Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

{audio:0:00:00} Jesús, could you give us a quick introduction to your background please?

{audio:0:00:05} JR: I am Jesús Rebollo, currently the managing director of Jobandtalent for Iberia, which is an EU marketplace in the staffing industry. I previously worked in the food delivery industry for over seven years at Just Eat and Uber Eats.

{audio:0:00:28} JB: My name is Jaume Boada and I am the country manager at MOX. I have worked at Philip Morris, LIDL and Just Eat, occupying positions from regional manager to head of sales.

{audio:0:00:46} Jaume, could you explain how the Spanish delivery legislation has changed?

{audio:0:00:53} JB: The new law obligates all food delivery marketplaces to employ their bikers. It will launch in the middle of April and allows companies three months for the implementation. Marketplaces will now pay social security and their workers will have rights to vacation, sick leave and unemployment compensation related to the hours they work.

{audio:0:01:36} How will that change the economics, looking at the cost per rider hour in this new model? Roughly how many euro do you think it will cost?

{audio:0:01:49} JB: In the previous freelance model bikers were earning €8 per hour whereas in the new model, if they signed with a company like MOX, they would get between €12.50 and €13.50. As you can see, that is a huge difference, with the social security being the principal cost.

{audio:0:02:36} That would be the majority of that €5 extra?

{audio:0:02:42} JB: Yes, more like €4 or €5.

{audio:0:02:46} JR: This is the main difference.

{audio:0:02:48} Will MOX employ them, pay their social security as well as an hourly rate to deliver to the marketplaces?

{audio:0:02:57} JB: Correct; we are working with Just Eat and, incidentally, Jesús signed the contract with MOX three years ago. Previously, Just Eat guaranteed a minimum forecast but now they simply provide us with branding for the riders who are exclusive.

{audio:0:04:00} Jesús, what year did you sign the contract with MOX and in what context?

{audio:0:04:08} JR: It was ages ago, but when we were working at Just Eat it was very important to be legally compliant. We were not interested in the independent contractor route but wanted to add value to the industry and also differentiate ourselves. Three or four years ago Glovo, Deliveroo and Uber Eats were entering Europe and employed the gig economy model which changed the future of work globally. At the time, we collaborated with independent fleet managers such as MOX.

{audio:0:05:04} We were not service recruitment experts so we found logistic partners to help us by approaching MOX and others. Legislation changes differ depending on the country but we are entering a world where it is clear we need to provide more value to the gig economy. We need to improve the social rights and benefits of those employees while simultaneously finding the right balance between giving more social benefits and helping the industry to keep innovating and creating added value. Food delivery has had a massive impact on the restaurant industry.

{audio:0:06:09} I cannot imagine this pandemic without the likes of Uber Eats, Just Eat, Glovo, Deliveroo and others so we need to praise those entrepreneurs who created new business models. In Spain we should find a balance between the gig economy and sector regulation, such as in France.

{audio:0:06:49} Did Uber and Glovo use the freelance model only or did they also use MOX?

{audio:0:07:05} JB: When Glovo launched two years ago, we tested in several cities. We also worked with Uber in 2019 and they hired many bikers through MOX, but in 2020 they changed their model again and went the freelance route. Today they are thinking about changing the model again.

{audio:0:07:48} JR: Those players tried everything because they needed to learn first, then expand. Business is quicker than legislation so they are always trying to find the right model. All the players have tried different models and are always trying to adapt their business model to the new reality.

{audio:0:08:21} There have been reports of fraudulent activity with illegal immigrants using Spanish identities for delivery. Is this a serious issue or is it simply press speculation?

{audio:0:08:50} JB: Unfortunately, there are many illegal immigrant riders. Several weeks ago, there were reports of riders selling their license to immigrants and earning 20 to 30% of their collections. Some platforms lack driver facial recognition so it is easier. It is impossible for one rider to work 20 hours every day of the week. It is easy to control because the government could ask for rider lists. They would notice that many riders simultaneously work on multiple platforms. I calculated that one person could work 300 hours per week, which is a big problem because with a single license, only 1% are paying social security of €60 per month, instead of six or seven people.

