Deliveroo’s Virtual Restaurant Model Will Eat The Food Service Industry, As Amazon Piles In To Fund

Posted: Aug 28, 2019

Alarm bells should be ringing for casual dining restaurants, large and small, because an unstoppable wave of disruption is coming. They will soon find themselves in a price war with U.K. tech startup Deliveroo, Uber Eats, and (separately) Uber Founder Travis Kalanick, competing for market share against thousands of new “virtual restaurants” (aka “dark kitchens” or “cloud kitchens” or “ghost kitchens”), that can be set up and serving customers in almost any location—for a fraction of the normal cost.

Amazon has switched sides, from competing against, to investing hundreds of millions in U.K. scale-up Deliveroo, to help it achieve its radical goals. Deliveroo’s "leaked investor slides" reportedly reveal plans to cut food costs by 50% for consumers by launching their own food offerings, and to double their profitability. The company believes it can do this with a powerful combination of new technology, and business model innovation. It is a Blue Ocean innovation strategy, industrialising the food service process with their own mini food factories, while eliminating inefficiency (jobs) through automation—including riders. Among the aims are to normalize high quality take-out food... To make your home kitchen redundant.

Trojan Horse
Incumbent restaurants don’t need to be reminded of their high fixed costs, particularly the rent, creditors, and headcount. It was for this reason that so many initially welcomed in Deliveroo to help augment their sales and maximise kitchen productivity. For the restaurant, it can cost 20-30% of the order value, however; which reveals just how motivated the supply chain is.

The original offer was to promote restaurant’s products on the mobile app as an aggregator, and offer independent delivery as a service. If a third party app is willing to invest in the technology, win the customers, and organise the labor, why not let them? It may have seemed like a "no-brainer" at the time. Deliveroo was welcomed in as a gift.

By Douglas Bell Contributor
August 26, 2019
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