|To: Glenn Petersen who wrote (785)||5/8/2020 2:41:19 PM|
|From: Glenn Petersen|
|The suggestion comes as Uber and other gig economy businesses face mounting pressure to provide health-care and other protections for their workers, including in the form of a lawsuit from the California Attorney General and three city attorneys in the state.|
Uber CEO says drivers should get health-care benefits based on how much they work, and Uber would pay for it
Published Fri, May 8 20209:18 AM EDTUpdated 3 hours ago
L auren Feiner @lauren_feiner
-- Uber CEO Dara Khosrowshahi said drivers should earn health-care benefits commensurate with the hours they work.
-- He said Uber is prepared to create a system to pay for those benefits, too.
-- The suggestion comes as Uber and other gig economy businesses face mounting pressure to provide health-care and other protections for their workers, including in the form of a lawsuit from the California Attorney General and three city attorneys in the state.
After years of debate over classifying gig workers as contractors rather than employees, Uber CEO Dara Khosrowshahi outlined his vision for a new way to provide health-care benefits for contract workers logging full-time hours.
Drivers should earn health-care benefits commensurate with the hours they work, he said Friday in an interview on CNBC’s “Squawk Box.” Uber is prepared to create a system to pay for those benefits, too, he said.
The suggestion comes as Uber and other gig economy businesses face mounting pressure to provide health-care and other protections for their workers, including in the form of a lawsuit from the California Attorney General. The coronavirus pandemic has magnified the burden and risk gig workers take on by interacting with customers without the financial protections that come with the status of a full employee.
Khosrowshahi said the new model would allow Uber to be an “entry point” into earnings for workers where they could choose to secure health-care benefits by working more hours or forgo some of those benefits by working fewer hours. But rather than have a cut-off at 20 hours, for example, Uber would pay for benefits on a sliding scale of hours worked.
“I think this system of if you don’t work 40 hours, you’re not full-time, if you work 40 hours, you’re full-time, and then there’s this hard break between the two, that’s the old world,” Khosrowshahi said. “If you’re putting in the hours, you should get minimum earnings based on the hours that you’re working and you should get health-care based on the hours that you’re working. And if you have haves and have-nots based on a particular number of hours worked, that doesn’t make sense... in a technical, forward world.”
Khosrowshahi said Uber would put money into a fund based on the hours workers put in. That fund would pay into workers’ health-care benefits and minimum earnings. He said Uber is aiming for “generally comparable” health-care to what workers would receive as full-time employees.
“What we’re looking for essentially is that flexible on-ramp or off ramp,” he said. “You want to work, you get the benefits, you don’t want to work, you don’t.”
Uber is now facing a lawsuit from the California Attorney General and three city attorneys in the state. Lyft is also a defendant in the case that alleges the companies denied workers key privileges by misclassifying them as contractors rather than employees. The lawsuit was filed under California’s new law, Assembly Bill 5 (AB5) that aimed to provide stronger protections for workers, especially in the gig economy.
But Uber has consistently fought back against the bill and has argued for a new way of thinking about worker classification altogether. In a letter to President Donald Trump in March, Khosrowshahi advocated for a “third way” of classifying workers other than contractors or employees, in order to maintain the flexibility he said gig workers enjoy while providing them with additional benefits.
The letter also asked for gig workers to gain access to unemployment benefits allocated in response to the coronavirus pandemic. While those funds were ultimately included in the bill, some gig workers have still had trouble accessing those benefits or proving eligibility.
Uber has had to push its goal of reaching EBITDA profitability by the end of the year due to the pandemic’s toll on ridership. The company reported a net loss in the first quarter of 2020 of $2.9 billion after seeing gross bookings on its core business segment, Rides, fall 5% year-over-year. But Uber’s stock shot up as much as 10% after hours Thursday as Khosrowshahi told analysts on the company’s earnings call that Uber has begun to see some signs of recovery. Ride volume has been up each of the last three weeks and its food delivery service has been booming, he said.
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|From: Glenn Petersen||5/31/2020 10:35:41 AM|
|During the Pandemic, Grubhub Should Be Thriving. It’s Not |
The crisis is a stark reminder that food delivery tech companies may have an unworkable business model
By Adrianne Jeffries
May 27, 2020 10:00 ET
Updated May 27, 2020 12:32 ET
Noam Galai / Getty Images
At first, the COVID-19 pandemic seemed like a perfect fit for food delivery apps. Restaurants in states with lockdown orders now depend completely on delivery and takeout, while public health authorities are telling consumers to stay indoors. The big four consumer-facing delivery apps—Grubhub, Uber Eats, Postmates, and DoorDash—offer a convenient solution for both parties, accelerating the move to the tech-centric, gig-economy-powered Delivery World of tomorrow.
It hasn’t quite worked out that way.
Instead, some consumers are walking away from delivery apps, restaurants are struggling to make delivery sustainable, and there’s potentially a bigger problem even a captive consumer base hasn’t solved.
“Their current models don’t really work,” said Dan Fleischmann, a vice president at Kitchen Fund, a venture capital firm that invests in food startups. “It just doesn’t really work for anyone. It doesn’t work for the restaurant. It doesn’t work for the third-party delivery provider.”
Even Before the Pandemic, Things Weren’t Looking Great
In August 2019, analysts from the investment firm Cowen estimated that Uber Eats was losing $3.36 on every order and would continue to lose money on every order for the next five years. Uber CEO Dara Khosrowshahi acknowledged that Uber Eats is not yet profitable in an email to employees in March after its parent company laid off more than 3,700 employees. “While Eats growth is accelerating, the business today doesn’t come close to covering our expenses,” he wrote. When asked about the profitability of Uber Eats, Uber spokesperson Sarah Abboud referred The Markup to the company’s 2020 first quarter earnings report.
In early March, DoorDash filed to go public despite losing an estimated $450 million in 2019, according to The New York Times. DoorDash declined to comment on that estimate or its path to profitability, but regarding the latter CEO Tony Xu told Fortune in February that “we’re working our way there.”
Postmates, the smallest of the four companies by market share, was privately valued at up to $2.4 billion in 2019 but delayed its IPO filing after investors started drawing comparisons to grossly overvalued WeWork. Postmates did not respond to a request for comment. Meanwhile, other companies have been ditching the food delivery business: Yelp sold Eat24 to Grubhub, Square sold Caviar to DoorDash, and Amazon shut down its Amazon Restaurants delivery service.
