Deliveroo

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Roofoods Ltd.
Deliveroo
Company typePrivate
Industry
Founded2013; 11 years ago (2013)
FounderWill Shu
HeadquartersLondon, England, UK
Area served
Key people
Will Shu (CEO)
Greg Orlowski
Dan Winn (CTO)
Rohan Pradhan (COO)
Revenue£277.1 M (2017) [1]
Number of employees
5,699 (2019)[2]
  • Around 20,000 technically self-employed couriers (as of September 2016)[3]
Websitedeliveroo.co.uk

Roofoods Ltd. (branded as Deliveroo) is an online food delivery company founded in 2013 by Will Shu and Greg Orlowski.[4] Based in London, England, it operates in two hundred cities[5] in the United Kingdom, the Netherlands, France, Belgium, Ireland, Spain, Italy, Australia, Singapore, United Arab Emirates, Hong Kong, Kuwait, and Taiwan. A subsidiary operation, Deliveroo Editions, focuses on developing a network of ghost kitchens -- kitchens located off-site from restaurants for the preparation of delivery-only meals.[6]

Business

History and basic operations

The company Deliveroo, headquartered in London, was founded in 2013 by Will Shu and Greg Orlowski, both Americans.[4] The company makes money by charging restaurants a commission fee, as well as by charging customers a fee per order.[7] It operates in two hundred cities[5] in the UK, and in the Netherlands, France, Germany, Belgium, Ireland, Spain, Italy, Australia, Singapore, United Arab Emirates, Kuwait and Hong Kong.

Orders are placed through its app or website and then self-employed[8] bicycle or motorcycle couriers transport orders from restaurants to customers.

In November 2017 Deliveroo introduced Deliveroo Plus, a subscription service which gives customers in the UK unlimited free delivery[9]

Deliveroo works with some of the biggest chain restaurants across the UK, with the majority being available exclusively on the Deliveroo app along with thousands of independent restaurants.[10][11] On 16 November 2016, it became known that the brewing company Heineken International had closed a deal for Deliveroo to deliver the latter's beers and ciders, initially across 15 sites in London, Bath and Cardiff. This delivery deal, whose activities started that same week, was considered the biggest one of its kind (that is, with regards to the brewing industry). Further expansion of these activities across the UK were planned by the end of the year 2017.[12][13]

In January 2017, Deliveroo announced plans to create 300 UK tech jobs when it opens its new head office in London later in 2017. Also in January 2017, the British-born company employed more than 1,000 full-time staff.[14]

Deliveroo’s Editions kitchens launched in April 2017. These delivery-only kitchens, sometimes known as ghost restaurants, allow restaurants to access customers in locations without needing High Street premises, thereby reducing set-up costs compared to a full-service restaurant. Deliveroo uses its data to identify areas where customer demand for certain cuisines is high and predicts which restaurants are likely to succeed there.[15][16]

In mid-June 2016, the founders of Deliveroo, Will Shu and Greg Orlowski received an award for the "Best Startup Founders" as part of "The Europas Startup Conference and Awards", which are given to technology companies. The company also received Fastest Rising Startup of the Year and the Europas Grand Prix award.[17]

Deliveroo recorded a loss of £1.4m for the year 2015. Mid-November 2016, the company reported a loss of £18.1 million for that year. In September 2017 Deliveroo recorded a growth in global revenue of 611% in 2016, with sales of £128.6 million, while "losses soared from £30.1m to £129.1m".[18][19][20]

Deliveroo cyclist in the UK

Deliveroo provides the delivery service as well as marketing and order taking, allowing it to provide food from restaurants that do not normally offer a delivery service. In a press release of May 2016, the German Bar Association (German: Der Deutsche Anwaltverein) informed the public that delivery companies such as Deliveroo, Take Eat Easy or Foodora are legally responsible for problems about the quality of the food, not the restaurants themselves.[21]

Economic impacts in the UK

In December 2017, a study by macroeconomic consultancy Capital Economics revealed that Deliveroo has helped create 7,200 jobs across the restaurant sector since it launched in 2013, whilst also boosting the industry’s revenue by £460 million in the year to June 2017. The report also found that Deliveroo helped add £372 million in value to the UK economy in the same 12-month period, a figure which Capital Economics projects to rise to £1.5 billion in the year to June 2019.[22]

Competition

Deliveroo's main competitors are Just Eat, GrubHub and UberEATS.[23]

Early June 2016, the German Hotel and Catering Association (German: Deutscher Hotel- und Gaststättenverband) cautioned for delivery services such as Deliveroo or Foodora (a competitor using almost an identical business model; and at that time almost equally present in Germany), claiming that they attack their value chain without respect. In this warning, the Association wanted to prevent the market for food delivery services starting to resemble that of hotels, where businesses have become dependent on booking portals such as Booking.com or HRS but are unsatisfied with the commission fees charged by those portals.[24]

In 2017, Just Eat announced that they were planning to compete with Deliveroo by moving into the restaurant chain market, working with local independent restaurants and chains.[25]

