Eat Out Kenya was one of the first generation digital media companies. It has grown and survived by expanding vertically into print. Now it's expanding its digital reach with an online payments app for restaurants. Russell Southwood spoke to its founder and CEO Mikul Shah.
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The idea for the Eat Out Kenya came out of Shah's frustration at being able to find places to eat in Kenya:"When I moved back to Nairobi, I was frustrated by not knowing where to eat and it's why we founded the site. It was launched before Facebook arrived so restaurants didn't have that tool to promote themselves".
It was very similar to restaurant finder apps that Shah had been familiar with when he lived outside of Kenya. It had the sort of functionalities that are now taken as standard. You can choose by cuisine, location and budget and filter by additional things like whether they are child friendly or have a TV showing sports. It was aimed at tourists with smartphones and cosmopolitan locals in search of good food. But in the Kenyan context it often was the web page for restaurants that might have no other online presence.
It raised US$200,000 from the Dutch Africa Media Ventures Fund (AMVF) that got 25% of the equity. Mikul Shah was also the co-founder of another of AMVF's investments, Sleepout.com. The original plan had been to take both out across East Africa and the rest of the continent. His Sleepout.com co-founder Johann Jenson left in December 2015 and the roll-out dream died.
"We had raised investment funding (for Eat Out Kenya) but the model was not very scaleable". You needed lots and lots of local knowledge in each country to make it work and in many African countries, the food and restaurant culture was not as well developed. Also it was probably a little ahead of Africa's developing digital curve.
He could also see that although it was new, the digital world in Africa was changing rapidly:"The big guys started up. The larger internationals were taking over the verticals. I spoke to Open Table, Zomato and Yelp. They told me you won't be able to compete with us on the tech and marketing budgets".
He sat down and thought about what his options were and came up with a two-pronged approach. Firstly, he decided that instead of expanding Eat Out into other African countries, he would go into print and events. Secondly, to hold on to the online space he was in he would launch a restaurants payments app that would also allow him to roll-out elsewhere.
He decided to launch a large format free publication in full color called Yummy based to some extent on its online equivalent: :"People in Kenya expect free distribution to be low quality. We want it to be the best quality publication in Kenya. Lots of people put ads in print publications." The magazine has a print run of 10,000.
By comparison, Eat Out and Yummy websites have 450,000 users per month and there have been 1 million downloads of the eat Out app:"We consider ourselves to be a digital company that's matured into publishing... We wanted to build the brand authority."
He also launched events, the first of which was Nairobi Restaurant Week that had its fourth edition earlier this year. Alongside it he created a Nairobi Restaurant Week Guide, similar to its print publication Yummy. Out of this event he then spun out new events like Burger Festival and Nairobi Wine Week. All these attracted international interest from people like chefs and sponsorship from brands like Absolut Vodka and Toyota.
Revenues grew and this year he hopes to break the US$1 million mark:"The next year is a big year and if the payments app works out, we'll have two companies, payments and publishing and events. I'm excited by the payments solution. The team is really embedded in food culture. We've survived in a market where big players have come in".
The payments app has taken two years to reach fruition. The approach is in two parts. Firstly, the new EatOut App will allow diners to pay for their meals through their mobile phone. Secondly, the mobile solution will be sold on a "white label" basis and integrated into several local banking apps thanks in large part to support from Craft Silicon, its new investor (which put in US$500,000) and also a local tech company supplying solutions to half of the local banks..
Shah gives me an example of the second approach:"For example, on the Barclays app, you will see the restaurants app white labeled as say Barclays Dining Club. You will be able to pay your bill from the bank's app".
So given everything he's said about the big international companies coming in, does he have any competitors?:"In terms of restaurant space, there is only one other significant play, Jumia Food, but they're food delivery which we don't do. Jumia Food advertises in Yummy magazine". There's also Uber Eats in South Africa in the same space.
"We decided not to do food delivery. I invested in Naked Pizza (which closed in May 2016). We did food delivery for the company. We wanted to understand food delivery. There's no address system and there's the problem of terrible traffic. Also most restaurants are not geared for food delivery. Rocket Internet made a deal to work with us. They paid our marketing budget but the contract was not renewed. We'll keep our options open".
One of the other big internationals into the market has been KFC:"I'm not excited by the food but it's a sign of the way it's going. There are lots of local franchises in the works. Demand has not yet caught up with supply and restaurants will have to market themselves more and be more innovative. To do that, they can use us".
"We've built a good relationship with Facebook. We're one of their case studies. We're helping restaurants to know how to use Facebook. We have 160,000 likes for our Facebook page... Influencer marketing has also kicked off in the region in the food space and entrepreneurs doing this have taken off. We help them work with restaurants".
Mikul Shah is on the board of Safaricom's Spark Fund and has made several personal investments in other start-ups.