Grubhub letter to shareholders Grubhub, which also owns Seamless, is publicly traded and the only one of the big four that has achieved profitability. Still, it lost more than a third of its value after revenue fell below investors’ expectations in the third quarter of 2019. In a letter to shareholders, the company revealed two things: Customers were “promiscuous,” or not loyal to the Grubhub platform, and the delivery part of the business was fundamentally not profitable. Instead, delivery was just a “means to an end”—getting restaurants to sign up on the Grubhub platform and then upselling them on “marketing” benefits, like greater visibility in Grubhub’s search results. In other words, like many tech companies, GrubHub is primarily an advertising company.
“Bottom line is that you need to pay someone enough money to drive to the restaurant, pick up food and drive it to a diner. . . ,” the company wrote. “At some point, delivery drones and robots may reduce the cost of fulfillment, but it will be a long time before the capital costs and ongoing operating expenses are less than the cost of paying someone for 30-45 minutes of their time.”
And while Grubhub’s “active diners” increased by 24 percent during the first quarter of 2020, the company still reported a $33 million loss.
When asked about profitability, Grubhub spokesperson John Collins pointed to its first quarter 2020 earnings call, during which CEO Matt Maloney said that the pandemic has been a “net tailwind” but that the company is not focused on profitability during the pandemic. “The company has made a decision to reinvest as much as possible into supporting restaurant owners right now. We only do well when they do well. Supporting them is our priority right now,” Collins said in an email.
Now Small Restaurants Are Hurting—and That’s Where Apps Get Their Dollars
The big issue with the business model, which the pandemic has only exacerbated, is how apps generate the bulk of their revenue: charging high fees to small restaurants.
The big four depend on charging between 10 and 30 percent to independent restaurants and small chains, said Matt Newberg, a food industry consultant and founder of the trade publication Hngry.tv. Big chains get a better deal because their name recognition brings new customers to the platforms, he said. It may also be that the big chains successfully engaged in “arm-twisting” to lower fees, as The Wall Street Journal reported.
Grubhub has acknowledged that it makes more money from independent restaurants and small chains. A February 2020 shareholder letter explained that a typical order from an independent restaurant that uses Grubhub for marketing and delivery generates $4 of profit for Grubhub, while an order from a national chain generates $0.
The independent restaurant “values our demand generation capabilities and utilizes our delivery services; we have a higher take-rate and collect the diner delivery fee,” Grubhub wrote, while the profit from the national brand “is significantly lower because the commission rate is lower AND the order size is smaller.”
For the independents, though, the delivery fees were too high “even in a strong market,” said Andrew Rigie, the executive director of the New York Hospitality Alliance. In a pandemic, they could put restaurants out of business—which would in turn put delivery apps out of business.
The lockdown is certainly devastating for restaurants. Sales were down 50 percent from just two months before, according to an April survey by the National Restaurant Association, and 3 percent of restaurants have permanently closed due to the pandemic.
Delivery apps do seem to be helping keep some restaurants from shuttering in the short term, but the future is murky.
Evan Franca, owner of Brooklyn Crepe & Juice, testified at a remote New York City Council hearing in April that 20 percent of his business now comes in through his pickup window, and the other 80 percent comes from online orders. He estimates he loses money on online orders but has chosen to keep accepting them in order to keep his staff and stay connected to customers.
“Right now I’m just trying to keep my staff employed and keep the lights on until the situation improves,” he said.
The tech companies seem to recognize that their revenue base is vulnerable to collapse. Uber Eats waived signup fees to some restaurants and waived delivery fees to customers at 100,000 restaurants indefinitely. Postmates waived fees for businesses in the Bay Area, L.A., Sacramento, and Detroit, and DoorDash cut fees in half for more than 150,000 restaurants through the end of May. DoorDash told The Markup it will not be collecting waived fees, and Uber Eats said the signup fee waivers are still in place for now.
Grubhub is deferring fees for some independent restaurants but not waiving them. “We have not collected any fees as of today and the timeline/process remains flexible,” Collins said.
“In a normal situation, this was barely profitable for the restaurant. In a situation where we’re 100 percent off-premises, it just flat out doesn’t make sense,” Newberg said. “The reason people are going to continue to do it now is you look at your numbers, all the commissions are zero. But it’s unclear if you’re going to have these guys come after you in the future and try to collect on the fees that they would be getting right now.”
The Public Is Getting Savvy About the Skewed Economics
Cities including Seattle, San Francisco, New York, Jersey City, and Washington, D.C., have temporarily capped the fees delivery app companies can charge restaurants. Customers are learning that those fees mean that ordering directly is the best way to support their favorite restaurants.
Andrew Martino is the owner of Ghost Truck Kitchen in Jersey City, which offers different cuisines out of the same kitchen for pickup, delivery, and catering. He had already been lobbying his customers to order directly from his restaurant instead of by delivery apps, but he’s found the message is suddenly connecting.
“The data shows that there’s been an uptick with people ordering directly through our website as opposed to the third-party carriers,” he said. “And then furthermore, we have far more customer advocates explaining what’s happening out there.”
Apps Are Trying to Save Themselves
The bad numbers are likely the reason Uber is now in talks to buy Grubhub, in the hope that more market power will translate to more profits. The scale created by the merger could potentially add up to a viable business, Kitchen Fund’s Fleischmann said, but it still might not survive outside the top five markets for delivery—New York City, San Francisco, Miami, Boston, and L.A.—especially in a post-pandemic recession.
Meanwhile, the delivery apps have been trying to market themselves as an aid to struggling restaurants. “I still get barrage after barrage of emails, you know, telling me about how great this promotion is they’re running,” says Andrew Martino, owner of Ghost Truck Kitchen. “But you know, all the fine print isn’t beneficial to restaurants. It’s all beneficial to the apps.”
The truth is, the apps will probably continue to struggle themselves. “They’re hurting,” Fleischmann said. “They were already losing money on every order. I really don’t know what the answer is there.” With no quick end to the pandemic in sight and a likely struggling economy to follow, there may not be one.
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|From: Glenn Petersen||6/5/2020 3:50:06 PM|
|Instacart tweaks tipping system after tip-baiting outcry|
The company let customers bait Instacart shoppers with big tips and remove them after the fact
By Nick Statt @nickstatt
Jun 5, 2020, 3:00pm EDT
Photo by Evelyn Hockstein/For The Washington Post via Getty Images
Instacart is adjusting how it handles customer tips following the announcement last week of a congressional inquiry into the practice of tip-baiting, in which Instacart allows customers to promise big tips for shoppers only for those customers to later rescind the tip after the order is dropped off.
