Our portfolio company ChowNow recently surpassed 100 million orders. In a crowded space in which most online ordering companies are predatory, taking advantage of small restaurant owners, we are proud to back a company that empowers restaurants and puts them in the driver’s seat, helping them grow their businesses during a trying time for restaurants.
The answer was obvious: Are you crazy?
I’d worked at a bagel shop in high school and had friends in the industry, so I knew restaurants were challenging to run even in the best of times. My family was in no way the type who invested in risky ventures either. But I peeked at the group’s business plan. It was 50 pages long, thoughtful, and well-vetted. I had to agree with my mom: It made sense.
So we did it.
The place was called Tender Greens—a comfort food joint specializing in local, sustainable ingredients—and within a few years it had grown to eight locations. The more time I spent with restaurant owners—both at Tender Greens in L.A. and at others in New York City—the more I would hear about the challenges of online ordering. The only real option for local restaurants was to join a marketplace, like Grubhub, but marketplaces would keep up to 40% of every order. They also kept all the customer information from the restaurant.
National chains like Domino’s and Chipotle knew marketplaces were the wrong approach and bypassed them by building their own direct ordering systems and mobile apps. Local restaurants didn’t have that luxury, though. You didn’t need a background in finance to see the problem. Unfair marketplaces weren’t just threatening Tender Greens and the L.A. restaurant scene—they would capsize independent restaurants everywhere.
In 2010, I officially ditched Wall Street, moved back to L.A., and co-founded ChowNow with Eric Jaffe. We were convinced that offering restaurants better pricing and more control could be the key to preserving and growing the industry. In the process, we could save money for both restaurants and diners.
We didn’t have a 50-page business plan, but we knew we had a great idea.
Taking On the Status Quo
Even in the early days, we quickly saw how offering restaurants more control over online ordering could create better business for everyone.
Eric placed the first order from a popular neighborhood sandwich spot in L.A. We’d somehow convinced the owner to let us beta-test both our technology and business model within their shop. It was quickly a hit in the neighborhood. Shortly after, we had dozens of local restaurants lined up.
Word had gotten out: ChowNow gave restaurants a level of control that the competition didn’t. And the difference actually had an impact on the bottom line.
This created momentum—enough to warrant expanding beyond Los Angeles. We aimed ChowNow’s sights at the ultimate regional test: Chicago, corporate home of Grubhub.
Our thinking was simple: Let’s test the model against one of the biggest players. Restaurants who’d been stuck on the commission model for years should be more willing to try something new.
And you know what? They were.
Chicago’s restaurants were tired of paying extra fees for the same takeout. The market was ready and primed for a better way to order. When a restaurant conference came to town around the same time, we were able to use our inroads in the Windy City to convince restaurants in 10 other states to sign up.
Then it snowballed to 20. Without us really doing anything other than explaining the business model, we were soon supporting restaurants in all 50 states.
How Doing the Right Thing Got Us to 100,000,000 Orders
To hit the 100,000,000-order milestone, ChowNow has had to play a number of unique roles over the years. We’ve expanded to help restaurants with their marketing, sales growth, customer data management, and outreach. Like our restaurant partners, we have always been singularly focused on one goal: ensuring the best food is offered at the best price.
But we never imagined the critical role that takeout would one day have for both restaurants and diners. The pandemic changed all that. When we started this, I always said that “we won’t keep a restaurant alive with what we do, but we can make their business stronger.” This year, we’ve managed both.
Milestones like this are exciting. But they can’t compare with the feeling I get each time a restaurant owner sends the team a thank-you note. We receive dozens of them in a given month, with messages like: “I just wanted to say that we cannot recommend ChowNow enough. Thank you for standing out during such a difficult time.” Or: “If it wasn’t for ChowNow, I don’t know where I would be right now. Being able to provide takeout and delivery with the support of ChowNow has made sure we stay open.”
We even recently saw a handwritten note that was stapled to a delivery bag—telling customers to order through ChowNow to avoid commission fees.
We’re honored to help restaurants succeed—especially during this pandemic.
A Better Future
This milestone is great for ChowNow, but the real winners are our restaurant partners—the reason we started the company in the first place—and so far we’ve saved them over $750 million in commission fees.
Without question, the online ordering industry is still broken. Apps like Grubhub and Uber Eats are now structured to monopolize the delivery world. And price gouging from third-party apps will only continue to worsen the issue.
That’s why we continue to believe in something better for the restaurant industry.
Looking ahead, we’re all excited to return to our neighborhood restaurants and dine in person. But takeout is only going to continue to grow. As restaurants navigate this new world, we’re thrilled to work beside them to innovate, expand, and continue to save money for themselves and their customers.
But don’t take my word for it. Just ask your local restaurant owner.
Chris Webb, Co-Founder and CEO of ChowNow