Tabbedout, mobile payment app for restaurants, $7.75 Million in funding

As a regular restaurant goer, I have felt the time spent between finishing a meal and waiting for the bill to make the payment, an unproductive one. I see that startups such as Tabbedout and Cover are addressing this need.

Tabbedout is a mobile payment app that claims to allow users to pay their bills at a bar or a restaurant through their smartphone. Tabbedout was co-founded in 2009 by Rick Orr (CEO) and David Lemley (CTO). The Texas based company has acquired a total of $13.5 Mn in funding till date. Tabbedout recently (3rd October, 2013) acquired $7.75 Mn in Venture Capital funding from Morgan Creek Capital, NEA and Heartland Payment Systems.

So, how does a user use Tabbedout to pay for bills? After a free Tabbedout app has been downloaded, users enter their credit card information, select 'nearby locations' to identify Tabbedout merchant partners.On arrival, customers tap the 'open a tab' option and show the 5 digit Tabbedout code to their server. The server will see a button matching their point of sale system to connect the customers tab directly to their smartphone. Orders are taken by the bartender or waiter as usual and the tab can be paid at anytime with the Tabbedout app. Consumers order as usual, and close out the check via Tabbedout when they're ready.

The free Tabbedout app for iPhone and Android enables consumers to open a tab with their mobile phone, view their tab in real-time and pay the tab anytime, anywhere. Users can even split the check paying just their portion directly from the app. Tabbedout’s mobile payment solution claims to integrate directly with the merchant’s point-of-sale (POS) system without the need of additional hardware. This allows Tabbedout merchants' to serve more people and turn more tables, especially during peak hours. Tabbedout also provides validated payment information when a tab is first opened.

According to estimates from research analyst firm Double Diamond Group, the market for hospitality mobile payments is 650,000 locations worldwide. The de facto restaurant-payment experience is the worst payment experience according to Todd Ablowitz, president of Double Diamond Group. He also says that 'There's nothing worse than … having the server go back and forth multiple times to take your check, type it in, come back with the final bill, go back with your credit card, bring it back for signing. Tabbedout simplifies and improves the experience. It solves a real problem that uses the technology everyone already has now. It's one of the best, if not the best, example of a mobile payment I've seen.

Cover is another startup operating on a similar business model. Cover launched out of New York City, allows consumers to pay bills at restaurants through their app. Consumers can check in to the restaurant on arrival, and the bill hits their cards, including preferred tip settings when they leave. Cover automatically splits the bill between guests evenly for consumers that travel in groups.

Tabbedout is available at more than 1,000 locations nationwide. The free smartphone app is available for download from the Apple App Store or Google Play.

LTP View: If solutions such as Tabbedout and Cover could free up the time of the servers, they can get more time to do value added activities such as suggesting side orders and desserts to the customers. It could also help the restaurant owner to right size the team and making the restaurant business more lean and sustainable.

The overall revenue at restaurants enabled with such solutions may increase due to the reduce in wait time and rise in revenue per table. Also helping the merchants to concentrate on their products, offerings and reward system rather than billing and paperwork. It will be interesting to see how Tabbedout fares against its competitors such as Cover, FrontFlip and PayPal in the restaurants space.