The story of a startup selling to restaurants during COVID-19 | LinkedIn
16 julio 2020
Two weeks ago, we gave an update to Cheerfy investors on our inside story during the pandemic. We have decided to make it public in the spirit of sharing our rollercoaster experience, and a few learnings in the process. We hope it helps!
Foreword: Cheerfy offers a full front-of-house software platform for restaurants. We strive to extend the physical experience at restaurants to a digital customer relationship that drives loyalty.
«Never let a good crisis go to waste»
We are big fans of the Winston Churchill quote. A crisis is a terrible thing to waste. But when you sell to (closed) restaurants, you don’t feel «awarded» with the best poker hand. Operating in Spain and the UK, two of the countries that have led the COVID-19 mortality rate rankings, does not make things better.
The elephant(s) in the room
However, a sector in a life-and-death fight has demonstrated to be a prolific context. And the elephants in this room are not being overlooked anymore:
«Food delivery marketplaces charge us with 25%+ commissions. This is something you can accommodate in your P&L when delivery accounts for 10% of your sales. But it’s unsustainable when it becomes a major part of your business» – Restaurant Brands Association
To complete the perfect storm, food delivery marketplaces own the customer relationship. This means restaurants have no customer data. At all. Just “anonymous» relationships (forget about loyalty, whatsoever). It also means restaurants compete with each other on marketplaces for users’ attention, in a sort of Moroccan Bazar.
Jumping off a cliff and assembling an airplane on the way down
Reid Hoffman says that entrepreneurship is like jumping off a cliff and assembling an airplane on the way down. I could not find a better way to describe our last weeks. Cheerfy Shop has been our particular airplane, assembled on our way down the «COVID-19 cliff».
With Cheerfy Shop, we enable restaurants to create their own online ordering channel for delivery, take-away, and on-table ordering, saving on commissions from marketplaces (we quantify these savings here). And we empower them to create a branded, differentiated customer experience. Fully integrated into Cheerfy Loyalty (our customer loyalty platform), the point-of-sale, and white-label couriers.
We’ve come a «long» way since we launched Cheerfy Shop (I’d never say it was just 6 weeks ago!). And it triggered sales from the beginning. Faster than ever. The first ones in the line were existing accounts like Grosso (see shop), Black Sheep (see shop), Macchina, or Knot Pretzels. And then, we closed new iconic brands like Tuk Tuk, New York Burger, Lalala, Pizzart, or La Fábrica.
As my Co-Founder Adrian would put it: «We are turning potential energy (in the form of pre-existing trusted relationships) into kinetic energy (aka business!)». And this traction has not gone unnoticed. El Pais / Cinco Días – the top newspaper in Spain – featured Cheerfy as «the platform that facilitates food delivery for restaurants without drowning in marketplaces’ commissions«.
Commercially speaking, Cheerfy Shop has given us the right to sit at the table. However, the 10x feature, the deal-maker, is the combination of Cheerfy Shop AND Cheerfy Loyalty. Cheerfy Shop creates the sales channel. Cheerfy Loyalty makes it compelling and differentiated. The combination turns us into the de-facto front-of-house platform for restaurants (Ordering + CRM, Marketing Automation, Loyalty Cards, Vouchers, Feedback). And, by extension, the restaurant sales channel of the post-COVID-19 era.
Our vision – which remains the same – now looks more tangible: «to let millions of people enjoy the beauty of online experiences in real life».
A square root-shaped recovery
We couldn’t find the right letter for Cheerfy recovery (V-shaped, U-shaped, W-shaped, L-shaped…) which led us to coin a new category: the square root-shaped recovery «√». You hit bottom and automatically rebound in such a way that significantly improves your pre-crisis directionality. This is how our Monthly Recurring Revenue looks like:
- MRR bouncing back to pre-COVID-19 levels by Sep’20 just from contracts closed in the last 4 weeks
- MRR tripling year-on-year by Dec’20, with 2/3 of that revenue coming from our existing accounts’ growth
- We are «default alive» i.e. we don’t need to raise capital in order to survive (even if we don’t intend to just… survive)
P.S. And if you are thinking about the risk of a potential second COVID-19 outbreak in Q4… you guessed right, if any, it would probably accelerate us further (please do not get us wrong here: by no means, an extension of this tragedy is the desired scenario).