Media & Entertainment

The Greasy Underpan Of Restaurant Tech

Comment

Image Credits: Carolyn Franks (opens in a new window) / Shutterstock (opens in a new window)

Bryan Menell

Contributor

Editor’s note: Bryan Menell is a technology entrepreneur and investor who has spoken with hundreds of tech startup CEO’s about their mobile restaurant apps.

This story is repeated hundreds of times across the country, and it goes a little bit like this. A group of tech-savvy people go out to eat at a restaurant and wonder why modern mobile technology has completely bypassed the industry.

“Why can’t I push a button on my phone to re-order a beer,” they commonly ask? “I wish we could just split the tab using a simple app on our phone, and just walk out like Uber” others will say. Then they begin to tackle this seemingly wide-open business opportunity, which is how they find me.

Let me save you a lot of time and money with a crash course. There are a host of good reasons why apps like this aren’t common today. To begin with, restaurant people are not necessarily technology people. In general, they have a passion for hospitality, and enjoy serving people great food. When you show up to pitch your tech idea to a restaurateur while she is preparing for dinner service, you might lose a finger.

Point of Sale

The road to any mobile tech solution requires integration with the point-of-sale (POS) system in the restaurant. Many misguided companies believe they are going to approach market-leading POS companies such as MICROS (now Oracle) and Aloha (now NCR), convincing them about how great their new app is, and that they will in turn sell it to thousands of their restaurant customers.

The reality is that these companies make no money off your fantastic app and have no incentive to share the APIs for their systems with you. The opposite is actually the case. Third-party applications are a leading cause of tech-support incidents for POS companies, because the restaurants don’t call app makers when the system goes down; they call the POS company. Mobile app companies like yours are a cost center to them.

If you get past all this and reach the point where you’re ready to install your integration at the restaurant location, you have a whole new batch of challenges that I will spare you in this post. There are a few major categories of mobile apps in the marketplace today, and each have their own challenges.

Ordering

Aspiring tech entrepreneurs hear tales of companies like Seamless/GrubHub commanding a 20 percent service charge on each order placed, and see easy money. The new incumbents are sporting $99 fixed-price offerings to lure away restaurants from those leaders.

But it’s not always about price. Companies like Seamless are building a brand and have commanded a coveted spot on consumers’ mobile phones. That is not simple to displace. Combined, those two companies pre-IPO raised around $135 million and invested 10 years of time to get to where they are today. If you’re miraculously successful at doing that, there are patent holders in this area that vigorously defend their intellectual property.

Payments

You would be hard-pressed to find a restaurant owner or general manager who consider mobile payments necessary for their restaurants. Everybody has a debit card, and it takes 0.0154 seconds to swipe. It has a user interface that everyone understands, and it’s fast and simple. The only thing about credit cards that restaurants don’t like is the fees.

If you’re passing card data to a POS system to settle the tab, then you’re also dealing with PCI compliance issues, which are expensive. It’s rare to find a restaurant owner who will pay you anything for your mobile payment app. Starbucks probably has the most successful mobile payment app in the world, but when I ask people why they use it, they say it’s for the loyalty points. This area is also well-covered by existing patents.

Loyalty

This seems to be the industry’s low-hanging fruit, yet it is incredibly hard to be successful. I personally try every mobile loyalty app that I can, and the only value above the classic punched card is that I don’t have to carry the card. Restaurants that use the current apps still don’t know me from the next guy. Not only do the apps not communicate anything about me to the restaurants, they clearly know nothing about me because I get email offers from them about underarm laser hair removal.

Social and Sharing

This category just hasn’t taken off, probably because I can already share great dining experiences on Facebook. No need for a speciality app there. There is also no value to the restaurant, so the category has no business model. Foodspotting grabbed the one possible exit in this space back in 2013.

Reservations/Wait List

Even employees of OpenTable will probably admit that their technology is a bit antiquated. After all, they have been in business for over 10 years. But who cares? They own the mental shelf space in my brain for the mobile app that guarantees me a table at a specific time.

Anything in this category also has to deal with significant operational issues at the restaurant. Your business is also relying on cooperation from the host at the stand: a low-pay, high-turnover position. Sales costs per unit are high, and the prices that customers are willing to pay monthly are low. In addition, the leading waitlist app NoshList is already free.

Tech Fatigue

In the larger restaurant markets in our country, such as New York City and San Francisco, management is bombarded with sales calls and pitches on the next great mobile tech thing. They are numb from all the inbound phone calls. I have seen technologies that can guarantee at least $500 in monthly cost savings through better analytics, and restaurants still aren’t interested because savings aren’t sexy.

What Can Win?

It is very difficult to start with nothing and be successful in the space. Many startups suffer from having a two-sided business model where they must sell restaurants on their product, as well as get consumers to adopt the mobile application.

One avenue of success would be to already have one side of the equation in hand: either a vast number of consumer eyeballs or tens of thousands of existing merchant relationships. Outside of that, you need a dramatically unique approach that speaks to all these industry challenges.

