Source Code: What matters in tech, in your inbox every morning

×

In a world where Grubhub said it doesn't believe a delivery platform "can generate significant profits" from actually doing the delivery, Slice's approach might offer a model for its competitors.

Photo: Slice
People

Slice's CEO on Uber, DoorDash and the one kind of pizza that should never be delivered

Ilir Sela says his company allows local pizzerias to focus on what they do best.

In an industry dominated by high-profile titans running afoul of lawmakers and restaurateurs alike, Slice is an outlier.

Founded by Ilir Sela, an Albanian immigrant from a prolific pizzeria-owning family, Slice views itself as "a hybrid." Unlike many of its competitors, Slice does not employ its own drivers. Instead, it offers a software solution to independent pizzerias, allowing them to take digital orders, alongside a marketplace app for consumers that pairs diners with nearby pizzerias. In a world where Grubhub said it doesn't believe a delivery platform "can generate significant profits" from actually doing the delivery, Slice's approach might offer a model for its competitors.

Sign up for Protocol newsletters

Just after the company announced a $43 million KKR-led funding round, Protocol caught up with Sela to find out what he thinks of his bigger competitors, whether food delivery can be profitable, and Slice's "business-in-a-box" plans.

This interview has been edited and condensed for clarity.

Where do you see yourselves in terms of positioning — are you a marketplace or a software provider?

I've described our model as a reverse franchise model, and I don't mean that in a negative way, but it's really analogous to what a Domino's offers their franchisees. We've taken a similar position to be able to offer technology, and marketing and economies of scale to fragmented small-business networks. We don't necessarily do the logistics. However, we do empower that component for the small business through software and technology.

How much value do you add to restaurants in terms of demand aggregation?

Our marketplace has scaled pretty quickly. It's actually our youngest product: We launched that in 2017, and it today represents over half of our volume in terms of consumer transactions. We have over 4 million active customers on the app, and it's scaling incredibly fast.

We provide a lot of value to the small business on both sides of the ecosystem. We do things like aggregating buying power to lower the cost of things like pizza boxes. We eliminate the need for small businesses to have part-time staff to answer the phone. And then on the digital side, we increase not only the AOV [average order value], but also the frequency of the consumer that is interacting with the small business.

Do you ever come across a pizzeria that doesn't have their own delivery service?

Yeah, we do. Over 80% of our network has first-party delivery — delivery drivers in-house. And last time I checked, about 18% do not have their own delivery. And what we're seeing as a result of COVID is a lot of those locations actually moving to first-party delivery. So we've seen an acceleration of pizzerias that never did delivery, wanting to do delivery in-house. We're also about to enable an ecosystem, a delivery platform for both national and local logistics companies to plug in and offer that as a solution to the small businesses that don't have any delivery. It'll allow third-party delivery providers to basically compete for the business.

Do you have any desire to get into the logistics space yourself?

To be fair, we organically are in the logistics space. It is still our responsibility to make sure that the logistics and the delivery that is provided by our partners is efficient, is on time, and meets or exceeds the expectations of the consumers on our platform. But we do not have any plans in becoming a three-sided marketplace, where we are the logistics provider directly to our small-business partners.

I'm curious what you think about that as a business model, seeing as you've obviously decided not to go into it. Can the Uber/DoorDash model ever actually work?

I think it works in a lot of ways. One of the challenges that we all have when we try to make sense of the food tech industry is that we lead with this thought that it's a winner-take-all scenario, and I don't think that's the case. I think there's going to be multiple models that will win and create value. I think there is room in the ecosystem for the Uber Eats and DoorDash and Grubhubs of the world to succeed.

I don't think it will be the only way that consumers will interact with the food industry in terms of takeout and delivery. I think it works in highly dense markets where the consumer is less sensitive to price and just really wants convenience and accessibility. A perfect market would probably be a place like Manhattan: The consumer is affluent, and convenience is critical. It's a very profitable market, from my own point of view — at least with the data points that I have.

Now, can you make that work on a national scale in the U.S.? I don't know about that. I think the jury is still out. I do think they can be successful. I just think it can't be applied, across the entire country, across all markets and across all categories.

There's been a lot of talk recently about the high commissions that some services charge, and some cities have capped commissions. What's your take: Are these businesses predatory?

I don't know that I would call them predatory. I just think the business model is the business model. As consumers, we want some level of service, some level of convenience, and these companies have done a really good job at making so many different cuisines accessible. There's a cost that's associated with that.

