This interview was conducted for the Food Innovators by Food-X Podcast.
Interview with Servy Founder Robert Edell by FOOD-X MD Andrew Ive
Speakers: Andrew Ive, Robert Edell
[Transcript]
Andrew: Tell me about your business. What do you guys do? Why do you do it? And why should anyone care?
Robert Edell: What do we do, why do we do it, and why should anyone care? Well, first, I’ll start off with kind of how it came to life and then I’ll tell you why people care. So really quickly, about 2 years ago, I was out to dinner in New York City and I had a horrible experience at a restaurant so bad that actually for the first time, I took out my phone, clicked Yelp and started writing one of those scathing reviews that keep restaurateurs up at night. But ultimately good came over me and I stopped myself realizing I didn’t want to bash this small business online. Most people know these online reviews, they live forever and they have a huge impact on businesses.
And so, this experience was somewhat of a light bulb moment for me in that I realize that there’s all these digital tools to create public content such as Yelp, Trip Advisor, Facebook, etc. However, there’s no ubiquitous platform that delivers private constructive feedback to business centers, and so that night I decided I wanted to create that platform and so pretty much dove headfirst in, started talking to restaurateurs, my friends in the hospitality industry.
And one thing that kept coming up was mystery shopping. And so I had learned about mystery shopping in the past, but what I didn’t know was how expensive it was. Restaurants currently pay up to several hundred dollars for a single mystery shop. When I learned this, I was mind-blown. If someone like me who studied hospitality, I’ve worked in hospitality and most importantly, I’m very passionate about hospitality. I love to dine out. And yet my feedback, my insights weren’t being captured anywhere yet someone else was getting paid in exorbitant amount to essentially fill out a survey.
And so when we learned this, that’s basically when we decided that we probably want to start—we want to disrupt this legacy, fragmented, billion-dollar mystery shopping industry. And so we created Servy to help operators attain valuable insights and data to help understand how they’re performing and how they can improve going forward.
And so what we built is a mobile app which we call Servy and Servy empowers the community of frequent diners and hospitality professionals to privately evaluate restaurants in exchange for a partial reimbursement of their meal. And the partial reimbursement is significant because (1) it’s more cost-effective for the restaurants, and (2) it means that the evaluator has skin in the game and are actually paying for part of their meal and so what that means is they’re actually inserted in that restaurant and they have skin in the game so the feedback is going to be more genuine.
And so, ultimately we’re building a huge community empowering and connecting them with restaurateurs to help drive business improvement and decision-making.
Andrew: Okay. There’s so many different things in there that we can kind of dissect them. But before we do that, I get why you started. So you were in a restaurant and it was just lousy. It was a really unpleasant experience and, you know, you had an initial urge which is quite a good one actually. An initial urge to pull out your cellphone and kind of slam them on Yelp. So you didn’t want to get off and, I don’t know, throw your plate across the room and hit the chef between the eyes with your paella or your spaghetti or whatever it was you were eating. But you actually—you know, you were being a good citizen by wanting to go on Yelp. But even then, you stepped back off the ledge, right?
Robert Edell: Right, right.
Andrew: But how do you go from that moment to—and I’m not sure where, you know—you can obviously—tell us where your business is at right now. How many people, you know, how’s it going, you know, what kind of traction are you getting? And what I’m trying to figure out is how do you go from pissed off kind of customer in restaurant who was probably doing some kind of interesting day job at the time to, you know, where you are today as an entrepreneur in your own office with a thriving business.
Robert Edell: Sure. So, I mean the experience basically I mean identified the problem, right? I, well, one, you know, the business, the restaurant behind that delivered poor experience which upset me, but identify the problem and that I wanted to communicate my feelings. I wanted to be heard. I wanted this, you know, problem to be solved yet there wasn’t a constructive way to do it. And so Yelp and all these platforms are a way to essentially voice your opinion publicly but not privately in a constructive way, and so identifying this problem and knowing that businesses, any type of business wants to hear from their customers and wants to deliver great experiences for their customers. And I realized that there is an opportunity here and so, you know, I realized that the best way to capitalize on that opportunity was to build a mobile app that, you know, essentially created that communication channel between customers and restaurants at least to start and eventually business owners of all sizes.
And so the reason we chose to actually start with restaurants specifically is, one, you know, this experience that I had. Of course, you know, it helped initiate that. But in addition, if you think about the service industry, I mean there’s hotels, there’s airlines, there’s retails, enormous but the one thing that people do every single day is eat and so we figured the best go-to market strategy was to go to restaurants where, you know, we knew we’d get people using this on a daily basis because, you know, everyone has to eat every day.
In addition, over the last few years, we’ve seen a shift in at least the American culture towards food. Being a foodie has become kind of a hot thing and so we wanted to definitely capitalize on that and build a strong community around these people that are very passionate about food. And so, we—I think we started the first restaurant about a year ago.
Andrew: So when did you—what was the meal by the way? Don’t tell me the restaurant, but what was the first meal that sort of started this crazy crazies game?
Robert Edell: I never reveal the restaurant but it was an Indian restaurant.
Andrew: Okay. So, a terrible Indian restaurant which is a shame because it’s my favourite food and I’ve had many, many good Indian meals.
Robert Edell: Yeah, but they’re not all good.
Andrew: Okay. So how long ago was that now?
Robert Edell: That experience was about 2 years now actually, which is crazy to think about. But, yeah, about 2 years ago.
Andrew: Two years ago. And you signed up your first restaurant when?
Robert Edell: About a year ago. So, you know, that’s a long time in between and the reason for that is, you know, when I decided I wanted to pursue this, I did have a day job. I was a consultant at Ernst & Young.
Andrew: Okay. So E&Y consultant, so you were probably working 100 hours but not very much money.
