In February this year, entrepreneurs Mohamed Al Fayed and Mohamed Hamedi had just two restaurants signed up to use the product designed by their new company GrubTech to digitise the back-end operation of restaurants.
GrubTech was less than six months old when the coronavirus pandemic struck. Restaurants, once heavily dependent on customer footfall, had to review their business models overnight. To survive, some shifted to a delivery-only model to keep their meager incomes flowing.
“Prior to the pandemic, digital penetration of restaurants was 30 per cent. Post-coronavirus, nearly 70-80 per cent of revenue was driven by digital mediums as a result of dining restrictions,” says Mr Al Fayed, who is co-founder and chief executive of GrubTech.
As restaurants struggled for survival, GrubTech’s services suddenly proved to be invaluable. While every restaurant had some form of digital engagement as an add-on, the pandemic upended the dynamics of conventional business, completely pushing the food industry online.
“Our business model turned out to be pandemic resilient in the sense that [restaurants] now have to rely wholly on digital mediums to communicate with their customers,” Mr Al Fayed says.
“A restaurant now has to serve you food at your home rather than welcoming you to their brick-and-mortar establishment due to capacity restrictions or as a precaution. It accelerated the need to solve the inefficiencies within the digital revenue streams [of] the restaurants."
They needed to digitally transform not only to deal with food aggregators such as Talabat, Zomato and Deliveroo that brought in orders, but also streamline the back-end processes to speed up the delivery process.
“You receive orders from these [aggregators] and then [the staff] manually entered these orders into a point-of-sale solution. That allowed the back-end to prepare the food and then the order needed to be fulfilled through your own driver or a food aggregator," he explains.
"All these manual functions could lead to human errors … and that could add to massive delays in deliveries.”
The entrepreneur says GrubTech is born from the need to digitise the food sector and simplify operations by automating certain labour-intensive operations in restaurants, or cloud or ghost kitchens that operate multiple delivery-only food brands from a single location. The company’s target group consists of restaurants that generate at least 50 per cent of their revenue from food aggregators.
Mr Al Fayed first got the idea for the start-up when he participated in an investors’ syndicate that was looking to invest in a local cloud kitchen. Then the vice president of Al Tayer Group’s omnichannel division, he was aghast at the inefficiencies that existed within these establishments. Having built Al Tayer's e-commerce platform Ounass from scratch, he quickly noticed gaps within cloud kitchens that could be solved by technology.
Mr Al Fayed quit his job and teamed up with another tech enthusiast Mr Hamedi – who became GrubTech's chief technology officer – to tap into the sector. During the initial months, the duo embedded within the restaurants and cloud kitchens to observe their processes, and how food was stored and prepared.
“We mapped out all problems and pain points … and we analysed how tech could solve it and then we started to code,” says the founder.
GrubTech hired a team of engineers and soon launched operations. While the initial team consisted of just 15 people, including the founders, the start-up scaled quickly as demand picked up amid the pandemic. The company’s engineering teams are based in Sri Lanka and Istanbul, while its operations and management teams operate out of Dubai.
Currently it employs 50 people and is in talks with about 700 restaurants across the GCC and Mena region that are looking to deploy its solutions.
But what has been driving GrubTech’s growth is the burgeoning demand from cloud kitchens – a lucrative segment in a fragmented food delivery market. According to RedSeer Consulting, cloud kitchen revenues within the UAE and Saudi Arabia grew 160 per cent year-on-year to reach more than $65 million (Dh283.55m) last year.
GrubTech has managed to snag a healthy share of the regional and global cloud kitchen market. Mr Al Fayed says the company is in discussions with cloud kitchens from Singapore, Oman, Milan, Riyadh, Jeddah and Cairo.
“Cloud kitchens have been around for two years and more of these are popping up in South Korea, Egypt, and Saudi Arabia. It has attracted a lot of frenzy and there wasn't any tech that could power these cloud kitchens. We were well positioned to capitalise on the demand.”
But the initial few months have not been without challenges for the company. While GrubTech’s services clearly helped restaurants, not many were in a position to invest heavily into technology at the onset of the pandemic, even though it was necessary. The company’s founders worked around it by giving early adopters free trials to familiarise themselves with the product.
“It was a win-win situation since it gave us an opportunity to deploy our solutions and learn from it being in the wild. It was used by real customers to refine and polish the product. It also gave restaurants a chance to use the product without a financial commitment,” he says.
The company's strategy has clearly worked. “When things got better, none of the customers left us,” the chief executive says.
GrubTech has also clearly appealed to investors. The start-up raised $2m in its seed round in July, which it plans to use to scale operations. Mr Al Fayed would not disclose the names of investors, only saying that the funds came from the “captains of the industry and C-suite executives”. It is now preparing to raise more money through a pre-Series A round.
“We need a little more firepower to go after and capture the potential in markets such as South-East Asia and Europe.”
Looking ahead, Mr Al Fayed and his team are also working to diversify operations between cloud kitchens and restaurants to record sustainable growth.
“The business model is bifurcated across delivery-centric rests and cloud kitchens – we see equal demand in both sides of equations. If cloud kitchens business model proves to be unsustainable and evaporates in the next five years, I strongly believe that our revenue targets will be met by delivery-centric restaurants.”
Q&A with Mohamed Al Fayed, co-founder of GrubTech
What other start-up you wish you had started?
Airbnb – I am a big fan of that. I see underutilised space that remains dormant and a marketplace that made unused space so efficient and easy from your phone. I am so mesmerised and I wish I had participated in a start-up that devised it.
What are some of the things you wished you had done differently?
I think what we never do enough of is to get the product out faster even though you are embarrassed of it. I am fan of Reed Hoffman, founder of LinkedIn, who said: ‘if you are not embarrassed by the first version of your product, you have launched too late’. I wish I had built the product faster and earlier to get more feedback.
What were some of the skills learnt in the process of setting up your start-up?
Fund raising is a new chapter for me. Each investor has a unique persona and what they are looking for and their motivations … having sat across the table from a wide spectrum of investors and having to tailor the pitch to what interests them is a new skill I learnt in the last few months I had started GrubTech.
Any start-up that has inspired you?
I was fortunate to have many mentors. But if I had to pick one, I would say Amazon because we work very closely with them on AWS. The efficiencythey have and ... how they are customer-centric is very inspirational. Being customer friendly is something we have borrowed from them.