I am working on a delivery-only restaurant that handles its own ordering and delivery platform to help groups choose dishes from a data-driven menu that covers a wide range of cuisines.
This operation is very capital intensive, both the set up of the kitchen operation as wel as the web/app development. Before getting seed funding we need to show some traction. Does anyone have any suggestions on how we can show some traction?
Edit: just to add, our business is looking to implement unique features that sets us apart from the competition. This is why a customised order experience is a must. Even if we don't go with a customised solution, a restaurant is still very capital intensive.
The restaurant industry has been slammed hard by the coronavirus outbreak, with venues in many cities in the U.S. and beyond shuttered or restricted in how they can serve customers — to say nothing of the comfort level of customers themselves to dine in public venues — in the name of helping contain the spread of infection. But today, a startup that has built a platform to help them manage their bookings business better is announcing a round of funding and an acquisition to help those restaurateurs on the road to recovery.
Seated, which provides a restaurant booking platform that rewards customers with credits for gift cards at select other retailers like Amazon, Nike, Sephora and Uber when they show up to eat, has raised $ 30 million in funding, and alongside that it is also announcing it has acquired another industry startup, VenueBook, a platform for event planners to reserve space at restaurants and other venues. Today VenueBook has some 120,000 event planners using its service across the New York tri-state area, Denver, San Francisco and the surrounding Bay Area, and the wider Washington, D.C. region.
The terms of the deal are not being disclosed, nor is the valuation of Seated . The funding is being led by Insight Partners and Craft Ventures; Greycroft (where Seated’s co-founder and executive chairman Bo Peabody is also a venture partner) and Rho Capital Partners are also participating. This appears to be the first funding disclosed by Seated since being founded in 2017 by Peabody and Brice Gumpel, although it had previously raised a seed round.
New York-based Seated had its start in the world of booking tables for in-restaurant eating — a business that has to date racked up some 900,000 reserved seats and $ 37 million in revenue for its restaurant partners across NYC, Boston, Atlanta and Chicago (covering around 800 independent restaurants in all at the moment), with some additional $ 7 million in tips for staff.
But in recent months it’s been recalibrating what it does to meet the needs of the moment, which include diversifying beyond providing reservations to in-restaurant individual diners. That has included the launch of Seated at Home, a takeout service that is positioned as a competitor to the likes of Grubhub and UberEats, with a 0% commission on orders. And now, the acquisition of VenueBook adds an event planning service into the mix that takes its booking platform beyond the walls of local eateries.
“We are always looking for new ways to support restaurants’ profitability and longevity, and with the acquisition of VenueBook, Seated Events offers a new way for restaurants to drive demand in yet another revenue stream,” said Gumpel, who is the startup’s CEO, in a statement. “COVID-19 has proved to be one of the toughest challenges the restaurant industry has ever faced and this funding will help us refine our current products to ensure we’re doing whatever we can to help our restaurant partners keep their doors open and remain profitable.”
In terms of just how hard restaurants have been hit, the statistics speak for themselves. Researchers from Harvard Business School noted in a recent essay that 40% of restaurants in the U.S. shuttered two months into the pandemic, putting 8 million people out of work, three times more job losses than any other industry.
And when some started to reopen, they were facing major investments as they retooled their businesses to cater to how people are “eating out” now — significantly more takeout and delivery, and a lot of eating outdoors. Even so, diner numbers in June were down more than 65% versus a year ago, with the National Restaurant Association in the U.S. predicting a drop of $ 240 billion in revenue for the year, with more than $ 120 billion during the first three months of the COVID-19 pandemic alone.
Some countries are trying to offset this huge hit: In the U.K., the government has started its “Eat Out to Help Out” scheme, which essentially subsidises the cost of meals by up to 50% when people eat out at participating restaurants.
That’s not the case in the U.S. at large, however, with federal government relief programs like the Paycheck Protection Program targeted across industry verticals.
