Companies

Description

Deliveroo is a British online food delivery company founded by Will Shu and Greg Orlowski in 2013 in London, England. It operates in over two hundred locations across the United Kingdom, the Netherlands, France, Belgium, Ireland, Spain, Italy, Australia, Singapore, Hong Kong, the United Arab Emirates and Kuwait. Its subsidiary operation, Deliveroo Editions, focuses on growing a network of ghost kitchens—kitchens located off-site from restaurants for the preparation of delivery-only meals. Deliveroo has not yet made a profit.

The company was first listed on the London Stock Exchange on 31 March 2021 as Deliveroo Holdings plc.

Business

History and basic operations

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

Customers place orders through its app or website, then self-employed bicycle or motorcycle couriers transport orders from restaurants to them.

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

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. 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.

In January 2017, Deliveroo announced plans to create 300 tech jobs in the UK when it opened its new head office in London later in 2017. That month the company had more than 1,000 full-time employees.

In April 2017, Deliveroo's Editions kitchens launched. 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.

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, mainly given to technology companies. The company also received Fastest Rising Startup of the Year and the Europas Grand Prix award.

Deliveroo provides the delivery services 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 with food quality, not the restaurants themselves.

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".

As of 2020, Deliveroo has not yet made a profit. It loses money on every single delivery it makes.

By mid 2020, Deliveroo had not benefited from the COVID-19 pandemic, when demand for food delivery from restaurants and takeaways surged. Deliveroo reported to be cutting 367 jobs (and furloughing 50 more) from its workforce of 2,500. The company's nominal reasoning is that coronavirus will be followed by an economic downturn, which could hit orders.

Economic impacts in the UK

In December 2017, a study by macroeconomic consultancy Capital Economics revealed that Deliveroo had helped create 7,200 jobs across the restaurant sector since it launched in 2013. It also boosted the industry's revenue by £460 million in the year to June 2017. The report also found that Deliveroo had 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.

Competition

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

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.

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.

Number of employees

One media article reported that in early August 2016, Deliveroo had 800 employees, while another article of around the same date reported there were 6,500 riders working with by the company. On 8 September 2016, Financial Times reported that 20,000 self-employed couriers were working for Deliveroo. In September 2017 Deliveroo confirmed that the company works with 30,000 riders across the globe.

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.

On Tuesday 1 November 2016, at around 8 pm (GMT), technical problems caused the Deliveroo system to go offline for around an hour. Reportedly, thousands of customers who had already paid for their orders got upset due to a lack of clear communication being provided by the company during the incident, with some customers having to wait hours to get their food delivered.

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.

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. 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. 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. In August 2016, Deliveroo raised a Series E of $275 million from the hedge fund Bridgepoint.

In September 2017, the company announced a $385 million Series F round. In November of the same year, An additional $98 million was announced, bringing the total round to $480 million.

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

In March 2021, the company announced its intention to join the London Stock Exchange with an IPO. It was listed on 31 March, but lost 31 percent of its value on the first day with market capitalisation declining nearly £2 billion from its £7.6 billion starting point. One of the company's bankers reportedly described it as "the worst IPO in London's history".

Taylor Review

In October 2016 Prime Minister Theresa May announced a review into employment practices in the modern economy, chaired by Chief Executive of the RSA Matthew Taylor. The review was criticised, accusing the probe of being biased as it was revealed by the Financial Times that one of its members was an early backer of Deliveroo, a fact that was not disclosed to the public. In its submission 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. 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.

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.

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

Leaving the German market

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

Operations in Taiwan

Deliveroo entered the Taiwan market in October 2018. In Taiwan, Deliveroo relied on contractors, according to an investigation by the Ministry of Labor. As Deliveroo workers in Taiwan were not considered employees, it was unclear if the company was required to provide labor insurance to workers. Despite not having the status of employees, Deliveroo and several courier services in Taiwan were cautioned by the labor ministry in 2019 that the Occupational Safety and Health Act [zh] still applied to contractors. Therefore, Deliveroo agreed to suspend work for riders when the government suspends work for those with employee status due to natural disasters. In October 2019, Sharing Economy Association Taiwan proposed safety regulations that were agreed to by several courier services active in Taiwan, including Deliveroo. That same month, Taiwan's Directorate General of Highways (DGH) fined Deliveroo for violations of the Highway Act, as it had not applied for a business license to establish an automobile transportation enterprise. Additionally, the DGH ordered Deliveroo to cease operations. Deliveroo announced its exit from Taiwan in April 2020.

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.

On awarding Deliveroo '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.'

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.'

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.'

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".

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. The centre's "Rights for Riders" campaign aims "to improve safety, pay, conditions and job security for food delivery riders".

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.

Numerous complaints have been mentioned about Deliveroo’s couriers poor hygene practices such as some riders resorting to defecating into Tesco bags while waiting for orders.

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, and the continuing lack of sick and accident pay. The company later abandoned these plans.

During these strikes, as a means of protest, London Deliveroo drivers held up signs containing the neologism "Slaveroo". The term and its corresponding social media hashtag were adopted by several news outlets, including non-English international media.

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

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. 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'.

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

In April 2021, UK Deliveroo's riders held a strike under the Independent Workers’ Union of Great Britain (IWGB) over pay and work conditions on the company's trading debut on the London Stock Exchange.

In June 2021, Deliveroo won a court case against the IWGB, which concerned the company's classification of its couriers. While the Union argued that Deliveroo couriers should be considered employees and have the right to unionize, Deliveroo classified them as self-employed. The court upheld Deliveroo's definition.

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 was released as episodes of the #BOOS online programme.

Partnerships

On July 2020, Deliveroo partnered with the NSPCC to train couriers to spot and report signs of child abuse. More than 7,000 riders completed the training.

On June 2021, Deliveroo announced a partnership with Neighbourhood Watch (United Kingdom) giving couriers the option to train and help spot the signs of everything from sexual harassment to domestic abuse and drug dealing.

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