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.