LocalUp Solutions, a platform provider for online restaurant advertising and food ordering, has licensees and company-supported account managers in 30 markets around the country. The company provides groups of restaurants in small cities with an aggregated online presence and ordering capability that expands their marketing footprint and doesn’t require a lot of time from staffers. Since the company’s launch, over 500,000 people have spent $25 million at over 700 restaurants using the service.
Street Fight recently spoke with the company’s CEO, Chris Jeffery, about how his business model works, what kind of online presence local restaurants need, and how white label platforms like LocalUp can bring value to busy merchants.
What trends are you seeing in the way that restaurants approach online marketing?
We think this space is going to follow the trend of an OpenTable. Obviously OpenTable has done well, and they think the next player to come along is going to be in the online ordering industry for quick service restaurants.
We’ve seen tremendous growth but we’re just scratching the surface. When Benchmark invested in GrubHub, [Bill Gurley] explained that this industry has been a late adopter to online ordering, and hasn’t moved as quickly as the airline booking or ticketing industries. I think it’s because 90% of restaurants are local mom-and-pop places that are not tech-savvy.
What about your business model sets you apart from companies like GrubHub?
LocalUp has a dual distribution model. [The first] is licensing. We work on everything from a hyperlocal perspective, from content management to sales.
We don’t take a one-size-fits-all approach to marketing. Every marketing piece is geared towards that community. GrubHub does transit advertising, and that’s their niche. Obviously they are in major cities, so I assume they’ve taken that approach because it’s easier to manage.
We train all of our local people, whether licensees or account managers, to think like a marketer … and we support them in what they decide to implement from a marketing perspective.
There are different things going on in each city from a marketing perspective. Obviously that, combined with local relationship building, local restaurant owners, and local content management, provides a better user experience for consumers.
We find a local entrepreneur and they invest their own capital. It’s the same type of person that might be interested in opening a Jimmy John’s or a Pita Pit. They might not have technology acumen, or the ability to put together a 24/7 call center — they might not have the slightest idea how to sell online ordering or what online ordering is — but they are a great salesperson, a great networker, a great marketing person, with capital behind them.
That’s our first distribution model. It came to fruition because we believe in hyperlocal. We worked with these licensees to get our footprint into the 30+ markets we’re in today.
We’ve slowly grown our second distribution model, which is company-managed. That’s where we go in and put in the capital and hire the local person, and then they execute the same way that the licensees do. It’s virtually the same.
What determines whether you use a licensee or an account manager?
Up until now, it’s just been a function of capital availability. We’ll assess a market. It has to be a good-sized market, but it can’t exceed a certain size. We’ll look at the competitive landscape. We’ll evaluate the licensees in that market. We have licensees who are raising capital to expand into new markets. Typically, if we have an existing licensee and they say, “I raised half a million bucks and I want to get into these two other markets,” we’ll let them.
However, if it’s a new licensee we’ll evaluate the market and determine the opportunity, the landscape, and the licensee. Do they have enough capital? Are they networked well enough? Do they have sales experience or ability? If it’s the right fit, we’ll move forward with them. If it’s not the right fit, we’ll go in ourselves.
If I’m a restaurant, why would I participate in an aggregated experience rather than developing my own online ordering presence?
We highly recommend restaurants have their own online presence. Have your own online brand, have your own online ordering experience for consumers that want to go directly to you. Those are what we call hunters. They want Papa John’s and they go to PapaJohns.com.
We’re going after the wanderers. The people that say, “Hey, I don’t know what I want, I’m just hungry.” We connect consumers and restaurants in these hyperlocal markets through a discovery engine that has all the options in front of them.
Once we have consumers coming to this aggregator, then we go to restaurants and say, ”Hey, we have 1,000 people a day coming to this site looking for food, and making decisions. There are no games on our site, no weather, no sports scores; they are just looking for food.”
So the restaurants say: “You know what? I have all these things to worry about like my Sysco orders, my employees, keeping the lights on, cleaning the restaurant, customers coming in. I don’t have time to focus on my site and my brand or figure out the next technology coming down the pike.”
So we become this kind of consultant. But we take it one step further and say, “We have a Facebook fan page and it has 3,000 fans on it. If you want to tap into our fan page you’re able to, or if you want to tap into our Twitter followers, you can.” So we become their connection to the digital world. They don’t have to worry about figuring out how to use Google Ad Words, or Facebook Ads, or best practices for Twitter. We do all the work for them.
If you think about a restaurant, 90% of them are mom-and-pop places. Most of them are good at making pizza, but they don’t understand how to use Foursquare.
We’re taking advantage of that in a way that works for all stakeholders. It’s a solution that’s affordable for restaurants, provides a great user experience for consumers, and obviously works for LocalUp and our licensees.
This interview has been edited for length and clarity.