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The fast-food delivery boom led by the likes of Uber Eats is a car crash waiting to happen, according to IBISWorld.
The research agency has revealed the pressure mounting from regulators, delivery drivers and fast-food operators could lead to big changes in the way delivery networks operate over the next five years. It even suggests that some delivery services may go under.
While it's estimated that a third of all Australians in capital cities use online food delivery services, IBISWorld warns the risks are growing and that they are likely to affect everyone from delivery drivers and food operators to their customers.
IBISWorld senior analyst Andrew Ledovskikh says regulators are already starting to crack down on delivery operators, with the most recent target Foodora being pursued by the Fair Work Ombudsman over underpayment of drivers. The key point of concern is the positioning of drivers on Foodora's books as contractors rather than employees.
"This contractor status is vital to third-party operators, as it keeps costs down," says Ledovskikh.
"Without the ability to employ these drivers as contractors, many third-party delivery operators would see their business model become unprofitable. This would see some operators collapse, while others would have to severely increase service charges to partner businesses."
Ledovskikh says potential test court cases and 'decisive government policy' could threaten the viability of delivery companies over the next five years.
IBISWorld argues that the golden age of this business disruptor is over and the early advantage for food operators opting into delivery services such as Uber Eats and Deliveroo has all but disappeared as the practice has become an accepted part of the industry.
Ledovskikh points out that food operators now are effectively held captive to the system and risk losing market share if they opt out.
"Although in many ways third-party operators are providing a store with advertising, they are first and foremost advertising their service to consumers," he says.
"As consumers become used to the service, if you leave, you lose those consumers. In effect many stores in Australia will feel they have been effectively franchised by third-party online operators.
"Overall, the fast food and takeaway food services industry has struggled to maintain profitability levels over the past five years, which is bad news for an industry where many of its players are already running on thin margins."
Revenue growth across the industry is forecast at 0.7 per cent a year over the next five years, which is well below inflation. Some food operators have argued that delivery services are adding to the pressure and making their stores unprofitable.
IBISWorld says something eventually has to give, forecasting that the convenience of delivery services will eventually come at a cost to the consumer. It says existing commissions to delivery operators are already being factored into overall pricing by food outlets.
"The pressure on third-party operators to ensure large investments pay off, and the possible increased costs to these operators if they lose regulatory battles surrounding contractor delivery drivers, will likely lead to consumers and small businesses facing higher charges over the next five years," says Ledovskikh.
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