Business models changed.
Traditional restaurants run on pay as you dine model. If you’re a fan of a restaurant you’ll visit it frequently, let’s say, at least once a month. These are roughly valued from few lakhs to couple of crores.
Then came successful restaurants. They managed to scale. They built chains. Adopted franchisee model. Fairly profitable. Their valuations went into thousands of crores. Eg: Dominos, Pizza Hut, Burger King, etc.
Then came restaurant aggregators. Used tech. They built a platform. Bought in lakhs of restaurants & crores of customers on apps. Offered lucrative cashbacks. Though in losses, their valuations skyrocketed to more than >1 lakh crore. Eg: Swiggy & Zomato.
The restaurant aggregators think lifetime.
In startups there’s an interesting term known as Lifetime Value of Customer (LTV). It’s possible that many customers on these app may spend more than ₹10 lakh in lifetime.
Assuming a minimum of 10% profits margin, these startups are going to be in good shape.
That’s a great business model. Specially when already you’ve crores of users. More people coming in. Duopoly market. Virtually no competition.
The few hundreds rupees short term cashbacks losses are building lifetime value worth lakhs of rupees. On a single customer.
Interesting times ahead.
Disc: Invested in Zomato.
