Sydney-headquartered online marketplace FoodByUs has today announced a $10 million Series A funding raise as part of its push to level the procurement playing field for thousands of Australian independent hospitality venues.
With its hospitality marketplace connecting restaurants, cafes, and caterers with hundreds of wholesale food and alcohol suppliers, FoodByUs has grown its annual sales by more than 600 per cent since 2019, whilst momentum continues month-over-month with more than 1,000 venues on board.
But co-founder Ben Lipschitz notes there is still a very large addressable market of 90,000 independent venues nationwide and a "$20 billion opportunity".
"If you ignore McDonald's, KFC and any big chain, expenditure on food just at independents is $20 billion, and we really want to be the dominant force there," says Lipschitz, who prior to FoodByUs had founded and sold international foldable footwear company Flipsters.
"The beauty of Australia and what has really served us so well is its independent dining scene. That is something that makes this just an ideal market for an idea like this.
"What we're disrupting in a big way is giving independent venues - that never had the time or the knowhow on how to procure and source things well - all the buying power and all the knowledge that was previously reserved for the big guys."
Lipschitz founded the business with Menulog co-founders Tim Chandler and Gary Munitz after meeting at a data analytics startup where they worked together before establishing FoodByUs in 2016.
"FoodByUs was built on the premise of improving the often overlooked ‘back of house’ function within hospitality venues," says Lipschitz, who is also a finalist in the upcoming Sydney Young Entrepreneur Awards.
"Using our deep experience in building marketplaces, we wanted to create something that could simplify the wholesale ordering process and get back time while increasing a venue’s bottom line.
"When these businesses can access a wider range of suppliers and best-in-market pricing, the whole industry benefits. For wholesalers we offer an additional channel to market with guaranteed payment"
It is a business model that has seen the company's team grow from 38 to 55 during the pandemic, with plans to add another 10 people to the team by the end of this year.
The funds raised will fuel FoodByUs’ impressive growth and its mission to become an essential piece of technology solution for every independent hospitality business, right alongside other critical software like point of sale, rostering, accounting and more. The platform currently allows or best-in-class search, digital issue resolution, one-tap comparison, purchasing and even automatically pushes all invoices into Xero.
Whilst the company has undergone significant national expansion, most of its sales are still in Sydney. Lipschitz explains the Melbourne market now accounts for around a fifth of the business, while a more recent expansion into Southeast Queensland still accounts for just around 5 per cent of sales.
"You can imagine there was a bit of a bumpy road with Melbourne being in and out of lockdowns, but having said that, we’ve got a lot of suppliers there, a full team, and office and things are growing really well to the point where it’s about 20 per cent of the FoodbyUs network," he says.
"We are focusing on growing our existing locations because we haven’t even begun to tap into what's available. But that’s not going to stop us from expanding.
"We anticipate that in 2022 we'll go more towards the the relatively smaller cities like Perth and Hobart, but also we anticipate growing into more of the bigger regional hubs so Newcastle or the Central Coast, and Canberra as well."
The company has also recently expanded into the $2 billion liquor sector, with current alcohol suppliers on the platform including the Liquor Co-Op and National Liquor Wholesalers.
He says that in the aftermath of COVID-19 many hospitality venues are weighing up their options for how to re-open while still being profitable.
"As well as trying to make up for lost sales they’re also having to deal with social distancing restrictions and in many cases a drop in revenue as a result of tourism being significantly down," he explains.
"Technology is going to play a critical role in helping venues reduce expenditure and maximise profit while still delivering an amazing customer experience."
The Series A was led by Macquarie Capital, which has invested in the business since inception, Base Capital and global marketplace investor F J Labs, which is based in New York.
"We have been investors in FoodByUs since the business started and the quality of its management has seen the business grow strongly, including through COVID," notes Macquarie Capital's venture capital team co-head Dan Phillips.
"We are excited to continue to support FoodByUs and its mission to improve the efficiency of Australia’s massive independent hospitality industry."
"We invest globally in digital marketplaces, and especially B2B (business-to-business) marketplaces. In FoodByUs we see not only a great product-market fit and huge problem to solve, but a team with all the necessary experience to pull it off," adds FJ Labs head Fabrice Grinda.
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