how-does-chownow-make-money

How Does ChowNow Make Money?

ChowNow is a food ordering platform connecting local restaurants with online customers. The company was founded in 2011 by Christopher Webb and Eric Jaffe. The company makes money via subscription (with three main plan options, with the monthly at $199/month, annual at $129/month, and two years at $129/month), setup fees (2.95% plus $0.15 for every order it facilitates), and order fees (12%, but the restaurant can essentially have this fee waived if it adjusts its menu prices to compensate).

History of ChowNow

While Webb was working in finance in 2007, he took a call from his mother about an investment opportunity. Three people were starting a new restaurant in his neighborhood of New York City and were looking for backers. Webb was initially hesitant because he knew how difficult it was to turn a profit in a restaurant. But after reading the group’s detailed business plan, he decided it was a worthwhile investment.

The restaurant, known as Tender Greens, proved to be a success with a further seven restaurants opening over the next few years. However, Webb witnessed firsthand that online ordering was problematic. At the time, the only viable option for a restaurant business was to join a platform such as Grubhub and surrender 40% of every order. 

Chains such as Chipotle and Domino’s realized this early and spent vast amounts of money on their own direct order systems. However, for smaller players, this was simply not feasible. Sensing there was a chance to do something about it, Webb quit his finance job in 2010, moved to Los Angeles, and founded ChowNow with Eric Jaffe.

After convincing the owner of a sandwich place in LA to beta test their new technology, Jaffe placed the first order on the ChowNow platform in 2011. The platform was an instant hit and expanded into multiple states thereafter. Webb and Jaffe made a deliberate play for to establish themselves in Chicago early on. Not only was it the home of Grubhub, but the pair figured it was full of restaurants who were tired of paying Grubhub’s commissions. They were ultimately correct, and it would not be long before ChowNow was available in all 50 states.

In mid-December 2020, ChowNow surpassed 100 million takeout orders and claims to have saved restaurants more than $400 million in commission fees. In addition to an app and website, ChowNow restaurants can also enhance their online presence with branded products, marketing assistance, and customer memberships.

ChowNow revenue generation

Unlike many similar services, ChowNow does not receive a commission on food orders. Instead, the company makes money via subscription fees, setup fees, and order fees. 

Let’s have a look at each of these in more detail below.

Subscription and setup fees

ChowNow charges a subscription fee for access to the full product suite. This includes takeout ordering, restaurant delivery, curbside ordering, QR code dining, email marketing tools, branded apps, and the ability to create customer membership programs, to name a few.

Setup fees vary from restaurant to restaurant, but typically cover the cost of point-of-sale system installation, tablet issuance, or the creation of branded apps and websites.

There are three plan options here:

  1. Monthly ($199/month) – plus a $399 setup fee per location.
  2. Annual ($129/month) – plus a $199 setup fee per location.
  3. Two year ($129/month) – plus a $199 setup fee per location.

The company also charges a fee of 2.95% plus $0.15 for every order it facilitates to cover the interchange fees incurred by Visa and Mastercard.

Order fees

ChowNow also charges order fees on its Order Better Network which connects client restaurants with a sizeable list of ordering traffic channels. These include Nextdoor, OpenTable, TripAdvisor, Yahoo!, and Yelp.

The order fee for this service is 12%, but the restaurant can essentially have this fee waived if it adjusts its menu prices to compensate.

Key takeaways:

  • ChowNow is a food ordering platform connecting local restaurants with online customers. The company was founded in 2011 by Christopher Webb and Eric Jaffe after Webb realized smaller restaurants could not afford to develop their own order systems.
  • Unlike its competitors, ChowNow does not charge order commissions. Instead, it charges a monthly subscription fee that gives full access to its product suite. There is also a setup should the restaurant want to open a new location.
  • ChowNow charges a 12% order fee on orders that occur via its Order Better Network, which helps restaurants open digital storefronts on high-traffic sites. 

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DoorDash is a platform business model that enables restaurants to set up at no cost delivery operations. At the same time, customers get their food at home and dashers (delivery people) earn some extra money. DoorDash makes money by markup prices through delivery fees, memberships, and advertising for restaurants on the marketplace.


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GrubHub Business Model

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Instacart’s business model relies on enabling an easy set up for grocery stores, the comfort for customers to get their shopping delivered at home, and an additional income stream for personal shoppers. Instacart makes money by charging service fees, via memberships, and by running performance advertising on its platform.

Lyft Business Model

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Uber Business Model

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Uber is a is two-sided marketplace, a platform business model that connects drivers and riders, with an interface that has elements of gamification, that makes it easy for two sides to connect and transact. Uber makes money by collecting fees from the platform’s gross bookings.

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Postmates is a food delivery service built as a last-mile delivery service platform connecting locals with shops. Postmates makes money by collecting fees (commission, delivery, service, cart, and cancellation fees). It also makes money via its subscription service (called Unlimted – $9.99/month or $99.99 annually) giving free delivery on every order of more than $12.

Uber Eats Business Model

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Uber Eats is a three-sided marketplace connecting a driver, a restaurant owner and a customer with Uber Eats platform at the center. The three-sided marketplace moves around three players: Restaurants pay commission on the orders to Uber Eats; Customers pay the small delivery charges, and at times, cancellation fee; Drivers earn through making reliable deliveries on time.

Coupang Business Model

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Amazon Business Model

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Amazon has a diversified business model. Amazon’s primary revenue streams comprise its e-commerce platform, made of Amazon labeled products and Amazon third-party stores. In addition to that, Amazon makes money via third-party seller services (like fulfilled by Amazon), advertising on its platform, AWS cloud platform, and Prime membership.

Getir 

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