Flipdish co-founder and CEO, Conor McCarthy sat down with Zendesk CMO, Jeff Titterton, to talk about the future of online ordering and technology in the restaurant and hospitality industry. Watch or read the full interview below.
Jeff: Hello and welcome to ‘Sit down, start up’ where we at Zendesk get to talk to some of our most interesting and fast-growing startup customers. My name is Jeff Titterton, I’m CMO here at Zendesk, and today I am joined by Conor McCarthy from Flipdish. Conor, it’s great to have you on the show.
Conor: Thanks Jeff!
Jeff: So first, tell us about Flipdish, what do you do?
Conor: So, Flipdish provides online ordering systems for restaurants, takeaways and cafés in the hospitality business. We give them branded websites and branded mobile apps so people can place orders directly to that restaurant or cafe as opposed to going through a marketplace.
Jeff: And do they prefer that?
Conor: The restaurants definitely prefer that yes. They’ve seen that (food delivery) marketplaces actually are a bit of a problem for them and initially they thought it would be great, they will bring us new customers, but they are now realising that’s not quite what's happening.
Jeff: Yeah, and they probably get a better margin right, if they go direct and have their own thing right?
Conor: Absolutely yeah, so our original idea was to build a marketplace,I’ll bring you through the history of Flipdish.
So, I was personally frustrated with ordering online 5 years ago. The user experience was pretty poor, especially on mobile. I found one evening I was trying to order a takeaway, the same one I had ordered from the week before using the same app, and the next week I had to re-enter my full credit card details because the app didn’t remember it. So then you had to re-type in your full address because it didn’t use geo-location on your phone; and I had to reset my password and type in my email and follow the link. It was just, not a good user experience.
So the original plan was to build a marketplace which had a nice user experience coming from the consumers point of view, and we went and did that. We built this lovely easy-to-use app, we listed all the restaurants in Dublin, where we are based, we didn't let them know we just put all their menus there and put it (the app) out on the internet and let people order from it. Myself and my brother who co-founded the company, originally we would get a text message whenever an order came through, where we would ring up the restaurants and put the order through.
But then obviously the restaurants found out, as to what we were doing because they were listed online. We got our first phone call and I thought ”What will they say?” but they just wanted to update their menu, so it was all fine. But then, we actually had to go out and sign up these restaurants, give them a printer so we wouldn't have to keep calling in all their orders.
However when we started talking to restaurants, something we probably should have done before we built a whole product. They educated us to a lot of problems they were having with marketplaces. They basically said “...yeah your product is lovely, but we really don’t need another marketplace..”. They told us that with marketplaces, they felt they were sending their customers to a place that had all of their competitors listed, and losing them because of it. They told us what they really wanted was a direct ordering channel. They knew their customers wanted to order online and they knew people were using phones to order - on mobile phones, on smartphones - but they did not have the technology themselves to accept direct orders and they said “don’t build another marketplace, just give us our own branded apps and website”. So we pivoted and started doing that.
Jeff: That's a great story. So, a couple things I love about that - one is, I love startups that are founded out of frustrating customer experiences. So you were frustrated by all that ‘badness’ in the technology and you created something, and then you actually pivoted. Pretty much 95% of startups end up pivoting at least once to meet a specific customer demand. So that’s really exciting.
Where are you today in terms of how big you are, where are you located, and what kind of restaurants are you serving?
Conor: So we serve 1,600 restaurants at the moment and they’re spread across Ireland, the UK, but we are in 12 countries in total. We also have staff in Ireland, the UK, France, Germany, Spain and New York, we have three guys in a We Work over there.
Jeff: It’s the beginning of the cross-Atlantic journey that’s exciting. So growing like that fast, funding is obviously a big part of the startup journey, so can you talk to me about how you were funded now and then, how do you invest the money, how do you decide to invest your money as you go forward?
Conor: Sure, so we raised 7 million in total, since founding Flipdish and most of it was a €5 million round about a year and half ago, and with that we’ve gone from 20 - 90 people. I think when we are deciding how to spend the money it falls into two broad categories. Either should we spend money on the product where we are building more products for existing customers, or should we spend it on acquiring new customers so sales, marketing, and everything that goes along with getting new customers in.