{audio:0:10:37} If the Spanish government mandates employment for all, it will be harder for illegal immigrants which will reduce the amount of delivery drivers in Spain?

{audio:0:10:57} JB: We will see how the platforms react to the new law but it will probably be difficult to find drivers. Jesús can tell you that in some cities, it is very difficult to find drivers. I am not sure if it is possible to deliver the amount of orders which exist today on all the platforms.Solutions include paying riders more or reducing the delivery radius to increase their productivity.

Jesús can give you a better response because he operates a recruitment company.

{audio:0:12:05} JR: For Jobandtalent this is an interesting opportunity because we provide all aggregators – including companies like MOX – the starting capability. If you are looking for X numbers of drivers in a specific city, we use algorithms to find the right people for each role. It is clear that there will now be an increasing demand for talent. Platforms sometimes look for drivers with or without motorbikes so it depends on many variables and we believe this will be challenging.

{audio:0:13:03} JR: We do not expect any issues from a driver supply perspective because if and when the law passes and is implemented by end of July, thousands of self-employed drivers will need to work for those companies.We suspect those guys would be willing to work with us and we will provide them to all platforms. One of the benefits of working with Jobandtalent is that we provide social benefits to our employees. This allows them to stay longer with clients and be more productive. We offer specific performance incentives to some of our partners. The total scope of how this industry was configured four years ago differs for each country.

{audio:0:14:12} When the new Spanish regulations come in, all drivers will earn €12 to €14 per hour so will there be an increase in supply of Spanish people willing to deliver food and thereby decrease the amount of illegal immigrant drivers in Spain?

{audio:0:14:39} JR: I would not distinguish between Spanish or non-Spanish because the only thing that matters is that they are legally in Spain. Our work at Jobandtalent is to convince them to work with us and we will allocate them to different projects we have, whether it be MOX or others.

{audio:0:15:14} What is the percentage of illegal immigrant food delivery drivers in Spain?

{audio:0:15:30} JB: I do not know the number; it is impossible to calculate.

{audio:0:15:41} JR: We know there is always news in the press around this, but it also exists in other industries and I want to reinforce the fact that the drivers are hard workers. In some cases, there could be fraud as there is in so many other industries, so I wanted to flag that.

{audio:0:16:13} There is no doubt that these people are crucial to global economies.

{audio:0:16:23} JR: Absolutely, you are completely right.

{audio:0:16:24} The industry is moving in a way which is hugely favorable for everyone. My question was more from a driver supply perspective. If Spain demands legal citizens are employed and 30% to 40% of these drivers are not, would that be challenging?

{audio:0:16:52} It is not that highly likely in your opinion?

{audio:0:16:53} JR: The unemployment rate in Spain below 25 years of age exceeds 46% so we suspect there will be a supply of workers for the industry. Fraud exists but it is not that high.

{audio:0:17:17} How are the delivery players reacting to this change in legislation?

{audio:0:17:25} JB: Currently they know the new legislation but continue to fight with the government until the last minute. Adigital is a platform which represents them and they were fighting until the last minute, trying to negotiate with them but the government has made a decision. We know they are thinking of different models and currently all platforms are either hiring their own riders or outsourcing to companies such as MOX. The latest news is that by the middle of August, all riders have to be employed so they are currently evaluating all their options.

{audio:0:18:44} Would they prefer to hire them internally or use someone such as MOX?

{audio:0:18:50} JR: They will probably choose both because in big cities it is easier to find and control riders. Some platforms are hiring supervisors in big cities but it will be difficult for them to do this in small citieswhere you only need 10 to 15 riders. In these cities, it will be easier for them to outsource. The law dictates that they cannot employ two models in the same city.

{audio:0:19:54} Has the government said you have to either hire internally or use MOX?

{audio:0:20:01} JB: Jesús could you help me here?

