It was another late night last fall at the LivingSocial office in Washington, D.C., and Alan Clifford and Ian Costello were hungry. As vice presidents of customer relationship management and product development, respectively, the two were often burning the midnight oil and coming upon the same dilemma: They wanted high-quality food, but fast.
Fast-forward to last November, when the two founded premium delivery concept Galley, which began taking orders in D.C. at the beginning of the year.
“It drove us nuts that every night we were making this tradeoff decision between convenience and high-quality food,” says Clifford, who worked at the D.C.-based digital coupon startup for six years. “We just always thought that somebody was going to do something in this realm, and so as we were getting ready to leave LivingSocial, we were trying to decide what was next. This was the problem that we just kept coming back to.”
Clifford and Costello aren’t the only entrepreneurs using the tech industry’s philosophy of disruption to shake up the restaurant space. Many other tech veterans are closing in on foodservice as the next industry due for disruption.
The tech mindset
The idea of disruption is a core tenet in the tech industry. In the past few decades, technology has embedded itself in our daily lives by transforming industries like communication, entertainment, finance, and more. Now several veterans of the technology industry are poised to disrupt a longstanding holdout: food.
Technology, of course, is already a mainstay in the restaurant industry. Social media platforms like Twitter and Facebook have helped operators engage with customers, while tools such as digital menuboards have improved efficiency. Nevertheless, the foodservice system as a whole has remained largely unaltered.
Where new tools can expedite or improve existing processes, disruption seeks to overhaul the entire system and rebuild it from the ground up. Just as pagers, mobile phones, and smartphones indelibly changed the way people communicate on a daily basis, a foodservice overhaul, experts say, would change the fundamentals, such as how consumers order food and how operators interact with the rest of the supply chain.
“All the sectors across the food industry are pretty antiquated, so it’s one of the last frontiers for disruption,” says Danielle Gould, founder and CEO of Food+Tech Connect.
Gould started blogging about the intersection of food and technology five years ago. At the time, she says, there was little tech activity in the foodservice space, with only about 50 organizations that were even thinking about food, data, and technology and how the three could intersect in a positive way. Since then, Food+Tech Connect has grown into a company that organizes in-person meet-ups and events and offers online resources for aspiring food entrepreneurs.
Gould has seen an explosion of innovation between food and technology in the last two years. “We’ve had this food renaissance where … chefs are the new rock stars,” she says. “You’re starting to see a lot of people that are coming with a technology background—be it investors or entrepreneurs or developers.”
Steve Case sees technology’s push into food as part of a natural evolution. Case, who was cofounder, CEO, and chairman of AOL before founding the investment firm Revolution LLC, has parlayed his tech and business savvy into the food space. In addition to D.C.-based fast casual Sweetgreen, he has invested in OrderUp—a food delivery startup that services secondary and tertiary markets that have not been targeted by existing companies like GrubHub—and Revolution Foods, which was founded by two mothers looking to bring healthy, affordable school lunches to K–12 schools.
Case says the fast-casual segment has already started to disrupt fast food. At the same time, consumer demand for healthier, “real” food and increased convenience are further driving a need for disruption in the restaurant industry.
“Our sense is technology will reshape how every aspect of food—the production of it, the distribution of it, the consumption of it—will evolve, with technology being a driver, as well as some demographic trends and some lifestyle trends that are favoring different options,” Case says. “In some respects, because of the ubiquitousness of the Internet, every company needs to be a tech company.”
When it comes to attracting tech alums and investors, the food industry’s potential for growth is an obvious incentive; the potential market for food is 100 percent, because, as Case points out, everybody eats, with Americans eating 4.9 times per day on average.
“Food startups will be using technology and tech startups will increasingly be targeting a $5 trillion food industry, but the lines will blur a little bit,” Case says. He adds that Revolution now receives more inbound calls from investors regarding Sweetgreen than any of the other couple of dozen investments in the firm’s portfolio.
The new face of innovation
As the borders between food and technology fade, the two sides have the opportunity to learn from each other and exchange diverse perspectives. In an effort to innovate and disrupt, tech companies often focus on optimizing their operations by continually breaking from routines and experimenting with new tactics.
