Friends of Branded!
Happy Saturday and I hope you had a great week!
I was reminded often this week that we’re in the ‘dog days of summer’ and when that phrase was used, it was usually uttered in reference to the weather (high heat & humidity), the lack of traffic in my hometown of New York City or the increase in out of office messages coming from various e-mail campaigns or communications.
For whatever its worth (and b/c people have commented that they appreciate my somewhat random inclusion of factoids), the expression ‘dog days of summer’ comes from the ancient Greeks who first coined the phrase, using it track the months. The Greeks found that Sirius, the brightest star, rose in the Northern Hemisphere, marketing the year’s hottest days. Sirius is the dog of Orion, the Hunter, and a part of the constellation Canis Major, which translates to the “greater dog” in English. The Greeks nicknamed this star the “dog star.” So, there you go.
Despite these being the ‘dog days of summer,’ there was nothing quiet about this week. We witnessed some meaningful equity market volatility (although I believe the 3% fall and recovery the next day was over-hyped), the continued ramping up of this election cycle and for those that are interested (and I’m one of those people), some amazing action and performances at the Olympics taking place over in Paris.
As someone who enjoys reading about our industry, there was also some great stuff published this week and at the risk of naming a few (and therefore by definition leaving out many), I’ll give shoutouts to (i) a New York Times piece by Pete Wells (I Reviewed Restaurants for 12 Years. They’ve Changed, and Not for the Better); (ii) friend of Branded and my favorite industry newsletter, Expedite by Kristen Hawley; and last but certainly not least, a LinkedIn post about the feast & famine in the restaurant industry by Sterling Douglass, Branded’s friend and the CEO of one of our very first investments, Chowly, the off-premise platform that helps restaurants create, capture and convert demand to help drive more profits into the bottom line (I never want to miss an opportunity to give one of our portfolio companies some well-deserved love). 😊
While the links to the above thought leaders and their writings this week that got my attention have been provided above, to be efficient with your time (I felt that eye roll people!!!), Mr. Wells doesn’t like the direction or the digital transformation that’s underway in our industry, Ms. Hawley defends and captures some great reactions to Mr. Wells’ New York Times article and Mr. Douglass’ post shares his observation that the failure rate of restaurants is increasing while at the same time other operators are expanding and then does his best impersonation of Marvin Gaye and asks his readers (as well as our friend & partner Nabeel Alamgir and myself by name), “What’s Going On?”
I’m taking some liberties here and pulling directly from Sterling’s LinkedIn post in an effort to share his take on some of the reasons operators are struggling…
· Lack of off premise and digital strategy
· Lower brand awareness with changing demographics
· No catering or events
· Never had to do marketing so never did
· Didn't raise prices enough
· Blamed staff / hiring
· New market realities for costs didn't match their business model
· Landlords pushing them out
As well as some of the reasons why others are thriving…
· Succinct and cost-effective off premise
· Great brand awareness
· Lots of automation on digital marketing
· Always be Catering (ABC)
· Raised prices to what seemed uncomfortable levels, but worked
· Big investment in staff training (paying above min wage)
· Or very little staff investment with heavier automation
· Some in-house supply chain (micro greens, direct farm connections)
· Landlords who are partners
· Detailed understanding of their customers and demographics
My overarching response to the above thought leadership is that the restaurant industry is experiencing a BOOM in traffic and according to the National Restaurant Association, sales are projected to reach a record breaking $1 trillion in sales in 2024!
To be clear, this monstrous sales number doesn’t invalidate Pete Wells’ comments about the industry and his dislike of the industry’s embracement of technology and the digitalization that he feels is negatively impacting the hospitality and human connection that he feels is most important to our industry.
Kristen Hawley’s article included some great contributions from leaders in our industry in response to her question: “Is technology making restaurants inhospitable?” Sterling Douglass shared his thoughts and asked for others to contribute their own on what is making this current environment one of feast or famine for operators.
All this leads and only adds to my conviction that our industry is over-supplied and saturated (and it’s important for you to understand that I’m not simply talking about the number of restaurants we have in our country). It’s the number of dining options available to us that has taken this saturation to a whole new level that is causing the feast or famine for operators.
According to Merrian-Webster Dictionary, a restaurant is a business establishment where meals or refreshments may be purchased. Words matter (thank you Mr. Hirth) and that specific definition is one Branded believes is accurate.
The Merriam-Webster definition is different from the Oxford Dictionary that defines a restaurant as a place where people pay to sit and eat meals that are cooked and served on the premises.
As an investment platform that embraces the breadth and depth of the hospitality industry and are focused on the diversity of the venues that sell and serve food & beverage (Merriam-Webster’s definition), over the past 20 years, the US has seen an increase in brick and mortar (aka: 4-wall) restaurants, and the expansion of dining options available to guests grow exponentially.
