- Local restaurants face closure due to the 30% fees of corporate delivery services and Google’s deals with them.
- Local delivery services can compete with a carefully-researched business plan that’s a mutual win for these startups, restaurateurs, drivers and customers.
- You don’t have to go it alone in starting a local delivery service in your area — peers are willing to share what they’ve already learned.
A fulfilling business opportunity awaits local entrepreneurs with the vision and fortitude to sidestep unsustainable third party restaurant delivery services and found one of their own. It was my honor to engage in an inspiring conversation with Omaha LoCo co-founder, Clay Seaman, who generously describes how he helped launch this admirable Nebraska-based startup. It’s my hope that you’ll find the spark of a business plan in Clay’s story — one that could protect and promote the dignity, character and economy of your local community.
We’ll begin with Clay Seaman’s own account of the 5-step timeline that brought Omaha LoCo into being.
1. Identify local need and meet it with a sustainable model
I came up with the idea for Omaha LoCo because I saw a need for a local delivery service that supports Omaha restaurants and battles back against the predatory practices of the big, third-party delivery services. I saw restaurants exposing these practices across my social media platforms and I have a good background in delivery services. Through a mutual friend, I was introduced to local restaurant industry veteran and executive director at the local culinary institute, Brian O’Malley. We decided to establish a local delivery co-operative that preserves local food culture, supports local restaurants by charging fair commission rates, and serves as a sustainable alternative to third-party delivery services while maintaining local ownership as a pillar of its business model.
2. Seek connections with established peers to learn what has worked for them
Over the summer, through the same mutual connection, we discovered CHOMP delivery in Iowa City. Jon Sewell, the founder of CHOMP, shared their story about building a restaurant co-operative model for local delivery, and Omaha LoCo was conceived to join their emerging national model.
3. Replicate already-successful models with experienced legal counsel
We worked with nationally recognized co-op attorney Jason Wiener and local counsel Bill Kutilek at Lincoln firm Crosby Guenzel LLP to adapt the Iowa City model to Nebraska. Based on partnerships with local restaurants, this model allows restaurants oversight, control of the delivery process, and potential to earn their share of profits.
4. Seek opportunities to begin building goodwill by dovetailing with existing community programs and funding
Once the legal affairs were in order, as we were preparing to launch Omaha LoCo by recruiting local, independent restaurants to buy memberships, we connected with contacts at our local county commissioners who had caught wind of this venture as an avenue to help local restaurants and provide meals with dignity to those on food assistance. We launched quickly in December 2020 to make deliveries as part of the Douglas County Meal Program, which was funded by leftover CARES funds with the goal of feeding 7,000 families. Concluding in February, the program distributed restaurant meals from our pilot members to feed over 40,000 Omahans.
5. Secure further funding, partners and press, then launch
With a core group of 40 local, independent restaurants spread across our county and recruited to support the Douglas County Meal Program, we secured additional funding from a good number of these local, independent Omaha restaurant owners and other restaurants not in the program who invested in the service as co-op members.
The restaurant owners paid $2,500 to become voting members and to use Omaha LoCo to deliver their food to the community. The meal program was both a blessing and a curse. It helped the community and our local, independent restaurants, gave us great media exposure, but it also launched across a wide geographic footprint -- a challenge for a new delivery service. Density is key to sustainable delivery operations. Following the program, we launched regular operations of our delivery service on Feb. 8, 2021.
Smart Tips for Delivery Startups
Omaha LoCo is just getting started, but Clay Seaman has 20+ years of experience in the delivery service and marketing industry, and his responses to my questions contain vital takeaways for anyone considering launching a local restaurant delivery business.
Miriam: What was the personal journey that led to you co-founding Omaha LoCo?
Clay: When the pandemic hit in March 2020, I thought about the importance of local delivery in a stay-at-home economy and the longer term impact that would have on consumer behavior. When I started hearing about the devastating impact third-party restaurant delivery services were having on local, independent restaurants, spurred in part by social media reports, I started talking about the possibility of local delivery options.
As a native Omahan, I have grown up in the area and seen the impact that local, independent restaurants have on the community. I’ve taken my passion for supporting local businesses into my current role as general manager of Omaha LoCo.
Miriam: What can you tell me about the ownership and funding structure at the company?
Clay: Formed as Nebraska LoCo Co-Operative LCA, Omaha LoCo allows restaurant owners democratic governance through an elected board by joining the co-op. Nebraska LoCo Co-Operative LCA is a multi stakeholder co-operative, starting with two member classes -- local restaurants and a managing member, that holds the LoCo licensee. Omaha LoCo is like the old-school farmer cooperatives Nebraska helped innovate more than 100 years ago. There are no dues; the membership fee funds the start-up costs. The model is designed to be self-sustaining once it reaches scale.
Each local restaurant member has an equal vote on matters that come before the membership. That share does not decrease or increase in value and cannot be sold without the co-operative’s permission. By electing the board of directors, restaurant members have collaborative control of the overall operations. Every year, the net margins are distributed by the board to members, based primarily on how much they use or contribute to the co-operative. These are called patronage dividends.
