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Anonymous

Former Head of Uber Eats, London 

Scaling Uber EATS in London

{audio:0:00:02} Norman, could you start by sharing some context and background to when you joined Deliveroo?

{audio:0:00:11} I joined Deliveroo back in May 2017, so around Q2. I joined as an operations manager and my job was, basically, to help open the Editions site, work with the team and build from one site to two sites, as much as we could, in terms of expansion. My job was to recruit the team, follow the SOPs, the standards and meet the KPIs that were set by the company, to achieve success and profitability.

{audio:0:00:49} Then, gradually, from there, within a year, I got promoted to senior site operations manager and then, lastly, promoted to head of site operations, managing five sites, with a total of 100 staff; 30 staff with Deliveroo Editions and the other 70 staff looking after the restaurant partners.

{audio:0:01:11} How is Deliveroo Editions structured and set up?

{audio:0:01:18} The way Editions was structured was that I was reporting to the general manager for Editions. We had a GM for Editions, globally and then we had a GM after him, who was Nigel. From Nigel, it dropped down to head of site operations, then down to the site managers. From the site managers, you had assistant managers, or GAs, as we liked to call them. Then from there, you had the runners. These were the people who were running back and forth, picking up the bags and all that stuff.

{audio:0:01:55} Then on the other side of Editions, we had the commercial team, which was headed by the regional manager, that was Yousef. Yousef had his team, which were dealing with the commercial side. They dealt with bringing in restaurant partners, working on the commissions, working on the commercials, in terms of which restaurant partners you can bring in; which brands are visible, in those areas? The head of Editions regional, then it was the head of commercial and then you had the Editions commercial manager and then you had the Editions site managers.

{audio:0:02:35} What is a dark kitchen and how does it work?

{audio:0:02:44} A dark kitchen is, basically, restaurant kitchen that operates on a delivery model only. The order comes on the online platform, either an aggregate or a restaurant platform. You place your order; your food is prepared by the kitchen; it’s packaged and sent to the customer.

{audio:0:03:08} Where are these kitchens normally based?

{audio:0:03:12} They could be located in any location you choose. They could be in residential areas, industrial areas; they could be in apartment buildings, in the basement or they could be in standalone locations, away from residential or office areas. You can have them in any location but, the main thing that you are looking at, is buildings that are self-contained, that at least have electricity water and all those facilities. You want to have minimal complaints from residents and have no power cables, power plants nearby. It should be in an area where it’s convenient for whoever wants to build the kitchen site, as an investor, and also make sure it is in the correct locality. If you just have the kitchen in the desert, it’s not going to work out.

{audio:0:04:04} It doesn’t have to be in a prime location; it could be in any location, within the area or the vicinity that you are looking at and it could be in a building, apartment, basement, car parking. You should be able to change it from a car parking to a kitchen, as long as you have enough structure for the conversion, like the H-box systems and things like that.

{audio:0:04:29} Typically, who finances the build out of the kitchen? Is it Deliveroo or is it a third party?

{audio:0:04:36} There are two different ways. There are those who have the funding, for example where Deliveroo will have the funding; then there are those who have investors.

{audio:0:04:46} So Deliveroo pays for the build-out cost of the kitchen?

{audio:0:04:54} On average, how much do they typically cost?

{audio:0:04:57} On average, you are looking at building a kitchen that is around 2,000 square feet and that is about three million dirhams.

{audio:0:05:19} Is that just that the equipment and the build out?

{audio:0:05:25} If I’m looking at a small kitchen, 2,000 square feet, six kitchens inside, you’re looking at a minimum of £800,000 to £1 million. This includes the kitchen equipment, the H-box system, the brick and mortar, tiles and that is the cost you are looking at.

{audio:0:05:51} That’s for a decent prime location, in Dubai?

{audio:0:05:55} Yes; for a decent prime location in Dubai.

{audio:0:05:58} What’s the difference in the UK, for a dark kitchen build-out cost?

