Popmenu: The startup empowering restaurants to outlive the pandemic
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Introduction
Covid-19 has been a brutal time for everyone. One of the most impacted groups is independent restaurants, establishments that are not part of a national chain. These are generally standalone properties and the owner(s) generally work on the premises. In 2019, there were over 650,000 US restaurant locations that were in business, approximately 53% of which were independent restaurants.
Figure 1: Average daily revenue trends for restaurants since the realization of Covid-19
Since early March, it has been nothing but downhill for restaurants and there has yet to be a true rebound to pre-COVID revenue levels. While all food businesses were impacted, national chains like Dominos were able to quickly recalibrate their business strategy and focus more on delivery and takeout. According to their Q2 earnings, U.S. comparable sales --- those from locations open at least a year --- rose 16% for its second quarter, ahead of analysts’ forecasts. A year earlier, the company reported a 3% gain. Surprisingly, Domino’s sales have been doing better during Covid-19 then their sales pre-Covid.
With Covid-19’s impact still being assessed, there is no clear end in sight. Technology-based industries were able to flip a switch and shift entire companies to work from home overnight, but the restaurant industry is still struggling to recalibrate from this damage. Part of the reason the restaurant industry is struggling is that most restaurants are not well equipped to go digital. The restaurant industry is in desperate need of a technology solution that lets them seamlessly transition online and establish their digital footprint. Without this, it will become very difficult for them to get back on track during this crisis.
Market Overview
When we think of the US restaurant market we can roughly break them into national chains and independent restaurants. National chains, like Dominos, can stand the force of the global pandemic for a couple of reasons:
Access to quick capital
Great branding and digitalization
Existing delivery and takeout strategies
Conversely, independent restaurants are in a bind for these same reasons. According to a McKinsey study published in May 2020, of the 650,000-plus US restaurant locations that were in business in 2019, approximately one in five—or more than 130,000— will be permanently shuttered by next year. Independents will bear the brunt of the closures, both because of attributes that make most independents more vulnerable in this pandemic (minimal off-premise presence, limited digital capabilities, low emphasis on value-based menu items) and because of their unfavorable economics (thin margins and poor access to capital). Independents’ share of US restaurant locations could fall from 53 percent in 2019 to 43 percent in 2021.
Going back to normal is a misnomer and won’t imply normal customer behavior like everyone was accustomed to before Covid-19. “Going back to normal” will mean adopting radical changes for all parties involved. For restaurants, we already see (1) Decreasing max capacity to a fraction of what it was originally or (2) Only allowing take out and adopting delivery. For a consumer, we already see (1) Ordering more takeout/delivery, (2) Eating in outside seating areas, or (3) Cooking more at home. I believe these customer and restaurant behaviors are very much structural changes that will become the norm even after the crisis comes to a halt.
Technology has been a blessing in many ways. Of the problems that the McKinsey study cited, adapting to off-premises methods like takeout and delivery options, are well enabled through companies like Doordash, Postmates, Uber Eats, and Grubhub. The area that independent restaurants still struggle with a lot is their lack of digitalization. While Dominos’ website has a relatively decent UX for people looking to order pizzas, independent restaurants rarely have more than a PDF of their menu for customers looking to order. It’s because of these problems restaurants face that I’m so excited about the solution Popmenu provides.
What is Popmenu?
Popmenu is a startup that helps independent restaurants compete in the digital age. It provides a dynamic consumer experience by placing photos, reviews, ratings, and social validation directly onto the restaurant’s website. It also gives powerful real-time menu management, automated omnichannel communication tools, and insightful analytics that help uncover opportunities to promote and measure performance down to the dish-level in a way that wasn't available before.
Technology impacts all industries, but at different paces. The impacts of Covid-19 have destroyed some industries and propelled other industries forward. In an April Press Release from Stripe, they note “While the full economic impact of Covid-19 remains uncertain, several years of offline-to-online migration are being compressed into several weeks.” With companies like UberEats, Doordash, and Postmates there was already an increasing reliance on food delivery. With Covid-19, I believe this existing macro trend is being accelerated. During this acceleration, it’s paramount that independent restaurants don’t get left behind because of a lack of technological awareness. Popmenu is catalyzing this sort of change with their product, they are enabling restaurants to seamlessly transition online, something typically only large chains with technical infrastructure could afford.
