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Daily news and analysis about the food tech revolution

Uber Eats

Amid Layoffs, Uber Eats Partners with Burger King

It’s been a bit of an up and down week for meal delivery service Uber Eats. On the upside, Burger King just announced it was partnering with Uber Eats for nationwide meal delivery starting today. However, this comes on the heels of news yesterday that Uber Eats is laying off one percent of its workforce including workers on the Uber Eats team.

People hungry to eat an Impossible Whopper (or any BK sandwich) from the comfort of their home can now place an order within the Uber Eats app. As part of the promotion, the Uber Eats is offering free delivery on orders of $15 or more through October 27.

BK’s partnership with Uber Eats isn’t an exclusive one. If you go to Burger King’s site, the “BK Delivers” link actually takes you GrubHub. Though when we searched for Burger Kings in a few different cities, there were no results, so GrubHub’s partnership may not be implemented nationwide.

The addition of Burger King to its roster also comes after McDonald’s ended its exclusive delivery relationship with Uber Eats in July of this year. Bringing on BK helps bolster Uber Eats at a time when DoorDash (which also delivers for McDonald’s and Burger King) leads meal delivery space with 35 percent market share of consumer spend, followed by Uber Eats, which has 25 percent.

With so many players in the space, meal delivery has become a cutthroat business, and Uber Eats is in a bit of flux as it works to stave off the competition. Uber has been under pressure after a lackluster IPO and racking up financial losses. Uber CEO Dara Khosrowshahi said that while there is a lot of growth ahead for Uber Eats, profitability for the division is still a ways off. To help stem the bleeding, Uber announced yesterday that it was laying off 350 people across the company, including Uber Eats. The company didn’t provide details on how many from Uber Eats were being let go.

We’re still early in the meal delivery game and Uber Eats isn’t on life support yet. The company has a “preferred” delivery partnership with Starbucks, and has been experimenting with drone delivery of burgers. Perhaps an Impossible Whopper by air isn’t that far off.

Wendy’s Ramps Up Its Digital Order and Delivery Strategy

Wendy’s is intensifying its efforts around digital order and delivery, announcing at an Investor Day call last Friday that it is aiming to make digital sales 10 percent of all orders by 2024. Right now, digital sales account for 2 percent of orders.

Earlier this year, the Dublin, OH-based chain said it was investing an incremental $25 million into building “a stronger foundation” across its digital platforms. So far, that move to play catch up to its competitors appears to be paying off. At Investor Day this past Friday, Wendy’s Chief Digital Experience Officer Laura Titas noted in a presentation that check sizes are now 20 percent larger with mobile orders. For delivery specifically, the chain now sees check sizes 50 to 60 percent larger.

Titas’ presentation also suggested delivery will be key towards helping Wendy’s reach its 2024 goal for digital sales. To that end, she outlined multiple initiatives around improving the delivery experience.

For starters, it’s adding more delivery services. Wendy’s has partnered with DoorDash since 2017. Next year, the chain will expand its reach with third-party delivery to include Uber Eats and Grubhub, too.

And as is the case with many chain restaurants, QSR or otherwise, Wendy’s isn’t focusing its delivery strategy solely on those third-party partnerships. Instead, it will also launch what Titas called “in-app delivery,” where, thanks to a POS integration, Wendy’s can also process orders directly through its own app. While she didn’t give too many details, Titas said she expects this direct integration to knock three to five minutes off the delivery process. Meanwhile, the arrangement will also allow Wendy’s to track customer data more precisely.

Geolocation capabilities, to improve delivery and help ensure that customers are ordering from the right (i.e., the closest) Wendy’s, voice-order via Google Assistant, and a long-needed loyalty program were all announced at the Investor Day event as well.

Wendy’s certainly has its work cut out when it comes to evolving into a tech-forward restaurant company. Between Burger King’s many publicity stunts to drive mobile orders and McDonald’s turning itself into a tech company, competition is only growing fiercer when it comes to retaining customer loyalty. But with 60 percent of all restaurant orders now off-premises, there’s also a lot of room for growth and new audiences to grasp for those who can make their reach wide enough.

