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The Spoon

Daily news and analysis about the food tech revolution

third-party delivery

Uber Eats Is Not Bailing On California

California imposed an order this week that, for a minute there, led us all to believe Uber’s food delivery business in that state was on the rocks.

Spoiler alert: it’s totally not.

Recap: On Monday, a California judge issued a preliminary injunction ordering that Uber (along with Lyft) reclassify its drivers as employees in keeping with the state’s AB5, which was signed into law in January. Uber CEO Dara Khosrowshahi then took to the airwaves to tell us all the company will likely have to temporarily shut down service in California if the court does not overturn the ruling.

As is usually the case when we talk about third-party delivery services, there’s fine print, which Eater SF promptly dug up. An Uber spokesperson confirmed to the publication that the shutdown would only apply to the company’s rideshare business, and that Uber Eats — now Uber’s biggest business — would continue “as is.”

I can’t really think of a better way of putting it than in Eater writer Eve Batey’s own words: “Uber’s threat to take their ball and go home if forced to comply with California law really only applies to a ball that, right now, isn’t the one that the other kids want to play with all that much.”

Eats currently generates more revenue than Rides, according to Uber’s second-quarter earnings report. That makes sense, seeing as the world has been in a pandemic-induced lockdown of late, and even with restrictions lifting in places, average consumers are just not going out as much. They are, however, ordering a ton of delivery meals from restaurants. Gross bookings for Eats were $6.96 billion in Q2, which was up 113 percent year-over-year and up 54 percent over Q1 2020.

Uber also recently struck a $2.65 billion deal to acquire fellow third-party delivery company Postmates — a service that just happens to be number one in Los Angeles, a city that just happens to be the second most populated one in the U.S. Yanking the plug on California, even temporarily, would make the deal pointless. Uber might have ethical flaws in its business model, but its leaders aren’t dumb.

Besides, they’ll get a chance to continue the fight to keep its delivery drivers and couriers as contract workers come November, when Californians vote on Proposition 22, which would exempt rideshare and delivery drivers from being considered employees. Needless to say, tech companies are all-in on this one.

But if regulators continue to scrutinize third-party delivery practices, and consumers continue to rely on off-premises meals while restrictions around in-house restaurant dining room remain in place, it seems only a matter of time before Uber et al. go from the frying pan to the fire with food delivery. 

Maybe then we can take eloquently worded threats to shut down seriously. 

Accelerating the Drive Thru

Of late, there’s been much ado about the drive-thru, with major restaurant chains like Shake Shack and Chipotle all announcing an increased focus on the format.

So it wasn’t too surprising this week to get new data showing the drive-thru is far and away the most popular restaurant “experience” among consumers. A new survey from Bluedot and research firm SeeLevel HX found that 74 percent of respondents said they have visited the drive-thru “the same amount or more often than usual” compared to 43 percent in April. Those consumers surveyed also named drive-thru “the safest” of the to-go formats polled in the report.

It’s all a bit of a no-brainer if you ask me. If you’ve hung around inside a restaurant lately waiting for your pickup order, you’ll know the experience is often tense and confusing. Meanwhile, curbside pickup is still so new for most restaurants that operational kinks have yet to be worked out. That makes drive-thru, a decades-old format, seemingly the safest and fastest way to collect your grub at a time when dining at a restaurant is a no-go for many consumers.

But drive thrus could be faster. A lot faster. In this week’s survey, 81 percent said waiting more than 10 minutes in the drive-thru is too long.

As mobile ordering increases in restaurants and more chains reformat their brick-and-mortar locations to accommodate drive-thru, speed of service will need to be at the top of the priority list.