Instacart now says it will shorten the window a customer can alter their tip from three days down to 24 hours. It’s also now requiring customers leave feedback for removing tips and pledging to deactivate any customer who “consistently and egregiously engages in this type of behavior.” The company claims “only 0.25 percent of orders had a tip adjusted after 24 hours,” and that, “less than 0.5 percent of orders have tips removed after delivery.” Instacart is also expanding its in-app cash-out feature to include tips, so shoppers can now receive the extra earned money from an order 24 hours after a completed order.
Instacart, like many other on-demand apps, has long had a controversial and at times exploitative approach to tipping. The company was accused in 2019 of tip stealing by counting customer tips toward a shopper’s guarantee payment minimum. It has since changed that policy to ensure more transparent allocation of tips.
But amid the pandemic, a new customer-side behavior on the Insatacart platform, tip-baiting, began posing serious risks to Instacart shoppers. Many Instacart shoppers began relying on the company as their only source of income during COVID-19-induced lockdowns and putting their health at risk to venture into grocery stores and delivery food to customers. Some Instacart users discovered they could promise large tips to ensure efficient service, only to reduce the tip amount to zero after receiving the order.
A recent Verge investigation into the human cost of Instacart’s rapidly expanding role during COVID-19 found that tip-baiting was a central complaint of many workers, some of whom said Instacart was making it difficult to receive promised sick pay. (Instacart this week expanded its sick pay policy as part of an agreement with Washington, DC Attorney General Karl Racine.) A group of senators led by Sen. Brian Schatz (D-HI) last week called for a potential investigation into Instacart’s tipping system in a letter to the Federal Trade Commission.
“Congress intentionally provided broad authority... so that the FTC could address new and emerging market practices that may constitute unfair and deceptive practices,” the senators wrote. “Particularly in light of the COVID-19 pandemic and the unique risks that online delivery shoppers are taking, we believe the tipping policy at Instacart and other similar companies deserve scrutiny.”
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|To: Glenn Petersen who wrote (787)||6/8/2020 10:09:34 AM|
|From: Glenn Petersen|
|Airbnb Joins Vacation-Rental Sites Seeing Surge in Summer Demand|
By Olivia Carville
June 7, 2020, 1:16 PM CDT
-- Weekend getaways are turning into work-from-home respites
-- Airbnb hasn’t ruled out an IPO this year, CEO Chesky says
Customers read newspapers and magazines at a cafe on a sea-front esplanade in Porto, Portugal, on June 6.
Photographer: Eduardo Leal/Bloomberg
Antsy city dwellers seeking to escape their Covid-19 refuges are road-tripping to nearby vacation rentals in surprisingly strong numbers, showing the first signs of life for an industry that essentially ground to a halt in March.
“People, after having been stuck in their homes for a few months, do want to get out of their houses; that’s really, really clear,” Airbnb Inc. Chief Executive Officer Brian Chesky said in an interview. “But they don’t necessarily want to get on an airplane and are not yet comfortable leaving their countries.”
Airbnb saw more nights booked for U.S. listings between May 17 and June 3 than the same period in 2019, and a similar boost in domestic travel globally. The San Francisco-based home-share company is seeing an increase in demand for domestic bookings in countries from Germany to Portugal, South Korea, New Zealand and more. Other companies, including Expedia Group Inc.’s Vrbo and Booking Holdings Inc. are also seeing a jump in domestic vacation-rental reservations.
International sojourns usually planned months in advance are being replaced with impulsive road trips booked a day before and weekend getaways are turning into weeks-long respites, Chesky said. Previously, a New Yorker might have headed to Paris for a week in June. Now they are going to the Catskills for a month. “Work from home is becoming working from any home,” he said.
Still, any rebound is coming from a very low base. The travel sector was gutted by the Covid-19 pandemic. Online travel agencies struggled to withstand unprecedented cancellations and air travel passenger traffic that fell 95%. Airbnb and Tripadvisor Inc. cut a quarter of their workforces and Chesky said last month that he expects revenue this year to be half of 2019’s level. Booking was forced to apply for government aid. In an annual shareholder report last week, Booking CEO Glenn Fogel said the pandemic would impact global travel more than the 9/11 terrorist attacks, the SARS epidemic and the 2008 financial crisis combined.
But months of pent-up demand is leading to a rush of summer reservations. Airbnb has more listings today than it did before the crisis, according to Chesky. The top destinations in the U.S. on Airbnb are almost exclusively traditional vacation rental markets such as Big Bear Lake in southern California, the Smoky Mountains, along the Tennessee-North Carolina border, and Port Aransas in Texas, according to the company.
The unexpected speed of the comeback has kept Airbnb’s plans for a 2020 public market debut afloat. Chesky had originally planned to file paperwork for an offering March 31, but was waylaid by the pandemic-related market turmoil that led to speculation the listing would be shelved until next year. However, Chesky says it’s still an option. “We’re not ruling out going public this year and we’re not committing to it,” he said. Airbnb was valued at $31 billion in its most recent private fund-raising round, though recent debt issuance to shore up its finances have significantly reduced that valuation.
Since the pandemic began, the percentage of bookings on Airbnb within 200 miles (322 kilometers) -- a round trip travelers can typically complete on one tank of gas -- has grown from a third in February to more than 50% in May. Travel in a post-Covid world is shifting “from airplane to car, big city to small location, hotel to home,” Chesky said.
Vrbo is seeing similar trends as popular tourist states like Florida and Maine reopen. There’s an “immediate pop” as soon as a destination opens, said Jeff Hurst, president of Vrbo, which accounts for about 20% of Expedia’s total revenue. “If you draw a 250- mile circle around any major metro -- every place where you see water in there or mountains or national parks, the homes around it are what’s starting to get booked up,” Hurst said.
Hotels aren’t as prevalent in more rural locations. And even where they are, travelers are preferring to stay in vacation homes so they can cook in their own kitchens, control who comes and goes and avoid crowded common areas like lobbies, Hurst said. To help salvage the summer season, Airbnb and Vrbo have enforced confidence-boosting policies that include flexible cancellations and new standards for cleaning.
