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EATIGO: CONNECTING EMPTY DINING TABLES
WITH EMPTY STOMACHS
HBSP No.: NTU152
Ref No.: ABCC-2017-024
Date: 12 September 2017
Khoo Hong Meng and Kong Yoon Kee
A meeting with one prospective investor in Q3 2015 left Judy and Sid, two of the four co-founders of Eatigo,
feeling exhausted and a little ovenryhelmed. They were drained after staying up late for numerous nights
collating copious amounts of information and addressing issues raised by various investors.
As Judy stepped out of the car with Sid, they both knew that they had to have a serious discussion with the
other two co-founders, Michael and Pumin, about the future funding direction of Eatigo. They needed to
reach a decision quickly: a substantial amount of their own savings had been pumped into the venture,
which was on the verge of running out of cash. They planned to call Michael and Pumin the next day so
that they could decide on their next course of action. But before doing so, Judy and Sid themselves first
had to seriously consider their options...
EATIGO: BACKGROUND INFORMATION
Headquartered in Bangkok, Eatigo is a restaurant reservation application (or "app" for short) founded in
2013 by Michael Cluzel, Judy Tan, Siddhanta Kothari and Pumin Yuvacharuskul. Eatigo offered an
alternative way of connecting diners to restaurants. Through its website, iPhone and Android applications,
Eatigo aimed to improve restaurants' profitability by filling up empty restaurant seats during off-peak hours,
by offering time-based discounts which could range from 1 0 to 50 percent (see Exhibit 1).
ln2O14, Eatigo was named one of the Top 8 Tech Influencers at Echelon Thailand. In 2015, Eatigo won
the Global Brain Award at the Tech in Asia Conference in Singapore, and placed second in the "Best
Startups in the Region" category. In less than four years, Eatigo had managed to shape diners' behaviour
and disrupt the modus operandi of the industry to become a leading restaurant reservation app with
presence in Singapore, Thailand, Malaysia, Hong Kong, India and the Philippines (see Exhibit 2).
Dr Khoo Hong Meng and Dr Kong Yoon Kee prepared this case based on interviews with
Eatigo Ihls case is intended
for c/ass discussion and learning, and not intended as source of research material or as illustration of effective or
m an agement
COPYRIGHT @ 2018 Nanyang Technological University, Singapore All rights reserved No part of this publication may
be copied, stored, transmitted, altered, reproduced or distributed in any form or medium whatsoever without the written
consent of Nanyang Technological University
The Asian Business Case Centre, Nanyang Business School, Nanyang Technological University, Nanyang Avenue,
Singapore 639798. Phone: +65-6790-4864/6552, E-mail: asiacasecentre@ntu edu sg
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THE FOUNDING OF EATIGO
Eatigo was a multinational start-up from the very beginning. The founders were of diverse nationalities Michael was from France, Judy was from Singapore, Siddhanta was from India and Pumin was from
Thailand.
Michael, Siddhanta and Judy knew each other whilst they were colleagues working for Millicom International
Cellular SA, an international telecommunications and media company which marketed a wide range of
digital services through the Tigo brand to more than 63 million customers in fourteen markets in Africa and
Lalin America. The divestment of its Asia operation in 2011 led to Michael and Siddhanta heading the
regional office for the new owners. Later, they left this company to join another telecommunications MNC
based in the Caribbean.
Judy left Millicom following its divestment in Asia and started a second career as an adjunct lecturer in one
of the national universities in Singapore. The trio met up again after two years when Michael and Siddhanta
approached Judy with a compelling business idea which they could nurture and build based on their shared
vision, values and skills honed from years of working in MNCs. They also roped Pumin into the venture.
Pumin was a mutual friend of both Michael and Siddhanta and, at 29, was already a well-known
entrepreneur in Thailand with a successful water business which utilized nanotechnology. After a couple of
meetings and several rounds of heavy dinners in Bangkok, the business concept of Eatigo was crystallized
- a platform where empty dining tables meet empty stomachs.
