ChowNow lands celebrity chef Thomas Keller and Google HQ as mobile ordering platform clients

By Michael Carney , written on May 15, 2014

From The News Desk

For restaurants looking for a mobile ordering solution, there are two competing business models to choose from. On the one hand, there’s the middleman model favored by Grubhub-Seamless and Eat24 in which restaurants benefit by joining a large discovery marketplace, but must pay a commission on every order. The second option is the software vendor model, favored by ChowNow, in which companies pay a recurring subscription or licensing fee but avoid paying commissions and maintain a direct relationship with the customer.

After years of the former dominating the category, it seems that restaurants are waking up and smelling the lost revenue, abandoning the middleman in favor or the software-only solution.

“Discovery is a huge focus when it comes to dining out, but not when it comes to takeout,” says ChowNow founder and CEO Christopher Webb. “People tend to order from the same handful of places. Recently, 40 to 50 percent of our merchant signups have been coming from marketplaces. They tell us they’re tired of paying a 15 percent tax to reacquire the same customer over and over.”

ChowNow has grown steadily to more than 1,000 merchants, but it’s more the caliber of its restaurant partners than the number that’s turning heads. Sure, the company has your neighborhood pizza and sandwich shops on board, but it’s also added restaurants by famous chefs like Thomas Keller (Ad Hoc, Bouchon Bakery) and Mario Batali (Otto, Mozza), as well as several premium hotels and cafes on the campuses of Google, Warner Brothers, EA, and the US Navy. The company also works with a number of large national and regional restaurant chains like Ground Round, Pitfire Pizza, and Nature’s Table.

“We’ve gotten to this place at somewhat of a measured pace, by focusing on setting a solid foundation and not growing at a pace we couldn’t support,” Webb says. “We’ve seen so many companies burn through insane amounts of cash forcing products through the market. That’s unsustainable, but we plan to be around for a while.”

Today, ChowNow launches Version 2.0 of its mobile, Web, and Facebook ordering platform in advance of this week’s National Restaurant Association show in Chicago, an event that marks the company’s two-year-anniversary. In many ways, the new offerings are a complete redesign, informed by the user data that the company has collected since launching, Webb explains. The focus with the latest update is threefold: increasing conversion, improving the mobile experience, and adding additional customization options.

“When you think about it, what we really do is ecommerce – sure it’s food, and its real-time, but at the end of the day its commerce,” Webb says. “We spent a lot of time this cycle on thinking about where people get stuck and abandon the order process and redesigned the experience to better mimic the step-by-step process of a phone order.”

ChowNow 2.0 also includes an entirely rebuilt API that Webb says offers more flexibility and eases the process of on-boarding new restaurant partners. The company will continue to support its V1 API for a period of six months, at which point it will mandate that all customers switch over.

ChowNow charges a monthly SaaS licensing fee for its software, but it’s hardly an enterprise company. Rather, the company it’s targeting the often-ignored and always challenging SMB market. With this in mind, the company has taken a particularly hands-on approach to helping ensure its customers’ success. For example, ChowNow operates an in-house marketing agency to help customers design attractive Web and mobile ordering experiences, as well as deploy targeted promotions to its database of current and past customers. It’s something that the Grubhub-Seamlesses of the world have no interest in doing.

The challenge for a restaurant choosing ChowNow over a “marketplace solution” is that it must then convince customers to download its proprietary mobile app. It’s one thing to as consumers to download a single app that grants access to thousands of restaurants, it’s entirely another to expect that they’ll download a single app for each of the potentially dozens of restaurants they frequent near their home and office.

For example, the “Food” folder on my iPhone currently contains eight apps, two that are branded, single merchant apps (Starbucks and In-n-Out) and six that are marketplace-style or search platforms (like Grubhub-Seamless, Yelp, and OpenTable). There just aren’t that many restaurants that I’m committed enough to visit the app store for, an attitude that I’m confident the majority of consumers share. ChowNow combats this today, with responsive mobile Web ordering options, but it would do well to reduce the App Store friction in any way possible. This will only become a bigger issue for ChowNow and its restaurant partners as the world shifts fully to mobile-first usage, leaving its Web and Facebook ordering platforms looking like yesterday’s technology.

ChowNow has raised $6 million to date from investors that include Upfront Ventures, Velos Partners, Double M Partners, Karlin Ventures, Daher Capital, and Launchpad LA. The company has grown to 32 employees between Santa Monica and Chicago – its largest market where its been poaching the most former GrubHub customers – and continues to build out its sales and technology teams. Sources close to the company tell Pando to expect to hear news on another round of funding, likely from insiders, later this summer, although the company declined to comment on such reports.

The restaurant industry is highly competitive, with razor thin margins and a high failure rate. Thus, any business that can help restaurant owners save money, deliver a better customer experience, and deepen customer loyalty is one that will attract plenty of attention.

ChowNow enters this year’s National Restaurant Association show with a ton of momentum. Who wouldn’t stop by a booth that’s shouting from the rooftops, “Come see the mobile ordering platform of choice of Thomas Keller and Mario Batali?”