Whether it's the restaurant that has to cover the costs, or the consumer, or, in their model, putting the burden on both sides of the ecosystem — that's just what it is. Now, when you cap the cost on the supply side, on the restaurants, then I think it's just organically going to shift the burden on the consumer even further. So I think delivery fees will go up. I think menu markups will go up on these platforms. Somebody is going to have to cover the costs.

It's not like all of a sudden [platforms] are just going to operate at a massive loss, more so than they're already doing. Look, we can't have the best of both worlds. The general consumer sentiment is that we want to save restaurants, and we also want that convenience. And the reality is that we can't have both, so we have to pick what we really, truly want.

So do you think caps are a good idea?

I don't know. It's to be determined. We'll see if it has the intended effects in helping SMBs, because I think larger enterprise chains already have had favorable pricing on these platforms. We'll see. It all depends on whether consumers will want to absorb the higher cost.

Lobbying efforts from Uber and DoorDash suggest they don't think consumers will bear the price, right?

I think they're gonna claim that. My hypothesis is that the service will become more of a luxury service. For the average American, with a household income of less than $50,000 a year, I don't think it'll be a viable product to really use on a frequent basis. So yeah, they may be right about that.

Do you ever see yourself branching out beyond pizza?

Right now, we're super focused on the pizza industry. The pizza industry is unique: It's been a product that's been delivered for decades, it's low cost, it travels well. I think the reality is that not all cuisine is created for delivery. In fact, not all pizza is created for delivery: The really delicious Neapolitan-style pizza, I advise people to eat that at the restaurant, it's not really meant for delivery.

And some restaurants' margins aren't created in a way that pizzeria margins are created. Pizzeria pricing has the price of logistics built in, right? Not every cuisine operates that way. And so I think there's just some very unique components to every single category, which is why I believe in verticalization and solving these problems more specifically, in a more targeted way.

Pizza happens to be the largest market in the U.S. in terms of food takeout and delivery, the small-business segment is by far the largest segment, and it's predominantly offline. So our job is to create value for not only small business, but consumers, by digitizing that volume through incredible technology products and solutions for both sides of the ecosystem.

What do you plan on doing with this new cash?

Continue to expand our network. We work with about 12,000 locations today: The small-business segment has about 55,000 locations in the U.S., so there's a ton of room for us to grow.

And then more importantly, continue to vertically integrate within these small businesses to solve more of their problems with this reverse franchise, or what some people in the VC community call a business-in-a-box strategy. That's where you really allow the operator to focus on what they do best, and what they love to do, which is being makers — making food and serving customers — and solving the challenges that they don't have the time, expertise or resources to solve.

We're a robust, experienced company with incredible talent. How can we then apply that talent to making small businesses more successful? Imagine the Slice team managed and supported the small-business operator when it comes to refreshing their brand, when it comes to managing the entire consumer experience, regardless of channel — managing their entire digital ecosystem. It's this idea that leveraging data, we can really influence the success of the business, by providing the consumer a very consistent, magical experience, which then goes back to the SMB in the form of increased revenue and margins.

One example would be marketing. Our current network, so 12,000 shops, last year spent (we estimate) more than half a billion dollars on marketing — inefficient marketing, because it's a pizza maker that's trying to figure out how to advertise. We can make that a lot more efficient.

It's being a very close partner to the small business in order to help them thrive and service the customer in a way that consumers have never experienced local pizzerias before — so almost that Domino's-level experience, for SMBs.

How is that any different from a pizzeria becoming a Domino's franchise?

We don't want to homogenize the product; we love the authenticity of it. We're going to leverage data to help them understand what items they should be looking at creating, and taking those lessons from the community and applying it to more and more locations.

But we definitely don't want to homogenize or dictate what they sell.

Are you profitable yet?

It's not a metric that we've shared publicly. We have the ability to be profitable whenever we choose to do so, because we are more of a software business; we're not a logistics business. But our focus is on growth, and the investment that we brought on will allow us to continue to invest ahead of our revenue, in order to make sure that we continue to scale and make an impact on our ecosystem.

Are you considering acquiring anyone?

We just historically have never been acquisitive, and that hasn't been core to our strategy.

We have a strategic offsite in June, and we'll definitely look at all opportunities and possibilities in order to make sure that we continue to accelerate. Everything's a possibility at this point.

Latest Stories

Source Code: What matters in tech, in your inbox every morning

×