On the product side of things we’ve decided that for us it’s best to focus on building more products for the one type of customer, so restaurants, takeaways, cafes, that vertical as opposed to being maybe the best online ordering solution there is used across lots of different verticals. We think that for us it doesn't make sense to be an online ordering system that could be used by a launderette, by a wine shop or a liquor shop and restaurants, because if we were to do that we’d need to market to 3 completely different verticals.
So people who run restaurants don’t read the same trade magazines and hang out at the same places online as people who run a launderette. But restaurants in one street will talk to a restaurant 4 or 5 streets away because they are in the same business. How we want to build our products. We want to become really really valuable to smaller vertical of customers than to have this massive wide product range which some people use a little bit of, others use a little bit of so if we do that, we're not gonna have the best products in any part of it, and we're not gonna be hugely valuable to any single customer.
We much prefer to have a deeper product range, so that kind of informs where in the product we spend.
Jeff: It’s quite a large vertical too, right. There’s an endless amount of restaurants, takeaway places etc.
Conor: Yeah, there’s like 300,000 in the US another half a million in Europe
Jeff: Do you have a lot of word of mouth growth between restaurants, so your customers know you’re B2B, your customer is a restaurant, so are they telling each other about you, and do you see this happening?
Conor: Definitely, and it varies based on the markets we’re in, depending on how or what sort of critical mass we have in the market. In Ireland we have a large percentage of the restaurants over here, there’s a huge amount of word of mouth. We would always ask our restaurants to help us, we would have a Flipdish sticker on their windows so that other restaurants can see. But when we are in a brand new market, we don't have any brand presence, and so early on it involves way more outbound work,
Jeff: Yeah that makes sense so you actually have sales teams out-bounding to those people.
Conor: Yes that’s another big area where we would spend our investment and it’s something that's easier to work out in many ways than our products, because you can measure it easily. We can measure how efficient a single outside sales person is compared to having a sales person with a sales development rep helping them arrange meetings. Compared with putting that money into Facebook advertising, where you can see the next day, what the results were.
Jeff: Yeah that makes sense, so growth, hugely important to you especially if you are backed by venture capitalists, they are constantly asking about growth, I know, this very well... So you have to make decisions about going into new markets right, so you’re very penetrated here in Ireland and you're obviously less penetrated in New York, at this point but you will become much more penetrated over time. What are some of the key challenges you face going into a new market?
Conor: Quite a few, I assumed people in America spoke English like we do, but they really don't. So in Ireland you’d order food for collection, in America you order for pickup, so that little thing means we need to have a whole new set of strings in our apps and have a different language or culture set for the app’s over there.
In the US it’s normal to ask for a 25% tip on an order, if a restaurant in Ireland was to ask for a 25% tip they’d be in the papers, because that's a quarter of the order amount that's crazy. So there’s lots of little product changes that we need to make going into a new market. Another big change for us has to do with online ordering in Ireland and I think all of Europe, it’s normal to show the prices on the menu inclusive of tax, like you wouldn’t show the tax rate at all. You would show if something costs €5 euro on the menu you give €5. Whereas in the US if something costs $5 on the menu you give them $6, because there is the tax, and a tip as well.
So there are a lot of little product changes that all add up, to go into your new market so that’s one side of things.
Then, having satellite offices is a big change, we’d find ourselves, in the Dublin office at HQ, making decisions and letting the office know but then you’d realise that all the other offices have no idea, so you have to really make a concerted effort to communicate with them and make them feel that they are a part of the company, because they are. That’s just a different thing to when everyone’s in one place. You can just have a sit down meeting with them.
Jeff: Yeah communication becomes incredibly important as these companies start to scale definitely that's great So switching topics a little bit. So obviously you're a technology company, tech is very important just listening to you talking about localization etc, etc there are just so many things that can go wrong. What are some of the technologies, what are the app’s, the tech and tools that your teams are using today to be really successful as you scale up so quickly?
