Square Buys OrderAhead Meal Ordering Service

by Raymond Pucci 0

Mobile order and pay promises to be quite appetizing for the restaurant industry and their diners. Square is expanding its presence in restaurant meal ordering and delivery by announcing its acquisition of OrderAhead. This will complement Square’s ownership of Caviar meal delivery service, as the following article describes.

Square, Inc. said it acquired startup OrderAhead’s dining pickup website and app that allow people to place take-out orders and skip the line at restaurants. The deal gives the payments processor access to more diners and eating establishments for its Caviar food-delivery service, which Wednesday announced its own restaurant pickup program. Terms weren’t disclosed.

OrderAhead was valued at $30 million in December 2013 when it raised about $8 million, according to Pitchbook Data Inc. Square won’t take on any of the San Francisco startup’s employees, according to a person familiar with the matter. With the acquisition of OrderAhead, Square is trying to capitalize on the trend of customers choosing their food online before stepping into a restaurant. San Francisco-based Square is betting the new pickup feature will drive more orders to restaurants affiliated with its Caviar and increase the number of payments processed on its platform.

Starting Wednesday, Caviar users will be able to order pickup in select cities on the West Coast and will soon expand to all of its markets, Square said in a statement. This isn’t the first time Square has experimented with food pickup. The company rolled out its own app that allowed customers to pre-order food in 2014, but shut it down a year later. Gokul Rajaram, who leads product engineering at Square, said the company now is much more prepared for the business because it owns a delivery unit that can leverage its existing restaurant relationships. While Square is increasing its investment in Caviar, after trying last year to sell the business, other Silicon Valley food-delivery startups have shown signs of trouble. Pressure has also increased as giants like Inc. and Uber Technologies Inc. have entered the market.

Restaurants are discovering a new sales channel with mobile order and pay apps. Consumer adoption of takeout has been a tried-and-true habit, and now mobile apps make the process faster and more convenient. Square recognizes the synergy with their new acquisition and their 2014 pick-up of Caviar restaurant delivery. Meanwhile, this also presents an excellent cross-selling opportunity for Square’s payment services for restaurants. Expect successful mobile ordering apps to be those that are highly integrated with payments, loyalty, and marketing features.

Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group

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