ChowNow CEO: 'The hits keep coming' for restaurants getting through the pandemic

ChowNow CEO & Co-Founder Chris Webb joins Yahoo Finance Live to discuss the state of the restaurant industry amid the Omicron wave of the coronavirus and how the online ordering platform is helping restaurants adapt.

Video transcript

- Well, ChowNow helps restaurants create their own online ordering system to maximize internal profit. Here to help us discuss its model and growth is Chris Webb, ChowNow CEO and co-founder, and Yahoo Finance's Brooke DiPalma. Thanks so much to you both for being here.

Chris, I want to start off by asking you if you could just help explain to our viewers-- how does your platform differ from let's say a Grubhub or an Uber Eats? And then what added strategic value do you offer to customers who use your platform?

CHRIS WEBB: Yeah, so we started the business about 10 years ago. And the premise back then is still very true today, which is to help restaurants get their brand set up and running online. So it's all about their direct connection with the customer that allows their customer to order directly at the restaurant.

So ChowNow has been behind the scenes for about 10 years, and we power about 21,000 restaurants. And so in the past year or so, 20 million people have used our platform to order food, most of them actually not knowing that ChowNow was the technology behind-- behind the scenes powering the ordering at their local restaurants.

BROOKE DIPALMA: And Chris, to piggyback off of that, back in August, New York City council passed a permanent commission fee cap that hit third party delivery apps, some of our competitors, including DoorDash, Grubhub, and Uber Eats. But ChowNow prides itself on being 0 commission. So to jump off Karina's question, break down for us how exactly you're able to do that and where the profit lies for ChowNow.

CHRIS WEBB: Yeah, so we have a very basic and easy-to-understand business model, which is just-- we charge a flat monthly fee for our software to restaurants. So just about every one of our restaurants pays this monthly fee to use the software. We don't charge commissions. We're very anti-commission.

We believe in strengthening the relationship with the restaurant and the diner themselves. And so we don't get in the way. We don't take a big cut. We don't take a cut, actually, at all. We just make money off that monthly fee.

- And then I guess my follow up question is, how do you really make your money? Because there's been a lot of animus in the industry. I think back to a shareholder letter for Grubhub, way back when it was still Grubhub-- this is a couple of years ago.

And they talked about the fact that you still, at the end of the day-- you need one person to deliver this to somebody. The industry's not going to really change until we have robo taxis and autonomous driving. I'm just wondering how your business fits into things as the industry goes through this change.

CHRIS WEBB: Sure, so we've processed about 160 million orders on our platform since the beginning. The majority of those 160 million were actually pickups. So in that case, the customer actually goes to the restaurant, picks up the food, and takes it home or to the office. But that's not all of them. We do process a lot of delivery orders as well.

The majority of those delivery orders are actually still fulfilled by the restaurant. I think everyone's kind of forgotten that restaurants, for decades, have been delivering food, and that's still very much the case today. So when you get onto ChowNow and use the ChowNow app to place an order for delivery, most of the time you'll actually have that food brought to you by the restaurant themselves. If the restaurant doesn't do their own delivery, then we've partnered with a number of delivery companies, most of them kind of regional and local, around the country who will actually fulfill the delivery.

We believe in being 100% transparent around the fees. And so we actually-- we just launched, a couple of weeks ago, something called the Diner Impact Score, which shows the diner, while they're ordering, how much money they're saving their local restaurant by avoiding commissions. And then when it comes to delivery fees, we're very transparent there. So we don't try to bury fees into the service fees or by raising menu prices. When you go to place of delivery order, you will see that fee. You'll see exactly what it costs. And you'll know exactly what the restaurant is paying there and exactly what the customer has to pay.

So we very much believe in transparent pricing in the industry. We're trying to lead the way there. Unfortunately, not everyone believes, but something that is one of our key principles. Always has been, and always will be.

BROOKE DIPALMA: And Chris, in recent weeks, we've seen restaurants get hit yet again with the Omicron variant, one restaurant owner yesterday telling Yahoo Finance that-- what round of challenges is this? Round three, round four? So as you speak to these restaurant owners, what exactly are you hearing from them, and have you seen, perhaps, a flock to join your app in recent weeks?

CHRIS WEBB: Yeah, so not only are we bringing on a lot of restaurants these days and have been since-- since, really, the beginning of COVID in March of 2020, but we're also seeing a growth in orders once again in the last few weeks, which is probably not surprising. I think everyone's a little bit cautious and wary. And so going into the beginning of this month, beginning of December, we started to see a lift, and the growth in orders week over week has been about 10% to 20% week over week, and continues to grow

In terms of what hit it is, I'm with that restaurant owner from yesterday. I don't know. Three, four, five? It's just-- the hits keep coming, and it's very, very challenging, which is probably an understatement. But you know, if anything, the restaurant-- to get into the restaurant industry, you have to have to be pretty nimble. I think that's always been the case for many, many decades.

And so you know I think one reason that we've seen, actually, very few of our restaurants on ChowNow go under in the last year and a half is that we work primarily with local, independent restaurants, and they've just always been nimble and they've always had to make adjustments and they've got through. And so, knock on wood, that will be the case once again here.

- And how nimble have restaurants been, Chris, as far as the technology that you offer? Are most restaurants at scale now? Are they up to speed where they need to be? Or are they still trying to get there? And how important are these multiple streams of revenue as businesses-- as restaurants move forward?

CHRIS WEBB: Yeah, so last year in March of 2020, when COVID kind of first hit and-- if you remember back in May of 2020, it's when the entire country was shut down. Every restaurant was shut down across the country. It didn't matter what state or city you were in. And that's when everything-- all the business at restaurants was takeout-- pickup or delivery. And so at that time, restaurants would just-- they scrambled. They signed up for every service possible at the time because they didn't really have a choice. They were just trying to make it to the next week and the next week and the next week.

And now it's been about a year and a half since then. And so now restaurants are really optimizing what they signed up for. And so what you'll see is-- a lot of restaurants have kind of dropped various services that charge huge commissions, and they realize, why am I paying 20%, 30%, 40% commissions? And they're sticking with the platforms like churn out that actually don't charge them anything in the way of commissions and allow them to get the customer data.

And so I think the last year and a half has taught them which platforms are good for them, which ones are good for the business, which allow to keep the profits, and which ones, frankly, are just kind of a waste of time for them. And so now it's all about optimizing their tech and which platforms they want to use.

- All right, well, Chris I hope there is a balance somewhere where restaurants can be happy, platforms like you are happy, and then consumers like me who order a soup and salad aren't paying four times just price just for the delivery and the taxes and everything else. It is a difficult situation. But thanks for coming on and explaining your model to us.

Chris Webb, ChowNow CEO and co-founder, and Yahoo Finance's Brooke DiPalma.