DoorDash Now Holds 35 Percent of Consumer Spend in Third-Party Delivery

DoorDash’s growth continues outpacing its competitors in the third-party delivery space, according to a new report. This week Edison Trends released data on the third-party delivery market that shows DoorDash leads the competition with 35 percent market share of consumer spend, followed by Uber Eats (25 percent) and Grubhub (23 percent).

The lead DoorDash currently enjoys is not surprise, as it’s been a big year for the San Francisco-based service. The company now offers delivery in all 50 U.S. states and was the first to do so. Its $410 million acquisition of Caviar in August gave the service an even wider reach, and over the last 12 months DoorDash has been scoring deals a plenty with major restaurant chains as well as expanding service to other continents.

Right now, DoorDash’s lead is a small one, though. As Edison points out, the company shared “approximately the same market share of consumer spend” with Grubhub and Uber Eats at the beginning of 2019, so a small lead now doesn’t necessarily mean total dominance for the foreseeable future. All of these companies are still looking for ways to boost user loyalty to their specific platforms, not to mention reach some level of profitability.

What’s interesting about DoorDash is that, as a service, it doesn’t tend to dabble in many initiatives outside of partnering with restaurants and acquiring companies that will help deliver food faster. By contrast, Uber Eats seems forever unrolling new features on and off its app, and Grubhub is of late fixed on launching digital-only concept restaurants. Postmates, meanwhile, appears to be turning its attention to large-scale venues like baseball stadiums.

It’s possible part of DoorDash’s lead is due to its simpler-is-better approach, which focuses primarily (though not exclusively) on expanding service and increasing restaurant choice. Whether this is the winning strategy remains anything but certain.

The Week in Restaurant Tech: It Was Mostly About McDonald’s

McDonald’s grabbed multiple headlines this week, and honestly if the chain keeps adding tech-forward initiatives at its current hell-bent pace, I’m gonna have to rename this column “The Week in McDonald’s Tech.”

As we covered earlier in the week, the company broke its longstanding silence on plant-based burgers by announcing the soon-to-launch P.L.T. (“plant,” “lettuce,” “tomato”) sandwich for menus in Canada.

But the possibly ill-named patty wasn’t the only bit of news to come out of the mega-chain’s headquarters. Lately McDonald’s seems to be taking a page from Domino’s playbook; which is to say, the chain is fast becoming as known for its tech initiatives as it is for its burgers.

Image via McDonald’s.

“Alexa, Get Me a McDonald’s Job” Is Now a Thing
This week, McDonald’s also announced it is working with Alexa to let potential new hires apply through a voice-initiated application process. Dubbed “McDonald’s Apply Thru,” the skill works on both Alexa- and Google Assistant-enabled devices. Users can simply say, “Alexa, help get me a job at McDonald’s” (or the Google equivalent of that statement) and answer a few basic questions via voice before getting sent a link to complete the application process.

It’s a neat trick . . . I guess. But you have to wonder if bolting voice capability to the front of the application procedure will actually make getting a job at McDonald’s faster and easier, or if it’s just tech for the sake of tech. Obviously it’s early days for these kinds of voice-activated initiatives. It’s not, as Restaurant Dive pointed out, a totally seamless process yet. McDonald’s will need to refine it if it wants to make the voice-enabled application process a long-term facet of its hiring process.

More Tension With McDonald’s Franchisees
But not everyone in McDonaldsland is thrilled about tech for the sake of tech, or the pace at which McDonald’s is aiming to overhaul its locations, of which there are more than 37,000 worldwide. This week, a Bloomberg article delved partly into some of the concerns and frustrations franchises face as its McBoss continues to mandate various tech initiatives.

You should read the full article, which is a fascinating look at how CEO Steve Easterbrook turned the company’s lagging sales around with tech. But franchisees are balking at the expectations around revamping their stores for this “Experience of the Future.” As Bloomberg noted, “They object to the enormous costs of the project, which, for owners of several locations, can run into tens of millions of dollars, even with McDonald’s offering to subsidize 55 percent of the capital for the remodels.”

This is not a new story. Friction between HQ and franchisees has been steadily growing for a while now. And with AI in drive-thrus and voice-recognition now part of the McDonald’s tech tool box, in all likelihood, the McSaga will get more intense in the coming months.

