Modern technology has made it easier than ever to enjoy a quality night in. Streaming services offer thousands of movies and TV shows for a low monthly fee. Video games continue to get more advanced with each passing year. The wealth of online food delivery services on the market today makes it convenient to look for your favorite local eateries, choose what food you want, and have it brought to you, without you ever having to talk to anyone on the phone.
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What you might not realize, however, is that the pizzerias in your community spend a great deal of money to appear on these food delivery applications. Pizza restaurants often see thin profit margins to begin with, and mom-and-pop pizza shops could be on an unsustainable path by doing business with major players like Seamless and UberEATS. Now, thanks to online pizza delivery service Slice, pizza delivery is being made more profitable for local pizzerias nationwide.
Slice was founded in 2010 by a New Yorker who comes from a family of pizzeria owners. He saw the financial impact these services have on pizza businesses, and he wanted to create an alternative tool that would help pizzerias compete online while also managing to turn a profit. So far, Slice has partnered with thousands of pizza restaurants in states across the US, including Baltimore, Boston, Chicago, Las Vegas, Nashville, New York City, Philadelphia, San Francisco, and Seattle. Slice has managed to amass a total of $20 million in venture captial (VC) funding. It's hard to make an impact in a crowded space as online food delivery, but Slice is standing out as a tool that works for pizza restaurants and customers alike.
Company DossierName: SliceFounded: 2010Co-founder and CEO: Illir SelaHQ: New York, NYWhat They Do: Online pizza deliveryBusiness Model: $1.95 fee to restaurants per orderCurrent Status: Live, and used in more than 10,000 pizzerias across the USNext Steps: Continue to scale and grow
Why It Works for Business
If you're the owner of a pizzeria, then you might feel as though you have no choice but to do business with one of the major online food-delivery platforms. After all, if your competitors offer online ordering and you don't, then you'll probably lose the sale to the more convenient offering. However, the most popular food-delivery platforms can end up costing you a fortune in fees, so it pays to do your homework before cementing any alliances.
According to an August 2018 report from Statista (see chart below), two of the most popular food-delivery platforms that respondents used in the past 12 months were Grubhub (which includes both the Grubhub and Seamless apps) and UberEATS. A report from The Zebra revealed that UberEATS charges a staggering 30 percent of the order total for its service. Grubhub charges a fee ranging from between 5 and 15 percent of every order depending on the restaurant's location. That's quite a bit of money taken from each sale.
Another thing that threatens the independent pizzeria is the online ordering systems offered by the large fast-food pizza chains such as Domino's and Pizza Hut. These companies have their own sophisticated online ordering systems and offer cheap goods. This creates a unique and severe problem for independent pizza restaurants. On one hand, they are directly competing with the large chains, which often beat them on price. On the other hand, they need to have an online ordering system to compete in the modern world, so they might think they have no choice but to sacrifice their profit margins and do business with the food-delivery platforms.
This is the exact sort of pain that Slice is trying to ease. It's a simple business model with transactions made through the Slice app cost restaurants just $1.95 regardless of the order's size. You can think of Slice as an e-commerce platform for pizzerias. The app comes with a pizza-building module in which customers can customize toppings and pie sizes before ordering. Slice has designed their app to give pizzerias the online ordering infrastructure they need to stay competitive, while giving them a much more affordable alternative to the mainstream food-delivery platforms.
Inside the Platform
Slice founder and CEO Illir Sela has a rich knowledge of the pizza business. He said that he was inspired by the need he saw in his community. Slice was originally founded under the name "MyPizza" and was limited to just a few dozen shops in the Northeast. After a period of rapid growth the company rebranded itself to "Slice" in 2016. Since then, it's been aggressively promoting itself to independent pizza shops.
"I founded the business to help friends and family in the pizza industry to be able to compete in the digital world. I'm third-generation in the pizza industry. I have a lot of family and friends that own pizza shops, mostly in the New York area, but also as far out as Arizona," Sela said. "I started off just building websites and online ordering services for these locations. But then I realized that the pizza industry was completely underserved as it pertains to technology and online marketing."
One curious difference between Slice and competing apps is that the competition is designed to offer as many food options to users as possible. Open the Grubhub app in an urban area and you will see food options ranging from pizza to Indian and everything in between. When we spoke with Sela, he made it very clear that Slice's focus is purely on the neighborhood pizza shop.
"We're very much a solution that's focused on this one vertical. The goal for us is to drive value to the pizza shops and then ultimately pass that value back to the consumer," Sela said. "Our whole system is built around pizza. We've designed the app so that, within just two taps, you can place an order, and we have features like the pizza builder, which makes it easy to customize your order."
By focusing on just one type of eatery, Sela said the company has designed a more streamlined experience than the other companies. "[With the other apps], you don't know what you want to eat when you log on. You want to discover all these different cuisines, and I think the experience is sort of heavy. We wanted to do something different."
Slice Users and Funding
So far, the more focused approach has worked well for Slice. Slice is currently used by more than 10,000 pizzerias throughout the US, and Sela told us that this number is quickly growing. On top of that, as stated earlier, the company has raised a total of $20 million in VC funding. Broken down, that amounts to $15 million in funding from VC firm GGV Capital, and the rest coming from VC firms Primary Venture Partners and Contour Venture Partners. When asked about the company's future plans, Sela insisted that he and the rest of the Slice team are committed to scaling and growing.
"There's another 40,000-45,000 local pizza shops around the country that are very much underserved. Our goal is to continue to drive forward and bring the solution to all those locations," Sela said. "At the same time, we want to continue to innovate on behalf of these locations, and ultimately, help them convert their businesses from a...phone-centric business to a digital business."
Ask the Experts: Startup Advice Lonne Jaffe, Managing Director at Insight Venture Partners , said that Slice is wise to focus solely on helping pizzerias."I think it's actually a really interesting model, and you can see that in their growth and traction. It's a similar business architecture as the food aggregator marketplace businesses, but very tuned to the pizza industry, and really focused on minimizing cost and allowing the pizzerias to charge the same price that they would charge if you called them up. Pizzerias don't have to raise prices or sacrifice their profit margin with it; it's a cost structure that's very manageable," said Jaffe. "I think the timing is very good, and the margin issue is particularly salient for pizza because the nature of the product and [its] pricing don't give as much margin room as other kinds of restaurants. By focusing on a large market that's very homogenous in some ways, I think that's a really good domain to target restaurants [that] are frustrated with the price point of something like Grubhub."