorney General Karl Racine later brought charges against DoorDash, claiming the old tipping model mislead consumers about where their money was going.

Torres’ proposed legislation seems as much aimed at protecting workers as it is about transparency towards customers about where their money goes. In a tweet Wednesday, he wrote:

#NYC can no longer afford to turn a blind eye to app-based delivery companies stripping workers of their hard-earned tips. It’s wage theft, plain & simple, and the public has a right to hold businesses accountable for exploiting their workers and stealing their wages.

He also told NY Daily news that there’s “a special place in hell for companies that confiscate the tips of low-wage workers,” adding that tips are “profits for the companies – dollars the companies should be paying workers out of their own profits.”

If the legislation is approved, all third-party delivery companies, including DoorDash competitors Grubhub and Uber Eats, would have to comply by disclosing their tipping policies in their terms of service or via some other method before a transaction is processed. Failure to do so would result in services being charged penalties.

DoorDash competitors Uber Eats and Grubhub would be on the hook to comply, as presumably would a service like Instacart, which has also come under fire recently for questionable tipping policies for workers.

A spokesperson for DoorDash said in a statement that “100% of [a] tip goes directly to the Dasher who earned it — in addition to the base pay our company offers for each delivery.” He also added that DoorDash shares “in Council member Torres’ commitment to transparency and we look forward to working with him to ensure the highest quality experience for our customers and workers.” 

Reports of a Grubhub Sale Fuel Talk of Consolidation for Third-party Food Delivery

Grubhub has hired financial advisors and is “considering strategic options including a possible sale” according to a report published by the Wall Street Journal yesterday. 

The news comes on the heels of a rough few months for Grubhub that started when the third party delivery service reported lackluster Q3 results in October of 2019 and posted a fourth-quarter forecast well below Wall Street expectations. The company cited competition from other players like Uber Eats and DoorDash as one of the main reasons for its slowed growth. Shares nosedived more than 40 percent after the earnings call.

Grubhub went public about six years ago and was a pioneer in on-demand restaurant food delivery. But with the seemingly unstoppable demand for off-premises orders and the rise of competing companies trying to see this demand, Grubhub has seen its worth erode over time by billions of dollars.

Yesterday’s news sent the beleaguered company’s value up 12.5 percent, to about $54 per share according to CNBC. CNBC also noted that Uber shares “also spiked on the news, as investors bet consolidation in the crowded food-delivery industry would help the company.” Uber is no stranger to lackluster earnings calls: the company posted billions in losses on its most recent earnings call, and its Uber Eats delivery business is said to be hemorrhaging money. 

Grubhub merging with Uber Eats, Postmates, or DoorDash is an obvious possibility, and today’s news won’t be the last time we hear the word “consolidation” when it comes to discussing the third-party food delivery market. Consumer loyalty with any one service isn’t high, with users preferring to hop from one app to the next in search of the best deals and perks. Investors, however, aren’t as excited about the free delivery, rides to restaurants, and other perks third-party services are doling out like after-dinner mints. Of late, investors have instead been urging these companies to focus less on attracting customers and more on actual profitability — something no third-party delivery service has yet achieved.

A consolidation of the market could help. Across the Atlantic, it’s already happening with the Just Eat-Takeaway.com deal (which is still moving ahead despite recent counter offers). Amazon, too, could be a potential player when it comes to mergers and acquisitions, though much of its future involvement could depend on how its controversial investment in Deliveroo shakes out, at least in Europe.

In the U.S., Some experts in the field say there isn’t room for more than two companies in the third-party delivery space.

DoorDash will probably be one of those companies. The service has built a food delivery empire by adopting the “out-raise and out-subsidize” approach when it comes to the competition. It is one of the fastest-growing brands in the U.S., and despite controversies around its tipping policies, the service is currently valued at over $12 billion. It grabbed the top spot among major food delivery services away from Grubhub in 2019.

Grubhub joining forces with any one of its main competitors could boost margins for these companies — though they still have yet to prove to investors that the third-party delivery model can even become profitable.

DoorDash Partners With Chase to Give DashPass Subscriptions to Cardholders

Today DoorDash announced its first-ever partnership with a credit card company. The food delivery startup has teamed up with Chase to offer DashPass subscriptions to certain Chase cardholders, according to a press release from DoorDash.

The DashPass is DoorDash’s monthly subscription service that waives delivery fees for users on orders of $12 or more. Normally, the service costs $9.99/month.