DoorDash Data Breach
DoorDash said in a blog post on Thursday that 4.9 million customers, merchants, and drivers had their information stolen by hackers. That includes names, email addresses, delivery addresses, passwords and, for some, the last four digits of their credit cards. DoorDash pointed out, in bold-faced type, that full payment info was not accessed and that “the information accessed is not sufficient to make fraudulent charges on your payment card.” The breach happened all the way back on May 4, 2019. DoorDash said customers, merchants and Dashers who joined after April 5, 2018 are not affected.

New Deals in Third-Party Delivery
Not that a hack enough to slow down the growth of restaurant delivery via third parties. This week, a few more chains announced deals with various delivery services. Postmates added two new partners, O’Charley’s and restaurant company Kahala Brands, who owns chains like Pinkberry and Blimpie. Meanwhile, Sweetgreen struck an exclusive deal with Uber Eats. That’s a win for the latter, who took a bit of a blow earlier this year when its exclusive contract ended with, yup, you guessed it, McDonald’s.

If you’re still reading and want to learn more about restaurant tech, join us in Seattle on Oct 7–8 for The Spoon’s annual Smart Kitchen Summit. Grab tickets here.

Uber to Merge Its Rideshare and Eats Apps, Partners With Rachel Ray for a Ghost Kitchen

At its event yesterday in San Francisco, Uber unleashed a slew of announcements and updates to its app, including merging Uber Eats into its main rideshare app, expanding its rewards program, and several other improvements geared towards bolstering the presence of Uber Eats in customers’ everyday lives.

Of all the food-centric news to come out of the event, what’s most interesting to us over here at The Spoon is Uber’s continued focus on ghost kitchens. The company announced yesterday it has teamed up with Rachel Ray to open a virtual restaurant whose menu will only be available on Uber Eats.

A blog post from Uber offered some details, though not a ton. The limited-time “restaurant” will run for 10 weeks in 10 cities and be timed with the launch of Ray’s new cookbook. Uber didn’t specify which cities and exactly when the launch will happen, but presumably the food will be cooked in one of the company’s growing number of ghost kitchens and delivered out to customers in a nearby radius.

The initiative highlights a new trend we’re seeing more of in ghost kitchens, which is using them to launch non-restaurant concepts that would be prohibitively expensive to test out in a traditional brick-and-mortar setting. Uber isn’t alone in this new arena: Grubhub has already launched two such initiatives, including a partnership with food publication Bon Appétit, which was announced earlier this week. Partnerships with big-name chefs seem a logical next step, and while the Uber-Rachel Ray deal is for a very limited time, it’s likely the first in what will be a long string of similar partnerships in future.

Rachel Ray wasn’t the only deal announced at the event yesterday. Uber Eats also unveiled an exclusive food delivery partnership with fast-casual chain Sweetgreen. Interestingly, the announcement comes the same week Sweetgreen closed a $150 million funding round and said it will launch its own in-house delivery service.

Uber made multiple other announcements yesterday that will affect Eats, including the news that it will merge its food delivery app into its main ride-hailing app. This “next generation of the Uber app,” as the company called it in a blog post, is currently testing two different versions of this new interface in “hundreds of U.S. and international cities.”

The company also highlighted allergy-friendly filters, which will let Eats customers communicate more effectively with restaurants about their dietary restrictions, and its forthcoming plans to make extras like cutlery and straws available only upon request.

With growth of its ride-hailing service stalling, including less-than-stellar earnings reports from Q2, it makes sense Uber is continuing to focus on its Eats business, though that business has yet to become profitable, either, and, as Uber CEO Dara Khosrowshahi noted on the Q2 earnings call, won’t be for some time. Whether celebrity chefs and allergy filters can actually make any real progress towards changing that remains doubtful.

Fatburger Is Turning Los Angeles Stores Into Ghost Kitchens for Its Sister Brand

Southern California QSR chain Fatburger is turning 15 of its Los Angeles locations into ghost kitchens for Hurricane Grill & Wings, one of its sister brands, according to a post this week from Nation’s Restaurant News. Both chains are owned by Los Angeles-based restaurant company FAT Brands.

