If you live in Chicago, you may think the online food ordering market is pretty well tapped. While services like Grubhub, Seamless and Eat24 offer thousands of options within city limits, areas further away from the city often lack the same breadth of options. In fact, online food ordering has penetrated just 5 percent of the restaurant market.
It turns out that the standard model, which works so well in dense urban areas, isn’t quite as beneficial out in the suburbs and rural towns. But foodjunky is taking a different approach to the online food ordering model that industry giants like Grubhub have adopted.
“The average charge in the [online food ordering] industry is 14 percent, and the average industry margin for restaurants is 13 and a half percent,” said foodjunky co-founder Travis Johnson. “What we’re going to do is not charge restaurants absolutely anything. That way, we can go after the 95 percent of the space that doesn’t have any competitors.”
Much of that space is in suburban and rural areas, where margins can be tighter, making foodjunky’s free service a more attractive option than those that charge a commission.
The site also serves as a source of exposure, getting the restaurant’s menu in front of hungry customers. In areas where foot traffic may not be reliable, foodjunky can even help drum up business.
Instead of charging restaurants, foodjunky charges customers 99 cents per order. That may seem like some user-hostile behavior, but the company also does a lot for that small fee. The “concierge fee” means that foodjunky will do the legwork if your order shows up wrong or doesn’t show up at all.
And since restaurants aren’t paying a fee — and could even be dropped from the platform for bad service — they’re usually pretty responsive to foodjunky’s customers.
Johnson said the company has grown nearly 700 percent in the last year. Right now, foodjunky is focused on corporate ordering, offering tools to streamline big group orders. But the company recently became a channel partner with Yelp and hopes to expand is footprint in the individual market over time.
“We aren’t competing with the big names,” Johnson said. “We’re filling in where they can’t really work.”
Johnson co-founded foodjunky back in 2011, but moved to Detroit to build out its business after raising a $1 million seed round. After building out the product, the company decided to move back to the city. While it helps that there are lots of great VCs and office spaces in the city, Johnson said what really drew foodjunky back was the talent.
A couple foodjunky co-founders had stayed behind when the startup initially moved to Detroit, working on the product in their downtime. But as the company grew, they took on full-time roles and started working out of 1871.
Then, more and more Detroit employees began heading to the Chicago office to work — and Johnson realized that the city was too much of a draw to ignore. Now, foodjunky is back as it looks to build out its consumer-facing product.
Currently, it has 10 employees across engineering, customer service and marketing. Next, foodjunky is looking to build up its next round up funding. That will allow them to shift from contracted teams to in-house employees for many development and customer service positions.
This article was originally written and posted by James Risley at Built in Chicago on 1/17/17 and can be found here.