In case you hadn’t noticed, there’s renewed appetite from investors across the globe in companies facilitating the online ordering of food prepared and delivered by partner restaurants.

US-based GrubHub raised almost $200 million in its IPO last month, and currently boasts a $2.5 billion market cap. More venture capital is finding its way to local competitors, too.

In Europe, things are heating up quickly as well, enough reason for us to take a look at the online food-ordering category in these parts, and size up the major and upcoming players. We took a particularly close look at Germany, where an all-out takeaway ordering battle rages.

Fierce competition

UK-based Just-Eat, one of if not the biggest online food ordering companies in Europe, just went public at a valuation close to GrubHub’s. Rival Takeaway.com, based in The Netherlands, just raised 74 million euros ($103 million) in Series B funding and acquired Lieferando.de, one of the largest food delivery websites in Germany. It had earlier raised a 13 million euro round in 2012.

Germany is also where originated another competitor, Delivery Hero, an upstart that has raised about $260 million in funding to date (a large chunk of which this year alone).

Also in Germany, Rocket Internet-backed venture foodpanda/hellofood says it’s growing fast, having spread to 40 countries in a mere 22 months after launching. So far, the Berlin company has raised $48 million in capital (but I wouldn’t be surprised to see it get another cash infusion soon). Germany is clearly a rapidly-heating battleground for online food ordering sites, too, with self-financed Pizza.de (founded in 2007) holding its ground and combatting its well-funded rivals with brio – at least so far.

On a European level, another one to keep an eye on is Denmark’s E-takeaway, which is also self-funded and quietly but surely expanding all over the globe.

By the way: it shouldn’t be much of a surprise to see the major players originating from the countries in Europe where food delivery is most prevalent (UK, Germany, The Netherlands and Denmark).

Nevertheless, in big markets, local players are staking their claims – for examples, look no further than Russia’s Delivery Club (which just raised $8 million) and Turkey’s Yemeksepeti / Foodonclick, which secured $44 million from General Atlantic and Endeavor Catalyst in September 2012.

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Dutch entrepreneur Jitse Groen (pictured), who founded Takeaway.com in the late nineties with a starting capital of exactly 50 euros and has managed to grow it into one of the dominant players in the space, posits that having a leading position in one country isn’t all that impressive, however:

“Being number one in a certain country doesn’t really mean anything if you want to expand. To make it really big in this industry, you have to strive to become dominant and profitable in a good number of key markets,” Groen says. “Being number two, even in a seemingly large market, significantly lowers your chances of booking meaningful profits.”

A relatively old category

One thing that’s important to note that it’s a bit of stretch to label all of the above ‘startups’. Groen founded Takeaway.com in 1999; Yemeksepeti was started in 2000 while Just-Eat and E-takeaway first saw the light of day in 2001. One of the oldest ones is actually France’s Alloresto.fr (1998), but it has since become part of Just-Eat (acquiring smaller, local competitors is a straight-forward and oft-used instrument for growth for a lot of online takeaway ordering enablers).

Clearly, the challengers are the younger, nimbler rivals such as Delivery Hero and foodpanda, both of which are very aggressive in positioning their services in Germany and other key regions in Europe, spending top dollar on marketing and media presence.

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Delivery Hero co-founder and CEO Niklas Östberg (pictured) says there’s more to it that just marketing, though:

“We operate in 14 markets across four continents and deliver more than 5 million meals globally every month – the equivalent of 1 order per second,” Östberg boasts. “We have a lot of innovation planned and ahead of us. We hope our competitors will be able to keep up with the pace.”

Östberg also added that, in the end, the increased interest of investors in fast-growing companies in this space ultimately benefits the health of the sector, restaurants and customers.

Sizing ’em up

Fighting words from Delivery Hero, which has just managed to steal away the CEO of now Takeaway.com-owned Lieferando to head its Germany subsidiary, Lieferheld.

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Dutchman Laurens Groenendijk (pictured), a veteran of the space who sold his company to Just-Eat and stayed on as an executive up until two years ago, says his former employer is still the one to beat, though.

“I think Just-Eat is in great shape, as they’re market leader in more than 10 countries. They will reach break-even in more countries as the market matures, and it helps being the dominant player in the second-largest takeaway market in the world – the UK,” Groenendijk says. “It’s a no-brainer that they still have a lot of room for growth.”

Just-Eat says it processed more than 40 million orders in 2013, with over 36,000 takeaway restaurants signed up to its system today. Takeaway.com, meanwhile, says on its website that it works with more than 25,000 restaurants, and seeing an average of 800,000 orders per month.

