Deliveroo expanding delivery-only kitchens throughout Australia

Yolanda Redrup
October 31, 2018
AFR
Online food delivery business Deliveroo is expanding its delivery-only commercial kitchens around Australia, opening its second location in the inner Melbourne suburb of Collingwood.
The new Collingwood site is almost five times the size of its Windsor location and will service around 280,000 Melburnians in the inner-east, who haven’t had access to the Windsor kitchen.
Deliveroo Australia country manager Levi Aron told The Australian Financial Review the company was also on the hunt for sites in Sydney and Brisbane, as well as regional hubs.
“It’s a mix between finding the right property, the price and looking at our data to see if there’s a gap in the cuisines,” he said.
“This is our first super site … and it will let us get involved in the supply chain of the food, work out how to make things more efficient, and we have the ability to make delivery a lot faster, cheaper and service new groups like late-night workers for corporates.”
The latest Deliveroo Editions site has nine kitchens, compared to Windsor’s two, and will support 25 restaurants including Sydney’s Fishbowl, which is opening in Melbourne thanks to the new facility, and popular burger joint Royal Stacks.
The Collingwood kitchen, which is one of 16 globally for the business, will also house pasta bar Sauced, Los Hermanos Mexican Taqueria and DiDi Dumpling.
Unlike restaurants that come with costs like rent, equipment maintenance and waiters’ wages, businesses wanting to use the Editions kitchens do not need to pay for rent or equipment, as Deliveroo recoups costs by clipping the ticket of the food deliveries, but does not charge any fees.
“There are no ongoing or upfront fees, it’s based on the order volumes they can produce. The restaurants just bring their intellectual property, brand and chefs to help drive the business,” Mr Aron said.
“Most of the brands coming into Editions are creating virtual brands too. Royal Stacks is launching a new virtual brand called Strange Bird that’s all about chicken … they will get feedback from customers which will tell them if they want to launch the brand and take it to other cities.”
Growth
Since Deliveroo launched three years ago it has increased its Aussie team from 14 people across Melbourne and Sydney to 150 over four offices.
In the year to December 31, 2017, Deliveroo Australia grew revenue by 261 per cent from $11.4 million in 2016 to $41.2 million.
In the same period its losses after tax shrunk from $21.3 million to $4.2 million, but this was thanks to a loan from its UK parent company Roofoods of more than $20 million.
At the time Mr Aron said it was not a payment to save the business, but was made after the company raised $500 million to help it expand. The money was designed to support the growth of Editions locally.
“We believe Australia has a massive opportunity when it comes to food. We talk about Deliveroo becoming the definitive food company … we’re looking to create more occasions through the day that we can service, like groceries, meal packs and food boxes,” he said.
“We’re still just scratching the surface.”
Employment laws
Deliveroo and other food delivery services like Foodora, which ceased local operations in August, have come under fire locally on numerous occasions, with accusations that delivery riders earn a pittance, or that they should be treated as employees, not contractors.
But Mr Aron refuted these claims, saying the average amount per hour that riders make on the platform is $22, and he said they value the flexibility, with many opting to work for other competitors too.
At The Australian Financial Review Innovation Summit in August Mr Aron said he wanted to be able to pay riders when they were sick or took holidays, but current employment laws did not permit this.
On Tuesday he said the business was in constant discussions with the government about this, and Mr Aron believed there was appetite at a state and federal level to review the laws, but that change would be slow.
“The government recognise that there is change in the air for the way people work,” he said.