{audio:0:06:02} In the UK, there are a lot of things that you want to be looking at. It’s all about investors, the location, the approvals from the local council. I know, in the UK, when I was dealing with a couple of the sites that we had, a couple of the bottlenecks that we saw were the local council complaining and the residents complaining. There were many stages of approvals you had to go through, to get it built and done. At least here in Dubai, it’s a little different, because everything is structured. You go to a department that deals with the land, you go to a department that approves the layout, the food control, and then you go to Civil Defense. All of these are structured and they’re strict. Every requirement that you have to fulfil when you are building a kitchen in this region, has to be met, to the standard, in terms of safety and everything else.

{audio:0:06:54} In the UK they do the same, but a couple of the costs are quite high. It’s going to cost you more if you are building, let’s say, in the UK and in the States, compared to if you are doing the build in a region like the Middle East.

{audio:0:07:09} Do they typically have six kitchens in the UK, as well? Or is it a bit different, depending on the size of the kitchen?

{audio:0:07:15} In the UK, brick and mortar is not something they always want to go with. They did pods. Pods were structures that were built by a company, called Chapman, where they would take containers and build self-contained kitchens inside. The cost of these were pods were around £100,000 to £300,000. It’s a self-contained unit that you can put one operator in, who has one or two brands. It’s brought by a crane, dropped in a certain location and then you just put a metal fence around it.

{audio:0:07:50} You said it was £100,000 to £300,000?

{audio:0:07:54} Yes; because it is a self-contained unit, coming with water, electricity, everything.

{audio:0:08:02} If you can fit two kitchens in there, two companies, do you look at it as the same unit cost? How do you look at the cost, per kitchen, for example? You mentioned £1 million, in Dubai, for six kitchens or £300,000, in the UK, for a pod for two brands or two kitchens?

{audio:0:08:27} So you’re looking at it as about £200,000 per restaurant kitchen?

{audio:0:08:36} Yes. The reason why that needs to be factored in is, even if you try to make all the kitchens standard, whichever brand you bring in, might have different requirements. For example, let’s say you are going to bring in a high brand, like Wagamama, they’re going to be requesting specific equipment, as per their brand requirements, so this might impact whatever budget you have. But if you sign a three-year agreement, you should begin to see your return within the second or third year.

{audio:0:09:13} Each brand, obviously, has a certain number of ovens and fridges and standard kitchen equipment?

{audio:0:09:26} All restaurant partners have the same refrigeration. The only thing that most of the brands will differ on, is when it comes to the cooking. If it’s an Asian brand, they might require woks; if it’s a burger brand, maybe they need fitted grills. Some other burger brands may tell you they are okay with the normal stainless-steel griddles. It depends on a case by case basis. Some of them will come in, look at the kitchen and say, this works for me; I can do one or two brands from this kitchen. Some of them will come in and say, no; as per the brand’s standards, we require XYZ equipment.

{audio:0:10:08} You build the kitchen and then, what exactly is the proposition to a restaurant?

{audio:0:10:17} The proposition to the restaurant is that we assure that the locations are live and running. With the first location where we started, we struggled and we evolved and changed to make them a much better solution; that’s what we always do with the partners.

{audio:0:10:32} Once they see the kitchen, it clicks in the restaurant partner’s mind that, yes, I am able to work in this kitchen. The question that every restaurant partner asks is, how do I work in this kitchen? It’s too small; someone might steal my recipes. It’s all about showing them what’s happening in one of the live locations that we have. Show them how they work, and there is someone there, to make sure that there is no stealing, that people don’t fight. At the end of the day, chefs are chefs. They all work in the same industry; they’ll get to know each other and get to make friends. We always assure the partner that their recipes are not going to be stolen, the brand is going to be successful. It’s always about assuring the restaurant partner that, from an operational perspective, it works.

{audio:0:11:27} In terms of the process, is it only the chef that works in the dark kitchen, for the brand?

{audio:0:11:37} We’ve seen some of the owners working inside the kitchen, before they start scaling the business. Let’s say, for example, someone started his brand from home, they come and work in the dark kitchen and once they start cooking, so they’re working in the second location, the other owners give them advice about what they’ve seen and what has worked. The moment your brand goes from one dark kitchen to a second dark kitchen, it’s always advisable to hire a chef and step back and just manage the operations or get an operations manager who manages the operations. You then just test the brand, make sure the food is cooked properly and make sure they are following the guidelines. Bit by bit, you are setting the standards of your brand, as you open one, two, three, four, five.

