Can Mom-and-Pop Pizzerias Be Modernized?

When Saroj Poudel worked as an employee at Papa John’s and Domino’s pizza franchises in North Carolina, he saw firsthand how important convenience was to customers: Sixty percent of sales at those chains, he says, came from online orders. So last year, when Poudel bought Pop's Backdoor Pizza, an independent pizza shop in Durham, he knew that if he had any chance to compete with the big pizza chains, he needed to offer the same conveniences.

When delivery services like GrubHub and Seamless first hit the scene, they were hailed as saviors for independent restaurants like Poudel’s, but restaurants quickly saw their profits eaten by commissions. As of 2014, GrubHub and Seamless received an average commission of 13.5 percent per order. But going at it alone and trying to build the technology wielded by delivery apps and big chains is often prohibitively costly to independent restaurants.

Most food delivery and ordering startups aim to solve a problem for the eater: namely, get them their food, fast. IT professional Ilir Sela, whose grandparents owned pizzerias in Manhattan and Brooklyn, started Slice, an independent pizza-ordering platform, with another group of customers in mind — the restaurants. Poudel started working with Slice in September, and estimates 20 percent of Pop’s orders come through the company’s website and app.

Although Poudel knew the important role technology would play in his restaurant’s growth, he’s a rarity. What people love about mom-and-pop pizzerias is what also makes it difficult for them to evolve, says Ian Manheimer, co-founder of the New York Pizza Project, a coffee table book and website celebrating the city’s pizzerias and pizza culture. “Their main offering is tradition,” he says. “The slice has been made the same way for decades, and it's what their customers have come to expect. While this orients shops to deliver consistently excellent pizza, they’re not built to respond to a rapidly changing business environment. Today, New York is a convenience culture, and even the slightest friction in ordering a pizza will hurt your business."

Slice helps pizzerias remove that friction: Not unlike Seamless, GrubHub, and other startups, customers place pizza orders with a few clicks from a straightforward app or website. But Sela knew many pizzerias operate without so much as a computer, and that simplicity would be a key selling point for the restaurants.

After receiving an order in the app, Slice will fax or email orders to pizzerias, depending on how they operate. But it’s not quite as archaic as it sounds, at least not from Slice’s end. When a customer places an order, Slice’s platform automatically relays the order to the shop. Humans are only involved if a pizzeria doesn’t have a fax or email option, in which case a Slice representative calls in the order — but that’s rare. Slice also handles customer service, such as when a customer has a question or an order needs to change. The pizzerias themselves handle delivery or order pickup.

Slice differentiates itself from other companies with its simplicity and focus on loyalty, according to Sela. “We’re not a discovery app — pizzerias, to me, are like barber shops,” he says. “You don’t change your barber every week.” Although Slice users can view many pizzerias in their area, the app encourages repeat visits. No algorithm calculates preferences and order history, or suggests a new restaurant to try. There are no reviews and no stars to award. When a user opens the app, they see the last restaurant they ordered from. With a few clicks, users can order the same pie they did last week. "It’s a habituated product," Sela says.

Consumers and pizzerias are both stuck in their ways. Although it hasn’t been easy dragging traditional pizzerias into the digital age, Sela has reached a critical mass. Now he’s aiming his attention to consumers who have become used to ordering with a few clicks on their smartphones. As Sela sees it, pizza lovers have turned to “big pizza” — Domino’s, Papa John’s, and Pizza Hut — because these companies offer easy ordering. Sela wants to bring the technology of "big pizza" to small mom-and-pops.

It’s not clear how often consumers will Tweet for their pizza, but the ease of online ordering is winning over eaters. In the U.S., pizza accounts for nearly 60 percent of the $11 billion online food delivery market. But "big pizza" has an oversized share of the pie — 15 percent of all pizza industry revenue comes from their digital platforms alone, according to Aaron D. Allen, a global restaurant consultant. For these companies, online orders account for nearly half of all sales. Domino’s, in particular, has been aggressive with its tech-forward ordering options, like the ability to order through Amazon’s Alexa or via Twitter.

