Rob Lynch, CityMunch7th October 2018
Tell us a bit about CityMunch.
CityMunch was originally founded after a conversation with a friend of mine, who owned a restaurant called Slabs London in Marylebone. Great place, fantastic food, not without problems though.
One of the things they were trying to do was to find more weekday evening trade. And there was an atmospheric element to that.
Restaurants that rely on walk ins on Monday, Tuesday and Wednesday, as most do, need to have an atmosphere in the early evening to attract people in. Bars achieve this with happy hours all the time.
The original idea behind CityMunch was to translate this into hour-by-hour offers for consumers to help generate this atmosphere and therefore increase trade. The more I got into it however, the more obvious it became that time was a massive factor for every restaurant.
As in their own time?
Most restaurants are empty most of the time. They’re propped up by Friday and Saturday nights, or by short lunch hours, in the main.
And in an environment where costs are high and demand is sagging, restaurants need to find ways to maximise the value of their assets, which means generating revenue in their off peak times as well. Our job is to convert their proposition into offers for consumers: Unrestrictive and consistent – essentially percentage discounts on food – and therefore easy to understand, across a series of reliably good places.
We’re trying to move away from the idea of ‘offers as adverts.’ We want to focus on genuine offers. Yes, some are at slightly off-peak times, but plenty of our partners use it at lunch time too.
Are they bespoke offers to you?
They are exclusive offers, yes.
And by being specific to us, every restaurant can limit the number of redemptions, which is key. They don’t want a stampede; they want presence on the app to drive awareness without cannibalising their peak periods.
Different businesses use the app for different things – they have their own challenges – but the overall product is consistent: Help the customer find new places, save some money and help the restaurant maximise revenue.
It takes a pragmatic operator to consider their inventory in a dynamic sense, £7 one minute and £10 the next. Are we seeing a greater level of comfort with this mechanism now?
It’s a good question. I think that, slowly but surely, the market is becoming more educated. The restaurant world is so varied and disparate but, fundamentally, it’s not an industry that is so different from others that already price dynamically: Hotels, airlines, taxis and so on. And there are ways to reflect this for food & drink.
We have to tread a line between pragmatic asset maximisation, and retaining the perception and ultimately the value of the brand.
"I think most customers are customers of a location, not a particular brand in most instances, so it doesn’t necessarily help to acquire new guests, or increase retention of those that might be on the fence."
People’s general understanding of asset value has shifted in the last few years – why own a car that you use for 2% of the day when you could take an Uber everywhere on demand, for example. And this has been coupled with a greater ability and desire to segment. Where do you think this goes? Do we end up with restaurants segmenting each hour of the day, as you originally considered? Do they offer different cuisines and service styles across the day, depending on who is in the locale?
I think, wherever it goes, it needs to be lightweight for the merchants. Even if they have a varying customer base – and we think about it in that sense – it can’t get in the way of them running their business.
We will always keep the pitch simple. There might be an extra layer of intricacy on our side however. We’re exploring how best to angle offers at certain markets now, like students, at CityMunch right now.
What do you say to people that say that offers devalue brands?
Yeah, again, good question. There are offers and there are offers. Marketers split the world up into segments. Operators see the world quite differently and would probably be surprised with the breadth of their audience base; who they are, where they work and what they value.
Our model treats customer with respect. We don’t layer T&Cs or add complex specifics to the experience with hidden costs. That’s your Groupon, discount-hunter mentality which can devalue brands. We’re making the options straightforward and bitesize, without needing to overthink or disrupt people’s days.
The audience we communicate with are used to this reality. They expect options on demand, so we don’t see this as a brand compromiser in any way.
Restaurant tech has obviously exploded over the last few years. How much space is there for this ever-growing tech stack in the trade?
Well, we know delivery is here to stay. So is Click & Collect. Certainly, if a restaurant wants to survive in this environment then they need some element of support from tech.
We think that, whether you work with us or not, the challenge of dynamic pricing needs to be solved. And this isn’t something that restaurants can deal with comfortably themselves. As we’ve discussed, there are ways and means – Happy hours and so on – but they’ll always struggle to distribute the message at scale.
Restaurant’s own apps have a place. They can engage their top x% of users, but there are limits. I think most customers are customers of a location, not a particular brand in most instances, so it doesn’t necessarily help to acquire new guests, or increase retention of those that might be on the fence.
Do you think the market will consolidate? I imagine restaurant operators would prefer to manage fewer relationships.
The end game is consolidation in some form, but this might be of the interface, rather than the companies behind them.
A high degree of integration, essentially.
Yes. A world where restaurants having 10 iPads behind their counter can’t last. I take the view that simplicity always wins out, so they need to be consolidated in some manner.
"Ultimately, we’ll do everything we can to be the obvious place for consumers to discover new places and save money on lunch. "
Delivery. Nobody seems to be offering dynamic pricing within delivery. Is this going to change in the near future?
As far as lunch is concerned, I think someone will but it’s a tough nut to crack. The economics of delivery are difficult enough. There are means, but it’s probably going to require some product bundling and clever logistics to make it all work. Someone will solve it, but it might not be soon.
There’s less of an offers culture I guess.
Right. At the same time, off peak days are still viable. Operators are still paying chefs and rates and rent, so anything that encourages demand on these days would help.
Fundamentally, gross margins aren’t the problem; the fixed costs are.
You’re in 3 cities today. Considering the model, do you need to ‘pick’ up the operation and move it to a new region or territory, even within London, to kick off any phase of expansion?
We focus on professional lunch in London. It’s very localised, with few exceptions. That means that our business is very localised, so we almost need to start again every time we move a few streets in any direction.
We work with the restaurants on launch, ensure we have a really strong set of offers for the first few weeks and conduct local marketing to support this. We have a head start in London. For us, it’s much easier to launch in Canary Wharf than Leeds, for example. But there are cities further afield on the hitlist, both in the UK and abroad.
Our proposition is particularly powerful for tourists: People eating out every day that want to find the best places at the right price, so a map of European tourist hubs, where guests take CityMunch with them on their travels, is particularly appealing.
That’s the ideal match right? Discovery and offers in one package.
Exactly. They make a pretty good cocktail.
What’s next for CityMunch?
There are a few very exciting things that I can’t talk about just yet. The main investment is in making the product as good as it can be. That means a new app at some stage, and as many quality offers as possible. The aim should be to create a Ferrari of a tech product and making sure that we have the best offers around.
Ultimately, we’ll do everything we can to be the obvious place for consumers to discover new places and save money on lunch.