Hurricane Grill & Wings has restaurant locations across Florida as well as in New York, New Jersey, and a handful of other states. A store for Chula Vista, CA is in the works, but at present, the chain has no locations in operation in the state of California. However, thanks to Fatburger’s newly launched ghost kitchens, customers in Los Angeles will be able to access the Hurricane menu when ordering for delivery.

The limited version of Hurricane’s menu will feature the chain’s wings as well as a few other items like onion rings, fries, and soft drinks. The menu will only be available for delivery customers who order via the usual suspects of third-party delivery: Grubhub, Uber Eats, Postmates, and DoorDash.

To be clear: The virtual Hurricane restaurants aren’t displacing those Fatburger locations. Rather, Fatburger’s kitchens will do double duty, with cooks trained to make food from both menus.

Like any other ghost kitchen, Hurricane’s will be a completely unseen operation. There’s no dining room involved — customers who eat in at Fatburger locations doubling as ghost kitchens will not be able to order off the Hurricane menu, which, as mentioned above, will be available solely through third-party delivery channels.

For a restaurant company trying to grow multiple brands at once, a move like FAT Brands’ is a smart play towards enticing new customers who might be fans of one restaurant chain but wouldn’t otherwise be exposed to another. Turning existing real estate into a ghost kitchen for another brand is a way to expose customers to more of those choices without incurring the high costs and thin margins of a full restaurant location that includes a dining room.

And in a restaurant business where delivery is becoming increasingly mandatory, enticing customers to try a new brand through delivery also potentially increases a business’s off-premise sales — something that would not only make investors happy during earnings calls, but could also give a brand more power negotiating commission fees with third-party delivery services.

According to NRN, FAT Brands wants to expand ghost kitchens for the Hurricane chain to 12 more Fatburger locations in the fourth quarter, and eventually apply the concept across its entire brand portfolio.

Postmates Raises $225M, Now Valued at $2.4B Ahead of IPO

Third-party delivery service Postmates has raised another $225 million in funding, TechCrunch reports. The round was led by GPI Capital and brings the service’s total amount of funding to roughly $1 billion. Postmates is now valued at $2.4 billion.

The San Francisco-based company confidentially filed for an IPO in February of this year. At last check, the company will make its IPO paperwork public this month and is expected to debut on the stock exchange at some point during the fiscal third quarter of 2019.

As TC writes:

. . . last-minute financings are critical for companies poised to run out of cash and in need of an infusion prior to hitting the public markets. The motives for Postmates last-minute financing are unclear, however, the company will certainly begin trading on the stock market at an interesting time.

Postmates would follow third-party delivery rivals Grubhub and Uber Eats into the public markets. Rival and current market leader DoorDash is also rumored to be going public.

But as we’ve written before, the long-term viability of third-party delivery is still in question. Postmates and DoorDash might be valued at massive sums right now, but as a model, third-party delivery has yet to become profitable.

It’s also an almost-constant source of controversy these days. From shady tipping policies to proposed caps on commission fees, these services have received endless headlines calling into question the ethics of the model. Meanwhile, California’s Assembly Bill 5, which was just signed into law, is a major blow to companies like Uber and DoorDash and will most likely have a ripple effect across other Democrat-led states.

Recent numbers put third-party delivery app users at 44 million users in the U.S. by 2020. When Postmates lines up next to its rivals in the public market, it will also be joining the struggle to somehow turn a profit from those millions of users.

Starbucks Plans Pickup Only Store for NYC

Starbucks will soon bring its streamlined, pickup-only store model to Manhattan this fall, according to an article published on Bloomberg.

The NYC store, which is still under development and slated to open at some point this fall, is based on the coffee chain’s “Starbucks Now” model it debuted in Beijing in July.

Starbucks Now stores have limited seating, which wouldn’t be too drastic of a change in Manhattan, where tables and chairs at Starbucks locations are already pretty minimal. More importantly, the concept features an in-wall pickup system where customers order and pay via the Starbucks app and retrieve their orders from pickup portals in the wall, without having to wait in line. The system also works for delivery drivers, who can simply walk into the store and grab their order from the wall and go. One or two baristas will be on hand to make drinks and assist customers if they need it.