{audio:0:12:30} Can we just walk through a typical order, for a dark kitchen? Let’s say that I’m a user on Deliveroo and I order a £20 meal, from a dark kitchen. How do the commercials work between Deliveroo and the restaurant?

{audio:0:12:45} The menu pricing is always handled by the restaurant partner. You can price the menu as you want, but usually, the data that the aggregators have, will tell you that your salad, within the market or within the zone or region that you are selling in, is at the high end of the range. They will always be given those margins, so that they don’t go higher than that so you don’t end up selling anything. If you go lower than that, you are not going to be making any profit. At the end of the day, it’s similar to what you do in a restaurant. You look at your cost price of the food, the packaging and all the ingredients that you are using and then the restaurant partner puts their own mark up on top of that. Most of them put a markup of between 8% to 10% on their menu items. Then, when you sell it to the aggregator, you also need to consider your food cost, plus their commission.

{audio:0:13:36} For example, all aggregators charge between 30% and 40%. If you order a meal that costs £20, 30% is going to be taken from the £20. From that £20, you add the delivery. In the UK, the delivery fees are usually around £1.50, so the customer pays £21.50. From the restaurant, you pay the commission to the aggregator, you pay the credit card fees, which are the gateway fees; here in Dubai it is around 60 fils. Then there is the delivery charge, which is around £1. Every time the driver picks up an order, it’s always £1 per drop. Each time they pick up the food and deliver it to where it’s been ordered for, that’s £1 for every single order. That is always paid for by the customer and it’s always taken out from the restaurant partner.

{audio:0:15:20} From a restaurant partner’s perspective, you look at your food cost and packaging, you add the aggregators commission on top of that and that’s how you mark up your price. You make sure that, when the price is taken off, you’re not ending up with a negative and not making any profit at all. From an aggregator’s perspective, they will usually take out your commission on a weekly or monthly basis, when they invoice you. They don’t invoice the commission on every single order; they do it at the end of the week. For example, if the sales for that week was £1,000, 30% is added to that £1,000, plus the credit card charges. If the credit card fees are 2%, that’s added to the 30% and they take 32% from the gross. What remains is the revenue for the restaurant partner.

{audio:0:16:20} Don’t forget, there is also tax. For us here, it’s VAT and the average is 5%. The advantage of it being 5% is that you can do a claim back. Everything on the menu usually has the VAT, so that’s something that you can reclaim, at the end of the year, or twice a year, or every quarter.

{audio:0:16:51} The commission that the restaurant pays of 30%, is that both in Dubai and London, typically?

{audio:0:17:01} In London, the commissions will be slightly different but here in Dubai, because the region is much more lucrative, the commissions are a little bit higher. In London, you’re looking at between 30% to 35%.

{audio:0:17:19} Basically, it’s a 30% base commission and the restaurant actually pays the payment fees too?

{audio:0:17:31} Yes; those are the gateway fees for the credit card. That’s also included.

{audio:0:17:34} That bumps it up from a base, let’s say, of 30%, to 32% to 35%?

{audio:0:17:43} So the proposition to the restaurant is, we’re going to build out the infrastructure; all you have to do is put a chef into the kitchen, cook your food and we will, pretty much, generate the demand and deliver the food for you?

{audio:0:18:01} Looking at the aggregator’s economics, for a £20 order, they charge the delivery fee, which is £1.50, so that’s now £21.50. Then they have to pay the driver costs. How do you pay drivers in Dubai versus London?

{audio:0:18:30} Basically, it works the same in every region. For example, here we charge seven dirhams for the delivery fee; four dirhams go to the driver and the other three is the profit that Deliveroo makes, as a charge.

{audio:0:18:47} Do you pay four dirhams because you can do many jobs per hour?

{audio:0:18:51} Yes; they can do many jobs per hour.

{audio:0:18:55} In London, drivers and riders and self-employed? Isn’t it different in Dubai, where you have an agency that serves the drivers for you?

{audio:0:19:07} Here in Dubai, it’s slightly different because here you need a sponsor. Once you have a sponsor and a visa, the sponsor provides your insurance and everything like that and set a certain salary. For us, we take into consideration how much the salary is for driver, how much the salary is for the supervisor and then how many drops they are going to be doing in a day. The driver will make four dirhams for every drop and then there’s another factor in there, which is how much we are paying the agency, in terms of how many drivers we have taken. If we have taken 200 drivers, if they’re being paid a £1,000 per month, it’s going to be that money, multiplied by the number of drivers we have taken.

