Amazon Restaurants, which is live in 20 cities as of today, is looking to accelerate the growth of its restaurant supplier network by partnering with the largest restaurant brands in America.
“National restaurants play an integral role in the Amazon Restaurant Delivery business strategy,” according to a current job posting for a business development position. The listing goes on: “Amazon Restaurants is seeking an entrepreneurial, results-oriented Technical Business Development person to lead negotiations with the largest 200 restaurant brands such as Applebee’s, P.F., Chang’s, Red Robin and point of sale (POS) brands such as NCR.”
A few locations of national restaurant brands such as Subway, Firehouse Subs, Five Guys, Applebee’s, and Which Wich are already on the Amazon Restaurants platform. However, based on our review of restaurants available in each city currently, the large majority are local brands.
Last summer, Amazon announced the launch of Amazon Pay Places, a service that enables select QSRs running the Clover POS to accept takeout orders via the Amazon app. Amazon says it charges restaurants, “10% of each order that’s processed through the Amazon App. This cost covers marketing and payment processing, including fraud protection. Amazon’s marketing may include a variety of paid social media, email, and in-app marketing.” We do not yet know what the specific pricing model is for Amazon Restaurants partners.
Restaurant food delivery is a highly competitive landscape, with a slew of startups operating in the space including DoorDash, Grubhub, Eat24, Caviar, Postmates, and more – in addition of course to Uber Eats (which Uber CEO Dara Khosrowshahi said in May has a $6 billion bookings run rate).
As former Uber growth leader and current Andreessen Horowitz General Partner Andrew Chen articulated recently, the nature of transportation marketplace businesses favors platforms that can keep transportation suppliers continuously in demand throughout the day. While the nature of Amazon’s local transportation demands differ from Uber’s, it does seem generally better equipped to keep more couriers busy more often than the vertical food delivery platforms, and thus to be more economically viable, in the long run.
One potential long-term play for Amazon, given its large volume of both customer relations and inventory of perishable food in its Fresh warehouses and Whole Foods stores, is to enter the virtual restaurant business. A “virtual restaurant” is a restaurant that doesn’t exist for physical customers, but rather appears as a restaurant brand in your food delivery app only. Fulfillment can occur in a space shared with other “virtual restaurants,” perhaps also in a lower-rent location than many traditional retail establishments. Delivery logistics are thus also simplified since the number of food source locations is potentially reduced. (In some cases, restaurant entrepreneurs are creating virtual restaurants inside their physical ones in an effort to grow.)
Another potential option for Amazon long-term is to create “private label” restaurant brands with fulfillment provided by existing third party (physical or virtual) restaurants, somewhat analogous to how it has created private label products in many hardline and softline retail categories. (Given how much Amazon has already aggregated demand, it has more options than most when evaluating how to go about aggregating supply.) We have seen no evidence of Amazon’s intent to pursue either of these strategies yet, but Amazon is at least getting more sophisticated in some aspects of retail food preparation through offerings in its Amazon Go and Whole Foods stores.
For now, Amazon is racing all of its competitors to bring on as many restaurants as it can to the platform, and national restaurant brands are a fast way to gain footprint.