The piping hot market for mobile pizza payments

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When it comes to the pizza industry, online and mobile ordering has generally been the province of chains like Domino’s, Pizza Hut and California Pizza Kitchen. But smaller shops are looking to get a slice of this market.

It's a high-stakes battle; the big chains' edge in technology was cited as the main reason chains were gaining market share at the expense of the mom-and-pop pizzeria in a 2016 report by restaurant consultancy Aaron Allen & Associates. If smaller chains can use mobile ordering to match the visibility of the larger brands, they could win back their most digitally savvy customers.

A New York startup, appropriately named Slice, is trying to give a high-tech edge to the independent pizza restaurants. The company builds basic online ordering sites for its partner restaurants, selling the restaurant’s menu items at in-store prices. It also offers a mobile app for iPhone and Android devices to allow ordering from any of its clients.

By most estimates, online food ordering surpassed telephone orders sometime in 2016. Online ordering has become especially popular in the pizza business. In 2015, the top three pizza chains—Pizza Hut, Domino’s and Little Caesar’s—accounted for 15% of the US pizza industry’s $38.5 billion in revenue on their online platforms, according to Aaron Allen. Chains account for 48% of U.S. pizza restaurants but 61% of pizza revenue.

While smaller restaurants could use existing online ordering services, like Grubhub/Seamless, DoorDash and Uber Eats, Slice hopes to compete on pricing. The startup charges restaurants a flat $1.95 per order fee, regardless of how big the order is; additionally, it uses Stripe for payment processing, passing on Stripe’s processing fee of 2.9% plus 30 cents per order to the pizza shops. Slice also supports Apple Pay, Google Pay and stored credit cards for online payments and gives customers the option of paying cash at pickup or delivery.

Given that Slice’s average order is $30, its pricing is designed to be preferable to the alternatives that charge 10% to 30% of the ticket size. Slice serves only as the online ordering platform; restaurants provide their own delivery services.

Slice launched in 2010 as MyPizza to build websites for local pizza shops in New York. Founder Ilir Sela grew up in the pizza business.

“Dating back to the 1970s, my grandfather, father and uncle all owned a pizza parlor in New York,” Sela said. “I have 34 family members and friends who own pizzerias today. They’re all on Slice.”

After launching the company, Sela soon discovered that his family and friends’ businesses didn’t just need a web presence but a way to take orders online. So Slice started building basic menu and ordering sites for its pizzerias. The restaurants provided the menu items and photos; Slice did the rest. Though the company remained small—just three employees—it started to catch the eye of investors, including the founders of Seamless. MyPizza changed its name to Slice in 2016 and raised $15 million in 2017. It launched an iPhone app, later expanding to Android, and now employs more than 400 workers.

Slice isn't the first company to design a dedicated pizza-ordering app. It follows the now-defunct Push for Pizza, which let consumers order a basic pizza—plain or pepperoni—at the touch of a button from a network of 1,200 pizzerias. The app got a lot of media attention, but little traction and is no longer available on the App Store. Its website redirects to a pizza service in Israel.

“[Push for Pizza] had a different approach than us, very consumer-focused, but they weren’t reaching out to the SMB,” explained Sela.

Sela’s long-term vision is for a Slice wallet to handle payments, possibly built on cryptocurrency.

“I think it’ll change in the next five years and there will be a breakout player,” he said, noting that Square’s bitcoin-based Cash app appears promising. “If somebody creates a trusted system that uses digital currency, we’ll be all over that. We want to be at the forefront of innovation to not only keep up but leapfrog big chains.”

Today, Slice is used by over 10,000 independent pizzerias in more than 2,500 towns and cities across all 50 US states. The company expects to have more than 15,000 pizzerias in its network by the end of the year, according to Sela.

“Pizzerias exist where other cuisines don’t,” Sela said. “There’s more or less a takeout or delivery option for every neighborhood in the country. We’re very much a long-tail play. In most places, your options are the local pizzeria or a big chain. We empower the local restaurant.”

Slice doesn’t disclose how many orders it handles, but Sela said the company expects to drive more than $200 million in orders this year. At an average order of $30, that translates to more than 6.7 million orders for independent pizza restaurants. Mobile accounts for 40% of those orders and is the fastest-growing e-commerce channel for Slice. Stored credit card is the most popular payment option, accounting for 70-75% of orders with cash on pickup or delivery accounting for 20-25%. Apple Pay and Google Pay combined represent no more than 5% of orders.

Though customers clearly prefer more traditional payment options, Slice is looking to expand the types of payments it supports. It plans to add PayPal and Venmo support this year, with Chase Pay expected in the first quarter of next year.

But the big chains aren't complacent. Domino’s earned a reputation of being a technology company that makes pizza, thanks to its innovations in online ordering, mobile apps and delivery tracking. Sela hopes Slice can win on technology and scale.

“We unite local pizzerias under our platform and drive consumer awareness,” he said. “The number of restaurants that need our help is mind-blowing. There are 30,000-plus pizza restaurants in this country that have no digital capabilities.” While Sela wouldn’t rule out an international expansion, he said Slice’s short- and long-term focus would remain on the U.S. market.

One of the challenges Slice faces today is integration with restaurant point-of-sale systems. The company doesn’t yet support integration with the various POS systems in place at pizzerias. This means manual order entry from the Slice tablet to Microworks POS system at Billy’s Pizza and Pasta in Brooklyn, N.Y., according to Anthony Qoku, co-owner of Billy’s, which fills 1,000 orders a month on Slice, about a third of its delivery business.

“We have to type the order into the POS to generate the sale, but it’s not Slice’s fault, it’s more the POS company’s fault,” Qoku said, explaining that Microworks doesn’t support integration with other systems.

There’s a good reason for that. In addition to POS systems tailored for pizza restaurants, Microworks offers its own web-based online ordering system and supports the building of custom online-ordering mobile apps for its pizzeria customers. But independent pizza shops with their own mobile apps are few and far between.

As with payments, Slice is looking beyond simple integration with POS systems.

“POS integration is more of a short-term solution,” said Sela. “Long-term, we’re building operating systems for these locations.” In other words, Slice would provide the POS system, integrated with its online and mobile ordering systems. Jason Ordway, former CTO of iPad-based POS system developer ShopKeep, was hired as Slice’s CTO last July and is spearheading this effort.

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