The Direct Ordering Land Grab
Also: goood morning, $DASH
Programming note: Next week’s Expedite will be the last of the year. I think it’ll be year-in-review style unless one of you feels like breaking some news. (Cool if you do! Hit me up.) Please join me in enjoying a happy, safe holiday break at home. Looking forward to a healthy 2021 in all senses of the word.
Good morning, $DASH
DoorDash rang the opening bell (virtually) on the New York Stock Exchange this morning with its IPO shares priced at $102, raising $3.4 billion at a valuation of nearly $39 billion. Shares were priced higher than initial estimates. Initial stock performance hardly dictates future stock performance, but it’s an undeniably good day for the company.
One thing worth watching very closely: DoorDash seems to be leaning into its recent Proposition 22 victory in California with some promoted social media messaging about the future of so-called independent work. This is a Big Deal. As a reminder, from the New York Times: Food delivery apps are booming. Their workers are often struggling. Yesterday, the Times ran an op-ed encouraging readers to forgo delivery apps like DoorDash, closing with the line: “But is an industry designed to enrich the elite and built atop a growing heap of struggling restaurants truly worth celebrating?”
The Direct Ordering Land Grab
Earlier this week I started to make a list of restaurant technology companies offering their restaurant customers direct ordering options. HA, joke was on me, because now all of them do. Direct digital ordering is the new table stakes for pretty much any company that touches restaurant operations — reservations services, point-of-sale systems, delivery services, and, of course, companies who built themselves as actual direct ordering services for restaurants.
On Tuesday, Grubhub, the large company in third-party delivery perhaps least known for its innovation (though to be fair it arrived way early to the delivery scene) introduced a more accessible direct ordering option for restaurants on its platform. The company provides a link, a button for use on a website, and a QR code for use pretty much anywhere — including in-person — for restaurants to accept commission-free digital orders via Grubhub. Fees paid by the restaurant include payment processing and a delivery fee, should the restaurant choose to use Grubhub’s fleet, which, they point out, is always optional.
It’s the latest offering from the larger third-party delivery set aimed to reach restaurants who don’t want to be constrained by the seemingly inflexible parameters of the services’ core product: online ordering through a marketplace with fees attached.
In a crowded market, then, what makes one ordering system better than any other? That depends what a restaurant needs it to do, but the best option for a restaurant is probably the one that integrates most seamlessly. Last month, BentoBox CEO Krystle Mobayeni told me, ‘Restaurants want to reduce the operational burden of the new digital revenue streams that rely less and less on the on-premise POS. Restaurant owners want to be more efficient and prioritize staff resources so they are looking to automate as much as possible.” While that quote is maybe a little self-serving (as any good CEO would be) given BentoBox’s own direct ordering function, introduced in February, it does encapsulate what restaurant leaders are looking for: the shortest, straightest line to managing diverse and, increasingly, digital revenue streams.
Also on Tuesday, Square announced a new integration with DoorDash allowing restaurants to use DoorDash Drive (that’s the whitelabel delivery program) to fulfill orders placed directly via Square’s software. It’s a well-timed option for the on-demand delivery for direct ordering functionality that Square launched in June. According to the company’s blog post on the topic, restaurants can also use Postmates for on-demand delivery “with additional delivery partners coming soon.” (As of last week, Postmates is officially a part of Uber Eats.)
Of course, just because the big names are jumping in the game doesn’t mean that the technology is new or particularly groundbreaking. ChowNow, for example, has built its business on direct ordering. This year, according to its CEO Chris Webb, order volume will increase fivefold to about $2.5 billion from $500 million in 2019. Others, like GoTab, have championed tableside digital ordering since before Covid made it a safety necessity. According to the company, customers rated their experience higher when ordering from their phone via GoTab versus ordering at the counter — and this was pre-Covid.
Even more companies have emerged in the space. Bite, formerly Bite Kiosk, is a three-year-old restaurant tech company whose software is in over 1,000 restaurants in the U.S. and Canada. Earlier this week, the company announced a new suite of products stemming from its original kiosk concept, including digital ordering powered by artificial intelligence that can help predict guest preferences and suggest items online, at the drive-thru, or on mobile.
One of the last great holdouts, now Dash-side
Related: In the enterprise restaurant world, people loved to hold up Jimmy John’s as an example of a business going it alone, bucking third-party delivery and just handling it all themselves. The company famously went it alone — until now. (I think the CEO quote du jour was something like “We’ll never use a third-party delivery service.”)
How quickly things change! Jimmy John’s has partnered with DoorDash on a new offering: self-delivery, which lets restaurants use their own fleets for delivery while still appearing on DoorDash’s restaurant listings on the app.
Remember last week’s demand gen conversation? Yeah, me too.
What else is happening?
Tock co-founder and CEO Nick Kokonas shared a graph with VC Twitter over the weekend to illustrate Tock’s growth. Restaurant Twitter is still curious what all the colors in the graph represent (though I have some guesses) but the gist is that business or Tock is growing, fueled by its to-go offering for takeout and delivery with, you guessed it, DoorDash.
A new delivery service called Wonder has launched in an upscale New Jersey suburb, and promises a new kind of delivery. According to Matt Newberg of HNGRY (story paywalled), Wonder “licenses notable restaurant brands to package their famed dishes into meal kits and finish them in hybrid electric vans while in transit to consumers’ doorsteps.” It’s also partnered with a number of high-profile chefs and restaurants to offer meals primed for delivery.
Many (including Newberg) compare the recently launched service to Good Uncle, which was acquired by Aramark last year for $30 million. Timing is everything. (So are the suburbs.)
Lightspeed POS, a Canadian company, has acquired U.S.-based Upserve for $430 million. Upserve is also a point of sale and restaurant management software company.It’s another example of consolidation in restaurant technology, as larger companies work to increase their overall functionality and appeal in an increasingly cloud-based, digital industry.
Uber continues to streamline its business, focusing on core functionality. This week it offloaded to future-looking initiatives: self-driving cars and flying taxis. Uber CEO Dara Khosrowshahi continues to make good on his promise to narrow the company’s focus which increasingly relies on Uber Eats to make investors happy.
Expedite is produced by Kristen Hawley in San Francisco. Paid subscriptions are available! Thank you for your support.