“We have seen a faster recovery within alternative accommodations than in hotels,” Morgan Stanley analyst Brain Nowak wrote in a note last week. Shares in hotel companies such as Marriott International Inc., Hyatt Hotels Corp. and Hilton Worldwide Holdings Inc. have dropped by more than 20% this year, compared with Expedia and Booking, which have fallen as much as 14%.
People are eager for open spaces like beach towns or mountain villages, which is sparking the vacation rental rebound, said Naved Khan, an analyst at Suntrust Robinson Humphrey Inc. “Little by little we are seeing it unfold before us as people are feeling bold enough to venture out and stay at another place for a couple of nights and most of the time these places are homes and villas.”
Searches for vacation rentals on Google are about at the same level as last year, while hotel searches are down, said Booking Holdings Chief Marketing Officer Arjan Dijk. Consumer appetite has completely changed from a year ago, he said. Significantly more users are signing on to the company’s wish list function and indicating interest in domestic homes over international ones. In fact, the company has seen its business shift to more than 70% domestic travel from 45% the same period last year, he said.
Demand for air travel is also showing some early signs of life after all but collapsing. Daily passenger numbers in the U.S. climbed to 391,882 on June 4, the highest since March 22, according to the Transportation Security Administration. But the average daily total over the past seven days was still 87% less than during the same period a year ago. American Airlines Group Inc. said it would boost July flights 74% compared with this month, though the number of flights in July will be about 40% of capacity a year earlier, compared with 30% in June, the airline said Thursday.
“It’s going to be awhile before people start crossing borders, getting into planes or traveling for business,” Chesky said. The big question on his mind now, as he weighs taking his startup public, is whether the spike in recent bookings turns into a sustainable trend. “The long-term question is what does it look like in a year or five years and that’s really anyone’s guess,” he said. Chesky won’t be celebrating until the market stabilizes. “I had a rule that even in our darkest of hours I wouldn’t get too low because that’s just a moment in time,” he said. “And if I can’t get too low, then I can’t get too up.”
— With assistance by Brendan Case
Published on June 7, 2020, 1:16 PM CDT
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|From: Glenn Petersen||6/12/2020 9:18:17 AM|
|Grubhub and Just Eat Takeaway position to win third-party delivery market share from ‘irrational’ competitors |
Just Eat Takeaway CEO Jitse Groen says the combined companies will ‘push back’ on rivals giving away food for free; the delivery group will have more than 360,000 restaurant partners in 25 countries
Nancy Luna | Jun 11, 2020
Nation's Restaurant News
In the third-party delivery horse race, Just Eat Takeaway from the Netherlands has emerged as the longshot winner that came out of nowhere to cross the finish line and win the ultimate prize: dominance in the restaurant delivery sector.
By taking over controversial U.S. third-party delivery operator Grubhub in a deal valued at $7.3 billion, Just Eat Takeaway gains instant access into the coveted and highly competitive U.S. market — a missing piece in its worldwide presence. The sale creates a combined group that will have more than 360,000 restaurant partners in 25 countries, serving 70 million active consumers.
Related: Los Angeles and New York City cap third-party delivery fees
“The acquisition of Grubhub is critical to our long-term mission to be the best food delivery company on the planet,” Jitse Groen, chief executive of Just Eat Takeaway.
He and Grubhub CEO Matt Maloney, who will lead the company’s North America division, said by joining forces Grubhub can better defend its leadership position in coveted markets like New York City while also having the financial strength to regain its No. 1 market share status in the U.S.
Related: Just Eat Takeaway agrees to acquire Grubhub in $7.3B deal
“We are taking back share,” Maloney told investors Thursday during a conference call to discuss the sale. “The Takeaway team is fully committed to support us in that aggressive competitive position for as long as it takes to win.”
Groen, who created his food-delivery company in his Netherlands attic, said Chicago-based Grubhub can now rely on the global strength of Just Eats Takeaway to fortress the business against ‘irrational’ players who are burning cash to push out market leaders.
“A big global company that is EBITDA positive can choose which battles are important to it. We are agnostic to where we have to defend our business,” Groen said. “It is pretty obvious to us that as long as we are large, EBITDA positive, and very dominant in the markets that actually matter, that cannot happen to us. And on top of that, we're going to push back.”
Groen went on to say that Grubhub’s position in New York City is very profitable, and far more important to defend than smaller markets.
“That doesn't mean that we should not be large in Arizona, but because obviously, we are interested in that as well. It just means that we can sustain for quite a long time a level of competition with irrational players, and we call these players irrational because they are essentially giving away food for free,” Groen said when pressed by an analyst to explain its U.S. strategy.
Losing the horse race to acquire Grubhub was frontrunner Uber Technologies. The company, which operates Uber Eats, had been negotiating a takeover of Grubhub for weeks. The merger would have brought together the U.S. sector’s No. 2 and No. 3 players and effectively put the combined companies on equal footing with current U.S. market delivery leader DoorDash.
Just Eat Takeaway said it was attracted to Grubhub’s hybrid business model, which focuses on both marketplace and last-mile delivery logistics.
“It has been built by a founder-led management team who've had a proven track record in building leading positions in markets of scale,” Groen said.
But Just Eats Takeway is inheriting a third-party operator that’s been one of the most criticized delivery players in the U.S. segment. Grubhub’s tactics for earning commissions from struggling restaurants has been questioned for more than a year, especially in New York City, Grubhub’s largest market.
For months, restaurant industry watchers had expected consolidation in the U.S. delivery market space. How the European-U.S. combination will impact restaurants – and more importantly restaurant commission fees – remains to be seen.
“I think it's too early to tell. I still do not believe aggregators will have long-term success because of the high prices that cut into operator profits,” restaurant analyst Tim Powell of Foodservice IP said. “Consolidation of Grubhub is not a big deal - probably not a winner for operators, but one for diners looking for discounts. The fewer aggregators out there, the fewer choices we will have and prices will likely increase.”
Gary Stibel, an analyst at New England Consulting Group, said: “Unlike a double negative, which can produce a positive, combining two questionable business models, particularly across a small body of water, does not a profitable business make.”
During the call, Maloney briefly addressed the pressure Grubhub and other aggregators have been under to reduce commission fees during the COVID-19 crisis.
The pandemic has led to a surge in delivery orders. Before the pandemic, delivery represented 3% of all restaurant orders. It’s now grown to 7% of orders, according to the latest market research from The NPD Group.