That has opened an opportunity for startups that are building tech to at least make what business opportunities are available more accessible to a wider number of users at both ends of its two-sided marketplace: those looking to eat out or meet in restaurants and the restaurants (and now, other venues) themselves.
The tech is about measuring footfall, providing analytics and more insights into how to fill venues and kitchen utilisation in a more efficient way, but that is at the back end. On the surface, the startup makes a point of touting how low-tech it is, requiring little more than a smartphone to use it. That sets it apart from a number of other restaurant service startups, which often sell specific tablets and other hardware to be able to use their software.
Indeed, the restaurant business is not known for being high-tech — one reason why you might argue many get taken for a ride by delivery and other startups that promise to handle all the fussy tech stuff on their behalf. So in an industry where typically profits are no more than 4-5% of revenue (and those are the lucky ones), the shift into events is a critical way of improving margins at a time when restaurants’ prime revenue generation has been pulled out from under them. Events are estimated to make up 10-15% of a restaurant’s revenue, and up to 20% of a restaurant’s profit, Seated notes. Seated Events provides a seamless way for restaurants to begin rebuilding this critical revenue stream, allowing families or smaller groups of people who would like to take extra precautions while dining out to book private rooms.
“Events are not only an important part of a restaurant’s revenue stream, but they’re important for internal operations. Restaurant events help to increase employee retention because both front and back of the house employees are able to exercise creativity and tap into different skill sets while planning and executing events,” said Peabody in a statement (Peabody himself has also owned and been on the boards of a number of restaurant businesses, in a long entrepreneurial career that has also included founding Tripod — a verrrry early social network sold to Lycos in 1997 — and being the founding chairman of Everyday Health, which was sold to Ziff Davis). “We are thrilled to be able to offer yet another way for restaurants to maximize their profitability. With Seated Events, Seated at Home, and Seated, restaurants can drive demand to their three primary sources of revenue in a single, easy to use rewards platform.”
All this means that even at a time when restaurants feel like a risky bet, investors are interested.
“Restaurants are a vital part of our culture and communities, and the industry has been completely upended by COVID-19. It’s been impressive to watch Seated’s unwavering commitment to help restaurants thrive as they quickly adapted their rewards platform to offer delivery, and now events, in order to continue to meet restaurants’ needs,” said Thilo Semmelbauer, managing director at Insight Partners, in a statement. “Seated’s expanded vision is compelling and this one-stop platform will be an important piece of the restaurant industry’s recovery and evolution.”
Currently working on startup and could use some PMIX data for some predictions/example data. All help is appreciated. I don't care necessarily what the restaurant is but I'm having a hard time making up information as I feel it's not real enough. I don't really care about the costs of each product, I'm more interested in how many times product X is sold a day over time.
I was listening to Dan Primack’s podcast on Pro Rata and he was interviewing Senator Klobucher who is now publicly and vocally speaking out against Uber purchasing Grubhub and has tried to mobilize against this.
Her argument is that if Uber buys Grubhub (which itself once merged with Seamless) it would mean that Uber Eats / Grubhub would control half the market and that with DoorDash the two together would control 90% of the market. I think that’s a largely flawed fight to be picking and of all the uses of Senator Klobuchar’s I could think of some much more productive fights to be having.
For starters Uber itself has had to lay off 27% of its workforce due to the pandemic and has been severely impacted financially from the crisis with no immediate respite in sight. It’s core business was already struggling to become profitable, so having tertiary businesses like food delivery that can deliver needed profits would be welcome to their financial stability. And the market would still have DoorDash and PostMates duking it out as well as the potential that players like Instacart broadens its business one day or Amazon gets into food delivery.
Even more likely is eventual technology disruption where drones deliver foods and make it hard for existing car delivery services to compete. It won’t happen right away but I’ve seen some innovative companies doing exactly this in places like Australia where they are taking a more liberal approach to allowing drone deliveries. Therein lies the advantages of free markets and competition and if we really believed it were that easy to buy off your largest competitor and be a monopolist we’d all be surfing on AOL TimeWarner portals.
