While food delivery apps have provided restaurants with a lifeline during the pandemic and lockdowns by creating new demand and exposure, the benefits do not come without a cost. The fees charged by these platforms can be as high as 30% cutting into already notoriously low margins for most food establishments. Sesame seeks to change this with its food delivery marketplace that offers a flat fee of $125 per month to restaurants rather than a per order commission and the customer is charged a flat $3 service fee delivery along with $2.99 for delivery. Most of these traditional apps do not provide restaurants with any customer data, preventing restaurants from building true customer relationships; Sesame operates with an open customer data model and allows restaurants to also build rewards programs tailored to their guests. The platform is currently in beta launch, serving a delivery zone between 34th and Houston, with an actively growing waitlist of NYC establishments seeking to join.
AlleyWatch caught up with Sesame CEO and Founder Josh Morgan to learn more about how his experience at Hillstone Restaurant Group and the Nomad provided the foundation for the thinking behind the business, the company’s strategic plans in New York and beyond, pre-seed round of funding, and much, much more…
Who were your investors and how much did you raise?
Sesame raised $3.4M in this pre-seed round co-led by Eldridge Industries, Tuesday Capital, and Relish Works — a venture arm of Gordon Food Service, the largest privately-held food distributor in North America.
Tell us about the product or service that Sesame offers.
Sesame is a food delivery marketplace that empowers independent restaurants to regain control of their off-premise business, combating the inequitable practices of platforms like Grubhub, DoorDash, and Uber Eats. With a zero commission and open customer data model, Sesame allows restaurants to profit while also offering a more affordable, user-friendly experience for consumers.
What inspired the start of Sesame?
When Covid hit, I began to obsess over the problems that exist within the restaurant industry. The one that stood out to me the most was the broken delivery system, in which a few large third-party apps have a monopoly on the market, prioritizing convenience over workers’ wellbeing and charging restaurants exorbitant commission fees. I committed myself to finding a solution that would help restaurants stay in business while offering consumers the convenience they have come to rely on.
How is Sesame different?
If a restaurant makes $100,000 per month in off-premise sales, mostly fueled by major third-party delivery platforms, that restaurant could pay up to $30,000 in commission fees. With Sesame, that restaurant pays a flat $125 fee per month. The commission-free model prevents restaurants from losing out on profit in order to offer delivery.
For the consumer, Sesame charges a fixed $3 fee per order, which means the more they spend, the more they save (most delivery apps charge percentage-based fees). Sesame also allows customers to feel good about their food delivery choices: they’re strengthening their communities by helping to keep their local restaurants in business. Plus, the Impact Points program rewards customers with points to donate to their favorite charities, including City Harvest, with whom Sesame has an ongoing giveback.
What market does Sesame target and how big is it?
The convenience economy has taken the F&B business by storm and off-premise sales have been on the rise for many years. Due to Covid, that trend was accelerated by several years, unfortunately, dominated by players like DoorDash, making it harder for restaurants to build sustainable off-premise businesses. We believe the growth in off-premise business will continue to accelerate over the years to come.
What’s your business model?
Our business model is predicated on a restaurant-first ethos — meaning creating sustainability for restaurants to operate off-premise while maximizing their profit is core to our model. We do this by throwing the commission-based monetization playbook out the window and replacing it with a fixed, nominal SaaS fee. We also charge a flat, fixed rate service fee to the consumer ($3), which means the more you spend, the more you save relative to other delivery apps.
What are your post-COVID office plans?
We are big believers in the importance of building culture and creating a cohesive team, and as a startup, it’s extremely important to spend as much time as possible in person. Most of our team has been in the office for the last few months but we offer a tremendous amount of flexibility between in-office and WFH.
What was the funding process like?
The fundraising process was exciting, scary, and daunting all at the same time. We set out with an audacious goal to disrupt a very large industry dominated by some of the biggest tech companies in the world, so it was no easy feat. But we met some incredible people, listened, absorbed, iterated, and ended up learning so much from the process that it was invaluable to the Sesame model. In the end, we established partnerships with some of the smartest, most sophisticated, and mission-driven investors around, and feel very honored to have the support of our investors.
The fundraising process was exciting, scary, and daunting all at the same time. We set out with an audacious goal to disrupt a very large industry dominated by some of the biggest tech companies in the world, so it was no easy feat. But we met some incredible people, listened, absorbed, iterated, and ended up learning so much from the process that it was invaluable to the Sesame model. In the end, we established partnerships with some of the smartest, most sophisticated, and mission-driven investors around, and feel very honored to have the support of our investors.
What are the biggest challenges that you faced while raising capital?
Being a pre-product, pre-revenue business is challenging, and due to the amount of capital we were looking to raise in a pre-seed round, it was not for everyone. So, it was challenging to find the right fit with an early-stage investor. But the positive is we made incredible relationships with many impressive growth stage investors that we look forward to staying in touch with.
What factors about your business led your investors to write the check?
I think most investors are looking for passion, a drive to create monumental change and impact on society, as well as a team of leaders that they have confidence in. This is what I think led investors to commit.
What are the milestones you plan to achieve in the next six months?
We have milestones established with the supply of restaurants on our platform as we get through our beta launch and look to expand throughout the New York metro area. We have milestones attributed to the economic impact that our platform has on our restaurant partners. And we have milestones relative to the societal impact we can have on our communities by helping to feed hungry New Yorkers via our partnership with City Harvest or our Impact Points program, which allow consumers to donate to thousands of charities in their communities.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Plan for a rainy day and never stop raising!
What’s your favorite outdoor dining restaurant in NYC?
Buvette.