Delivery became a crucial channel for earning revenue for operators hampered by dine-in restrictions. But restaurant owners have grown increasingly frustrated by the profit-hurting fees, a pain point that has escalated during the pandemic. That’s led to a nationwide revolt with leaders from Seattle, Los Angeles, San Francisco and New York City enacting commission caps.
Maloney said he understands why “local municipalities are working very hard” to help restaurants during the COVID-19 crisis.
But “the reality is there is a fundamental misunderstanding in many of those cities as to the economics of the typical delivery order,” he said. “For example, about 25% of the total order volume size is what it cost to deliver the food. So, any fee cap that is under 25% literally doesn't pay for the delivery itself.”
In its latest earnings call, Grubhub said commission caps ultimately hurt independent restaurants as it forces consumers to order from less expensive quick-service restaurants. The brand has repeatedly said that it has been acting to help restaurants by reinvesting profits into advertising and promotions that will generate more revenue to restaurants.
Last year, Netherlands-based Takeway.com merged with Just Eat to form Just Eat Takeaway. The combined companies formed a leading position in three profitable food delivery markets: the United Kingdom, Germany and the Netherlands. The Grubhub purchase, which is subject to approval by shareholders at both companies, is not expected to close until the first quarter 2021. If the deal is finalized, Just Eat Takeaway will become one of largest delivery companies in the world outside China.
Contact Nancy Luna at email@example.com
Follow her on Twitter: @fastfoodmaven
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|From: Glenn Petersen||6/19/2020 11:18:32 AM|
|DoorDash scores valuation of $16 billion as coronavirus pushes it to top of food-delivery chain|
Published Fri, Jun 19 20209:31 AM EDT
-- DoorDash has raised an additional $400 million in equity financing led by Durable Capital Partners and Fidelity, pushing its valuation to $16 billion, Axios reported.
-- Since Covid-19 lockdown orders were issued across the U.S. in mid-March, DoorDash’s sales have surged placing it well above rivals such Grubhub and Uber Eats.
-- DoorDash ranks No. 12 on the 2020 CNBC Disruptor 50 list.
The coronavirus pandemic has upended the U.S. economy and wreaked havoc on businesses ranging from global shipping to cruise lines to restaurants. But food-delivery companies are thriving, with DoorDash looking to be the rare winner in its niche.
Since Covid-19 lockdown orders were issued across the U.S. in mid-March and consumers shifted to ordering delivery for dinner, DoorDash’s sales have surged, according to data from Edison Trends, which studies anonymized and aggregated e-receipts from millions of U.S. consumers.
The food-delivery service, which earned the No. 12 spot on the 2020 CNBC Disruptor 50 list, grabbed 45% of third-party delivery orders, followed by rivals UberEats at 28%, Grubhub at 17% and Postmates at 7%.
DoorDash on Thursday confirmed that it raised $400 million in equity capital, selling shares to mutual fund companies T. Rowe Price and Fidelity, along with other investors. This new funding round was led by led by Durable Capital Partners and Fidelity. It raises the company’s valuation to nearly $16 billion, up from the $13 billion value Bloomberg reported in November after the company raised $700 million in a Series G funding round.
This funding deal could push off the meal-delivery giant’s move to go public. In February, DoorDash confidentially submitted a draft S-1 filing in February, the first step toward an initial public offering, to join rivals Uber Eats and Grubhub on the public markets. (DoorDash declined to comment, citing SEC rules governing the quiet period.)
The race to the top of the food chain
The race to become the top delivery provider — and then to maintain that position — has weighed on the SoftBank-backed company, which reportedly lost $450 million last year. In a bid for more market share, DoorDash bought Caviar from Square in 2019 in a $410 million deal.
But then came the pandemic, accelerating consumers’ shift to third-party delivery apps. The NPD Group found that delivery orders soared 67% in March, even as overall restaurant traffic fell 22%.
“For some restaurants, that was their only means of being in business,” said Douglass Miller, a lecturer at Cornell University’s School of Hotel Administration. “The only other option was to physically close.”
For some restaurants [food-delivery services were] their only means of being in business,” said “The only other option was to physically close.”
The company implemented a number of measures to help its delivery drivers and restaurants struggling with the pandemic. For example, eligible delivery drivers in the U.S., Australia, Canada and Puerto Rico who are quarantined or diagnosed with Covid-19 are receiving up to two weeks of financial assistance. The company waived or reduced commission fees for local restaurants and added more than 100,000 independent eateries to its subscription program for free to generate sales.
Monica Challingsworth, head of global relationships for Synergy Restaurant Consultants, said that DoorDash’s tech savvy has helped the company keep up as the restaurants responded to new conditions under lockdown.
“They were sending out automated robocalls to operators to ask if they were open, what their hours of operation were,” Challingsworth said. “Because of that, I think that they really quickly found a way to execute all of these things and get in front of all of these brands in a really strategic way.”
DoorDash also recently introduced Storefront to help restaurants create their own websites to take pick-up and delivery orders. The service also allows restaurants access to customer data, which third-party delivery aggregators do not share on orders placed through their apps. DoorDash’s chief operating officer told Reuters that restaurants won’t have to pay most fees for Storefront through the end of the year.
The company is also shifting to delivering more than just food. On Monday, DoorDash announced CVS Health will be the first pharmacy retailer to join its platform. Delivery drivers will now drop off non-prescription household essentials, like shampoo or over-the-counter cold medicine.
Challenges amid pandemic
But DoorDash, like others in the food-delivery industry, has also come under increased scrutiny during the pandemic for the fees it charges restaurants, which take a chunk of the industry’s already razor-thin profit margins. Restaurant owners can pay up to 30% in commission fees for every delivery order, and some chefs, like San Francisco chef Christian Ciscle, have called out delivery apps for just deferring or reducing fees.
In response, cities across the country, including New York City, San Francisco and Jersey City, placed caps on how much delivery apps could charge restaurants for their services. DoorDash has said that fee caps will hurt the quality of its service for consumers, lower its drivers’ earnings and lower restaurants’ sales volumes. While those restrictions are meant to last for the duration of the pandemic, regulatory scrutiny will likely continue even after restaurants resume normal operations.
“Delivery companies’ margins are also small, because they spend so much money on technology and marketing,” Miller said.
