Restaurant.com
Helping restaurants thrive in the new normal
Overview
Raised: $140,405
Total Commitments ($USD)
Republic
04/08/2021
07/03/2021
$250
Equity - Common
Seed
RegA+
$2.50
$30,000,000
Rolling Commitments ($USD)
07/31/2021
$1,633
123
2011
Food, Beverage, & Restaurants
Foodtech
B2B/B2C
Low
Low
Balance Sheet
|
Cash and Cash Equivalents |
$560,000 |
|
Investment Securities |
$0 |
|
Accounts and Notes Receivable |
$246,000 |
|
Property, Plant and Equipment (PP&E) |
$4,979,000 |
| Total Assets |
$5,785,000 |
|
Accounts Payable & Accrued Liabilities |
$2,656,000 |
|
Long Term Debt |
$7,906,000 |
|
Total Liabilities |
$10,562,000 |
|
Total Stockholders' Equity |
$-4,777,000 |
| Total Liabilities and Equity |
$5,785,000 |
Statement of Comprehensive Income Information
|
Total Revenues |
$1,163,000 |
|
Costs & Expenses Applicable to Rev |
$3,182,000 |
|
Depreciation and Amortization |
$253,000 |
| Net Income |
$-2,272,000 |
|
Earnings Per Share - Basic |
$-0.46 |
|
Earnings Per Share - Diluted |
$-0.46 |
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Synopsis
The restaurant industry was one of the hardest hit by the COVID-19 pandemic. It ended 2020 with $240 billion less than previously estimated sales, which led countless businesses to shut down. Although the country has started edging towards normalcy, restaurants can still use all the help they can get.
Restaurant.com is here to answer that call. Established in 1999, it serves as a restaurant directory that offers consumers money-saving deals at dining establishments across the country. Hungry diners simply need to search Restaurant.com’s website or app for an appetizing deal, select the promotion, and bring it with them to the restaurant. The platform also benefits the restaurants, who can partner with Restaurant.com in exchange for promotions and custom microsites that can draw in more customers.
Restaurant.com aims to develop itself further by launching “a new menu of services.” According to the company, these will help restaurants increase the average check size and encourage customer loyalty on top of bringing new customers in.
However, Restaurant.com gives investors a number of reasons to be concerned. Not unexpectedly, the company’s 2020 revenue plummeted in the wake of COVID-19. In addition, the company’s revenue has not been audited, raising questions about its financial credibility. Perhaps an even larger threat to Restaurant.com is its own reputation. The company has garnered exceedingly poor ratings, with many online reviews describing it as a scam. Altogether, there is a lot to carefully consider before choosing to invest.
The Kingscrowd investment team has given Restaurant.com’s current Republic raise an Underweight rating.
Price
Restaurant.com is currently raising at a $30 million valuation with no discount. Given the company’s enormous revenue decline in the most recent year (from $10.6 million to $1.1 million), this valuation is far too high. The price rating for Restaurant.com is one of the weaker points of an already worrying raise.
Market
COVID-19 has presented enormous problems for the restaurant industry. Everyone staying home and not dining out means restaurant profits underperformed to the tune of $240 billion in 2020. That said, it still is a massive market worth $800 billion in 2017.
Competition is rampant in this space. Restaurant.com shows customers nearby options and cheaper prices, but does not deliver food. UberEats, DoorDash, and Grubhub operate in similar niches and are much more widely used. In terms of dine-in experience, Groupon is a much larger and better-established company providing a similar service. There is room for multiple winners in this space, but these firmly entrenched competitors that not only match customers with nearby restaurants but even go the extra mile to deliver the food present a growth problem for Restaurant.com.
Team
The current CEO and chairman of Restaurant.com is Ketan Thakker. Thakker has highly relevant entrepreneurial experience as well as a solid educational background. He has an MBA from Northwestern University’s Kellogg School of Management and previously worked as the chief financial officer at Apartments.com. He also founded TripRental.com.
Aaron Horowitz, president and general counsel for Restaurant.com, graduated with a JD from the University of Chicago Law School. Vice President of Technology Josh Randall has a long career in various technology-related roles, including CTO at Rx-Precision and director of IT at Durex Industries.
Rounding out the executive team is Tim Miller, who oversees all business-to-business operations for Restaurant.com. Miller has been with the company since 2004 and has generated hundreds of millions of dollars in sales for Restaurant.com.
The Restaurant.com executive team members have impressive academic backgrounds and are led by a CEO with solid entrepreneurial experience.
Differentiators
The food app market is already full of reputable and popular companies. Uber, DoorDash, and Grubhub connect customers with local restaurants for delivery and pickup. They don’t focus on the dine-in experience that Restaurant.com does, but they do offer deals and discounts for their users. The widespread popularity of these apps means their deals are likely more enticing to customers than Restaurant.com’s offers. Restaurant.com also comes up against much more established competition like Groupon, which offers similar services and has a much bigger presence in the market.
Restaurant.com seems to have an uphill battle ahead to outpace the growing number of well-established food-related apps, both for delivery and dine-in. This lack of differentiation, coupled with the across-the-board negative reviews of the service, only adds to the company’s Underweight rating.
Performance
According to Restaurant.com’s raise page, the company generated revenue of $10.6 million in 2019. COVID-19 impacted the business heavily in 2020, lowering revenue to just $1.1 million. However, investors should take this with a grain of salt, as this financial performance is entirely unaudited.
Restaurant.com claims it has around 8 million customers and more than 184,000 establishments listed on its platform. But Restaurant.com also has a major reputation problem. Even assuming its user traction and revenue is as solid as it claims, negative customer feedback is rampant. Restaurant.com has a 1.7-star rating on Trustpilot, a 1.4-star rating on sitejabber, and a one-star rating on the Better Business Bureau website.
Risks
Many aspects of Restaurant.com’s current raise are questionable. Numerous bad reviews that accuse Restaurant.com of running scams and poor customer service may lead to future legal troubles, which could be financially devastating. On top of that, Restaurant.com’s product isn’t particularly innovative, which limits its potential users. The poor reviews also pose a risk to the product. The more negative reviews it gets, the less new users will want to try it.
Bearish Outlook
Trust is vital for a company’s long-term success, and it’s safe to say that customers don’t trust Restaurant.com. Horrible customer ratings limit the company’s possible growth and pose a huge threat to its future. When potential customers have countless options for finding dinner deals and easy access to online reviews, Restaurant.com’s poor reputation is crippling. The company has major competition in its market, all of which are well-established and widely used services. Its product lacks differentiation of any kind, which gives customers even less reason to use it. The company also has unaudited financials, which makes this current raise suspect as well. Finally, the valuation can’t be justified after such a monumental revenue decline.
Bullish Outlook
If Restaurant.com’s revenue numbers are to be believed, $10.6 million in revenue in 2019 shows that there have been active users in the past. Restaurant.com claims that nearly 8 million people have utilized its services, and as the food technology market and food app market continue to grow, so does Restaurant.com’s available market. The company has also been operating since 1999, indicating that it may have staying power.
Executive Summary
Overall, investors should approach Restaurant.com with caution. All financial information is unaudited, meaning its revenues and profits cannot be confirmed. The online perception of the company is exceedingly poor, and its product doesn’t seem positioned to outperform any other food app on the market. The company’s current valuation of $30 million is not at all justified by its alleged $1.1 million 2020 revenue, making this a worrisome investment. The user base seems solid enough, but it isn’t enough to save the raise. As such, Restaurant.com has been given an Underweight rating.
For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com.
Analysis written by Ethan Thomas.