CHAPEL HILL — Delivering profits proved to be the biggest challenge of all for Takeout Central.
Over the past decade, the Chapel Hill-based company – which delivers restaurant orders to homes and businesses throughout the Triangle – enjoyed steady revenue growth. But it didn’t turn a profit until 2011.
“Spending was out of control,” said co-owner Wes Garrison, 34.
The turning point, from Garrison’s perspective, came in 2009 when Charles Douthitt, 30, joined Takeout Central. Douthitt, now a partner and co-owner of the business, forged an initiative that enabled the company to slash costs without hurting its ability to expand.
Indeed, Takeout Central’s revenue growth was robust enough to land it on Inc. magazine’s latest list of the 5,000 fastest-growing private businesses nationwide. It ranked No. 3,766 after revenue zoomed from $1.4 million in 2009 to $2.4 million last year.
A big part of the company’s growth has been its ability to attract new restaurants interested in taking advantage of its service. Another factor has been increased orders from businesses that want to bring in lunch or dinner for employees.
Today about 120 Triangle restaurants that mostly don’t do deliveries themselves have outsourced the process, including taking the orders over the phone or online, to Takeout Central. The restaurants, of course, prepare the food.
Hundreds of similar delivery businesses are scattered across the country. According to the Restaurant Marketing and Delivery Association, it’s a $400 million-a-year industry.
Scott Novak, co-owner of The Loop Pizza Grill, a Chapel Hill eatery that has relied on Takeout Central for deliveries for several years, said his restaurant averages 10 deliveries a day, and complaints are rare.
“They do a great job,” he said of Takeout Central. “Their staff is very friendly, and they’re pretty much always on time to pick up the food. ... Most of the time they’re here a little bit early, which is good.”
Up until now Takeout Central has operated under several different names – Raleigh Takeout, Durham Takeout and, in Chapel Hill, Tarheel Takeout.
Since December, the company has been gradually rebranding the entire enterprise as Takeout Central with an eye toward eventually eliminating the individual Raleigh, Durham and Tarheel brands. On a busy day, it delivers about 300 restaurant orders across the Triangle. On a slow day, it delivers about 150 orders.
Digging out of debt
The company’s revenue – and, more recently, its profits – come from both sides of the delivery spectrum.
Consumers typically pay $4.99 per delivery. Restaurants pay a commission on each delivery based on the size of the order.
Garrison, who in 2004 started Raleigh Takeout along with a partner who’s no longer connected to the business, blames himself for the company’s string of money-losing years.
“Part of the problem was I was good enough at managing money and had enough access to credit that I was able to let the bad things continue,” he said.
At the peak, Garrison amassed nearly $500,000 in debt. That included credit-card debt, a home equity line of credit and loans from family members.
Expansion contributed to that debt. In 2006, Garrison acquired Tarheel Takeout, which had been in business since 1997, for $80,000. And in 2008, he started Durham Takeout.
Although he was loath to admit it even to himself, the outlook was bleak when Douthitt came aboard four years ago. At the time, Douthitt was fresh out of UNC-Chapel Hill, where he majored in public policy but also had a concentration in entrepreneurship.
Garrison and Douthitt met each other through a mutual friend, Aaron Houghton, a serial entrepreneur best-known for being co-founder of iContact, an email marketing company acquired last year in a deal valued at $169 million.
With Douthitt aboard, Garrison was able to focus on the company’s software that it uses for taking orders and dispatching drivers. Douthitt concentrated on streamlining the operations.
The company closed its Raleigh office, which involved laying off five employees, and consolidated all its back-office operations in a no-frills office on North Columbia Street in Chapel Hill. It also cut costs by slashing its marketing spending, which wasn’t generating enough new business to justify the cost.
Another move involved switching from paying a monthly fee for a commercial software package to upgrading software that it owned outright. That software had been commissioned by Tarheel Takeout’s former owners – and was created by Houghton when he had a technology consulting business.
“Free is better,” Douthitt said.
A luxury service
Lowering spending has enabled Takeout Central to whittle away at its debt, which has been reduced to $120,000. The owners expect to be debt-free in three years – or possibly sooner if the business accelerates its debt payments.
One thing Takeout Central didn’t do was cut back on drivers, because it didn’t want delivery quality to suffer. Today about 55 of its 65 employees are drivers.
Takeout Central’s owners acknowledge that, at $4.99 per delivery, its service isn’t cheap.
“We are a luxury service,” said Douthitt. “Our target market is upper income families, offices.”
Takeout Central even tacks on up to several dollars more if the delivery is especially far. The extra charge, which goes to the driver, is designed to persuade people to place orders from nearby restaurants.
Its service isn’t cheap for restaurants, either. Takeout Central’s commission typically amounts to 35 percent of the total order.
“That’s a tough sell to get a restaurant owner to give that up,” said Garrison. “We basically end up splitting the profit.”
The company’s sales pitch is that although the delivery service may not be a significant source of revenue, “it can be a significant source of profit,” said Garrison.
In addition, restaurants pay nothing until Takeout Central brings them an order; there’s no upfront fee.
Jamil Kadoura, owner of the Mediterranean Deli in Chapel Hill, said teaming up with Takeout Central amplifies his restaurant’s brand and attracts new customers who have never been to his establishment on Franklin Street.
“I think, in the long run, that helps us make more money,” he said.
Paving the way
Takeout Central’s recent focus on costs hasn’t stopped Douthitt and Garrison from investing in the business.
Garrison is spearheading development of a new system, in conjunction with an electrical engineer and designer the business retained, that aims to save time and improve efficiency on both ends of an order. The system includes cloud-based software plus a custom printer that would automate the task of receiving and fulfilling orders, a task that now involves phone calls between drivers, restaurants and Takeout Central headquarters.
Takeout Central has invested about $60,000 in the system, which it expects to have up and running in December, and estimates that the final cost will be in the $100,000 range.
Takeout Central hopes it will be able to sell the system to similar delivery businesses, but that’s not an essential part of the business plan.
“Even if we are the only ones who use it, it’s worth it,” Garrison said. “It allows us to grow without adding more people.”