Shane Murphy (00:01.597)

Welcome back everybody today. We are joined by Andrew Nakkache the co -founder and CEO of First which is an all -in -one delivery operating system for restaurants and they really focus on helping customers take back control of their delivery operations and Reduced the cost of the delivery for their business Andrew. I am super excited to have you on the show today. We've we've known each other for a bit and

You have a lot of insights to be able to share with restaurant owners. So thank you for coming on today.

Andrew (00:33.198)

Yeah, no, thanks for having me. Appreciate it, Shane.

Shane Murphy (00:36.893)

Yeah, maybe before we dive too far into the meat, can you tell us a little bit more about you and your background and maybe give a brief explanation of what FIRST does and the problems that you guys set out to solve?

Andrew (00:49.934)

For sure. So when we first started the company, so there's four co -founders, right? Two of us are technical, two of us are non -technical. I'm non -technical. And when we first started the company, we were actually doing the delivery. So we had our own delivery drivers, right? And we went from one market at our home university in Temple in Philadelphia, and we grew that to 10 markets over the span of four years. And so that was the first four years of the company.

We got into Y Combinator, got to 50 ,000 deliveries a month. And then at that point, mid COVID, it just became too hard to scale that business. And at the same time, DoorDash Drive, Uber Direct, Relay, and lots of other fleets started opening up their delivery APIs. And we said, okay, there's a better opportunity to build a software business. So what we do today, when we work with restaurants,

is we connect all their ordering channels. It doesn't matter where they get orders from, and we bring that all into first, where then a restaurant can choose to send those orders out to whatever provider they want. So they can get an order from Grubhub and send it out to their own driver, or send it out to a Fleet Lake Doored Astronaut.

Shane Murphy (02:07.005)

And are those orders generally coming from their direct online ordering and then they're farming out the delivery logistics from there?

Andrew (02:15.246)

Typically, I mean, they come from all types of channels. So we support over 30 different integrated ordering channels. If you hear a dog barking in the background, my dog must be hearing something outside.

Shane Murphy (02:28.221)

You're good, no worries. Awesome. And so maybe to kind of go down this path, like third -party delivery has shifted a lot over the last five to 10 years. Niproll has third -party, you're good.

Andrew (02:34.062)

Bye.

Andrew (02:42.702)

you

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Coach. Sorry. He's getting out of here.

Shane Murphy (02:53.885)

I guess what role has third party delivery played in restaurant marketing and how has that shifted?

Andrew (03:00.366)

Yeah, so I think that the way, you know, when third party delivery first started coming to the market, it was all incremental, right? And then COVID happened and it was no longer really incremental. It became like a big part of their business, right? And so what you've seen restaurants do today now is they primarily just like mark up their prices, right? The consumer ends up paying a lot more, like they end up paying those commissions more or less.

And what we're starting to see now is restaurants are really starting to evolve how they use those third parties more as a lead gen channel, right? Where I can get orders from Grubhub, but then choose to deliver them however I feel. And I get to know who that customer is. I know it's Shane Murphy. I know he lives at 1000 Broad Street in Philadelphia.

Shane Murphy (03:58.365)

Yeah, because this is largely coming from the cannibalization that has happened as the third parties have gotten more established through the years. Can you speak to that a little bit? Like how has order cannibalization happened and what does that actually mean?

Andrew (04:19.054)

Yeah, it's a good question. And really, so what it means is that, you know, that customer who used to just maybe, you know, order pickup or used to call the restaurant, right, to place an order instead, right, has shifted to becoming essentially like a customer for a third party delivery app, right? It's been easier. I mean, these apps make it really easy to order. They make it really easy to reorder and,

And if they're going to deliver a better customer experience, right. It's, it's harder for restaurants to still own that relationship. And that's really kind of the challenge that restaurants face. How can they deliver a better customer experience when you order direct versus when a customer orders on a third party.

Shane Murphy (05:07.581)

And why is it so valuable for the restaurant to have like the direct relationship and like have access to their customers contact information? Why is that valuable?

Andrew (05:19.982)

Yeah, I mean, I think it's like the thing that's crazy is that like you're even asking that question, right? It's like, how is this even a question? I imagine if this was any other industry, right? And you didn't know who your customers were. Like I couldn't imagine running a business where I would say, okay, well, my revenue is up, but I don't even know who my customers are. Just think about how crazy that is. I mean, that doesn't happen in any industry.

in any business relationship where you have customers and don't know who your customers are, but you just see money coming into your bank account.

Shane Murphy (05:55.965)

Yeah, it's wild and it's a really unique industry because, you know, the restaurants, they always view the end guest as their customer, but the third parties view the people ordering through the platform as their customer and not the restaurants. And so there's this conflict between restaurants and the third parties on whose customer is this really? And, you know, in

In many cases, the third parties have kind of carved it out and said, yeah, if they're ordering from us on a marketplace, it's not your customer. They're just a dollar in your bank account, but we're gonna keep marketing to them and getting them to order through us, not from you directly. And that might mean they're ordering for the pizza place next door a week from now instead of your restaurant.

Andrew (06:52.59)

Right, which I don't know. I just, I think the thing that I think about is, you know, if you put your consumer hat on, right, it's not like I'm buying a commodity like tissues, right? Where I don't really care what the brand of those tissues are. Tissues are tissues, you know? I don't really think, you know, Kleenex is that much better than the next guy. It's just a tissue, right? But like if I'm buying food, right?

and I'm buying hot food coming from a restaurant, like it shouldn't, it's not a commodity, right? I'm buying Panera, I'm not buying a panini, right? I'm buying a certain food and I'm expecting it to taste a certain way. And if it's a good experience, I'm gonna order again, right? And I think that's the like the fundamental difference, you know? They're not, you can't say the argument that they're a wholesaler.

Right? Because if they're a wholesaler and they're just selling pizza, right? Well, then, I mean, it's not like brand, it's not like third party delivery pizza, right? It's Papa John's, right? And you're ordering that. So that's just my two cents.

Shane Murphy (08:07.133)

Yeah, I think that that's like almost the heart of the age old conflict on whose customer is this. And in reality, the answer is both. And that leads to pros and cons with the third parties where you do get exposure. And in today's world, you have to essentially be on these parties to maintain your market share. But what you've been talking about as well as the importance of

actually owning your customer and getting access to some of that information so that you can maintain your margins. How in real world practicality does a restaurant owner strike the balance of getting the benefits of both worlds, the positive benefits of being on third party platforms while...

reducing their costs associated with delivery along the way and having that direct relationship.

Andrew (09:11.886)

It's a great question, right? I don't think I have like a silver bullet. But what I would say is that, you know, I think it kind of starts with understanding their unit economics as a restaurant, right? And understanding like, what does profitable delivery look like? Like you should understand how much money you're making after you pay out the third parties, after you pay your labor, after you pay for

food costs, and you should understand what your bottom line margin is, right? And then it's almost like you just like, you go backwards from there, right? You then say, okay, well, I know that I wanna be able to make, you know, $2 in bottom line margin, right? Or $3, right? I'm gonna make $3 in bottom line margin, and my average order value is gonna be $30, right? Okay.

my food cost is gonna be nine, right? My labor cost is gonna be nine, right? So $18 for food and labor, which leaves me with $9 as my kind of cost that I can attribute towards everything else, right? And then from there, how I look at it is, you know, as a restaurant owner, like if I was a restaurant owner, right? I would, you know,

try to be conscious of like, okay, how much can I mark up? How much am I going to have to mark up to make sure that I can still make my net margin that I need to make? Right. And, and again, like, I think that, like, I think that things are going to change overall. Like if I had to predict the future, I think that it's going to be more transparent in the future, for restaurants and for diners. I think that's kind of like,

and for delivery drivers, like overall. I think the big challenging thing in the market is like there's a lot of reasons why, you know, DoorDash and Uber and Grubhub, they have to charge high commissions because it's expensive. You have to pay a delivery driver to deliver food. And it's very hard to do that efficiently, right? And then when you have other things happen, like consumer fraud, right?

Andrew (11:32.206)

driver stealing food, these kinds of things happen and they don't have to happen a lot to make it really expensive. And I think that's like the challenge. I mean, I'm sorry, I'm not answering your question more directly, but I think really what it comes down to, if I'm a restaurant owner, I want to know how much money do I want to make, right? On a third party order versus someone who walks into my restaurant, you know, on a percentage basis and then just go up from there, make sure you bake in enough markup.

to cover the marketing fees you need to without turning off customers. It's a balance.

Shane Murphy (12:08.925)

Yeah, and I think that that's a really crucial balance that you're highlighting because you can use these to your advantage and you can preserve margins along the way, but you have to be thinking about the margins. I think that's probably mistake number one with managing your third party delivery is you don't think about your margins and you look at the bank account at the end of the month and think, yeah, I got X.

thousand dollars through third parties and well what land what actually was kept in the business stayed about the same as last month and i don't get it but if you think about it from this unit economics perspective that you're walking people through you can make it very profitable you can adjust the prices that you have on the third parties you can use a company like like first to help facilitate some of this as well

How does First actually enable people to reduce their cost of delivery?