Delivery Hero may be among the new kids on the block, but Östberg claims already over 60,000 restaurants have become part of its network, which spans 14 countries. Fellow German online takeaway site foodpanda has signed up 22,000 restaurants to date, according to a recent press release.

Conclusion

It’s no surprise to see online food ordering sites growing fast all around Europe, with an increasing penetration of Internet connections and smartphones across the board, more restaurants and improved convenience of ordering thanks to better search, applications and more payment methods.

So far, the ones who were started around the start of the new millennium have been holding up well against smaller, more local competitors, but the latter are poised to grow fast thanks to significant capital injections and an increased spend on marketing.

No doubt it will be very interesting to see if the battle between the ordering sites, and particularly the one that currently rages in Germany, will play out as the market continues to mature.

The real elephant in the room, several people I spoke with pointed out, is that the main competitor of all of the above remains the telephone, still the preferred way to order food for many Europeans.

I wouldn’t bet against the continued growth of online ordering, though.

(The amazing illustration above made by the equally amazing Dana Zemack > Twitter)

  • Yoav Amit

    I find it somewhat funny restaurants are still joining these sites. These sites draw consumers from the restaurant sites and then overcharge the restaurants for their very own customers. Popular restaurants should avoid joining these sites as they will need to pay commission for customers that would normally order directly from them anyhow.

    For that reason, restaurants should focus on having a powerful white-label solution, that charges them a flat fixed monthly fee and never pay a commission per order. Restaurants should not pay for customers coming from their direct marketing efforts!

    Another important thing to note that was not mentioned in this article is the migration of orders to the mobile online ordering systems. Today, over 40% of the orders passing through our restaurant web and mobile solutions are actually done from our native application solutions and not from the websites! This is compared to 20% last year. People find it easier to order from their mobile device from the couch. As a result, the real battlefield of the near future (or even of the present) will be the mobile market – who will have the best and easiest to use mobile app.

    Yoav, OpenRest. (online ordering systems for restaurants and portals)

  • Calin

    You should also look at https://www.gloriafood.com/ their real time online ordering system set’s them apart from other startups in the area

  • Clement Bonhomme

    No one there is innovating. They do the exact same thing : it is nothing but a spreading and marketing battle. We’ll soon, at https://www.capitainepizza.com/ , innovate.

  • Fabio Fusco

    I don’t entirely agree with the article or some of the comments.

    There have been some valid points made but in my opinion you are all missing out on a vital fact:

    Marketing restaurant menus on third party websites is essential but converting these new customers to ordering directly from a restaurants own branded website is vital to the success of the restaurant.
    The leading portals have done a fantastic job in educating the masses and proving the concept works.The “Portals” are also a valuable part of the marketing mix and we would always recommend that a restaurant publishes their most powerful tool “Their Menu” everywhere – including as many portals/aggregator websites.

    The really smart restaurants take this one step further though by converting these online customers to ordering directly from their own websites.It does not make sense to pay a premium for a customer twice! One simple way is to offer portal customers a voucher (First time online order discount (say 25%) – when you order from our website.As restaurants become more savvy in their digital marketing activity, engaging directly with their OWN customers and commit to building a lasting web presence.They WILL win the battle.

    A professionally branded responsive website with a RELIABLE online ordering solution and a willing restaurant owner is all that is required. Fabio, Zuppler & Digital Restaurant.

    • Yes because most people go to hotel websites to make bookings rather than use Booking.com, Expedia or other aggregators …

    • Kyongsun Chang

      Would you install 30 apps run by the restaurants to place an order, or install one? I guess the answer is simple and clear.

      • Fabio Fusco

        We are creatures of habit. I see the benefit of using portals from a discovery point of view however 90% of customers have their favorite local takeout restaurants from which they order from most of the time so it makes sense to download a few of your favorite apps whereby these restaurants can then offer promotions directly to their loyal customers! The real issue here is how restaurants are going to sustain the high fees associated with third party portals. A local restaurant cannot allow itself to become “portal dependent” and needs to have a direct relationship with their own loyal customers. If portals were to share the data (emails, buying behavior, analytics etc…) with the restaurants then this begins to look like a fair compromise and justify the high service fees. Presently, portals do not share this important data and are effectively taking ownership of a restaurants customer base whilst still charging a premium for the same customers!

