Deliveroo is planning to go big with a concept that uses shared kitchens – here’s what it could mean for Singapore

Food is big business in Singapore. In 2015, the food and beverage (F&B) services industry here generated a turnover of close to S$9 billion.

It is no wonder then that food delivery app Deliveroo is hoping to bank on Singapore’s love for food and grab a bigger slice of the pie.

In April, the company launched its Deliveroo Editions kitchen in the Katong area of Singapore.

As a delivery-only centralised kitchen, Deliveroo Editions allows restaurant operators to use the space for delivery-only orders. Instead of paying rent, these restaurant partners pay Deliveroo a percentage commission from their sales.

Currently, Deliveroo Editions’ five restaurant partners operate six F&B concepts from the kitchen – VIOS by Blu Kouzina, Blu Kouzina, Sacha & Sons, Kurry Korner, Pho Stop and Aloha Poke.

New F&B business models

In an email interview, Deliveroo Singapore’s managing director Sid Shanker told Business Insider that Deliveroo Editions is meant to provide partner restaurants with increased reach.

“From the Deliveroo Editions site, the restaurants are able to access an entirely new customer base that they could not reach from their original location in Singapore,” Mr Shanker said.

“The restaurants also benefit from lower manpower costs as they don’t have the need for front of house staff, which in turn increases their profit margins,” he added.

This is a key point in Deliveroo’s strategy. Anyone familiar with the F&B industry knows that manpower and rental are the biggest costs restaurants face in Singapore.

Statistics from 2015 show that remuneration and rental were the second and third largest costs for restaurants, losing only to the cost of goods and materials, which ranked number one.

If Deliveroo Editions is able to eliminate or reduce those burdens and increase a restaurant’s reach, it could be onto something.

For example, Greek restaurant Blu Kouzina saw a 550% increase in revenue since its Deliveroo Editions’ launch. The promising results prompted Blu Kouzina to launch its first app- and website-only restaurant, VIOS by Blu Kouzina, which works solely out of the Deliveroo Editions’ kitchen.

The benefits of running a delivery-only restaurant from a shared kitchen also extend to improvements in production and delivery timing.

The average delivery time for VIOS by Blu Kouzina, for instance, is just 22 minutes.

Expanding in Singapore

Mr Shanker revealed that when Deliveroo first started operating in Singapore, one of the challenges it faced was scaling business to meet consumer demand.

Deliveroo Editions was introduced to the Singapore market precisely as a result of that challenge.

“We wanted to expand the reach of our restaurant partners and give Singaporeans in harder to reach areas better access to the food they love,” he said.

As it continues to expand in Singapore, Deliveroo is looking for more local restaurants to work with, and is aiming for to reduced delivery times.

Among the company’s priorities are “rapid growth” of (the) Deliveroo Editions programme; growing its technology team to improve the app’s algorithm and riders’ working experience; and rapid expansion into new towns, cities and countries.

Deliveroo also plans to launch more Deliveroo Editions central kitchens in Singapore in the future, and is already looking at possible sites in Singapore.

If it is successful, Deliveroo could pave the way for new low-cost F&B business models, such as the one used by VIOS, to take root here.

Food still doesn’t come cheap

One thing that remains to be seen though, is if these costs savings can be passed down to consumers, and if they are significant enough to make a difference.

It is Singapore after all, where die-hard foodies are willing to travel and queue up in the hot sun for a plate of chicken rice that will set them back by just $3.

That’s hard to beat especially when pitched next to a $12 meal – even if it is a healthier option delivered to the consumer’s doorstep.

Food delivery apps such as Deliveroo are probably here to stay for the long run, but for now – especially if factors such as price and variety are being considered – it seems they still have plenty of room to grow.