Restaurant Tech ‘Round the Web

  • A new survey by Oracle Food and Beverage found that 59 percent of U.S. consumers and 47 percent in the U.K. “plan to dine-out as soon as they are able.” Forty percent in the U.S. and 39 percent in the U.K. would feel “safer” using a digital menu from their own device. Another 35 percent in the U.S. and 31 percent in the U.K. had similar feelings about digital payments. 
  • Mobile platform Mad Mobile has acquired restaurant tech company CAKE, best known for its POS system. Mad Mobile hopes to use the acquisition to create a next-gen POS designed for mobile-first restaurant experiences. 
  • For more on the future of ridesharing, which is usually an indicator of what’s to come for food delivery, check out this podcast from Axios Re:Cap. 

This is the web version of our newsletter. Sign up today to get updates on the rapidly changing nature of the food tech industry.

Are Food Delivery Services ‘Violating’ Mandatory Fee Caps in NYC?

NYC regulators are demanding stricter oversight of the recently mandated caps on delivery commission fees, according to the NY Post. NYC Councilman and head of the small business committee Mark Gjonaj this week urged Mayor De Blasio’s Office of Special Enforcement to fine the offending parties (i.e., the delivery services) found to be violating the fee caps.

Which is apparently happening. At a hearing this week, OSE’s executive director Christian Klossner said his office had received two complaints from restaurants that were charged more than fee caps allowed by the delivery companies. Klossner said the companies (unnamed) had refunded the money, but Gjonaj demanded the OSE “consider fining the offending company.” 

Two restaurants isn’t a lot, but Gjonaj, seems to suggest the actual number of businesses being overcharged could be bigger. Speaking at the hearing this week, he said, “If these companies have done it to one restaurant, it must be widespread.”

While not proven, that point wouldn’t exactly surprise, since third-party delivery services have disregarded legislation before, most notably around worker classification. Fee caps are so new on the third-party delivery regulatory front that there hasn’t been much time for companies to flout the rules, or for restaurants to make known that they’re being overcharged. Part of Gjonaj’s call over more enforcement of the caps seems aimed at bringing any violations into the light. “How are you getting the word out to the thousands of businesses that they need to bring this to your attention?” he asked attendees at this week’s hearing.

Like a growing number of U.S. cities, the Big Apple imposed mandatory fee caps on commission fees at the peak of shelter-in-place mandates brought on by the pandemic. The aim of those fee caps is to help restaurants, who normally fork over as much as 30 percent per transaction to third-party delivery companies in commission fees. Needless to say, those commission fees were gutting the already decimated restaurant industry, hence caps imposed by NYC, San Francisco, Los Angeles, Baltimore, and many others. 

Those fee caps are for the most part meant to endure only as long as cities remain in emergency states around the pandemic. Soon enough, though, these cities will have to weigh the ups and downs of mandating — and enforcing — the caps over the long term, along with other measures that can better protect restaurants in a delivery-crazed world. 

Just Eat Takeaway.com to Stop Using Gig Workers in Europe

Just Eat Takeaway.com just made its sentiments known about how to classify gig workers — but not in the way you’d expect from a third-party delivery service. Company boss Jitse Groen told BBC this week that Just Eat Takeaway.com will “end” gig working in its operations in Europe.

“We’re a large multinational company with quite a lot of money and we want to insure our people,” he said. “We want to be certain they do have benefits, that we do pay taxes on those workers.” 

“Large multinational company” aptly describes Just Eat Takeaway.com these days. The company itself is the product of Netherlands-based Takeaway.com’s recent acquisition of the U.K.’s Just Eat. And in June, the newly formed company announced it would acquire Grubhub, creating the largest food delivery service in the world outside of China.

All that M&A means more hiring. But this hasn’t been a particularly easy time for gig workers, in Europe or elsewhere. With the pandemic keeping more folks at home, delivery orders are up. That demand renders the folks driving or biking the food to customers frontline workers at higher risk of exposure to the coronavirus. Under the status of gig worker, these individuals do not have access to certain workplace protections (e.g., paid sick leave) they would as employees.

Just Eat Takeaway.com’s changes to worker classification may only apply to Europe right now, but the company has operations all over the globe. The aforementioned Grubhub deal will soon give the company a presence in the U.S., too, where the debate over gig workers is especially heated right now. Just this week, a California judge ordered Uber and Lyft to reclassify its contract workers as employee. For Uber, that would mean changing the underlying model around its Eats business, too.

