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third-party delivery

Newsletter: What Comes Next for Ghost Kitchens? Plus, Third-party Delivery and At-home Agtech

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I’m not gonna lie: putting together our market map on ghost kitchens was hard. The concept as we know it is relatively new, and the lines between the different categories of ghost kitchen might be easy enough to draw in a graphic but are never as solid in real life. For example, CloudKitchens provides kitchen space but it’s also a network of virtual restaurants. Starbucks runs its own kitchens but relies on Alibaba’s Heme supermarkets to provide the space. Grubhub, Uber Eats, and DoorDash deliver food but also operate in other areas of the stack.

That overlap, though, is a big part of what makes this area of the restaurant industry such an interesting one to watch. Not only is the 2019 ghost kitchen redefining the restaurant experience as we know it, it’s also redefining the way restaurants operate, the technology they use to do that, and even what their menus offer in any given area. Fat Brands, for example, uses Fatburger locations on the West Coast to also fulfill delivery-only orders for sister brands that would normally only be available to customers in the East. 

As we head into the next year, we can expect the overlap of companies and categories to increase as more multi-unit chains try their hand at ghost kitchens, more kitchen infrastructure providers try out their own virtual restaurants, and literal mobility (kitchens on wheels) becomes more commonplace. 

Head over to The Spoon for more predictions on what comes next for ghost kitchens (RIP POS?) and to download the map. And since this is such a nascent market that changes weekly, expect more iterations of this map to hit your inbox in the future.

Third-party delivery is staying put. Sort of.
It’s no secret that consumer appetite for delivery is driving the growth of off-premises orders. And while they may be controversial, third-party services like DoorDash and Postmates are a big part of this growth.

The biggest part, by some accounts. This week, CBRE Group noted in a new report that 70 percent of delivery orders will come from third parties by 2022. That’s a no-brainer. These services provide the tech infrastructure, logistics, and actual drivers that are often too expensive for restaurants to operate on their own. Third-party delivery may be expensive for restaurants and paddling through a sea of bad press lately, but it is in many ways necessary for businesses who want (need, actually) to offer off-premises ordering for customers. 

Like ghost kitchens, this is a messy, fast-changing market whose model will continue to evolve as restaurants adopt hybrid strategies and new laws are passed regulating how these companies do business.  

At-home vertical farms: Big convenience or big expense?
If you still prefer the old-fashioned method of actually cooking food for yourself, Miele’s latest news will be of some interest. As my colleague Chris Albrecht reported this week, the German appliance-maker known for everything from washing machines to coffee systems has acquired Agrilution, a Munich, Germany-based agtech startup known for its Plantcube indoor vertical farm. 

As Chris notes, the Plantcube looks like one of those at-home wine fridges, and like any vertical farm uses software to regulate temperature, climate, water levels, and nutrient delivery to crops. The system grows a variety of leafy greens and fits right inside your existing kitchen infrastructure. 

Question is, Do people want vertical farms built into their kitchens?

Potentially.

No, setting up a grow system in your home is not as convenient as buying a bag of kale from the store. For those so inclined, though, an at-home vertical farm like Agrilution’s means being able to pick fresh, better tasting ones right out of their own cabinetry. Those living in dense urban areas, where the fire escape is the closest thing to outdoor space, could have an actual at-home garden.

First, though, we have to get over the cost hurdle. Right now, price points of various at-home vertical farming systems go for anywhere between roughly $500 (Ponix Systems) and $3,000-plus (Miele). What we don’t have is abundant data on how much these farms cost consumers in terms of electricity, water, or repairs if the system breaks down. There is also the issue of space. Agrilution’s Plantcube may fit nicely into the under-counter space of a single-family home in Nashville. Your average New York apartment, on the other hand, would be hard-pressed to accommodate one.

Still, it’s a great sign that a major appliance-maker like Miele is showing interest in getting cabinet-to-table greens to more homes in the future.

Until next time,

Jenn

Domino’s Expands GPS Tracking Tech Across U.S. Stores

Domino’s announced this week it will expand its GPS tracking technology to roughly a quarter of its U.S. stores by the end of 2019. The chain has been piloting this technology, dubbed Domino’s Tracker, in select locations throughout this year. According to a press release, Domino’s expects “a significant portion of stores” to use it in 2020.

