Acquiring customers at an early age and getting them to use your services or products through their various life stages has been an appealing strategy for everything from autos to cigarettes to newspapers. Can it apply to online food ordering when it starts from a college dorm?
Dotmenu CEO Frank Blot thinks it can. I met with Blot, President and founder Michael Saunders and CMO Tony Wills in their office in New York this week. Blot says that by offering enhanced features for restaurants and users alike, Dotmenu’s original service, Campusfood.com, can become “a springboard into local” via a second site, Allmenus.com, where everyone from busy families to shut-ins utilize the service. “A large group in a retirement community ordered $700 of food last week,” says Blot.
By offering convenience, value and selection, and adding new functionality, such as mobile apps, neighborhood data (from Zillow‘s API) and social games on Facebook (Food Friendzy), Blot thinks he’s got consumers covered. For restaurants, the sites are offering a wide range of services, including landing pages, search engine optimization (including a direct relationship with Google) and especially, bill processing. More than 2,500 restaurants are currently participating, processing more than 3 million orders a year.
The 12-year-old company also offers coupons, typically handing out 1,000 free coupons on quality paper to restaurants when they sign up. “We tie them specifically to loyalty and they’re time sensitive,” says Blot. He notes that they’re much more effective than point or frequent diner programs, which can be used everywhere (and are sometimes not used anywhere).
Blot adds that some of Dotmenu’s restaurant customers make the mistake of thinking of it as just a technology company. In fact, it is a business partner that drives orders, he says.
“Some (restaurants) have implemented their own ordering technology and immediately see that the orders they were receiving through our program stop,” says Blot. “These orders are actually redistributed to our other restaurant partners in our virtual food court. Within days these restaurants are asking to be placed back within the virtual food court with a clear understanding of the value we deliver to our partners.”
Restaurant owners under 35 really get it, adds Blot. The challenge is to sell across every age group.
As for the transaction-based business model, it has proved to be the best approach since the company doesn’t need to ask for money upfront, a la OpenTable, the upscale restaurant reservation service. But it isn’t always easy convincing restaurant owners to give the company its required piece of the online order — typically around 4 percent. Two-thirds of the company’s revenues comes from transactions, and one-third comes from advertising.
“Four percent of $100,000 is $4,000,” he notes. That’s not bad for all the extra business the company delivers to them, and “much cheaper” and better than building their own ordering system and advertising.
Blot also notes that while the economy has been difficult for restaurants, his company’s business has been steadily growing as it adds more and more markets and increases its local penetration. “We’re taking a formula for local and replicating it,” he says. At the same time, the restaurant business isn’t always an easy one to work with. “It’s a complex-simple business.”