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Can Uber Make Burger-Delivery-By-Drone A Real Thing?

If it sounds too 'sci-fi,' consider Delivery Econ 101: 'As off-premise dining grows across the country, it becomes less economical for a delivery driver to spend 20+ minutes making a delivery for a $10 burger and fries," says Yext's Lee Zucker.

With Uber’s race to build a self-driving fleet slowing down for the moment and the goal of crafting flying cars to pick up passengers appears to be further and further away, there’s one area of the on-demand ride-hailing company’s soaring ambitions that may be more down-to-earth than it might seem: 5-to-30-minute drone delivery for food orders.

Uber CEO Dara Khosrowshahi discussed his initial skepticism of the food-by-drone-delivery concept speaking at Uber Elevate with Bloomberg News, but with the Department of Transportation having approved 10 state, local and tribal governments to test drones with companies such as  Google parent Alphabet, Intel, FedEx, Qualcomm Inc., as well as Uber, the reality of getting a burger from a restaurant to a customer’s doorstep could be closer to reality than the other sci-fi sounding ventures.

For Uber, a drone program is existential and crucial to its identity to be seen as more than an app-based ride-hailing and sharing service.

“Uber can’t just be about cars,” said Khosrowshahi. “It has to be about mobility.”

While Amazon has most prominent in promising drone delivery in the near-future, as more Americans buy drones — market researcher NPD pointed to a a 117 percent lift in sales of the flying technologies priced around $300 in 2016 — the introduction of drones as a delivery tools seems increasingly likely. Well, in some places more than others, at least.

The On-Demand Divide Drones Are Suburban, Delivery Is Urban

While a 2017 Cowen study titled ‘Dining In Is The New ‘Dining Out’ found that just 52 percent of Americans had used an on-demand food delivery app in the past year, delivery will comprise 30 percent of the industry sales growth through 2022. These kinds of services are expected to outpace growth among the restaurant industry generally during the next few years.

Ultimately, delivery is expected to increase 12 percent on average from $43 billion today to $76 billion in 2022, while the restaurant industry itself is projected to gain an anemic 3.5 percent.

In that sense, on-demand delivery is very real. And yet, at the same time, the growth is wildly uneven based on geography, gender, and age.

Apart from those divergences, the Casual Dining category is likely to be more impacted by lower-margin/higher cost food delivery than QSRs.

As an eMarketer report on delivery services noted, just over one-third of US internet users had used a food delivery service in the past 12 months. More women (37 percent) than men (33 percent) had done so, and the behavior was very much tied to age.

On the high end, 55 percent of those 18 to 24 had ordered from a restaurant via a delivery service, compared with 33 percent of those 45 to 54 and just 17 percent of consumers older than 65.

Looking at the divide among consumers who order app-based delivery and those who don’t, Lee Zucker, head of Industry/GM – Food Services, Strategy, Product, GTM for Yext, notes that at the very least, the development of Uber’s vision with drone delivery will be interesting to watch. (Full disclosure: Yext owns GeoMarketing. More details on that relationship here)

Most pointedly, Zucker suggests, drones may be able to bridge the divides in food ordering.

“Most of food delivery happens within urban areas, which is less accessible to drones,” Zucker says. “That being said, as off-premise dining grows across the country, it becomes less economical for a delivery driver to spend 20+ minutes making a delivery for a $10 burger and fries. Drones could help the economics and help restaurants expand their delivery radius, therefore serving more customers.

“This is just another ‘service’ fighting for the same share of stomach as every restaurant, meal kit, grocery store and third party delivery company. When a family starts preparing for dinner, delivery from a restaurant who once didn’t deliver to that address, just adds another option that they did not have before,” Zucker adds.

“Therefore, the casual restaurant down the street, the meal kit plan the family orders weekly, the grocery store a mile away or the neighborhood pizza place that has delivered for 20 years are now competing with a whole new set of restaurants that weren’t part of that decision,” Zucker says. “While this tech is unbelievably innovative, it still boils down to the same old challenge for restaurants: continue acquiring new customers while retaining your most loyal fans, and do this in as many channels that are economically feasible for the business.”

Getting Drone Burgers Off The Ground

Considering that Uber Eats, the ride-hailing company’s on-demand food delivery program, is in third place with 20 percent market share in terms of orders following restaurants’ own websites/apps (52 percent) and GrubHub/Seamlesss (34 percent), it’s fairly well-positioned to take the lead on drone delivery since “mobility” is its broader business focus.

But there are considerable hurdles in connecting automotive fleets with successful delivery.

“I would say the same thing about food deliver via drone that I would any drone based delivery, it’s not going to be easy to get that off the ground,” adds Zucker’s Yext colleague, David “Rev” Ciancio, the company’s director, Industry Insights.

“Seeing as how the lion’s share of delivery happens in urban areas, I have trouble picturing how this will work,” Ciancio says. “Where do they land? In the suburbs, I can envision so many reports of drones crashing into trees, power lines, birds, street signs … etc. We are long way off from remote piloting a la Black Panther. I do hope they can figure it out though because I would love to get my burgers brought to me hotter and fresher!”