How Does ChowNow Make Money?

Table of Contents

  1. Introduction
  2. The Genesis of ChowNow
  3. ChowNow's Unique Value Proposition
  4. Marketing and Distribution
  5. Key Takeaways
  6. Conclusion
  7. FAQs
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Introduction

Imagine your favorite local restaurant around the corner: its delicious menu, friendly staff, and warm atmosphere. Now, imagine the struggles it faces when trying to offer online orders without surrendering a large chunk of its profits to big third-party platforms. This scenario is exactly what inspired the creation of ChowNow, a food ordering platform designed to support local restaurants. Founded in 2011 by Christopher Webb and Eric Jaffe, ChowNow has since revolutionized online ordering by offering a more affordable and transparent solution for eateries. However, how does ChowNow generate revenue? This blog post delves into the company's history, business model, and various revenue streams to provide a comprehensive answer.

The Genesis of ChowNow

The Inspiration

The origins of ChowNow can be traced back to a pivotal moment in 2007 when Webb, then working in finance, was approached by his mother regarding an investment opportunity in a new local restaurant named Tender Greens. Despite initial hesitations, Webb was swayed by the restaurant's solid business plan, which eventually led to its success and the opening of multiple locations.

Tackling a Major Pain Point

Webb's investment provided him an insider's view of the restaurant industry. He quickly saw the significant challenges smaller restaurants faced with online ordering services, particularly the hefty commissions charged by platforms like GrubHub. Determined to find a solution, Webb joined forces with Eric Jaffe and founded ChowNow in 2010.

Early Successes and Expansion

ChowNow's journey began with the first order placed at a sandwich shop in Los Angeles in 2011. The platform's success led to its quick expansion into multiple states, strategically establishing itself in Chicago, the home of GrubHub, to attract restaurants burdened by high commissions. By December 2020, ChowNow had facilitated over 100 million takeout orders, saving restaurants more than $400 million in commission fees.

ChowNow's Unique Value Proposition

ChowNow differentiates itself from other food ordering platforms through its unique revenue model that does not rely on commissions from food orders. Instead, it utilizes a combination of subscription fees, setup fees, and order fees, providing a more sustainable option for restaurants.

Subscription and Setup Fees

Subscription Plans

ChowNow offers a suite of products through various subscription plans. These products include takeout ordering, curbside ordering, restaurant delivery, QR code dining, email marketing tools, branded apps, and customer membership programs.

  • Monthly Plan: Priced at $199 per month.
  • Annual Plan: Available for $129 per month.
  • Two-Year Plan: Also billed at $129 per month.

Setup Fees

In addition to subscription fees, ChowNow charges setup fees tailored to each restaurant’s needs. These fees cover the cost of point-of-sale system installations, tablet issuances, and the creation of custom branded apps and websites.

Order Fees

To offer a comprehensive service, ChowNow charges a transaction fee of 2.95% plus $0.15 for each order processed through their platform. This fee primarily covers the interchange fees levied by payment processors like Visa and Mastercard.

Order Better Network

ChowNow connects client restaurants with a broad spectrum of ordering channels, including Nextdoor, OpenTable, TripAdvisor, Yahoo!, and Yelp, through their Order Better Network. While there is a 12% order fee tied to this service, restaurants can offset this expense by adjusting menu prices accordingly.

Marketing and Distribution

ChowNow's marketing strategy centers around ethical and community-oriented approaches. They position themselves as champions of local restaurants, contrasting sharply with competitors relying on high commission fees. This ethos is well-communicated through their website, social media channels, and partnerships.

Target Market

ChowNow focuses on small to medium-sized local restaurants that value transparency and sustainability in their business dealings. The platform emphasizes building long-term relationships with these establishments by offering a suite of tools to enhance their digital presence and customer engagement.

Distribution Channels

The primary distribution channels for ChowNow include their official website and app. Additionally, ChowNow partners with various third-party platforms for wider distribution while consistently maintaining its stance against high commission fees.

Key Takeaways

ChowNow provides a lifeline to local restaurants struggling with exorbitant online ordering commissions. By leveraging a mix of subscription models, setup fees, and sustainable order fees, ChowNow not only generates revenue but also aligns its success with the prosperity of its client restaurants.

Summary

  • Subscription Fees: Monthly, annual, and biennial plans providing access to the full suite of ChowNow's products.
  • Setup Fees: Customized fees for POS installations, tablet issuances, and branded app/website creation.
  • Order Fees: A nominal fee covering transaction costs and an additional fee waived through menu price adjustments via the Order Better Network.

Conclusion

ChowNow has carved out a distinct niche in the food ordering market by focusing on the needs of local restaurants and offering a transparent, low-commission alternative. Through a combination of subscription plans, setup, and order fees, ChowNow not only sustains its business model but also helps restaurants thrive in an increasingly digital marketplace.

FAQs

1. How does ChowNow differ from other food ordering platforms? ChowNow avoids high commission fees that other platforms charge, instead relying on subscription and setup fees, as well as nominal order fees.

2. What types of subscription plans are available? ChowNow offers monthly plans at $199, annual plans at $129 per month, and biennial plans also at $129 per month.

3. What is the Order Better Network? It is a service that connects restaurants with various ordering channels like Nextdoor, OpenTable, and Yelp, with a 12% fee that restaurants can essentially waive by adjusting their menu prices.

4. Does ChowNow support restaurant marketing? Yes, ChowNow provides email marketing tools and helps create branded apps and customer membership programs to enhance the digital presence of restaurants.

5. Are there setup fees involved? Yes, ChowNow charges setup fees that vary based on the specific needs of the restaurant, covering costs like POS installations and branded app development.