Friends of Branded!
Happy Saturday and I hope you had a great week!
Schatz and I are well into our 4th decade of friendship and 3rd decade in partnership and I’m going to let you all in a little secret right here and right now. Without the show Seinfeld, I don’t think we could have ever made it this far.
When it comes to 1990s sitcoms, while Schatz’s boys (not his buddies, literally, his 3 sons) have a big love of the show Friends and a far lesser one for Seinfeld (I personally think this is an indication of Schatzy’s failure as a father, but whenever I mention that, he points out my daughter’s love of the Philadelphia 76ers, so we agree to call it even).
For those that might be less familiar with the show Seinfeld, it’s a show about nothing (that’s not my being mean b/c that’s something the creators are very proud of) and has brought a great deal of joy and laughter to so many people. For Schatz and me, it’s provided us with countless quotes to use regularly and contributed to our own sort of language and a way to communicate with one another.
When I was reading this week about McDonald’s continuation of the it’s $5 Meal Deal, the overall mixed results of this promotion and specifically how some franchisees weren’t thrilled with the campaign b/c of the “double-dipping” that took place, I wanted to lean in and learn more. The “double-dipping” in this case is defined as the pairing of these $5 Meal Deals with digital coupons that hit operators’ margins hard. The whole idea that “double-dipping” caused McDonald’s franchisees issues with this $5 Meal Deal promotion of course made think about Seinfeld and the issues made famous by its definition of “double-dipping.” Most importantly (of course), this all led to the theme for my Top of the Fold this week!
In a 1993 episode of Seinfeld, Jerry’s best friend George was confronted at a funeral reception by Timmy, his girlfriend’s brother, after dipping the same chip twice. “Did you just double-dip that chip?” Timmy asks in disgust, “that’s like putting your whole mouth right in the dip!” George responds, “you dip the way you want to dip; I’ll dip the way I want to dip,” as he attempts to put another chip in the dip. Timmy tries to take the chip away from George, and the scene ends as they wrestle to the floor.
This scene didn’t just make audiences laugh, b/c in 2008, a rerun of the “double-dipping” episode inspired a study in the Journal of Food Safety that was conducted by Clemson University and designed by Professor Paul L. Dawson, a food microbiologist. Professor Dawson proposed the study AFTER watching the “double-dipping” episode as he thought it would help get undergraduate students involved in the scientific research.
If you’d like to read the article and learn about the results of the study, I’ve placed it here: Dip Once or Dip Twice? (spoiler alert, Timmy was essentially correct).
While I enjoyed the “double-dipping” reference, it was McDonald’s continuation of this value-proposition for its guests DESPITE the mixed results that caught my attention.
Restaurants of all shapes and sizes are feeling pressure or a heightened demand from value-oriented customers. In its latest consumer trends data release, Branded’s friends at Yelp revealed an uptick in restaurant searches for “cheap eats” along with Caesar Salads, limoncello and soccer bars (by the way and for whatever its worth, a nicely priced Caesar Salad, with a glass of limoncello at bar showing a soccer match on the TV sounds like a pretty awesome afternoon to me, just saying). 😊
But back to the trends, McDonald’s, along with Taco Bell, Burger King, and other quick-service restaurants (“QSR”) are competing (as they always do) for the guests’ wallet. Now that consumers are cutting back and spending less, value-meals are in high demand and QSRs are discounting, couponing and offering whatever specials can drive guest traffic.
According to Yelp, searches for the phrase “value meal” are up 240% since 2023, while “meal deal” brings in even higher numbers, increasing 307%. Let’s face it friends, search matter (a lot!).
Economists (and some politicians) are correct when they say that inflation has slowed significantly from the pandemic-era peak, but consumers are still feeling the financial squeeze and opting for takeout, value meals and happy hour deals (this last one is the OG of dynamic pricing).
