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As restaurant owners tire of GrubHub commissions, ChowNow slides under the door

6 months ago by Joshua Fruhlinger in Innovation

Running a restaurant is tough business: tons of overhead, bevvies of competition, and a delivery industry that's scraping profits off the top. In the crosshairs of many restaurant owners is GrubHub ($NYSE:GRUB), which many say charges exorbitant commissions to the point that margins are shrinking them out of business.

A class-action lawsuit against GrubHub claims that the service is engaging in shady accounting practices resulting in hundreds of dollars in commissions per month. In some cases, restaurant owners say that GrubHub even charges $9 just for phone calls that don't even result in orders.

As owners sour on the high cost of delivery, services like ChowNow ($CHOWNOW) are moving in, charging restaurants a flat fee instead of scaling commissions.

And it appears to be working; in the past year, ChowNow has been on an aggressive growth path.

According to LinkedIn data, ChowNow's employee count (via LinkedIn) now sits at 228. At the beginning of 2019, less than 200 LinkedIn members listed ChowNow as their employee. Of course, that still pales in comparison to GrubHub, which claims 3,400 employees on LinkedIn alone.

But ChowNow's model is certainly proving attractive to those who matter most: customers and investors. In May 2019, 3L Capital and Catalyst Investors led a $21 million series C round of funding for ChowNow — this after having raised $43 million in outside funding.

Because of ChowNow's flat fee model (monthly prices start at $99), restaurants owners are increasingly turning to the services as a margin-saving alternative to GrubHub, Postmates, and Uber Eats. In fact, many restaurants now include fliers in their GrubHub deliveries promising discounts if their next order is made through ChowNow.

ChowNow CEO and co-founder Chris Webb is quite aware of the struggles that GrubHub is causing restaurant owners. "Local restaurants are often the heart of neighborhoods, and there should be a way for them to stay competitive and profitable,” he told Venturebeat. “We’re interested in giving these small businesses the tools they need at a fair price so they can focus on doing what they do best.”

He says that ChowNow now works with more than 11,000 restaurants across North America and claims $1 billion in revenue.

About the Data: 

Thinknum tracks companies using information they post online - jobs, social and web traffic, product sales and app ratings - and creates data sets that measure factors like hiring, revenue and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales. 

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Joshua Fruhlinger

Joshua has been writing about technology, lifestyle, and business for over 20 years. He's one of the original writers and editors for Engadget, and still writes a...

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