Food entrepreneurs shift their focus to software to help the industry thrive
Slinging espressos and wrapping burritos are tough businesses. Is selling software any easier?
Two groups of food-service entrepreneurs — the ones who brought you the Barismo cafés and Boloco lunch spots — are about to find out. They’re raising money for software ventures that will target the business they know best. It’s a business, explains Barismo founder Jaime van Schyndel, in which the labor market is tight, rents are high, health regulations create constant pressure, and there’s always a well-heeled competitor like Starbucks or Peet’s trying to steal your customers.
And, adds Lucy Valena, money is often too tight to purchase the pricey software that might help a small-scale entrepreneur better manage her business. Valena is CEO of Raveler, a Boston company she cofounded with van Schyndel, but she’s best known locally for having run Voltage Coffee & Art in Kendall Square. The café, which had become a favorite gathering place of techies and biotechies, was acquired by Barismo in 2015.
Valena and van Schyndel unveiled Raveler last month at a coffee industry trade show in Boston. It’s a Web-based software application designed to help small food producers — like a café that sells bags of coffee beans, for instance — keep track of what they do. When a new batch of product gets started, the software gives it a batch number and keeps tabs on the ingredients that go into it, as well as any special notes about how it was made.
It’s intended to help food producers gather data that can help them better understand their historical production and demand, as well as predict future demand. But it also does something simpler, van Schyndel says: It helps them remember exactly how they made a particular batch of product.
“One of our test customers is a chocolatier who made this beautiful batch — but lost his sticky notes” reminding him of what went into it, von Schyndel says. “By the time you get feedback weeks later, when it sells to customers and you want to replicate it, you can’t find your notes.”
Several local companies have been testing Raveler, but Valena says it’s “still in beta-land, getting feedback and adding new features.” The company has raised some initial funding from individual investors, she explains, but is hoping to raise $500,000 more this year, as it transitions the beta testers who have been using the product for free into paying customers — and looks to sell to other businesses.
John Pepper is also hustling to raise money, about $1 million, for a startup called Worthee. In 1996, he was one of the founders of the Wrap, a smoothie and burrito chain now known as Boloco. It operates eight locations around Boston and one in Hanover, N.H., not far from where Pepper lives.
While overseeing hundreds of front-line workers (and their managers) at Boloco, Pepper says, he observed a few things: Managers didn’t like to do performance reviews. No one was helping employees develop their skills or polish their résumés, so they could eventually move into better-paying roles. And for restaurant owners like Pepper, it was hard to tell if things behind the counter were going well or poorly at a particular location — until problems started affecting the bottom line.
“A strong culture with a team working together can increase your sales in almost a matter of weeks,” Pepper says. “And even a few percent increase of sales makes all the difference in the world of the restaurant business,” with its thin profit margins.
The Worthee app runs on a smartphone and provides a way for workers to give feedback to one other and to the company. When an employee opens the app, a short statement pops up, like “Cleanliness is something we focus on every day,” “My manager gives good feedback,” or that a particular coworker is trustworthy or reliable. The employee can respond with a star rating to each statement and enter a bit of text, if so desired. (Pepper worked for a stretch as an Uber driver, and the feedback mechanism is inspired by that company’s app.)
Pepper says the feedback is aggregated anonymously. The goals are to help managers who work on-site identify high-potential or problem employees and help off-site managers understand when they have issues that need addressing.
A key component, Pepper says, is helping ambitious employees gather information about their own performance in a way that will help them earn more pay where they currently work and build an online résumé that will help them when they’re ready to find the next job.
What’s different about working in software, versus food?
“The physicality of the food business was what made it hard,” Valena says, whether that means back pain or a leaky pipe. “The lack of physicality is what makes the software business difficult. I spend less time feverishly rowing my little boat and a lot more time checking my compass and wondering if the damn thing is broken.”
But the lure of software, compared with wrapping burritos, is that it’s much more “scalable” than a restaurant or food-production company. In other words, you can sell $10,000 more of it next month, and $100,000 the month after, without renting additional space, buying any more equipment, or having the health inspector in for a high-stakes visit.
And for that reason, more investors will put money into a software startup, versus a new bistro or craft brewery.
An example: Toast, a Boston company founded in 2012 that now counts almost 1,500 employees, last month raised $250 million in funding. It began by selling a tablet that could replace the cash register in restaurants, but has since added more features.
Still, if selling food is challenging, selling software to the people who sell food has a high degree of difficulty.
“The people running restaurants are working 60-plus hours a week, and constantly putting out fires, so the attention span and the ability for them to spend time implementing or adopting any new solution or product is very low,” says Rory Crawford, CEO of Boston-based BevSpot. His company has raised $25 million to sell inventory-management software to bars and restaurants and has 35 employees.
“It’s absolutely a cop-out to say that you can’t sell into this industry,” says Philip Beauregard. He’s an entrepreneur who founded a Boston software startup that sold to restaurants — it didn’t take off — and runs a beef jerky company, Brothers Artisanal, in New Bedford.
“The really hard industries are the ones that produce the biggest payout,” he says. “But you have to do the gritty hard work and give the restaurants or food producers something they want.”