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Deliveroo has entered administration, leaving 15,000 local riders — and the thousands of restaurants that use them — in need of new work and a new service to move food.
Key points:
- Deliveroo has suddenly announced it is quitting the Australian market, effective immediately
- KordaMentha has been appointed as the administrator to wind up the local arm of the business
- The move affects more than 12,000 partner restaurants, 15,000 riders, 120 staff and an unknown number of customers
"We have today (Wednesday) made the sad announcement that we are leaving Australia," the company wrote in an email to clients.
"This has been a difficult decision to make. We have enjoyed serving you the amazing food that Australia is known for, working with thousands of brilliant restaurants and riders."
The company said customers could no longer place orders on Deliveroo in Australia, however accounts would remain open for the next six months to allow customers to download their information.
Deliveroo, which had operated in Australia since 2015, blamed "challenging economic conditions, which requires us to take difficult decisions".
Despite starting in the market ahead of Uber Eats, it fell substantially behind its rival.
Competitors Menulog and DoorDash also overtook Deliveroo, pushing it into an unsustainable fourth place in an already-crowded market.
"In Australia, we have concluded that achieving a sustainable position of leadership in the market is not possible without a disproportionate level of investment which would have highly uncertain returns," the company concluded.
Deliveroo got out of the German market in 2019, and already this year has quit The Netherlands and Spain.
Administrators take control
The Australian arm of the company had more than 12,000 partner restaurants, employed approximately 120 staff and recently expanded into grocery and liquor delivery.
Firm KordaMentha has been appointed as the voluntary administrator. Creditors have been told to visit the administrator's website for more information.
But administrator Mark Korda said Deliveroo was "unable to achieve sufficient market share in Australia to develop a sustainable business".
With the London Stock Exchange-listed UK parent company deciding to wind up Deliveroo Australia, administrators said they had "no alternative but to cease operations immediately in the absence of financial support".
"Our priority is to execute an orderly wind-down of the Australian operations to achieve the best outcome for all stakeholders."
The decision to cease trading immediately means all of the company's employed staff in Australia had their employment terminated on Wednesday, with the administrator working to calculate and secure their outstanding pay and entitlements.
The administrator said delivery riders were considered contractors, not employees, of the company and would be treated as unsecured creditors.
That means that any delivery riders owed money by Deliveroo will need to submit a proof of debt form to the administrator to make a claim, but will not be guaranteed to receive what they are owed in full.
The administrator said riders could keep their company-supplied kit.
Transport Workers' Union national secretary Michael Kaine said the union had sought "urgent consultation" with the administrator to understand what "entitlements might be clawed back for food delivery riders who stand to lose their jobs".
"This will be a shock to the thousands of food delivery riders who rely on Deliveroo for income," he said.
Mr Kaine said it highlighted the "urgent need" for the federal government to enact reform for gig workers.
"It is clear that urgent regulation is necessary to stabilise this industry and ensure workers are treated fairly, can work safely, and have secure jobs," he said.
Restaurants owed money by Deliveroo are also unsecured creditors and will need to lodge a proof of debt form. They are being asked to contact the administrator if they possess any Deliveroo-supplied IT equipment to arrange its return.
Information for creditors, such as riders and restaurants, can be found on KordaMentha's website.
The first creditors meeting for Deliveroo Australia will be held on Monday, November 28, 2022.
The future of Deliveroo Australia will then be decided at the second meeting of creditors, which the administrators say is likely to be held in mid-to-late December.
Food delivery companies are suffering due to competition and the threat of workers getting more rights, making labour costs more expensive.
One of the Labor Party's promises during its recent election win was to expand the security of work and boost workers' conditions.