Deliveroo has announced the closure of its Australian operations and entered voluntary administration, leaving 120 employees, 15,000 riders, and 12,000 eateries without any work. The food delivery business, which was run by former Powershop Australia CEO Ed McManus, was placed into voluntary administration late on Wednesday and discontinued operations. Michael Korda, Andrew Knight, and Craig Shepard were named as the voluntary administrators.
Deliveroo, a company with its headquarters in Melbourne and a listing on the London Stock Exchange, debuted in Australia in 2015 and has since entered the grocery delivery market with partners BP and EzyMart. The UK-based platform, which was established by William Shu and is financed by e-commerce behemoth Amazon, claimed that a “disciplined approach to capital allocation” was behind the move and disputed that federal government reforms to the gig economy were a factor.
Deliveroo had been involved in legal disputes for years, including an August workplace tribunal decision that reversed a previous determination that a Deliveroo rider was an employee. Deliveroo was not a party to the agreements made this year by US industry giants Uber and DoorDash with the Transport Workers Union. The TWU claimed it strengthened the argument for reform by requesting rapid engagement with administrators on what benefits might be taken away from “riders who stand to lose their jobs in the blink of an eye.”
According to TWU National Secretary Michael Kaine, “this will come as a shock to the hundreds of food delivery riders who depend on Deliveroo for money.” The abrupt and cowardly behaviour by Deliveroo, which treated employees with the same callousness in termination as it did in operation, “highlights the critical necessity for the federal government to adopt gig reform,” he said. “The gig tsunami hit transportation workers first and hardest, and Deliveroo is now abandoning them when it becomes clear that company cannot rely on exploitation to generate profits.”
The TWU cited Foodora’s closure in 2018 when authorities discovered that some of its employees had been wrongly designated as independent contractors; parent company Delivery Hero later paid $3 million in backpay. Deliveroo’s COO Eric French remarked, “This was a difficult choice and not one we have taken lightly.” We would like to express our gratitude to everyone who has supported our Australian business over the past seven years, including our employees, customers, riders, and restaurant and retail partners.
Deliveroo said that the local market had become “extremely competitive” due to four international competitors, and that these players “did not maintain a broad foundation of strong local positions.” The latest participant in the Australian food delivery game, which already includes Uber Eats and Menulog, is the US powerhouse DoorDash. Deliveroo reported that in the first half of the year, the Australian business accounted for just 3% of their gross transaction value and had a negative impact of 30 basis points on the company’s adjusted EBITDA margin.
According to Mr. Korda, Deliveroo failed to gain enough market share in Australia to establish a long-lasting company. Without financial assistance, “administrators had no choice but to immediately suspend operations,” according to Mr. Korda. The orderly termination of the Australian activities is our top objective in order to maximise benefits for all parties involved. Based on the average weekly earnings over the previous 12 months, Deliveroo said riders will receive two weeks’ salary, with an additional two weeks granted if the agreement presented under the Deed of Company Arrangement is approved. On Monday, November 28, Deliveroo Australia will hold its initial creditors meeting.