Uber has added its latest local service: catering. With the $2.3 billion acquisition of ezCater, Uber buys its way into the sub-vertical. Joining Uber Eats and other functions in its super-app ambitions, Uber is hoping to be a customer acquisition channel for restaurants that want additional revenue streams.
Specifically, ezCater is a marketplace for catering events in the U.S. Anyone in need of catering services can browse available providers and book something straight through the app. You could say that it’s the Uber for catering. You could also say, given the acquisition, that Uber is now the Uber of catering.
Uber is positioning this as a way to offer restaurants secondary revenue and big customers. This normally entails barriers to entry, such as sales and administration. That’s where Uber handles customer acquisition – for a cut of revenue, of course – while providers focus on fulfillment. Sound familiar?
While all the above is in play, Uber is meanwhile expanding its food business in other ways. It’s in the process of a $15 billion acquisition of Delivery Hero to expand and buttress Uber Eats. Elsewhere, it’s partnering with and investing in drone delivery companies such as Zipline and Flytrex.
Spinning Plates
For restaurants with established catering clients, Uber’s new capability may not be worth the revenue share. But for others, Uber’s cut may be worth the customer acquisition, as they can focus on the parts they do best, not to mention other spinning plates (excuse the pun) in their core restaurant operations.
Furthermore, catering can be a lucrative side quest for restaurants. For one thing, it gives them large-scale and isolated revenue that doesn’t impact core restaurant revenues in the ways that onsite events do. But to be fair, catering can present opportunity cost in terms of time, resources, and mindshare.
That last part leaves an opportunity gap for Uber, or someone, to fill. Perhaps somewhere in Uber’s roadmap is a complementary function to connect restaurants to catering resources (people, equipment, etc.). That could let them scale up and fulfill as demand dictates, without balance sheet headaches.
As for the nearer term value proposition for restaurants to book more catering gigs, we’ll have to see how it resonates. Meanwhile, the acquisition will be an all-cash transaction, and a nice exit for ezCater, which launched in 2007 and bootstrapped most of its lifespan, with only a few million in outside funding.
Super-App Trajectory
Stepping back, this is all logical and aligns with Uber’s core model and its super-app trajectory. By propping itself up as a marketplace to connect buyer and seller – starting in rides and gradually expanding into related functions – it gains network effects and other advantages of adjacency.
For example, it recently moved into travel. Beyond local rides, we’re talking about travel bookings like hotels and airfare. This gains economies of scale in applying Uber’s existing platform to a new vertical – not to mention some internal competency from CEO Dara Khosrowshahi, who previously ran Expedia.
Travel makes sense for Uber for other reasons. According to the company, 15 percent of Uber rides are to or from an airport. By expanding into flight and hotel bookings, it’s just extending its relationship with the same customers/travelers for a larger portion of their journey. It’s all about adjacency, as noted.
The move into catering follows similar principles, while having some operational synergies with Uber’s existing work in food delivery. It can now work with the same restaurants that already have an Uber account and relationship in place. So it all works on paper… we’ll see about how it works in practice.
Header image credit: Saile Ilyas on Unsplash