For customers, the Domino’s Tracker offers a more precise time estimate of when their pie will arrive. After placing an order via the Domino’s app, they will be able to access an interactive map of their order and receive an estimated delivery time. Users can opt in to receive text message updates letting them know when their order is on the way, when it is two minutes away, and when it has arrived. 

Store managers, meanwhile, can view where drivers (Domino’s refers to them as “delivery experts”) are on the road. The idea is that by having more exact visibility into drivers’ locations, managers can better manage operational elements of the delivery process, such as route optimization and driver safety. 

GPS tracking technology isn’t new to the delivery world, and in fact, part of Domino’s motivation behind enhancing its own is to compete with third-party food delivery services like DoorDash and Uber Eats, who already have such capabilities in place. The move is one of many strategies Domino’s has in place to fight back against third-party delivery dominance.

That’s no small order in a restaurant industry where 70 percent of all delivery orders are expected to come from third-party delivery services by 2022.  Hence initiatives like the Domino’s Innovation Garage, a testing ground for new tech that opened in August, an e-bike program to speed up delivery in dense urban areas where cars are inefficient, and partnerships with location-tech companies to pinpoint hard-to-find street addresses. 

Earlier this year, Domino’s CEO Richard E. Allison noted that his company faces “headwinds related to aggressive activity from third-party delivery aggregators” and that he did not expect to see this change any time soon. He added the company will continue to invest in technology for the foreseeable future.

Domino’s GPS tracking technology is currently operating at stores in Phoenix, Houston, Salt Lake City, Miami, Las Vegas, Baltimore and Norfolk, Virginia.

Report: 70 Percent of Delivery Orders in 2022 Will Come From Third-party Services Like DoorDash

Restaurant food delivery from third-party services like DoorDash and Grubhub will account for 70 percent of all delivery orders by 2022, according to a new report from CBRE Group.

It’s a surprising prediction — said no one ever. CBRE’s new report, the third in the firm’s U.S. Food in Demand series, is one of many, many pieces of research confirming the central role third-party food delivery services now play in the restaurant industry. Off-premises ordering is expected to be the major driver of restaurant sales over the next decade. An undeniable part of that growth is delivery, which according to the CBRE report reached $34 billion in sales last year, up 13 percent from 2017.

DoorDash, Grubhub, and other third-party services remain an important — and obvious — element of this growth, and for good reasons. As CBRE points out, there are many elements of the delivery stack restaurants need to meet today’s demand, whether it’s technical logistics to process orders, marketing services to widen a brand’s audience, or couriers and drivers that place the actual food in customers’ hands. “Restaurants often lack the infrastructure for direct delivery and the customer reach that third-party delivery operators like Grubhub, Seamless, Eat24 and DoorDash provide,” the report notes.

However, these services are also expensive for restaurants to use. Controversial commission fees eat into restaurants’ overall profit margins, which are already thin. The third-party delivery model itself is also currently under fire from multiple angles — how it treats workers, what it does to the environment, and the increasingly important question of profitability. 

None of those issues mean third-party delivery services are going away any time soon. Instead, the model will evolve, so that by 2022 it will look substantially different from the one we use today.

Already, we are seeing clues as to what direction that shift will take. A growing number of restaurants are now adopting hybrid strategies, where customers place orders and pay for them through the restaurant’s own mobile app or website, which handles the technical logistics around processing and fulfilling that order. Third-party delivery companies, meanwhile, supply the last-mile logistics, including drivers and couriers. Some restaurants, notably Panera, work off an inverse version of this, with customers placing orders via the third party’s app and the restaurant handling that last mile itself. 

Both approaches have pluses and minuses. The general consensus is that the hybrid concept will continue to gain popularity over the next year, even as it too changes and evolves alongside the way third parties process, fulfill, and deliver our restaurant orders.

McDonald’s and Uber Eats’ Latest Contest Is Another Play to Build More Brand Loyalty Online

If Thanksgiving leftovers aren’t your thing, consider entering McDonald’s latest contest, which gives Twitter users the chance to win free late-night food for an entire year from Uber Eats. 

