- Chris Webb cofounded ChowNow in 2011 to help independent restaurants with digital orders.
- The food-tech firm provides the industry a commission-free marketplace for web orders.
- In an interview with Insider, Webb explained why he cut 97 workers last week.
On June 1, JPMorgan CEO Jamie Dimon told investors to prepare for an economic “hurricane.”
Chris Webb, the CEO of the veteran online-ordering company ChowNow, heeded the warning.
The Southern California food-tech firm, backed by 3L Capital and Catalyst Investors, cut 97 employees across all divisions last week, as TechCrunch first reported.
ChowNow, which works with 21,000 independent restaurants, follows a string of food-tech companies in cutting staff, including Reef Technology, Gopuff, Sunday, and Nextbite, as valuations plummet and investor look for profitability over growth.
But ChowNow didn’t lay off people to reduce out-of-control burn rates or scrap underperforming parts of the company, Webb told Insider.
Instead, it was to prepare for an economic storm, he said.
“Interest rates have been essentially zero for 12 years, and that has allowed businesses, ChowNow included, to grow very quickly and take advantage of cheap capital,” Webb said. “That era is now behind us.”
It didn’t feel that way in 2021. Webb said capital markets were humming, venture capitalist were generous with money, and food-tech companies like Toast and Olo went public with high valuations.
That momentum prompted Webb to declare 2022 an “investment” year for ChowNow, an online-ordering tool he cofounded in 2011 to help local restaurants grow their digital orders long before the food-delivery war between Grubhub and DoorDash.
“The world was very, very different last Thanksgiving,” Webb, who made Insider’s list of restaurant-tech power players last year, said.
ChowNow hired dozens of employees to develop products for 2022.
“It was the wrong year to do it,” Webb said. “We were too ambitious with our plans for this year. And now we need to bring it back in line.”
While food-tech market leaders like Olo, Toast, and DoorDash are posting record revenue, their stocks remain “at all-time lows,” Webb said.
That was “the canary in the coal mine” that prompted ChowNow to cut staff, he said. The company is now at about 400 employees, the same staffing level as a year ago.
“It was strictly a financial decision as we prepare the company for what will be a recession,” he said.
While some tech disruptors like Reef are on shaky footing, ChowNow recorded its best month of the year in June.
“We signed up more new accounts and new restaurants in June than we did all year long,” he said, adding that ChowNow’s churn rate was low in both May and June.
“It’s not like our business has imploded. It hasn’t at all,” he said.
To date, ChowNow has raised about $75 million. By cutting staff now, Webb believes ChowNow can ride out the storm ahead without relying on investors, he said.
“We’ve been addicted to venture capital, like so many other companies for a decade,” he said. “We went cold turkey this month like anyone that’s trying to kick a bad habit.”
And while others are scaling back, expansion is still in the works for ChowNow.
Webb declined to offer details but said the company was “investing in a number of partnerships” that would be announced soon and “be very big for us.”
“As we look further out beyond this quarter, we are much closer to break even and profitable than we were going into this quarter,” he said.