According Lightspeed Commerce, an e-commerce provider, 81% of Americans say they dine out at least once a month and 31% dine out at least once a week. Consumers say that inflation is affecting their tipping habits, and that free loyalty clubs and discounted gift cards can help stretch your dollar while dining out. The fact is food prices in restaurants have been growing at a faster rate than grocery store items.
Kroger’s CEO, W. Rodney McMullen, (who knows a thing or two about grocery stores and consumer trends) explained on an analyst call; “while food inflation has impacted every meal occasion, inflation and food-away-from-home has been even higher than food-at-home inflation since 2019.” As readers of the H^2 know well, the competition for the guests / consumers’ wallet is fierce and companies like Kroger are navigating how to please a customer that continues to be gloomy about the economy.
The University of Michigan consumer sentiment index showed consumer confidence slumped for the third month in a row as high prices and high interest rates weigh on their minds. How is Kroger competing? They reported better-than-expected earnings in part b/c of the rise in private label sales and digital sales. Grocery store operators are creative folks, just like restaurant operators!
Again, according to Lightspeed, 69% of diners reported pricier meals while 39% see “shrinkflation” in action with 39% noticing dishes shrinking in size as prices remain the same or have even increased.
I’m clearly not the only person that continues to point to the pandemic as a key factoid in the changes in consumer behavior. According to Ted Kenkin, the CEO of oXYGEN Financial, consumer dining trends could be lingering effect from the aftermath of the pandemic. According to Mr. Jenkin, “It started with revenge travel, and then it was followed by revenge shopping. And now I think it’s just a way that people are living their life with this mentality of ‘I’m going to just enjoy my life today, because I don’t know what tomorrow is going to bring me.’”
Nearly half of U.S. diners, 45%, are being more frugal by asking for takeaway boxes to keep their leftovers, according to Lightspeed. Meanwhile, 43% are hunting for deals with coupons, 39% are choosing value meals and 36% are taking advantage of happy hour specials.
I’ve written often (and lengthy) about the different views when it comes to discounting among industry operators and for clarity, Branded does NOT believe in discounting (although we do believe in rewarding loyalty).
One high profile restaurant group that is bucking the trend are our friends at Darden Restaurants which has resisted deep discounting despite the slowdown in sales at its Olive Garden and Longhorn Steakhouse locations. According to Darden’s CEO, Ricardo Cardenas, “we’re not going to do things to buy sales, even with the increasing discounting our competitors are doing.”
Another company that is outperforming its peers, Chipotle, which delivered second quarter results and showed a revenue jump of 18.2% year-over-year, same-store sales increase of 11.1% driven largely by an 8.7% increase in transactions. Chipotle’s growth is certainly not the norm and the company’s CEO, Brian Niccol, explained that “Chipotle is not built on promotional prices; it’s built on great culinary exactly how you want it with great speed. We keep executing and continue to get market share and our value scores continue to move up. We’re going to play our offense throughout this whole process.”
Chipotle prides itself on its ‘value scores’ and prefers to compete on that basis as opposed to competing on price (and readers of the H^2 know how Branded values, well, value). The company understands the importance of speed and faster throughput and has made this a key area of focus over the past several quarters. When restaurants are operating efficiently and effectively, they will deliver a better experience for both the staff and the guests (which in turn strengthens the restaurant’s value proposition).
The restaurant industry is a large, diverse, and fragmented one and operators will always make the best decisions they can for their business as they should and see fit.
McDonald’s, Taco Bell, Burger King, and so many others are embracing promotional activities to attract the guests. Driving traffic by attracting the budget-conscious guests seeking more affordable dining options is the objective, which also gives your restaurant the opportunity to upsell. The goal is always to have the guest feel that they’re getting value for their money.
Some restaurants are of course not embracing or using promotional activities, but these players too are working hard to deliver value to their guests.
The non-discounters are specifically leaning heavily on digital strategies and guest engagement tools to win and drive business. An over-reliance on discounts is detrimental as it puts only more pressure on margins (which are already shrinking as a result of food costs).
