An App That Comes With A Kitchen

Deliveroo is pushing an unorthodox solution to food delivery as it struggles to make money

- Adam Satariano

Food delivery apps don’t make money. That’s one of the big lessons venture capitalists have taken away from the past few years, as the startup graveyard has filled with names such as Sprig, Jinn, and Take Eat Easy. Despite the $100 billion market, margins are thin or nonexistent, and apps haven’t been able to wring much extra efficiency out of logistics algorithms trying to organise orders from restaurants spread within a given customer’s delivery radius.

Deliveroo, one of Europe’s biggest startups, is bringing an unprecedented amount of money to bear as it bets on a different approach. Although unknown in the crowded U.S. market, which it has purposely avoided, the five-year-old London company is ubiquitous in Europe’s capitals, available in 200 cities and on four continents, and it’s raised a little less than $1 billion in venture funding—more than half of it last year—from the likes of T. Rowe Price Group Inc. and Fidelity Investments. It’s pushing money into a series of kitchens that it’s leasing to already successful restaurants interested in expanding their delivery services.

The company has opened 105 of these shipping container-size kitchen spaces, each big enough for about five cooks, across a dozen cities, and in the next few months it will announce five additional cities, such as Manchester and Cambridge. It’s part of a broader plan by Deliveroo, including a reported move into India, as the startup faces rivals Amazon.com Inc., Delivery Hero, and Uber Eats, among others.