Groen did not say when the change for its his company’s European workers would take place. And how Just Eat Takeaway.com handles U.S.-based workers once the Grubhub deal kicks in remains to be seen. 

While Just Eat Takeaway.com looks to remove many of the downsides of gig worker jobs, others are spending millions to fight any changes to the system. At some point a new standard around benefits for these workers might emerge from the fight. Let’s hope it’s one that values human health and well-being over food delivery’s ever-elusive path to profitability.  

ShiftPixy Launches Ghost Kitchen Incubator

Gig economy engagement platform ShiftPixy announced today the launch of its Ghost Kitchen Incubator Project, which will provide advice and infrastructure to restaurants wanting to launch and/or improve their off-premises strategies. 

The incubator is part of ShiftPixy’s new Labs offering, which is a suite of marketing and support services designed specifically for QSRs. ShiftPixy says that through it, restaurants can get insights and advice on what exactly they need to operate an off-premises business. Via the Incubator Project, that means access to physical kitchen space as well as ShiftPixy’s technology, which connects restaurants to delivery drivers and couriers.

ShiftPixy differentiates itself from third-party delivery services like DoorDash or Uber Eats by hiring these gig workers (“Shifters”) as W-2 employees and facilitating the connection between them and the restaurant. Meanwhile, ShiftPixy’s tech platform doesn’t act as a consumer-facing marketplace for food delivery. Rather, it powers the back end of restaurants’ native mobile apps.

For those restaurants, the benefits of a system like ShiftPixy’s is avoiding the high commission fees associated with other third-party services and retaining customer data because orders are coming through their own digital properties. 

The benefits of this alternative delivery model are attractive at a time when most restaurants have been forced into doing delivery and other off-premises formats as a means of survival. Ghost kitchens, too, are growing more popular thanks to the pandemic, which has shuttered many restaurants and is now making many rethink how important the dining room is to their overall livelihoods. 

In the QSR realm, ghost kitchens are becoming especially prevalent, with Starbucks, Fat Brands, The Halal Guys, Chick-fil-A, Wendy’s, and an ever-growing list of others either turning their own stores into ghost kitchens or renting space from third-party kitchen providers.

But, as we discussed at length in The Spoon’s recent report on ghost kitchens, not every QSR needs one. And of those that do, the specific requirements for equipment, location, menu items, and other factors will vary from one chain to the next. 

ShiftPixy will undoubtedly address these and other issues through its new Incubator. Company CEO Scott Absher said in today’s press release that “if operators want to survive, they need to re-think their business processes, customer engagement and their approach to real estate.”

ShiftPixy hasn’t yet given full details on the new facility or said if any specific QSRs have yet signed onto the Incubator program. The company says it will “continue to issue updates” in the coming days, so stay tuned. 

Updated: California Judge Orders Uber and Lyft to Reclassify Drivers as Employees

UPDATE: Uber CEO Dara Khosrowshahi said the company would probably shut down operations in California temporarily if this week’s ruling is not overturned. However, that would only apply to the company’s rideshare business. An Uber spokesperson confirmed to Eater that the company “has no plans to cease California operations of Uber Eats.”

PREVIOUSLY:

A California judge late Monday ordered that Uber and Lyft must reclassify their drivers as employees. This preliminary injunction is stayed for 10 days, during which time Uber and Lyft can file an appeal. Both companies have said they will do so.

This week’s order comes after California Attorney General Xavier Becerra and city attorneys in California sued Uber and Lyft in May for allegedly treating their workers as contractors. The suit alleged that these companies were in violation of AB5, which went into effect in January of this year. Under the law, gig economy workers (including food delivery couriers and drivers) must be classified as employees and given access to benefits like sick leave, unemployment, and workers comp.

