Uber’s Restaurant Empire

[QML]

In reflection, it’s a good idea. Consumer preferences are hard to gauge; there isn’t much of a feedback loop right now with restaurants beyond you either have business and are sustainable, or you don’t and lose it all. This is comparable to YouTube giving you different advertisements, but that these ads (restaurants) are really expensive to run and experiment with. Virtual restaurants essentially bring A/B testing from the digital realm to the physical one. They provide and shorten the feedback loop, lowering the cost of exploration by centralizing and by economies of scale; and resulting in greater exploitation (not in the economic sense but in the multi armed bandits framework).

[blatherard]

Seamless had virtual restaurants at least 5 years ago. I remember in particular my wife liked to order burritos from a certain restaurant, named "Coastal" on the UWS. We tried visiting the restaurant based on the address, and found out that it was actually "Citrus", an upscale latin american place with an entirely different menu (that has since closed).

[smmnyc]

I used to live on the UWS and remember Citrus. Never encountered Coastal but do recall an eclectic menu. (No burritos though!)

[actuator]

I think this is pretty common across industries where a platform acts as an aggregator/marketplace. Case in point services like Amazon.com, Netflix have their own brands/content as well. Netflix is known for using data of people's content consumption to make new content. I think this makes sense for two reasons:-

- Tighter control over what you produce, so higher margins and potential differentiators(like the burger example in article).

- Acts as a defensible strategy for the aggregator if it can tie these brands with itself.

The only scary thing is when these marketplaces/aggregators just kill small businesses because of controlling the "storefront", discovery and leveraging economies of scale. Example search in Amazon: https://imgur.com/a/zHDueIk

[petra]

In the case of "virtual restaurants", centralized, high volume kitchens are much more cost efficient - for example they can get salmon for $6/pound instead of the $9-$11/pound restaurants pay, and can save maybe up to 85% on labor.

So thinking that a small business could play in the "virtual restaurant" industry, is probably not realistic.

[vageli]

> I think this is pretty common across industries where a platform acts as an aggregator/marketplace. Case in point services like Amazon.com, Netflix have their own brands/content as well. Netflix is known for using data of people's content consumption to make new content. I think this makes sense for two reasons:-

In this case it's quite different, I believe, in that Uber will notice an underserved market and reach out to existing players/small business in that area to expand into that market. This sounds very different than Uber using their market knowledge to create a competitive advantage for themselves.

[dawhizkid]

I'm still waiting for someone to figure out how to make "Etsy for food" work at scale. My guess if/when it happens it will look somewhat like what Uber has i.e. rent licensed "ghost kitchens" to small cooks by the hour and make all deliveries originating from those kitchens.

[netsharc]

Seems that's already happening: https://www.theguardian.com/business/2017/oct/28/deliveroo-d...

Article lead: As appetite grows for upmarket takeaways, delivery service is setting restaurants up with satellite kitchens inside metal boxes.

[dopeboy]

This was tried most recently by Josephine (josephine.com) in the bay area. They ran up against laws that forbid selling food cooked at home.

I don't think it is a matter of figuring out but rather legislation.

[appwiz]

Sounds like Cloud Kitchens is trying this model - https://www.cloudkitchens.com

[foolfoolz]

That’s Gobble https://www.gobble.com

They’ve been around a long time

[ben_jones]

Op-ed from a former power user: Uber eats caters in part to the socially anxious and introverted demographic with moderate to high levels of disposable income. It pushes high margin, low-quality, foods at 2x or more pricing - particularly pizza, wings, chinese, and burgers. With some exceptions a large portion of these restaurants delivered already for lower prices, but with less convenience such as order tracking or ordering through an app. Over-time many "power users" of Uber eats and similar apps will regress to only a couple favored restaurants or stop using the app entirely. Uber eats will optimize for these power users to the detriment of non-chosen parties for the worst of the ecosystem as a whole.

[706f6f70]

> the socially anxious and introverted demographic with moderate to high levels of disposable income

I've began wondering if Silicon Valley is intentionally growing this demographic. If your customers need you because they are mentally unable to order food without you . . . well that's even better than a lifetime prescription of your medication or selling cigarettes.