        • Kyongsun Chang

          Thank you for your comment. However, I’m afraid there’s a logical leap between your research result and the customer behaviors. Your notion is only vaild if: ① at least some customers welcome the chores(downloading and installing specific apps provided by their favorite restaurants and running them to place an order), ② they usually order from the same restaurants and ③ they don’t prefer dialing these restaurants. Actually, there was a war between these food portals(Yogiyo, 배달의민족, and Baedaltong, to name a few) and local & chain restaurants in South Korea:The majority of chain restaurant representatives said exactly the same thing you mentioned and the result is… even the chain restaurants, not to mention the comparatively small local restaurants, have become the clients of these portals and pay up to 9%~ 16% of the gross sales as service fees, because the customer flow from such portals is approximately 10~20 times bigger than the one from their own apps(in case of my own company, the number is about 100, believe it or not).

          • Fabio Fusco

            Hi Kyongsun. Not sure what these restaurants were doing in terms of marketing or which platform they were using for their online ordering. There seems to be a growing number of less than usable or reliable ordering solutions in the market. The Zuppler solution which we operate in Europe has an extremely high success, retention and conversion rate with migrating customers over to using our white label platform that sits behind the restaurants website or app.The user experience is paramount to the success of a customer using a restaurants own branded solution.We have invested millions of dollars in getting this right. A recent case in point was a medium size client of ours Diep.ie who recently removed their menu from a major portal in Ireland and have within 3 months successfully converted all of their customers into ordering directly from their own website and have increased their order averages by as much as 15% and repeat custom. Apart from all of this and other benefits such as data capture they have reduced their service fees by more than 70%. We can say the same for most of our clients who have any interest in protecting their brand and want a direct relationship with their “own customers”.

          • Kyongsun Chang

            Thank you for your comment, Fabio. Still, personally, I believe the convenience some food protals can provide is one of the main keys to success. Another side of the coin can be the tangible benefits of the service users, which includes both monetary(price off, for instance) and informational ones. In case of the three dominant food portals in Korea, all these portals provide BBS on which users are freely encouraged to evaluate the restaurants they used in the past. Moreover, some of these portals even evaluate the quality of the foods prior to registration and they boast such evaluation result on their BBS. If individual restaurants can provide higher level of convenience and benefits than the portals can, I would say they definitely have a chance. Unfortunately, in Korea, such an attempt has failed, and these portals have become so successful that the local government is even considering regulating the service fee rate.

          • Fabio Fusco

            Very interesting Kyongsun. Looks like there’s a real requirement for Zuppler in Korea!

  • Denis

    You should also look at http://www.food-ordering.co.uk/ which is a kind of alternative in the sense that it’s a system the restaurant can place on their own site and thus take ownership of the orders. ie. no commissions.

  • Yoav makes a very valid point, these platforms will reduce your restaurant’s ability to differentiate, remove branding and take a cut on top.. They serve a purpose but for serious restaurants a white label solution is the only sensible option. I think the same applies to the booking/reservation platforms like OpenTable etc.

    Our solution http://www.bluebird-global.com/online-ordering-system/ is invisible and you own your website, customers and data.

  • I believe that what restaurants and cafeterias need is to have both: ordering sites and their own branded on-line and mobile presence.
    But most importantly F&B businesses need to maintain their branding. They should give it a try on their own. Their business should not rely on joining food delivery platforms. Percentages are high. They might have higher revenues but what about profits?
    What we have managed to do is to offer restaurants and cafeterias the option to have their own Mobile App, exclusively branded for them and uploaded to iTunes and Google Play Stores. With just a tiny set-up fee which is waived is they sign up for a year, and a very reasonable monthly recurring fee they can have their own complete ordering app in just a few days. http://www.mandoapp.com and be able to accept take away, delivery and dine-in orders.
    It was amazing to see clients who increased their sales by just dropping a tiny leaflet in every bag when they were delivering food.

  • BPL Digital

    Interesting Deliveroo wasn’t mentioned in the piece, granted they were still fairly small a 18 months ago. Now raised 100M USD and a real threat to Just-Eat. As others have mentioned though, these channels should only be exactly that, a channel. If you’re driving a significant percentage of your sales through an external site restaurants should really look to try and bring some of that revenue back under their own control, on their self-branded online ordering system: http://www.bpl-digital.com/online-ordering.

  • Bharti

    As these platforms will become bigger and start to play on their own ground rules, the demand for self serve online ordering will go up. Restaurants will try and serve their customers personally via online channels like restaurant branded mobile applications, website or facebook pages. With companies such as Restolabs(www.restolabs.com), online ordering has become very affordable for restaurants. The catch is that these online ordering platforms are very easy to run and manage for the restaurant and as digital ordering evolves so will these platforms and so will the restaurant.

    Bharti, Restolabs