chinese-takeout

There are no shortage of startups playing in the food ordering space. Nationally there’s Seamless, GrubHub, and Eat 24, while regional players like LABite challenge on a market by market basis. They problem with most of these solutions, from the restaurant’s perspective, is that they stand as a middleman between the business and its customers. Los Angeles’ ChowNow offers an alternative, by way of a SaaS solution that includes a custom mobile app, as well as Facebook and mobile Web ordering, and allows restaurants to offer their consumers a branded experience at all times.

“The vast majority of to-go orders come from repeat, loyal customers,” says ChowNow founder and CEO Chris Webb. “It’s not logical to pay 15 percent to a portal (e.g. GrubHub, etc.) if someone was going to order from the restaurant anyway. If a restaurant sends a customer to a portal, it would be like Delta sending a customer to Kayak or Priceline to buy tickets.”

Today, ChowNow is announcing $3 million in Series A funding, led by returning investor GRP Partners, with participation from Daher Capital, Double M Capital, Karlin Ventures, and Velos Partners. The company previously raised a $1 million seed round following its graduation from Santa Monica’s Launchpad LA accelerator.

ChowNow has been growing rapidly since launching in May, despite its lack of an inside or outside sales team. Word of mouth within the small community of restaurateurs, has allowed the company to onboard “hundreds of restaurants” in 44 states, including large chains like CiCi’s Pizza and Ground Round, and smaller independent restaurants. Recently the company has expanded beyond traditional restaurants to work with several ski resorts, gym smoothie bars, and food trucks – each which has a unique need for mobile ordering. At its current pace, Webb anticipates signing up another 1,000 restaurants in the first six months of 2013.

The good thing about ChowNow’s approach, is that it doesn’t need critical mass in any particular location to be valuable to a restaurant or a consumer. On GrubHub, which many use for discovery as well as convenience, a first-time visitor who visits their website or downloads their app and finds only a small handful of local restaurants is unlikely to return. Because ChowNow isn’t offering a discovery marketplace, but rather a proprietary branded mobile ordering solution for each individual restaurant, it’s able to sign up a single restaurant in North Dakota – true story – and still add value. Additionally, many finer restaurants have told ChowNow that they would never use GrubHub or Seamless due to the perceived brand damage – to many, this would be like Apple offering a Groupon.

ChowNow costs restaurants $89 per month as a SaaS subscription. Companies pay a one-time $200 setup fee which includes the digitization of its menu and the creation of its custom mobile app. From then on, the service is entirely self-serve, including making menu, delivery option, and hours of operation changes.

As part of their fee, each restaurant gets a mounted Wi-Fi or LTE tablet – the company recently moved from Android tablets to iPad Minis – which serves as their ChowNow order management hub. Rather than worrying about point of sale system integration at this early stage, the company has opted to allow restaurants to manage Incoming orders as if they were phone orders – except without the challenge of hearing or understanding the caller. Soon the company will begin offering wireless printing stations alongside its tablets.

With the new funding, which actually closed in September, ChowNow is expanding both its team and its product offering. The company recently hired an account manager in Chicago who will oversee the midwest region, and a traveling salesperson who will focus on college towns across the Southwest and South. The next step will be to add an LA-based inside sales team. On the product side, the startup recently added the ability to offer deals, as well as a beta catering product to its platform, as well as expanded CRM and marketing capabilities like email and social media messaging, push notifications, and customer analytics.

“ChowNow has the potential to significantly improve the way restaurants communicate with their customers,” says GRP partner Steven Dietz.

Business to business sales can be a challenging and costly proposition. Just as Groupon. ChowNow accomplished its goal of proving the concept and establishing demand with its seed funding. Now that it’s taken on Series A capital, the mandate is to demonstrate scalability. This will be no small task.