Product Deep Dive
The Popmenu product can be broken down into three distinct pieces: an interactive menu, an in-house social media feature, and a team dashboard product. This section will explore what each piece has to offer.
1. Interactive Menu
Popmenu makes it extremely easy for independent restaurant managers to import their existing menus into a more aesthetically pleasing form. Popmenu provides restaurants a dashboard (more on this in the Internal - Team Dashboard) that allows restaurants to manually create all the menu items that they would normally have. This exercise of making a menu is super simple for the restaurant team but it vastly enhances the customer experience by providing visual aides of what the food will look like.
Figure 2: Menu Management (left), Add Item (right)
The interactive menu is a fantastic feature by Popmenu, but its importance is only truly seen when we see the data. A restaurant survey conducted by MGH found that 77% of diners visit a restaurant's website before they dine in or order out from the establishment. Of that group, nearly 70% have been discouraged from visiting the restaurant because of its website. Furthermore, they also found that 33% of consumers were discouraged by a difficult-to-navigate website, and 30% were discouraged because the restaurant’s website looked old or out of date.
With the increase in online ordering, it has never been more clear why we need products like Popmenu.
2. Social Media
An interesting statistic from the Popmenu website is that 90% of restaurant website visitors go straight to the menu, but most look elsewhere for validation or photos. Popmenu changes this by bringing a social media ethos to the restaurant’s website. So now, instead of going to Yelp or Google Reviews to see what food looks like, customers can get a good sense of the food straight on the restaurant’s website.
Any customer that goes onto a Popmenu website will immediately be lured to it because it’s more similar to a Facebook or Instagram then it is to an old-school restaurant website. Figure 3 below is an image from Terra Terroir, a Popmenu user in Georgia. If you take a close look at the image you’ll see that the “Chef Flexes His Mussels” item has one “Pop” and one “Review”. A “Pop” in the context of Popmenu is a “Like” and a “Review” is the equivalent of a “Comment” in social media terms.
Figure 3: Terra Terroir menu illustrating Pops and Reviews
With the addition of the Pop and the Review, Popmenu is letting independent restaurants in-house the reviews that would traditionally live in Yelp and Google Reviews (more on this in Internal - Team Dashboard) and is furthermore letting restaurants own their reviews. This is useful because not only is the menu more enticing the website also gets better as more people visit the site.
Although a simple and intuitive feature, readers of this article would be surprised by how many independent restaurants have pdfs as their menus. Here is a link to my favorite Italian restaurant back home, Visconti’s Ristorante. Still delicious, but revamping this with Popmenu’s strategy would be a game-changer for Visconti’s Ristorante. Coupling the social media features with a more aesthetically pleasing menu leads to more customer satisfaction.
In addition to the features mentioned above, Popmenu helps restaurants build out an easy to use eCommerce experience by enabling online ordering. When you go through the adding/checking out process you’ll find that the eCommerce experience looks very similar to maybe an Amazon or Uber Eats.
Figure 4: Adding to cart (left), Placing an order (right)
In our current state of Covid-19 running amuck, these features are paramount for independent restaurants that are looking to enhance their digital footprint and re-calibrate during the crisis.
3. Internal - Team Dashboard
The team dashboard is where restaurants manage their website. Menu management is all done through the dashboard, as explained in the Interactive Menu section. This is also where restaurants: (1) manage their orders, (2) view reviews, (3) integrate with social media platforms, and (4) track business analytics.
This dashboard is very efficient at managing orders and is exactly what restaurants need given the rapid rise in online orders. It allows them to easily accept/reject orders and payments based on inventory restrictions. It also equips them to respond with delivery estimates as a function of their current queue.
Figure 5: Order Management
The reviews feature in the dashboard is for restaurants to manage reviews that they get from customers. This feature allows restaurants to:
Accept/Reject reviews that they want to show on their website
Respond to reviews publicly/privately
Give out offers to people that leave reviews (good or bad)
This is a valuable part of the Popmenu experience because this allows restaurants to engage with their customers and keep them happy. It also allows them to remediate any problems that may have occurred during the customer’s time at the restaurant.
The social media piece of the dashboard is Popmenu’s way of integrating with social media platforms. Generally, independent restaurants will manage their own Facebook page, Twitter account, and Instagram page. This becomes a tedious task because this will involve an active effort on the restaurant’s part to go into each social media site and post. Popmenu’s social media integration allows restaurants to sign into their restaurant’s social media accounts through the dashboard so that they can post from the dashboard. This will allow restaurants to easily update customers on new dishes added to the menu as well as specials that they may be offering.