And some consumers have even filed lawsuits against DoorDash and its rivals for their commission fees. A lawsuit filed by New Yorkers in April alleges that the delivery companies violated antitrust laws by requiring restaurants to charge delivery and dine-in customers the same price, even though restaurants have to pay a percentage of revenue on delivery orders.
Fierce competition spurring consolidation
The fierce competition among food-delivery services has spurred consolidation within the industry. Netherlands-based Just Eat Takeaway.com was formed earlier this year through an $11.1 billion merger between the U.K.-based Just Eat and Takeaway, a Dutch company.
Now Just Eat Takeaway and Grubhub have announced that the two companies plan to merge, a deal that could topple DoorDash’s dominance. The all-stock deal with the European company, which is expected to close in the first quarter of 2021, will likely sidestep any scrutiny from regulators and could give Grubhub the ammunition to regain its status as the market leader.
“Grubhub being acquired by a larger competitor will only embolden the market share battle just at the same time that the regulatory environment around delivery fees across cities is becoming a larger headwind,” Wedbush analysts Dan Ives and Ygal Arounian wrote in a note to clients.
Uber had previously courted Grubhub on and off for more than year, but talks fell through amid concerns over antitrust scrutiny. The deal would have brought two of the largest food-delivery companies in the U.S. together, pushing DoorDash back to second place for market share.
Staying supreme post-Covid
Experts say it’s too early to tell if consumer behaviors formed during the pandemic will last after restaurants fully reopen.
For now, states across the country are limiting restaurants’ dine-in capacity, meaning that some will still have to rely on pick-up and delivery for the bulk of sales. About 68% of U.S. restaurants are allowed to reopen in some capacity, according to the NPD Group.
According to Miller, as some consumers look to circumnavigate some locales’ restrictions on large parties dining at restaurants, dinner parties are coming back in fashion — this time with restaurant meals ordered from a third-party delivery platform.
And while DoorDash has 340,000 restaurants on its marketplace, as much as 30% of independent restaurants are not expected to reopen their doors.
"One of the strengths that they push is diversity of restaurants,” Miller said. “If restaurants close and their portfolio shrinks, that hurts their business model because they don’t have that diversity of restaurants for consumers to choose from.”
The pandemic has also pushed large restaurant chains that were previously signed to exclusive delivery contracts to work with other delivery providers as a way of driving sales growth.
“If I’m a consumer who wouldn’t go onto Grubhub, and Grubhub is the only way I can get McDonald’s, for example, I would just go to the next fast-food burger place because I wouldn’t want to download a whole new platform,” Challingsworth said.
The U.S. economy has also entered a recession, and stay-at-home orders and lower consumer spending has left millions of Americans out of work. Consumers typically spend less during economic crises and may be less willing to pay the premium just for convenience.
“I think it will be a tale of two cities,” Miller said. “Recessions do not impact everyone equally.”
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|From: Glenn Petersen||6/29/2020 9:13:09 PM|
|Uber Makes Offer to Buy Postmates Delivery Service|
The ride-hailing company has been trying to expand its food-delivery business to compensate for the collapse of its main business.
By Mike Isaac and Erin Griffith
New York Times
June 29, 2020
Updated 8:48 p.m. ET
A deal for Postmates, last valued by investors at $2.4 billion, could bolster Uber’s delivery business, Uber Eats.Credit...Charles Rex Arbogast/Associated Press
SAN FRANCISCO — Uber has made a takeover offer to buy Postmates, the upstart delivery service, according to three people familiar with the matter, as the on-demand food delivery market consolidates and Uber looks for new ways to make money.
The two companies could reach a deal as early as Monday evening, according to the people, who spoke on the condition of anonymity because they were not authorized to do so publicly. The talks are still going on, the people cautioned, and any potential for a deal could fall apart.
Representatives of Uber and Postmates declined to comment on any potential deal talks.
A tie-up could bolster Uber’s delivery business, Uber Eats, and help it compensate for the cratering of its core ride-hailing business, which has collapsed in many cities because of the coronavirus pandemic. Food delivery is not profitable, but demand has soared while restaurants are closed and people are staying at home.
The deal would also be a lifeline for Postmates, a nine-year-old company that was one of the earlier start-ups to harness the power of the smartphone and the nascent “gig economy” to offer city dwellers a courier service that could deliver anything at the tap of a button.
The value of the takeover offer was not clear Monday evening.
While Postmates saw early popularity in coastal cities — especially Los Angeles — the company has struggled to compete with much larger competitors like DoorDash, GrubHub and Uber Eats. In February, Postmates confidentially filed to go public.
The category has been ripe for consolidation. Uber held merger talks this year with GrubHub, a food delivery competitor. But those talks fell apart after the two companies could not come to agreement on a price, two people familiar with the matter said. GrubHub was eventually bought by Just Eats, a European food delivery service, for $7.3 billion in June.
Shortly after the GrubHub deal fell through, Uber began to piece together a potential offer for Postmates, one of the few stand-alone American companies in food delivery.
Postmates also held sale talks with DoorDash and GrubHub over the last year, according to two people with knowledge of the situation, who declined to be identified because the talks were private.
Postmates was created in 2011 by Sam Street, Sean Plaice and Bastian Lehmann, who is the chief executive. It managed to capture the hearts of Hollywood, with endorsements from celebrities like Kylie Jenner and the singer John Legend. It even scored an investment from the actor Jared Leto.
But Postmates, last valued by investors at $2.4 billion, remains a small player in a fiercely competitive market. The other large private company, DoorDash, which investors have valued at $12.7 billion, confidentially filed to go public in February.
Though not a direct comparison because the companies calculate fees and discounts differently, GrubHub reported $1.3 billion in revenue in 2019 and Uber Eats reported $1.4 billion.
Postmates and its rivals face regulatory hurdles. California recently passed legislation that may require them to treat delivery drivers as employees rather than as independent contractors. That would mean the companies would have to offer drivers full-time benefits such as health care. Other states are considering similar legislation.
Postmates is supporting a California ballot measure to overturn the law, which is known as Assembly Bill 5.
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|From: Glenn Petersen||7/8/2020 9:00:33 AM|
|13 million gig workers getting unemployment benefits, 41% of the total|
Published Mon, Jul 6 20201:25 PM EDT
Updated Tue, Jul 7 202011:16 AM EDT
Greg Iacurci @GregIacurci
-- Nearly 13 million Americans are getting unemployment benefits through the Pandemic Unemployment Assistance program.