But the broader issue that hasn’t garnished much press attention is how the restaurant industry itself is being transformed and what tools a modern restaurant will need to compete. What is the Shopify of the restaurant industry? I have some compelling data that suggests it may just become ChowNow.
We know that the restaurant business already operates on thin margins and many struggle to survive. So when delivery services came along many were willing to pay the fee to try and increase business. It was only about 10–15% of their actual total revenue per month so for many it wasn’t a battle worth fighting — they just put up with the food delivery company fees. Customers were happy and restaurants focused on their in-store business.
The problem for the restaurants is that the more successful the “aggregators” of customer demand become over time, the less power the restaurants themselves have individually. This will largely be true whether you have 2 strong competitors or 5 because unless a delivery company can make a profit it won’t continue to stay in business.
The delivery companies own the customer relationship and can drive traffic to the most profitable restaurants for them. Obviously if you have a great restaurant brand with differentiated food people search for you by name but for many people looking for pizza, sushi, Mexican food, Thai food, whatever, you might go with the choice put in front of you if it’s being recommended or delivered more quickly. The delivery companies also own many of the assets like the photography so they can make certain options look much more attractive.
So just like when Groupon came out many small merchants welcomed the uptick in traffic, without owning the customer you lose the most valuable asset — the ability to re-market to your customer base and encourage them to become more loyal and more frequent customers. You lose the ability to up-sell and cross-sell products. And just like with Groupon the small businesses ended up having many unprofitable customers.
At Upfront we always took the approach that we wanted to back startups that enabled merchants to own the customer relationship and to increase profits by becoming excellent at marketing and serving ones most loyal customers.
So several years ago we backed a company called ChowNow that enables restaurants to offer self-service ordering for pick-up or delivery and the restaurant owns all of the customer information and relationship — ChowNow is simply a SaaS enablement product.
The company has done well over the past several year but never really captured the same press mindshare as the food delivery companies because when a company shows up at your house you get to know that brand rather than the tech that enables restaurants.
Covid-19 has changed all of that. Whereas pickup & delivery may have been 10–15% of a restaurant’s business before it’s currently 100% and when it’s your entire business the thought of paying huge commissions to a third-party delivery service becomes much less attractive. So while many restaurants knew they eventually needed to invest in better order management software, many had been putting it off.
But just as many product or apparel companies were happy selling at Amazon, Walmart or Nordstrom in the past and have lately realized the importance of Shopify and serving customers directly — so, too, are restaurants. Enter ChowNow.
What data do I have to make the case?
- ChowNow now has 17,000 restaurants using its SaaS platform for take-out and delivery and is adding more than 2,000 / month right now (and trending up)
- 10 million diners now use the ChowNow ordering platform vs. 24 million for GrubHub, so like Shopify while they built the customer base slowly and with capital efficiency they are now rivaling the bigger players in footprint
- Last year they were serving 50,000 customers / day through their platform and did approximately $ 500 million in GMV (the value of the orders placed), this year they are on track to do $ 3 billion (with a B) and expect to end the year at a revenue run rate that may top $ 100 million (yes, I asked for permission to publish these numbers).
If you want to see a short spot that outlines the importance of the restaurant industry arming itself with better software tools to serve and market to their customers you may enjoy this 60-second video that makes it clear why it matters. It speaks volumes to why we all love our local restauranteurs and want to see them survive …
Or if you want to see the argument laid out clearly by a customer, look no further than Motorino Pizza in NYC who posted this note that appears before you enter their website:
Beyond Meat Inc. reported sales that outpaced Wall Street’s expectations, a sign that demand remains robust in spite of the coronavirus outbreak that’s closed restaurants across the U.S.
Read more here.
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