Brian Erke and Ryan Halper went to college together in Seattle, and like many college friends, they had a tradition of dining out together on birthdays.
When Erke moved away after graduating from the University of Washington, the friends couldn't carry on the tradition. But Erke wanted to send Halper a celebratory drink, and the two of them thought: "Why can't you purchase somebody a cocktail or a glass of wine, something more personal than a $20 gift card?"
Their pain point led the pair to develop Gratafy, which launched publicly in May 2013 and last month expanded to its sixth city. The gifting platform lets consumers remotely send menu items and digital certificates from restaurants and bars to friends, and is available in Seattle, Los Angeles, San Francisco, Chicago, Houston, and now Denver.
In the research and development phase of the platform, Erke and Halper discovered bars and restaurants have a big pain point with fulfillment for gift certificates, Erke says. "They wanted to get their inventory, their signature items out into the real world without people actually having to come in," he explains. "Gratafy, as it stands right now, truly is a gifting platform. It's a way to get inventory outside your fall walls in a way that previously you just didn't have the ability to do, all at full price."
Gratafy integrates with a restaurant's point-of-sale system, making the gift redemption process simple and swift. Two months ago, Gratafy launched Gratafy Valet, with two new capabilities. Widgets lets customers send Gratafy gifts from a restaurant's individual website, much like consumers can make OpenTable reservations without going to OpenTable's website.
Along with Widgets, Gratafy Valet introduced the ability for restaurants to send gifts to their consumers via email marketing. "If a restaurant has 10,000 people on its email list, and all they really do is send a menu update every month or say, 'Hey, it's Chef Ronnie's birthday,' maybe that's a little bit staid and they're not getting a lot of engagement and response from their email list," Erke explains. "This is a way for them to send a signature item, like a slice of their world-famous chocolate cake, get somebody back in the door, and say, 'Thank you for being a great customer.'"
Getting in front of a restaurant or bar owner is the toughest part about expanding Gratafy, Erke says, though the company closes about 95 percent of the merchants it gets in front of. Between the six cities, there are more than 250 bars and restaurants in the Gratafy network.
For a venue to join Gratafy, there is a one-time $400 setup fee that covers the POS integration. Gratafy also photographs a restaurant's inventory for use on Gratafy's website and app, and gives the restaurant access to the images, as well. Finally, Gratafy offers training on the technology and builds up a merchant's storefront. After the $400 fee, Gratafy earns 10 percent of each gift sold.
"We don't keep any of the overspend, and system-wide we see about 400-500 percent overspend, meaning when people come in on a $10 glass of wine, they usually spend another $50 or so in venue; that goes straight to the merchant," Erke says, adding that the net effective cost of the program is about 2 percent for a restaurant.
When considering cities for potential expansion, Gratafy deliberates the scale of the city, how it would hire a team there, and the size of the opportunity. Erke hints that Gratafy will pop up in New York sooner rather than later.
Also coming down road: Gratafy will use its POS analytics to tell restaurants at a very granular level how successful a campaign was, how much people spent beyond the gift that brought them in the door, and which customers prefer specific menu items. "It'll allow you to take what you're doing with the core gifting product and re-target back to different segments of your audience base and really get smart about what you're offering," Erke says. "What you see right now is very much the first of what Gratafy is all about."
By Sonya Chudgar