{audio:0:20:06} JR: The institution in Spain is not easy because, in addition to the government, we have 17 different regions. At some point they may be able to change some laws, so if there are some local nuances it will add complexity to the system. I agree with Jaume that all aggregators will work with both systems. Some will work with employment contracts and others with fleet managers through staffing partners like MOX. They will need to create a balance between internal and external employees.

{audio:0:21:09} JB: Each Spanish province has their own laws and restaurant sector agreements differ in every community, in every province. I know that Malaga has three sector agreements; city, coast and mountain. Each agreement has their own rules with different wages for riders.

{audio:0:22:02} Looking at the economics on a simple level, if we have 1.5 orders an hour at an order value of €25, which is probably quite high, that would give you €38 GMV. With 30% commission and €13 per hour for the driver, that equates to a net revenue of minus €2, so Jesús how do you see this playing out for those operators?

{audio:0:22:46} JR: This is challenging and three things need to happen to correct this. Firstly, increasing driver productivity in terms of the number of orders delivered per hour which we know is easier in a city like London or Madrid than it is in suburban areas. Secondly, customers need to realize there is a real cost associated with delivery and at some point, they need to pay for it. Why when it is raining and you want pizza do you refuse to give a €3 tip to the guy getting wet for you?

{audio:0:23:50} I find this absolutely treacherous as a society and think that customers need to pay a portion of that cost. The all-for-free mindset destroys the value chain of a global industry. The third thing is to provide drivers security, stability and protection to increase their productivity.

{audio:0:24:57} The interesting point is that it is minus €2 an hour excluding the delivery fee. If you add a €2 delivery fee, you will reach a 1.4 net revenue per hour.

{audio:0:25:16} JR: Encourage customers to pay for delivery and increase driver productivity. We all know there is an extremely tight business margin but there is money to do it due to the volume. In the US and Canada where people give $5 and $10 tips, suddenly the whole industry changes.

{audio:0:25:52} But it is not European culture to tip that way though?

{audio:0:26:02} JR: The customer needs to pay something; delivery for free is absolutely ridiculous. It is a matter of changing our behavior which will happen. A portion of the heavy user customers of those platforms under certain circumstances will sometimes tip. We do not need to tip €10 in Spain but if we tip €2 it will make a huge difference.

{audio:0:26:35} JB: They will have to increase both delivery price and minimum order value. Today some platforms allow you to order one soup for €4 which is totally ridiculous. When they increase delivery prices and minimum order values, they will give restaurants a chance to increase their own orders. Recently restaurants have created their own channel because it is impossible to fight against the platforms.

{audio:0:27:54} Who offers zero minimum value today or do they all offer the same thing?

{audio:0:28:03} JR: There are many players and you can order a Coke and pay no delivery fee.

{audio:0:28:13} Is that mainly Glovo or those types of businesses that do the convenience?

{audio:0:28:19} JR: Yes, I don't want to mention any name but what they are implementing is that for orders under €9, you pay more for the delivery. In that way the driver's effort is compensated. I know it also happens in the UK where you can literally order an ice cream at midnight and pay £5.

{audio:0:28:50} JB: Recently I spoke to a Pakistani with five restaurants who told me they do not currently have their own riders and all deliveries are made through Glovo, Uber or Deliveroo. The average order is €10 so until they change the law for him it is too expensive to have his own riders. It is interesting to see how Pakistani and Chinese restaurants do not employ their own riders.

{audio:0:29:43} Historically, legacy Just Eat business in the UK and Spain worked with typical suburban Chinese and Indian restaurants who employed their own drivers or used their family for deliveries, do you think they will change their perspective on delivery?

{audio:0:30:14} JR: Some will choose not to have their own drivers and will use the fleet of an aggregator like Uber, Glovo or Just Eat because it is not their core business. In other cases, the same rider will be serving tables. It is important to protect those mom-and-pop restaurants which are basically family-owned restaurants which have been working for generations and who have their own business model which include staff working in the restaurants doing multiple things. They do delivery and clean and set tables and we should allow them some freedom with legal constraints.

{audio:0:31:19} This is more traditional, but modern and high-end restaurants, as well as dark kitchens, will clearly choose the fleet owned by Uber, Glovo, Just Eat or Deliveroo.

