By Tina Irgang
Imagine a future where the price of consumer goods changes instantly based on a number of relevant factors, such as the time of day or the day of the week when demand is highest.
As Cherian Thomas sees it, that future is inevitable. “In 2020, you’re going to go shopping and you’re going to look at an item — chewing gum, a newspaper, anything — and the price will change in front of your face. There’s just enough data out there.”
Thomas is co-founder and CEO of two-year-old startup Spotluck, whose business model reflects his belief in the fundamental power of yield management.
Here’s how it works: Spotluck’s mobile app offers users a chance to spin a wheel once a day. The wheel contains a list of participating restaurants in the user’s current location (locally owned restaurants only; it’s a key part of Spotluck’s philosophy not to do business with chains). Whichever restaurant the wheel lands on at the end of the spin will offer the biggest discount — say, 20 percent. If users don’t want to eat there, they can take advantage of smaller discounts — say, 10 percent — at other restaurants on the wheel.
Benefits for restaurants and app users
The actual discounts users receive depend on a number of factors that influence dining demand — whether it’s Monday or Friday, 12 p.m. or 2 p.m., whether it’s raining or not. At times when restaurants are less likely to see traffic, the discounts are larger.
The model works for users because they get discounts ever time they use the app. It works for restaurants too because even if diners don’t pay full price, they still spend money, says Thomas. “Restaurants get it — they say, I pay rent, I pay electricity, and my chef isn’t paid based on how many lamb chops he makes; he has a fixed salary. So it’s better to get somebody sitting there rather than no one.”
Restaurants also benefit in other ways. While Spotluck charges a signup fee, the only cost thereafter is a $1 charge for each diner the app brings in. At the same time, Spotluck offers marketing data.
“We can provide restaurants with incredible data such as, if 1,200 out of 1,300 people land on your restaurant and choose to go next door for 10 percent instead, something is wrong, and we can make a data-driven conclusion about that,” says Thomas. Restaurants also receive reviews from diners, along with insights into what ZIP codes they are coming from and how old they are.
The startup’s business model also works because it’s more or less recession-proof. While people cut down on restaurant meals when the economy dips, they become more receptive to couponing, notes Thomas. “We run a beautiful plateau in between these [economic] peaks and valleys, which allows us to be less susceptible to these types of economic risks.”
How Spotluck got its start
Thomas conceived the idea for Spotluck while working on his MBA at Georgetown University. “This was my thesis,” he says. “I kind of had this idea for a collaborative marketing platform based on the fundamentals of yield management.”
That idea turned into a business when Thomas’ co-founder, Brad Sayler, became involved. The pair met through Thomas’ wife, and quickly found that they had a dynamic that seemed to bode well for going into business together. While Thomas, who was working in commodities alongside his studies, was an outgoing, big-vision type of person, Sayler was more introspective. A corporate attorney and CPA, Sayler had a head for the details, so he “certainly grabs the strings and bring us back to reality quite frequently,” says Thomas.
The two started work on the app, which was a little rough around the edges at first — “it was almost like an attorney and a commodities guy created it,” Thomas jokes — but was funded out of Thomas and Sayler’s own pockets. Eventually, they realized it was time to quit their jobs, and started working full-time out of Thomas’ basement. “I had a weight set, sold it, took that money and built a desk where Brad and I could sit next to each other,” he says.
It soon became clear that it didn’t make much sense for Sayler to keep coming to Thomas’ house, since Thomas spent most of his day out and about, drumming up business. The two moved to a small office and kept upgrading as the company grew, until they landed in Spotluck’s current space, a roomy suite in Bethesda, MD.
The company now has 17 employees based in Bethesda, Philadelphia, New York and San Francisco, and is growing fast. (Thomas likes to point out that if you search for “dining” in the App Store, Spotluck is number one on the list of results.)
Plans for the future
Spotluck got its start in 2014, in Bethesda and another Washington, DC suburb, Rockville. The company has since expanded to a long list of DC-area neighborhoods, as well as Leesburg, VA, Frederick, MD, and Annapolis, MD. Outside the immediate Washington area, Spotluck has launched in Philadelphia and Baltimore. A New York launch is planned for December.
In Baltimore, where Spotluck arrived in October, a group of restaurants in the Federal Hill neighborhood had heard about the app and asked Thomas to come and give a presentation. “Every single person in that meeting signed up,” he says. “That’s not the first time that’s happened for our company. It really shows that there’s a need.”
For Thomas, the goal is to get Spotluck established across the U.S. and, once that’s achieved, to take it global. The company’s way of solving what Thomas calls “the dining dilemma” — “where are we going to eat tonight?” — has the potential to work just about anywhere, he believes: “Last time I checked, there’s people in Spain arguing with their spouses about where to eat as well.”
Spotluck’s ambitious expansion will be fueled by its team, whose members are hired based on their “passion, discipline, drive, determination,” says Thomas. “You can’t teach those things.”
Hiring people who get along well with each other has been a key ingredient in Spotluck’s growth, he says. “If the app breaks and disappears tomorrow, as long as we can all have a beer with each other, I’m cool with it. Because if we’re selling hats and you give me this same team, we will crush it. We will sell more hats than anybody in the world.”
Getting Started tells the stories of companies with less than five years in business. To be considered for Getting Started, email firstname.lastname@example.org.