The deal with Chase gives certain cardholders access to the DashPass for a free or discounted rate. Chase Sapphire Reserve and Preferred members can receive a complimentary DashPass subscription for up to one year (maximum two years). Chase Freedom, Freedom Unlimited, Freedom Student, and Slate cardholders can get a complimentary pass for three months, followed by a 50 percent discount price on the DashPass fee for nine months. 

Catherine Hogan, President of Chase Branded Cards, noted in a statement that Chase has seen spending on food delivery “more than double” in the last year, with cardholders ordering delivery at least once per month on average. The deal with DoorDash gives those cardholders access to more rewards for the money they spend on food.

For DoorDash, the deal is also a way to access a larger number of potential DashPass subscribers. DashPass launched in 2018 and has since grown to 1.5 million active users, with 1 in 3 DoorDash orders in top markets coming from DashPass users, according to the press release. Chase, however, is one of the largest credit card issues in the U.S., with 93 million cardholders overall — many of whom could in theory at least become DashPass holders long term.

So far, no other third-party delivery service has teamed up with a credit card company. However, if the DoorDash-Chase deal proves fruitful for both companies, we could see many more initiatives like this between other banks and delivery services. Both Uber Eats and Postmates offer monthly subscription plans that could potentially be used for similar deals, for example.

Eligible Chase cardholders have until December 31, 2021 to activate their DashPass service.

Little Caesars Is Finally Delivering Its Pizzas, Thanks to a Hybrid Strategy With DoorDash

Little Caesars — a chain best known for its pickup-only model for pizza — announced today a partnership with DoorDash to deliver from Little Caesars stores in the U.S. and Canada directly to customers’ doorsteps. 

Here’s the catch: Little Caesars will not actually be listed on DoorDash’s website. Instead, the chain is adopting a hybrid delivery strategy where orders originate via the Little Caesars website and app. DoorDash will only be involved for the last mile, using its drivers to transport the food from restaurant to customer. 

The deal is just the latest of many hybrid delivery strategies restaurant chains are employing of late when it comes to using third-party delivery services. Panera operates an inverse version of the Little Caesars deal, where orders originate on the DoorDash, Grubhub, or Uber Eats platforms and are then delivered by Panera’s own drivers. Outback Steakhouse, meanwhile, struck a deal with DoorDash in September of 2019 to “complement” its existing in-house delivery program and receive incoming orders from both its own app and that of DoorDash.

By some accounts, 70 percent of restaurant delivery orders will come from third-party platforms like DoorDash by 2022. At the same time, however, restaurants large and small are looking for ways to offset the hefty commission fees and loss of control over branding that come with letting third-party services handle the entire delivery stack. So whether it’s handling the technical logistics, the last mile, or some combination of those, it makes sense more restaurant chains are experimenting with ways they can customize the third-party delivery model to meet their specific needs.

The deal with DoorDash will cover about 90 percent of Little Caesars’ locations in the U.S. and Canada. The chain’s full menu will be available, and there will be no minimum amount required for delivery.

Last year, Little Caesars unveiled its self-service Pizza Portal to speed up in-store pickup orders. With the addition of delivery, the chain is clearly taking consumer demand for off-premises options seriously. 

Uber and Postmates File a Lawsuit Claiming AB 5 Is Unconstitutional

With California’s Assembly Bill 5 (AB 5) law set to go into effect on January 1, Uber and Postmates have filed a complaint alleging that the new law, which will make it harder for gig economy companies to classify workers as independent contractors, violates constitutional rights.

The complaint, filed Monday in a U.S. District Court, argues that AB 5 violates multiple clauses in the U.S. and California constitutions, including equal protection. The suit points to the “laundry list” of occupations exempted from AB 5, which includes travel agents, grant writers, construction workers, and salespeople, and argues that AB 5 is designed to stifle gig-economy companies and their workers.

“[AB 5] irreparably harms network companies and app-based independent service providers by denying their constitutional rights to be treated the same as others to whom they are similarly situated,” the lawsuit says.

The complaint alleges that AB 5 also violates due process clauses of the Fourteenth Amendment, the Ninth Amendment, and the contracts clause of Article I. It asks for a preliminary injunction against AB 5 while the lawsuit is considered.

AB 5, which expands on a California Supreme Court decision from 2018 known as Dynamex, was signed into law in September by California governor Gavin Newsom. Under the new law, workers are considered employees of a business unless the employer can show they meet certain criteria that would classify them as independent contractors.

The new law would require gig-economy companies like Uber, Postmates, and other food delivery services to give drivers and couriers health insurance, paid time off, and other perks not typically only given to full-time employees.