The contest runs from today (November 27) through Cyber Monday (December 2), according to a McDonald’s press release. To enter it, fans must tweet two menu items they want delivered and include the following tags: #McDelivery, #Sweepstakes, @McDonalds and @UberEats. The grand prize is one year of free late-night delivery awarded as an Uber Eats promo code, along with a bundle of weird McDonald’s swag that includes, among many other items, a massage chair. An additional 50 winners will get a Late-Night Weekender Bag with a $20 Uber Eats promo code.

That’s a lot of burgers and fries, but in the bigger picture, this contest — like many other recent QSR promo efforts — isn’t about free swag or even free food. It’s about McDonald’s and Uber Eats finding new ways to brand themselves in a restaurant industry that’s increasingly moving online. Delivery and pickup orders placed via apps and websites are only going to increase over the next decade, particularly as a younger generation raised in a connected world comes of age. Sweepstakes like this one are as old as the QSR concept itself. McDonald’s and others are simply tweaking the concept to meet their audiences online, where they have the greatest chance of boosting brand loyalty.

More importantly, social media-based contests like these give QSRs more access to data on customer preferences. Having fans tweet the food items they want delivered late at night is, after all, a pretty clear-cut way to determine what people are ordering in the after hours. (Though AI does a pretty decent job of that, too.)

For Uber Eats, enticing more potential delivery customers is key, as the service’s longstanding exclusive contract with McDonald’s ended in July when the chain brought on DoorDash and Grubhub as additional delivery partners. And with customer loyalty to any one delivery platform not particularly loyal right now, these companies need every method they can get their hands on in order to keep existing customers firmly entrenched in their own ecosystems. I doubt contests basically giving away food and free massage chairs will be the strangest efforts we see as this trend continues to take hold.

Bite Squad to End Service in 3 Minnesota Cities

Around this time last year, we predicted that small- to mid-sized U.S. cities would be key battlegrounds in the war to win food delivery, and that this expansion would give smaller services a chance to stand out.

We were half right. Restaurant food delivery has indeed made its way to every conceivable corner of the nation, and the majority of restaurant growth over the next 10 years is expected to come from off-premises sales. But it looks like instead of benefiting from this expansion, smaller services are getting edged out by the usual suspects (DoorDash, Grubhub, etc.).

Case in point: this week, Minneapolis-based food delivery company Bite Squad said it was ending service in three Minnesota cities: St. Cloud, Rochester, and Duluth. The announcement comes mere months after Bite Squad launched services in these cities. 

“We were unable to grow the market fast enough to become profitable,” Bite Squad Media Relations Director Dean Turcol told the SC Times this week.

Bite Squad sent a bare-bones email to those partners in those cities saying only that the company is suspending service “indefinitely” and that its last day of operations will be December 5.

One year ago, Bite Squad was far more optimistic about food delivery and the company’s approach to the model, which has always been to focus on small and mid-sized cities in the U.S. rather than fight the competition in LA, NYC, and other major metropolises. At the time, Bite Squad’s Chief Marketing Office, Craig Key, said the company was “very bullish” on restaurant delivery across Middle America. “We’re confident in our position because we’re not haphazardly going into markets,” he told The Spoon.

Then Waitr acquired Bite Squad in December 2018 for $321 million, a deal that at the time seemed like a win for smaller delivery companies. Waitr has since written off much of that deal, laying off many of Bite Squad’s staff at the latter’s Minneapolis headquarters.

So who’s winning over Middle America and all the smaller cities in between the nation’s coasts? DoorDash. Despite recent controversies, the San Francisco-based company continues to seize the suburbs and lead the market for third-party restaurant food delivery. Unfortunately for companies like Bite Squad and Waitr, that doesn’t look likely to change anytime soon.

D.C Attorney General Suing DoorDash Over Its Former Tipping Model

DoorDash and its tipping policies are at the center of controversy once again. This time, D.C. Attorney General Karl Racine has brought charges against the third-party restaurant delivery service, alleging that the company pocketed tips for workers and misled customers about where their tips went.