Robert Edell: That’s about right, although I got to expense a few meals and a few cabs here and there. But yeah, I was working a lot and traveling a lot too which was pretty draining and so, you know, it was hard to have a side project. I also had another start-up at the time. So this was kind of the third venture at that very moment.
Andrew: You can’t tell me being a start-up founder is any less intense than being a consultant.
Robert Edell: It’s tremendously more intense.
Andrew: There you go. So you’re sort of saying “Well, I was working too hard and traveling too hard,” but you’re still working too hard.
Robert Edell: Yeah. I probably work harder now that I did that, but regardless, things were challenging. But, yeah, you know, I was—you know, I had a day job and so I could only work on this, you know, when I had time. In addition, you know, when you’re pursuing a venture, you know, while your entrepreneurial instincts tell you to jump right in, you know, you really need to do your research and go through the customer discovery process to identify whether there is an opportunity and what the best approach is to this opportunity.
Andrew: So how did you—well, let me—before I ask that question. You had the idea. Who did you rope in, convinced, bang on the head, schmooze, whatever, to join you in the craziness which kind of followed?
Robert Edell: That’s a great question. So, initially I decided to pursue it alone and figure out, you know, first, is it worth pursuing at all and so there was a research, you know. I would say a research stage and then after, you know, doing some customer discovery, after speaking to some restaurant owners, after talking to some friends and people in the industry and identifying that there was real problem to be solved, that’s when I decided I needed to recruit a technical co-founder to help me build the solution.
As you know, it’s not easy to find great tech talents today and especially, you know, not only just a capable developer but also someone that you want to build a business with. And so I spent several months, you know, basically networking and trying to find, you know, the ideal co-founder and I just couldn’t. And so what I ended up doing is I tried to outsource development with a little money I had saved through a dev firm in Argentina and didn’t have a good experience there. I wasted about—
Andrew: It’s amazing how many kind of entrepreneurs have that inflection point where it’s “Do I go find a CTO or something? In which case, it’s incredibly tough to find that person because they’re such a hot item right now. Or do I go outsource it via Upwork or, you know, eLance or whatever, you know, oDesk or whatever?” Normally, if they go the oDesk route—well, not normally but quite often it ends in tears. And also—and even if it doesn’t, you end up with code which isn’t necessarily something you can evolve because it’s—you know, it was designed by somebody specific and unless you continue to work with that specific person, the next person picking up that code, you know, has challenges sort of picking it up and moving forward.
Robert Edell: Yeah, absolutely. I mean if you think about it, the incentives aren’t aligned. It’s a typical agency relationship in which, you know, the outsourced company is, their objective is to get you, you know, basically to meet the minimum requirements as quickly as possible. They’re not incentivized to think long-term. They’re not incentivized to think “Oh, this code needs to be easily digestible by a different firm or a different, you know, developer.” And so, you know, yeah, in some ways it’s a Band-Aid solution, you know. I do know people that have had great experiences, but the majority, you know, don’t have.
Andrew: It’s so much just the first market validation step that gets you the minimum buy per product out there, you can revalidate the market, you can figure out whether consumers even want this thing. And if you start to get real traction, then you’re probably going to have to bite the bullet, get some money and build it for real from scratch.
Robert Edell: Yeah, it’s interesting you said that because that was my plan. I had developed, you know—I had essentially created the requirements for what I would call an MVP and my goal was to, you know, basically use that MVP to validate the concept and then build the team and build everything in-house. You know, the goal was never to work with this particular entity long-term, but they couldn’t even get me an MVP built. So, yeah, that was—
Andrew: How much did that cost you?
Robert Edell: So I negotiated the hell out of that contract and so it actually didn’t cost me much at all because they failed to meet certain deadlines and that, you know, again I had it in my favour there. So, luckily, the financial loss wasn’t great but there was a huge time loss and time to me is the most valuable resource, and so I wasted 6+ months trying to make it work with this organization. And yeah, I mean “fuck” is the only response there because, you know, I would have rather have spent more and wasted less time.
Andrew: But the way you sort of backed kind of kept it made sure that you didn’t completely lose everything was to say to these guys, “Okay, in month 1, you’re going to deliver X. In month 2, you’re going to deliver X+Y, and you’ll get paid at each stage. And if you don’t, you don’t get paid,” and the reality is they didn’t.
Robert Edell: Correct, correct. I mean coming from Ernst & Young, I was very familiar with the, you know, structuring these types of consulting agreements and that, you know, you have milestones and you make sure there’s dates and deliverables attached to them. And if those things aren’t met, then there are repercussions more or less.
Andrew: Yeah.
Robert Edell: So, you know, I—
Andrew: So how did you solve the problem?
Robert Edell: So how did I solve the problem? So after this dreadful experience, I already connected with an old friend from high school actually. We had known each other for almost 10 years and so he was at GE at the time.
Andrew: He was a developer?
Robert Edell: Yes. So he studied information science in college and then he was in GE’s IT leadership program and so while he wasn’t a hard-core engineer at the time, he was, you know, developing some web tools for them. And so, you know, I found a way to convince him to join me on this venture.
Andrew: So hold it a second. He was in GE in a leadership program—
Robert Edell: Right.
Andrew: –which meant he probably had the next 30 years all mapped out.
Robert Edell: Correct.
Andrew: He was about to, you know—eventually he was going to be owning some serious money, probably had all sorts of potential shares and things in the pipeline as well. Take me through that conversation. So you met up with this old friend that you’d known for 10 years and you sat him down and you said “I had a really bad Indian meal once.”
Robert Edell: I had a bad Indian meal. Let’s open a restaurant. You know—
Andrew: Take me through that first conversation, or had you kind of kept him up to speed anyway?
Robert Edell: Yeah. So, you know, backtracking a little bit. I had looped him in a couple months before, you know, kind of the conclusion of this outsourcing arrangement and I booked him in, you know, basically—you know, I initially started asking what his, you know, competencies were from a development standpoint and his interest in the start-up world and, you know. I got the sense he was interested in a start-up opportunity but maybe he wasn’t fully confident that, you know, he could be that, you know, CTO right off the bat to build, you know, a full-tech suite that, you know, in production in the market. You know, he didn’t have experience with mobile apps for example at the time and what-have-you.
And so what I decided to do is offer him a position as essentially an adviser. So I engaged him in a way that was, you know, a little more hands off, not too connected.
Andrew: Low impact.
Robert Edell: Yeah. And then, so over time, you know—and first of all, he was excited about the idea. I explained, you know, the opportunity but I was able to loop him in over time slowly and show him what could be built and that—
Andrew: So when you offered him that advisory role, did you offer him equity?
Robert Edell: I did. I did. Yeah, over a vesting schedule, I did.
Andrew: Okay. Out of interest, what was the range of that? Was it 1%, 2% and kind of in that ballpark?
Robert Edell: I don’t like to talk specifics from an equity standpoint, but I offered him a significant amount because I really valued, you know, his opinion. I trusted him. I think to me the ability to work with someone is probably the most important thing. I knew him and he’s an honest, hardworking person. I was willing to, you know, pay up so to speak for him.
Andrew: I love that. Most entrepreneurs sort of are worried about 2 things. One, their idea which they always think is something that they can never tell anyone about in case they steal it. And the other is, you know, the equity side and they’re trying to nickel and dime everybody which means you get what you pay for. You get people not committed to, you know, achieving the vision. So, okay, you got one of your friends on board, a real kind of serious guy who had some chops in the space on board as an advisor to start and you sort of saw that as—that was almost like a gateway drug for you guys. That kind of got him a little taste of the Servy action, right?
Robert Edell: That was the hope. That was the hope. Give him a taste and I hope he keeps coming back for more.
Andrew: And he did.
Robert Edell: And he did, and he did. You know, his turning point was, you know, at some point that summer—I was out at an event. I was going to a ton of food events, restaurant events trying to, you know, network, meet restaurateurs just kind of get ingrained into that scene as I was somewhat removed from it because Ernst & Young, I was in financial services advisory, which is a big step away from hospitality. I studied hospitality at Cornell. I’m not sure if I mentioned that. So, big turn there, but trying to, you know, kind of crawl my way back into the hospitality scene.
And actually at this event I met Shen Tong and Chris Stewart and, you know, we were having a conversation. I don’t think I could understand half of the things Shen was saying, but what I did pick out was that they were starting a food accelerator program and, you know, that immediately, you know, piqued my interest as I was—At that point in time, I would have done anything to go full-time on Servy. I just didn’t have the capital to do so. And so, you know, long story short, we applied to Food-X.
Andrew: So you and your adviser.
Robert Edell: Me and my adviser, yup.
Andrew: And when Food-X said yes, you both quit?
Robert Edell: We both quit. I think Julien—so Julien, my co-founder, was in Milwaukee at the time. So, GE he was working in their healthcare division, so GE Healthcare. So he was in Milwaukee and so I think he gave 2 or 3 weeks’ notice and he was in New York, you know, 2 or 3 weeks later with all his stuff packed up, so—
Andrew: Now, it’s worth mentioning that although Food-X, you know, gives a 50K total package money-wise for people to join as founders in the accelerator, that’s not going to get 2 guys a full—that’s not really a full-time income for a long period of time. So, you guys still have to kind of jump off the cliff and hope you could build a parachute before you landed.
Robert Edell: Absolutely. You know, it’s funny. You get into an accelerator program and it’s obviously very exciting. You’re getting a capital infusion into the business. You’re getting mentorship, resources, etc., etc. But reality is the money provided, it doesn’t move the needle, you know. It’s capital but it’s—you’re essentially getting 3 to 6 months runway depending on the size of your team, sometimes even less I guess for a larger team. But for us, you know, I think it served as one validation in that other people believed in what we were doing and other people believed in us. And I think that helps mitigate the risk in that, you know, you feel like, you know, you’re on to something and that there is a big opportunity there. So I think that’s part of it.
And then the other part of it is, you know, as an entrepreneur, you’re somewhat delusional, right? You believe you’re going to succeed no matter what. You know you’re going to keep fighting. You know that no matter what, nothing is going to stop you. And so, you know, I think at that point in time, my thinking was, you know, “All we need is 3 months. All we need is 4 months. We’ll make it work.” And so that was the mentality we went in with and, you know, we’re obviously very fortunate. We’re still around so I guess it worked out, but—
Andrew: You joined Food-X. You’ve got the—you know, there was that small injection of capital. I’m interested and this isn’t about—you know, I don’t want this interview to be about Food-X. I want this interview to be about Servy. But I’m also interested in just understanding if, you know—I’m guessing some people applied to Food-X because they want that 50K, you know, the initial amount and then the kind of CLN on the backend, so the 50K capital.
And then, as they go through the program, I sort of realized that what they’re getting out of it is actually—there’s actually other more valuable things than that small amount of money. I’m wondering if you when you joined saw the breadth of what you could get out of it or whether you sort of figured that out as you went through the program.
Robert Edell: So, we definitely—you know, we didn’t just do it for the money at all. We knew that, you know, there is a tremendous amount of value to be obtained through the program that would come through networking, through the mentorship, through the co-working space just being around other start-ups, you know, at a similar stage in a similar space solving similar types of problems. So we knew that, you know, the program value was worth more than the actual capital that was being provided. We definitely knew that going in.
With that said, I think the difference is we needed the capital. There was just no way to go full-time without it and so I think, you know, different companies come in with different needs and so we needed the capital more than I think some of the other companies where, you know, I think there was— in my cohort, there was 1 or 2 companies where the founders had had successful start-ups in the past with successful exits and they maybe had some savings that they could allocate to this new venture. We just, you know, being— at the time, we were I think 23 years old. We didn’t have, you know, the financial resources to, you know, to do that start-up.
Andrew: So given that you both quit your jobs, did you guys end up, I don’t know, living in the same house on sofas with ramen noodle pots everywhere? Or how did you kind of get through the first 3 to 6 months?
Robert Edell: Yeah. So, I was living in New York at the time. I was in the same apartment for the last 2 years with my girlfriend. As you probably know, sharing an apartment with a significant other assuming you’re splitting it makes it a little easier to live in New York, a little more affordable.
Andrew: Was she cool with you quitting E&Y?
Robert Edell: Yeah, absolutely. You know, I think anyone that knows me knew I wasn’t going to last at Ernst & Young. And it’s not that I couldn’t last, it’s that my heart was never in that world, that corporate world.
Andrew: So everyone but E&Y knew what, right?
Robert Edell: Everyone but— I think E&Y figured it out too. I was trying to start something like entrepreneur—I was trying to start actually a business development opportunities related to accelerator programs whereby we would provide pro bono consulting and start building, you know, relationships with early stage start-ups. So I mean I think anyone that actually saw what I was doing there would have realized that, you know, I was itching to get into the start-up world.
But yeah, my girlfriend was supportive. And Julien, he—so Julien and I both grew up in New Jersey, so about a 40-minute train ride from the city and so for that reason, Julien moved back here. He was actually able to live at home for a little bit. So, you know, I can’t think of enough for that as, you know, not many 23-year-olds want to live at home. But, you know, obviously our priorities were set around the business and so he commuted in and then crashed on my couch a bunch as well. So, there were some, you know, some couch nights but, you know, all in all it wasn’t too bad.
Andrew: Okay, so 1 year to get the product done. Was that predominantly Julien?
Robert Edell: So we started development in September of 2014 and Julien got the first version of the app and I would say, you know, a dirty, dirty MVP sometime in Q4 2014. And then we would iterate it on an almost weekly or, you know, twice monthly basis.
Andrew: So 8 to 12 weeks, give or take.
Robert Edell: Yeah, yeah, which is pretty remarkable. It’s a testament to, one, Julien’s, you know, ability to learn and work ethic as well as, you know, the development of technology that we’ve seen, you know. We now have hybrid app technology that allows you to essentially create a website, wrap it in a container and push it, you know, within, you know, a month or two which is remarkable and so, you know, we chose to use the Ionic framework, but there is React, Native, and some others out there that, you know, have really made mobile app creation, you know, attainable for, you know, most web developers.
Andrew: Yeah. I mean you’re talking about the technology and I get it, but there’s also a little sprinkling of having no money and desperation in there too I’m guessing.
Robert Edell: Oh, of course. You know, everything about it, that amount of money and then the 3-month accelerator program, every hour that goes by, you know, you just get—you know, you feel more weight on your shoulders and more pressure because when money runs out, you know, it’s over.
Andrew: I agree. Money is oxygen.
Robert Edell: Exactly.
Andrew: So a question for you. How did you keep the customer in the frame as you and Julien were building this product? Because, you know, no point spending those 12 weeks hacking something together if at the end of it nobody wants it and, you know, there’s not a product that anyone is going to pay for.
Robert Edell: Yeah, it’s a great question. So I mean I think that’s where customer discovery comes in. You have to get out of the building and talk to customers, you know. You, of course, always have to use your instincts and your gut but, you know, at the end of the day, you become too close to your product and you’re too biased, you know, to really make every decision around the product. You need customer input to drive, you know, the product road map and so I was frequently meeting with restaurateurs, with foodies, with pretty much everyone, you know, I could get a hold of to identify, you know, what were the minimum requirements, you know, to build something that added value, a credit value for someone.
And so, we—you know, I mean I met with crazy little restaurateurs to chain director of operations to school professors to Yelp elites to, you know—I tried to get anyone and anyone that, you know, was in our, you know, market to talk to me and so that helped us get the insight to make some of the decisions we made.
Andrew: And was that sort of an Evernote kind of accumulation of Evernote notes as you went around having all of these conversations?
Robert Edell: Yeah. I mean, you know, I don’t know if it was Evernote specifically but, you know, we tried to come up with ways to document the conversations and, you know, make sure we took note of the takeaways because it’s too easy to have these conversations and then forget some of the details and, you know, and/or let your own personal preferences or assumptions kind of taint, you know, I guess what actually was said and what happened. And so we tried to be diligent about documenting everything so that it was more or less an objective view. But at the end of the day, I mean anytime you’re soliciting information from someone even like the way you word a question impacts the response. So there’s no way to perfectly collect that type of data, but we did the best we could.
Andrew: Yeah, absolutely. So did you—was it sort of going out and just having conversations with people about the problems so you could really understand the context on whether or not it was a pain point people were prepared to pay for? Well, there’s a lot of P’s in that, isn’t it? Pain point people were prepared to pay for. Or were you in pitch mode? Was it—I’m wondering if there ever came a point where you sort of went out, had all of these conversations sort of brought it all back with the notes and figured it all out, and then (a) built a product and (b) turn that into a specific and typed pitch that would get your customers? Or whether you didn’t even need to ever pitch it, it just became a kind of organic point where restaurants say to you “Hey, if you solve these things, come talk to me.”
Robert Edell: So, I mean it’s a mix. I would say very early on when we didn’t have a product, it was you know mostly conversations were around like “What would you—what is, you know—what—” I guess we were in problem identification mode. And so, you know, I think that stage you know again we were kind of just gathering insight to help, you know, make some of the early decisions.
But once we had something that we can actually put in people’s hands and show then it became more of a pitch and that, you know, like “This is what we have. What do you think?” And actually I think there was a point in October, November when I actually was going out to try to sell these restaurants. I wasn’t just, you know, interviewing them for insights. I was actually going and pitching them our MVP solution and so—I think that’s actually the most important way—I think that’s the best way to get the feedback and insights is because when you’re asking just generally about something very abstractly, I think, you know, people are more likely to be like “Oh, yeah, that’s interesting. That’s cool, like that would help me.”
But when you’re actually asking them to pay for something, it’s a whole different ballgame and you’re going to get, you know, real honest feedback. And if someone is saying no to you, you know, that’s essentially validation or I guess a validation somewhat.
Andrew: Yeah. So what—do you remember your first pitch?
Robert Edell: First pitch, so before even Food-X, I had gone to restaurants and pitched them as if I was selling it. I had tried that in the past to essentially validate the idea and so I think my first pitch was a restaurant—like technically my first pitch was a restaurant around the corner from my apartment. And without going into detail, this individual owns a bar restaurant and I would say he wasn’t too interested in guest feedback and so he was kind of just like “Why should I care? I don’t get it. Why do I need to hear it from these people?”
Andrew: So, how did you open the conversation?
Robert Edell: So at that point in time I had said, you know, and I basically, you know, lied and said “In about 4 weeks, we’re launching this platform that helps you get private constructive feedback from your guests and it’s actually tied to the check, meaning it’s verified. It’s not fake Yelp reviews, and it provides additional context, yadi-yadi-yada.” And, you know, I never really even trained in sales especially not B2B, you know, hit the pavement sales and so I kind of just threw it all out there like that and this particular operator just wanted nothing of it. And part of is I don’t think he fit our target market in that, you know—
Andrew: He didn’t care what consumers thought.
Robert Edell: Yeah. I mean, you know, he just didn’t care. And so I think that was really hard to hear because, you know, I think at that point in time I just assumed that every single business owner wanted to, you know, get feedback and always, you know—I always thought there was an opportunity to improve something, but it turned out that wasn’t the case.
Andrew: In your experience now, how many out of interest— just kind of spit-ball it for me, how many restaurants do you think you’ve spoken to at this point since you launched Servy?
Robert Edell: It’s tough. Maybe 100 plus? I don’t know.
Andrew: Okay. And so of 100 plus, how many would you say do care about what consumers think and actually do want feedback? Or are you getting just better figuring out your target audience, in which case, you know you’re going to be talking to somebody that does care in advance.
Robert Edell: Yeah, so—you know, it’s hard to know who’s really going to care or who’s not going to care. But, you know, I would say generally speaking, if a restaurant is doing—well, restaurants with more than 1 location generally love what we’re doing and that’s because, you know, they’re scaling, they’re losing touch with the customer and they’re trying to figure out ways to make their operation more efficient, you know, identify trends across location, how to compare locations, etc., etc. So we found that multi-unit are kind of a sweet spot for us.
In the independent space, you know, the fact of the matter is there are some small business owners that care tremendously and see value in data and modifying ways to quantify, you know, some of these insights and then again there are some operators that are just, you know, they’re contentious. I mean there are small businesses that, you know, pays the bills and gives them a place to hang out and maybe, you know, share their grandparent’s recipes and they’re not interested in what the customer thinks because their position is that “It’s working. Why do I need to change anything? You know, I’m paying my bills, like why change?”
And so—and there’s nothing wrong with that. It’s just a different approach, like they may not be aspiring to build the next restaurant group or the next Chipotle. They’re content, you know, so we’ve identified that, you know, not every independent restaurant is a fit for Servy, but that’s every business, right?
Andrew: But I would have thought Servy helps restaurants who want to grow because they understand their customers better. They also understand how they are performing, their staff, the quality of their food. I mean there’s so many dimensions to it. but I would have also thought it’s restaurateurs whether it’s with one restaurant or multi-restaurants who want to figure out how to improve customer loyalty, survive, you know, if the time is tough. I mean it’s not just about “Okay, I want to build an empire,” is it?
Robert Edell: No, not at all. Yeah, it’s—you know, I mean if you think about Servy, we provide a platform that allows a restaurateur to assess any aspects of his or her business, and so it could be food-related, it could be atmosphere-related, it could be service-related. The questions can be yes, no, multiple choice, 5-star or it can be free-form text. So, you know, we really give them the opportunity to obtain any type of information they want and so, you know, you don’t have to want to build an empire you could just want to know like “Hey, you know, what should we change about our menu? What do you think of our, you know, new bathrooms? Do we have enough TVs?” you know, if you’re a sports bar. I mean the opportunities are endless and, you know, it’s not necessarily just about scaling.
And I think that’s what’s exciting about what we’re doing is I think from Yelp and some of these other platforms, you can pull out some interesting insights, but you can’t do—you know, you can’t measure the things that you can measure with Servy. So, for example, we can tell you who your top-performing servers are, who your worst-performing servers are. We could tell you that, you know, which nights of the week yield the highest food ratings and that could maybe tell you which chefs or chef de cuisines or sous chefs are performing the best. We could tell you—you know, we could ask the question of “Why did you choose to dine with us tonight?” so that a restaurant can understand, you know, what brings guests in.
I mean just the opportunities are endless and so we really have a product that works for any type of operator, but we can’t help those that don’t want to be helped and don’t want, you know, to obtain information.
Andrew: Yeah. I mean one of the aha moments I had talking with various restaurateurs, my assumption going in was location was the most critical factor of restaurant success. So that was my initial thinking. And I think there’s this sort of belief that location is everything. But I came to the conclusion rightly or wrongly and it’s just my theory that it’s the interception of location, business model and marketing. And what I mean by that is there are some restaurants which are destination restaurants; in other words, people will physical drive the distance required to go there because it’s an experience and because the business model for that particular restaurant necessitates people are fine making that journey.
There are other restaurants which are more neighborhood-star restaurants, drop in and they’re catering to their local community and the business model of that restaurant needs to work within that context.
So I would have thought a product like Servy would allow a new—well, I was going to say a new restaurateur, but any restaurateur to figure out how their business model needs to evolve to optimize, you know, their location, their business model, the customers they’re getting coming through the door now versus the kind of customers they want in the future, and I think it helps them to figure out how the business needs to evolve.
Robert Edell: Yeah, I mean absolutely. Yeah, I mean absolutely. I think, you know, today we’ve seen consumer behaviour changed tremendously and especially with technology and all these different things. And I think the way people think about food and hospitality is changed. I mean if you think about 50 years ago, what was a restaurant was just a place to go eat, right?
And now we’re creating what people referred as experiences and people are going to restaurants not just to have a steak; they’re going to have a steak and feel this energy from the dining room and, you know, have the server recite, you know, menu items in this certain way and tone and what-have-you that, you know, elicits this emotional feeling and so, you know—because it’s so easy to get good food today, but it’s really hard to have a great experience.
Now as we’ve become ingrained in technology, you know, our heads are down in our phones, we more than ever need those experiences, those great experiences to continue to get us out of, you know, our apartments or homes and get our heads out of our phones. And so I think, you know, it’s interesting you said location, service, and what was the other—?
Andrew: So it’s the intersection of—
Robert Edell: Business model and location.
Andrew: Location, business model and marketing. So in other words, positioning how you communicate to your customers, what you do and how you do it.
Robert Edell: Yeah. And that’s an interesting piece too is today more than ever, you know, social media and the internet is driving, you know, decision-making around, you know, food. And so, you know, you really do have to position yourself in a way that appeals to this digital world. And, you know, whether it’s creating more photogenic food or creating an atmosphere that makes people want to, you know, be seen in it so they’re sharing it on Instagram, Snapchat, Facebook, etc. I mean I think that’s a huge part of it today.
Andrew: Yeah. And also size—it’s interesting. Size of the restaurant, you know, turns—there’s also the kind of financial aspects of how a restaurant works.
Robert Edell: Yeah. I mean it’s so easy to forget that it is a business, right? And so it’s got to make money somehow and so—yeah, I mean there’s the economics that are driven by—you’re absolutely right, you know, the size of the restaurant, how quickly it can get guests in and out. You know, obviously the menu pricing, there’s so many variables there and that’s what makes this so tricky. It’s a very low margin business.
Andrew: Yeah.
Robert Edell: You know, best case is you’re making, you know, single digits and so I mean sometimes you can pull a 20% but it’s not easy. And so, yeah, I mean that’s the hard part and that’s something where data and technology can really help so you can identify how many turns you’re getting per night, what’s your average check size, what servers are helping you drive, you know, the highest check sizes. You know, that’s where data and technology can come in. But at the end of the day, if you have a small venue and a concept that doesn’t drive large check sizes and/or you don’t have the volume there, you know, you’re not going to make money and you’re ultimately not going to succeed.
Andrew: Now the interesting thing is that most of the restaurateurs I’ve met with are passionate, fabulous, committed people who normally, well, often are quite terrible at business.
Robert Edell: Right.
Andrew: Especially if they’re chef restaurateurs, right? I’m wondering how—if I was looking at Servy as one of those folks, I think I would be saying to myself “I kind of get it but I know this stuff. I already know who are my best waiters. I already know who, you know, which meals are making me the most money. I already know which nights of the week, you know, kind of are delivering the most kind of—” Now maybe there’s a degree of arrogance in that, but I’m wondering how you—what do they really do know, that’s the first thing, where the Servy sort of gives them the kind of data side of things rather than the gut side of things. How do you overcome that sort of “I already know my business this well; therefore, I don’t need you”?
Robert Edell: Yeah. Well, what’s interesting is—the truth is they do know their business better than anyone else. There’s no doubt about that. But they don’t know everything. They can’t see everything even if they’re spending 100 hours a week in their restaurant, it’s physically impossible to touch every single table. And more importantly, even if you engage every single guest that comes to your door, 90% of them are not going to tell you the full story.
How many have someone, a manager or your waiter come over and said, “How is everything?” and you say, “Oh, it’s great.” And then when they turn around, you turn your wife, your girlfriend, your kids, whatever and you’re like “Except for the steak and our water was not filled this and that,” you know, you’re never telling the full story. And so I think that’s the key is just, you know, painting the truth for these operators but without questioning, you know, their commitment or their understanding of their business and positioning it as a complement to what they’re already doing. You know, we’re never going to replace, you know, the hands-on owner, but we’re going to provide some additional tools to help him or her make, you know, decisions .
And in addition, you know, for some of these operators that are spending 100 hours a week, you know, we can maybe convince them that Servy can help them cut it down to 80 hours a week. So, you know, it’s a fun little one.
Andrew: So if I’m interested in finding out more about Servy and I think that, you know, getting more contextual and kind of deeper all-around information is going to help me in my business, how do I get set up and how do I get started, how do I get set up? Is this a kind of a 2-month process to kind of get started? Is it going to cost me, you know, the equivalent of car to kind of get committed? What’s it all about?
Robert Edell: Yeah. And so you just brought up pricing and that’s an interesting one for us because the real beauty of Servy is we’re making mystery dining affordable. And so what that means is we actually allow operators to break even or profit on every single evaluation. And so even if you don’t want our data—
Andrew: Forgive me. Every restaurant—I want to make sure I’m understanding correctly because you used the term—you didn’t say restaurateur. What did you say?
Robert Edell: So we allow every restaurant to profit—break even or profit on every evaluation, so every mystery shop. And so if we send a diner to your restaurant, we will charge you depending on what type of restaurant you have and some of the specifics. We’ll charge you anywhere from 50% to 100% of that check. And so what that means is from your perspective if you’re in that tier that allows you essentially to be charged 50%, you are actually going to profit of that diner that we’re sending you because your food and beverage costs are about 30% and so if you pay 50% to us and then 30% to F&B cost, you have 20% profit.
In addition to that, you’re also getting the data. And so, we are not only a data provider but we’re also an incremental revenue driver for a lot of our restaurant clients. And so for the operator that doesn’t even want the data, you know, we could actually convince them that we are essentially a marketing tool for them. We’re a customer acquisition tool as well. So that’s an interesting piece.
Andrew: So customers who are interested in using Servy—and by customers—let’s talk customers versus consumers. The people who are using your service to get the data, i.e., the restaurateurs, they’re the customers, right?
Robert Edell: Right.
Andrew: The consumers are the people who are sitting their butts down in the restaurant and consuming the meal.
Robert Edell: Correct, correct. So we advertise our customers, our restaurant clients on our app as an opportunity for our community of diners to essentially go to that restaurant, evaluate it and they’re going to get partial reimbursement of their meal. And so—
Andrew: Okay. So if I’m accepted as a restaurant into the Servy app/system, my restaurant is then marketed to your mystery consumer/shopper network.
Robert Edell: Right, right. So, essentially if we sign you up, if you’re a customer of ours, we would put your restaurant on our app. We’d work with you to create a customized question set, a set of questions to assess what’s most important to you or that’s food service or atmosphere-related. And then once you’re on the app, yeah, you’re advertised to our community and—
Andrew: And I can change those questions over time?
Robert Edell: Yes, absolutely. The goal is to allow you to obtain any types of insights you want. So we allow our operators to change that on a fly.
Andrew: Is that tough to do? Is that something that I can do myself or do I have to send my questions to somebody and they do it for me?
Robert Edell: Yeah, right now, you have to send them in but long-term we’re going to build a self-service tool that allows the restaurants to change them in real-time at their own discretion. And so that’s where the tool becomes very, very powerful because, you know, for example, if you are launching a new product, you know, or testing a new menu item on a given day, you know, you could immediately, you know, ask questions around that menu item and get immediate feedback from legitimate customers.
Andrew: You could also figure out if particular new staff members are up to scratch.
Robert Edell: Absolutely, absolutely.
Andrew: Okay. So, I want to join your app because it’s some—I’m sorry. Let’s stay with the economics for a second. So, now my restaurant is in your app. It’s being advertised to members of your mystery shopping group, so it’s a marketing opportunity for me. My costs are—go back. Okay. So I’ll just say that one more time. We will just cut that part out, you know, later on.
So, I’m accepted into your app. I then get marketed to all of your mystery shoppers and they get the ability to come in and have a meal. My cost of doing so—is there a setup cost?
Robert Edell: We only charge a setup cost in certain scenarios.
Andrew: Okay.
Robert Edell: So, low if anything.
Andrew: Low if anything, 50 bucks; low if anything at 5000 bucks?
Robert Edell: 100 bucks.
Andrew: 100 bucks. You got to put that price up.
Robert Edell: We’ll get there. We’ll get there.
Andrew: Okay. So I’m a restaurant. It’s going to cost me 100 bucks to get on your system and be marketed to your eaters. That’s insane. You guys are—okay. So it’s 100 bucks setup fee or less. That’s that. And then how do I get charged and how do—and you sort of touched on this, but how do I get charged and how do I pay you and when?
Robert Edell: Sure. So, as a restaurant, you would only pay us once we submit data to you. So once a diner comes to your restaurant, dines there. After the meal, takes a picture of their receipt to verify that they ate there and provide additional context around the experience such as the server, the date, the time, what was ordered. And then submits the evaluation within 48 hours of that experience. Once that evaluation is approved and sent to you, we would then bill you at the end of the month for it.
Andrew: Okay. And if they don’t submit the receipt, etc., within the 48 hours, you don’t get billed—they’ve just paid for their meal and they—
Robert Edell: Exactly.
Andrew: Nice. So you guaranteed results.
Robert Edell: Absolutely.
Andrew: And so it’s not one of those things where you sign up for a service and, you know, you get billed for something you’re not quite sure whether you’ve actually got something out of it.
Robert Edell: Yeah. No, early on in talking to restaurateurs, you know, too often they’ve been sold advertising products and other marketing solutions that promise, you know, a lot and don’t deliver or have no way to prove that they delivered. And so, you know, we wanted to take a stance early on that, you know, you’re only going to pay for the value we deliver. And so we think it’s important part in building these early relationships and credibility early on. In a long-term, maybe we introduce a monthly subscription component, but for the time being, we really like the pay for what you get model.
Andrew: It’s nice. I mean too many people are trying to sell things to these restaurants and then, you know, they’re never quite sure whether they’re going to get the real value on the backend. So this is something that’s totally aligned to results.
Robert Edell: Absolutely.
Andrew: Cool. I did have lots and lots more questions. How much time do you have?
Robert Edell: 5 minutes, 10 minutes.
Andrew: Holy cannoli. I got to wrap this one up then. This is too interesting, I apologize. I could go on for another, you know, 30 minutes or more. Okay. So we’ve covered the business model. We’ve covered the alignment of your fees with their results, which is fantastic. I’ve heard anecdotally via, you know, Food-X and SOSV people that have been working with you guys for a while that quite a few of your customers want more from you. And the guys are having to kind of say, “Well, you know, we can do what we can do right now.” How are you—where are you from a restaurant perspective geographically and can you take on more customers? Are you looking for more customers every day?
