RIDEGURU
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.
Comments
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.
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.
Woah. deep.
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.
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.
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.
If you are a restaurant though, why NOT use it. You are still running your restaurant business, making food, servicing their customers. If a few additional orders come in and it's not your drivers or staff getting slammed, why not have the extra income stream?
There are no downside unless the cooks/kitchen becomes too busy and it affects the establishment's level of service.
Just don't miss the point that having deliveries would also increase the volume of the business, hence the end profit would grow even though it would affect the %.
Not everyone is eating at home though, so the restaurant can balance the expense from one side to cover deliveries, the same as it happens on some dishes and beverage which have different profit margin.
Hi There,
Really great insights about UberEats which is growing their business each year.
Most of the restauranteurs are moving their food delivery business to online by spending money building UberEats clone and Foodpanda, GrubHub clone to generate more revenue.
This is awesome.
Then again, this is a highly leveraged business model where the profits comes second to everything. They are vying for marketshare and growth in order to beat out the competition. At some point, one of these start-ups will capture the market and take over. That's when they'll jack up the prices.
I dont like any of them. Food was always warm at best. Kept orders close to home but didnt make a difference.
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.
Is anyone surprised? I mean their passenger business isn't even profitable.