Starbucks CEO Kevin Johnson told Bloomberg that these stores aren’t meant to replace existing Starbucks cafes and are instead geared towards on-the-go customers (which is basically everyone in Manhattan). The express stores can also double as locations where nearby Starbucks cafes can have their delivery orders fulfilled, freeing up time for employees to focus on non-mobile customers.

They’ll need that extra location for delivery orders. Starbucks recently announced that its delivery partnership with Uber Eats will be available throughout the U.S. by early 2020.

While there’s no official timeline yet, Starbucks will likely plan similar Starbucks Now stores in other cities, including San Francisco, Boston, Chicago, Seattle, and Los Angeles.

Uber Eats Getting Out of South Korea

Uber Eats will no longer be delivering food in South Korea, the company said today. Reuters was first to report the news, writing that company faced competitive pressures in the world’s fourth biggest online food delivery market.

Indeed, it was a daunting task for Uber Eats to gain meaningful traction in South Korea, where Woowa Bros.’ food delivery service Baedal Minjok enjoys a 75 percent market share. Helping strengthen that position, Woowa Bros. raised $320 million in December of last year in part to build more food delivery robots.

Presumably, however, it wasn’t just external forces that brought Uber to this decision. Since going public this year, the company is under greater scrutiny to turn a profit, or at least, you know, not lose $5 billion every quarter. Even though Uber Eats grew 140 percent year-over-year and generated $3.9 billion in bookings as of its Q2 2019 earnings report, Uber CEO Dara Khosrowshahi told CNBC that Uber Eats wasn’t going to be profitable any time soon, saying:

The Eats business is still a business that carries very significant growth going forward and that continues to attract a lot of capital. Not just in the US, but all over the world. With the eats business there’s a lot of capital chasing a lot of growth and we’re the leader on a global basis. So, I don’t expect that business to be profitable in the next year or year after frankly.

Looking to relieve at least some pressure, in June, Uber laid off 400 people across its marketing team in an effort to streamline operations. For more background on Uber’s long struggle with turning a profit, check out this recent episode of The New York Times podcast The Daily.

Among the bigger, more existential questions for Uber is exactly where in the world can it be the number one food delivery service. It faces tough competition just about everywhere around the globe. In the U.S., Uber Eats lags behind DoorDash and GrubHub. In Europe its up against the likes of Deliveroo and recently merged services Just Eat and Takeaway. In India it faces Zomato and Swiggy.

It’s not all grim news for Uber though. One differentiator the company has over its rivals is its ride-hailing business, which the company is further integrating with its food delivery business. Uber has been testing a $9.99 subscription service that would include unlimited meal delivery.

Uber Eats will cease operations in South Korea on October 14.

McDonald’s Partners With Grubhub, Expands Delivery to NYC and Tri-State Area

McDonald’s struck a major deal with Grubhub this week to expand the burger mega-chain’s McDelivery program in the NYC and Tri-State areas.

McDonald’s ended its exclusive delivery partnership with Uber Eats earlier this year. Then, in July, it added DoorDash to its roster to expand McDelivery further across the U.S. Among third-party delivery services, DoorDash currently holds the number one spot in terms of market share.

But Grubhub is still the top service in NYC and many other parts of the Northeastern U.S., including Boston and Philadelphia. Mired in controversy it maybe be, it’s still McDonald’s best bet when it comes to expanding delivery to as many locations as possible in that part of the country.

In the press release, McDonald’s said the Grubhub-Seamless partnership will expand delivery to 500 locations in the NYC and Tri-State areas, while overall delivery is expected to be a $4 billion business for the company in 2019. As is becoming the norm with major delivery partnerships, Grubhub will integrate its service directly into the McDonald’s POS system to streamline and speed up orders. McDonald’s did not say when exactly the new delivery program will become available.

The aggressive delivery expansion is part of McDonald’s push to transform all of its locations into “Experience of the Future” stores, which emphasize tech initiatives like self-order kiosks, mobile ordering and payments, and AI powering the drive-thru. And, of course, delivery.

Grubhub, meanwhile, has been building more of a presence in the rest of the country. In August, the service announced nationwide delivery with Shake Shack as well as a partnership with Dine Brands, who owns Applebee’s and IHOP restaurants.