THE BUSINESS IDEA
The idea of Eatigo was inspired by yield management practices in travel and hospitality. Time-based price
differentiation had been applied successfully for years in the airline and hotel industries. In this model of
differential pricing, lower prices are charged during periods of low demand while higher prices prevail during
peak periods. This differential pricing significantly reduces capacity under-utilization during lull periods and
helps even out demand patterns.
At the 1me of Eatigo's conception, the demand for restaurant services typically followed the shape of an Mcurve (see Exhibit 3). Most restaurants' businesses peaked during lunch and dinner, though seating
capacity remained very much constant throughout the day. During peak periods, popular restaurants would
experience long queues and might have to turn down customers who either did not want or could not afford
the time to wait. Outside peak periods, all restaurants had to manage the issue of excess capacity. Underutilized seats could range from 20 to 80 percent depending on the popularity of the restaurants. The empty
seats were effectively deadweight loss, they did not contribute positively to offsetting fixed costs like rental,
air-conditioning and utilities. And, the capacity utilization of restaurants was significantly lower than the
capacity utilization of mid 70-percent in airlines and hotels.
By 2015, the global dine-in market was estimated by Eatigo to be valued at around USD 2.1 trillion, with
only an average of 35 percent restaurant capacity utilization (see Exhibit 4). Application of effective yield
management practices could lead to a more even spread of diners over the day, resulting in fewer lost
business opportunities and increased capacity utilization, an improvement of '1 0 percent in utilization could
lead to USD 590 billion in extra revenue for the industry
The idea of offering time-based dining discounts was aimed at making restaurants more profitable by filling
othenruise empty tables during off-peak hours (see Exhibit 4). This could bring benefits to popular
restaurants too, as it could spread the peak-hour dining crowds over periods just before or just after peak
hours, thereby reducing queues and increasing total diners served. Diners could choose to dine at various
times in a restaurant and enjoy discounts which could range from 10 percent during peak hours to 50
percent during off-peak hours. The discount amount depended on the number of unfilled seats in a
soecific
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restaurant. For example, one could enjoy a high 50 percent discount in a certain restaurant in the central
business district (CBD) area at 6pm during weekdays as the CBD often empties out after work hours. The
same restaurant may give a mere 10 percent discount during lunchtime on weekdays, as they would already
have good crowds during that time. Weekends were generally quiet for such restaurants, and as such,
prices could be reduced by 50 percent for weekend lunches. Restaurants in other areas had different
patterns. For example, in the heartlands, weekday dinners and weekends were generally peak periods with
weekday lunches being quieter and where restaurants would have empty tables to fill.
DYNAMICS OF THE DINING INDUSTRY
With restaurant capacity utilization at only 35 percent, the market for restaurant apps had much potential
to grow, and there might be room for a few major market players even in the near future. Initially their
concept was new and there were hardly any direct competitors. There were also typically no government
policies that barred entry into the restaurant reservation app business.
Mindful that their pioneering time-based discount bookings could be replicated later, Eatigo sought to
establish and entrench clear market leadership by carefully tailoring their marketing to both restaurants and
diners, with initial focus on Bangkok and Singapore. Establishing clear market leadership would mean that
new competitors would need deep pockets and extremely good connections to build up sutficient restaurant
partners and patron bases in a short time. Eatigo did not consider online food delivery platforms like
Foodpanda and UberEats as offering a substitute service, as they catered to the dine-in segment while
Eatigo focused on the dine-out segment. Similarly, social buying platforms would not offer a direct substitute
as Eatigo's high 50 percent off-peak discount evened out the M-curve effectively, while these other
platforms could not
Diners were a diverse group, and there was no single diner or group of diners which the dine-out industry
and Eatigo were dependent on. Users were not locked-in to using Eatigo's app and could vote with their
feet. Hence, Eatigo aimed to make its app very user-friendly and introduced many attractive features to
retain users such as simple terms and conditions for enjoying the discounts.
