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Postmates Agrees to Acquisition by Uber

Uber has announced their plan to acquire Postmates via an all-stock transaction valued at $2.56B. This news, first reported by Bloomberg, comes on the heels of several reports from last week that claimed Postmates was evaluating a public offering, a bid from an investment firm, and an offer from Uber.

The acquistion is an interesting development in the so-called “Delivery Wars” for several reasons. Just two years ago, for instance, it was reported by Recode that Postmates and DoorDash were discussing a merger. The maneuver was part of a strategy to more aggressively take on Grubhub, Uber and Amazon, which were thought to be better funded at the time. According to Recode, the merger—which ultimately didn’t materialize—was discussed shortly after DoorDash received a $535M investment from SoftBank.

It’s clear that Uber has been considering a strategic purchase for several years now. Bloomberg’s article said the company first made an acquisition overture to Postmates four years ago. Today’s news could result in Uber bolstering their position throughout the southwest region of America and Los Angeles, according to Bloomberg’s Eric Newcomer, Liana Baker and Katie Roof.

Earlier this year, Bloomberg and Forbes reported that Uber made an offer to acquire GrubHub. According to Forbes, the purchase would’ve expanded the reach of Uber Eats—which has partnerships with some of the restaurant world’s top chains—to include independent restaurants. The reports stated that had the purchase become reality, Uber Eats and Grubhub would’ve become the largest third-party delivery service. The Forbes article, published in May, included an estimate by a Cowen & Co. analyst that small and independent restaurants make up to 80 percent of Grubhub’s orders.

Third-party food delivery—and alcohol delivery where permitted—has been increasing in popularity among consumers, becoming an important element of operations well before the pandemic ravaged the world and the hospitality industry. This has been chalked up to today’s always-connected consumers seeking more and more convenience in every aspect of their lives. This culture of convenience has changed how consumers interact with restaurants and bars.

In recent months, with so many people stuck at home due to mandates, restrictions imposed on restaurants and bars, and an adundance of caution, delivery has seen even more growth. Multiple industry experts and publications have posited that delivery will be here to stay long after the country gets a handle on COVID-19 and businesses can return to “normal,” or a “new” normal in which surviving restaurants and bars can operate at a version of full strength.

Restaurant and bar operators have had a tumultuous relationship with third-party delivery services. Since their inception, many owners and operators have expressed skepticism or outright disdain for such companies. This is due, in part, to what many consider excessive fees, a reduction in customer engagement and guest traffic, and a loss of control over the product. Consider that when a delivery goes awry—hot food arrives cold, for example—it’s often the restaurant or bar that receives the ire of the customer, not the delivery service.

However, as restaurants and bars seek to generate whatever revenue they can during the pandemic, delivery has been held up as a viable and necessary solution. Even some skeptics have embraced delivery or at least conceded that it can help some operations stay afloat.

Unfortunately, it’s not a solution that’s helping to bring unemployed hospitality professionals back to work. Millions of restaurant and bar pros are still out of work and experiencing job insecurity, unable to find new positions within the industry. This situation is being exacerbated by renewed service restrictions and closures.

(Please take this time to tell Congress to pass the RESTAURANTS Act.)

Third-party delivery services have helped some owners and operators keep their heads above water. But other overhead costs—and sometimes third-party delivery fees—mean operating with but a handful of employees. Given Uber’s clear interest in gaining a competitive advantage over DoorDash, now may be the time for operators who currently offer third-party delivery to attempt to renegotiate their delivery fees and terms.

Image created and provided by author.

David Klemt View All

I’ve been studying and writing about the hospitality industry since 2006. Like so many people, I started my journey in this business by working as a host, server and bartender. I was introduced to nightlife in Chicago, learning the ins and outs of nightclubs and after-hours hot spots.

After moving to Las Vegas nearly 20 years ago, I both co-owned a valet company and helped promote the club it serviced. That led to me taking on the role of editor for a Las Vegas hospitality industry publication.

A few short years later, I continued along my journey of hospitality industry reporting. I went from contributing to a major industry outlet to taking on the role of editor and content curator.

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