More TechCrunch

“When I heard the released demo, I was shocked, angered and in disbelief that Mr. Altman would pursue a voice that sounded so eerily similar to mine.”

Scarlett Johansson says that OpenAI approached her to use her voice

A new self-driving truck — manufactured by Volvo and loaded with autonomous vehicle tech developed by Aurora Innovation — could be on public highways as early as this summer.  The…

Aurora and Volvo unveil self-driving truck designed for a driverless future

The European venture capital firm raised its fourth fund as fund as climate tech “comes of age.”

ETF Partners raises €284M for climate startups that will be effective quickly — not 20 years down the road

Copilot, Microsoft’s brand of generative AI, will soon be far more deeply integrated into the Windows 11 experience.

Microsoft wants to make Windows an AI operating system, launches Copilot+ PCs

Hello and welcome back to TechCrunch Space. For those who haven’t heard, the first crewed launch of Boeing’s Starliner capsule has been pushed back yet again to no earlier than…

TechCrunch Space: Star(side)liner

When I attended Automate in Chicago a few weeks back, multiple people thanked me for TechCrunch’s semi-regular robotics job report. It’s always edifying to get that feedback in person. While…

These 81 robotics companies are hiring

The top vehicle safety regulator in the U.S. has launched a formal probe into an April crash involving the all-electric VinFast VF8 SUV that claimed the lives of a family…

VinFast crash that killed family of four now under federal investigation

When putting a video portal in a public park in the middle of New York City, some inappropriate behavior will likely occur. The Portal, the vision of Lithuanian artist and…

NYC-Dublin real-time video portal reopens with some fixes to prevent inappropriate behavior

Longtime New York-based seed investor, Contour Venture Partners, is making progress on its latest flagship fund after lowering its target. The firm closed on $42 million, raised from 64 backers,…

Contour Venture Partners, an early investor in Datadog and Movable Ink, lowers the target for its fifth fund

Meta’s Oversight Board has now extended its scope to include the company’s newest platform, Instagram Threads, and has begun hearing cases from Threads.

Meta’s Oversight Board takes its first Threads case

The company says it’s refocusing and prioritizing fewer initiatives that will have the biggest impact on customers and add value to the business.

SeekOut, a recruiting startup last valued at $1.2 billion, lays off 30% of its workforce

The U.K.’s self-proclaimed “world-leading” regulations for self-driving cars are now official, after the Automated Vehicles (AV) Act received royal assent — the final rubber stamp any legislation must go through…

UK’s autonomous vehicle legislation becomes law, paving the way for first driverless cars by 2026

ChatGPT, OpenAI’s text-generating AI chatbot, has taken the world by storm. What started as a tool to hyper-charge productivity through writing essays and code with short text prompts has evolved…

ChatGPT: Everything you need to know about the AI-powered chatbot

SoLo Funds CEO Travis Holoway: “Regulators seem driven by press releases when they should be motivated by true consumer protection and empowering equitable solutions.”

Fintech lender SoLo Funds is being sued again by the government over its lending practices

Hard tech startups generate a lot of buzz, but there’s a growing cohort of companies building digital tools squarely focused on making hard tech development faster, more efficient and —…

Rollup wants to be the hardware engineer’s workhorse

TechCrunch Disrupt 2024 is not just about groundbreaking innovations, insightful panels, and visionary speakers — it’s also about listening to YOU, the audience, and what you feel is top of…

Disrupt Audience Choice vote closes Friday

Google says the new SDK would help Google expand on its core mission of connecting the right audience to the right content at the right time.

Google is launching a new Android feature to drive users back into their installed apps

Jolla has taken the official wraps off the first version of its personal server-based AI assistant in the making. The reborn startup is building a privacy-focused AI device — aka…

Jolla debuts privacy-focused AI hardware

The ChatGPT mobile app’s net revenue first jumped 22% on the day of the GPT-4o launch and continued to grow in the following days.

ChatGPT’s mobile app revenue saw its biggest spike yet following GPT-4o launch

Dating app maker Bumble has acquired Geneva, an online platform built around forming real-world groups and clubs. The company said that the deal is designed to help it expand its…

Bumble buys community building app Geneva to expand further into friendships

CyberArk — one of the army of larger security companies founded out of Israel — is acquiring Venafi, a specialist in machine identity, for $1.54 billion. 

CyberArk snaps up Venafi for $1.54B to ramp up in machine-to-machine security

Founder-market fit is one of the most crucial factors in a startup’s success, and operators (someone involved in the day-to-day operations of a startup) turned founders have an almost unfair advantage…

OpenseedVC, which backs operators in Africa and Europe starting their companies, reaches first close of $10M fund

A Singapore High Court has effectively approved Pine Labs’ request to shift its operations to India.

Pine Labs gets Singapore court approval to shift base to India

The AI Safety Institute, a U.K. body that aims to assess and address risks in AI platforms, has said it will open a second location in San Francisco. 

UK opens office in San Francisco to tackle AI risk

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

1 day ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions