How Third Party Delivery Apps are Draining the Lifeblood of Restaurants with Nabeel Alamgir: An EOFire Classic from 2021

0:01Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire. Brought to you by the HubSpot. podcast network, the audio destination for business professionals with great shows like the Ops Authority. Today, we're pulling a classic episode from the archives, and we'll be breaking down how third-party delivery apps are draining the lifeblood of restaurants. To drop these value bombs, I brought Nabil Alamgir into EO Fire Studios. Nabil is an immigrant and grew up homeless. He worked at Bear Burger for 10 years before becoming the CMO at 25. He is now the CEO of Lunchbox. He is revolutionizing third-party delivery and how restaurants utilize marketing analytics.

0:40In today's foundation, we'll talk about how as a marketer, you get to throw everything on the wall and see what sticks. How ghost kitchens also give restaurants the ability to explore new areas. They give new entrepreneurs and chefs who can't open their own business the opportunity to own one and oh, so much more. And a big thank you for sponsoring today's episode goes to Nabil and our sponsors. DTC Pod, hosted by Ramon Berrios and Blaine Bolas, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. DTC Pod is a podcast about all things direct to consumer.

1:12Ramon and Blaine cover everything from starting, growing, and optimizing e-commerce stores and DTC brands. If you're interested in the stories behind your favorite consumer brands, this podcast is for you. One recent episode on how the best brands are built is a must listen. Listen to DTC Pod wherever you get your podcasts. Many EO Fire listeners have launched non-food franchises and Franbridge Consulting has guided them. Franbridge's founder and frequent EO Fire guest, John Ostenson, has done more placements than any other in the country and his service is free. Sign up for a consultation with John or get a free copy of his book, Non-Food Franchising at franbridgeconsulting.com.

1:53Nabil, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. Hey everyone, thank you for having me. I love that that's the first question and here's what I believe and actually everyone disagrees with me on this one, especially within my organization. Quantity over quality. Quality is not important. Quality is definitely not important because it is subjective. quantity, that you cannot ignore. Volume, you cannot ignore. Speed, you cannot ignore. Trial and error, the biggest part of trial and error is trying and finding those errors.

2:32So that's something I believe in all parts. And I'm a marketer and designer before this, so I care about quality. But to me, pace matters more than anything else. And I don't care what anyone says, which is you have to be thoughtful, you have to find the consequences of what you're doing. I don't care about any of that. I care about pace. I care about try and fail and do that very quickly. Well, Nabil, believe it or not, I 100 % agree with you because you're talking to the first ever daily podcast guy back 10 years ago in 2012. What? No way, is that true? Yeah, listen, I knew that quality was not going to be there for me because I had never podcasted before.

3:13So I just said, I'm going to be the quantity guy. I am going to kick out the most episodes humanly possible, one every single day, interviewing a successful entrepreneur. And guess what? It was a quantity that won because I got better every single day. Instead of just doing one per week or a couple per month, I was putting in the reps. I was honing my skills and mastering my craft, getting better quality, but because of the quantity. So love that. Great way to start the interview off. And I just want to kick this back in your direction, Nabil. Who the heck are you? I am a foodie and I am a busboy.

3:52Those are the two things I am. I love food, especially my mothers. And I love that I started as a busboy in this country when I first came here. I started as a busboy at 17, but I came to the country at 15. That's who I am. I am other things, but that's the origin story. That's the scene in the movie I hope happens if I'm successful. If I'm not, but I hope they don't make a movie because who wants to watch that? Well, I do love that. We mentioned in the introduction that you worked at Bearburger for 10 years before becoming the CMO, so the Chief Marketing Officer at 25 years old. Can you talk just a little bit about those 10 years and how you achieved the CMO position at such a young age?

4:36It was painful. It was filled with trial and error. It was filled with, and as a marketer, you get to do this. You get to throw everything at the wall and see what sticks and rinse and repeat. So I think that's where it came from. But, you know, the early years were tough because I was a, I mean, I'm a son of a cab driver and a Duncan worker. Those were my parents. I love them so much. They brought me to this country. That's like winning the lottery, right? That's it. Nothing gets better than that. So that's what happened. They brought me here. They brought me to the one place where I think I could have made it and nowhere else, Queens, New York, right?

5:08The most diverse zip code in the world. More languages spoken in Queens than anywhere else in the world. So fact check me on that. Maybe I'm making that up. Most likely I'm not. We're going to go with you on that one. Yeah, I think so. I think so. I checked Wikipedia. So that's what happened. And the early years were, hey, I need a job to pay for prom and pay for school. And we grew up in the project. Things were tough. I need a job. And I got a job as a buzz boy. And I was very humbled by it. It was exhausting. But I was humbled by it because I got to do work and I got paid for it. That was the first time doing it, a new concept.

5:43an amazing concept and I never looked back I just wanted to dive in I went to college for a hot second and dropped out it was all about staying in the restaurant industry staying in hospitality growing that restaurant from 1 to 50 and letting life take you where it needs to but something amazing happened and this is a this is the part despite all the trial and error and all the insecurities and all the nights where I thought I was not good enough at one point I started believing I was. And I started believing that I've earned this. And some confidence started to build, and that was beautiful. And even all the way to becoming CMO, I was still grappling with those things.

6:20So it's an amazing thing to try and to, even no matter your background, to build the habits and muscles that will help you believe that you can do better and you can contribute. So that's what those 10 years were like. And a blur. They were like a blur. believe in yourself fire nation because what's the alternative not believing in yourself why would you want to live a life like that you have two choices yeah believing or not believing so why not make the obvious choice and just believe in yourself have the confidence to go forward and one thing that i think is true is that 99 of the listeners right now nabil they'd be lying if they said they've never used a delivery food app to bring amazing steaming food to their doorstep.

7:07It seems such an amazing convenience, but you have another tale to tell. So share how restaurants have developed an unhealthy reliance on delivery and delivery apps. Absolutely. Before I say that, I just want to say one more thing about believing to Fire Nation. I'm not saying Fire Nation. Like this is, have you watched Avatar? Yes. animated show and there's fire nation in there so i'm i'm dating myself aging myself but uh one thing about believing which is i i i heard david sacks uh a venture capitalist say this uh a couple of weeks ago on his podcast and it just it is ingrained in my life now which is as a pessimist you get to be right but as an optimist you get to be rich and it is so much healthier being optimistic So please believe it's so important.

7:55Back to the question, which is about unhealthy reliance on third-party delivery apps. You know what happened? Restauranteurs said, we want to open restaurants. We want to serve our community. We want to do two things. Build a cool place where me and my friends and our community can hang and serve good food. That's what we are going to do. And that was really hard. That was low margin. That was a lot of labor laws. and that was really hard to do because most people who open a restaurant have never opened a restaurant before. They just do it. They're so entrepreneurial. They have so much grit, so much more grit and so much harder than running a tech company.

8:30I've done both. This is a walk in the park compared to owning a single restaurant. I wouldn't wish it on my worst enemy. Actually, I would wish it on my worst enemy because it is stressful. So that's what happened. And then one day overnight, the world said, you better be great at technology as well or we're going to crush you. Who's we? Just the restaurants who decided to go ahead and invest in technology. So the early adopters did. Domino's did. The pizza places did. Some of the burger places did. And then marketplaces came, Grubhub, Uber Eats, and others. They came and they were amazing. I love them.

9:07I love them as a user. That's where my love ends for them. The rest is pure hate. The love is there's a bunch of restaurants on a system I can order from, mix and match, and it'll come to me. But the problem is every$100 you spend on this system, the restaurant only makes five bucks on it. That's not sustainable. Like, what do you think about that? Did you know that on a$100 spend, the restaurant makes five bucks on it? I can't even picture that. I mean, how does a business survive? They do if it's only very little of your orders. They do if it's only 20 % of your orders and 80 % is dine-in. They do if you say, hey, that's just like cost of marketing, cost of doing business.

9:47These people will come back and dine in with me, right? Bam, the pandemic happens. Guess what? That 20 % that was insignificant is now all of your business. 100 ,000 restaurants in America have closed and are never opening again. There's only 650 ,000 restaurants to begin with, John. So it made it very, you know, the pandemic was so terrible. The only good thing that came out of it, it has made it clear to consumers and restaurateurs that you have to have your own system. You need to know your own guests. You know, when you order from Grubhub, the restaurant doesn't know who you are. There's no way for them to apologize to you if they screwed up.

10:24There's no way for them to thank you and give you something to invite you back. There's no way for them to speak to you ever again. That is insane to me being just an online marketer for so many years now because that's everything. Like knowing that data, knowing those analytics, knowing how to upsell, to downsell, to entice, to do all those things. that's absolutely crazy. So what's a restaurant to do? There is no more excuses for restauranteurs. I'm hard on restauranteurs because I'm one of them. I cut them no slack and I give them no room to breathe because they can do anything in the world.

10:59They opened a restaurant for the love of God. Adding some tech, easy, walk in the park. So they all have options now. You should have, and we call them third-party companies. We call Grubhub third-party companies. You should have third-party companies. They should be a discovery channel. They should be like Amazon. You introduce yourself to a whole new world. But you need to have your direct channel, a direct channel that sits on your website, that is as thoughtfully being crafted as your storefront where you have signed a 10-year lease and you're paying millions of dollars. You need to also invest in your digital storefront because it matters.

11:35Because not only is the pandemic made it clear that this could happen to you anytime, time, but the people who order from home and the people who dine in are not always the same people. It's a whole new community that you should have access to, that you should speak to. You always reward the people. Like if John, if you came to my restaurant and you came time and again, I'm buying you a beer on the house, right? Because you give me business and I know you and I see you all the time and you've been sending your friends over. I want to buy you a beer. I want to take care of your tab once in a while.

12:05That's what restaurateurs love to do. A chef and a restaurateur, they would love nothing more than for people to say their food is great. And now you can do that digitally as well. You need to use systems like Lunchbox, but not just Lunchbox, not just my company. There's so many others out there. There's no excuse. You need a first-party ordering system like you need a kitchen staff. It's the equivalent to me. Fire Nation, so many good value bombs here. and we have some things to be talking about when we get back from thanking our sponsors. Marketers have never been spread so thin. Trust me, I feel it too.

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14:35That's FranBridgeConsulting.com. So Nabil, we're back. And something that I'm kind of curious about because I kind of followed a little bit about what Travis Kalanick did, the former CEO and founder of Uber. And one thing that he really got into was creating like all of these like quote unquote ghost kitchens, I think they're called, where they're just like kind of popping up in like warehouses. So like really cheap rent because they're not even near any kind of population and they just don't have any like storefront facing. They just have the meal delivery service. That's the only thing that they serve.

15:11What are your thoughts on those? I love them. We call them ghost kitchen. There's so many different names. There's virtual, they're called virtual kitchen, ghost kitchen uh dark kitchen i love to call them ghost kitchen because i think that's the coolest of the three names or five names if you will so i love ghost kitchens because they tell you that you don't have to have a lot of money to open a restaurant like what does a most restaurant cost like five six seven hundred thousand dollars to open right because that's a lot of money that's not nothing it's not you don't need 10 million dollars but it's still a lot of money so what ghost kitchens do is they make restaurants and food accessible again, right?

15:52They tell you, hey, you're from a lower class family or a lower class income. You're a minority. Whatever you are, no problem. We will let you open a restaurant in this commissary kitchen, this shared kitchen, and we'll let you build a digital brand. You don't need much, a digital brand, nice logo, nice brand, maybe nice merch if you want to go above and beyond. And we will let you sell on third-party websites like Grubhub and Uber Eats, and you can do that so quickly. You need good food and somewhat of a brand, and you can do that very quickly like startups have built businesses. They have a domain, they have some business card, they pretend they have an office like the early days we did, and they go out to conventions and events and they sell their product, seem bigger than they are.

16:40You cannot do that as a restaurant. You don't have to go out and have this 10-year lease with this space that you don't know about. And most restaurants don't survive anyways. So I love Ghost Kitchens. I think they're amazing. I think they give existing restaurants ability to explore new areas. And I think they give new entrepreneurs and new chefs who could never open a business, now open businesses in commissary kitchens, in Ghost Kitchens, to go ahead and test out the space before they can land and expand, if you will. It is the same I'm being a startups and I'm so happy to can do this now. I'm really glad to hear that because I will say my kind of gut reaction as an entrepreneur myself is like, I love that concept.

17:21But I was wondering what you were going to think, you know, coming from the industry that you come from, because for me, it's just makes so much sense where it's like when you're like a front facing store and you have like dine in people, there's like so many factors. You're having to do so many different things. The expenses are so high. You're having to bring people into your restaurant. You're having to clean this, do that. But man, like with these ghost kitchens, it's almost like you can just create the most efficient food production. You can make it the most insanely beautiful delivery experience if you so choose.

17:50You know, if you're smart, make it such an insanely awesome delivery experience because of the boxes you're using or this or that. Whereas sometimes I feel like some restaurants, the delivery is kind of an afterthought, which again makes sense when you're giving us those numbers that they're making$5 for every single hundred. And I will say, as we're kind of talking about these third-party delivery services, they kind of smell a lot like the Groupon and Living Socials of the past. They seem to have kind of faded, where, you know, you get like 80 % off your first meal. But their whole promise back in those days was like, hey, yeah, you're going to lose money.

18:25And this is what Groupon's pitch was, was like, hey, yeah, restaurant. Like, you'll lose money on this 80 % off meal, but they'll get to know your restaurant. And, of course, they'll come back and back and back and back. Now, did that work back in the day? Restauranteurs have always been upset with Groupon and a similar couponing system. They were never happy by that because a group of people that came, they came and they burned everything on their way out. These were customers that never wanted to come back. These were customers that cared more about the cost than about value. And these were customers who were not repeat visitors.

19:02They were not from the community. They were not from around you. So there's no reason for them to come back, right? They were supposed to be a discovery channel that never quite delivered. And the problem with Groupon is, even when the food was half off, even when the food was half off, you still have to pay half of everything you made, which was a negative loss, back to Groupon. So it was not just half off for the restaurant. It was half off. And let's say on a$50 order, it was 25 bucks. The restaurant made 25 bucks. Their profit margin on that is, let's say, 20%. they still had to give half of that$25 to Groupon.

19:36So every order was a loss. Similarly, on Grubhub and others, the problem is the statements that you receive at the end of the month are so confusing. There's no way for you to know if you made money or if you lost money. Because Grubhub will pay you, and they'll make you look like they're crushing it for you, and then they'll come in and say, where's our money? And then you pay them off. So it feels better than it is. But again, the pandemic made everything clear. The pandemic clarified that they are not good. And the one solution we have as restaurateurs is to know that, you know, there's a good part of using Grubhub.

20:14And there's a reason the dominoes of the world did better during the pandemic than anyone else. Chipotle launched more ghost kitchens. Actually, Chipotle for the first time launched ghost kitchens in the middle of the pandemic. Stop watching them. Emulate them. we can make it accessible. Tech doesn't have to be so complicated. So your company is Lunchbox. Let's talk specifically about how Lunchbox is helping to resolve these problems that we're talking about. Lunchbox, we do two things. The impressive tech that Panera spent$300 million building, we give that to you for a couple of hundred dollars per restaurant per month.

20:51Monthly SaaS fee, no 20%, no 30%, no 50%. We charge you a monthly SaaS fee because that's what I wish I had when I was on the other side of the table. And what do we give you? We give you a custom app. We give you web. We give you technology where you can order from the table for dine-in and get the food delivered. We give you technology that Starbucks has where you can scan your phone and get the meal paid. We give you everything that the top tier systems have. They needed the least. We needed the most. We wanted to make that democratic. We wanted to get that tech and give it to everyone, regardless if you have five restaurants or 500.

21:29So that's what we do. That's one thing we do. And the second thing we do is we look at your data, we look at your customers, and we know John stopped coming in. We know John is vegan. We know John likes lunch more than dinner. And we know he likes to order at 11, sorry, 1 p.m. on Tuesdays. Let's ping him next Tuesday, one or two hour ahead on Facebook, Instagram, and via email or wherever we want to find him and let's bring him back because John actually likes us. He just needs to be reminded that we're here for him whenever he wants, right? And we convert that grub up sales. And while most restaurants in the country do 20 % or less in direct ordering, our restaurants do 50 % direct ordering and 50 % comes in from third-party companies.

22:11And that we think is fair. I mean, that sounds fair, Fire Nation. And that's kind of what I was sharing during the intro before I brought Nabil on is this whole idea, this whole concept, this whole conversation that we're having here today, what I wanted to do is plant seeds about how you can identify other strangleholds and maybe areas that you're passionate about, that you're excited about, or that you see need fixing, just like Nabil did with Lunchbox. So I love how you broke this down, how you, you know, worked on both sides of the fence here. So you know, the problems, you know, the solution that is needed and you're out now making the world a better place.

22:46So Nabil, let's end with a bang brother. Give us the one key takeaway that you really want to make sure Fire Nation gets from the entire conversation that we had here today. Give us the best way that we can connect with you and of course Lunchbox and maybe even start making Lunchbox part of our daily life and then we'll say goodbye. I'll share the last part first and end with the banger. I hope it's a banger. I don't have one, so I can come up with something while I'm buying time and sharing how to contact us. Our website is lunchbox.io. Come check us out. And for me, Nabil Eats on all social media sites.

23:21I do eat a lot, so Nabil Eats on any of the social to find me. But more importantly, I'm so happy that, John, that there are other entrepreneurs listening, and I hope I can tell them what I've heard, and I hope I can tell them what I did not hear enough, which is it is supposed to feel like hell. It is supposed to feel like a grind. It is supposed to be exhausting. There's many days now and we have built a successful couple of hundred million dollar business. We're in 30 states, 200 employees. Some days I still am not sure. I still don't believe. There's Friday nights I wish I did not do this.

23:56It is supposed to be part of the process. It's fine. It's noise. Be optimistic. Keep going. Go to bed. Going to bed is a huge, huge solver of many problems, wake up and you're fine again. It's part of the process. Believe in it. Believe in yourself. I failed two, three companies before this. It sucked when I was in the middle of it. I look back. I don't think about it at all. So look back at other challenges you've already overcome. You're going to be fine. Just keep going. Nabil, thank you for bringing us back around to the theme of this entire interview, in my opinion, which is believe in yourself.

24:33because when that starts, Fire Nation, it never ends. So Fire Nation, you know that you're the average of the five people you spend the most time with. You've been hanging out with N.A. and J.L.D. today, so keep up the heat. Head over to eofire.com, type Nabeel, that's N-A-B-E-E-L, in the search bar. His show notes page will pop up with everything that we talked about here today. And Nabeel, thank you for sharing your truth, knowledge, value bombs with Fire Nation today. For that, we salute you and we'll catch you on the flip side. Thank you. Thank you so much, John. Thank you, everyone. Hey, Fire Nation.