Startup Daily is reporting that Alistair Venn, the former CEO of Groupon is the new Managing Director of Menulog. Following the $865 million acquisition of Menulog by Just Eat from the UK, Menulog has grown it’s market to 7,000 restaurants in Australia and New Zealand, however it is currently facing an ACCC investigation to the market power that the combined Eat Now / Menulog company had following the merger of the two companies prior to the acquisition by Just Eat. How will the appointing of a new Menulog Managing Director affect the Menulog Commission rates?
Venn, who according to his Linkedin profile started at Groupon in February 2012 as the MD of Sales. He was made CEO in January 2013 and continued on their till May 2016. He will bring with him extensive knowledge of the Groupon ability to mass market to consumers, build a brand, and maximise sales through achieving the most effective discount for a product.
What does this mean for Restaurant Owners?
Venn will have been bought on board to attempt to build Menulog into the company which can return the investment of Just Eat has made in it. Menulog was clearly always going to increase the commission rates that it charged Restaurants, but the change of Managing Director with these kinds of skills also means an increase in the discounting and auction fees that Menulog will force Restaurants to accept in order to appear at the top of search results. On our recent trip to Chicago for the National Restaurant Association show, we talked to the team from GrubHub and they said they had charged commission as high as 45% in cities like Chicago and New York. These types of increases in commission will only increase in Australia and New Zealand as Menulog attempts to justify the $865 million that was spent on it by Just Eat.
The amount and rate being charged appears to be variable, depending on the amount of competition and how well the Restaurant has negotiated in the past. We are also seeing much more increased activity in the area of ‘bidding’ for orders, where the Restaurant is charged a higher commission to appear higher in the search results. We have had Restaurants ringing in scrambling to replace large amounts (more than $2,000 a week) of online orders that were coming from Menulog / Eat Now that have gone to other restaurants because they have either refused to payhigher Menulog fees or refused to offer higher discounts to customers.
According to the article in Startup Daily, Menulog has added 29 staff this year as it clearly attempts to ramp up the number of customers that it has and as well as the number of orders that each restaurant does.
What can Restaurants do to minimise the impact from Menulog?
There are 4 main things to do to minimise the impact of the Menulog fees increase:
- Stop promoting the Menulog brand. The awards that are given out and stickers on the windows drive consumers to use their website and app, which places Menulog between you and your customers.
- Negotiate with Menulog about commission. In some areas where there is little competition, Restaurants may be able to negotiate a decrease in fees without any loss of orders.
- Determine your strategy. Some restaurants are cutting food prices with lesser quality meat and other ingredients to be able to cope with increased Menulog fees and the increase in discounts that need to be offered. Others are maintaining their quality but accepting that they may not be price competitive in Menulog.
- Start taking orders online from your own website. Our Free Restaurant Online Ordering is cloud based Restaurant software that allows Restaurants to take commission free online orders and most importantly to collect the email addresses of their customers. This is critical to being able to build a sustainable online orders business for your Restaurant.
Our online ordering software for Restaurants is becoming increasingly popular as Restaurants look for ways to build their databases and cut the fees that Menulog is charging.
What has happened to Groupon?
One of the big trends that we have seen over the last 12 months is the decreasing number of our customers using Groupon. This could be from a couple of reasons, firstly that our customers are using alternative means to market their Restaurants. Email, Facebook and SEO are significantly better ways to market a Restaurant, driving non discounting customers to the Restaurant and the Restaurants are more in control of their branding and marketing so it is easier to increase sales through marketing, or it could be an increasing recognition across the industry that it is extremely difficult to drive sustainable profits from a Groupon campaign.
We used to scan our data to see which of our customers were running Groupon campaigns for what we called the Groupon death spiral. A restaurant would run one campaign, then a second one 2 months later, then another a month later, then 2 more the next month and then they would stop answering the phone. The increasing frequency of the campaigns was driven by the lack of overall profitability from Groupon and coupon marketing.
Last year when the share price fell below $5, the Chicago Tribune wrote an article about the challenges facing the business. With the share price now just above $3, (still a market cap of $1.7 Billion) Investopedia outlined some of the issues for Groupon, including increasing competition, the decline of daily deals and a focus on new customer acquisition at the cost of looking after existing customers. With flat user growth and net income losses since 2010, we may be seeing the end of Groupon unless it can morph into a business that creates value for both Restaurant owners (and other types of businesses) and consumers.