Robert Edell: It’s a great question. So, we are a marketplace, a marketplace with mystery diners on one side and restaurants on the other. And, yeah, the challenges with marketplaces are it’s very rare that supply and demand match equally and so, you know—in the very early stages of our app, we had 0 restaurants and 0 diners, so I guess that was the only time they were equal. But, you know, and slowly you sign a few contracts with some restaurants and then you immediately need diners and then you go out and get diners and incidentally there’s too many diners for the number of restaurants you have and so you’re constantly trying to balance, you know, both sides of that market. And that’s the challenge for us is as we continue to grow.
On the restaurant side, we need more diners. But from the diners’ standpoint, they want more opportunities. They want more restaurants to go to. You know, they want to see different things and so, you know, that’s the biggest challenge right now. But it’s something that, you know, we’ve overcome the initial hurdles there. We’re now in over 100 restaurants in New York City. We’re in New York City only right now and we have thousands of diners on our app in New York City and so we’re fortunate that from a diner’s standpoint, we have people that are very passionate about what we’re doing and love our app.
And so 90% of our growth is from referrals actually on the diners side, and so you know that’s not only encouraging in that, you know, people love our app and believe in what we’re doing, but it also means that we don’t have to pay for expensive advertising quite yet to build up that user base.
From the restaurant side, we’re always trying to grow. We need to get to a thousand restaurants in New York, one, to create an app that people, you know, can literally use every day and also to help make some more money because at the end of the day, we need restaurants, the restaurants are the ones paying us.
Andrew: What you need also I’m just kind of throwing it out is to figure out not only how to get a thousand restaurants in New York, but to figure out how to go do this quickly in San Francisco, in Las Vegas, in—you know, you name it because this is great. I think this is a great model.
Robert Edell: Yeah. You know the go-to market—I guess the expansion plans are large cities like you just said, you know, D.C., Boston, L.A., Chicago, Miami, big foodie-centric cities. And as far as how we go into those markets, you know, it’s still to be determined but that’s kind of what we’re doing right now in New York, is figuring out what works and what doesn’t. And once we feel, you know, confident in what we’ve done here and we develop kind of the strategy, the restaurant and user acquisition strategy, then we’re just going to replicate that in other markets. But, you know, we got to move quickly because it’s a competitive world out there.
Andrew: I entirely agree. Okay. Why don’t we—like I said, I could go on for another hour, so apologies that you said you’ve only got a couple minutes left. Why don’t we do this, tell me and tell other people where they can connect with Servy if they’re a (a) restaurant and want to sign up, or (b) they’re a potential mystery eater, and please—I don’t know if I can, but I would love to be a mystery eater for you guys if you’ll have me. How do people sign up if they want to be a mystery eater? And also if— I’m not sure if you’re in fundraising mode or if you want more advisers or, you know, what your results requirements are, but how can people get hold of you if they want to just talk to you about other parts of your business?
Robert Edell: Sure, sure. The best way to get in touch with us is our website, www.servyapp.com. So that’s S-E-R-V-Y-A-P-P.com and that’s where we have download things for our app. We’re on Android and iOS and when you download our app, you can join our community of diners.
Andrew: Does it cost to be a community of diner?
Robert Edell: No, not at all. It’s a free app. You just got to sign up—
Andrew: You just got to pay for the meal and then you get some of it back.
Robert Edell: Exactly, exactly.
Andrew: Nice.
Robert Edell: And then for restaurants, via that same website, you can contact us and you know reach out or you can email us at info@servyapp.com. And we’re always trying to add restaurants and build up our network. So, you know, that’s the restaurant side. As far as fundraising, we’re not actively fundraising, but we’re always looking to connect with smart people that, you know, can help us continue to think through, you know, how we’re going to grow and scale our business and so—
Andrew: Yeah.
Robert Edell: Always open to talk to more people.
Andrew: How would they get hold of you as well? Through the website?
Robert Edell: Yeah, I would say the website or I’m available on LinkedIn or Twitter or Facebook and Instagram actually. We’re on Instagram as well. Our social media handles are servyapp.
Andrew: Right.
Robert Edell: And then my email is rob@servyapp.com.
Andrew: Oh, now you’re going to get all the flow of people.
Robert Edell: I know.
Andrew: So if somebody wanted to connect with you on LinkedIn, they would go search for—
Robert Edell: Well, they could search for either me or Servy. We have both. We’re happy to connect.
Andrew: And they would search for Servy app within LinkedIn or just Servy?
Robert Edell: I believe both would work, but I think in LinkedIn it’s probably just Servy.
Andrew: Okay, cool. So I encourage anyone to reach out. Now I’m wondering if there’s somebody in San Francisco who believes that Servy should be there and we’ll start—you know, we’ll kind of somehow try and convince you to let them go put all the pieces together, you know. Get some restaurants interested in being your first customers and getting some people signed up on the app. If there was that person who proactively wanted to kind of help you start pulling San Francisco, Chicago, Atlanta, etc., etc., together, would you talk to them? Or is it just too early for that?
Robert Edell: I would probably start talking to them about now because I think, you know, there’s obviously a lot of planning that goes into that and so, you know, I think it’s better to start that conversation earlier than later. So I probably would start that conversation now. With that said, as far as, you know, a launched timeline, I couldn’t say quite yet. Yeah, I don’t think we’re quite there but I wouldn’t be surprised if we’re in another market, you know, in sometime in mid-2016.
Andrew: Perfect. Well, I really appreciate your time today. Thank you. And I know that—you know, I hope that people will reach out to you and connect with you whether it’s to, you know, become a mystery shopper, to sign up as a restaurant or to, you know, help you move the business forward. I encourage anyone who could do any of those things to reach out to you. I’m going to disconnect—or I won’t disconnect. I will pause everything, stop recording everything and again, thank you for your time today.
Robert Edell: Thank you, Andrew. Thank you so much.
Andrew: Okay. I am stopping now. Look at that.
[End of transcript]
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