And here’s where the rubber meets the road, winning brands don’t want to offer discounts to deliver a value-proposition to their guests. Instead, they’re offering access and exclusivity. This leads to an enhanced customer experience and amplifies a brands story (and as our friend, Shawn P. Walchef tells us, “Be the story, not the commercial”).
I’m not talking about private clubs and experiences that are incongruent with QSRs and Fast-Casual restaurants, I’m talking about executable strategies that reward loyalty, such as secret or hidden menu items that are only available to your best customers. I’m talking about personalization and digital marketing, that allows you to engage directly with your guests.
As I write this, I realize it’s probably far easier to discount your menu than to embrace digital strategies and capture your guests’ data in loyalty programs.
Creating a BOGO (Buy-One-Get-One) flyer must be cheaper (short-term) than investing in the necessary digital marketing campaigns to create a more personal guest experience and engagement.
I’m not being sarcastic, I’m really not.
We all need to work with the tools we have and within the budgets that are available to us, but I don’t like restaurants having to cheapen they’re offering to win business b/c that means you’re training your guests to look for discounts and to move onto other venues when you’re not the discounter.
As always, the Branded Team is here to help and to work with operators that want to explore the digital tools that can bring value to your brands, to your guests and to your business.
I can’t guaranty much (and my attorneys hate it when I guaranty anything), but this one is safe. Everyone you know is going to eat and drink, every day, for the rest of their lives (I guaranty you that they will). Let’s make sure at least part of that spend is at your joint!
It takes a village.
While I think the following is well known, Schatz and I like to play a pretend drinking game when we attend conferences and other live events.
We pick a word and every time it’s spoken at the event, we pretend to raise our glass a take a fake sip of an adult libation.
(Now remove the word “pretend” and “fake” from the above and you’ve got the game correct). 😊
The hospitality word of the summer is “catering” and the realization that while delivering single meals is most challenging, taxing, and expensive proposition for operators, delivering catering orders is far more orderly, structured, planned and valuable.
Yes, catering is the hospitality industry’s word of the summer and that makes our friends and partners at Lunchbox deserving of the first shoutout this week and in sticking with this week’s Shoutout theme, "The Oxford English Dictionary" (widely regarded as the accepted authority on the English language).
This summer, Lunchbox launched a catering hub for the industry called, Cater, a dedicated community hub and council for catering executives across the restaurant industry.
According to Branded’s friends at Fast Casual, the catering industry is expected to grow to over $73 billion in value and is anticipated to grow to over $124 billion by 2032. Cater is a resource that curates industry news, reports, and resources.
Friend of Branded, Stefan Hertzberg, the CRO at Lunchbox and a key person taking an active role at Cater shared this week Lunchbox's First Party Catering Trends Report, a deep dive into the latest B2B catering trends and the impressive success of its Catering customers.
You can access the report here: The First Party B2B Catering Trends Report
Speaking of catering (this is your cue to lift up that imaginary drink), our second shoutout goes to Branded’s very own Rev Ciancio and our good friend and catering maven, Kelly Grogan. This dynamic duo will be hosting a webinar this upcoming Thursday to discover game-changing tips and tactics to increase revenue from catering. You can read more about the webinar in the Marketing section below!
Branded invites readers of the H^2 that are interested in learning more about our portfolio companies, and investment strategies to become part of our Access Hospitality Network.
Over the past few weeks, I've received several questions about the Access Hospitality section of the H^2 and I’d like to do my best to clear that up here.
This section is dedicated to the companies Branded is working with and supporting with respect to its investment activities. The content shared in this section is for informational purposes only, but you can be sure these are companies where Branded has invested and / or is exploring an investment.
If anything in this section proves to be interesting to you, accredited and qualified investors are invited to join the network and / contact me directly. Nothing in this section should be viewed as a solicitation or an offer to sell anything, but the companies written about here are ones that Branded is working with on the ventures side of our business.