Miriam: How did you acquire and implement good software for Omaha LoCo?
Clay: The Omaha LoCo staff worked with the team in Iowa City who provided the software to create a marketplace for consumers to order from local restaurants, paired with delivery service software to help manage the deliveries efficiently. While there are a number of off-the-shelf solutions, by partnering with Zuppler.com, we are working with best-in-class online ordering. The Iowa City team provided the training on how to use the technology to run the delivery service. The team also set up an account for FreshDesk, a customer service software that allows LoCo staff to receive phone calls from customers and restaurants as well as manage any issues that arise.
After receiving training on how to use the technology, the team was instructed on how to use the Get LoCo app to manage and track orders. Our team received instruction from the seasoned professionals in Iowa City on how to build a restaurant delivery service and manage the entire process, from recruitment to setting hours to updating menus. Omaha LoCo staff shared that knowledge with restaurant owners who control ordering times and confirm orders through tablets the team installs at each restaurant when an establishment joins the co-op service, as a co-op member or participating restaurant. Not all restaurants on the platform are co-op members, but currently do have local ownership. In order to be a co-op voting member, a restaurant must be independent and locally owned.
Miriam: How do you find and compensate local drivers?
Clay: We find drivers by the restaurant members promoting their delivery service (Omaha LoCo) using advertising on Facebook, OmahaJobs.com, and through word-of-mouth referrals from Omaha LoCo staff. Employed as independent contractors, drivers can work as many or as few hours as they would like.
Pay is $1.69 for the first 3 miles (plus tips) and 99 cents per mile for any additional miles. We offer subsidies to help insure drivers always receive a living wage, or better. Drivers can apply at omahaloco.delivery/driver-application and our staff will contact them to add them to the driving team!
Miriam: Which types of messaging and marketing have been most effective in reaching all the different players involved in Omaha LoCo?
Clay: With the county meal program, we received generous coverage from almost all of our local media, and they continued to cover the official launch in February. Beyond that, we have mostly done guerilla marketing so far, but tactics that have worked include consistently updating our Facebook, Twitter, Instagram, LinkedIn, and Google My Business profiles to let customers know about new restaurants as well as specials run by existing restaurants.
Our best marketers are the restaurants themselves, who promote LoCo to their clientele with bag stuffers, signage, delivery links on GMB listings, websites and social media. We have also had success in obtaining earned media coverage from national and local outlets, bloggers, academic webpages, and podcasts. In addition, we have advertised with bus benches, distributed our flyers and marketing materials at our LoCo restaurants, and sponsored or had signs at local events such as Taste of Omaha and the College World Series, which have resulted in more local exposure.
The message that resonates with customers is that we are a local delivery service that charges lower prices and fees, supports local restaurants and is actively involved in the community. Restaurant owners are also pleased with the lower commissions and the opportunity to communicate with local staff as well as control the delivery process.
Likewise, drivers respond to the message that we are a local service that supports local restaurants, offers a flexible schedule, and provides better communication than national apps, since we are composed of local staff and dispatchers who know the area and collaborate with drivers on each step of the delivery process.
Bottom line, beyond the locally owned component, it’s our customer service that sets us apart, being able to pick up a phone and talk to a real person in your community about any issue or questions that arise.
Miriam: As you know, the big corporate delivery apps have yet to become profitable, with all of them posting YOY losses. Has Omaha LoCo become profitable yet?
Clay: Not yet, but we did not hope to reach break even until this upcoming winter, possibly longer. Restaurant delivery slows down in the summer. We’ve been actively recruiting and training restaurants -- almost 70 so far -- to deepen our geographic footprint to give consumers better choices and drivers better routes. Ultimately reporting to restaurant owners in the co-operative, we cannot afford the excesses or even the giveaways of the big corporate apps, that in this current investing environment, seem to have a bottomless pool of venture capital. We’ll have to earn our spot with the right selection, the right customers, the right drivers and the best service.
Miriam: Finally, why is it so key to build new businesses like Omaha LoCo on sustainable models?
Clay: We believe our business model is sustainable because we are a co-operative, meaning restaurant owners have equity opportunities as members of the co-op board, maintain their customers’ data and gain a share of the profits. We also charge lower commissions and fees than national services, which often take up to 30 percent in commissions from local independent restaurants, which is way too much, especially in light of the COVID-19 pandemic.
We also believe the only way to battle nationally-based extractive business models is for local independents to work together, to organize and lead with equity. We know these models have been overlooked quite often in the past, but there are strong examples of multi-generational co-operatives. The key seems to be commitment, education and governance. We feel like we have those strong ingredients in our community to support that.
Unlike national services, we provide local customer service, partner with and promote local brands, and offer back office and IT support to partners. We also charge a flat delivery fee that saves customers money as opposed to the higher costs associated with national apps. By downloading the Get LoCo app, customers can enjoy their favorite food delivered by local drivers and support Omaha restaurants. Our service is a win-win-win-win -- restaurants, consumers, drivers, and us!