Caviar – Premium Bites at Your Doorstep
Caviar allows customers to get food delivery from the most popular and top-rated Yelp restaurants. In most instances, Caviar is the ONLY way to get delivery from these eateries! Finally, a way to get Momofuku right to your doorstep.
Started in 2012, Caviar is in the business of food delivery, a competitive space that is becoming increasingly saturated. GrubHub, DoorDash, and Seamless are just a few names that immediately pop up when we think about food couriers.
So what’s so special about yet another food courier service?
Caviar allows customers to get food delivery from the most popular and top-rated Yelp restaurants. In most instances, Caviar is the ONLY way to get delivery from these eateries! Finally, a way to get Momofuku right to your doorstep.
Business Model
Caviar provides food delivery from “the best local restaurants” [3] in a timely manner. Customers can order from restaurants nearby via the web or mobile app (Android and iOS). After payment is processed, customers can check delivery progress via GPS tracking in the app.
Caviar earns money from a ~20% markup (based on personal observations) on the price of food, as well as service fees and delivery fees. The courier fee was previously a $9.99 flat rate with no limit on the size of the order, which prompted many startups in San Francisco to order in huge volumes in the beginning stages of the company. This pricing strategy actually worked out well, as the bulk orders provided Caviar with much needed cash flow to continue quickly growing the business. More recently the company adjusted its flat delivery fee to a dynamic model ranging from $1.99 to $6.99 depending on the delivery distance.
Caviar’s business model is two-sided, which requires balanced scale on both sides (business partners and consumers) for success. Caviar’s competitive advantage is its ability to develop strong and unique restaurant partnerships. Most if not all restaurants in Caviar are not available on Seamless or any other food courier options. By developing a portfolio of high-quality restaurants, the sales process to add on incremental restaurants of similar tiers becomes easier as good restaurants want to be on this “exclusive” list with other restaurants on the same caliber. As the business expands its curated list of restaurants, the service increasingly becomes the delivery of choice for customers, which then improves incremental restaurant revenues. These data points are presented as part of the sales pitch to add additional restaurants to strengthen Caviar’s merchant acquisition proposition.
Operating Model
Caviar currently operates in Atlanta, Boston, Brooklyn, Chicago, Dallas, Los Angeles, Manhattan, Miami, Minneapolis, Philadelphia, Portland, Sacramento, San Francisco, Seattle, SF East Bay, SF South Bay, and Washington DC.
Operationally, Caviar requires meaningful investment to launch, develop meaningful restaurant coverage, and build efficient delivery capabilities in each new city because of its emphasis on quality partnerships and offerings. For each new city, city launch employees perform rigorous on-the-ground market research to understand customer preferences and identify high-demand restaurants. Restaurants must score at least 4 stars on Yelp to be considered. After inking a deal with the restaurant via its sales force and using its past successes in other cities as case studies, the company sends photographers and numerous “foodie” employees for menu sampling. The foodies pick dishes that pass the taste test to add onto the Caviar website, and the photographers take professional food snapshots from multiple angles and under various lighting to add onto Caviar. The company has built up a curated menu from the top-rated, most sought-out restaurants via this restaurant on-boarding process.
On the delivery side, Caviar hires its own fleet of couriers (independent contractors) to deliver orders, and provide them with GPS tracking to enable consumer visibility.
Finally, Caviar manages its own website and mobile apps in-house. The simple and visually pleasant design also contributed to its success. Caviar really focused on optimizing the user experience–setting up an account is seamless and restaurants are presented in a non-cluttered manner with consistent image styles (thanks to Caviar’s contract photographers).
[1] Conversations with Caviar founder Jason Wang
[2] https://squareup.com/news/square-acquires-caviar
[3] http://trycaviar.com
[4] http://blogs.wsj.com/venturecapital/2014/04/28/caviar-raises-13m-to-challenge-grubhub-help-top-chefs-deliver/
[5] http://www.forbes.com/sites/kerryflynn/2014/08/04/square-mergers-its-mobile-payments-with-food-delivery-by-acquiring-caviar/
[6] http://mashable.com/2014/12/04/square-caviar-app/#T2ASwqdeukql
[7] http://www.theverge.com/2014/12/4/7327181/square-caviar-app-order-food
[8] http://ny.eater.com/2014/2/10/6282591/inside-caviar-a-new-premium-food-delivery-service
[9] http://nextjuggernaut.com/ondemand-directory/caviar-meal-delivery-revenue-funding-business-model/
This sounds great and I would love to try it! You mentioned that this ends up becoming an “exclusive list” that high end restaurants actually want to be a part of but I wonder how effective that strategy actually is. It would be interesting to learn more about how easy it is to sign these restaurants on because I can imagine there being some level of concern with regards to optics if the food isn’t consumed as fresh as it is meant to be which may reduce perception of quality. In addition, I wonder if any restaurants lose any allure of “exclusivity,” especially the one with long wait lines. Interesting to see how Caviar plays out in the long run!
Chun,
Thank you for writing this interesting post about Caviar; I’ve heard a lot about the company yet had little understanding of it. I am a bit surprised by the high cost of ordering this service with a 20% markup plus service and delivery fees. That seems like a hefty price, and I wonder who, exactly, their core customers are. Perhaps they should target the corporate segment, as I could envision this service being of value to companies hosting clients for meetings – rather than going to a nice (but busy and loud) restaurant, they can conduct more effective meetings in-house with better food.
I am also curious how they intend to maintain a steady cache of couriers, as they are competing with all other on-demand service providers for this pool of independent contractors. Why would someone deliver for Caviar rather than drive for Uber, Lyft, or Postmates? If they intend to scale and keep growing at rates even close to their current growth rate, this will be an important answer to get right.
I am very interested in how all of these types of platforms grow in the next few years and, in the case of Caviar, whether their promise to deliver from the best local restaurants continues to appeal to both customers and restaurants. After all, this model requires restaurants to change their operating models, as they will have to adapt their processes to accommodate the demands of a take-out restaurant. I think Caviar’s future success will depend upon its ability to help these restaurants make this transition.