-- The PUA program is meant for the self-employed, independent contractors, gig-economy workers, those with limited recent work history, and those looking for part-time work, among others.
-- PUA recipients account for about 41% of all people getting unemployment benefits, and the share is growing.
Certain groups of workers, like the self-employed and those in the gig economy, are pulling in an increasing share of jobless benefits relative to others.
Around 12.9 million Americans are collecting unemployment benefits through the Pandemic Unemployment Assistance program, according to most recent Labor Department data.
That program, created by the federal CARES Act relief law enacted in March, extends jobless benefits to some workers previously ineligible for the jobless benefits traditionally offered by states.
These include the self-employed, independent contractors, gig-economy workers, those with limited recent work history and those looking for part-time work, among others.
That so many Americans are receiving aid through this new federal program suggests the system should be altered to provide unemployment benefits to these workers even in normal times, say some experts.
“If we think unemployment insurance is a good idea, why would you be excluding work that’s now characteristic of so many jobs?” asked Erica Groshen, a senior labor economics advisor at Cornell University and former commissioner of the Bureau of Labor Statistics.
Workers collecting benefits through the PUA program represented about 41% of the 31.5 million total unemployment benefit recipients nationwide as of June 13, according to most recent Labor Department data.
That’s up from a little over a third the month prior.
These workers can generally get benefits for up to 39 weeks, through the end of the year. Like other worker groups, they get an extra $600-a-week supplement through July 31.
The share increase is partly attributable to claims for traditional state unemployment benefits leveling off after a precipitous rise over the past three months, after state-mandated business closures led to mass layoffs and furloughs.
About 17.6 million Americans were collecting regular state benefits as of June 13, a decline of about 778,000 from the week prior.
Many businesses recalled furloughed workers back to their jobs as state economies have begun reopening. They may have also received federal loan money through the Paycheck Protection Program that offers incentives to rehire workers.
These dynamics would have largely helped those with traditional employment arrangements, rather than workers such as the self-employed and independent contractors, to come off the ranks of unemployment benefits, Groshen said.
Meanwhile, the number of PUA recipients has been ticking upward, with an increase of about 1.7 million people between June 6 and 13, according to the Labor Department.
Many states struggled to get their PUA programs up and running amid a deluge of jobless claims in the first several weeks of the pandemic, said Stephen Woodbury, a labor economist at Michigan State University.
“The PUA program generally had a slow start,” he said.
A handful of states haven’t reported their numbers of weekly PUA recipients to the Labor Department. They include Florida, Georgia, New Hampshire, Oklahoma and West Virginia.
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|From: Glenn Petersen||8/6/2020 8:21:38 AM|
|Rural Airbnb bookings are surging as vacationers look to escape the coronavirus|
PUBLISHED THU, AUG 6 20207:30 AM EDT
UPDATED 45 MIN AGO
M ichelle Gao @MICHGAO
-- As the coronavirus devastated the global travel industry, Airbnb laid off nearly 25% of its employees, raised emergency debt funding and at least temporarily shelved its highly anticipated IPO.
-- The one bright spot: Rural hosts are seeing huge surges in business.
-- According to Airbnb, hosts in rural areas of the U.S. earned over $200 million in June 2020 — an increase of more than 25% from the previous June.
2020 has not gone according to plan for Airbnb. The tech company came into the year preparing for a highly anticipated IPO, but then the coronavirus pandemic changed everything.
As the pandemic devastated the global travel industry, Airbnb laid off nearly 25% of its employees, raised emergency debt funding and at least temporarily shelved the IPO.
But there is one bright spot. While urban Airbnb hosts have suffered heavily along with traditional hotels and travel companies, Airbnb hosts in rural areas are seeing huge surges in business.
These rural Airbnbs for local getaways are all the rage as Americans jump at opportunities to escape the confines of their homes and the stress of the ongoing pandemic.
Trisha Mixer lost over $40,000 worth of bookings for her two properties outside Austin, Texas, when Covid-19 hit. But once the state started reopening in May, she said, she was “barraged” with requests.
“You could tell people were desperate,” Mixer said.
Mixer’s two properties, a lake house and a cottage, are 30 and 90 minutes away from Austin, respectively, and the majority of her recent customers are other Texans — even people from Austin who just want to get away. Summer weekends have always been popular, but this year she hasn’t had to do extra to fill up weekdays too.
Mixer even raised prices a little to try to slow down the pace of bookings, but it didn’t work. Her properties are filled through the summer, and weekend business looks steady through the end of October.
The data supports the popularity of rural renting. According to Airbnb, hosts in rural areas of the U.S. earned over $200 million in June 2020, an increase of more than 25% from the same period a year ago. Airbnb also said more than nine of every 10 dollars earned by hosts for June trips inside the U.S. were for sites outside the 10 biggest American cities by population.
Airbnb’s data also supports hosts’ speculation that guests are choosing to stay local. In New York, for example, Airbnb hosts earned over $5.8 million from guests living within 300 miles during June, according to data from the company.
“Many families are looking to stay in short-term rentals because it gives you a little more control over your environment, a little more privacy,” a spokeswoman for Airbnb told CNBC. People can access these quieter areas by driving and still practice social distancing while going outdoors, she added.
The rustic indoor setting of Jacki Hannon’s property in upstate New York.
Courtesy of Jacki Hannon
Jacki Hannon, a host in upstate New York, is capitalizing on this shift. She adjusted her social media posts and Facebook advertising to emphasize the peace, solitude and “off the beaten path” atmosphere available at her cabin 10 minutes away from Lake Ontario.
Now it’s booked at a higher rate than ever before, and most of her recent customers are from the greater New York City area. This is a welcome development. She has been trying to target the downstate area for some time with “meh” results, she said, but now, those renters are “finding me on their own.”
Location isn’t the only change renters are making. People are also looking to go away for longer. The average stay length has increased 18% to 4.27 days between January 2020 and June 2020, according to AllTheRooms, an aggregator of data on the vacation rental market. At its peak in April, just after the majority of shutdown orders, the average stay lasted 7.43 days.
“It really looks like individuals and families [are] choosing to get away from densely populated areas and wait out the virus,” said Joseph DiTomaso, CEO of AllTheRooms.
Many hosts noticed the same thing. Those whose weekends usually filled up first now have no problem booking weekdays as well, because people are staying through the week. Guests are also booking with less lead time — they just want to get away quickly.