Similarly, restaurants, the industry suppliers' base, were very diversified by cuisine and location To attract
and retain restaurant partners, Eatigo's unique business model sought to improve their profitability by
sending diners to them during their off-peak hours, when they had underutilized capacity. Eatigo sought to
retain their restaurant partners' loyalty by ensuring that their profits were sustainable despite Eatigo's
discounts. Eatigo aims to be the go-to platform for off-peak reservations, by striving to attain and maintain
pole position as the leading off-peak reservation app
EATIGO'S DIFFERENCE
Conventional restaurant booking required calling the restaurant physically or making a reservation through
email or at the restaurant's own online portal. Restaurants were required to have available manpower and
an existing system to manage reservations done in this manner This may be a stretch on resources,
especially during busy periods lt may also be inconvenient for diners, who may wish to make or edit
reservations before or after the restaurants' opening times, and who would have to track their reservations
themselves.
Restaurant reservation platforms such as OpenTable and Chope offered diners and restaurants greater
convenience by allowing users to reserve seats at restaurants through online web portals or mobile apps.
Diners could make or change reseruations as they wish at any time, and were reminded of their reservations
by these portals through email and/or SMS, and thus did not have to manually make a note of them by
themselves. Such restaurant reservation platforms provided marketing services for restaurants as well as
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an online platform to capture reservations, negating the need for restaurants to dedicate manpower and
have their own system for accepting and managing reservations. However, diners who made reservations
at restaurants via these platforms tended to follow regular dining times, which did not help restaurants solve
the problem of excess capacity in the form of unfilled tables during off-peak hours
Social buying platforms such as Groupon/Fave were promotional tools. They attempted to improve
restaurant patronage by giving discounts for a given period of time, with these discounts being fixed and
without any intra-day variation. These deals tended to exacerbate the intra-day peak period constraints
faced by restaurants. Another potential problem was that these sites collected payment upfront from their
customers upon online purchase of dining vouchers, and paid the restaurants after that. Hence, restaurants
were exposed to credit risk due to this time lag in receiving monies payable to them by these platforms.
Similar to the case of a conventional restaurant reservation system, they did not help with the problem of
excess capacity during the off-peak periods as most diners used the dining vouchers during peak hours.
Eatigo aimed to improve capacity utilization by bringing diners to restaurants when they needed them most.
Through a time-based discount system, Eatigo encouraged higher restaurant patronage during off-peak
hours. The idea was to make restaurants more profitable by filling othenarise empty tables during the offpeak. This could benefit popular restaurants too, as it could spread the peak-hour dining crowds over
periods just before or just after peak hours, thereby reducing queues and increasing total diners served.
SOLVING DINERS' PAIN POINTS
ln many parts of the world and especially in Asia, consumers are value conscious. They are motivated by
good deals such as discounts. Social buying platforms understood this well and worked towards customer
acquisition through offering discounts However, indiscriminate discounting harms the profitability of
restaurants, and as such, is not sustainable. Also, the deals are often accompanied with a number of terms
and conditions which may make it difficult for diners to enjoy their meals with total peace of mind, resulting
in frustration and sometimes disagreements with restaurant staff. As such, a number of popular restaurants
may not want to work with these platforms.
Eatigo's challenge was to find a way to bring to consumers what they want without hurting the profitability
of their restaurant partners. They designed a system to ensure that the best discounts were for diners who
patronized the restaurants at times that the specrfic restaurant would otherwise have empty tables.
Whilst consumers were value driven, not all looked for low prices. In addition to providing usage gains,
Eatigo had to solve diners' pain points. Eatigo's app and website helped diners to access and evaluate
discounts available in restaurants in their vicinity. The app and website were simple and easy to use, and
diners could book restaurants up to a maximum of 30 days in advance. There was no downloading of
coupons and pre-payment required Diners simply made a reservation via the app or website, obtained a
confirmation via the app or email, turned up at the restaurant at the expected time, and dined to their hearts'
content. The stipulated discount for that time period would automatically be applied to their bills after
showing the reservation confirmation to the restaurant staff.