Uber, Lyft, and other gig worker companies have already funneled substantial resources into challenging AB5. In December of 2019, Uber and Postmates filed a complaint (which was later rejected) alleging the law violates constitutional rights. DoorDash, along with Uber and Lyft, has vowed to spend millions to get a ballot measure in 2020 that would counteract AB5. And these tech companies have argued ad nauseam that their workers want to be independent contractors and that their services are exempt from the law on the grounds that they are platforms, not transportation companies. 

California Superior Court Judge Ethan Schulman wrote in this week’s ruling that such logic “flies in the face of economic reality and common sense… To state the obvious, drivers are central, not tangential, to Uber and Lyft’s entire ride-hailing business.”

That third-party food delivery services stand on the same side of the AB5 argument as rideshare companies is no surprise. The third-party delivery model relies on workers to transport food from restaurants to customers’ homes. Having to pay workers things like health benefits and paid sick leave would undercut the entire third-party delivery model, adding extra costs for the likes of Uber and DoorDash, and ultimately slowing their still-elusive path to profitability. 

Uber went as far as to say that if this week’s injunction stands, it may have to exit California. Assuming that would apply to both its rideshare business and its Eats operation, that would erode the company’s recent deal to acquire Postmates, a service that’s most popular on the west coast. 

No other state has yet moved so aggressively to get gig workers reclassified. But thanks to COVID-19, much light has been shed on workers’ access to things like health benefits or even paid sick leave and unemployment during a global crisis. In March, a New York Court ruled that Postmates couriers are employees and therefore eligible for unemployment. In the same month, Instacart revamped its benefits for drivers after workers threatened to strike.

You can read this week’s ruling in full here. If it stands, and Uber and Lyft are unsuccessful in their appeals, the order could have a ripple effect across other states in the U.S.

UK Regulators Finally Approve Amazon’s 16% Stake in Deliveroo

The UK’s Competition Markets and Authority (CMA) has at last approved Amazon’s 16 percent minority stake in food delivery service Deliveroo. The CMA’s findings, released today, note that the proposed Amazon-Deliveroo deal “has not resulted, and may not be expected to result, in a substantial lessening of competition (SLC) within a market or markets in the United Kingdom (UK) for goods and services.”

That concern — that Amazon’s investment in Deliveroo would lessen competition and consumer choices along with it — has hindered the investment since it was first announced back in May of 2019. For a quick recap, here’s how the saga has played out since then:

  • May 2019: Amazon announces its participation as the largest investor in Deliveroo’s $575 million Series G funding round.
  • July 2019: The CMA opens an investigation into Amazon’s investment, saying there were “reasonable grounds” that such a deal would mean the two companies would “cease to be distinct.”
  • October 2019: The CMA launches a formal probe into the deal.
  • April 2020: The deal gets initial approval, with the CMA citing “significant decline in revenues” for Deliveroo thanks to the pandemic.
  • June 2020: Regulators grant provisional clearance of the deal.

With this final approval, the CMA did warn Amazon that that increasing equity ownership of Deliveroo could result in further investigation, according to CNBC.

The approval comes at a time when consolidation is rampant among third-party food delivery services worldwide. The CMA finally approved the Takeaway.com’s acquisition of Just Eat, a deal that has created the largest food delivery service outside of China. The newly formed Just Eat Takeaway.com then swooped up Grubhub. Uber Eats, meanwhile, had been looking to buy Grubhub but backed away from such a deal in part because of the regulatory scrutiny the move would raise. Instead, it acquired Postmates in July.

With the pandemic still wrecking much havoc on the restaurant industry, we will probably see more of this consolidation — and probably a good deal of scrutiny, too — before the year is out.

Chipotle Increases Digital Sales 216.3%, Experiments With Delivery Pricing

It seems Chipotle has one-upped itself again in terms of sales numbers. For the quarter ending on Jun 30, digital sales increased 216.3 percent to $829 million. Digital sales made up well over half — 60.7 percent — of Chipotle’s overall sales. More than half of those sales are pickup, with the rest coming from delivery, CEO Brian Niccol said on this week’s earnings call.