{audio:0:19:58} Basically, the way the company is going to be paying that is, the amount of revenue that we drive from the commissions, that’s where they pay all this off from. The more sign ups you do, the easier it is to pay salaries, drivers, utilities and so on.

{audio:0:20:18} But that’s not the case in the UK?

{audio:0:20:21} In the UK it’s totally different.

{audio:0:20:28} How do you look at the difference in the structure of the drivers in the UK versus Dubai and the impact on the profitability of the aggregator?

{audio:0:20:37} One challenge in the UK is that you don’t have any control over the drivers. Secondly, I remember that in the UK, they had to launch insurance for the drivers which, I think, was done in 2018, 2019. It was also about what your competitors, the other aggregators, were offering to the drivers. You can find a rider or a driver who has four mobile phones and it depends on which order is closest to him and how much he makes from that. They don’t like orders that are more than three kilometers away. If it’s more than three kilometers, by the time you drop it and come back, from their perspective, they may have lost three or four orders.

{audio:0:21:25} Do they get paid per order, in the UK, or is it a fixed fee?

{audio:0:21:29} In the UK, they’re paid a fixed fee; it’s for every drop that you do. You get paid for every order that you pick up and you drop. For example, if you do 500 drops in a week, you’re going to be paid that much, multiplied by how much it is.

{audio:0:22:01} How has that price for the driver changed, over the years, in the UK?

{audio:0:22:06} Basically, it’s trying to vet those riders who want to do this for the long term. For example, if someone is at university, they are doing this for a side hustle; they just want to earn some money for shopping and partying. If someone is doing this because they want to pay rent, it means that you have to get more than one or two aggregators to make ends meet. How they’ve done this to be more competitive than other aggregators is by having things like better insurance, better coverage, a couple of extra perks where, for example, if customers start giving you good comments, such as saying, this driver was good when they came, they were polite, then the drivers are rewarded by giving them access to certain schemes, such as educational benefits. Some of them had schemes where they could go on certain platforms and do short courses. These were a couple of things that most companies do, to leverage most of the drivers.

{audio:0:23:13} How do you look at the difference in the profitability of a dark kitchen versus a core delivery model, of the aggregator?

{audio:0:23:24} If you go for a dark kitchen, the main things that you are looking at to make you profitable is, firstly, you’re looking at it being completely low risk, in terms of rent. You’re also looking for better expansion opportunities, where it’s easy to expand to another region. You save on overheads, which are very low when you use a dark kitchen. You have high revenue and high profit. You have a high market share control and you have more customers online.

{audio:0:24:09} When you look at it from a restaurant’s perspective, basically, you’re not getting what dark kitchens have, because of the technology they are using. For example, if you are doing traditional delivery, from a normal restaurant, the disadvantage is, firstly, you’re paying the rent and your rents are high. Secondly, you have to hire the drivers yourself. You have to pay for the bike fees, the maintenance and insurance, so your overheads are quite high. When you look at the rental model, rents are high and profitability is not that high. Therefore, it’s a higher risk and, from an aggregator perspective, your risks are completely low.

{audio:0:24:53} If you invest in a dark kitchen and, after three years, you have made good profits and everything has gone well, if you decide to sell that kitchen off you have, basically, made your money back. If you are someone who has a restaurant and you’re trying to sell it, it becomes much more difficult and you’re going to lose a lot. I’ve been in a couple of restaurants where they were not doing well financially and when they tried to sell the restaurant, the loss was actually quite high, because everything you sell has a depreciation and amortization value, where you won’t be able to make the money that you did as compared to the day you bought it.

{audio:0:25:30} Looking at Deliveroo, for example, let’s say the average order is £25, 30% commission, maybe £7.50 or even £8, plus a delivery fee. Let’s say it’s £9 or £10 revenue, per order, does that sound about right or too high? If you take away the delivery cost, which is £3-4, you’re getting about a £6-7 contribution profit, per order?

