I am writing a long post because I don’t have time to write a short post.* *Wrote this before the valuation range came out. I mean, £8bn at the mid-point… that’s pretty high. That prices the company on a much higher valuation than $DASH on a comparable accounting perspective. Also, existing investors which include Will Shu will be selling OVER £600mn shares...interesting
Also, corporate overhead doubled in 2020 despite then firing half their “director and global management” team and shrinking the other divisions. I wonder how much segment level costs were stuff in the corporate line item to make it seem like the business is profitable on a segment/country level.
1. Why can't Deliveroo or Uber Eats just go out and capture the marketplace restaurants? It seems that TKWY is relying on these marketplace restaurants in the UK, but what prevents Roo to do in marketplace what TKWY is doing in logistics? In fact, it costs much more money for TKWY to add a 1P restaurantwhere they are handling logistics vs. Roo adding a 3P restaurant where they just put them on the platform. If you are a marketplace restaurant, it costs you nothing to be added to another app and even if you capture 1-2% more sales, it is already a win.
2. I see your point on white label, but at least you are capturing some demand. For example, if there 100 customers interest in Nandos day 1 and Roo captures 100 of them. In day 2, Nando incentivizes them to go straight to Nandos and Roo captures 50 of them. So yes Roo lost 50 day 2, but guess what - TKWY lost all 100 day 1 when Nandos is no longer on their app. So overall, it seems this movement is negative for the entire space, but Roo is still better positioned v TKWY if they have Nandos than if they do not.
Could you share your maths on adjusting deliveroo GP 30-40% lower under the DASH accounting approach? I agree that their GP is inflated. But those "admin expenses" also include the army of footsoldiers who go and pitch to restaurants to sign them to the platform. That process is very manual/janky in Yr1, but in theory should be somewhat non-recurring + it scales as orders per XYZ increases.
Also anecdotally the back-end of Deliveroo is a bit of a shitshow, plenty of human beings typing things on spreadsheets. So whilst I agree those costs are variable for now, in 5yrs time they should be able to automate and therefore "steady state" business model could gain more leverage.
Art not science and I agree some adjustment is needed. But 30-40% sounded v punitive to capitalise to perpetuity so just interested to understand working (not saying it's wrong)
Also, corporate overhead doubled in 2020 despite then firing half their “director and global management” team and shrinking the other divisions. I wonder how much segment level costs were stuff in the corporate line item to make it seem like the business is profitable on a segment/country level.
Really enjoy the blog. Couple key questions:
1. Why can't Deliveroo or Uber Eats just go out and capture the marketplace restaurants? It seems that TKWY is relying on these marketplace restaurants in the UK, but what prevents Roo to do in marketplace what TKWY is doing in logistics? In fact, it costs much more money for TKWY to add a 1P restaurantwhere they are handling logistics vs. Roo adding a 3P restaurant where they just put them on the platform. If you are a marketplace restaurant, it costs you nothing to be added to another app and even if you capture 1-2% more sales, it is already a win.
2. I see your point on white label, but at least you are capturing some demand. For example, if there 100 customers interest in Nandos day 1 and Roo captures 100 of them. In day 2, Nando incentivizes them to go straight to Nandos and Roo captures 50 of them. So yes Roo lost 50 day 2, but guess what - TKWY lost all 100 day 1 when Nandos is no longer on their app. So overall, it seems this movement is negative for the entire space, but Roo is still better positioned v TKWY if they have Nandos than if they do not.
Could you share your maths on adjusting deliveroo GP 30-40% lower under the DASH accounting approach? I agree that their GP is inflated. But those "admin expenses" also include the army of footsoldiers who go and pitch to restaurants to sign them to the platform. That process is very manual/janky in Yr1, but in theory should be somewhat non-recurring + it scales as orders per XYZ increases.
Also anecdotally the back-end of Deliveroo is a bit of a shitshow, plenty of human beings typing things on spreadsheets. So whilst I agree those costs are variable for now, in 5yrs time they should be able to automate and therefore "steady state" business model could gain more leverage.
Art not science and I agree some adjustment is needed. But 30-40% sounded v punitive to capitalise to perpetuity so just interested to understand working (not saying it's wrong)