Is The Dragons' Den a Farce?
The Dragons' Den has been one of the CBC's most successful original shows in recent memory. In January, it will begin its fifth season and earlier this year ABC started to notice and launched a similarly formatted show called Shark Tank, bringing two of Dragon Dens' VCs, Kevin O'Leary and Robert Herjavec, along for the ride.
But while The Dragons' Den might seem like a way for budding entrepreneurs to raise quick funds (while at the same time gaining national exposure for their brand or product on the show), the reality is that not all the deals that get made on-air come to fruition. Take for example the case of GrubCanada, a Toronto start-up that helps restaurants find take-out customers via the web. They appeared on The Dragons' Den a number of months ago and, as the clip embedded above might have us believe, they secured $200,000 in funding for 50% of their company. Or did they? Last week I connected with GrubCanada founder Ross Lipson who filled me in on his business and what actually transpired when the cameras weren't rolling.
You're from Detroit. What brought you to Toronto?
With the colder climate and the wide variety of restaurants, I felt there would be demand for GrubCanada.com in Toronto.
So you came here specifically to start the business?
What was it about Detroit or the US market that you felt wasn't going to work?
Actually, I ran a similar website in the States; we sold the business and saw the demand for it in Canada. I was a first year university student that LOVED ordering delivery, like all university students do. I had a stack of delivery menus on my table.
It was a hassle sorting through the menus, and I hated calling. The busy signals, and the mis-communication was very frustrating, so I thought to myself: there must be a solution. So I started the company. (Note: Lipson asked that I not include the company name in this post.)
So did you have a non-compete clause in the U.S. that prohibited you from launching a similar site or expanding in the U.S.?
When did Grubcanada.com launch?
GrubCanada launched in September 2008 in London, Ontario. We have expanded to eight cities across Ontario - Toronto, London, Guelph, St. Catharines, Waterloo, Hamilton, Kingston and Ottawa. We now offer online ordering for over 200 restaurants in Toronto and we are actively signing more.
From which restaurant are you getting the most orders from?
A few restaurants that we have noticed do extremely well, including Spring Rolls, B.B.Ques, Mykonos Mediterranean Grill, Sizzlers Panzerotto Pizza, and Dominos.
You charge a 9% commission per order. Are there any restaurants that have declined to come on board that you really wish you had as customers?
We have received great feedback from all of our restaurants. GrubCanada lists restaurants on the website for free! We post menu information and allow customers to order directly online. We only charge the restaurant for results. The only reason people come to our website is because they are hungry and ready to place an order. They are qualified customers. We give restaurants the opportunity to put their menu in front of these potential customers and take the order.
We bring restaurants additional orders - incremental revenue - and only charge a small percentage, making it a direct return. The first order they receive, they have seen an ROI.
Fair enough. But on the episode of Dragons' Den, one of the chief criticisms laid against you was that restaurants would balk because 9% commissions would cut into their margins. Is it not safe to say that many restaurants have declined to be listed, even for free?
No. We have not had restaurants deny the charge. What aired on the show, was not exactly what took place when taping.
So you're able to sign up every restaurant you approach?
I don't want to say every restaurant, but restaurants love the concept. And we have great feedback from them.
Who do you consider your main competition?
Just-Eat.ca. They just recently launched in Toronto. They have a very similar business model.
Are there any ways you're different (or better) than them?
We work out exclusive specials with our restaurants so we can offer menu items at a discounted price. The idea is that you save money when ordering online at grubcanada.com. We have focused on making our website extremely user-friendly. We also have a larger selection of restaurants! GrubCanada is known to give out free food! We frequently send out emails with free food coupons to our customers!
On Dragons' Den you initially asked for $200,000 for 20% of the company. Why did you choose to take the offer for $200,000 + 1% commission for 50%?
We valued the experience and knowledge Brett Wilson brought to the table; however, the deal fell though after the show. We did not end up partnering.
Why did the deal fall through?
We respectfully declined. After meeting with our partners and advisers, we felt the deal undervalued GrubCanada.
So saying yes on-air wasn't intended to be a binding decision in any way?
No. It goes to a due-diligence period where both parties have the right to back out.
Did Brett back out or did you?
So you didn't get your funding. How would you rate your overall experience with Dragons' Den?
It was an awesome experience. It was fun! I love talking about GrubCanada, especially with experienced and knowledgeable people.
Have you maintained contact with any Dragons from the show?
How did you feel when Jim Treliving declined to participate in the offer. His decision seemed to sway the rest of the Dragons. Do you think he understood your business?
Yes, he wanted to speak post-show, and see if it may be a conflict of interest.
What do you mean?
He wasn't sure if our system would work with Boston Pizza (Jim is the chairman and owner of Boston Pizza International Inc.).
So he chose not to invest simply because he didn't think your web site would integrate with Boston Pizza's ordering process?
He wasn't sure. He doesn't know much about online food ordering. He wanted to speak with his team. So he stated he could not make the deal at the time of taping; however, he wanted to revisit the opportunity after speaking with his team.
What did you mean when you said the clip that aired wasn't really how it went?
Well, of course what aired happened. However, they taped for 90 minutes and cut the clip down to 7 minutes.
So what did we miss in the other 83 minutes?
There was a lot of talk in between that was not aired. The Dragons loved the concept. The Dragons explained to [Treliving] how it is incremental revenue; they are additional orders and that he would be naive to say he didn't want a piece of the cake. The Dragons had more of a conversation and were on our side when speaking with [Treliving]. He simply didn't know if it would be a conflict of interest, so he stated he could not move forward at this time. But he thought it was a great idea. We went more in-detail with our numbers and revenues. That was not shown as well.
So why didn't more of the Dragons make an offer? Or a better offer?
I'm not sure. Arlene was the only one that said why, and that was because she thought someone else can do the same thing.
She thought there weren't any competitive barriers to entry?
Is she right?
We have very strong relationships with our restaurants and clients. They listen to us. Although you can run a similar operation, it may be difficult to start. A lot of our clients would not be opposed to signing exclusive contracts.
Are most off your relationships exclusive? Or can the same restaurant sign up with another site?
Yes they can sign with another site. We do not have exclusive contracts.
What advice would you give to other entrepreneurs considering appearing on the Dragon's Den?
Do it. It's fun, exciting, and very rare to have the opportunity to speak to such intelligent individuals about your business.
What's next for GrubCanada?
GrubCanada is actively signing more restaurants across Ontario. We hope to have over 300 restaurants in Toronto within the next few months. We will be continuously running aggressive discounts on the website, and giving away FREE FOOD to our customers! We have plans to expand out west in 2010.
How do customers get free food?
Simply sign up and order! We send our customers emails with coupons quite often. Also if you would like, I just made a coupon code: BLOGTO for 10% off any order at any restaurant. It expires January 1st.
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