It's twice as good if I can slowly train my customers to develop social anxiety by removing transactional interactions with minimum wage earners. That sort of interaction would traditionally service as a stepping stone in developing and maintaining social skills.

Add in social media which constantly has self-condemning memes about social anxiety, embarrassing moments, and so on; and you've got an extremely fertile ground for social anxiety.

[stephengillie]

Many of these stores have a counter or wall full of tablets - 1 for each delivery service. They have an Uber Eats tablet, a GrubHub tablet, DoorDash tablet, Bite Squad tablet, etc.

[gonehome]

I stopped using it because the Uber drivers never get out of their car and come to your door (even if you mark this in the app).

I also had a driver drive close to my place and then steal the food - there was no ability for me to rate them and support was some call center that didn’t understand the issue.

DoorDash is a lot better.

[user5994461]

It pushes for higher quality. It allows me to get food from real restaurants that didn't offer delivery otherwise. Same as sitting in.

That being said, I agreed that the margin is huge.

[1123581321]

I disagree with your theory but you shouldn’t be downvoted for it.

I think that over time, the cost of delivered food will lower as restaurants that do it well (perhaps these virtual restaurants) become faster, optimize their production and optimize the handoff to the driver. Jimmy John’s subs is an example of a company that has done this with their own delivery drivers.

[buboard]

is that an american perspective? There many places where ordering delivery food is a very ordinary thing.

[sytelus]

There are two fundamental issues in food delivery business:

1. Per hour cost of a delivery person is usually $20 after taking in to account vehicle, gas, down times etc. If you assume each delivery takes minimum of 20 mins (accounting for restaurant-customer-return hops), we are talking average of $6+ per delivery. Considering a cost of a meal is usually $10-20, this is significant barrier. My question is: Does these startups taking on losses to build customer base?

2. Cooked food is notoriously perishable. Think about eating burger lying around for 30-60 mins before you eat. This not only limits items you can deliver but also puts on pressure that you are always running against clock. One mistake and you are bound to lose a customer for factors not in your control.

So, food delivery idea is not new. It had been tried and failed to takeoff probably couple of dozen times mainly due to above two issues. What really has changed now to mitigate these two issues?

[alaskamiller]

Fundamentals still the same from the Spoonrocket days. $15/hr to pay the drivers. 3 to 5 trips an hour. Avg ticket is $16, and the platforms (P, U, D) take a third.

What's changed?

Consumers changed. People are paying $6 for delivery. They've grown accustomed to room service.

No one's taking 60+ min for food delivery.

What's next is taking India's lead and integrating ordering, prep, delivery all in one.

[remote_phone]

I get food from UberEats and DoorDash that are still hot to the touch. I’ve had some food that I had to cool down. This is in stark difference from delivery in the 90s (the last time I got delivered food). I’m very willing to pay extra for this and not have to pay tip to the restaurant.

[chrisseaton]

> we are talking average of $6+ per delivery. Considering a cost of a meal is usually $10-20, this is significant barrier

I don't understand. Why does the value of the thing being delivered make a difference to the value of the fact that it's delivered?

Should we expect it to cost more to deliver a more expensive item? I don't see why. Why should it cost less to deliver a less expensive item.

[jy1]

Average order is closer to $20.

Uber then takes up to 30% cut on the food cost.

[dpeck]

See Mac’d from the last yc batch as well. There’s some cool stuff happening in food. Ghost kitchens have existed for a while, and I’ve had a restaurateur friend mention them to me quite a few years ago, but it seems like they’re hitting scale and getting very interesting.

[diogenescynic]

I will not order take out from Uber. I’ve seen drivers with the food on the floor with passengers sitting over it. Deliveries also aren’t quick.

[icebraining]

Weird; in the two cities I've seen them, all UberEats drivers use mopeds, they don't drive people as well. How does that even work? I don't think the apps let you coordinate the delivery and ride.

