Online catering provider ezCater has raised $100 million and is reviving plans to go public, CEO Stefania Mallett said Wednesday.
The news caps a remarkable turnaround for the company that was dealt a body blow by the pandemic, forcing it to abandon an IPO originally slated for this year and reexamine its business as corporate catering was turned on its head.
But after some strategic shifts, the Boston-based company is now exceeding its pre-pandemic run rate and growing faster than it was before the virus hit. That drew the attention of prominent investor SoftBank, which led the nine-figure Series D-2 funding round.
"When COVID happened, we were all like, 'What the hell?'" Mallett said in an interview on Wednesday. "We lost 85% of our business in the course of one week" as many offices transitioned to remote work.
At first, the struggling company wondered if it should try to follow those workers home. But that would go against its core business of facilitating large, profitable group orders.
So instead, it turned its attention to the 15% of customers it still had—the sectors that had no choice but to continue working on-site—and doubled down on them. Those included retail, ecommerce, logistics, distribution, factories, government agencies and hospitals, Mallett said.
“Today, we are bigger and growing faster than before the pandemic, and we’re doing that by having gone deeper into the sectors that have to work in the workplace.”
EzCater has also been able to capitalize on the so-called hybrid work model, in which employees split their work week between the office and home. While it's more flexible for workers, it presents a problem for companies that have cafeterias or other foodservice with fixed costs.
Hybrid workplaces “needed a solution that flexes up and down” depending on how many people are in the office that day, Mallett said. Enter Relish, an ezCater product developed before the pandemic that allows individual workers to order lunch from one or more restaurants, fully or partially subsidized by the company. EzCater aggregates the individual orders and sends them to the restaurant, where they're individually packaged and delivered in one batch.
Daily lunch presents a whole new business for ezCater, which had formerly focused on catering for large, one-off meetings and events, Mallett said.
The nationwide labor crisis has also played into the company's favor as employers increasingly use free food as a lure for workers.
"I never thought that certain manufacturing centers, certain retailers, etc., would find the margin to provide food for their employees," Mallett said. "But they’re doing it now because it's cheaper than dealing with the turnover, dealing with the cost of attracting new employees.
"It is a perk that is starting to feel like for a lot of the younger workers as a requirement, not a perk."
The recent success has ezCater thinking IPO again. Prior to the pandemic, EzCater had planned to go public this fall, but COVID put a lid on that, Mallett said. Now, with business booming and a fresh infusion of cash, an IPO is "absolutely still in the cards" for 2023.
Including the Series D-2, ezCater has raised $425 million over its lifetime and is now valued at $1.6 billion. But before to this latest round, it was not necessarily thinking of trying to raise more money. "We were putting money back in the bank" from its $150 million funding round in 2019, Mallett said. But its board urged it to consider raising more, and a couple of days later, SoftBank reached out.
“SoftBank looked at all our numbers and said, 'Wow, you guys have really done well during COVID,'" she said. The two had talked off and on for years, and this time, ezCater took the deal.
It will use the funding to continue developing its technology for both restaurants and customers as it ramps up to go public.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.