Food delivery from restaurants has long been a staple and stable service across the country.
For the most part, restaurants have hired part-time employees with vehicles to make the deliveries.
Technology on several fronts has allowed a new business model to develop based on delivery only by one operation.
This service cuts out the need for the restaurant to hire and manage operators of its delivery service. And the delivery business can supposedly make a buck by efficiently consolidating numerous deliveries from numerous restaurants.
According to an in-depth research study by California-based Credence Research, online food delivery was a $81.5 billion U.S. industry across the globe in 2017.
Even more amazing, the research estimates the food delivery business will grow at an annual compounded rate of 9.8 per cent until 2028 — likely doubling in value. By contrast an annual growth rate of three per cent is considered good.
Technology has permitted the new delivery business model. Two-way mobile communications offer efficiency; phone apps let customers conveniently place orders online.
The business in the U.S. is dominated by 10 large corporations from Uber Eats, a spin-off of the taxi company, to Grubhub, Deliveroo and Domino’s.
Domino's is the only food vendor among the top 10.
The growing market enticed a small Montreal-based company to offer the service.
Started as a junior capital pool company looking to acquire a business in 2017, GOLO Mobile Inc. became operative with a merger in June this year.
GOLO entered the Montreal food delivery industry with a fleet of 30 low operating cost electric vehicles providing pickup and delivery of grocery and pharmacy items.
A corporate study revealed a market among millennials, aged 25 to 40 years, for the service based on hunger, emergency and convenience.
GOLO began signing up merchant partners to exclusive delivery. The company website indicates 140 partners in five cites.
A recent signing involves an office complex with 10,000 workers and 30 restaurants in Montreal. A satellite office was set up in Toronto.
GOLO intends to focus on office towers, airports, hospitals, condo developments, stadiums and events to develop business.
The model appears strong. The main weakness appears ease of entry into this business. Deep pockets may be needed to maintain and grow revenues if stiff competition arrives on the scene.
The company has burned through a lot of cash in two years, posting an accumulated deficit of $31.9 million.
For the three months ended June 30, operating loss was around $2.5 million on revenues of only $47,000.
Cash on hand amounted to $7.25 million — enough to last another nine months at this rate.
With a share price of 34 cents raising more cash will dilute shareholder interests.
GOLO is worth watching to see if the business model delivers within the next year or two. If it does investors could be well rewarded. If it doesn’t investors may need a lot of Tums.
CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.
Ron Walter can be reached at [email protected]
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
