Coming off the acquisition of his most recent venture, Procoto, St. Pete entrepreneur Michael Otis has launched FareFood to help restaurants fight rising food spend.
Why restaurants and why now?
“I’m not sure people realize how difficult it is to run a restaurant,” Otis said. “The hours are long, the margins are thin, and most restaurants don’t survive their first few years in business.”
According to the U.S. Bureau of Labor Statistics, 20% of restaurants close within a year and 60% shutter within five years. A staggering 38% weren’t profitable in 2023.
“…and it’s only getting worse,” Otis added. “Typical 3-5% margins pre-pandemic are shrinking to 1-2% today.”
The average full-service restaurant in the U.S. carried $51,863 in debt by the end of 2023 (2024 Sate of Restaurants Report), with nearly all citing higher food costs as the leading culprit.
Food costs are up 13%, labor is up 15%, and overhead is up 5% since the start of last year, while operators have bumped menu prices just 8% to counter the mounting costs.
“Labor and overhead are largely dictated by the market and regulation, but restaurants can do something about their food spend. That’s where FareFood comes in,” said Otis.
Where did the idea come from?
“A big mistake I made with previous companies was not speaking with enough potential customers before launching into them,” reflected Otis. “We were able to overcome it with Procoto, but there was an extended period of wandering through the dark, thanks in large part to my stubbornness.”
Otis isn’t making the same mistake again. Before writing a line of code for FareFood, he spoke with 47 restaurant owners in the Tampa area. The initial concept was an adjacent restaurant product until a local restaurateur guided him down the path that would become FareFood.
“A restaurant owner actually suggested the idea,” Otis remembers. “He said he’d been looking for something like this for years and every restaurant would use it if someone just built it.”
A few dozen validating conversations later, FareFood was born.
What does FareFood do?
FareFood is an app that allows restaurants to order from multiple food distributors in one place.
“Today, restaurants either trade inflated costs for the ease of buying from one major supplier or spend hours juggling multiple suppliers to find savings,” Otis explained. “With FareFood, they don’t have to choose. They get the convenience of one distributor but the competitive pricing of multiple distributors.”
Why do food distributors work with FareFood?
“What’s beautiful about what we’re doing is it’s hugely valuable for the suppliers too,” Otis remarked. “We’re giving restaurants a new, easier way to buy from distributors and giving distributors a new, easier way to grow their business.”
Otis says he was pleasantly surprised by just how much suppliers have embraced FareFood. Before launching their product, the team was approached by major national distributors Gordon Food Service and US Foods to form partnerships. They have since forged ties with Sysco and Performance Food Group as well.
“How did I get so lucky?” asked Tameka Geneste, account executive at Gordon Food Service during her first conversation with Otis. “You’re my dream customer.”
What impact are you having on restaurants?
“Some restaurant managers are getting valuable hours back to focus on their team and their guests, while others are saving as much as 27% on their food costs,” Otis said. “For most, it’s some combination of the two.”
“FareFood completely transformed our business,” says Michael Mychack, owner and general manager of Bocelli Modern Italian in Tampa. “We were overspending for years and these guys fixed it in a couple weeks.
FareFood is focusing its efforts on other restaurants like Bocelli in the greater Tampa Bay area for now, but Otis does have plans for wider expansion.
What’s next for FareFood?
“We’re staying in Tampa / St. Pete for now, but already have our eyes set on Orlando in the coming months and the rest of Florida shortly thereafter,” said Otis. “If we continue to help restaurants like we know we can, a more national expansion would come next year.”
For those of us who love dining out, let’s hope that’s the case. FareFood has a chance to restore a notoriously challenging industry that needs more help now than ever.