As we’ve discussed before, a big reason the brand has managed to not just survive but break sales records during the pandemic is that Chipotle has been aggressively pursuing its digital strategy for a few years now. And between the first quarter’s earnings call and today, the company has doubled-down on its drive-thru lanes for mobile orders, launched a direct-to-consumer farmer’s market for its suppliers, and created a virtual version of its famous assembly line, among other things.

A restaurant breaking sales records during a devastating pandemic is news enough, but Niccol outlined multiple other new developments, most notably around the company’s delivery strategy. He noted that “partnering with all the major third party delivery aggregators has led to an increase in orders, a reduction in delivery time and cancellations and an improvement in overall customer ratings.”

However, for both independent restaurants and mega chains like Chipotle, with third-party delivery come sky-high, controversial commission fees that eat into profit margins. In response to those as well as some higher supply chain costs, Chipotle said it would test raising the prices on items for third-party delivery. “Similar to what many of our peers are already doing, we’re about to experiment with delivery menu prices as a way to potentially help offset this headwind and fully capture the margins expected at this volume,” said CFO John R. Hartung.

Hartung didn’t elaborate much on the call about where those tests would take place, how long they will run, and how much higher items on third-party delivery sites would be compared to ordering for pickup via the Chipotle app.

Chipotle may be one of the undisputed leaders in terms of QSRs aggressively pursuing digital, but it’s hardly alone. Starbucks has said it is reformatting many of its traditional cafe-style stores to be digital-focused to-go locations, Burger King is testing more delivery hotspots, and Taco Bell has launched a brand-new loyalty program.

Niccol said on this week’s call that he expects order-ahead transactions to continue to be a major driver of future growth for the company. Whether that means the chain will break another record come next quarter remains to be seen. 

Asian Food Delivery Platform Chowbus Raises $33M

Delivery platform Chowbus today announced a $33 million Series A funding round. The round was led by The round was led by Silicon Valley-based Altos Ventures and NYC-based Left Lane Capital, with participation from Hyde Park Angels, Fika Ventures, FJ Labs and Silicon Valley Bank. This brings total funding for Chowbus to $38.1 million.

Chowbus’ claim to fame is connecting customers with authentic Asian food from independent restaurants that might not normally be found on the major third-party delivery aggregators. Underscore that word “authentic,” because the company takes the quality of its restaurants very seriously: restaurants must pass a blind taste test for before they are allowed to join the platform. The company offers meals via standard delivery as well as through its Lunch Shuttle, which bundles multiple orders together and delivers them to a central drop-off point Monday through Friday.

The last year has been a big one in terms of growth for the company, which was founded in 2016. At the start of 2019, the company raised $4 million to build out its technology and marketing. According to today’s press release, Chowbus has increased its revenue 700 percent and grown its employee headcount 300 percent.

Chowbus will use the new funds to grow its existing business, launch in new cities, and expand its product line to offer services outside of delivery. For example, it recently released a dine-in feature to its platform that lets restaurant-goers order and pay from their phones while eating at the restaurant.

Right now, Chowbus is available in roughly 20 cities around North America, including New York, Boston, Seattle, Atlanta, the San Francisco Bay Area, and Chicago.

Uber Eats’ New Pilot Offers Commission-Free Orders for Restaurants, with a Catch

Today, Uber Eats launched a pilot program that lets its restaurant parters accept pickup and delivery orders directly through their own websites with no added commission fee for the rest of 2020. 

The program seems to be a bid on Uber Eats’ part to keep restaurant partners entrenched in the third-party delivery service’s ecosystem by offering them the option to process orders via their own digital properties. The catch (because there’s always a catch) is that Uber Eats still powers those orders. The Uber Eats site clearly states that with this new program, restaurants will “leverage best-in-class Uber Eats feature and powerful technology to fulfill orders.”

That brings up a whole host of questions around customer data, which we’ll get it shortly.