Andrew (13:16.686)

Yeah, it's a great question. So when we work with a high volume delivery restaurant, right? So say we work with Joe's Pizza, right? And our best customers are restaurants that are doing at least 30 deliveries a day across all their third parties, right? So call it a thousand deliveries a month, right? And we have some customers that will do single locations that will do 3000 orders a month.

right? They're doing a hundred deliveries a day and those are our favorite customers, our best customers. And it's, it's where our product works best. Right. And so, so for example, you know, we have a restaurant, in Chicago, I won't, I didn't get their consent, so I won't name them on this call, but they do a hundred deliveries a day across all the third parties. Right. And so they do enough volume where they can actually deliver, you know,

they're essentially able to aggregate a lot of volume. And when you can do that, you can do a few things. One, you'll switch to self -delivery on third parties. And typically, if you're saying you're paying like a 25 % commission, right? It'll go down to somewhere between 11 to 15%, right? So their commission structure, immediately their commissions are gonna go down quite a bit, right?

but they still need to pay for a delivery driver, right? But here's the big kicker. When you switch to self delivery on third parties like Grubhub, Uber and DoorDash, you can charge a delivery fee that you keep. So instead of that delivery fee going to DoorDash or Uber or Grubhub, so say I'm a restaurant and I was paying 25 % right in commissions and my average order value is $40. That means $10 is going to go to the third party.

Say I got it reduced to 10%. Right. Now I have $4 going to the third party and I have $6 in commission savings. Right. And then the kicker on top of that is I can charge a delivery fee. So I may charge a $3 delivery fee to the diner. Right. So now I'm charging a $3 delivery fee to the diner and maybe it costs me $6 to do the delivery. Right. So consumer is going to pay three.

Andrew (15:37.806)

I'm going to pay three, but I saved six from what I was paying the third party. Right. So now that I saved six from what I was paying the third party, I'm going to take $3 of that to pay my driver. Right. But I'm going to have $3 in savings that goes right to my bottom line. Right. So when you have that kind of savings and restaurants, I mean, if you're at a 10 % bottom line margin, like that's good in today's world. Right. And so if you have

$4 and what your bottom line margin is on a $40 order, right? And it goes from four to seven, that's material, right? That pays for a lot of stuff in the restaurant.

Shane Murphy (16:19.965)

Absolutely. I love that because it's not like these delivery channels are often marketing channels for you. And even when you're doing your own marketing and you're trying to drive people to your online orders and maybe dispatching other delivery drivers, but you have to be thinking about how do I make my marketing profitable? How do I increase the

money in the bank account, even without having to increase the volume that you do as a restaurant. And what you're describing are the strategies to do that and to maximize returns. So this is a phenomenal conversation. I'm curious when you just look at experiences that you've had and seen and gotten exposure to recently,

Maybe what's one or two of your favorite marketing strategies that you've seen restaurants employing lately?

Andrew (17:22.989)

Yeah, no, it's a good question. I think, and then one more thing I would add on that like previous point is that find whether you're using like, whether it's your accountant or someone, right? Like we, like all, like we'll do this for restaurants, right? We work with about 2000 restaurants today, right? And when we work with a restaurant, one of the things that we'll do, if you ask us, right, is we'll do essentially make you a delivery P &L, right?

Shane Murphy (17:28.413)

Yeah, please.

Andrew (17:51.502)

where you can see how much money you're actually making. And like, we need to know, okay, like, hey, tell us what, you know, your labor cost is roughly, tell us what your food cost is roughly. And then we can give you a chart that updates in real time, like every day, hey, here's what your delivery P &L looks like. And we can break it down per channel and so on. And that's something that whether, you know, you're using first or not.

I think every restaurant should understand their delivery P &L and have it as a separate P &L really from their kind of dine in P &L because it's a different line of business. It's like a different revenue stream. And if you have that granularity, then you know what's going on versus money's just coming in and money's going out and you don't know how to make sense of it all. So I just wanted to staple that there. And then I think on the, on the marketing side, well, we've seen restaurants start to do.

Shane Murphy (18:40.669)

Absolutely.

Andrew (18:48.494)

is I think that the best operators out there, they actually want to offer hospitality to their delivery customers too. Right? So a lot of times when customers order delivery, right? So like if you ask, if you ask restaurants, they're going to tell you one of two scenarios, either that they like the fact that when the customer calls, they can just tell them to call DoorDash, right?

Or they're in the other camper that they don't like when the customer calls because they feel like they're powerless and they can't do anything about it. Right. And then the customer just might never order from me again. We like working with restaurants in the second camp, like the restaurants that actually want to have relationships with their delivery diners. Like those are the customers that we like to work with and they like with us. Right. And the ones that do that.

Shane Murphy (19:41.853)

Yeah.

