As Menulog seeks $500m sale, a commission-free competitor calls a bubble
Amid reports that Menulog/Eatnow is on the block with $500 million hopes, a restaurant web marketer who’s created a commission-free online ordering system as a loss leader says the 8-12 per cent commissions underpinning the sector can’t last.
These Thai restauranteurs are customers of Menulog, which may soon have a new owner.
The Free Restaurant Online Ordering System (FROLO) is in its infancy, with a trial of 15 Australian restaurants processing $5000 of home delivery orders through the platform last week.
FROLO is an anonymous back-end to a restaurant’s own website, a marketing asset which founder James Eling says is degraded when the restaurant signs up with an online takeaway ordering hub like Menulog.
“The restauranteur is paying Menulog a commission for the privelege of building Menulog’s database, instead of the restaurants’s own,” says Eling, who’s spent “under $100,000” building FROLO as a loss-leader for his Marketing4Restaurants business, which builds websites and provides outsourced marketing services to restaurants.
“You Google the name of a restaurant that’s signed up with a Menulog or a Delivery Hero and most likely, the first results you’ll get are ads for Menulog or Delivery Hero. These guys are competing with their own customers.”
Menulog chief executive Dan Katz had not responded to a request for comment at presstime.
If there is a backlash brewing against Menulog or Eatnow, the market-dominating players which merged in February, it’s not reflected in FROLO’s waiting list just yet - only a dozen restaurants joined it last week.
However Eling is adamant that restauranteurs “really, really want this to work - we had a guy on the phone for 90 minutes the other day talking us through a couple of the bugs we’ve been ironing out, he said we’re the first online player that’s actually listened to him.”
The commission that Menulog/Eatnow is able to charge could rise further if it is bought by Delivery Hero, the cashed-up Rocket Internet subsidiary.
Anecdotally, Eling says Delivery Hero seems to have about 10-15 per cent of the Australian online takeaway ordering aggregation market, and would have a virtual monopoly if it bought Menulog/Eatnow.
“You’d think the [Australian Competition & Consumer Commission] would look at that. Talk to any real estate agent or car salesman today about what they think of digital monopolies.”
Restauranteurs are in a different position to those two professions in that their margins were much smaller before digital disruption begun, Eling says.
“They're also very skeptical - the phrase we hear most about FROLO is ‘what’s the catch?’ - so they’re not going to wear commissions at the levels we’ve seen forever.”
Eling think Zomato, the Indian owner of Urbanspoon which has made 12 acquisitions in the past year, is an alternative potential buyer for Menulog.
Source : BRW Michael Bailey 4th May 2015
