Deliveroo closes in Australia: Food delivery giant goes into administration: Adam Bant

Is this the real reason Deliveroo is pulling out of Australia? How food delivery company was rocked by a massive court decision before falling into administration – as the way drivers are treated is roundly slammed

  • Deliveroo pulls out of Australia just months after a major court decision 
  • The decision to leave Australia puts more than 15,000 riders out of a job
  • The federal government announced drivers would be classified as ’employees’
  • Deliveroo said it would cost too much money to catch up to market leaders
  • Leaves 6,500 employees in the lurch but promised payouts to everyone
  • Three per cent of global sales are in Australia where it has 11 per cent of market

Deliveroo has entered voluntary administration – putting more than 15,000 riders out of a job – after a recent court decision potentially tipped the struggling company over the edge.

On Wednesday the food delivery service suddenly announced it would shut down all operations in Australia. 

The decision affects more than 12,000 restaurants, 15,000 riders and 120 staff.

The snap closure garnered an angry reaction online, led by Greens leader Adam Bandt, who took aim at the company for leaving its workers without a job with next to no notice.

‘Imagine finding out at 4:50pm that your job no longer exists – and you’re probably not going to get company support after losing your job,’ Mr Bandt said.

‘That’s the reality for thousands of Deliveroo riders tonight. The gig economy isn’t working for workers.’

Deliveroo suddenly announced it had gone into voluntary administration and would shut down all operations in Australia

Deliveroo suddenly announced it had gone into voluntary administration and would shut down all operations in Australia

The snap closure garnered an angry reaction online, led by Greens leader Adam Bandt, who took aim at the company for leaving its workers without a job with next to no notice

The snap closure garnered an angry reaction online, led by Greens leader Adam Bandt, who took aim at the company for leaving its workers without a job with next to no notice

Adam Bandt (pictured): 'Imagine finding out at 4:50pm that your job no longer exists - and you're probably not going to get company support after losing your job'

Adam Bandt (pictured): ‘Imagine finding out at 4:50pm that your job no longer exists – and you’re probably not going to get company support after losing your job’

In August the Fair Work Commission ruled a sacked Deliveroo rider was an employee rather than an independent contractor, a decision appealed by Deliveroo and later overturned.

The Commission heavily criticised the way the company treated the rider but found they could not technically be defined as an ’employee’ and therefore were not entitled to an unfair dismissal claim.

Following the decision, the government announced a plan to protect ‘gig economy workers’ – individuals working often as independent contractors such as delivery drivers.

The changes involved the creation of a new category of ’employee’, accounting for gig workers.

This means food delivery riders and rideshare drivers will be entitled to minimum wage and therefore gain protection from unfair dismissal.

Industrial Relations Minister Tony Burke introduced the changes to the House of Representatives in October.

‘Australians have asked for change. They’ve asked for less conflict and fairer pay. They’ve asked for a better future for themselves and for their families,’ he said.

‘It will take time for this bill to result in improvements in workplaces and pay increases in the pockets of Australians. So we cannot waste a moment in passing it.’

The industrial relations bill will allow the Fair Work Commission to set minimum pay and conditions for gig workers. 

The decision will affect more than 12,000 partner restaurants, 15,000 riders and 120 staff.

The decision will affect more than 12,000 partner restaurants, 15,000 riders and 120 staff.

As well having a major impact on workers, those hoping to order a mid-week takeaway were also left hanging. 

When customers opened the app, where a list of restaurants would usually appear, there is an error telling customers ‘there’s a problem’ and to try again later.

Others voiced their disappointment in the company going bust.

‘Deliveroo is my go to food delivery service. This is a sad day for me and their workers,’ one commented.

‘Pretty sad of Deliveroo to shut down considering Uber Eats charges your first born in delivery fees,’ said another.

Deliveroo informed its customers in an email that they would no longer be able to place orders on the app in Australia.

Customers will still be able to access their accounts and download their customer orders and information for six months.

Deliveroo on Wednesday entered voluntary administration after a recent court decision requiring workers to be paid more potentially tipped the struggling company over the edge

 Deliveroo on Wednesday entered voluntary administration after a recent court decision requiring workers to be paid more potentially tipped the struggling company over the edge

Financial documents show the firm was put into administration on Wednesday with KordaMentha Restructuring appointed to take over.