For simplicity (and there’s empirical data backing this simplicity), the number of meals consumed remains completely correlated to the population and one can therefore think of dollars spent on dining as a zero-sum game. If a new restaurant group (4-wall, digital, convenience story, meal-kits, etc) is winning business, that means that another restaurant group is losing business. The fact that sales for the restaurant industry are increasing (and hitting record levels) is a testament that we’re successfully earning a greater share of consumer spending.
My brother-from-another-mother, Mr. Wolf, would of tell me that “if you’re standing still, you’re falling behind.” When we look at the winners and losers, I believe there are many that are standing still and paying the consequences for doing so.
Quick digression (I swear), what’s your favorite scene from the film Pulp Fiction? There are so many, but mine is the one with John Travolta (Vincent) and Samuel Jackson (Jules) discussing Vincent’s love of pork (“bacon tastes good, pork chops taste good”), while Jules feels pigs are filthy animals (and Jules “don’t dine on swine”). The scene concludes with Jules acknowledging that for him to stop viewing pigs as filthy animals, "it would have to be one charmin pig…ten times more charmin than that Arnold on Green Acres.”
Okay, back to the topic…
Readers of the H^2 know that I believe the restaurant industry is comprised of some of the hardest working, most creative and team-oriented people anywhere, but we’re also fiercely competitive, b/c we need to be!
Our industry is fragmented, saturated and also extremely personal. Our customers are called “guests,” and we want them to feel a connection and bond with our respective brands. Food & Beverage is akin to gravity and oxygen, meaning, it’s going to be part of our lives, every single day for the rest of our lives.
How we eat and what we eat is of course extremely personal and as I learned from daughter’s kindergarten class, you shouldn’t “yuck on someone else’s yum.” The options available to us are virtually endless which again only makes how operators and brands engage with their guests so much more important and relevant than ever before. I see the brands that are winning and expanding and the ones that are losing and closing are equally visible in the public domain.
Operators have every right to run and manage their business as they wish and that includes doing it as they’ve always done it before (respect). From my seat, I see such a strategy or maybe attitude as being incongruent with the phrase “evolve or die.”
None of the above is to suggest that all restaurants need or should embrace the same technology stack whatsoever. The fragmentation and diversity of our industry is one of the reasons there’s such an abundance of technology and innovation bursting onto the scene. And here’s the absolute truth, now that the genie is out of the bottle (and I’m referring to the restaurant industry experiencing a digital transformation), you can’t put her back in. If you feel your business doesn’t need or couldn’t benefit from some of the technology and innovation tools now available to you, I’d love to engage in a discussion. In the short-term, for some sectors of the restaurant industry, the embracement of technology and innovation will be the difference between winning and losing. In the long-term, for ALL sectors of the restaurant industry, the embracement of technology and innovation will be the difference between winning and losing. I’m sorry, not sorry, but you’ll need to evolve or die.
Our industry is NOT a technology industry (and Dominos is not a tech company that sells pizza, it’s a pizza company that leverages technology). We’re an industry that is tech-enabled, tech-supported and can benefit from the embracement of technology (just like all the other industries I know).
Change is hard, scary even, but in the spirit of Billy Joel celebrating his 150th lifetime show and completed his residency at Madison Square Garden on July 25th, “the good ol’ days weren’t aways good and tomorrow ain’t as bad as it seems.”
It takes a village.
The first shoutout this week goes to our friends and partners at PourMyBev, the world leader in self-pour beverage solutions! The beverage solution platform that increases sales by 50%, decreases labor by 20%, and produces a positive ROI within a year (just in case you were wondering how operator-centric company was). 😊
PourMyBev (aka: PourMyBeer) announced this week that our friend Mr. Robert Thompson has joined its Board of Directors. Mr. Thompson is an award-winning hospitality entrepreneur and brings a wealth of experience and innovative spirit to PourMyBeer as the company continues to revolutionize the beverage service industry.
Robert Thompson, CEO of the Joy Trade EATertainment platform, home to the recently opened Jaguar Bolera concept in Raleigh, N.C. and the highly anticipated Camp Pickle concept slated to open next year, is renowned for his transformative impact on the EATertainment sector. Robert was the founder of category-defining Punch Bowl Social and successfully grew the concept to 20 locations across the country with $120 million in annual revenue. His dedication to creating unique, immersive experiences for patrons has made him a leader in the quickly growing industry.
With both the cost and availability of labor ranking among the biggest challenges facing operators (especially in the casual dining, quick-serve and EATertainment space), the need for simple solutions is imperative and PourMyBev / PourMyBeer is such a solution. That includes you my stadium and arena owner friends! Give your fans what they want! 😊
And since this week’s edition of the H^2 is leaning heavily on the pulling of thought leadership including LinkedIn posts from others, then I’d be crazy not to share a most recent one from our friend and PMB’s Founder & CEO, Josh Goodman.
Here’s the LinkedIn post: YOU ARE EXACTLY WHERE YOU ARE SUPPOSED TO BE
And here’s the image I want to share:
This week’s second shoutout undoubtedly falls into the category of a most personal one.
Last week I was fortunate to be up in the Adirondack Mountains at Brant Lake Camp, a summer camp that my family and I have been fortunate to be involved with since 1978.
