Home Entrepreneur A Bigger Truth About Restaurant Food Delivery | by Mark Suster

A Bigger Truth About Restaurant Food Delivery | by Mark Suster


photo taken by Viktor Forgacs on Unplug

I’m listening to Dan Primack’s podcasts on Pro Rata and he’s interviewing Senator Klobucher who is now strongly and openly against Uber’s acquisition of Grubhub and has tried to lobby against it.

Her argument is that if Uber bought Grubhub (it was merged with Seamless itself) it would mean that Uber Eats / Grubhub would control half of the market and with DoorDash, they both controlled 90% of the market. school. I think it’s a battle that is largely flawed to choose from and in all of Sen. Klobuchar’s uses I can think of some of the much more effective battles there will be.

For starters, Uber itself had to lay off 27% of its workforce due to the pandemic and was hit hard financially from the crisis without immediate respite. The company’s core business has struggled to become profitable, so having tertiary businesses like food delivery that can yield the necessary returns would be welcome to stabilize wealth. their main. And the market will still have DoorDash and PostMates fooling it as well as the potential that players like Instacart expand their business one day or Amazon goes into food delivery.

Even more likely is the ultimate technological disruption, where drones deliver food and make current delivery services difficult to compete. It won’t happen right away but I’ve seen some innovative companies doing exactly this in places like Australia where they’re taking a more liberal approach to allow air delivery. the driver. These include the advantages of free markets and competition and if we truly believe that it is easy to buy out your biggest competitor and become a monopolist, we all will. surf on the AOL TimeWarner portal.

But the broader problem that doesn’t get as much press attention is how the restaurant industry itself is transformed and what tools a modern restaurant will need to compete. What is Shopify for the restaurant industry? I have some interesting data that shows what it can turn out to be ChowNow.

We know that the restaurant business has been operating at low margins and many people have struggled to survive. So when delivery came into play, many people were willing to pay a fee to try and boost their business. It only accounts for about 10–15% of their total actual revenue per month so for many people, it’s not a battle worth fighting – they just have to pay the food delivery company. Satisfied customers and restaurants focused on their in-store business.

The problem with restaurants is that the more successful the “aggregators” of customer needs become over time, the less powerful the restaurants themselves have. This is largely true whether you have 2 strong competitors or 5 competitors because unless a shipping company can make a profit, the company will not continue in business.

Delivery companies own relationships with customers and can drive traffic to restaurants that are most beneficial to them. Obviously if you have a great restaurant brand with distinct dishes people look for you by name but for many people looking for pizza, sushi, Mexican food, Thai food, whatever. What, you can choose up front if it is introduced or the delivery is quicker. Courier companies also own a lot of assets like photography so they can make some of the options look much more appealing.

So just like when Groupon launched, many small merchants have welcomed an increase in traffic, if you don’t own a customer, you’ll lose your most valuable asset – the ability to remarket your guest base. customers and encourage them to become more loyal and regular customers. You lose the ability to add and cross-sell the product. And like Groupon, small businesses end up with many unprofitable customers.

At Upfront, we have always taken an approach that we want to support startups, enabling merchants to own customer relationships and increase profits by being excellent in outreach. market and serve the most loyal customers.

So a few years ago we supported a company called ChowNow allows restaurants to offer self-service ordering on pick up or delivery and the restaurant owns all customer information and relationships – ChowNow is simply a SaaS support product.

The company has been doing well for the past few years but has never really won the hearts of the press like food delivery companies because when a company shows up in your home, you know the brand better than it is technology enables restaurants.

Covid-19 changed all that. Meanwhile, pick up and delivery could have been 10-15% of a restaurant’s business before it was now 100% and when that’s your entire business, think paying hefty commissions. Third-party delivery services have become much less attractive. So while many restaurants know they eventually need to invest in better order management software, many have abandoned it.

But just like many product or clothing companies previously were happy to sell at Amazon, Walmart or Nordstrom and have recently realized the importance of Shopify and serving customers in person – so are restaurants. Enter ChowNow.

What data do I have to create this instance?

  • ChowNow currently has 17,000 restaurants using the SaaS platform for take-out and delivery and is growing by more than 2,000 restaurants per month (and growing).
  • 10 million diners now use ChowNow ordering platform compared to 24 million for GrubHub, like Shopify while they build a slow and capital efficient customer base, they are now competing with larger players about the footprint
  • Last year, they served 50,000 customers / day through their platform and earned around $ 500 million GMV (value of pre-orders), this year they are on track to make $ 3 billion. (with a B) and expect to end the year at a rate of maybe $ 100 million (yes, I got permission to publish these numbers).

If you want to see a short demonstration of how important the restaurant industry is to equip themselves with better software tools to serve and market their customers, you can enjoy this 60-second video. to explain why it is important. It says so many reasons why we all love our local restaurants and want to see them survive …

Or if you want to see the argument clearly presented by the customer, look no further Scooter Pizza in NYC, who posted this note appearing before you visited their website:

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