{audio:0:26:09} Yes; and don’t forget, the more orders you do, the higher your contribution profit becomes. For example, when we open the sites, we were looking at how many orders we would be able to make from that site, so that we can see the contribution and break even. You are looking at, at least, 500 orders a week, from a restaurant and then you will be breaking even and that was a good number for us. If every restaurant partner did at least 500 orders a week, if I’m looking at six kitchens, you are looking at around 3,000 orders a week. If you double that to 6,000 which, with the previous experience I’ve had and why I say Deliveroo is a money-making machine, they are doing that number easily. When you look at the revenue, if you start with a revenue of 50K, it can go up to as much as 100K, per week. You can double or triple that number.

{audio:0:27:06} The more order volume you make, the more profitable the aggregators are and it’s also profitable for the restaurant, because they get more customers on the platform and they get more orders. The negative side of that, for the restaurant partners is – and I’ll use the example of Uber – when Uber shut down here, if you were only dealing with them on delivery, I would say you are going to be left with your pants down because the devices have gone, the platform has gone; all the customers you had, they’ve gone with them. It’s a lose for the restaurant partner side, but it’s a win for the aggregator side. For someone like Uber, when they left, most of the restaurant partners were using them on an exclusive model and they really lost a lot. You have to go back to the drawing board and start looking for other aggregators and signing up again. Then you have to start the process from the beginning again, because you don’t have any of that data on the customers that you had. The data is kept with the aggregator.

{audio:0:28:03} People like Careem or Talabat, are opening their own kitchen sites and have their own app. When you do that, you have control of the market and you have more of the power. You have more buying power, more of the market share, so you can move into any region, any area and dominate it easily. You can move restaurants from the UK to Dubai, from Dubai to the UK; you have the buying power. From a restaurant perspective, you don’t have any power. Even if you are the top restaurant and they leave, you don’t have that data. They’re never going to give it to you because of the data protection policy that came in in 2018.

{audio:0:28:53} So the aggregator owns all the data?

{audio:0:28:57} They own the data, they own the platform, they own everything. The only thing that you’re getting is new customers and current customers. If they pull out, you don’t get them anymore; you don’t get them at all. When I joined, I told them, listen, I’ve come from an aggregator; I know what happens with aggregators and, maybe tomorrow, we’re not going to make any money at all. We are in the process of launching our own app, so that, at least, we will be able to have our own data, our own plans and it will help us to build that platform. In the next couple of months, we should be one of the most aggressive aggregators in the market.

{audio:0:29:39} But our model will be very different, where we are planning to give the information to the restaurant partners who are working on our platform; share the data, share the information and, basically, empower them. At the end of the day, it’s like the stock market. There are those people who have the buying power and those who control the market. For us, we don’t want to do that. We don’t want to capitalize or monopolize the market. We want to make sure that everyone benefits from it.

{audio:0:30:06} Deliveroo and the aggregators must be in a position to really inform, or almost dictate, the menu price for the restaurant, if they have all this data?

{audio:0:30:17} Yes, they can dictate the price. For example, if I have my menu and I want to sell it at 70, the first thing they are going to say is, why are you selling it at 70? Let’s look at your food costs. They will want to see and look into your food costs. The restaurant partners don’t likes sharing their food costs because that’s where they make up their profit and their margin. If I tell you a dish costs £2 and I’m selling it for £20 they will say, why are you selling it that high? At the end of the day, it’s always about, for a restaurant partner, where are they getting it from, from their suppliers, where are they getting the products from? If they are ordering them internationally, their food costs are going to be high and their costings are going to be high.

{audio:0:30:58} A question was asked, where can the aggregators can help here? What Deliveroo did was, we had a model where we, basically, went to the suppliers and said, listen, we are going to cap the middle man. This is where most restaurant partners are getting hurt because they can’t go directly to the suppliers; they stay with the middle man. In this region here, there are too many middle men. In the UK and the US, it’s easier; you have someone who’s making fresh produce from the farm and you can go straight to the farm, buy the produce from them, at the price that they are going to be selling and it will also lower the price of what you are selling. If you’re getting something from a farm that’s close by, you can get it at a huge profit, in terms of quantity and the cost becomes low. It’s also easy for you to dictate the selling prices on the menu and you will be able to lower it.