Rural hosts emphasize their WiFi can hold up. They are fielding requests from guests who want to do a little remote work while still enjoying the getaway.
Guests are also coming in larger groups. Several hosts noted a trend of larger, multigenerational families organizing vacations together. Hannon, whose cabin fits 10 people, has also seen the rise of the mid-20s friend group looking to get away from New York City — like the “getaway of my youth that I remember,” she said.
On these getaways, just some space and, if possible, a swimming pool might be enough. At Kathryn Langer’s property in Lake Travis, Texas, which sleeps nine people and does have the coveted pool, it is the “busiest and craziest” time in her four years of hosting on Airbnb.
People are “stir crazy,” she said, adding that she had a guest who booked in May and then rebooked for August without having visited the first time yet.
Langer is in a unique position to see the difference in rural-urban demand because her urban property in Fredericksburg, Texas, where she said people come for shopping, wineries and restaurants, remains practically a “ghost town.” Girls’ weekends and bachelor or bachelorette parties are no longer providing a steady stream of guests. But Langer, who relies on hosting as her only source of income, has been relieved to see demand for her rural retreat recover.
As summer continues, the most sought-after states are those known for their rural getaways, according to AllTheRooms’ data. The states with the greatest year-over-year increase in bookings for the next 90 days are Oklahoma, Arkansas, West Virginia, North Dakota and Iowa. Meanwhile, bookings have dropped around 25% from last year for California, Massachusetts and New York.
But as the coronavirus continues to flare up in many places across the country, it’s an open question whether shutdowns or rising anxieties will affect demand again. Just being in a rural area isn’t automatically safer, of course.
“The question is not about population number but density,” said Dr. Ashely Alker, who works in emergency medicine and has treated Covid-19 patients. “You are safer in a city using adequate social distancing than in a rural area if you are going to surround yourself by people in bars, restaurants and boardwalks.”
Alker also pointed out that many of these smaller vacation spots attract people from the same nearby cities, so you may not be getting away completely. She noted rural areas may have less hospital capacity as well.
These reminders are not to discourage people from traveling at all. Alker said it’s important to continue doing the “simple things” such as wearing masks and distancing, even while on vacation.
Airbnb has also developed an “ enhanced cleaning protocol” informed by CDC guidelines to help hosts demonstrate the safety measures they’re taking so that guests can make responsible decisions.
When so many travel plans have been disrupted, perhaps people are more appreciative of the local getaways they wouldn’t have otherwise chosen. Amid the surge in rural demand, there’s been one other change Hannon noticed: “The reviews have been better than I’ve ever seen.”
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|To: Glenn Petersen who wrote (794)||8/10/2020 9:48:58 AM|
|From: Glenn Petersen|
|Uber CEO advocates for ‘third way’ to classify gig workers while fighting California labor lawsuit|
PUBLISHED MON, AUG 10 20209:11 AM EDT
UPDATED 31 MIN AGO
Lauren Feiner @LAUREN_FEINER
-- Uber CEO Dara Khosrowshahi laid out his argument for a “third way” to classify gig workers in a New York Times op-ed published Monday.
-- The op-ed comes as Uber fights a lawsuit from the California attorney general that claims it denied its drivers benefits by falsely classifying them as contractors.
-- Khosrowshahi suggests companies that rely on gig work should be required by law to create benefits funds that can be used by workers for anything from health insurance to paid time off.
Uber CEO Dara Khosrowshahi laid out his argument for a “third way” to classify gig workers as he fights a lawsuit from the California attorney general that claims it denied its drivers benefits by falsely classifying them as contractors.
In a New York Times op-ed published Monday, Khosrowshahi elaborated on his vision of a new labor construct which he had previously floated by President Donald Trump ahead of his signing of the CARES Act. Though the bill ultimately provided relief to gig workers along with others impacted by the pandemic, Khosrowshahi had urged Trump and Congress to consider updating labor laws more broadly to support gig workers who cherish the flexibility of contract work but also desire the protection of employee status.
The op-ed comes as Uber awaits a California judge’s ruling on a preliminary injunction over its worker classification. California Attorney General Xavier Becerra and three city attorneys filed suit against Uber and its rival Lyft in May, alleging they broke the state’s new law which aimed to reclassify gig workers as employees, rather than contractors. Uber, Lyft and other companies that rely on gig work have consistently opposed the law and have backed a ballot initiative seeking to roll back the requirement.
In the op-ed, Khosrowshahi calls the classification of workers as contractors versus employees a “false choice.” By requiring companies work within a binary system, he said, they take on “more uncertainty and risk” when they choose to provide more benefits to independent workers.
Instead, he suggests companies that rely on gig work to be required to create benefits funds that can be used by workers for anything from health insurance to paid time off. The amount of money workers can take out of the fund would be based on the number of hours of work they put in. Since all gig companies would have to contribute to the fund, workers would be able to accumulate benefits even if they switch between the apps they use to make money.
According to Khosrowshahi, Uber would have contributed $655 million to benefits funds last year if such a law had existed in all 50 states, though he does not specify the percent contribution he expects gig companies would be required to set aside. He estimates a driver in Colorado averaging more than 35 hours a week would have made about $1,350 in benefits last year, which he said would cover two weeks of paid time off or a median annual premium payment for a subsidized health insurance plan offered through an Uber partnership.
Khosrowshahi says gig workers should be allowed to choose which benefits they want. He said while policymakers believe health care would be most important to drivers, health care does not even rank in the top five benefits drivers say they want most when polled by Uber.
Gig companies should also be required to provide medical and disability coverage for when workers get hurt on the job, Khosrowshahi said, adding that they cannot currently offer such benefits “without risking their independent status under the law.” New laws should also prevent companies from denying opportunities to independent workers on the basis of protected classifications like race and gender, he argued.
Khosrowshahi said Uber would be “more transparent about what drivers make and the realities of the work,” starting with a new earnings estimator drivers can use to understand what they can expect to earn in their area. He also committed to surveying all active drivers in the U.S. about what is and isn’t working and releasing the results publicly. Uber will also help every driver register to vote, he said.
“During this moment of crisis, I fundamentally believe platforms like Uber can fuel an economic recovery by quickly giving people flexible work to get back on their feet,” Khosrowshahi wrote. “But this opportunity will be lost if we ignore the obvious lessons of the pandemic and fail to ensure independent workers have a stronger safety net.”
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