Now that the above has been disclosed, Branded welcomed a new member of our B Works community this week and we’re proud to be the East coast HQ of Mr. Gregg Majewski and Craveworthy Brands.
The Branded Team prides itself on working hard (and playing hard) and being an operator-centric platform. We cover a great deal of ground thanks to our integrated and agile ventures, solutions, and media businesses. And yet, Craveworthy makes me feel lazy!
What triggered Craveworthy to set-up an office at B Works?
What did Craveworthy do the week before it acquired Untamed Brands?
After completing these acquisitions in May, what has Craveworthy done lately?
Do you wish Craveworthy would enter the cookie wars?
I could go on (and you probably think I’ve more than done that), but my point, Gregg is an industry executive that not only has deep understanding and expertise as an operator, but also has a deep desire to make this industry better for everyone in his ecosystem and the industry at large.
Gregg is part of the Franchise Master and Netsertive series and you can watch the trailer of his upcoming episode here: Franchise Masters + Gregg Majewski
The Branded Team is proud to call Gregg our partner and more importantly, our friend.
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In today's summer rewind episode of the Hospitality Hangout, Michael Schatzberg “The Restaurant Guy” and Jimmy Frischling “The Finance Guy” are joined by James Vitrano, Chief Executive Officer of Sucré. The guys recorded LIVE at the ICR Conference this past January, and it was such a fantastic lively episode, we're bringing it back today!
They discussed James' background, from his early ambitions to getting into the restaurant industry and working for major chains like Ruby Tuesday's. They talk about his current role as CEO of Sucré, a high-end New Orleans-inspired dessert chain that he and his partners acquired and are now focused on growing. The three discuss topics such as franchising models, use of technology in restaurants, what's right and wrong with the hospitality industry, along with James' vision for bringing Sucré to new markets.
You can tune in on Spotify, Apple, Amazon, iHeart, or your favorite listening platform!
TECHNOLOGY
Moving Upmarket: Why Great Products Alone Won't Cut It for Enterprise Clients
By: Seth Temko, Solutions Services Partner at Branded Hospitality Ventures
Expanding from small businesses to larger enterprises requires not just innovative products, but also exceptional service, support, and client involvement in product development.
Welcome to the new IFMA
The future of food-away-from-home is evolving—and so is our membership structure.
MARKETING
10 Easy Ways to Get More Catering Orders
By: Rev Ciancio, Head of Revenue Marketing at Branded Hospitality Ventures
Catering is awesome. It allows a restaurant to fulfill large group orders with full control of margin, plus it has the benefit of getting a bunch of new people to discover your restaurant from a trusted source.
Join catering expert Kelly Grogan from CRUMBS and hospitality marketing consultant Rev Ciancio from Branded Hospitality and Handcraft Burgers and Brew on a webinar to discover game-changing tips and tactics to increase revenue from catering that you can start to use today!
ASK THE HEADLINE
🔍 Got Questions? We've Got Answers! 🌟
Satisfy your thirst for knowledge? Look no further! It's time to dive into our brand-new segment: "Ask The Headline"! 🎉
📅 We'll be answering YOUR questions every week. And here's the best part: you can choose to stay anonymous or receive a fabulous shout-out when we feature your question!
That’s it for today!
See you next week, (about the) same bat-time, same bat-channel.
It takes a village!
Jimmy Frischling
Branded Hospitality Ventures
jimmy@brandedstrategic.com
235 Park Ave South, 4th Fl | New York, NY 10003
Branded Hospitality Ventures ("Branded") is an investment and advisory platform at the intersection of food service, technology, innovation and capital. As experienced hospitality owners and operators, Branded brings value to its portfolio companies through investment, strategic counsel, and its deep industry expertise and connections.
Learn more about Branded here: Branded At-A-Glance