The company changed its much-maligned former tipping model earlier this year, but Racine is now seeking to recover millions of dollars in tip money DoorDash customers paid over the last couple years, calling the former model “deceptive.”

Here’s a quick recap:

Under the old tipping model, Dashers — that is, the folks driving/biking/walking DoorDash orders to customers — were guaranteed a minimum pay amount for each order they delivered. That minimum came not from an hourly wage but from a base fee paid by DoorDash then supplemented by workers’ tips. As the lawsuit alleges, “the only thing the consumer’s tip changed was DoorDash’s share of the worker’s pay. “

That lack of transparency for customers, who would have had to go through the fine print with an even finer-toothed comb to understand where their tip money was going, is a main point in the lawsuit:

“Any reasonable consumer would have expected that the ‘tip’ they added to the delivery charge through the DoorDash checkout screenflow would be provided to the Dasher on top of the payment promised by DoorDash for the delivery. But during the relevant time period, that was not the case.” 

A spokesperson for DoorDash responded to the lawsuit with the following: 

“We strongly disagree with and are disappointed by the action taken today. Transparency is of paramount importance, which is why we publicly disclosed how our previous pay model worked in communications specifically created for Dashers, consumers and the general public starting in 2017. We’ve also worked with an independent third party to verify that we have always paid 100% of tips to Dashers. We believe the assertions made in the complaint are without merit and we look forward to responding to them through the legal process.”

The lawsuit comes at a time when the debate around the ethics of the third-party delivery model has gotten louder, particularly when it comes to how workers are treated, paid, tipped, etc. The California Senate passed Assembly Bill 5 in September, which entitles gig workers like Dashers to minimum wage, workers comp, and other labor protections. DoorDash, Uber, and Lyft responded by pledging tens of millions of dollars to fight the legislation. 

Even if they succeed in overturning AB 5, these companies — and the business models to which they cling so tightly, will face more lawsuits, regulations, and legislation battles with time. And while bad press is one thing, the real danger for third-party delivery companies in all this is that legal and regulatory struggles could corrode that existing business model and undercut food delivery’s potential to be profitable (not that there is any profit at the moment).

Controversies haven’t yet gotten in the way of investment for DoorDash, which was valued at almost $13 billion in May of 2019 and recently raised another $250 million.

Chopt Is the Latest Restaurant Chain to Launch a Store Dedicated to Delivery and Pickup Orders

Chopt Creative Salad joins the growing number of restaurant chains building out brick-and-mortar stores completely dedicated to delivery and pickup orders. The fast-casual chain opened its first location for off-premises-only orders last week in Manhattan’s SoHo neighborhood. 

Customers of the Chopt SoHo store can order online or via the chain’s mobile app, bypassing the need to wait in line and interact with a cashier. Delivery orders are handled by the major third-party services (Grubhub, DoorDash, etc.), while the SoHo location will also feature self-order kiosks for those walking in off the street. Those kiosks will be able to accept cash in addition to cards — an important feature in an age where the debate over cashless payments is heated and chains like McDonald’s have come under fire recently for kiosks that won’t take good old-fashioned greenbacks. 

Chopt hasn’t said whether its delivery- and pickup-only store will provide a new model for future locations. CEO Nick Marsh told Forbes that, “It will be a significant part of our growth going forward, though we can’t give a percentage on how many of them will open.”

Chopt isn’t the only salad chain in NYC to be experimenting with off-premises order formats. In October, Just Salad teamed up with Grubhub to deliver a virtual restaurant brand called Health Tribes to NYC customers. Sweetgreen, who raised another $150 million in funding in September, has expanded its Outpost service, which entails placing pickup stations in office buildings. The chain also just opened its Sweetgreen 3.0 store, a so-called high-tech location that emphasizes self service and orders destined for outside the restaurant.

It all makes sense. Salad travels well — better than, say, french fries. But — and this is the understatement of the week — salad chains aren’t alone in embracing this off-premises store model designed to fulfill more delivery and pickup orders. Chick-fil-A has operated off-premises stores since 2018 and just announced it’s also working out of DoorDash’s new ghost kitchen in Northern California. Starbucks has a to-go-only store in China and one planned for NYC. Masses of other chains following this trend is pretty much a foregone conclusion.