[pietroglyph]

The most interesting part of this is their use of user data. Traditionally, it seems like there isn't a great way to judge demand for a restaurant until you open it, so it makes sense that user tracking (to gauge interest) and the ability to operate out of an already profitable space (reduced upfront cost) gives establishments a significant advantage (although the article doesn't exactly comment on number of failed online restaurants, so selection bias cannot be ruled out.) I wonder how competitors like GrubHub use data to gauge interest...

[ikeboy]

What's annoying is when you try to order from an existing restaurant and notice they marked up their menu across the board for Uber Eats, then there's delivery on top of that.

[tardo99]

The thing that really impresses/surprises me about the growth of services like these is that people have so much disposable income to pay for stuff like this. In the news one reads constantly about how people are stressed financially. Maybe people are diverting money they once would have spent on other luxuries (cable tv maybe?) toward this kind of expense.

[pjc50]

The inequality slope is increasing. There's a fairly large upper middle class of people who work+commute long hours and are prepared to pay for extreme convenience. While at the same time there's also a precariat of people for whom earning a small and variable amount outside normal working hours sounds like a good idea, providing cheap labour to these services.

https://delong.typepad.com/sdj/2009/02/changing-relative-pri... : "In Agatha Christie's autobiography, she mentioned how she never thought she would ever be wealthy enough to own a car - nor so poor that she wouldn't have servants..."

Perhaps that is now reversing. Or the gap is wide enough to have a servant with a car.

[prostoalex]

1) It’s not that huge of a markup

2) For a larger group, consider the added cost of dining in - expectation of 18-20% tip, the wine (or other alcohol) is typically overpriced or there’s a $15-20 corkage fee per bottle. Transportation or parking is another potential expense.

3) Some foods lend themselves well to leftovers, so with marginal increase in price one might be buying a meal for the next day, too.

4) For family dining, this puts less pressure on kids and less stress on parents. Keeping the little rascals busy for 2+ hours that a typical dinner might last could get a tad hard.

[huac]

couple factors

- growing inequality: more people at each end of the spectrum; rich get richer (and have more income for food delivery), poor get poorer and lack full-time job opportunities (and are more incentivized to take low income, insecure delivery jobs) - it's expensive to be poor: working more hours means fewer opportunities to buy groceries or take time to cook.

[actuator]

Cable TV? I am quite sure in the future we are going to pay almost the same amount what people were paying for cable TV. Not all content is available on each service so in the end people will end up subscribing for Netflix, Amazon Prime, HBO, Disney whatever etc. Plus more for sports. Also, good luck to people who don't have true unlimited plans, as streaming all those high definition bits over the internet just means paying your ISP more.

[r00fus]

One word: kids. For a family of 4 or 5 or if you have baby, going to a restaurant is much more challenging than eating in.

We order in usually once a week - sometimes from DoorDash sometimes from the restaurant directly.

[KeepTalking]

hmmmm.... I wonder if Uber eats can do what AirBnb did to the hotel business by allowing home chefs-after-6pm to take low risk experiments and launch micro Uber only restaurants from their home kitchen or a common kitchen (managed by Uber eats to deal with sanitation challenges).

[kerng]

Had never thought about this, but it's pretty smart idea. Wondering if this will become more and more the norm, especially catering singles. Is there a way to search for these online only restaurants exclusively?

[SideburnsOfDoom]

Seems similar to this: https://www.theguardian.com/business/2017/oct/28/deliveroo-d...

Which talks about "dark kitchens" i.e. existing, well-known chain, having a branch that purely serves delivery services.

[jasonwilk]

I have always thought this space will turn into the Netflix of food. First you differentiate by having a good array of content (food) but will eventually need to create original content with exclusivity (Uber creating or funding their own restaurants just for delivery) to differentiate.

[PretzelFisch]

It would be interesting to have access to an anonymized uber eats order dataset.

[baseballMan]

The biggest thing I've noticed with uber eats is the outrageous delivery fees. I'm not really interested in paying an extra $6.99 for a meal and I'm surprised other people are fine with it.