Administrators Craig Shephard, Michael Korda, and Andrew Knight will either sell Deliveroo to a new owner, or liquidate it and sell it for parts.

How much debt Deliveroo’s Australian arm is in, and who stood to lose money they were owned, was not immediately known.

Opening the app, where a list of restaurants would usually appear, is just an error telling customers 'there's a problem' and to try again later

Opening the app, where a list of restaurants would usually appear, is just an error telling customers ‘there’s a problem’ and to try again later

Deliveroo told customers pulling out of Australia was a ‘difficult decision’ but it was ‘doing business in challenging economic conditions’.

‘We always aim to deliver the best possible service for our consumers wherever we operate, and if we cannot do that we will be prepared to review our position,’ it said. 

‘In Australia, we have concluded that achieving a sustainable position of leadership in the market is not possible without a disproportionate level of investment which would have highly uncertain returns.’

A separate announcement to investors explained that Deliveroo was simply too far behind that market leaders and it would cost too much to catch up.

‘The company has determined that it cannot reach a sustainable and profitable scale in Australia without considerable financial investment,’ it said.

‘The expected return on such investment is not commensurate with Deliveroo’s risk/reward thresholds.

Deliveroo at the end of last year had just 11.7 per cent of the Australian food delivery market, behind dominant market leader UberEats on 52.9 per cent and MenuLog with 19 per cent, according to IBISWorld data.

Deliveroo at the end of last year had just 11.7 per cent of the Australian food delivery market, behind dominant market leader UberEats on 52.9 per cent and MenuLog with 19 per cent, according to IBISWorld data

Deliveroo at the end of last year had just 11.7 per cent of the Australian food delivery market, behind dominant market leader UberEats on 52.9 per cent and MenuLog with 19 per cent, according to IBISWorld data

‘In Australia, the market is highly competitive with four global players, and Deliveroo does not hold a broad base of strong local positions,’ Deliveroo said.

The global company, headquartered in the UK, said its Australian business was just three per cent of its total revenue and was a drag on its profit.

‘[Australia] negatively impacted the company’s adjusted EBITDA margin (as a percentage of gross transaction value) by approximately 30 basis points,’ it said.

Deliveroo has about 6,500 employees and drivers in Australia and would provide ‘guaranteed enhanced severance payments for employees as well as compensation for riders and for certain restaurant partners’.

Business boomed for all players in the market during the pandemic when Australians were stuck inside during lockdown and restaurants could only provide delivery and takeaway.

Many liked the convenience and seven million kept using the service after dine-in reopened, according to Roy Morgan.

A survey found 33.4 per cent of the country used one in an average month in August, up from 16.9 per cent in early 2020.

Use of delivery companies skewed massively younger, and the percentage of Australians using one actually increased this year beyond the pandemic.

Deliveroo’s email to Australian customers

Dear Customer,

We have today made the sad announcement that we are leaving Australia. This has been a difficult decision to make,’ the statement said. 

We have enjoyed serving you the amazing food that Australia is known for, working with thousands of brilliant restaurants and riders.

Deliveroo, like all other companies, is now doing business in challenging economic conditions, which requires us to take difficult decisions. 

‘We always aim to deliver the best possible service for our consumers wherever we operate, and if we cannot do that we will be prepared to review our position.

‘In Australia, we have concluded that achieving a sustainable position of leadership in the market is not possible without a disproportionate level of investment which would have highly uncertain returns.

On the basis of this decision, Deliveroo Australia has been placed into administration. The director of Deliveroo Australia has appointed Michael Korda, Andrew Knight and Craig Shepard of KordaMentha as voluntary administrators. To find out more, including information for creditors, please visit click here. You will receive further communications from the Administrators shortly.

What this means for you

Deliveroo Australia has ceased operations, meaning you can no longer place orders on Deliveroo in Australia.

You will still be able to access your customer account for up to 6 months from this date onwards. After this period your customer account will be closed. Within this period while your account is open, you can download your customer information.

Thank you for ordering with Deliveroo.

For any further information, please visit the administrators’ website at: https://kordamentha.com/creditors

We want to thank you again for using Deliveroo.

The Deliveroo Team

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