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Uber Eats is not a profitable business. Here's the math. ...and how Uber has the cake and eats it too. (Forbes)

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SmittenKitten
1792 Rider
 Posted 2 weeks, 6 days ago

I am glad someone is doing the math.  It's too bad it isn't the drivers. I assume this applies to UberEats' competeitors like GrubHub, Postmates, and DoorDash.

The problem here is that the average profit margin for a restaurant is under 30%. Fast food such as McDonalds reported profit margins about 22% in 2017. Casual dining or family style restaurants have a profit margin between 5% to 10%. Lastly, full-service restaurants such as fine-dining have average profit margins of about 6.1%. (source)

Based on the average profit margins above, every restaurant that engages Uber Eats will lose money on every order they take. The more orders coming from Uber Eats, the more money a restaurant would lose.

On the other side of the phone, you will have to pay a “booking fee” for your delivery that is also being paid directly to Uber. Thus, Uber is getting its cake and eating it too.

https://www.forbes.com/sites/cameronkeng/2018/03/26/why-uber-eats-will-eat-you-into-bankruptcy/#2b484ae321f6 

Comments

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    bBerman81
    258 Rider
     5 days ago

    I keep hearing that this is the fastest growing business in Uber in terms of orders and revenue, albeit there is a lot of competition. How does this make sense?

    Another start-up where profits and sound business models are completely ignored for the sake of growth. Notice how a few investors decide what businesses and concepts should be next. No matter what any one says, we live in a world where a few people determine how the world should turn.

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      CaptainChampion
      128
       5 days ago

      Woah. deep.

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      JimHemlock
      122 Rider
       5 days ago

      All these companies like GrubHub, UberEats, and DoorDash have to keep competing because that's where the market is going.  The same is true for restaurants too. Unless they compete, they will lose.

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    RichardJLawrence
    3
     1 week ago

    I think you're reading the article incorrectly.  I believe the article is saying Uber Eats etc is not profitable for restaurants since the delivery services typically take about 30% of the gross order.  However, the rationale for restaurants is the delivery services increase their reach.

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      ChrisWeston
      90 Rider
       5 days ago

      Actually, the article's intent is that restaurants won't make money and they will not get the exposure Uber claims they will. 

      What you are saying is what Uber claims, i.e. extending the reach. I think that point is heavily debatable.

      I agree with the writer that people who get their food delivered will continue to use UberEats.  They won't go sit in the restaurant.  Well, I am sure some will, but at an increased likelihood?  I don't think so.

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        DFosterG11
        177
         5 days ago

        I disagree with you and the writer. You have to consider two things:

        - Competition - If a restaurant does not participate in UberEats, your competitors will.  Consumers will continue to shift away, and eventually forget who you are. (Think branding and advertising.)

        - Fast Foods - We aren't all talking about high end niche restaurants here.  Think McDonalds and Chipotle. In this high-volume market, these stores want people to think of them as they go through the day.  The next time those people drive or walk by that McDonald's, they will stop in.

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    bBerman81
    258 Rider
     1 week ago

    Why does everyone thinks this is a good idea then?

    Investors?  Uber is obviously not making any profits, so this must be based on growth and their attempt to capture the market share.  It's another start-up business taking over an existing industry and operating under heavily leverage finances (borrowing a lot of money for growth for potential long-term gain).

    I feel all the other businesses that are being affected by this changing tides.

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    AGirlHasNoName
    113
     2 weeks ago

    Is anyone surprised?  I mean their passenger business isn't even profitable.