It would also undercut the entire model on which these companies are built — a model many already call unsustainable for the long term. By some accounts, third-party services will make up 70 percent of all restaurant delivery orders by 2022. But these companies have yet to turn a profit. If AB 5 causes a ripple effect across other states who would sign similar laws into place, it could further erode the possibility of profitability ever happening.

DoorDash, Uber, and Lyft have pledged $90 million to get a 2020 ballot measure passed that would counteract AB 5.

Food Delivery Got Really, Really Messy in 2019. That’s a Good Thing

Roughly this time last year, talk around the future of restaurant food delivery screamed promise and progress. Funding and acquisitions abounded. Valuations skyrocketed, and by mid-year, third-party food delivery apps were projected to have 44 million U.S. users by 2020. 

That number hasn’t changed, but a heck of a lot else did, and somewhere along the line, the rose-tinted glasses through which the industry viewed food delivery came off and reality set in. In case you hadn’t heard, reality is a messy business. At the close of 2019, food delivery is even messier, mired in regulatory battles, bad press, and questions around profitability that grow louder each week.

None of this means third-party food delivery is dying. All of it plays a crucial role in moving the discussion forward about food delivery — what it is now and what it should become going into 2020.

Before we go forward, here’s a quick look back:

Third-party Delivery Opponents Got Stronger and Fought Harder

Largely speaking, there weren’t many detractors — at least not vocal ones — of third-party delivery services like DoorDash, Grubhub, etc. at the start of 2019. While some chains, notably Jimmy John’s, opted out of third-party delivery, we saw more deals struck in the first half the year than questions raised. 

DoorDash serves as a good example of the sentiment around third-party delivery in the first half the year. DoorDash became the first delivery company to offer service in all 50 U.S. states. It also struck lucrative deals with high-profile restaurant chains left and right. And there was its valuation, which kept ballooning with each new funding round, eventually eclipsing $12 billion. 

The other major services also had their fair share of lucrative deals and high valuations. Uber Eats nabbed a “preferred” delivery partnership with Starbucks. Postmates raised millions ahead of its IPO (more on that in a minute). Grubhub, too, made a slew of deals with high-profile restaurant chains, including Taco Bell and Dunkin’.

Then things started to get tense. In June, an oversight hearing held in NYC called into question the high fees Grubhub and other companies charge restaurants for use of their services.

From there followed one controversy after another: antitrust investigations, ethically questionable tipping policies, plummeting stock. More recently, California passed Assembly Bill 5, which reclassifies gig workers as employees and undercuts the entire model on which third-party delivery is built. DoorDash and Uber, among others, have vowed to fight back in 2020.

We can certainly expect that battle to take place. But if events in 2019 taught us anything, it’s that no matter the front it chooses to fight, third-party delivery companies will find more than one opponent lying in wait. 

IPO Fever Cooled Down

Of the big four third-party food delivery companies, Uber, Postmates, and DoorDash were all said to be moving towards IPOs in 2019. (Grubhub IPO’d back in 2014.) However, Uber was the only one of them to actually follow through and go public — then subsequently racked up billions in financial losses. The company’s most recent earnings call saw some improvement: roughly $1 billion in losses in Q3 versus $5.2 billion in Q2. But it’s still $1 billion in losses.

Postmates, meanwhile, confidentially filed for an IPO in February but was at last check in talks to find a potential buyer after laying off staff and shuttering its Mexico City operations. DoorDash may be pursuing an IPO for 2020. Or it may be pursuing a direct listing, largely to avoid some of the scrutiny that comes with debuting on the public market. After all, profitability remains very much a question mark for third-party delivery companies, and IPOs in general fizzled this year, leaving even more questions about them for next year.

Hybrid Delivery Heated Up

Earlier this year, I wrote that “there are now more ways for restaurants to do delivery than the two extremes of pay for your own fleet or sign up with a third-party service.”

That middle ground gained, eh, ground in 2019 thanks to the rise of hybrid delivery strategies, where delivery orders originate through the restaurant’s own app and third-party services are used only for last-mile fulfillment. Some chains, notably Panera, are using an inverse version of this strategy, sending orders through third-party apps but handling the last mile themselves. 

There are even variations on those variations, but they all hint at the same thing for the future: the delivery stack — tech, operations, the all-important customer data — won’t rest in the hands of one but many for some time yet.

Progress, as George Orwell once wrote, is “slow and invariably disappointing.” The market for third-party delivery may be mired in confusion and controversy (of its own making in some cases), but, as I said before, that doesn’t spell the end for the model. In fact, third-party delivery is still expected to account for 70 percent of delivery orders in 2022.

In the near future, though, expect this area of the food industry to get messier, raise more questions, and incite more regulatory battles as it progresses towards normalization.