Local entrepreneur launches app to cut restaurant costs
A St. Petersburg-based serial entrepreneur has created an app to help restaurant owners navigate ever-increasing food costs.
Michael Otis, founder of FareFood, said the platform's first local restaurants have saved nearly 30% on their typical food spend. The app also reduces labor costs by allowing general managers to efficiently compare pricing and order from multiple distributors in one place.
According to the U.S. Bureau of Labor Statistics, 60% of restaurants shutter within five years, and 38% lost money in 2023. Otis believes FareFood provides a "painkiller solution" for the industry's most persistent problem.
"If you break down restaurant costs, there are three major categories – overhead, food and labor," Otis said. "They largely can't control their labor or overhead, but they can do something about their food costs. That's where we're jumping in."
He founded Procoto, a procurement software company, in 2019. Otis was already exploring his latest venture when St. Petersburg-based Bedrock acquired the startup in July.
While Procoto ultimately provided a valuable product, Otis compared it to a "vitamin solution" compared to FareFood's "painkiller." However, he initially planned to launch a menu engineering service – optimizing prices according to ingredient cost and profit margins.
Learning from past mistakes, Otis and his former NASA engineer business partner let the market dictate their company. He cold-called 47 restaurant owners throughout Tampa Bay and realized "they're either satisfied with a solution they have today or don't think it's a big enough problem."
Otis also found that restaurants either overpay for the simplicity of ordering food from a single supplier or navigate multiple companies, sales representatives, invoices and processes to receive the best-priced products. "There's not really an in-between," he said.
"No one has built the Amazon for restaurant food supply."
The most recent State of Restaurants Report found that the average full-service establishment held $51,863 in debt by the end of 2023, and nearly all owners attributed soaring food costs as the primary factor. General managers often oversee dining, kitchen and back-office operations and typically lack the time to compare pricing.
Otis said FareFood compiles suppliers into an easily navigable platform that allows users to sort ingredients by unit price. "It's just making it abundantly easier for restaurant owners and general managers to do what they prefer to do; they just don't have the means to do it today."
Supplier participation is critical to FareFood's success. Otis said multiple national companies, "somewhat surprisingly," embraced the concept.
He said U.S. Foods and Gordon Food Service officials invited him to their Tampa offices to discuss partnerships. Otis realized their excitement was due to customer acquisition challenges.
He explained that suppliers often must "push somebody else out the door" to expand their client base. FareFood allows restaurants to maintain their current products and relationships while providing new and potentially cheaper options.
Otis said the platform brings suppliers additional business "in a much more convenient way, and with "much less acquisition costs on their side." He said food accounts for 30% of a restaurant's revenue, and reducing those costs can mean the difference between profitability and bankruptcy.
"We have this self-fulfilling incentive to ensure restaurants succeed because that will enable our success. Candidly, we're helping each other. It just feeds back and forth organically."
FareFood will maintain its regional focus before gradually expanding statewide. In addition to partnerships with Gordon and U.S. Foods, the startup has forged ties with national suppliers Sysco and Performance Food Group.
"If we continue to help restaurants like we know we can, a more national expansion will come next year," Otis said.