Like many foodservice providers, Clifford and Costello tested recipes, hired fine dining–trained chefs, and worked with local food producers to position Galley for success. They broke from tradition by building kitchen automation software to predict consumer demand and inform ingredient volume. The cofounders also created a similar system to determine delivery routes.
“Instead of having the normal … hub-and-spoke system that exists with all food delivery businesses, where the driver’s constantly going back and forth to the restaurant, we send all of our drivers out with chilled bags at the beginning of the night, but with an optimized route that they’re going to hit everyone’s delivery window,” Clifford says. “We got really good at building algorithms to allow us to make that a very efficient process and a very affordable process for us.”
Like many entrepreneurs, tech leaders focus their efforts where they see a problem. Clifford and Costello started Galley because they experienced a dinnertime dilemma; Case invested in Sweetgreen because he saw an unmet demand for premium, healthy food in a fast-casual environment.
Ryan Salts, director of outreach and engagement for entrepreneur research center Café Commerce in San Antonio, Texas, says the limited-service sector could be especially ripe for innovation, given the challenges that operators face.
“Where food and tech will initially meet will be on the biggest pain points, because it makes the most sense for an entrepreneur to follow the pain. A lot of those pain points happen to be in waiting and idle time,” Salts says. “The pain points in quick service are more obvious because of the short amount of time that you have to get everything out.”
While the tech industry is well-versed in the art of disruption, foodservice is an exceptional undertaking. Tech experts might have experience in a fast-paced work environment, but it is hardly the same as running a kitchen and delivering a perishable product meant for consumption.
Clifford says that although his LivingSocial background did help guide him in running a business, Galley has proved more challenging. “If we have a problem in the kitchen and we’re slightly off on a recipe that day, you either throw out the entire batch or you get ready to hear a lot of customer complaints,” Clifford says. “It’s definitely a more difficult business because we have two very tough operational problems—delivery and food prep—but we think the technology enables us to make those problems a little easier to solve every day.”
Echoing this sentiment, Case says technology is a useful tool for innovation, but it should not overshadow other important factors like food quality and unit location.
“I think it requires a balance and a meeting of the minds and a partnership mentality,” Case says. “In the case of the [quick-service] space, obviously the food is the main event. Technology is increasingly important, but people aren’t eating the technology; they’re eating the food.”
Foodservice also stands to teach the tech industry and its workers about sharing. While brands strive to differentiate themselves from the competition, operators are not allergic to experimenting within the same category as competitors the way tech companies can be.
Salts says aspiring tech professionals could learn from the restaurant industry by not being deterred by competitors and rather viewing them as a means of bettering themselves. Just as food-truck gatherings and restaurant clusters capitalize on being part of a community, so too should tech companies.
“The communities of tech and communities of food work a hell of a lot better than islands. You’ll learn more,” Salts says. He adds that the modern tech community is a bit more receptive to collaboration than its forbears.
Similarities between food and tech workers also make for better partnership potential. “A programmer is almost like a chef: They’re both really good at their craft and there’s, to some degree, an artistry behind how you can create code,” Salts says. “But [it’s] also similar to if you were to make a soufflé: There’s not too many ways you can do that and make sure it doesn’t fall flat.”
The food-tech intersection
As the intersection of food and tech becomes more pronounced, a plethora of companies have emerged to guide operators and aspiring foodservice entrepreneurs through the nascent space. South by Southwest (SXSW), the annual Austin, Texas, music festival, has evolved to include film, tech, and, more recently, food.
In 2014, SXSW launched SouthBites under its “Interactive” category with the mission of jumpstarting innovation and bridging the gap between food enthusiasts and tech innovators. While this past March was only its second year, SouthBites boasted 30 panels over its three-day run, featuring culinary giants like David Chang, as well as Food+Tech Connect’s Gould.
“Interactive has always covered food programming in one regard or another … but within the last four years, we’ve really started seeing an acceleration of topic submissions that had even more of a common thread,” says Sarah Garcia, the senior festival programmer who leads SouthBites. In SouthBites’ first year alone, she says, food and tech individuals who were previously unfamiliar with each other’s work met for the first time and began talking about new projects and ways to change the food space. “We were all having conversations with each other about this [theme] starting to bubble up and there being a real opportunity for us to create a space that was maybe a little different from some of the already existing [technology] events.”