Andrew (19:45.326)

that say, hey, I'm actually going to take control over these relationships, right? Versus just telling them to just call DoorDash when they have an issue. And what they do is they like, they'll send out a tracking link to the diner, right? On every order. So they'll send out a tracking link. It's branded with their restaurant brand, right? They often like, they can include like a promo code. So it's a lot like what restaurants have done for years where they'll put like a flyer in the delivery bag, right?

but you don't know how many of those flyers actually ever even get seen, right? Whereas everyone looks at a tracking link, right? If I get a tracking link, I gotta see where my food is. I mean, my food's on the way, I'm hungry. If it doesn't come, we're gonna have problems. And so they use that tracking link as a way to say to the customers, hey, look, give us feedback and we'll give you $5 off your next order, right?

Shane Murphy (20:20.285)

Yeah.

Andrew (20:43.438)

And then they can use that as a way to get customers to then order on their own website. Right. And that's just, in my opinion, like what the market deserves or wants is like, how do you help restaurants better, you know, deliver to their diners? And oftentimes those deliveries are still being done by DoorDash Drive or Uber Direct. So it's not like you're saying like, forget third party. You're still lying on third party. Right.

But you're getting more control over the customer experience and we believe it's better for everyone in the ecosystem. It's actually better for Uber and DoorDash because they don't have to support all those customers as well. And you can better support them when they order direct.

Shane Murphy (21:31.837)

Yeah. That's great. So you talked about two different strategies there for essentially helping to convert third party orders into first party direct orders. One was the age old flyer that you stick in the bags on top of the boxes. And back in the day, the delivery drivers used to be told, look and rip those out because you don't want the customer to get

get that and I think that happens less now. The drivers aren't ripping stuff out, but it used to happen. But still a certain percentage of people will see the flyer taking action and things like that. Another option through, it sounds like a company like First facilitates this using the branded tracking link and giving people an incentive from that user experience.

to come and order direct in the future. Are there other ways that people have gone about transitioning those third party orders into first party?

Andrew (22:42.19)

Yeah, the other way is like, I think that like, there is a reason why, like, I don't know if like, I still get direct mail, like often from like third parties, right? And so, you know, if you have those customer addresses, you should use them, right? And I think that like, whether you're using First or someone like us, right? One of the main value props of leveraging First is you can turn on more channels.

So there's more channels out there where they can't do the delivery. They can send you orders, especially on the catering side. There's lots of companies out there like Cater Cow, Fuda, where they can send you orders, but you have to figure out the delivery. And so those are the customers too, these catering customers that are worth a lot more. And so how I look at it is turn on as many channels as you can.

try to get as much data as you can on customer phone numbers, right? And delivery addresses. And then with direct mail, I mean, there's companies like, there's a company called MailJoy, also actually another white combinator company, ironically, right? That they also can do like personalized direct mail. So you can basically upload an Excel sheet.

where it says, you know, Shane, and it says, okay, here's the promo for Shane, right? And you can personalize direct mail the same way you can like personalize an email, right? Very easy to do, very cost effective. We're talking 90 cents a mailer, right, to do that, cost nothing.

And there's lots of companies that do direct mail. Also like Kevin from Mailwise, you know, Mailwise is more of like a tailored solution. So there's that. I mean, there's, there's, you know, we're on the Boosley show. Obviously there's Boosley. That's a no brainer on how you can like leverage your historical customers, right. And have them opt in in a compliant way, right. As well as when net new customers come on board, right. And like engaging those customers, marketing them.

Andrew (24:58.286)

helping them order direct, the more direct customers you have, I think like Noah from Olo, I think he said something, I remember this quote that just stuck in my head. He said something like, the most important metric of like the 2020 decade will be like what percentage of your diners are ordering direct, right? He said something like that. And you know.

We have like a small partnership with Ola, but when he said that, that was something that resonated with me deeply. Cause I think it's so important for a restaurant to know who their customers are and protect like any kind of long -term risks. Cause you never know how the future is going to unfold and you should know who your diners are and try to get as many of them ordering from you as possible.

Shane Murphy (25:46.781)

Certainly. Andrew, this was really great. You put a lot of information out today and really appreciate you sharing your knowledge and experiences. How can people follow you and learn more about FIRST at the same time?

Andrew (26:01.582)

Yep, you can find us on LinkedIn. That's the easiest. If you just search First Delivery, it'll come up fast. You know, you can also, you know, we go to quite a few shows every year, so you can find us there. Reach out, Andrew at firstdelivery .com, easy enough. And yeah, we'd love to, you know, partner with more restaurants who want to do more to get more customers ordering from them.

Shane Murphy (26:29.853)

Thanks so much for joining us today, it was great having you.

Andrew (26:33.294)

Thanks, take care Shane, appreciate it.