Number of employees

One media article reported that in early August 2016, Deliveroo had 800 employees,[26] while another article of around the same date reported there were 6,500 riders employed by the company.[27] On 8 September 2016, Financial Times reported that 20,000 self-employed couriers were working for Deliveroo.[3] As of November 2016, one source claimed that over 13,000 people worked at Deliveroo. In September 2017 Deliveroo confirmed that the company works with 30,000 riders across the globe.[28]

Technical malfunctions

On 7 September 2016, the Deliveroo website and application crashed in the city of Chelmsford, reportedly due to a high demand on the first night of launching its service in that city.[29]

On Tuesday 1 November 2016, at around 8PM (GMT) technical problems caused the Deliveroo system to be unable to operate for around an hour. Due to this malfunction, both its delivery applications, as well as its website went off-line. Reportedly, thousands of customers who had already paid for their orders got upset, also due to a lack of clear communication being provided by Deliveroo during the incident. Some customers had to wait for hours to get their food delivered.[30][31][32][33]

Again on 21 January 2017, the Deliveroo app went down due to a server crash, and hundreds of UK customers were delivered cold food, hours late, or even no food at all.[34]

During periods when the system is down, and therefore no deliveries are available for riders, Deliveroo pays riders a flat rate per hour until the system is restored.[35]

Funding

In June 2014, Deliveroo raised a £2.75 million series A investment round from Index Ventures and Hoxton Ventures, as well as an assortment of angel investors.[36] In January 2015, Roofoods Ltd, doing business as Deliveroo, received $25 million in series B funding led by Accel with participation from Index Ventures, Hummingbird Ventures and Hoxton Ventures at an estimated valuation of $100 million.[37] At this time, Deliveroo was providing deliveries for approximately 750 restaurants. In July of that year, it secured a further $70 million in series C investment from Index Ventures and Greenoaks Capital, marking Deliveroo's third funding round in a year.

In November 2015, Deliveroo raised $100 million in Series D Funding.[23] In August 2016, Deliveroo raised a Series E of $275 million from the hedge fund Bridgepoint.[38]

In September 2017, the company announced a $385 million Series F round. An additional $98 million was announced in November, bringing the total round to $480 million.[39]

In May 2019, the company announced a $575 million Series G round led by Amazon, bringing the total round to $1.35 billion raised till date.[40]

Taylor Review

In October 2016 Prime Minister Theresa May announced a review into employment practices in the modern economy,[41] chaired by Chief Executive of the RSA Matthew Taylor. The review was criticised as corrupt as it was revealed by the Financial Times that one of its members held shares in Deliveroo, a fact that was not disclosed to the public.[42] In its submission[43] to the review, Deliveroo called on the Government to update legislation to allow the company to offer its riders rights - such as injury pay and sick pay - without limiting the flexibility which comes with self-employment. The company was the first in the on-demand economy to break ranks and ask for changes in legislation to enable it to offer self-employed riders more benefits.[44] Deliveroo argued that current employment legislation means companies in the on-demand economy are forced to choose between offering riders flexible work and benefits. Deliveroo suggested that the Government either allow companies to offer entitlements to self-employed people or create a new category of employment in which benefits are calculated on the services they deliver instead of how many hours they work.[45]

Rider safety

In response to the attacks on moped drivers over the summer of 2017, Deliveroo announced a series of measures to help keep riders safe. Among the measures introduced were a new app feature that allows riders to raise security concerns, plus a trial of helmet cameras to allow Deliveroo to gather evidence and to pass on information to the police. The company also hired 50 new staff across the country who have a focus on rider safety.[46][47]

In December 2017, Deliveroo announced that its riders will have access to the first ever insurance scheme for food delivery riders in the UK on-demand economy.[48] As well as sickness and accident insurance cover, cyclists will also have access to the first-of-its-kind public liability insurance.[49]

Leaving the German market

On 12 August, 2019, Deliveroo sent an email to German customers stating their decision to leave the German market stating that all services will stop from 16 August [50]. The email cited its inability to provide a sufficient quality of service and that it would focus on other markets. This comes just days after acquiring Scottish startup Cultivate, and three months after raising £450 million in a funding round led by Amazon.[51]

Praise

In a 2016 study of the sharing economy, PwC wrote that ‘the UK has also contributed one of the sharing economy’s quickest-growing stars’ in Deliveroo.[52]

On awarding Deliveroo with ‘Best Startup Founders’ in the Europas Awards 2016, TechCrunch declared that founders Will Shu and Greg Orlowski ‘have proved a rock-star team, scaling a high-growth business and introducing new thinking to the market.’[53]

In November 2016, Management Today argued that Deliveroo has become ‘one of the best’ in the food delivery sector ‘thanks to its USP of providing a network of dedicated couriers and an ordering platform, making it easy for restaurants which wouldn’t otherwise offer delivery, to do so.’[54]