{audio:0:31:38} Would it be rational for a family-owned restaurant in a Madrid suburb to use and pay that driver fee as opposed to using their own employees?

{audio:0:31:57} JR: I remember calculating the numbers with Jaume when we were working together. There is a certain volume where it pays off but, until that volume is reached, it is better to be flexible with your own work force where the same guy who is serving tables can deliver to the neighbor. But it depends on your volume and how many orders per hour you are able to produce. When you need to add many drivers, it becomes a hassle because you have to manage them and their motorbikes, whereas for the small mom-and-pop not producing many orders, their current business model still works. Jaume knows the restaurants well, is it better for independent restaurants to go through Glovo, Uber or Just Eat or to use their own staff?

{audio:0:33:11} JB: It depends on how many orders they receive, especially at peak times. 70% of orders are on Friday, Saturday or Sunday between 8PM and 10PM but some restaurants have their waiters who also have their own motorbike. It becomes difficult when increasing the number of orders because you may need another rider if orders arrive late. You then hire extra riders but end up with too few orders, so it is difficult to find a balance.

{audio:0:34:12} Is there a risk to Just Eat in the suburbs if Glovo or Uber offer their logistics?

{audio:0:34:30} JB: There is a risk if all platforms decide to implement the marketplace model. Restaurants will work with all the platforms because it is good for them. If these platforms enter the tier 4 and 5 cities, without charging subscription fees to restaurants, it will be very easy. Just Eat has been in these small cities since 2014 and today they are in over 1,200 cities in Spain. It will be difficult for them to attract new users but signing up restaurants will be easy.

{audio:0:36:04} If Just Eat drives 40% of my revenue, do I have capacity for Uber or Glovo?

{audio:0:36:18} JR: I doubt it is 40% but, as Jaume said, even during COVID they need as many partners as possible to maximize order volume because currently restaurants are empty or closed. Even before COVID restaurants would hardly ever refuse orders. It happens in 1% of the cases with a few popular restaurants, but the rest need more business. The beauty of an open market with many players is that it gives restaurants more opportunities to increase their revenue.

{audio:0:37:17} The vision of the big aggregators is to give the restaurants more orders. Currently in Spain it is not a winner-takes-all approach but more like a well-balanced market.

{audio:0:37:32} Is that due to the new regulations which mandate employment of riders?

{audio:0:37:37} JR: No, it is due to the market share of the platforms; not one has a 90% share.

{audio:0:37:48} Surely Just Eat have a higher market share in certain suburbs and towns?

{audio:0:37:54} JR: I am not familiar with the current data but some cities have platform stickiness. If another brand opens a new suburb, their customers also enter that market. Brand power is important which is why every time a new platform arrives, the market also increases. In most cases, customers are not stolen from one platform to another but rather more customers are added.

{audio:0:38:38} JB: During summer when users from Barcelona, Madrid and other big cities go on vacation, you see how restaurants in a village increase their order numbers. These come from the same users who place orders in the cities so there is a risk because Uber Eats brings these users.

{audio:0:39:20} Is the Just Eat network in small towns not that strong any more, Jesús?

{audio:0:39:30} JR: Just Eat has a phenomenal business model and after their Takeaway acquisition we have seen great improvements. The results they released two weeks ago were very impressive. Every player has their own niche and Just Eat is clearly the market leader. Uber Eats are bringing many new customers and Glovo is disrupting the industry in different ways with restaurants but also with convenience and delivering within 10 minutes and attracting high-end restaurants. The more aggregators or brands that come to a city or suburb, the more customers enter the industry.

{audio:0:40:44} If Glovo have a €0 minimum order and now have to employ staff, won’t that reduce the attractiveness of that service in the near future?

{audio:0:41:03} JB: They are about to raise $470 million and have a $2 billion valuation so what Glovo has built is absolutely insane. They have created an amazing business with investors and all industries are looking at them to a future where we order groceries and want things in 10 minutes. They will eventually become profitable but now they are launching many business units and focusing on one area. They have the density, drivers and the brand with a great business model.