To relieve diners' pain point of having to remember, examine and compare the terms and conditions under
which discounts offered by various restaurants would apply, such as payment methods (e.9., which credit
card to use), offer period, timing of the day, percentage discounts, minimum amount spent, and so on,
Eatigo decided to standardize its offerings to very simple rules: its discounts are applicable to all food items
on the menu with only drinks being excluded, its discounts cannot be combined with other discounts or
promotions, and discounts are time-based. With only these simple terms to remember, it became very easy
for diners to use Eatigo on a regular basis and they enjoy a minimum discount of 10 percent, with at least
two dining slots of 50 percent discount every day, as long as the restaurant was open. In addition, restaurant
menus could be easily obtained from the app with their pricing (before and after the time-specific
discounts,
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saving consumers the hassle of making these calculations themselves). Cross-country bookings could be
made, and there were also halal-certified options offered.
Customers could leave feedback in the form of restaurant ratings and comments; potential customers could
view them to make a more informed decision, and restaurant managers could also take them into
consideration to improve their service. Live chats were made available during office hours, and links to
maps to locate participating restaurants were provided to maximlze convenience for diners.
GOING LIVE IN BANGKOK AND TEETHING PROBLEMS
ln June 2O14,the founders launched Eatigo in Bangkok. Bangkok had sufficiently high Internet and mobile
telephone penetration rates. In addition, its dine-out culture, openness to dining innovation, and diners'
willingness to make lifestyle changes for discounts were favourable factors. Besides, Eatigo's founders
were familiar with the Thai market and culture. They decided to use Bangkok instead of Singapore as a
testbed as Thai restaurants and diners were relatively more forgiving and any mistakes made would be
less costly due to the overall lower cost of doing business.
When Eatigo first entered the market, the F&B industry seemed conservative and hesitant to take up this
new idea. Industry players preferred the status quo, and to remain in control. And so, the enrolment of the
first 40 restaurants was difficult. Many could not understand the concept of using cloud-based technology
and algorithms to shape traffic. Most restaurants were hesitant and adopted a wait-and-see attitude. They
did not want to be the first to try out new products and services, and potentially the first to fail. Popular
restaurants felt that they did not have the capacity as they already had long, snaking queues of customers,
and Eatigo did not want to work with non-popular restaurants as they would not have the necessary
underlying economic elasticities necessary for effective yield management. Fine-dining restaurants were
concerned that the 50 percent discount might tarnish their image, and Eatigo had to convince them that
whilst cut throat promotions could tarnish their brand, yield management would not. The founders cited the
case of Singapore Airlines, a world-renowned international airline, which practises yield management by
having different prices on different days of the week but still maintains its premium branding.
Despite being cautious, many restaurants did not want to be left behind by the competition. When they
learned that others had gained significant sales volume increases of more than 15 percent by using Eatigo,
they began to sign up. Suki-Ya, Outback Steakhouse, Wine Connection, Coffee Club, and Manhattan Fish
Market were some of the better-known restaurant chains that came onboard Eatigo's panel of restaurants.
Eatigo also attracted a lot of hotels: they understood yield management easily, since they do that with room
capacities too - popular hotel restaurants such as Novotel, Swissotel, Hilton, Renaissance, Westin, The
Peninsula, Siam Kempinski, Grand Hyatt, and SO Sofitel joined the platform as well.
EATIGO'S REVENUE MODEL
The founders were mindful, even before the launch of the business, of the types of revenue models they
would not adopt at the outset. They decided against a subscription based revenue model which charged
companies a flat fee per month, as that restricted upsides for the company They also decided against
charging a one-off setup fee for restaurants since Eatigo was new and unknown to many restaurants, and
this might impede achieving a critical mass of restaurant partners to come onboard.
As such, the founders faced a chicken-and-egg situation. lf insufficient diners signed up for the Eatigo app
or website, restaurants would be less inclined to use it. On the other hand, a limited list of restaurants
available in Eatigo would deter diners from signing up. After much contemplation, they decided to prioritize
restaurants over diners. They believed that enrolling reputable and good restaurants was important, and
that diners could be persuaded by providing attractive deals.
