Aussie hospitality startup Foodbomb has entered the buy-now, pay-later arena, offering hospitality businesses 21 days’ credit for purchases from their suppliers, at no additional cost.
The new BombPay BNPL offering is designed to integrate with the existing platform, and terms can be expanded to 30 days once a trading relationship is established, Foodbomb founder and Paul Tory tells SmartCompany.
Foodbomb is a marketplace for wholesale food suppliers, allowing hospitality businesses to order from various suppliers through one platform. BombPay will now be available for approved businesses as a payment method.
Founded in 2017, Foodbomb was the winner of the first ever SmartCompany Startups Awards — then called the StartupSmart Award — at the Smart50 Awards in 2018.
Today the Foodbomb marketplace houses products from more than 100 suppliers, and has been used by more than 3000 businesses.
In 2021, despite disruption in the hospitality sector, the startup saw 80% revenue growth, year-on-year.
BNPL for hospitality: Why now?
When asked why FoodBomb has moved into the BNPL sector, Tory says the short answer “is that we listened to our customers”.
Hospitality was one of the sectors hardest hit by the COVID-19 pandemic, not to mention other challenges including the ongoing flooding crisis.
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“They’re coming out the other side doing it tough.”
In conversations with Foodbomb customers, two themes kept emerging, Tory explains: labour shortages and cash flow.
With government support and rental relief coming to an end, even as they’re able to reopen, many hospitality businesses have found themselves struggling to keep up.
At the same time, lockdowns were tough on suppliers, with many now struggling with their own cashflow concerns. That’s led to a shift in the industry that has largely gone under the radar.
“Suppliers have been the forgotten side to this equation,” Tory says.
“Many of our suppliers have clamped down on trade terms”
Responsible access to capital?
BombPay isn’t the first bringing BNPL into the B2B sphere. In April last year, industry heavyweight Zip launched its Zip Business offering, extending up to $150,000 in credit for all kinds of SME expenses.
Foodbomb’s is the first, however, to focus exclusively on the beleaguered hospitality sector.
Any BNPL offering comes with controversy attached. Critics of consumer-focused products say they provide a line of credit that can get expensive fast, without necessarily acting with the consumers’ best interests at heart.
A January survey from Reviews.org found that 27% of people who use BNPL services have paid a late fee.
Tory stresses that BombPay doesn’t hand out credit to businesses “willy nilly”.
Venues go through an application and screening process, and the startup works with a third-party underwriter to ensure venues are able to support these short-term loans.
The model also means businesses are not being faced with a stack of hefty invoices at the end of each month, Tory adds. Rather, they can pay off each invoice within the 21- or 30-day period, even setting up a direct debit if they choose.
If a business defaults on a payment, Foodbomb will work closely with the individual venue to establish a payment plan, the founder says.
“We think it’s a fair model for both supplier and venue,” he adds.
With technology playing more of a role in the hospitality sector — a trend that has only been accelerated by COVID-19 — Tory says business owners are looking for new ways to optimise their operations.
Foodbomb has helped them to do just that for supplies and procurement, he adds, and BombPay is an extension of that.
“I wouldn’t be surprised if we had some copycats pop up now.”