Deliveroo topped Deloitte’s annual ranking of the UK’s fastest growing technology companies in November 2017, with a four-year revenue growth of 107,117% - a record for the UK Technology Fast 50 awards. David Cobb, lead partner for the Deloitte UK Technology Fast 50 programme, commented: ‘The achievements of this year’s winner are truly remarkable: Deliveroo is now the fastest-growing technology company in the history of the competition. Their relentless growth has justifiably added them to the exclusive list of UK ‘unicorns’. Everyone wants a slice of the online takeaway business, but very few have found success in the same way that Deliveroo has.’[55]

Criticisms

Australian-based employment lawyer Josh Bornstein, principal at Maurice Blackburn, examined work contracts from Deliveroo and its competitor Foodora in late March 2016 and described the contracts as "sham", designed to pay workers "below the award rates" and to "deny their basic benefits".[56]

Law firm Maurice Blackburn announced that test cases against Deliveroo, as well as against Foodora, were being prepared wherein they were "accused of under-paying their delivery riders and failing to meet minimum employment conditions". Such allegations were confirmed by the Young Workers Centre in Australia, which claimed that the contracting arrangements by those companies left workers without access to minimum pay rates, WorkCover insurance, leave and superannuation.[57] The Centre's "Rights for Riders" campaign aims "to improve safety, pay, conditions and job security for food delivery riders".[58]

Complaints have also been made regarding the company's failure to provide cycle training and safety equipment (such as lights and helmets) to its sometimes inexperienced riders. It has been argued that the need to race against the clock is another reason for risky cycling behaviour exhibited by the couriers; and that bikes should be checked for safety.[59][60]

Strike

Deliveroo's London drivers held a day-long strike in August 2016 to protest a new pay plan that they claimed would result in riders earning substantially below minimum wage,[61][62] and the continuing lack of sick and accident pay.[63][62] The company later abandoned these plans.[64]

During these strikes, as a means of protest, London Deliveroo drivers held up signs containing the neologism "Slaveroo", a term formed as a contraction between "slavery" and the company's name. The term and its corresponding social media hashtag were adopted by several news outlets, including non-English international media.[65][66][67][68]

In the aftermath of these protests, chair of the Independent Workers Union of Great Britain Couriers and Logistics Branch, which represents couriers and delivery drivers in London, Mags Dewhurst, published an article in The Guardian backing the protesters, saying that Deliveroo's claim of freedom and flexibility vis-à-vis its couriers are sham, calling it "exploitation and exhaustion" instead.[69]

On 8 November 2016, news headlines covered the demand of a small group of UK Deliveroo drivers to seek union recognition by the company. The Independent Workers Union of Great Britain (IWGB) represented the drivers in the Camden area of north London.[70][71][72][73] In November 2017, the Central Arbitration Committee dismissed the challenge by the IWGB and ruled that Deliveroo riders are self-employed. Deliveroo welcomed the decision as a ‘victory for riders [who] value the flexibility that self-employment provides’.[74]

In mid-November 2016, it was reported that Deliveroo's CEO, Will Shu, almost doubled his salary around the same time that low-paid Deliveroo drivers were demanding better employment conditions. Shu increased his pay to £102,135 in the year to December 2015, from £53,333 the year before that.[19]

In May 2017, Deliveroo workers protested working conditions in Berlin, Germany.[75] In January 2018, Deliveroo riders went on strike in Belgium and in the Netherlands.[76]

The Netherlands

In 2017 and 2018 Dutch online consumer affairs journalist Tim Hofman investigated Deliveroo undercover, asserting that the company forced its delivery staff to declare themselves self-employed rather than being employees of the company, which would give them rights to benefits such as sick pay. The investigation and presentation of the evidence to Deliveroo management were released as episodes of the #BOOS online programme.[77]

London

In London from 2019, it has been widely reported and confirmed that Deliveroo are paying its riders progressively less per delivery whilst pushing the pickup/delivery distances further for the lower fee. It has been noted this practice in particular penalises scooter riders, who frequently find themselves being required to travel 1-2+ miles to perform a pickup, only to then undertake a delivery 3-4 miles away (totalling 5-6+), with no material visible distance benefit being paid over the base fee. The riders subsequently find themselves significantly 'out of zone', potentially in an area with low coverage, 'marooned', and no longer receiving orders unless they make the journey back in to zone first. This results in significant time wastage for the rider, undermining their ability to earn a reasonable hourly wage.

Another undermining tactic that has been observed is where riders, who might even have an excellent to exemplary 'performance statistic', arbitrarily have their previously reserved 'repeat' hours cut without warning, sometimes drastically (a cut of 4-plus days of work in a single week has been observed), from their pre-booking weekly calendar for no justifiable reason, thus seriously affecting the rider's ability to earn a stable income. The reason given by Deliveroo was that the hours were given to other riders to meet the (over-subscribed) demand. This behaviour could potentially be interpreted as discriminatory. [78]

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Bibliography

External links

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