Garcia says that being able to bring in notable speakers from the Austin community and beyond was encouraging for the future of SouthBites. SXSW’s “Interactive” category also touts an accelerator program in which startups can apply to pitch their concept before a group of judges selected by SXSW; Garcia hints that as SouthBites grows, it could become a category within that accelerator program.
Salts sat on a SouthBites panel to discuss Café Commerce, which launched last July. Created as a partnership between the city of San Antonio and micro-fund nonprofit LiftFund, Café Commerce was designed as a business incubator program. Its culinary accelerator program, Break Fast & Launch, is the first of its kind in the U.S., Salts says, specifically targeting food-related ventures.
“When we saw that this was a consistent need … we thought it would be a good way to mimic what we’ve learned from the tech community,” Salts says.
The three-month programs are not classrooms, but rather hands-on learning with expert guidance, Salts says. With most accelerators, attendees come from around the country and then take their skills back home. Since food laws vary by state, the process is a little more complicated for Break Fast & Launch.
“Because food is so geographically centric, especially with regulations … we’re specifically [geared toward] starting a restaurant in San Antonio regulation-wise. It might not be the exact same set of rules for Seattle,” Salts says, adding that a lot of the business fundamentals are still transferrable.
In New York City, Food+Tech Connect recently launched Food+Tech Ed, which offers online and in-person business courses ranging from “Fundamentals of User Research” to “Crowdfunding for Food Entrepreneurs,” and even a full-day branding boot camp.
The company also does an annual “hackathon” that brings together developers, designers, and entrepreneurs to tackle big challenges—such as overhauling the meat industry to be more sustainable and profitable—and create viable solutions over the course of three days. Similar to the tech space, these hackathons emphasize rapid prototyping and iteration. Last year’s event, Hack//Dining NYC, partnered with Chipotle, Google, and Mario Batali’s Batali & Bastianich Hospitality Group, among others. Each company presented a unique problem for the hackers to solve. For example, Google queried how corporate foodservice might use technology to encourage people to make better food choices.
“There’s never been more interest in disrupting food, but the food industry is so complicated, and just because you eat food doesn’t mean that you understand the intricacies and the complications,” Gould says. “We think that the best solutions come from when you bring everyone to the table to work together.”
Gould recommends that current and would-be operators interested in a more synergized approach to food and technology attend events designed around the two industries’ intersection. Those events are increasing in number; in September, Food+Tech Connect, along with Union Square Hospitality Group and American Express, will host a conference called Tech Table.
“It’s high-tech for ‘high-touch,’ so it’s all about tech for the hospitality industry and how we get the technology industry together with the hospitality industry in order to create better products and create a dialogue,” Gould says.
The sweet synergy
Millennials have been early adopters of technology, and Case says these “digital natives” will hasten the food-tech crossover, given their foodie orientation, adventurous palate, and drive for convenience.
Regardless of whether an aspiring foodservice operator comes from the food or technology side, Case says, they shouldn’t venture into the industry alone.
“Everybody trying to do everything themselves is likely going to be difficult,” Case says. “How do you surround yourself with people who understand this? Some of it is hiring younger people who are generally more in touch with what’s happening here. But [it’s] also partnering with the entrepreneurs to figure out ways to engage with the startups there and not just focus on the business as it is today, but focus on where it’s going.”
Back at Galley, Clifford and Costello are working to incorporate lessons learned from their tech background into the new business. That means Galley will aspire to increase convenience, serve a higher-quality product, and operate more efficiently.
At press time, the business had only been in service a few months, but was already receiving hundreds of orders a day, with requests to extend into Bethesda, Maryland, and Northern Virginia. At the current pace—“We’re growing ridiculously fast,” Clifford says—the pair expect orders will be into the thousands soon enough.
Despite the demand, Clifford says, they want to make sure they’ve got it right in D.C. before expanding; they want to retain ownership over the whole Galley ecosystem in a way that few operators have been able to accomplish until now.
“There are either food people who’ve been trying to change the food preparation side or there are tech people that have been trying to build software to make the overall restaurant process easier,” he says. “But there have been very few people that are owning the entire value chain. When you look at technology and all the tech businesses, food is one of the last areas that there just hasn’t been enough done.”