Butler shows hundreds of employees the door after raising $50 million to deliver room service – TechCrunch
On May 16th, Butler Hospitality, an on-demand platform for room service and amenities, sent out emails to vendors that could be considered reassuring under other circumstances. “We are writing this letter to inform you [that] Room service and food service will continue to do so. All collateral is still active,” the email read. “We appreciate your loyalty in sticking with us all this time.”
Trouble was, Butler’s workforce of about 1,000 had been laid off just days before. In fact, most were told the company was dissolved – according to interviews TechCrunch conducted with some former employees and corroborated in a report. last week by industry blog Diving Restaurant.
Butler’s downfall is a cautionary tale of both the opportunities and challenges that exist in the world of on-demand startups. There may be glaring gaps in the market for services that appear theoretically as smooth sailing. However, they can certainly be affected by economic, social and, in recent times, public health extremes. And in the midst of all that, the people who worked there were the first to come through.
Delivery upon request
New York-based Butler was founded in 2016 as a “ghost kitchen” operator with a simple business model. Butler will rent a hotel kitchen on a property and use it to provide meal delivery to guests staying there and other nearby hotels.
Gjonbalic has experience in the hospitality industry. Follow According to the Forbes profile, he opened his first restaurant in New York City at the age of 19 – located inside a “baggy” hotel. Gjonbalic is also listed as an advisor to Fast Acquisition Corp., a special-purpose acquisition company that unsuccessfully attempted to launch Fertitta Entertainment, a food, hospitality and gaming giant into a public debut. they.
“We are coming and showing what the experience should be like,” Gjonbalic told Crunchbase in a 2020 interview, “You don’t need a cart in your room or a $20 service charge to deliver food. Customers want nice packaging, good menus, transparent pricing and being able to track their orders. This should have happened a long time ago.”
Butler owns five different restaurant concepts it staffs, including Standard by Butler (a casual bar and grill), Prime by Butler (an American brasserie) and Super Franc (a steakhouse). Tuscan region). Hotels can choose which concepts to offer their guests; Butler handles integration, experience, menu design, and packaging. For customers, they promise to deliver orders – including “convenience” items on the side, like chargers and shaving cream – in less than 30 minutes, charged directly to the bill. their hotel.
After a seed round and fundraising from Gjonbalic, Butler went on to raise $15 million in Series A donations from The Kraft Group, & vest, Scopus Ventures and Mousse Partners. The company then raised $30 million from backers including Shamrock Holdings, Maywic Select Investments and Platform Ventures, bringing the total raised by Butler to the “north” of $50 million.
In one Press Release Released last October, Butler says it wants to double its presence in 12 markets in the US with plans to expand rooms in cities including Boston, Dallas, Houston, Los Angeles, Philadelphia and Pittsburgh (expanding from their campuses in New York., New Jersey, Chicago, Miami, Denver, San Francisco and Washington, DC) The company says Hilton, Hyatt, IHG and Marriott are among more than 400 partners their hotel partners, big partners for small operations.
But some former employees say trouble is happening behind the scenes.
Signs of instability
Butler has certainly been affected as the pandemic of service and hospitality consumption has waned. In April 2020, the company take $600,000 loan through Paycheck Protection Program. Butler, with the intention of expansion, continues to take on expensive new hotel restaurant leases.
At one point, Butler was offer for sale Visa card prepaid $500 for each successfully referred hotel partner.
Gjonbalic told TechCrunch via email: “Butler has expanded its footprint across the country in 2021, hoping to capitalize on the tourism recovery. However, the startup sees COVID-19 having both direct and indirect long-term effects, he added, among them labor and supply chain shortages, closed international borders doors and continue to delay corporate and group travel.
As tourism recovers by the end of Q1 2022, Butler’s challenges have not yet gone away, with inflation, geopolitical issues (i.e. war in Ukraine), rising interest rates and greater pressure on the economy. with technology finance, all create a challenging fundraising environment for startups. . This resulted in commits dropping “suddenly,” says Gjonbalic.
But Gjonbalic and the rest of the company’s senior executives failed to communicate the severity of the situation, according to former employees who spoke to TechCrunch on condition of anonymity. Just weeks before the mass explosion, a former employee claimed that they had been told Butler had no cash flow problems and that “next time [financing] The round has arrived. Another said they had been assured that the company’s board of directors would give them six months regardless of how the next fundraising went.
