Start-up in 'sharing economy' says it helps boost local tax revenue
We're all about the sharing economy, though it's not really sharing. It's about providing a service that's convenient and affordable. I'll share my car with you, if you'll share some of your money with me.
Popular car-sharing services like Uber and Lyft are hits with consumers. There is a downside, however: Critics say the new services cut tax revenue by taking business away from cabbies who pay licensing fees and potentially higher taxes.
All of which raises a question: Can the sharing economy also share the wealth?
A delivery start-up called Favor thinks so. The company will deliver just about anything, anywhere, anytime in designated neighborhoods of Austin, Texas, via its app. Favor has presumably not taken away anyone's job. In fact, jobs are being added, and so are local sales taxes.
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There are 200 Favor "runners" so far, and some restaurants say sales are up because of Favor's convenient delivery service.
The company was started by a couple of former pizza delivery guys. CEO Ben Doherty was studying civil engineering at Cal Poly San Luis Obispo and thought, "It would be really cool if we knew when a friend was going to Albertsons, we could just ask him to pick something up for us."
He contacted his childhood buddy, Zac Maurais—"I knew Zac knew a little bit about the Web"—and they created Favor in the basement of Doherty's parent's home in New Hampshire.
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They bought "JavaScript and HTML for Dummies" to figure out how to start. "We couldn't figure out how to all read the book at the same time," said Doherty, so they used a bread knife to cut the book into parts and assigned segments.
After beta testing in San Luis Obispo, the company chose Austin for Favor's full-fledged launch. "Austin has a strong concentration of university students, and a lot of great food that couldn't be delivered," said Doherty.
Favor makes money two ways. It charges anywhere from $5 to $10 based on the size of the order, and, in some cases, a restaurant also pays Favor for a percentage of the sale. Co-founder Maurais said Favor has three goals.
"We're helping people get more jobs. We're also bringing money into the local economy, extra tax revenues. And we're making people's lives easier."
Is it working?
"We started noticing them in late January or early February," said Brittany Platt, chief marketing officer for Torchy's Tacos. "They were easily spotted, they have these bright blue shirts."
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Platt noticed on social media that Favor was promoting deliveries from her restaurants, and she contacted them about using Torchy's name without permission.
"They apologized," she said. But now the two are working together, sharing marketing, and Platt said Favor deliveries have boosted regional sales 1 percent. "Some locations are up 5 percent on same-store sales ... it's gotten our products into so many hands."
There are competitors, but Favor considers itself unique. Unlike GrubHub, which places orders only at certain restaurants that already have delivery services, or Instacart, which only goes to certain grocery stores, Favor will go anywhere to pick up anything in its targeted region.
"Favor, at its core, is a team of personal assistants," said Doherty. His past experience as pizza deliveryman has also affected the business model. "We work to empower the delivery driver." Drivers average $14 an hour.
Favor boasts more than 50,000 deliveries this year through the beginning of August. The company has nearly 200 drivers and claims it's responsible for $1.8 million in food sales. The most popular products are burgers, followed by tacos, and then pizza. It doesn't limit itself to just food, also delivering things like dry cleaning and other in-store items.
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"Some people in my apartment were ordering food using Favor," said Deborah Pickett of Boardwalk Burgers and Fries. "They told me they used it all the time." So she reached out to Favor to make sure her stores were on their radar. "We're still very new, but we're very pleased."
"Definitely, I've seen an increase in sales," said Felice Schimmel, catering and events manager at Austin Java. Her chain pays Favor a portion of every sale which comes in through on the app. "If I could improve one thing, it would be if people could place the orders online as well as the app."
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Favor is now planning an expansion. The company received $2 million in funding from Silverton Partners, Draper Fisher Jurvetson and angel investors.
It's just moved into Boston ("Chipotle is insanely popular here," said Maurais by phone from Massachusetts).
The plan is to focus on more major cities with a lot of college students. "Sometimes people will pay more for delivery," said Torchy's Tacos' Platt, "to have food brought to their hungover dorm room."
—By CNBC's Jane Wells