My brothers and I had the privilege of being campers, counselors, and forever active alumni at BLC.
Each summer I make a visit to camp and have the opportunity to re-engage as an official on the courts, fields and otherwise. Over the past 8 summers, my wife and I have brought our daughter to be part of this trip, and she’s developed her own relationships and love of the camp.
For those that haven’t experienced sleepaway camp, there’s event known as Color War or the splitting of the camp into two teams (usually defined by the colors of the camp) that is the highlight of the summer. Brant Lake is a little unique in that once you’re selected by a team / color (which takes place in your first year), that is your team / color for the rest of your life.
The question “Green or Gray?” is what immediately follows when someone encounters a Brant Laker (and I’m a proud member of the Green Team).
My daughter, who is 7-years old, and has not been pulled as either or a Green or a Gray b/c thus far she’s only been a visitor, but given the camp’s commitment to tradition and family, Vegas is not taking bets on what color she will be chosen when her time comes.
Brant Lake Camp is much more than sports, it’s about sports done right. Green & Gray splits the camp into two teams and while the competition is fierce, you’re also competing against some of your closest friends.
The photo below is of my daughter when Green & Gray came to a finish, and it was announced that the Gray Team had won.
Of course, no parent wants to see their child upset, but I love this photo (and I know that my mother-in-law does not). 😊
I love this photo not b/c I’ve captured a moment when my daughter is unhappy, but b/c my daughter cares and was emotional about the loss (please note, the Green Team won last year). You can only be upset about a loss if you cared deeply in the first place about the event, the person or whatever it was that brought you joy and therefore the act of losing can bring you to tears. There are no participation trophies in Green & Gray. There’s a winner and there’s a loser of the event.
Moments after this photo was taken, my daughter was embracing members of the Gray Team and congratulating them on their well-earned victory (this year).
In the spirit of this week’s edition of the H^2 and the theme (feast of famine), it’s a privilege to play this cerebral sport that is hospitality, and I feel fortunate to care (deeply) about our portfolio companies, our partners, the people that are trusting us with their business and / or capital and of course our team.
Yes, it’s business, but it’s also extremely personal (sorry Godfather, this is the only rule of yours that I don’t agree with).
Seeing restaurants close is heartbreaking b/c I understand firsthand the work, capital and optimism that went into the opening. But it’s part of the business we’ve chosen and always will be.
As I wrote above in the Top of the Fold, despite the record-breaking sales numbers, we’re all competing for a share of the guests’ wallet and our respective position in the industry. As an industry, we’re an incredibly close-knit community and we want to see our brothers and sisters win, but as the numbers show, the failure rate is real.
I believe in camp over color, country over party, and I believe in the hospitality industry and the amazing people who work so hard to serve, delight and create memories for our guests.
Say Goodbye to Unfair Refunds
With Restaurant Logistics, you'll never be unfairly charged for refunds. We handle it all for franchise-owned QSRs.
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.
This is where we share our deal flow, investment activities and strategies.
With respect to emerging QSR and expanding FSR restaurant companies, the Branded Team is thrilled with the work we're doing with our friends and now partners at Big Chicken and LDV Hospitality respectively.
Members of our Access Hospitality Network should expect to see our latest B2B and operator-centric SaaS opportunity after the Labor Day weekend.
Stay tuned!
The Cloud-based Software Keeps Your Kitchen Moving
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In this weeks episode of the Hospitality Hangout, Michael Schatzberg “The Restaurant Guy” and Jimmy Frischling “The Finance Guy”, are joined by Scott Finlow, the Global CMO for PepsiCo Food Service.
Scott’s journey into marketing began at PepsiCo, where he led many successful initiatives, and now brings twenty-one plus years of a strong, innovative, and consumer-focused approach to marketing and he plays a leading role in establishing key partnerships and developing effective marketing strategies, connecting the company's brands with the food service industry. With a degree in English from Tufts University, Scott’s early career included experiences as a dishwasher, an experience that gave him valuable insights into the foodservice industry. Scott’s time in Thailand, as part of his extensive international career, involved marketing and brand management, significantly broadened his perspective on global markets and consumer preferences.
You can tune in on Spotify, Apple, Amazon, iHeart, or your favorite listening platform!
Are you loving the Hospitality Hangout? Make sure to subscribe, download + leave us a review!
TECHNOLOGY
Strengthen Your Startup Core: Business Advice for Founders
By: Seth Temko, Solutions Services Partner at Branded Hospitality Ventures
Focus on your startup's core strengths, and mind-map your money to build a solid foundation for success!
MARKETING
Want a Restaurant Marketing Playbook?
By: Rev Ciancio, Head of Revenue Marketing at Branded Hospitality Ventures
Restaurant marking is hard. There are a lot of moving parts, multiple channels that need to be maintained daily and best practices ... well what worked on Monday might be a totally a dead way to do something by Thursday!
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!
Would you like to contribute? Share your article with us, and it could be featured in our headline!
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