When Sela launched his company in 2010, he called it MyPizza, and it simply placed pizzeria’s menus on websites. Sela often had a personal connection to those early customers. Avni Klobucista, the owner of A&S Pizza, located right off the Staten Island Ferry, was one of the first pizzerias to sign on with Slice, and he admits he does not embrace new technology. But while a majority of A&S’s orders still come in through the phones, Klobucista knows the times are changing. “Nobody wants to talk to nobody no more,” he says. Currently A&S receives between three and 15 orders a day from Slice. And it’s made Klobucista think “we might do a website one day" — something beyond Slice’s online menu.

For five years, Sela’s mostly bootstrapped the Slice business, expanding from helping pizzerias place their menus online to taking orders for delivery and pick-up. Now Slice needs to focus on their eaters. The customers using Slice are key to growth and profitability, something many delivery apps haven’t achieved. To accomplish this, Sela hired a tech veteran as company president and took on his first large round of funding, including investments from Paul Allepbaum, a co-founder of Seamless. In July 2016, Slice closed on a $3 million Series A funding round. A few months later, MyPizza rebranded as Slice.

As it focuses on growth, Slice might have to contend with Seamless’ reputation, says Stephen Zagor, the dean of culinary business and industry studies at the Institute of Culinary Education. According to GrubHub, restaurants’ monthly takeout revenue grows by an average of 30 percent after joining the service. But Zagor has spoken to plenty of fed-up restaurateurs who are no longer willing to share their profit with a food app. (Slice takes a $2 commission from every order, regardless of the order size.)

Another hurdle for Slice will be working with small pizzerias that haven’t embraced many (or any) new technologies. Sela says Slice focuses on pizzerias in smaller cities and suburban areas, many of whom have yet to offer any online ordering options. But “I think they will run into cultural issues around adoption,” Manheimer says. “In our research, we found many small shop owners to be wary of newcomers hawking different solutions to business problems. There is a culture of distrust in the community that Slice will be burdened with.”

At the same time, many of these pizzerias know they must adapt at least a little to survive, says Zagor. “I think [Slice is] the best of many evils,” he adds. “But GrubHub and Seamless have incredibly great marketing. And they’re all over the place; they have lots of time in the business. They’re going to be tough competitors, but someone has got to start somewhere.”

By the end of 2014, Sela was working with about 3,000 pizzerias. “We were doing meaningful revenue and sales to these pizzerias,” says Sela. “But it was a lot of hard work. It was still basically me on a laptop, a developer in Alabama, and one in California.” And Slice isn’t the only business looking to give restaurants a more affordable alternative to GrubHub or Seamless. Recourse, a New York-based company, passes the delivery fees on to the customer and charges restaurants only a flat fee to join. Homer Logistics, also in New York, aims to make deliveries more affordable for independent restaurants by centralizing the process.

At Slice’s new headquarters in Manhattan, pizza parties are frequently held at one side of the office that’s set up to look like a pizzeria — black-and-white checked floor, small tables, and pizza parlor paraphernalia. But in the open office space, developers, marketers, and business development types are hunched over computers, and it feels like a buzzy startup.

Slice’s funding round helped Sela staff up. The company now has close to 50 employees in New York, and another 135 employees in Macedonia handle customer service. Sela hired tech industry veteran Pete Chen as president; Chen worked at Constant Contact, an email marketing company, and was a founder of the early social networking site Community Connect. On Slice, customers can now order from a slick app with pizza-specific customization feature, like the ability to request toppings for one half of a pie.

Since the funding round, the team implemented marketing emails and grew the business to serve 6,000 pizzerias in 49 states. (GrubHub Seamless declined to disclose the number of pizzerias currently using its service.) Although Sela won’t share specific financials, he says, “we’re never too far off from profitability, but we are heavily investing in growth.”

The restaurants still seem to come first for Sela. He’s most excited about the tech the company is rolling out to help pizzerias, and he is also considering bulk purchases of items like pizza boxes, so independent shops can get the low prices afforded to "big pizza." “Ultimately, what’s most important to me is that we provide value to the restaurant,” Sela says. "I think the most important thing is, How do we maintain the relationships with restaurants that we’ve partnered with? How do we scale those relationships at a much much faster rate? And how do we remain a business that adds value to those guys?”