First, it is worth noting that Uber Eats is waiving commission fees on delivery and pickup orders placed through one of these sites through the end of 2020 (restaurant still pay a 2.5 percent processing fee). The exorbitant commission fees third-party delivery services charge restaurants — as high as 30 percent per transaction in some cases — has been by far the biggest grief restaurants and restaurant advocates have voiced over the last year. The pandemic cranked the volume on that conversation up so high that many cities have introduced mandatory caps on these fees for the time being. The general argument is that restaurants are getting decimated by coronavirus restrictions, and asking an indie restaurant barely surviving to pay 30 percent of each order to a delivery company is a spoonful of salt in an already pretty grievous wound. 

In the short term, a program like Uber Eats’ could give restaurants a much-needed boost when it comes to building out an off-premises strategy that won’t financially gut them at the same time. 

The cost, however, looks to be data. As noted above, Uber Eats is still powering these transactions, which means it ultimately controls access to the data on customers. In fact, a fine-print note buried at the bottom of the new program’s site states that a “restaurant can access customer data subject to opt-in from customer during checkout.” What’s unclear is if that opt-in will be an easy-to-see feature on the consumer-facing app — and if customers would actually use it. We have reached out to Uber to get clarification on this.

Uber Eats sort of addressed this by also announcing today the release of its mobile app for restaurant managers and customer engagement tools. Per the blog post, both of those things helps restaurant managers track sales, respond to customer feedback, and get other insights about customer behavior. 

Like I said before, all of these things could very well help struggling restaurants right now, many of whom never offered off-premises before the pandemic and are now having to learn as they go when it comes to running a delivery and takeout business.

Longer term, however, getting locked into Uber’s ecosystem so thoroughly will limit the amount of control restaurants have over their own data and ultimately their customer relationships. 

Updated: DoorDash Did Not Violate the SF Commission Fee Cap for Restaurants

UPDATE 07/09 at 6:03 EST:

A representative from DoorDash sent the following statement to The Spoon: “We have corrected a separate error affecting fewer than 10 out of over a thousand of our SF restaurant partners and will be issuing reimbursements to these restaurants.”

UPDATE 07/09 at 5:37 EST:

San Francisco chef Christian Ciscle, who originally surfaced news suggesting DoorDash had violated San Francisco’s 15 percent cap on restaurant commission fees, sent an update this afternoon via Twitter: 

“UPDATE: Doordash called around 5:30- I fucked up. While the Merchant Info STILL said 30%, they were actually only taking 15% when I looked at the invoice. They never responded to my emails about it from weeks ago. But, hopefully those “10” Restaurants will get reimbursed.”

The Spoon has reached out to DoorDash for clarification and will post another update in the event of new information on this story.

PREVIOUSLY:

DoorDash looks to have violated the 15 percent cap the city of San Francisco put in place in April for the commission fees delivery services charge restaurants. Some businesses have reported getting charged unexpected 30 percent commission fees from the third-party delivery service after the caps went in place, according to the San Francisco Chronicle. 

DoorDash told the Chronicle that the charges were a mistake and that it will reimburse restaurants affected by said mistake. According to the delivery service, fewer than 10 restaurants were impacted, and those restaurants will be reimbursed.

However, Christian Ciscle, a San Francisco chef, said he had not been notified of any reimbursements “despite multiple calls to DoorDash.” 

Ciscle was the one to shed light on the issue via a screenshot posted to Twitter:

Normally (read: no pandemic), the commission fees services like DoorDash charge restaurants can reach as high as 30 percent per transaction, a point that’s been an ongoing problem in the world of restaurant delivery. When the pandemic shuttered dining rooms around the country this spring, the problem became a major focal point in the debate over the ethics of third-party delivery. 

San Francisco isn’t the only city to have introduced mandatory fee caps for delivery services. New York, Seattle, Chicago, and several others made similar moves in the recent past. Most of these fee caps are set to last so long as cities remain under emergency states due to COVID-19. That could be a while longer, given the record-setting number of cases the U.S. is now seeing.

