SAN FRANCISCO: For years, Bob Gordon, the owner of Footprints Cafe in Brooklyn, handled the delivery of his restaurant's meals, like his Caribbean-inspired "Rasta Pasta," to customers. So when he decided to work for the first time with an outside delivery service -- UberEats, the delivery arm of the ride-hailing giant Uber Technologies Inc -- he was nervous.
Then, the orders started pouring in.
"We weren't prepared for the volume that came in through UberEats this year,'' Gordon, 46, said. "I myself, as an owner, had to work three weeks straight cooking on the food line just to keep up."
By winning over restaurant owners like Gordon, Uber has barreled into the crowded, cutthroat space of food delivery.
As its new chief executive, Dara Khosrowshahi, assesses the strengths and weaknesses of the company with an eye toward an initial public offering in the next 18 to 36 months, top executives believe UberEats could generate enormous growth.
Even as Khosrowshahi grapples with issues such as Uber's loss of its operating licence in London, he has said UberEats has been a "wonderful surprise," according to a person who has spoken with him.
'We weren't prepared for the volume that came in,' says Bob Gordon, owner of Brooklyn's Footprints Cafe.
UberEats stands out even from the rest of the company's fast-growing -- and unprofitable -- business.
"The delivery service, available in more than 120 markets globally, sometimes eclipses Uber's main ride-hailing business in markets like Tokyo; Taipei, Taiwan; and Seoul, South Korea,'' the company said.
The number of trips taken by UberEats drivers grew by more than 24 times between March 2016 and March 2017. As of July, UberEats was profitable in 27 of the 108 cities where it operated. Uber declined to reveal the service's revenue.
"There's a global trend towards delivery," said Jason Droege, vice president of UberEverything, the division under which UberEats operates. "As people use mobile phones more and more for everything in their lives, we're starting to see a secular change in how people eat."
Uber came late to food delivery, which is a $100 billion-plus market, or about 1% of the total food market, according to a study by McKinsey & Co.
Typically, food delivery companies fall into one of two categories. The first is aggregators like Grubhub, which collect restaurant options and menus through an online portal for customers, and which usually require restaurants to handle delivery themselves.
The second is full delivery services like Postmates and UberEats, which take orders through an online portal and deliver the food for restaurants. The restaurants generally pay a fixed percentage of an order as a fee; customers also pay a fee to the delivery service.
The competition is stiff. Postmates, which established a foothold six years ago, has raised more than $250 million, has more than 100,000 delivery drivers and makes 2.5 million deliveries every month. Grubhub, a public company, had $3 billion in gross food sales in 2016, with an active base of 8.17 million customers.
There is also the threat of Amazon.com, which has tried food delivery in a few markets. The Seattle-based retail giant's recent acquisition of Whole Foods Corp provides hundreds of potential bases for drivers to pick up prepared food for delivery in major urban areas, where takeout orders are popular.
"The No. 1 concern for all of these delivery companies is Amazon," said James Cakmak, an analyst at equity research firm Monness, Crespi, Hardt & Co who follows the food delivery space.
"How could Amazon use its network to crush our business? They have the logistical network and the balance sheet to be able to compete on the price side with all of these players."
Matt Maloney, founder and chief executive of Grubhub, said his company's focus on food orders set it apart.
"Uber has built a great company focused on black car service and human transportation, but succeeding in food delivery is a different game," he said in a statement. "We are known for one thing only -- takeout ordering -- and we have engineered our entire product around this purpose."
Both Amazon and Postmates declined to comment on UberEats.
Uber executives said UberEats, which is now in more than 120 cities, had several advantages over rivals.
For one, Uber has a network of more than two million drivers who can also deliver food. Cars used for UberEats also do not need to pass all of the inspection standards required to carry passengers, widening the potential delivery labour pool. (Drivers need not own a car at all; UberBike is a popular delivery method for food orders.)
Uber has also spent the better part of a decade mapping cities and finding the most efficient routes, which the company says may help improve delivery times.
It has also invested in better technology and added more drivers in participating cities.
The ideal UberEats delivery has the driver arrive at the restaurant just as the food has finished cooking, and has it delivered to the customer while still warm.
"What Uber has are the last-mile logistics, and that's crucial," Cakmak said.
For Gordon, the owner of Footprints Cafe, Uber's investments have been a boon for business.
He said the delivery service had helped his restaurant reach new customers outside its loyal Caribbean community, without spending on advertising or promotion on Facebook or Groupon, as he did in the past.
"We've employed people who just work on Uber deliveries, and have a counter just for Uber driver pickup," Gordon said. "It has definitely been worth it."
An order for an UberEats driver to pick up at Footprints Cafe.