It’s been a big year for Chris Meaux, the founder and CEO of Waitr. The Louisiana-based company focused on restaurant delivery in underserved cities went public, and now has essentially doubled in size with the acquisition of Minnesota-based Bite Squad for $321 million.
“It’s been quite a year, it’s lucky for us that we like to move fast,” said Meaux.
He said management teams in both companies have been in close contact for about two years, given their very similar way of doing business.
“They have W2 drivers, we have W2 drivers, they’re in small-to-medium markets, so are we. They’re the most valued restaurant partners, we are too. They have local teams in the markets, so do we,” said Meaux.
About the only thing that the companies didn’t have in common was operating areas.
“We do believe there are some system and process synergies that will be attained by the transaction, but the key was we operated in almost completely different areas,” said Meaux.
In all, Waitr and Bite Squad had overlapping operations in just five cities out of more than 500 cities across 86 markets. That means both companies can largely operate as they have been, but can push forward together.
“It’s not often that you see a transaction like this where two brands come together that have high brand recognition where you can have both brands move side-by-side,” said Meaux. “There’s no reason to think about changing that quickly, we’re going to take our time and really put together an integration plan prior to closing.”
He the combined company would release a little more about those plans early next year.
Bite Squad was especially busy last year, growing the scale the two companies now enjoy together. The company made 17 acquisitions, and another in 2018. In all, the company grew annual food sales by 85 percent and revenue by 98 percent through the third quarter of 2018.
With the two companies combined, Waitr and Bite Squad are getting closer to the big guys like Grubhub, Postmates, DoorDash and UberEats in terms of coverage.
“I think this puts us right there in the top of number of restaurants served, number of cities number of markets served that kind of thing,” said Meaux. “You can no longer say we’re a regional player, we’re a national player now.”
And much like Bite Squad and Waitr, the new entity doesn’t overlap much with the big players. In fact, Waitr was on an intentional course to stay out of big markets until much later in the growth cycle, akin to Walmart’s growth strategy. That gets gears turning about a mega acquisition, but it also could pressure the big players to get serious about midsize and smaller markets or scare them away completely. Meaux said that he sees as many as 300 more cities that are under penetrated when it comes to delivery.
“This gives us a national footprint to get to those markets quickly,” said Meaux.
If his track record for 2018 is any indicator, those markets won’t be underserved for very long.
But for the big questions about profitability that is endemic for the industry, the combined company isn’t there quite yet.
“Profitability is certainly we see on the horizon, but growth is what we’re more squarely focused on at the moment. So we’re going to grow and make sure that growth is not at the expense of a tremendous amount of profit,” said Meaux. “Then I think we have a real path to profitability.”
Meaux said the deal was partially financed with an additional $200 million balance from going public via a SPAC merger with Landcadia Holdings and a secondary financing from Luxor Capital that happened soon after going public. He said building up those cash reserves was a big reason that the company could move fast on the acquisition—in fact, serious talks started about a week before the announcement. That’s a breakneck pace in any industry, and while the companies had been in close contact for a long time, preparation was key.
“The real gist is when you see an opportunity, you need to be ready to activate that opportunity. When we did the Landcadia transaction, the reason we did the Luxor financing on top of that is when an opportunity like this presented itself, we wanted to be able to move,” said Meaux.