Online restaurant-order platform ChowNow announced this week it has closed a $21 million Series C funding round. The round included growth-equity firms 3L Capital and Catalyst Investors, and brings ChowNow’s total funding to $60 million.
The ChowNow system powers the online ordering and delivery process for smaller, independent restaurants, either integrating with a restaurant’s own app or website or by creating those digital properties for the business. The company’s biggest selling point is that it doesn’t gobble up a hefty commission fee from the restaurant for each order like other third-party delivery services. Rather, restaurants who participate with ChowNow pay a flat monthly fee. ChowNow also promises restaurants they can keep their own data and branding in the process.
The service does not, however, provide the actual delivery services. For that, restaurants are on their own (which is presumably why ChowNow can simply charge restaurants a $99 flat fee for use of its software). That could make sense for a small restaurant in a dense urban setting like NYC, where delivery more often than not is a guy on a bicycle. But in any place where a restaurant would need an actual car to get the food to the customer, having to handle delivery oneself is costly: vehicle maintenance, insurance, and storing the cars, to name just a few items. Paying $99 for system like ChowNow’s, which handles ordering and some marketing aspects, likely wouldn’t offset the financial burden of having your own fleet, even if it’s just one or two vehicles.
Providing drivers is definitely part of the hefty commission fee third-party services like Grubhub and Uber Eats charge restaurants. Even so, those fees can certainly wreck havoc on small restaurants working with thin profit margins. In some cases, a 10 to 35 percent commission fee could equal paying a third-party delivery service up to $3.50 for every $10 from the customer.
There are plenty of companies out there peddling online-order software to restaurants now. MenuDrive, based out of Pennsylvania, offers a similar service for the same $99 flat monthly fee. And most of the major POS systems nowadays — Toast, TouchBistro, etc. — offer online ordering through their partner integrations.
One area ChowNow could prove valuable is with small neighborhood restaurants who want to focus more on takeout than actual delivery. If a restaurant is in the process of building a delivery strategy but isn’t quite ready to pull the switch, using a system like ChowNow’s might be a less-risky way to test out off-premises orders.