In a place like NYC (or San Francisco, for that matter), the model allows restaurants to utilize smaller spaces and cut down on the amount of rent they pay to be in business. And as demand for delivery increases along with the expectation for online ordering and self-service technologies, this to-go concept will become a de facto part of most major chains’ strategies.

As QSRs Double Down on Off-Premises Ordering, What Happens to the POS?

Whatever your food plans for the weekend, I’m betting there’s a good chance they’ll involve some kind of off-premises ordering. Delivery? Drive-thru? Drone? All of the above and more are becoming de rigueur for foodies and restaurants alike. With that in mind, here are a few more pieces of restaurant industry buzz from the week, all of which hint at what the next 12 months could look like when it comes to when, where, and how we get our food.

Grubhub and Shake Shack Expand Delivery Partnership Nationwide
Expanding on a deal struck back in August, Shake Shack is now available for exclusive delivery with Grubhub across the U.S. According to a press release sent to The Spoon, more than 140 Shake Shack restaurants now offer delivery through that third-party service and no other. While that’s great for customers who want Shack Burgers delivered to their couch, the partnership has also hurt Shake Shack’s sales, according to the chain’s third-quarter results. Part of that may have been due to the exclusive nature of the deal, exclusivity being a strategy increasingly discouraged in the restaurant industry when it comes to effective delivery services.

KFC’s Drive-Thru of the Future Is Open for Business
July brought the initial news that KFC had a drive-thru-only concept in the works down under, in Newcastle, New South Wales, Australia. Said location is now open for business. The new store features five drive-thru lanes that let customers order and pay via the KFC mobile app. While there is a designated lane for customers who want the traditional drive-thru experience (ordering on a crackly speaker, paying an actual person), there is no dining room at this location. If this pilot location proves successful, we’ll see more such KFC locations in the future.

Dunkin Donuts

Houston, We Have a Dunkin’
Dunkin’ (née Donuts), an institution here in the Northeast, is continuing its expansion across the U.S., and it’s bringing its next-generation store with it. The chain announced it is developing 18 new locations around Houston, TX that will emphasize to-go orders, self-service kiosks, and dedicated drive-thru lanes for customers who order via the Dunkin’ mobile app. The first of these new stores is slated to open in summer 2020.

Image via Unsplash.

RIP POS?
But is the POS about to become an endangered species? Not this week, and not probably in the next year. But the growth of ghost kitchens, which exist to fulfill off-premises orders and have no dining room, suggests that pieces of the front-of-house restaurant tech stack could be eliminated in the future. That’s the scenario posed by the folks at Reforming Retail this week. An excellent article from a few days ago points out that with no front of house or cashiers, and with customers ordering directly from their mobile devices, 99 percent of the tech in restaurants could disappear: “And instead of a restaurant needing multiple [sales] terminals they need, well, none.”

Agree? Disagree? Drop your thoughts in the comments below.

Chick-fil-A Begins Delivery Operation Out of DoorDash Ghost Kitchen Facility

Chick-fil-A is now expanding its presence in the SF Bay Area via a ghost kitchen. The Atlanta-based chain started operating a delivery-only concept this month using DoorDash’s newly opened ghost kitchen facility, according to Nation’s Restaurant News. As of now, the full Chick-fil-A menu is available for delivery during Chick-fil-A hours from DoorDash Kitchens.

This isn’t Chick-fil-A’s first foray into ghost kitchens, as the chain already rents space from Kitchen United’s Chicago location.

DoorDash opened DoorDash Kitchens in October of this year. The facility offers kitchen space to restaurants wanting to fulfill more off-premises orders without having to actually open a full restaurant. Chick-fil-A joins The Halal Guys, Nation’s Giant Hamburgers, Rooster & Rice, Humphry Slocombe as participating restaurants.

The Redwood City location, which will be the first of multiple DoorDash Kitchens facilities, serves multiple cities around the Peninsula, including Menlo Park, Palo Alto, and Woodside, among others, so Chick-fil-A will be able to expand the small presence it already has in the Bay Area. Currently, the chain operates brick-and-mortar locations in San Jose and Sunnyvale.