The last piece of the dashboard is the analytics piece. The Popmenu dashboard allows restaurants to track visitors, followers, Pops, and reviews over periods to get a better sense of the health of their business. This is an invaluable feature for independent restaurants that currently don’t keep track of any metrics.
Competition
The restaurant tech industry is widespread and has a variety of areas where tech startups can impact restaurant management. Of these areas, I believe that the restaurant websites and the restaurant management systems are the most impactful areas to build in right now because of restaurants’ immediate need to digitalize.
Figure 6: Restaurant Market Map - CB Insights
I have selected a few players from the Restaurant Websites and Restaurant Management Systems space that I thought was worth noting.
Table 1: Competitor Matrix
All the companies highlighted have some sort of interactive menus, some analytics tracking, and most importantly online ordering. If you are a restaurant tech startup that’s helping enable digitalization for restaurants then having some sort of online capability is paramount.
Feature-wise there is no overarching leader but I believe that Popmenu is differentiated amongst its competitors because of the in-house social media environment they are building out with their Pops and Reviews. I think this is a really big value add and allows restaurants to take control of their image from the start. For a national chain, reviews can be less impactful but for independent restaurants, a handful of good or bad reviews can be directly linked to their financial performance. Michael Luca, a professor at Harvard Business School, conducted a study to determine how online consumer reviews affect restaurant demand. Two of his important findings were:
A one-star increase in Yelp rating leads to a 5-9 percent increase in revenue
This effect is driven by independent restaurants; ratings do not affect restaurants with chain affiliation
This shows that being able to effectively control your reputation externally is extremely valuable. It also shows that independent restaurants have a lot more to lose in this scenario. Therefore, I believe that Popmenu’s in-house social media environment brings a huge competitive advantage for independent restaurants. On top of their in-house social media, Popmenu also allows restaurants to track their reviews on Google as well. This is the best of both worlds and allows independent restaurants to take control of their image.
Team
Popmenu was founded in 2016 in Atlanta, GA and they recently raised a Series A at the end of 2019. According to Popmenu’s Linkedin, their team currently sits at 97 FTEs and is up 85% YoY. Popmenu has four co-founders that have all worked together in their previous companies. All of them intersected at a company called Cinc, which is a real-estate tech company that in many ways is similar to Popmenu, but for real-estate technology.
Risks/Concerns
Popmenu has proven to be the company that independent restaurants need, but I think there are some areas for concern:
Account creation friction to Become A VIP
A concern that popped up when I was looking at Youtube videos and current users of Popmenu was their “Become a VIP” feature. For this feature, users have to have to go through the account creation flow to be able to “Pop” and “Review” restaurants. We live in a time where some of the most hyped-up companies are doing everything they can to get rid of passwords. This feature seems to be the opposite of that. When you click on “Become a VIP”, you hit a general account creation popup where you can either create an account or log in through Facebook or Google. I fear that this is a major point of friction for users. Moreover, all of the social media features that are so unique to Popmenu are contingent upon people willing to make these accounts.
Cloud kitchens
Cloud kitchens pose another risk to Popmenu’s growth. The concept of cloud kitchens is fairly new and refers to the building of a delivery-only kitchen that leverages food-delivery services to reach their customers. There are numerous proposed advantages to this model, some of which include: reduced labor costs, reduced real estate costs, etc. With the advent of cloud kitchen models, companies like CloudKitchens, Kitchen United, Virtual Kitchen Co, and DoorDash Kitchens it's unclear what the next 10 years in the restaurant space will look like. Coupling this with Covid-19 and the clear shift to reliance on delivery, the cloud kitchen model could be promising.
Figure 7: CloudKitchens analysis of restaurant delivery space
Cloud kitchens primarily rely on delivery services (Uber Eats, DoorDash, etc) and are posted as restaurants on these apps. It’s not exactly clear if separate websites are needed for these cloud kitchens. In a world where an individual wants to set up an individual restaurant through a cloud kitchen model they would need:
Real estate big enough for a kitchen
A few staff members
A spot on UberEats/DoorDash/etc delivery service apps
In this world, the necessity for restaurant websites could get overlooked because these delivery-service apps already build out good visual menus where Popmenu’s other offerings are no longer high-priority items. In this world, I could see Popmenu’s business being threatened because customers will rely more on delivery app menus then they do restaurant menus.