Conor: I’m just old enough to remember a time before Slack, so I remember at the beginning of Flipdish, I’d be looking for a text message I knew James or someone had sent me, through my text messages and then I realised oh no it was WhatsApp, and then I’d get onto Slack, or get onto Skype, and then he’s say, “oh yeah check your emails”. We’d be all over the place on these different channels and it’s become a lot nicer having a single place for all work communications you can go to, so that's one of the things that’s changed, improved how we work to an extent. That’s one big one.
The nature of our business with the localisation a lot of our businesses are taking payments from people ordering food and having a payment provider. We use Stripe which allows us to go into new regions without any extra work on the payment side, which for us is really valuable.
I think one reason our user experience in the app is really nice is, because we don't push people through unnecessary barriers. Like one of the things that really frustrated me, when ordering 5 years ago, was I had to go through 3d secure for like a €12 transaction, and I thought this was just stupid, I mean you know where I live, you know so much about me I shouldn’t need to go through 3d secure where I’m sent off to my bank, on my phone, I have to move the page around and enter 3 digits of my code. Awful!
So being able to go into lot’s of countries especially where they have different payment methods, so in the Netherlands they use a system called Ideal, where it’s like a bank transfer, and we can set up with them, without any new integration work.
Belgium has a whole different system, Poland, they have a whole different system again. But we don't have to do any extra work because we’re using a Global payments provider.
Jeff: Yeah it’s amazing I'm old enough to remember those dark days when you had to manually add one of those payment systems in and then be like get on the backlog with the engineering team, and in three years they can add direct debit in Germany or whatever these payments are. It's great that these services like Stripe really opened that up for companies, that's awesome expanding on that question..
Are there any technologies that give you a competitive advantage at your company?
Conor: Well I’d like to say that Zendesk gives us a competitive advantage, but it seems like everyone else is using it as well so it’s just getting us on a level playing field!
Jeff: Thank you for saying that go ahead!
Conor: We started using Zendesk internally, so we have a factory team who set up the new restaurants that come on board. They would set up, enter information, enter their menu, get their delivery zones set up and with that type of thing it would be typical for our support team to send requests over to the factory team. Saying for instance “...hey can you do this / update this...”, then they would reply etc. Then as the volume of restaurants began to build we were suddenly doing hundreds a month, it became wild having these thousands of emails going around and trying to keep track of what was going on.
So we first brought in Zendesk to allow the support team to create tickets, for the factory team, and then if the factory team needed to get help from tech they could assign that ticket over, and the ticket never got lost. You can see what’s still open and things just wouldn’t get lost in these massive email inboxes,then it kind of spread to all the other teams in the company, because we’d find somebody from another team who would want to have a look at it so we get signed over there, and that’s been really useful for us internally.
Then it spread to an external facing role, where people from other restaurants and our customers send us messages which just doesn't just go into an email inbox now. We have something we know that we can follow up with. It’s great now that we can also measure, are we getting back to people in time and are we solving their problems, so that's really helped us.
Jeff: Do you also serve end customers, the restaurants customers do you do customer service for them or do the restaurants handle that themselves?
Conor: The restaurants handle that themselves.
Jeff: Well I love the internal external use case that's something we’ve seen a lot more companies doing because especially with all of our collaboration tools it kind of enables an end-to-end really good customer service and also helps your product team and your development teams do better work so that's great.
So we live in a brutally competitive world obviously the great thing about how technology has exploded is that startups can be founded anywhere and it's really exciting to me as a former startup guy to see. The days of it only being founded in Silicon Valley are long over and they're now seeing startups founded everywhere, so this is great and you're a great success story. With that it also means there's a lot more competition, because everybody can create their own startup relatively quickly so...
How do you, in a competitive industry because you competing against a variety of different types of competitors including marketplaces etc, how do you differentiate yourselves at Flipdish.
Conor: I was thinking about this, how we are different and it seems that the biggest difference between us and nearly all of our competitors stems from our pricing model. So for us we charge transactionally, so that when a customer, specifically an end user, places an order, that’s when we make a small fee on it. Instead of signing up a restaurant and charging 100 euro per month, and that's the difference. I don't know any of our competitors who charge in a similar way, and that has changed how our company is set up in so many ways. At a high level it just completely aligns us with our customers and what they want from us is a system which makes it really easy for their customers to order online, and because we only make any money if a customer places an order it keeps us aligned doing that.
