As co-owner of the priciest eatery in Chicago and CEO of an internet start-up focused on restaurant reservations, Nick Kokonas is uniquely exposed to the current economic crisis.
But he's definitely not succumbing to it.
While reservations giant OpenTable is cutting staff, and restaurant software vendor Toast said last month that it's reducing headcount by 50%, Kokonas just raised $10 million in venture funding for Tock. His six-year-old company in Chicago is helping high-end eateries transition to takeout.
Kokonas told CNBC that Tock, which has about 100 employees, processed $350 million in transactions last year by selling prepaid reservations to customers for high-end restaurants. When the coronavirus hit, Tock quickly adapted the business to focus on takeout orders. Within the next month or two, Kokonas expects, the company will be on pace to process $1 billion in orders annually.
"I wasn't going to do nothing," said Kokonas, who simultaneously had to figure out how to keep things afloat at his restaurant Alinea, where diners pay $395 for its "most intimate, immersive and cutting edge experience," according to the website. "We adapted very very quickly in both cases, and it's working."
Tock lets restaurants use the same reservation system they were accessing previously, and charges the same 3% fee. But now instead of asking a customer to enter a time and party size for dining in, the user chooses a time slot for pickup and says how many people will be eating. Cars can show up every 15 minutes.
Reverence in New York is charging $40 a person for an appetizer, choice of two entrees and a dessert. Wolfgang Puck's Spago in Los Angeles is selling fried chicken on Wednesday for $39 a person and barbecue on Thursday for $59. Kokonas said that Tock is getting between 150 to 200 inquiries a day from restaurants that want to sign up, and the company just added five account managers to the team.
At Alinea, the Osso Buco and risotto that comes with antipasto and dessert costs $34.50 a person for pickup. Kokonas said the restaurant served more than 1,300 meals on Mother's Day, and that the increased business in recent weeks has allowed him to reemploy 100% of his staff.
The new investment round was in the process of coming together pre-coronavirus, Kokonas said. But when cities began shutting down and the economic impact started to become clear, several venture investors who had wanted to participate said, "We're going to see how long this lasts and see you on the other side," Kokonas recalled.
Jonathan Shulkin of Valor Equity Partners stuck it out. Valor led the prior financing round in 2018, and Shulkin is leading this round through Valor Siren Ventures, a fund that raised $100 million from Starbucks last year to support next-generation food and retail businesses.
"Jon called and said, 'This is the time to make investments,'" Kokonas said. "We were in negotiations but hadn't settled on a valuation or anything like that. He said, 'We'll take the terms you proposed two weeks ago.'" Kokonas said he's not disclosing the valuation but confirmed that it's doubled since the last round.
Tuesday was a busy day for the online food ordering market. GrubHub shares surged 29% on reports that Uber has made an offer to buy the food delivery company. And Slice the online ordering site for local pizzerias, announced a $43 million financing round, led by KKR, amid a "surge in demand for pickup and delivery during the COVID-19 pandemic."
Kokonas, a former derivatives trader, said demand for Tock's service is picking up as restaurants come to terms with the long-term reality of social distancing. Even as local economies start to reopen and loosen guidelines on group gatherings, the fear of getting sick will keep a lot of people away from restaurants. Thus, the ability to sell food for takeout in reasonable quantities will be necessary for many restaurants to survive.
In addition to restaurants, Tock is also now providing its technology to farms so they can sell bags of fresh produce directly to consumers. Tock is working with White Oak Pastures in Georgia and The Chef's Garden in Ohio, and is the process of bringing about 20 farms onto its site.
Kokonas said Tock will have a dedicated part of its website called Tock Pastures, Produces, & Purveyors and will promote the service's availability to its 12 million user accounts.
"These are some of the best farms and best ranches in the U.S., and they've primarily served the restaurant industry," Kokonas said. "All the sudden, they have no clients."