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A year ago, ClubFest, a subscription service aiming to disrupt the food delivery industry, went public with $3.5 million in seed funding and backing from notable investors including General Catalyst and Pica Capital. Co-founders Atala Atala, Ghazi Atala and Chris Miao say they have partnered with hundreds of restaurants to create low-cost meals that can be offered for just $5.99 per plate plus a $2 delivery fee (and a $1 fee for single food orders).
Business seems to be going strong, even hiring travel bloggers for promotional spots on TikTok. But earlier this year, subscribers started seeing higher tabs and fees. Then, in the past few months, ClubFest has completely cut its corporate dining offerings, leaving original customers with meal credits they can’t use (despite the company’s contention).
“The advertised price didn’t last long and by the time I stopped using the service, the price was the same as Seamless and Uber Eats,” one former Club Festival user told TechCrunch on Twitter. “I literally look into it [mobile] Application and price were different. Then they tried to say that the reason was the rising cost of materials etc. [but] “For me, it was a lack of transparency and accountability,” he said.
Low cost food supply
When it started, Club Festival diners signed up for a weekly meal plan and placed lunch or dinner orders several hours in advance. Enrollees receive a food credit number that can be topped up, paused, or canceled at any time. Club Fest’s restaurant partners offer four or five dishes to choose from, with co-pays ranging from $8.50 to $9 — or less for customers who sign up for a $7.99-a-month “Festival Pass” plan that eliminates delivery charges.
The idea was to estimate the amount of purchases so that restaurants could plan ahead and cook more economically – passing the savings on to the dairies. When operators accept low profit margins on club festival meals, they do so in the expectation that high volumes will be met. Club Fests bike riders, too, had more predictability in order-to-order platforms as routes were chosen for “efficiency” and meals were released on a regular schedule.
In an interview with TechCrunch in January 2021, Atala Atala said that — while Club Festival may eventually introduce higher-priced fancier dishes — the price point will remain intact. “We want to make sure this doesn’t affect the $5.99 concept,” he said.
There was reason to believe that Club Holiday would keep its word. Atala Atala is the founder of the restaurant awards organization Seted, which claims to have generated tens of millions of dollars in revenue for its restaurant partners. And Club Party has been on an expansion tear for a year, adding New York City and the greater Bay Area to its delivery zones after running pilots in San Francisco and San Matthews.
But the calculation changed at some point. By mid-2021, meal prices increase to $6.99. Club Festival then began charging an 18% service fee and adjusted its delivery model: customers could choose express deliveries instead of variable fees ($0.49 to $3).
Club Holiday website from 3rd August. Image Credits: Club holiday
Businesses adjust prices all the time – especially in a tough market where subscriber growth is key. That is not unusual. Just last month, DoorDash increased the minimum order size for free delivery. But where Club Party went wrong was not being proactive in notifying them of price changes, according to customers TechCrunch spoke to.
One customer said they saw the entrance fee increase to $8.50 in February. The item at another restaurant went up to $9.99 in early March. A second customer noted that even when they choose a wider delivery window, they are often charged higher shipping fees.
When reached for comment on LinkedIn, Atala Atala was adamant that customers had been notified of the price increase by email. He defended the walkouts by blaming restaurants for the price hikes, saying customers could change their credit and still be able to place orders.
“As for the actual promise of $5.99, no one expected ~10% inflation, so restaurants were forced to raise the price. We did our best to keep that low, but we wanted to be fair to restaurants and consumers on both sides, so we found a middle ground,” Atala told TechCrunch.
An email sent to customers purporting to be a price increase. Image Credits: Club holiday
It was around this time that some club festival organizers took to social media to complain that they were not being paid on time for extra provision beyond their scheduled lines. One club fest said he promised to send a log sheet but never did. Others lamented the lack of pay history, salary estimates per shift, and visibility into the app.
Club party – perhaps hunting for alternative business lines – began to introduce large-format group and family orders. A few months ago in 2022, customers realized they couldn’t use their credit to order dinner or take out on the weekend. Soon they were unable to give any orders.
Business model change
Several customers tell TechCrunch that the app and website mysteriously stopped working in June. Those who purchased meal credits could not use the credits. Some received full or partial refunds, but others continued to be charged for their weekly subscriptions and were unable to close their accounts.
“I tried to communicate. [to customer service], and I was told that my subscription was canceled and refunded…I didn’t get my refund,” one customer told TechCrunch in an email. “I got back in touch and was told again that the refund had been issued and I had to be patient… If the goal was to get people to go if it was difficult to get a refund, it succeeded.”
This reporter has tried several times to sign up for a new Club Holiday account and has failed. The company’s FAQs reflect the old business model, but Club Fest’s homepage has been redesigned (as of July) with corporate meal service ads: $60 per employee per month for one meal to $300 per employee for five meals per week. A week.
Meanwhile, subscribers said the customer service chat function in the Club Festal app has stopped working. (Atallah argues)
In a recent interview with Food on Demand News, Gazi Atala said the plan is to expand Club Festival to new markets in 2022 and 2023. It’s unclear if that’s still in the cards, pole or not.
At Club Fest, catering driver jobs are posted on various bulletin boards, and the company’s LinkedIn page lists more than 100 employees. ClubFest has raised capital somewhat recently, last May raising $10.25 million in a “Seed II” round from General Catalyst, Grishin Robotics, Modern Venture Partners, Eric Feldman and Pica Capital, bringing its total to $13.75 million.
Atallah said Club Fest has made efforts to refund any customers who have made a request, and that anyone who feels they have received a refund can request a refund via private email.
“[Refunds] It took a few days for Stripe to process… the delay [also] Maybe it was from their banking process, which caused some confusion. “As for Pivot, we are focusing more on our corporate customers as we see a lot of appetite for the benefits of returning to the office. Our price point makes it easy for any company to support local restaurants and provide their team members with great tasting food. We have grown our business-to-business business by over 600% in the last six months.
Club Festival’s chaotic change of direction comes at a time of upheaval for the wider catering industry. This week, Just Eat Takeaway was forced to write down Grubhub’s value by billions, a year after buying the group. Butler, a promising hospitality-focused food delivery concept, abruptly closed earlier this year. And in early July, Chow Now laid off about 100 workers in what its CEO said was a response to worsening capital conditions.
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