Some complaints have been more public and open. Kelly Buerger, the former head of Butler’s startup, applied class action lawsuit against the company in June alleging Butler failed to adequately notify employees of the termination of their contracts. Under the New York Alert Act and the federal Warning Act, companies that employ 50 or more employees are typically required to give several weeks’ notice of mass layoffs.
“Commencing on or about April 22, 2022 and within 90 days thereafter, [Butler] The lawsuit alleges that hundreds of its employees have been laid off. “[Butler] required by the WARN Act to provide [Bruger] and hypothetical class members with at least 60 days’ written notice of termination of their contract… [Butler also] can’t pay [Brueger] and each team member assumes wages, salaries, commissions, bonuses, accrued vacation pay, and accrued vacation for 60 days after their termination, along with compensation perks another within 60 days. “
Several former Butler employees, who were promised health benefits through August, received emails a week after the dissolution saying their plans would be terminated soon.
Start layoffs
Butler began taking special measures to preserve his remaining capital. An employee at one of the Butler hotel’s customers said the company had begun shutting down service and introducing new rates without warning. For example, Butler started charging for delivery that was previously free.
At the beginning of the year, there was a round of layoffs at Butler – fewer than 20 people – which management described to employees as a “one-time thing”. A few weeks later, about 50 people studied what Butler internally calls the “challenge” response.
“We regret to inform you that due to… circumstances that [Butler] Due to the COVID-19 pandemic, including the critical need to conserve our cash, we have made the very difficult decision to put you in a temporary position,” said a former Butler employee. get informed. “We hope that [Butler’s] financial situation will improve and we hope to call you from temporary predicament to continue your position with [Butler] no later than November 9, 2022.”
The larger-scale layoffs began in May, shortly after Butler hired a new COO and chief revenue officer. The company dissolved on May 13.
Gjonbalic claims that Butler’s board and legal counsel at Cooley, a Palo Alto-based law firm, explored “several options” to try to save the company, but ultimately decided closed and dissolved the company on May 12.
“On May 13, Delaware advisors were retained to assist with the closure and liquidation of the business’s assets, and employees were terminated on May 13,” Gjonbalic told TechCrunch. in an email. “Butler doesn’t work. The board of directors agreed… to close the company, but this is not something that happens overnight, so some redundant responsibility centers have been assigned or transferred back to hotel ownership to help get this done as quickly as possible. “
The laid-off finalists, including operators who worked at Butler-hired restaurants, were notified during the three-minute Google Meet call. A former employee told TechCrunch that the services stopped abruptly after the company dissolved; Guests at a hotel contracted by the Butler suddenly cannot order room service.
The vestiges of the company remain. A former employee with knowledge of the matter said people who formerly worked for Butler directly messaged the company’s Instagram account, which is still active, to inquire about missing payments. . Much of Butler’s senior leadership hasn’t updated their LinkedIn profiles to reflect the closure, and Butler’s website doesn’t mention that.
“Hotel owners and hotel management companies have taken over most of the [Butler’s] Gjonbalic said [in an email to TechCrunch]. “A transferee is present and he is handling all post-dissolution matters.”
Warning story
Despite being a prime example, Butler is hardly the only food delivery startup that has fallen on hard times. recently. Instacart last month slashed its valuation is close to 40% and Recruitment slows down. Public trading DoorDash and Deliveroo have seen their share prices fluctuate wildly over the past year. Gorillas, Getir, Zapp, Jokrand Gopuff is among other delivery startups that have laid off employees in recent months, despite raising funds. And some have been forced to close completely, like No more refrigerators1520 and Buyk.
Beyond foodtech, stories like Butler’s are playing out with increasing frequency as investors tighten their belts, fearing a recession. As one former Butler employee put it, VC advocates perpetuated the need for insatiable growth, encouraging expansion that later proved insane. Valuations become inflated, which causes unrealistic expectations and changes in direction – and initiatives.
“Butler is a prime example of what’s happening in tech right now – except instead of just laying off 20%, the whole company went down,” the employee said.