That shows itself in the way the product is designed, like for us if we have customers opening the app and 80% of them placed an order versus 70%, that’s a massive difference for us, so we’ve placed a huge amount of attention to the user experience to make sure it’s absolutely the best experience for the people trying to order.
Whereas I know, as much as we’d like to think we would do that if we charged just a flat monthly fee, it wouldn't make any difference to us if the conversion rate was 70% or 80%.
Jeff: Yeah I really like that, and then you can apply all your expertise on conversion optimisation which a restaurant is going to have no idea how to do. They create great food, and you help, it’s aligned goals.
Conor: It’s very similar to how charging a flat monthly is similar to how gyms operate where their whole business is signing up as many people as possible, get their membership and have none of them ever go. But that’s not what our restaurants need, they need people to go they need their customers to order, and it’s changed how our company is structured internally. We have an “oversized success team”, when you would compare that with other SAS companies and it’s because we want and we need people to make sure our restaurants are doing well online. So last week we had a restaurant where they had embedded our web ordering into it and their SSL certificate had expired. We saw a dip in their web orders, their app orders were fine, because it doesn't go through the website. But we saw a dip in their orders so we were on the phone to them saying “Hey, your website is down, you should get your webmaster to take a look at that!”
But if we were charging a flat monthly that would never happen, like their website could come back in 3 weeks and it wouldn't make any difference to us.
Jeff: They are never going to churn from you, that’s a great story. You telling them how their website is doing, that is awesome.
Conor: And because of the way our pricing is structured we need to do that, like we dont make money from them if they aren’t doing what we need them to do.
Jeff: So you are serving customers that are, far away from you all over Europe and now into North America and you interact with customers through email, chat, phone sometimes but most of the time without the human touch…
How are you able to create great customer relationships and really serve your customers when you’re often far away from them?
Conor: We use lots of different channels like we mentioned, like it would be very normal for us to use WhatsApp, for talking to our customers they, or the restaurants would be busy and could just pull out their phone and send us a WhatsApp message, and we actually recently set up the integration with Zendesk which makes it much easier for us to have all of that in one place.
But we actively don't tell our customers “no”, you can’t use WhatsApp, you have to use email because it goes through this particular channel. We want to use, what they are used to so
we can have instant communication with them. If they have a really quick question, they can send us a 4 or 5 sentence question, and we can get back to them. So being able to do that helps build up a relationship, because you are there, and you have frequent contact points with them, and the fact that we're using technology and not face to face, helps us scale a lot. We always know their name because there is a CRM behind it, and it’s a lot to ask our one support people to remember 1,500 customers' names.
But if they phone in and it pops up saying who they are and that is really helpful and that helps us build up a relationship with them, and we do talk to our customers on the phone, we would often have face-to-face meetings with them as well. So we try not to leave it as just an email, once a week, and then a robot replying.
Jeff: It's great to hear using WhatsApp because if you think about working in a restaurant you know I worked in restaurants when I was much younger but it's a very fast-moving.V Things are happening on the fly and so they'll probably often have a question very quickly for you that they need to have answered so being available whatever channel they want to be on is probably the right way to go so that's great it...
Sounds like you're a very data driven company, when you talked to me about conversion rates, what are the metrics that matter the most to you?
Conor: Well average customer value, is an important one, but we, measure NPS, for our customers we have in our office our headquarters we have a big screen, dedicated to the NPS of our customers we have our overall and we have it split out by region and our system is built so this when we send out an NPS request people can reply if they give us a five six or anything below an eight they will be sent a questionnaire saying hey what's wrong and all the replies will go up on the screen as well so that's important for us and it gives us really quick visibility to see are there any problems there and the whole company can see this customer had this problem and then we can get it resolved so that's a big one.
Our menu team who deal with hundreds of requests, from loads of different restaurants, 1500 of restaurants who are all making tiny little changes to their menus. They measure CSAT and that is very useful for them, and they get to see like, are our customers getting what they need.
So we can measure the response times and the like, medium resolutions times and all that but it seems a bit further removed from how the customer feels, like the customers could be really happy if you solve a massive problem for them and it took four days. But we might expect our first response time to be a couple of hours and that could be the wrong thing to do. I mean there are customers that are really happy mettrics that measure their sentiments and how happy our customers are with us as opposed to particular things are, like median response times and I think that probably would change as we grow.
