Restaurants (Short Kitchens, Long Bikes)

Options abound for food these days - particularly if you live in an urban area. You can get your food sent to you in kits (Hello Fresh and Blue Apron), as groceries (Amazon Fresh, Fresh Direct) or from restaurants via the gazillion delivery services that are duking it out with one another AND capitalizing upon the rise in co-cooking kitchens (Caviar, Postmates, Grubhub and UberEats). We could fill 6 minutes of a$$-kicking reading just by continuing the list.

Here's the thing: much like the consumer products e-commerce space - where shipping is cutting into retail margins bigly - food delivery is killing your favorite restaurant. Why? Well, Captain Obvious, there are too many hands in the pot. As The New Yorker highlights (must read), "over-all profit margin has shrunk by a third, and that the only obvious contributing factor is the shift toward delivery." Ruh roh.

The piece is shocking in how ignorant every seems to be about the effect of delivery services on restaurant margins. This bit also struck us, "It’s worth noting that, even while charging restaurants steep rates, most delivery platforms are not yet profitable, either. Their hope is that order volumes will one day become high enough—and couriers will deliver enough orders per hour—to push them into the black." The alleged answer? A kitchen within a kitchen. Uber "is nudging restaurants to embed “virtual restaurants” inside their kitchens—picture a burger joint housing, at Uber Eats’s behest, a cookie company that exists only as a menu on the delivery provider’s site. DoorDash, an Uber Eats competitor, has started to experiment with leasing remote kitchen space to restaurants so that they can expand their delivery radii. If such practices catch on, it’s easy to imagine a segment of the restaurant economy that looks a lot like, well, Uber, with an army of individual restaurants designed to serve the needs of middle-man platforms but struggling to make a living themselves." This is "progress" folks. 
 

Long Regulatory Disruption of "Gig Economy" Disruption

P.S. What Happened to Unicorn Homejoy LLC? 

Busted Tech? (Long Regulatory Disruption of Disruption). There are, what, 183929 Uber-for-X style companies today offering everything from weed delivery to in-home massages...? Most of these companies - Uber and Lyft included - are built on the 1099-economy where "gig" workers are framed as contractors rather than employees. Given that these companies are struggling to be profitable to begin with, it's especially helpful for these companies to avoid outlays for overtime pay, health insurance, worker's compensation, and other W-2 employee-related expenses. Except now, for the first time, a challenge to this model is seeing its day in court as a GrubHub Inc. ($GRUB) employee is suing for reimbursement of wages. Uber and Lyft have both settled prior (similar) suits out-of-court. Instacart, Caviar and Postmates have also been sued. A similar lawsuit, in part, forced Homejoy LLC into an assignment for the benefit of creditors in August 2015 and Chapter 11 in late-2015.* Which is to say that many companies - of GrubHub's status and otherwise - will be watching this fight closely as it has potentially existential ramifications for the gig economy going forward. Sometimes moving fast and breaking things runs into a regulatory roadblock.

* We thought it made sense to dive a bit deeper into what ultimately happened to Homejoy LLC, which, for the uninitiated, was at one time a Y-Combinator darling valued over $1b (after approximately $64mm of funding). Why? Because more often than not companies are celebrated on the way up and quickly forgotten after they come crashing down. It should be noted what happened to the company, its employees, and its assets after the crash. Here is what we know from the bankruptcy filing and otherwise:

• Per Re/Code, Google hired "around 20 members of Homejoy's product and engineering team." Notably, Google Ventures was one of the largest creditors of Homejoy's bankruptcy estate - to the tune of approximately $18mm. 
• Per the company's court filing, the Google hire occurred in July 2015 and the purchase price had to be several million dollars because it subsumed not just the tech team, but enough "consideration" to payoff the company's secured credit facility from Silicon Valley Bank, fund the wind-down AND leave money in the bankruptcy estate for a liquidating trust. See below. 

Company's Bankruptcy Disclosure Statement, filed 9/15/16. 

• The company sold its customer list, service provider list, trademarks and domain names to entity called ABAP Holdings Inc. Some may recall that this transfer wasn't without its own controversy. The total purchase price was $100k.
• The company sold its remaining office equipment for $20k.
• The company seemingly tried to sell its source code but apparently was unable to find a buyer as the bankruptcy docket reflects no motion filed with the Bankruptcy Court seeking approval of said sale.  
• The company would have managed the wind-down without a chapter 11 filing were it not for the "gig economy" lawsuits. It is unclear whether payments were ever made to the plaintiffs out of the liquidating trust or, if so, for how much. 

Clearly this wasn't the ending that Google Ventures, First Round Capital, Andreessen Horowitz and others wanted. 

9/17/17 Update. Apparently that gig economy lawsuit with massively disruptive potential didn't get off to a hot start for the plaintiff.