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ChowNow’s Chris Webb: No Super Bowl Ads, No Fees For Restaurants

Chris Webb is cofounder and CEO of ChowNow, which builds websites, apps, and online ordering systems for restaurants.

A year ago, I emailed our team and all the investors about the pandemic, saying, “We haven’t seen any negative impact on the business, but we’re watching very closely.” I started that way because no one knew what to expect and everyone feared the worst. We didn’t know. Were we going to lose half our client base? What should we expect?

Immediately after that email, the phone started ringing. Leads started pouring in from restaurants all over the U.S. looking for online ordering. I said, “Okay, that’s better than we first thought.” But then it was like, “Holy shit, how do we help all these restaurants that need online ordering set up today?”

For years prior to that, we required certain metrics for restaurants to work with us because there’s an upfront investment. We put a full team on, we input their menu, we build their apps. It cost us $1,000-plus per restaurant to bring them on. Eventually, over the course of working with restaurants for many, many years, we recoup that cost and make money.

We did away with those requirements because the world had changed, and we realized that restaurants needed help. But then we had the problem of being understaffed. So we ended up hiring about 100 people last March and April from the restaurant industry, many of whom were actually clients that were unfortunately laid off because of the pandemic. They helped onboard accounts, helped train them, and helped our support team with these clients. We went from 300 people companywide to 450 people in the matter of a few months.

We’ve always had white-glove treatment. Every account is assigned a person on our team to help them from day one. They have that one point of contact with the company—somebody they can call, email, or text anytime for help. Given the amount of restaurants that we had to onboard in a very short period of time, we told restaurants that if they wanted to go live that day, we were going to do them in batches. We did daily webinars where you could join anywhere from 10 to 100 other restaurants. We walked all of them through the system—how to onboard, how to do more on their own if they needed to get running immediately. But we kept the white-glove treatment at the same time in case someone wanted one-on-one service.

Our onboarding metrics actually improved in the pandemic. On average, before COVID, it would take restaurants 20 to 30 days to onboard into our system. It wasn’t because they were waiting on us—usually it was us waiting on them to approve a menu, or to provide us their logo or other assets like photos of the food. COVID changed all that, as getting online became restaurants’ top priority. The amount of time it took to onboard a restaurant on average actually dropped to about six days at the height of the pandemic.

Also before the pandemic, we gave our sales team a do-not-sign list for categories of restaurants that might be really excited about having their own branded app or their own ordering system, but which we knew weren’t going to get many online orders. It was going to be a waste of their time and our time. That included steakhouses, ice cream and frozen yogurt shops, and very fine dining.

Basically, back then, if the restaurant didn’t have an existing takeout business, they probably weren’t a good fit for our platform. We could take a restaurant with an existing takeout business—whether the orders come from GrubHub or over the phone or whatnot—and help make that business better and more efficient. What we historically had not been good at pre-COVID was taking a restaurant that did zero takeout and help them build that up from scratch.

Steakhouses are a prime example. On average, not many people order steaks for delivery. There are some outlier examples, but typically if you want a steak, you go out to eat with friends and family. But consumer behavior changed quite a bit during COVID. Now we have steakhouses, ice cream shops, and others that are doing insanely well on our system because everyone’s trying to get the normal experience, even if it happens to be at their own house—getting that pint of ice cream or that $40 steak delivered to them.

I think this is a permanent shift, though it’ll pull back a little bit as the country and the world reopens. We’re witnessing that now. I’m in Texas at the moment, so it’s very different than what’s going on in LA, but it’s reopening nonetheless. We’re hearing the same thing from restaurants. We understand the importance of this diversified revenue stream, meaning takeout and online ordering. We understand how convenient it is, but you’ll probably have to modify it over time.

If restaurants historically never did takeout, they’re now coming out with very specific takeout menus with fewer items on them—maybe some of their most-ordered items combined with the ones that travel well. We’re seeing that change now. Everything we hear from our clients backs this up. This is here to stay.

Another lesson for restaurants over the past year is that they need to constantly communicate with their customer base over Instagram. Even more important than that is email. Personally, I get more emails from restaurants every single week than I did pre-COVID. Restaurants now realize that they need to send these emails, that they need to own that relationship with their customers. They need to stay in constant communication. A restaurant in LA just sent me something about menu items that they are adding next week. Things like that are critical to any business, but restaurants have been slow to understand the importance of ongoing communications with their customer base.

From day one, we have always charged a flat monthly rate for the software. Our view is that online ordering is just another way of communicating for the restaurant, just like placing a phone order. It’s not like AT&T takes a percentage of every order placed over the phone. Something changed with online ordering where companies thought they could justify charging a percentage of every order. And restaurants, at least independent restaurants, went along with that until they woke up and realized, “Man, this costs me a ton of money.”

We’re starting to see people copy our model, which is flattering. The biggest change to the industry over the past year is consumer awareness of the way this model works. For years, restaurants knew how painful and how expensive it was. But the average consumer wasn’t aware. The press has done a very good job of highlighting the negative impact those platforms have on your local restaurants. I think consumers have woken up too.

And this pricing model actually makes it more expensive for consumers as well. Restaurants, in trying to recoup some of these 30 percent commissions that they have to pay, are simply raising their menu prices on the platforms. So not only is the restaurant making less money, but the consumers are overpaying for dinner when they use these platforms.

We realized that all of a sudden last year that the ChowNow app, which we built as a side project a couple of years ago, started to grow organically. People started to realize that this was an alternative to the big four delivery companies. In the last year, 20 million people have used our platform to order food. It’s a much simpler app to use, but it’s also a much cheaper app to order food from because none of the menu prices are inflated. We can just about guarantee that you’ll pay the lowest menu prices because we haven’t layered in all these crazy fees.

When you open up the ChowNow up, the restaurants you see are the ones that are physically closer to you. If they’re further away, they’ll show up further down the list. You as a consumer can filter for cuisine types, takeout, delivery, curbside pickup, whatever you’re looking for. Or you can search by name if you want. But we have zero ways for restaurants to outspend others to get placement, and we have zero plans to install that. Frankly, I think it’s a shitty thing to do for both restaurants and consumers. A better approach in the long term is actually to match you with restaurants that we think you will like.

What’s also really interesting—this is something that we did last year, and we’re seeing early success with it—is that we launched a loyalty program for restaurants that allows them to offer memberships to customers. Think of it as restaurants running their own version of Amazon Prime.

At the beginning of COVID, restaurants were taking a huge hit in terms of revenue. The quick answer was gift cards, gift cards, gift cards, buy gift cards! But there’s an ongoing debate about whether gift cards are actually good or not. The last thing you want as a restaurant who’s short on funds is everyone coming in at the same time redeeming their gift cards. That’s not a good thing.

We found a better approach was a membership model where customers would pay an annual fee, where 100 percent is paid up front, and 100 percent goes to the restaurant. You, as a member, get an ongoing discount at that restaurant over the course of the year. It’s not like you’re coming in and redeeming it all at once. Members spend more often in the restaurant because they need to recoup that original $100 they paid for upfront.

When we launched the loyalty program last summer, we had nearly a thousand restaurants sign up in one day. It’s doing exactly what we wanted it to do, meaning it’s getting members to spend more at restaurants over time. Restaurants are not losing money on these memberships, given the kind of consumer behavior we’re seeing.

Otherwise, we don’t spend money on the ChowNow app. We have zero plans to take out Super Bowl ads because that ultimately comes at the expense of the restaurants. Those ad campaigns have to be paid for from revenue, and revenue comes on the back of commissions and fees from restaurants. We are trying to take a much more grassroots approach.