Teaming up with DoorDash for a ghost kitchen operation is just one of many initiatives on Chick-fil-A’s part to boost off-premises orders around the country. The chain tested a meal kit program in 2018, where customers could try to recreate the Chick-fil-A experience at home. Shortly after, Chick-fil-A partnered with DoorDash for a much more traditional form of delivery across the U.S. Since then, the company has also introduced dine-in mobile ordering for customers, who can grab a seat at select brick-and-mortar locations and order from their phone without having to get in line. Chick-fil-A also operates a couple takeout-only brick-and-mortar locations where customers can order ahead via mobile app or get food at the pickup window. Besides a few lone tables outside, there is no dining room.

And with no dining room quickly becoming one of the new norms for restaurants everywhere, Chick-fil-A is wise to expand its off-premises strategy to include more ghost kitchens. Doubtless we’ll see it along with other national chains expand into other major cities in the near future.

Uber Eats Using Discounts and Ad Space to Entice More Restaurants

Uber Eats and Ordermark announced a partnership this week that will offer service discounts to Ordermark restaurant customers who also leverage the Eats platform for their delivery needs. According to a press release sent to The Spoon by Ordermark, the partnership will make it “easy for restaurants to participate and manage off-premise orders.” It could also help Uber Eats woo more restaurants into becoming more loyal and longtime partners.

Ordermark’s technology helps restaurants centralize incoming orders from the many different channels in which they originate nowadays — in-house, delivery, takeout, etc. The technology pushes orders placed via Uber Eats directly to the kitchen without restaurant staff having to use an extra device or manually input the orders into the main POS system.

According to the press release, restaurants that sign up with Ordermark and request to use Uber Eats as a delivery partner can get their initial setup fees waived by Ordermark and are also eligible to receive a discounted rate on Ordermark services (actual discount numbers were not disclosed). While not the most earth-shattering news of the week, it’s also not insignificant, given the ongoing battle between delivery services and restaurants over sky-high commission fees and the fact that we’re seeing more companies like Ordermark come to market with solutions that promise to simplify both operations and financials for restaurants when it comes to delivery.

In another bid to entice more restaurant partners, Uber Eats is also reportedly selling ad space inside the Eats platform to restaurants. TechCrunch reported a job listing for an Uber Eats Ad Lead, which was confirmed by Uber. “There’s a bunch of different ways we can work with restaurants over time. If we have all the restaurants on the marketplace and we give them tools to help them grow, then this will be a very efficient marketplace,” Uber told TechCrunch.

Both developments come on the heels of Uber’s most recent earnings stats which, while not quite as abysmal as the previous quarter’s numbers still show the company posting more than $1 billion in losses. Losses for the Eats business grew to $316 million, up from $198 million one year ago.

Like Grubhub, who just saw its sharpest one-day decline in its entire history as a publicly traded company, Uber Eats is struggling to show investors it can be a profitable business. Firmly entrenching more restaurants into its ecosystem with discounts and ads could help Eats. Unfortunately, it’s a wait-and-see scenario as to whether that will be enough.

We’ve Seen the Restaurant of the Future. It Doesn’t Look Like a Restaurant

What will the typical American restaurant look like in 2030? Ask the National Restaurant Association, whose new report, “Restaurant Industry 2030” serves up some answers to that question.

Many answers, actually. The 80-page report gives us an in-depth look at everything from how the restaurant workforce will change to technologies that will become commonplace in daily operations, many of which we already see quite a bit of in 2019: self-order kiosks, dedicated areas for pickup orders, and digital drive-thru signage, for example.

Overall, restaurant sales are expected to reach $863 billion in 2019 and grow to $1.2 trillion in 2030, according to the report. The major driver of that growth will be off-premises ordering — delivery, takeout, drive-thru, and other mobile-centric experiences. That will, as the report states, change the definition of the word “restaurant”:

Some restaurants will morph into a hybrid model, offering counter service, full service, takeout and delivery, and meal kits. The delivery-only restaurant is on the rise through virtual restaurants and ‘ghost kitchens.’ New food halls feature retail and restaurant pairings to make it easy for people both to eat and to shop for food they can take home.

