- Waitr is the fourth-largest delivery operator in the US, according to Bloomberg Second Measure.
- To differentiate itself from DoorDash, Waitr is leaning into the $38 billion cannabis industry.
- Waitr is buying cannabis-focused software firms that work with hundreds of dispensaries.
When Carl Grimstad took over as CEO of the struggling food-delivery company Waitr in early 2020, he set out to differentiate the company from DoorDash, Uber Eats, and Grubhub.
“I realized that it really wasn’t exciting to try to constantly play catch-up and be a mini-me of DoorDash or Uber,” Grimstad said.
Instead, he devised an end-run play that called for the delivery of a product the so-called Big Three players wouldn’t touch: cannabis.
Global cannabis sales are projected to increase from $37.7 billion in 2022 to $62.1 billion in 2026, according to BDSA, a cannabis market-research firm. To embed Waitr in the space, the company has made strategic acquisitions of software firms that support hundreds of cannabis dispensaries.
This year, Grimstad said Waitr is poised to launch cannabis delivery in Canada.
Waitr went from crippling losses to profitability
Before Grimstad could execute his cannabis plan, he had to make one major fix to Waitr.
Grimstad, a former iPayment CEO, started before the pandemic hit in early 2020. He was the third CEO to run the struggling Louisiana delivery company in less than two years. In 2019, Waitr had logged a $291 million net loss. It owned a 3% share of the food-delivery market, well below the double-digit shares controlled by the top-three players, according to Bloomberg Second Measure.
While he knew he had to differentiate Waitr from its rivals, Grimstad made one move to emulate other third-party delivery companies. He got rid of the company’s W-2 delivery-driver system, which contributed to the company’s crippling losses. About 2,300 drivers were laid off.
Waitr’s drivers are now independent contractors. That led to a financial turning point for the company.
Waitr, which announced plans last month to rebrand under the name ASAP, closed 2020 with a net income of $15.8 million. In its latest quarter, Waitr reported a net income of $12.3 million, up from a net income of $4.6 million for the same period in 2020.
Waitr buys 4 firms with ties to cannabis dispensaries
The company’s financial stability allowed Waitr to make its next move: invest in software systems that cater to the cannabis industry.
Last month, Waitr announced plans to buy Retail Innovation Labs Inc. Its Cova-branded point-of-sale and inventory software platforms are used by 2,000 cannabis dispensaries in Canada and the US.
Before announcing plans to buy Cova, Waitr purchased three payment-processing companies last year: ProMerchant, Flow Payments, and Cape Cod Merchant Services. Some of these POS firms offer cashless-payment workarounds for 300 dispensaries.
While marijuana is legal in 19 states and the District of Columbia, cannabis is still classified as an illegal drug by the federal government. As such, major credit-card companies, such as Visa and Mastercard, don’t process cannabis transactions at dispensaries, essentially forcing these merchants to be cash businesses.
But some payment-processing companies, like the ones bought by Waitr, offer a “cashless ATM” solution. This process, also known as a “point of banking” solution, allows customers to use their debit cards on an ATM-style terminal.
The company plans to use its new pot payment services to target growth in states where cannabis is legal.
Waitr needs the leverage as most of its operations are not in pot-friendly states.
Waitr operates in 13 states, serving second- and third-tier markets in the South and South Central regions of the US, including Texas, Florida, Tennessee, and its home turf in Louisiana.
According to the cannabis compliance firm Simplifya, medical and recreational marijuana delivery is allowed in New Mexico, New York, California, Michigan, and parts of Colorado and Oregon.
Grimstad sees an opportunity to grow in new markets by bundling cannabis software with last-mile delivery in states such as California and Colorado.
“Ultimately, when the regulatory environment does change, and you see an influx of bigger players come into the space, either we’ll be a survivor, or we will be an acquisition target. And that’s really the strategy there,” he said.
‘The messier it is right now, the better it is for us’
Big players are looking at the space.
Last April, Uber’s CEO said it would get into cannabis delivery when “the road is clear for cannabis.”
Boutique cannabis delivery services such as Eaze and SpeedWeed operate in parts of California and Michigan.
Grimstad said he likes jumping into the space while it’s still in the Wild West phase. By being a first mover, Waitr can gain market share ahead of rivals.
“The messier it is right now, the better it is for us,” he said. “I believe both Uber and DoorDash will enter the market at some point, but due to the massive regulation around the space right now, I think it may be a few years until they enter the space.”