{audio:0:31:54} Most restaurant partners are going to tell you, I know you want me to bring my prices down, but my suppliers will not lower their prices. If it is something that is being shipped out of the country – and we saw this during Covid, where restaurant partners had to give up their prices – when you tell them, go to this town, they don’t like doing promotions in that town. If you sell something at 50% in this town, it’s half the price and they need to look at the cost. If they’re not making a profit margin of more than 5%, then they’re not going to be going for those promotions. At the end of the day, promotions are what brings in the volume for you and that new customer’s volume feasibility. But if you are a restaurant who is really doing well and you’re selling at least 70 or 100 orders a day, without any promotions, it means your product is good. People love your brand. But the thing is this, you have to have high presence in digital marketing, as well, such as social media and note what people are saying about your brand. There are a lot of factors that play in here.

{audio:0:32:58} That’s where you find most of the aggregators. They have a platform which is a dark kitchen, they have their tools and net box, where they keep the data and also, digital marketing. When they do all of this for you, as I said, if they pull out, you’re left with nothing. The top restaurants, like Pizza Express or Wagamama. They have good marketing people who work together with the aggregators. That’s where they are smart and the owners say, promote it on our platform and not your platform. They know that if they promote it on the aggregator’s platform, the customer will go to you and not to them. But if they go to your platform, it’s easy for you to get the details of that customer and then you can plug in your own promotions. Now, aggregators give everyone the opportunity and they will say, this month, this is the number of promotions we will do. Plug in the menu prices or the items you want to have on promotion. You then have the power to say, okay, I’m not going to promote this item, because it’s costly and it’s an incentive; I’ll go with the slow-moving items, push them, and hope to make some revenue from that.

{audio:0:34:12} Going back to the economics for the aggregator, how did the order volume change when you rolled out a dark kitchen? Let’s say you’ve got four, five or six brands on the core platform; you’ve opened a dark kitchen; the brands come to the dark kitchen, as well. What was the type of order growth or change in the orders, per week, that brands actually saw when you opened the dark kitchen?

{audio:0:34:34} I’ll explain to you, from a delivery perspective. The way we told the brands to put on the dark kitchens was, basically, us taking the top brands, depending on the zone or the market area that you are going to. For example, if you’re in central London and you want to bring in a brand, you’ll go on the platform and look to see what are the top brands in central London, that are doing well. You have Pret A Manger, Wagamama and all of these top brands that do well. These are the ones you go and speak to and have them come into the dark kitchens.

{audio:0:35:09} What are you doing? You’re putting them in an area they are not in. You bring them to a niche market where that brand presence is lacking. It’s you telling them. instead of you spending £1 million to build a restaurant, we have a kitchen where you can just come in, the overheads are gone, just bring in your staff and you cook and this is the number of orders you will see.

{audio:0:35:30} When these brands moved into these kitchens, you are looking that, within four to eight weeks, their order volume would go up by 20% to 30%, so the revenue would rise the same way, as well. This is because visibility was there for them; we brought in a lot of marketing push and new customers would come in. There would always be SMS blasts and emails and notifications and all of that stuff. The brand got presence. And this is something, from a restaurant perspective, you don’t get to do that in those regions. In six months, you would see a brand going from a delivery brand to the number of orders that would be competing with a traditional brick and mortar restaurant that they had. I’ve seen this with a countless number of restaurants, where for us, it was a positive thing. We had restaurant partners shutting down their restaurants and dealing only with Deliveroo. They only went on the Deliveroo platform and shut down their restaurants. They didn’t want to deal with dine-in anymore, because they saw the profitability they had with delivery. And there were those who would just decide, you know what, let’s have two different sectors in the company, where there is the restaurant and there is delivery.

{audio:0:36:52} You mentioned earlier that the breakeven for a dark kitchen, roughly, is 3,000 orders per week? Is that right?

{audio:0:37:00} You’re looking at 500 orders per week. Each kitchen should do at least 500 orders per week. If they do 500 orders a week, that’s around 70 orders a day; that’s where the breakeven point comes in.

{audio:0:37:13} That’s 500 per brand or restaurant?

{audio:0:37:17} Yes, per brand or restaurant.

{audio:0:37:19} That would be 3,000 orders per week, for the total kitchen?