All of these things underscore the influence off-premises orders are having on restaurant business models. As the report states, “the shift affects everything from restaurant design to marketingtech investment, operations, and site selection.”

Take ghost kitchens as a prime example. Not so long ago, the idea of having a restaurant without a dining room for anything other than concession-type food was unheard of. Now, restaurants are not only using them to fulfill the influx of delivery orders, they are also testing out brand-new menus and, in the case of multi-brand companies, using the ghost kitchen concept to cross-promote and sell sister brands.

Third-party delivery companies, in particular, are capitalizing on the craze for ghost kitchens, with DoorDash opening its own facility in Northern California and Uber Eats and Grubhub teaming up with non-restaurant food brands to launch virtual concepts.

New business models aside, though, Grubhub et al. face a far more ominous prospect over the next decade: increased regulation of third-party delivery. The National Restaurant Association’s report notes that the restaurant of 2030 will see many a government mandate over the next decade around employees, the environment, and food service-related taxes. But the big one to stand out is the increased regulations for third-party delivery operators.

The debate over stricter regulations for third-party delivery is already in full swing. Earlier in 2019, Grubhub, Uber Eats, and indeed the entire sector came under fire when an oversight hearing was held in New York City that called into question the high commission fees these services charge restaurants. Since then, it’s been one headline after the next proclaiming antitrust issues, biased fee structures for restaurants, caps on delivery fees, ethically questionable tipping policies, and so much more.

The shift towards more regulations is already in place, most notably with California’s Assembly Bill 5, which reclassifies gig workers as employees and was signed into law in September. Third-party delivery companies are fighting AB 5, but even if they succeed, there will be virtually no end to new bills, laws, and other regulatory matters to fight over the next decade. Between that and the constant struggle for profitability for these companies, it’s safe to say the third-party delivery sector of 2030 will be markedly different from the one we know today. Which is to say, the very elements changing today’s food landscape will undergo there own change on the road to 2030.

Uber’s Latest Earnings Reports Underscore the Fragile State of Third-party Delivery

Uber beat estimates but still posted over $1 billion in losses in the most recent quarter, according to the company’s Q3 earnings call this week. While Uber’s Rides business shows signs of stabilizing, other business units, including Eats, are still losing enormous amounts of money.

Losses for the Uber Eats business grew to $316 million, or 67 percent, from $189 million one year ago. And while Uber CEO Dara Khosrowshahi said the company aims to achieve profitability for 2021, he also in August said, “I don’t expect that business to be profitable in the next year or year after frankly.” Uber Eats team members were part of the layoffs Uber announced in October.

Over the last several months, Uber has unveiled several new features to its business aimed at cross-promoting its Rides and Eats services. Uber Vouchers, for example, is meant to drive more foot traffic to restaurants by subsidizing a user’s ride there. The company also said in September it would merge its Eats app with its main rideshare app.

“We can more quickly and efficiently attract and retain customers, as well as deepen their engagement by linking and cross promoting all of our offerings,” Khosrowshahi said on this week’s call.

But a good cross-promotion strategy won’t necessarily stem the bleeding when it comes to losses for the Eats business. And as Grubhub’s lackluster numbers for the last quarter suggest, the hype around the third-party food delivery services could be cooling down.

One reason for that may be that more restaurants are taking delivery, or at least pieces of it, back under their own control. As restaurant chains move to own more of their branding, credibility, and in some cases the last mile, many are turning to hybrid delivery strategies that only rely on third-party services like Uber Eats for part of the delivery process, which could result in restaurants paying lower fees to these companies.

Then there’s California’s AB 5, which was signed into law in September and classifies contract employees like Uber Eats and DoorDash drivers as employees. Despite Uber, DoorDash, and Lyft committing $90 million to fight the legislation, New York is considering a similar law right now, and others are bound to follow.

On this week’s call, Khosrowshahi reiterated Uber’s plans to defend its stance on AB 5 and similar laws. “So this is going to take dialog,” he said of the issue. “We’re up for that dialogue, and one way or the other we think that our model will thrive and grow.”