{audio:0:41:57} But they need the order volume to cover the new higher cost of the drivers?

{audio:0:42:00} JB: Yes, I agree, but they already have a huge volume of orders.

{audio:0:42:07} So you’re suggesting Glovo, Uber and Just Eat have a different user base which means they can coexist in a country and improve the entire ecosystem?

{audio:0:42:31} JB: We have seen that with many data points but there could be an overlap. There is a net increase in total customers because, in order to get market share, they invest in marketing. They attract new customers who do not have brand affinity. In one city they may have a restaurant which brings new customers to the industry. In an industry which is still growing rapidly there are many new customers to acquire and all brands are working hard to do exactly that.

{audio:0:43:21} In London, Just Eats Takeaway are rolling out Scoober quite aggressively which has been very successful. They are offering zero delivery fees in a mission to win market share, based on the fact they have a profitable marketplace which can finance growth. The logistics players have a harder time paying for drivers compared to Just Eat, so do you think that gives them a stronger position than Glovo or Uber Eats in Spain?

{audio:0:44:02} JB: The market is becoming very interesting and there are many rumors. You think Deliveroo is in a bad situation but now they are listed on the FSTE after Amazon invested in them. Glovo received a lot of money in the last round so the situation in Spain will be very interesting because there are four very strong players. Two months ago, I thought some platforms were in a bad situation and would need to make changes such as exiting from some cities and increasing their minimum order value and delivery fees. Whereas today I have no idea what will happen.

{audio:0:45:30} JR: I totally second what you say Jaume; it is a great time for all the brands. They need to deploy their strategies but have strong marketing teams and are doing what they have to. The coming 24 months are going to be super interesting.

{audio:0:45:56} How difficult is it for Uber or Glovo to move into the suburbs?

{audio:0:46:17} JR: They are already in multiple cities nationwide. Correct me if I'm wrong Jaume, but Glovo and Uber Eats provide delivery services in many cities including outskirts and suburbs.

{audio:0:46:41} In the smaller towns are they now competing with Just Eat in those mom- and-pop marketplace restaurants?

{audio:0:46:54} JB: Deliveroo is doing that but Uber do not have many restaurants. Glovo and Uber Eats already work in these small cities and are not signing up restaurants with their own riders. They are busy controlling the order chain but Uber Eats are trying to convince some restaurants to have their own riders because they want to reduce their future cost.

{audio:0:47:56} They are trying that with some restaurants by changing the model and reducing their commission. I first heard about this a month ago when a restaurant wanted to hire MOX for some slots. Deliveroo and Uber Eats are currently allowing restaurants to combine both models. Restaurants have their own riders and simultaneously use Uber Eats or Deliveroo for certain slots.

{audio:0:49:04} Are they mainly for larger chain restaurants rather than smaller ones?

{audio:0:49:12} JB: I only see that for the small restaurants. I understand commissions are lower for the large chains so they are currently not interested in having their own riders.

{audio:0:49:35} Jesús, how do you see the restaurant side changing given your experience working with chains in Spain?

{audio:0:49:44} JR: The changes on the legislation depends on the different chains. Some, like Domino's, have their own drivers which they will continue to work with in their own system. What is important for the chains is that there are clear rules of engagement so everyone knows exactly what to do and expect. As long as the aggregators deliver the right value that is all that matters. If I were a chain speaking to one of those guys, I would not agree to pay more for their service. They have some problems and it is up to them to fix it. The only thing I care about are the number of orders, new customers and my KPIs.

Online Food Delivery: Spain Labor Law & Market Structure Changes

Former Head of Enterprise Sales, EMEA, Uber Eats

inpractise.com/articles/spanish-food-delivery:-labor-law-and-market-structure

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Executive Bio

Jesús Rebollo & Jaume Boada

Former Head of Enterprise Sales, EMEA, Uber Eats

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Online Food Delivery: Spain Labor Law & Market Structure Changes(April 12, 2021)

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