If we were ten times the size and we had more brain power and knew more about how response times effected customer happiness then we would progress into a place where we pay more focus to that but were not there at the moment as a company.
Jeff: That makes sense and you know I like the focus on customer happiness right customer satisfaction and you're talking about how your goals are very aligned with each other you know your revenue goals are their revenue goals their satisfaction is your satisfaction that's gonna make you all successful together, that's a great model...
So looking ahead 5 years from now which probably seems like 50 years to you because you're growing so fast, where do you see the business five years from now?
Conor: Well I quite like where Zendesks is at,
Jeff: Good answer...
Conor: So yeah we're going to keep building products that our restaurants needs that’s gonna be our focus at the moment I don't see it changing is on how their customers interact with with their business so that could mean different to online ordering channels and so over the last few years we have seen McDonald's put thousands of Kiosks into thousands of their restaurants and it's massively successful for them. Customers like using them it’s great for the restaurants there's so many benefits to it so that's a new product that we're offering because not all the small and medium sized restaurants can go and build this technology themselves so we're giving them an off the shelf solution that's one new consumer facing product for the restaurants which are offering.
I said we see ourselves continuing to do that type of thing and whether it be Alexa apps or chat BOTS or receive orders. A couple of years ago we we launched an API where any third party can come along and integrate with us and we're seeing loads of companies pop up one day saying hey we've got this integration with you it's been running for months and they have a question we'd have no idea about it which is great so we have typically POS companies who wants orders from Flipdish to go directly into the POS machine they would build integrations. There are last mile delivery companies who do similar the restaurant receives an orders they want to automatically dispatch a driver to pick it up and so we want to keep building out that ecosystem and build it as a platform and that will probably move into having an app store or a place where people can easily discover what integrations are available so I think we'll continue down that route.
But really, we're a tiny little company the moment with 1,600 restaurants when there's half a million in Europe hundreds of thousands in at US, so I think a lot of what we'll be trying to do is to reach that audience and they'll all need direct online ordering if they want to survive over the next five years. What we've seen, like I mentioned at the beginning with food marketplaces like Uber and Deliveroo, great businesses and so forth. They're very very bad for small or medium sized restaurants, they're going to restaurants having them listed them on their marketplaces, having them send all the customers to their marketplace. Actually now in many countries (marketplaces) are building their own brands and having their own kitchens and listing them at the top. So all the people who "John's Takeaway" sends all of its customers to one of these marketplaces, they’re going to see "Jones' Takeaway" just above selling very similar food, its targeting his customers and it's a real threat for the restaurant industry and so for next 5 years we're going to continue to work and help the restaurants to defend themselves from that.
Jeff: All right well great that's a that's an ambitious goal I'm looking forward to seeing how how well you're doing five years from now I'm pretty I'm sure I'm excited for you that's good it's a great business model so last question most startups fail you have made it right you say you're tiny but you have 1,600 customers that's a that's a success and I see this going continue to be a success what advice would you give to other startups who are at the beginning of their journey
Conor: So I think that's the most important thing that they have is time so they should realise that they don't have all the time in the world and they should understand that not all business models are good business models. They should think about what they're doing and understand that maybe you shouldn't be doing what you're doing.
Even the best people in the world that are put into a terrible industry that isn't growing or isn't going anywhere it might not be the best use of their time so think about that. If they feel like we should stop they should probably stop straight away and do something new, pivot because there are lots of brilliant business models out there and things they could be working on in that time they could take you eight weeks or eight months or eight years to get them done and that's grounds for, at the end of the period eight weeks say, you can see value from that.
But if you work on them each individually you'll also get them done in eight weeks time, but you'll see value from the first thing after the first week which is a big difference than waiting eight times longer and so I think it's important just to keep focus and do one thing at a time and get it out the door see value from it before moving on and also it's much easier it's not context shift and do two things at once.
Jeff: I think that's great advice for everyone not just startups but it's particularly good for startups so great well thank you so much for joining us that sit-down startup let's check in soon.
Conor: Thanks very much
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