Hello, hot M&A fall!
The big companies continue to get bigger and do more in what's becoming a race to do it all.
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If 2020 was the year of the breakout restaurant tech star, 2021 is the year of consolidation. The high-profile deals continue this week with Olo’s acquisition of Wisely. Olo, the online ordering product serving hundreds of enterprise restaurant brands, announced it would buy Wisely, a customer relationship management and marketing platform last week. Olo spent $187 million in cash and stock on this, its first acquisition.
"As we look to the future of digital entirety for restaurants, tools that help brands harness customer data and turn it into applicable insights will be essential for them to better serve guests and manage the restaurant enterprise as a whole," said Noah Glass, Olo's founder and CEO, in a statement.
The customer-data-into-insights piece represents a huge opportunity for restaurant tech companies and restaurant businesses alike. At this point, most restaurant operators probably know they’re sitting on a trove of data, but likely need help understanding exactly what it means and translating that into campaigns and other communications strategies. Wisely offers marketing automation, including emails and SMS communication.
Interestingly, the deal also gives Olo more tools for the dine-in business, like table and waitlist management. In-restaurant dining is an area that Glass has said offers growth opportunities for his company. Per an investor presentation about the deal, Wisely co-founder and CEO Mike Vichich becomes Olo’s general manager & VP, customer intelligence and front of house.
It’s yet another example of restaurant tech companies moving to offer more functionality without the need for many disparate systems.
And speaking of…
Also just announced, another restaurant software/POS company, HungerRush, has acquired Menufy, an online ordering service. A rep for HungerRush said the acquisition gives the company more than $100M in annual recurring revenue. (For context, at the time of its IPO, Toast had $500 million in ARR.)
Reef’s permitting fail
Trailers in parking lots operating as ghost kitchens making food for delivery from several different brands — what could go wrong, really? Plenty, but in the category of “most basic things,” there’s a permitting process businesses are expected to respect.
As first reported by Insider ($), Reef, the company that operates mobile kitchen “vessels” (they’re trailers) isn’t operating those vessels in New York City right now. Why? It was caught operating without the proper permits. In a statement to Insider, Reef said its brick-and-mortar locations were operational (and in compliance) and that the company “continue[s] to work collaboratively with regulators on ways to permit our innovative model which seeks to reinvent urban spaces in a way that improves cities and neighborhoods with mobile structures."
But Reef insiders also told Insider (ha) that there’s no long-term permitting strategy. “They're essentially hiding,” one former operations manager said.
The ask-forgiveness-not-permission model is tried and tested when it comes to big tech disruptions — it was essentially Uber’s entire growth strategy. Proponents of the big change (and big business) ushered in by companies like Uber and Reef say that regulations like permits (or in Uber’s case, medallions) are inefficient (at best) and antiquated. Add in the growth-at-all-costs mentality and a whole lot of money — Reef has raised $700 million from Softbank — and sometimes it makes more sense to pay the literal penalties for not following the rules instead of actually following the rules.
There’s something particularly unsettling about this strategy here, probably because these vessels do act as ghost kitchens for other brands. Plenty of diners don’t realize where their orders come from; so it feels not great that the company is playing fast and loose with the rules — even rules that haven’t been updated to the ever changing business of digital kitchens.
What else is happening?
Just Eat’s second-largest shareholder wants Grubhub gone. On the heels of yet another disappointing quarter for Grubhub, one of its parent company’s largest shareholders thinks it’s time to bail. Cat Rock Capital Management is urging Just Eat Takeaway’s management to sell or spin-off Grubhub by Dec. 31 in order to refocus and fix what it believes is a deep and damaging undervaluation of Just Eat’s equity. Just Eat has acknowledged that Grubhub presents certain challenges, but maintained that it has significant strategic value as the company’s US presence.
Cat Rock concluded its open letter with the following: “The case for a Grubhub sale or spin-off is obvious and urgent. If JET management fails to act on either option before the end of the year, we and other investors will justifiably question whether this team has the capacity for effective capital allocation or management of a public company, and we intend to take additional action to help JET realize its great potential.”
Country fried steak goes to Hollywood. Cracker Barrel has moved into the Los Angeles market via delivery only ghost kitchen, Cracker Barrel Kitchen. The chain has been making headway into the virtual brand space with the earlier launch of Chicken ‘n Biscuits by Cracker Barrel and The Pancake Kitchen by Cracker Barrel.
Square introduces Cash App Pay. It’s exactly what it sounds like: businesses using Square’s register can accept payment from the company’s Cash App online or at the point of sale. Per the company, “Cash App Pay is protected by Square’s managed payment platform, including end-to-end payment security and authentication, dispute and chargeback management, and Cash App takes on 100% of fraud liability.”
Sweetgreen’s IPO filing reveals its pandemic fallout but also its digital success. The salad chain is one step closer to an IPO, filing paperwork this week that disclosed a net loss of $87 million in the nine months ending in September, down from a net loss of $100 million a year earlier. A bright spot: the company’s growth in digital sales. Digital channels like Sweetgreen’s app accounted for half of sales in 2019 and 75 percent in 2020.
Speaking of, McDonald’s is doing well digitally, too. Per the chain’s latest earnings report, 20 percent of sales in its six biggest national markets come via digital channels, which includes in-restaurant kiosk ordering. The company, which once negotiated an exclusive deal with Uber Eats, will continue to work with third-party partners, no doubt leveraging its size to negotiate favorable terms.
The QR menu backlash continues. This week it’s in Grubstreet, though the author seems to take more issue with a shoddy ordering system than the technology itself. I was surprised to see a QR code menu in a special occasion, fine dining restaurant recently, too. I mentioned it and the server handed me a paper menu. ¯\_(ツ)_/¯
Union Square Hospitality Group introduces house accounts. What’s old is new again thanks to a partnership with InKind. In a clear loyalty play, guests purchase restaurant credit through InKind and receive a bonus — pay $500, get $675, for example. Credit is stored in the InKind app and apparently “there’s more to come.”
I enjoy this headline: Dating app Bumble extends women-first ethos to its new restaurant — with male chefs. Thanks, Eater.