DoorDash should absolutely pay back restaurants involved. However, let’s hold off a bit before we herald fee caps as the thing that will keep third-party delivery practices in check. They won’t. They’re necessary to some degree while restaurants are forced to do delivery and off-premises orders. But they’re still just a bandage on a much larger ailment, which is the convenience-driven, gig-economy-reliant model on which third-party delivery is built. Until some of delivery’s more fundamental issues, including the glaringly unprofitable nature of the model, are addressed, fee caps are just one in the crowd when it comes to problems for restaurants.

Fare Launches ‘Ethical’ Delivery Service in NYC With Zero Commission Fees for Restaurants

Restaurant delivery service Fare, which calls itself “an ethical and fair alternative” to third-party delivery, today announced its official launch in NYC. The company’s number one claim to fame right now is that it charges restaurants zero commission fees on orders because of its more local approach to food delivery.

Fare works with local restaurants around NYC, curating a menu of available options for customers to choose from based on their neighborhood. Given that, customers get a much more limited number of options to pick from each day compared to, say, Grubhub or Uber Eats. The company claims to taste-test every single menu that goes onto its site. It also says, via its FAQs, that if a restaurant’s food quality starts to slip, Fare will remove their menus from its site.

The service differs from third-party delivery apps in that orders need to be placed in advance, usually on the day before, through the Fare website. There is no minimum for orders. Fare then groups orders together by neighborhood, block, or building, and the restaurant drops the order off at each customer’s door within a designated 1-hour timeframe. 

Having the restaurant drop the order off itself is how Fare gets around charging businesses commission fees — which, as we’ve documented ad nauseam, can be as high as 30 percent per transaction with the major third-party delivery services. To make money on orders, the company says it charges customers a small service fee.

Fare’s localized approach to delivery is definitely an attractive option for smaller restaurants that primarily serve customers in their immediate vicinity and may not have the money to ink a deal with Grubhub. For customers, it might not be as convenient as using a major third-party delivery service, since orders have to be placed ahead of time and food choices are limited. The real acid test will probably be the convenience factor, which seems to drive everything in the restaurant industry nowadays. Will consumers be willing to sacrifice some of the “on-demand” aspects of food delivery to get a cheaper meal and ensure restaurants aren’t getting gauged with commission fees? The jury, as they say, is still out.

Fare is currently operating in Manhattan, Brooklyn, and Queens. 

Uber to Acquire Postmates for $2.65B

Uber has agreed to acquire Postmates in a roughly $2.65 billion all-stock transaction, according to a press release from Uber. The deal is expected to close in the first quarter of 2021.

Uber first made the offer to buy Postmates at the very end of June, after a failed attempt to snap up Grubhub. According to sources close to the matter that spoke to Bloomberg, the two companies have actually been in talks on and off for about four years. 

The boards of both Uber and Postmates have approved the transaction, which is still subject to the approval of Postmates shareholders and also any regulatory approvals. Uber said in the press release today that it will keep the consumer-facing side of the Postmates app running separately from its Eats app, “supported by a more efficient, combined merchant and delivery network.” 

Acquiring Postmates would give Uber a larger presence in certain key markets, like Los Angeles, where Postmates is the leading third-party delivery app. In the past, Uber has said it will pull out of markets where it is not the number one or number two player.

Today’s deal is another piece of evidence that third-party delivery is consolidating fast. Grubhub itself was acquired by the newly formed Just Eat Takeaway.com in June. Elsewhere, Delivery Hero recently bought South Korean service Woowa Bros. for $4 billion and Brazil-based iFood announced a merger with Colombian delivery heavyweight Domicillios.com.

Notably, DoorDash, which is still the U.S. leader in terms of marketshare for third-party delivery, has not come up in this M&A flurry. At last check, the company secured an additional $400 million in funding. It filed to go public in February and still plans on a listing for 2020.