Independent restaurants are closing in droves and many are barely clinging to life, slammed by the coronavirus pandemic and a technological revolution in food delivery that gives convenience to customers but can exact a high price from restaurants.
Now a 21-year-old high school dropout from Menlo Park wants to help keep everyone’s favorite eating spots — along with a pillar of the U.S. economy — from going under.
“Local businesses are a really important part of what makes the American Dream possible and plausible for people all across this country,” said Adam Guild, co-founder and CEO of Profitboss, an online platform for restaurant marketing and delivery launched in May. “We want to help the independents who are being destroyed by large corporations to take back control of their businesses and maximize profitability.”
The startup’s offerings address an acute pain point for restaurants serving legions of customers who use wildly popular delivery apps like DoorDash and UberEats, which take a bite of up to 30% out of each order from small businesses already running on tight profit margins. Several Bay Area jurisdictions, including Santa Clara and San Mateo counties, San Jose, Oakland, San Francisco, Hayward and Newark have recently capped the amount delivery companies can charge restaurants at 15 percent. Berkeley has set a 10% cap.
Profitboss is entering the market amid a pandemic-induced restaurant “apocalypse” that has killed off 100,000 restaurants out of 750,000 across the U.S. already and will likely destroy another 50,000 in coming months, according to Christopher Muller, a professor at Florida International University and an expert in restaurant management. At the same time, big delivery apps are disrupting the restaurant industry worldwide and consolidating globally. In the U.S., DoorDash has 51 percent of the market, though it’s not yet turning a profit, Muller noted.
Guild wants to disrupt the disruptors by adopting their own tactics — inserting his startup into the customer-restaurant relationship — and even their tools: special flat-fee programs they offer to smaller companies like his. He sees Profitboss as a win for everyone, with restaurants saving money, customers paying less and the big app firms getting a share of the business he attracts. “They deserve money for providing the logistics,” Guild said.
Customers, who are routed to Profitboss’s platform when they hit an ordering button on a participating restaurant’s website, pay $1.50 to Profitboss plus a $7 delivery fee that goes to the major delivery company that brings the food to their door. That’s considerably less than they’d pay the big delivery firms, whose various fees can make up 25% of an order’s cost, Guild says. Restaurants pay nothing for delivery but can choose to subsidize some or all of the delivery to encourage orders, Guild said.
In response to Guild’s claims that the bigger companies are hurting restaurants, both Uber Eats and DoorDash say they’re helping at a time when more people than ever want food delivered. An Uber Eats spokeswoman said the firm committed $20 million over six months to its “Eat Local Support Effort” involving small grants to restaurants and reduced fees. DoorDash said that during the pandemic, a restaurant’s odds of surviving are six times higher if they’re using DoorDash.
The fortunes of Profitboss, which Guild co-founded with computer scientist and restaurant technology entrepreneur Dean Bloembergen, rest on its $1.50 per-order fee. That model looks good from a restaurant standpoint, Muller said, but he’s doubtful the startup can survive and turn a profit without selling customer data, which Guild said Profitboss won’t ever do.
At Wine Affairs restaurant and wine bar in San Jose, owner Doug Cookerly said he didn’t offer deliveries until Profitboss came along because he didn’t want to pay the rates the bigger firms were charging. Having Profitboss, he said, “allows guests to have a wine and cheese night at their house now, which is huge.”
Cookerly also appreciates a function Guild calls “intelligent up-selling” which suggests possible appetizers, drinks and desserts to customers at checkout — a job often done in-person by wait staff. “You’re hungry and you’re buying online and you see a picture of something and you say, ‘I want that,’ Cookerly said.
Syndee Nguyen, owner of Grill’Em steakhouses in San Jose and Campbell, also started using Profitboss to avoid the 30% per order delivery fee she had been paying and in hopes of a more reliable delivery process. Since switching to Profitboss about two months ago, only one delivery has gone awry, and the restaurants are spending less on getting orders to customers. But the platform has room for improvement, Nguyen said.
“The system isn’t so sophisticated,” she said, adding that she’s waiting for Profitboss to integrate its system with her point-of-sale software so orders don’t have to be manually entered for the kitchen to see them — an issue Cookerly also raised. And she would like to see more aggressive marketing.
Profitboss also touts “Karen proofing” for negative reviews
… since bad reviews on third-party sites can be damaging and unfair, Guild said. “The person’s having a bad day or they’re a stupid Karen and they decide to unleash on the restaurant,” he said. However, Profitboss’s review function for clients’ websites, which will give restaurant owners power to moderate the commentary — is still under development and about a month from launching, Guild said.
“It’s up to the restaurant owner to decide how they want to handle reviews. Profitboss exists to empower them,” Guild said. “We plan on making it clear in the messaging surrounding the feature that it would be stupid to hide all negative reviews, instead of just unfair ones, because it will seem sketchy if they only have glowingly positive reviews.”
Some restaurants are using Profitboss for pickup orders but not delivery. At Morgan Hill’s Yolked breakfast spot, long-time South Bay restauranteur Jim Angelopoulos said he’s not sure what Profitboss has done, but more customers are ordering online and coming in, and fewer are asking for delivery, so that’s cut some of the nearly 30% per-order fees he pays DoorDash. “It’s great to see it working,” he said. “It really comes down to them coming up with different ideas that I will buy into.”
Guild, growing up in Los Angeles, had loving parents — with expectations. “They‘d been selling me on the whole, ‘You go to Harvard, you go to Yale, or you go to jail,” he said. When he dropped out of high school at 16 to build a World of Warcraft online-gaming server, his mom and dad were not pleased. However, since he launched a startup — initially aimed at helping his mother’s struggling dog-grooming shop — that’s since pulled in more than $3 million in funding, his parents have changed their tune. “Now they’re proud,” he said.