DoorDash Launches Delivery In Melbourne, Its First City Outside North America

As of today, DoorDash is now available in Melbourne, Australia, the first city in which the third-party food delivery service is operating outside of North America.

In a blog post, DoorDash said it has already added “thousands of restaurants” in Melbourne to its platform, including national chains like Nando’s and Betty’s Burgers.

DoorDash joins a competitive food delivery market that includes Uber Eat and Deliveroo, both of which have operated in Australian for years. The latter is even part of Australian airline Quantas’ frequent flyer program. DoorDash will also have to contend with MenuLog a subsidiary of Just Eat, whose recent acquisition of Takeaway.com makes it one of the biggest third-party food delivery companies to contend with outside of the U.S.

As to why DoorDash chose Melbourne as its first overseas market, the company did not say, though Reuters points out that the “city of 4.5 million people has been a popular entry point for global companies in the so-called ‘sharing economy.'”

The Australia expansion comes on the heels of DoorDash’s recent launch in Montreal, Canada, the service’s first non-English-speaking location. Not that the company is slowing down its march across America: Since becoming the first U.S.-based third-party delivery service to operate in all 50 states, DoorDash has been striking deals left and right with major restaurant chains. The company also recently acquired autonomous vehicle startup Scotty Labs and is potentially looking at an IPO.

In August, the company outlined a new policy for its pay structure for drivers, a move largely in response to controversies surrounding the way the service handles worker tips.

In this week’s blog post, DoorDash said it expects to expand “throughout the suburbs of Melbourne, its surrounding regional cities, and Australia broadly” over the rest of 2019 and into 2020.

Zuul Kitchens Is Launching a Huge Ghost Kitchen Facility Next Week in NYC

Come next week there will be a new kitchen in town, but it won’t have any dining room attached. Zuul Kitchens, a ghost kitchen facility that will exist solely for the purpose of helping restaurants fulfill delivery orders, will launch operations in New York City starting in September, according an article from Eater NY.

Zuul will open its first facility in Manhattan’s SoHo neighborhood. According to the Eater article, the 5,000-square-foot space will house nine kitchens and house Sweetgreen, Junzi, and other chains looking to grow the number of delivery orders they can fulfill. Restaurants will pay a monthly membership fee (undisclosed at the moment) that covers kitchen space as well as equipment.

Ghost kitchens are basically restaurant kitchens without a dining room or front-of-house operation. Back in December of 2018, The Spoon predicted that the rise of ghost kitchens would be a major trend unfolding over 2019. So far, that’s been the case. Kitchen United, a major player when it comes to offering restaurants shared kitchen facilities for delivery-only orders, has been rapidly expanding across the U.S., opening or planning to open locations in Atlanta, GA, Austin, TX, Columbus, OH, as well as Washington, D.C. and NYC. Former Uber CEO Travis Kalanick runs a network of delivery-focused facilities called CloudKitchens. Outside the U.S., Starbucks opened ghost kitchens in China to fulfill delivery orders and Uber is rumored to be dabbling with them in Europe.

Ghost Kitchens serve a couple of different purposes. They provide a place for existing restaurants to fulfill more delivery orders and also serve as facilities for food entrepreneurs and restaurants to test out new concepts. For example, restaurant group Lettuce Entertain You just announced a partnership with the folks behind the Whole30 program to open a virtual, delivery-only Whole30 Restaurant, with food delivered by Grubhub.

For the SoHo locations, Zuul will focus on established restaurants that have existing brick-and-mortar locations but are looking to grow their delivery orders.

Zuul told Eater it is aiming to fulfill delivery orders in 15 minutes total from the time the order is placed, which would certainly satisfy consumers’ need for speed when it comes to food nowadays. Whether or not the company can meet that goal on every order will depend on the people actually delivering the food. Zuul is using Uber Eats, Grubhub, and DoorDash services for the actual delivery, so part of the 15-minute strategy is at the mercy of those couriers. That said, Zuul is apparently offering drivers a waiting area that includes plenty of phone charging stations, places to sit, and refreshments like coffee and tea, all of which could entice drivers to arrive a little early so they’re onsite as soon as an order is ready for delivery.

For now, Zuul will focus on the New York market, which means it won’t have a ton of direct competition at first. That will surely change once Kitchen United comes to town.