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Eatigo's revenue was mainly derived from charging restaurants a fixed fee for every successful referral.
Eatilo segmented restaurants into three tiers - low-end, mid-end and high-end restaurants. The fee
charleable for each restaurant tier increased accordingly from low to high. Eatigo would not charge for nosnows, and diners could download and use Eatigo's app for free. Eatigo used this simple transactional fee
model to encourage restaurants and diners to use its platform actively. The start-up funds for the business
came from the four founding partners. However, with Eatigo's rapid expansion, funding became increasingly
challenging.
THE DILEMMA: WHIGH FUNDING OPTION?
A series of meetings in Q3 2015 where Judy and Sid pitched to different investor groups left them drained.
Cash was running out soon, especially after the launch of Eatigo's app in Singapore in Feb 2015. They
explored the various options that were available to a small-medium enterprise operating in Singapore and
Bangkok, in preparation for their call to Michael and Pumin to decide on the next course of action. Debt in
the f-orm of small business loans were not readily available and rather prohibitive because Eatigo lacked a
track record and physical assets to pledge as collateral. Credit cards were plausible more for the shortterm, but the amounts they could obtain on credit would be too small for the company and interest rates
were just too high. They could try to buy some time by getting smaller amounts from friends and family or
even iry for one of the grants offered to start-ups in Singapore. They had found some information about the
requirements of these grants and needed to check if the company could fulfil these requirements. The grant
amounts were not likeiy to be sufficient for the aggressive business plan they were pursuing but it would
not involve too much being given away in terms of equity or control. lt would still make sense to obtain such
smaller interim funding to scale up and gain more traction, so that Eatigo could further boost its sales and
gain more market share. This would help to justify a higher valuation later, and the consequential dilution
would be less for the founders.
On the other hand, to obtain more immediate substantial funding, should they continue their discussion with
the various venture capital firms that they had met so far, and if so, how would they evaluate Eatigo? Other
than the provision of funds, it was clear that certain firms had connections and resources that would be
extremely helpful especially in the countries where they planned to launch next. However, it was also clear
that the venture capital companies had firm ideas on how the business should be scaled up, and this might
mean that the founders lose the ability to control the direction of the company. There were also a lot of
terms such as pre-money valuation, post-money valuation, parlicipating versus non-participating liquidity
oreference, anti-dilution, ratchet clauses and so on that were discussed - the implications of these would
need to be fully understood as it could have significant impact on the founders. Last but not least was the
question of valuation - how should they determine this and what data could they provide to support their
estimates? Initial numbers indicated by a couple of venture capital firms seemed too low and would mean
heavy dilution for the founders.
Eatigo had had a number of discussions with other investors such as family offices as well as strategic
investors in related spaces such as F&B consultancy, media, and technology development. These investors
seemed more than happy to continue to "let the founders run the show" but wanted to see strategic
cooperation in the areas where they operated. Would that limit options for the company, for instance, by
forcing Eatigo to work with only one media company? Also, they needed more time to conduct due diligence
processes, and funding from these investors would likely take more time to procure.
Eatigo had to decide whether it should seek smaller interim financing to buy time for higher valuation, or
seek a bigger funding quantum from venture capitalist immediately with the founders risking loss of control,
or source funds from family offices and/or strategic investors which involved longer processing time but
retained more control for its founders. Cash was burning up fast because of the huge pickup in expansion,
and the clock was ticking.
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EXHIBIT
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EATIGO'S TIME-BASED DISCOUNT
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EATIGO, A LEADING RESTAURANT RESERVATION APP
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EXHIBIT 3
TyPtcAL DEMAND VARIABILITY lN THE RESTAURANT BUSINESS (M-CURVE)
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SMOOTHENING THE M.CURVE
Capacity utilisation of restaurants LHSS TI{AN half of those of airlines or hotels
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Eatigo shapes diner's traffic with 90% of its diners eating at off-peak hours, increasing restaurant profit and
capacity utilization.
Source: Eatigo