Deliveroo is Disrupting the UK Restaurant Industry — Here’s How
I am sitting in The Orange Room, a Lebanese Restaurant in East London on a Saturday night. The place has been recommended by many locals, and is a popular spot, particularly at the weekend. But we are the only people in there. Undeterred by this fact, we order food. Although delicious, it takes a bizarrely long term to arrive as a flurry of motorcyclists and cyclists rush in decked out in Deliveroo uniform, taking take-away packages away at a rate of knots. It is a different restaurant experience to the past — and one which is simultaneously causing restaurants joy and pain, as they struggle to cope with the way in which their industry is changing.
Operating in 84 cities across the world, Deliveroo’s basic value proposition is that it offers restaurant food as take away both from independents and large, well established chains. The need was identified by former investment banker and founder Will Shu, who was not able to find quality take-away food in London during his long nights at the office compared to working in New York. The pain point is a familiar one for office workers in the City and beyond, but also addresses a wider fundamental question — why does takeaway food have to be of lesser quality?
Forbes earlier this year reported that Deliveroo is growing 25% month on month, although this is likely to slow as the company battles with increasing competition from the likes of UberEATS, Just Eat and Delivery Hero. The UK start-up that has joined the ranks of Unicorn status following $275m of investment in August, taking total funding for the company to $475m with an estimated valuation of $1bn.
Deliveroo’s march to European dominance is facing a second threat beyond its competitors. Restaurants, preferring customers who visit their physical premises (as it generate higher incomes per meal through tips and added extras), are starting to join forces to fill their restaurants again. Bookatable, a new app by Michelin, is seeking to fill restaurants back up through making the booking process easier. The launch of this app has been accompanied with a significant marketing budget, as restaurants make a concerted effort to get people out of their homes and into their restaurants. Getting restaurants to prioritise Deliveroo orders and keep those wait times to a minimum will be a significant concern for the start-up.
What does this mean for Restauranteurs? Owners are still trying to tease out the impact. Undoubtedly the arrival of Deliveroo and other take-away restaurant food apps has increased the number of customers ordering restaurant food, particularly on a regular basis as a replacement for weekday meals. It is primarily replacing demand from traditional take-away houses and other convenience foods. It is these industries that are going to have to react in terms of quality and price.
But Deliveroo isn’t a universal win for restaurants: they are having to deal with the negative impact on atmosphere that more takeaways and less guests inevitable deliver. As alluded to above, no one wants to eat in an empty restaurant, and this could begin to turn away a restaurant’s most regular customers. Secondly, delays in serving customers due to Deliveroo orders is something restaurants are still working out how to grapple with.
Costs are also likely to change for restaurants. There will need to be more kitchen staff and less front of house, a change in the structure of restaurants that is neither simple or cheap to implement. These significant changes show how much of an impact Deliveroo et al. are having on the industry.
The disruption to the industry recalls strongly the way in which online delivery in retail began replacing physical stores. Now, rather than the eradication of the high street, the change has led to the current equilibrium of a mixture of online/offline services suiting different consumer needs. The restaurant industry will need to similarly pivot over the course of the next five years to move towards a similar equilibrium.
