EU Restaurants Take Back Control From Third-Party Aggregators

Restaurant owners and operators started their entrepreneurial endeavors because they mainly wanted to be independent and have direct relationships with their customers.

But James McCarthy, co-founder of Dublin-based ResTech company Flipdish, said working with third-party marketplaces, aggregators and online food portals has posed a threat to that goal.

In an interview with PYMNTS, he said Flipdish’s business customers are increasingly aware of the negative impact these third-party marketplaces, that can charge 30% commission or more per order, are having on their bottom lines.

“On top of that, they’ve realized that marketplaces have siphoned away their customers over the years by competing with them for real estate on Google, by creating microsites, by bidding on their keywords on Google ads, by claiming their Google business pages [and] by plastering their stickers all over doors and windows in their restaurants,” McCarthy said.

Now desperate to take back control from these “predatory forces” threatening their very existence, independent restaurants have turned to Flipdish’s technology to deliver a digital consumer experience both online and in-store, while increasing their volume of direct-to-consumer (D2C) orders, building customer loyalty and reducing costs, he said.

On the in-store front, the company’s QR code technology also helps with staff shortages, a need that has been propelled by pandemic-related labor deficiencies and mobile phone companies like Apple and Google adopting QR codes.

“It also provides a more efficient, seamless and convenient way for consumers to order restaurant meals in restaurants,” he explained.

The firm’s product suite also includes self-service kiosks that allow consumers to place orders without human interaction, helping to reduce the size of queues and increasing revenue with higher average order sizes.

Read more: Investors Bet Restaurant Apps Beat the Aggregators

“You’ve seen them in the likes of McDonald’s and large chains, but they’re being adopted in small- and medium-sized businesses [SMBs], and we’ve seen credible adoption over the last 12 months,” he said. “We have about 1,000 stores using kiosks, and the growth for this year is going to be pretty big.”

Based on its growth trajectory so far, that optimistic prediction is very likely. Since its launch in 2015, the ResTech company has amassed over 5,000 hospitality brands in over 20 countries across Europe, the United States Canada and South America.

And to further cement its place as the leading brand for digital consumer experience and hospitality in Europe, the multinational firm announced this month that it had secured a $100 million investment, boosting its valuation to a unicorn level at $1.25 billion.

Low-Hanging Fruit

Foreign food firms setting up operations in Europe find it challenging to manage different payment processors in a region with multiple languages and cultures or to navigate the complex regulatory landscape, including compliance with the data privacy laws under the General Data Protection Regulation (GDPR).

This is a particular challenge for U.S.-based food chains looking to launch their business in Europe, McCarthy said, especially those that have been working with a U.S. provider that doesn’t operate outside of North America.

Here, too, the firm has the monopoly in serving these foreign companies, most of which have their Europe headquarters in Dublin where the company is based.

“That’s something that we’ve solved over the last seven years,” he said. “We’re very well positioned geographically within Europe and [operate in] the only native English-speaking country in Europe.”

But when it comes to operating — and even expanding — the business in the fragmented European region, he said it’s an entirely different ball game given the cultural nuances and unique local point-of-sale (POS) needs in each market.

For example, the company must integrate with various country-specific payment methods across the region, such as meal vouchers or Restaurant Tickets in France; PayPal and cash payments that are popular in Germany; the inter-bank online payment system iDEAL that is widely used in the Netherlands; and Bancontact, the most popular online payment method in Belgium.

“So, when you want to expand into another country, it’s not just figuring out the language,” he said. “There are a lot of technical things that need to be resolved in order for you to be successful.”

Another expansion challenge lies in the abundance of opportunities available from a broad range of businesses, like large hotel chains and stadiums, coming to Flipdish to solve their digitalization issues.

“Knowing what kind of work to spend your time on can be tricky sometimes when there are just so [many] low-hanging fruits,” McCarthy remarked.

Booming Dark Kitchen Market

One sector the FinTech unicorn is keenly focused on, however, is the booming virtual restaurant market in Europe.

According to data gathered in a whitepaper report Flipdish published on virtual kitchens, 50% of all restaurant deliveries will be food made in a dark kitchen by 2025.

McCarthy said it’s an indication that the franchises of the future will be leveraging the new delivery and takeout business model to help cut out one of the biggest cost components of the restaurant business: rent.

See also: Why Flipdish Wants to Help Restaurants Make Their Own Digital Destinies

He went on to add that the fast-growing sector will lead to an explosion in D2C brands due to a reduction in the barrier to entry and businesses that no longer need to acquire expensive restaurant equipment to simply test out food concepts or develop a brand.

Apart from SMBs, large restaurant chains stand to benefit from the model as well, as he pointed to the opportunity it gives them to experiment more and open additional food concepts with very little upfront investment.

“Experimentation is the word of the day [and] virtual restaurants can change and update brand names, logos, menus [and] menu photography as they see fit,” McCarthy said. “And Flipdish is a really nice product for dark kitchens because you can spin up websites and apps very quickly and easily under multiple brands.”