What does Popmenu look like in 2030?
Researching the restaurant technology space has been exciting because there are a lot of heavily invested players and the pandemic is stress-testing these players to see which ones are in it for the long run. I see a couple of worlds manifesting out of this.
World 1: In the year 2030, the delivery trend has slowed and we can expect customers to equally depend on food delivery and on-premises dining. In this world, Popmenu wins because they were able to seamlessly transition independent restaurants during a time of need and now they are widely adopted in the independent restaurant industry.
World 2: In the year 2030, cloud kitchens become a widely adopted and preferred method for restaurants. Cloud kitchens build out their delivery network. Current delivery services like UberEats, Doordash, etc lose market share but still compete. In this world, independents that opt into the cloud kitchen model decide that having interactive websites and branding is useful and in this world, I believe Popmenu wins. Although this is the opposite scenario of my Risk section, I think both are possibilities.
World 3: In the year 2030, the pandemic fundamentally changed how we interact with restaurants. Delivery is the preferred method and on-premises dining is no longer popular. Cloud kitchens didn’t pass the unit economic test so customers still heavily rely on delivery services as we do now. In this world, I believe Popmenu still wins because it was the catalyst in allowing independent restaurants to make seamless technology transitions. All the data mentioned in this piece corroborates that in delivery preferred world websites will be heavily relied upon.
Only time will tell which World will play out, but I think in most scenarios, Popmenu’s platform will become a core component of restaurant tech. Furthermore, I believe an argument can be made for Popmenu being the first in a wave of verticalization of Shopify. Unlike typical retail stores setting up with Shopify, restaurants are an example where a company like Popmenu providing restaurant industry-specific integrations/customizations could prove to be more meaningful than the Shopify’s restaurant offering. In the classic aggregators vs. platforms framework, Popmenu’s platform allows restaurants to own more of the traffic that previously might have gone to aggregators (UberEats, DoorDash, etc.).
Let's take an example where “restaurant X” solely depends on aggregators to direct traffic to restaurants. This traffic comes with an exceptionally high cost of doing business (i.e. UberEats cut, delivery service fee, etc) because of fees that get applied when dealing with aggregators. Now let's say restaurant X onboards Popmenu and gives them 20% of their traffic. Simply speaking, this is a 20% that was previously heavily destructured by fees but is now predominantly restaurant X’s to have. This is because, as Shopify COO Harley Finklestein says, we at Shopify want to create more value for your partners than we capture for ourselves. The power of the platform dictates that by providing more value for your “partners”, then yourself you will naturally win.
Now the point of all this is to say that, I think that as we see Popmenu winning, there will be similar startups building Popmenu for X in different verticals. I believe they will manifest in the following areas:
Highly fragmented industries dominated by independent business owners
Industries where there is a 3rd party demand aggregator that is delivering traffic to said businesses
These are the two likely criteria where Popmenu for X businesses arise. The first scenario seems probable because the McKinsey study at the start of this article explains how independent restaurants generally struggle with access to capital and digital branding. I believe this is a struggle that independents face in almost all industries and technology solutions similar to Popmenu’s caliber are the solution. The second scenario also seems probable because I believe that there will always be cases where there are 3rd party demand aggregators that are taking a bigger piece of the pie because they can. I think this is an invitation for platforms to build and easily unlock business opportunities. Whichever framework wins out, I think Popmenu will serve as an archetype for what the verticalization of Shopify will look like.
Conclusion
With Covid-19 in play, it’s more important than ever to be investing based on longer-term secular trends that aren't dependent on short-term events. I believe that digitalization for independent restaurants is a more recent trend, mostly because independents struggle to understand the value of technology until they really need it. This was the case when Square became critical for restaurants because cash-only stores were losing business to competitors. This is still the case for Popmenu. Although the data clearly shows that having a strong digital footprint is valuable it's still an area that independents are adopting because they must. With Covid-19, it seems like this trend is even more important but my general take on this is that giving restaurants the ability to adopt technology is important whether we are in a Covid-era or not. Popmenu is giving independent restaurants a push they desperately need to fight another day in these hard times.
If you enjoyed this piece and would like to chat more, please reach out through Twitter at @bchandras3karan or Email at bala.m.chandrasekaran@gmail.com.
Thank you to John Luttig, Sid Vashist, and Sid Venkateswaran for multiple rounds of edits and recommendations.