UPDATE: Feb. 18, 2020: Waitr will lay off 2,300 Louisiana delivery drivers effective April 8, according to a WARN Act notice filed with Louisiana's labor department. News of these job cuts comes less than two weeks after the struggling restaurant delivery platform announced that it is shifting its drivers from hourly to contracted workers. All impacted drivers will be able to continue working with the delivery platform as contracted drivers, Waitr spokesperson Dean Turcol said, but declined to comment further on the news. In a letter to the Louisiana Workforce Commission, Waitr VP of Human Resources Amy Behne wrote that Waitr and Bite Squad "will be instituting a layoff for all Company drivers in all area markets nationwide."
Dive Brief:
- Waitr announced this week that it's shifting its drivers from hourly to contract. Drivers found out about the change, which is effective in April, via email, according to KATC.
- This change means Waitr’s workers will now be paid by the delivery versus the hour. Under federal tax law, contracted workers aren’t required to receive benefits, and employers aren’t required to withhold taxes for them.
- This news comes a week after the company announced more layoffs, and about a month after Adam Price resigned as CEO. He was replaced by Carl Grimstad.
Dive Insight:
Though Waitr touted its change to a contracted employment model as a positive development in an email obtained by KATC, a driver told The Advocate that the transition "definitely hurts."
And though Waitr is giving all its terminated drivers the chance to continue working as contractors, the question is whether or not the bulk of its workforce will choose to do so. Waitr is also laying off 491 drivers in Alabama and 219 drivers in Beaumont, Texas, according to The Advocate. The company will need to continue filing WARN notices in states where it employs more than 100 drivers as the transition continues.
It may also affect Waitr’s restaurant partners. One such operator told The Advocate that Waitr had more control over their drivers when they were considered employees, for example.
Waitr, which was founded in 2015, has long differentiated itself from other food delivery companies with its employment model. But with this announcement, it joins market share leaders, including DoorDash and Grubhub, in operating on a contractual basis. Drivers who continue working for Waitr will waive their rights to class-action lawsuits and other disputes. Such an agreement comes as Uber and Grubhub have navigated court challenges for classifying drivers as contractors versus employees. According to The Advocate, judges have largely ruled in favor of the companies.
No doubt this move is an attempted solution to yield profitability and stability in a segment and company where such results have been largely elusive. Waitr joined the Nasdaq in late 2018, but it hasn’t been an easy ride on the market. That ride has included three rounds of layoffs, a tentative (then aborted) plan to move its base to Mexico, a class-action suit brought forth by restaurant partners, backlash from a new fee structure and so on.
This doesn’t include the threat of being delisted. During its Q3 call in September, the company reported a loss of more than $220 million and its stock performance has suffered accordingly. In early December, Nasdaq sent the company a delisting warning as its stock price closed under $1. On Wednesday, Waitr’s shares closed at 32 cents.
Waitr has made some changes to try and keep pace with larger competitors and find more solid footing. These have included a new "Order It Again" section via its new Android and iOS app, the introduction of alcohol delivery, and the addition of a reservation and loyalty program. But such moves haven’t proved enough to move the needle.
To be sure, Waitr is not the only delivery company that seems to be pulling out all the stops to find profitability. Deliveroo just adopted a dynamic pricing structure, while Grubhub, DoorDash, Postmates and Uber Eats have also rapidly diversified their portfolios, including through ghost kitchen operations and partnerships with major credit card companies.
It’s hard to say at this point if this major shift to save on costs will provide a boost to Waitr’s bottom line. The company's Q4 earnings in the next month or so may paint a better picture. However, other delivery companies that have long been following a contract model are also struggling to find profitability, so this employment shift may not be a silver bullet.
