Cloudwaitress was born from the problems faced by numerous small business restaurant and cafe owners. Towards the end of 2015, we had the opportunity to speak with many local restaurants. At the time I had been working for another company that was also in the food service industry selling a different product.
During this period, most restaurant owners were open enough to discuss the problems they were facing. I realised through my conversations with them that one of the biggest trends coming into the food space currently is online ordering. However, all the existing widespread solutions in the market were a nightmare for restaurant and cafe owners.
Currently, the main players in the online ordering space for food service businesses run off a marketplace business model. This means that they provide a platform for you to put your menu online which they often do for you free of charge. They then promote your store through their marketing campaigns in order to generate orders for you. In turn, they take a % based fee and I’ve heard some people tell me they are paying upwards of 20%.
There are 2 critical problems with the model from the perspective of a small business restaurant owner. Firstly the obvious one is you lose a large amount of your profit from these orders. The restaurant industry is by far one of the most competitive industries out there. As Peter Thiel says in his book about business (youtube video summary) when you enter highly competitive spaces, the profits often get competed away as a result of trying to have an advantage over your competitors.
Bankwest an Australian bank published a report on the Australian food service industry which you can find here (pdf download). The report shows how the average profit margin for restaurants in Australia is only around 7-10%. I’m sure its similar for many parts of the world. The fact is small business cafes and restaurants can’t afford to lose a massive % of each sale with all the existing costs in place.
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