{audio:0:37:23} Yes. Roughly, I would always recommend people to have between six and 10 kitchens; don’t go more than that. With a dark kitchen that has six kitchens, it’s easy to churn the kitchens. I can tell you, within a span of three years, we’ve done more than 200 churnings of restaurant partners, in the five locations we’ve had. What does this mean? Basically, it means a partner can come into your kitchen, stay with you for six months; they’re not doing well and you try your level best by saying, okay, open another virtual brand; try doing this, change the menu. If it doesn’t work out for them, they would end up terminating the contract and pulling out and then you have a span of four weeks, to fill up the kitchen with another restaurant partner. For us, we had a queue. If someone left today, in two weeks’ time, the kitchen would be completely full.

{audio:0:38:27} We had locations where the kitchen was empty for a month, so we went from six kitchens to five and we still generated the same revenue as if it was full with six kitchens.

{audio:0:38:46} I’m just going through the economics for Deliveroo and it seems crazy how you can get to £100,000 in revenue, a week, for a dark kitchen, which is probably a very small plot.

{audio:0:39:04} The things that helps you reach this kind of revenue are how much marketing push you have and it’s important, in terms of selection, to choose the right partners and the right brands in the kitchen. Every year I saw, where we did this with a couple of brands, where we broke records on a weekly or monthly basis. It was always about having the right brands, the right promotions, at the right time. The thing that I love with Deliveroo is that Deliveroo didn’t have promotions from the 1st to 30th. They had the promotions on a weekly basis. They did it for five to seven days and then they pulled the promotion. Then they had another teaser. The week after that, then they would have the promotion.

{audio:0:39:46} These kinds of ways of doing the promotions attracts the customers, to the point where you find your loyal ones that stay with you. When I look at other aggregators, like Talabat, Zomato, if you put a promotion from the 1st to 30th, if you open your phone and I tell you, you have 50% off for the entire month and it’s only the 5th, you do get tired. If you do it this week, it’s Asian cuisine. After a week, there are no more promotions and you’re going to be interested in knowing, okay, what do they have the week after? The week after we tell you, okay, it’s something else and after that, we keep quiet. That entices the customers who always want to know, what’s going to happen next?

{audio:0:40:32} But when you leave it for a long time, someone orders for a week, and then they get bored. When you look at people like KFC and McDonald’s they basically change the way they do their promotions, because they stopped doing that; they stopped having billboards showing, buy a coffee and a doughnut for the whole month. They have started doing the same as Deliveroo. They bring it in for a few days; they have a time lapse; for example, between four and seven is a happy hour and if you go at those times, you get the deal. The traffic coming to your restaurant or to the page is so high that you are able to get repeat customers and new customers.

{audio:0:41:16} Also, you get to see people’s eating habits. What do they like about the location; what does this region say, in terms of feedback. We always take this detailed information, to help the restaurant partners perform well. It could be small things about your packaging; a customer could talk about your stickers. These are small things that make partners change what they do, to be more effective. We’ve seen it hugely impact the brand. When I joined Dynamic, there were a couple of things that we did, such as we did the packaging differently, we did the stickers differently and we saw the volume go from 20 orders in a day to 100 orders in a day.

{audio:0:42:06} There are small things that could look minute, but they end up having a huge impact, from a customer’s perspective. Other things, for example, the value proposition of the restaurant and the customer. From a restaurant perspective, it’s all about speed of delivery and consistency of the product. From a customer perspective, it’s value for money, what’s the selection, the effectiveness of the app and, also, the speed of delivery. If you go to a restaurant, it takes around 30 to 35 minutes to prepare a burger. But if I can deliver a burger in 15 minutes, someone gets wowed by that. Basically, it means that if you wake up in the morning, you can place your order for breakfast, at 9am, and by 9.20am, someone rings the doorbell and your breakfast is there. This is changing a lot, especially for the millennials, where they are the ones who ordering more, they are the ones who have the buying power. The industry has changed because of this age group, between 25 to 35.

Former Head of Operations, Deliveroo Editions, Middle East

Deliveroo & Dark Kitchens

Cost of building and size of an average dark kitchen

Take rate, fee structure, and commercial relationship between Deliveroo and restaurant brand in dark kitchens

Contribution profit per order for aggregator and restaurant in dark kitchens

Risks for restaurants using dark kitchens

How aggregators can vertically integrate to commodotize restaurants in the value chain