Food delivery platform Deliveroo says it will permanently cease operations in Australia, with the company declaring it “cannot reach a sustainable and profitable scale” without significant new investment.
In a shock announcement, the company on Wednesday revealed its Australian operations have been placed in voluntary administration, with Michael Korda, Andrew Knight and Craig Shepard of KordaMentha appointed as voluntary administrators of Deliveroo’s Australian subsidiary, Deliveroo Australia Pty Limited (DAPL).
Deliveroo’s Australian operations comprise “approximately 3%” of its gross transaction value, said the company, but the cost of keeping Deliveroo Australia afloat has “negatively impacted” its adjusted EBITDA margin by 0.3%.
Building Deliveroo Australia to meaningfully compete against competitors like Uber Eats and Menulog would require a significant capital injection, but “the expected return on such investment is not commensurate with Deliveroo’s risk/reward thresholds”, the company said in a statement.
Eric French, chief operating officer, said the decision to end the platform’s Australian operations was “not one we have taken lightly”.
“We want to thank all our employees, consumers, riders and restaurant and grocery partners who have been involved with the Australian operations over the past seven years,” he said.
“Our focus is now on making sure our employees, riders and partners are supported throughout this process.”
In an email on Wednesday afternoon, Deliveroo notified Australian customers that they can no longer place orders on the Deliveroo platform, although they will have access to their accounts for the next six months. Customers can download their account information within this timeframe.
Deliveroo Australia intends to put forward a Deed of Company Arrangement as part of the administration process, which will include “appropriate compensation packages” for creditors. Such compensation will include “guaranteed enhanced severance payments for employees as well as compensation for riders and for certain restaurant partners”.
The announcement from Deliveroo comes in the same week that grocery delivery platform Voly seemingly shut up shop, and just months after Ballarat-based food delivery service Delivr — once touted itself as a profitable Australian competitor to international giants like Uber Eats and Deliveroo — collapsed into liquidation.
Deliveroo launched in Australia in late 2015, and less than a year later spoke about its efforts to “deepen its roots” in the country off the back of a significant Series E capital raise.
By the end of 2018, the food delivery platform was significantly expanding the size of its local operation, adding new delivery zones and hundreds of delivery drivers.
According to estimates on Wednesday evening, Deliveroo currently has around 6,500 drivers in its network.
More to come.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
