Los Angeles Business Journal

Online Ordering System Hopes Eateries Take Bytes

INTERNET: Investors fill ChowNow’s plate with $3 million in funding. By Bethany Firnhaber, Natalie Jarvey Monday, January 21, 2013

But ChowNow has some stiff competition in the online food-ordering space. Seamless, in New York, has a popular food-ordering platform, and GrubHub, in Chicago, operates a website and app that allows people to search for local restaurants and order food for pickup or delivery.

Hollywood startup PayDragon likewise is trying to become a player in the online food delivery space. It’s also planning to deliver grocery store items to a customer’s door.

Integration issue

ChowNow, Webb said, puts its focus on working with restaurants more than its consumer-focused competitors, most of which charge a 15 percent service fee for every order placed through their systems.

The company also helps restaurants advertise that they have a new online ordering system, which he said helps in getting restaurants to switch to ChowNow’s service.

“Once someone’s set up an account and places that first order, we see a lot of repeat business,” Webb said.

But ChowNow faces challenges, particularly in convincing restaurants to use a service that doesn’t integrate with in-house ordering systems.

For example, when a customer places an order for food from a ChowNow platform, the order pops up on an iPad tablet inside the restaurant. Once there, a worker must confirm receipt of the order, accept or deny it and estimate a preparation time. Only then can the order be communicated to the kitchen.

Jerry Prendergast, principal at Culver City restaurant consultancy Prendergast & Associates, said restaurants would be better off paying more upfront to install more sophisticated point-of-sale systems that allow for online ordering than paying a monthly fee indefinitely for a service that doesn’t integrate with the back of the house.

“If this online ordering doesn’t connect to my point-of-sale system, it’s just a labor issue for me,” he said. “Who’s going to read these orders coming in, and who’s going to put them into my point-of-sale system?”

Jaffe, chief operating officer, said ChowNow doesn’t try to integrate with restaurant point-of-sale systems because it just doesn’t work.

“Philosophically, we don’t do it because they’re always breaking, and if they break, that means we will suffer an error in terms of process,” he said. “Our goal is to be really efficient with the restaurant’s time. We’re not looking to change their inside processes by any means.”

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