Friends of Branded!
Happy Saturday and I hope you had a great week!
I expect no one would argue that the biggest story of the week in hospitality was the announcement that Starbucks brought Mr. Brian Niccol over from Chipotle to become its new CEO.
There’s been a great deal of coverage on this seismic leadership change and I’m not even going to mention the financial package that Starbucks will pay Mr. Niccol in his first year (and instead I’ll copy a link to the article by Friend of Branded, Mr. Danny Klein, and let his story on the topic take care of that for me). 😊
If one of Pitbull’s nicknames is "Mr. 305," then I think (hope) at least a few of Mr. Niccol’s buddies call him "Mr. 117" (at least for a week or so).
The Top of the Fold of last week’s H^2 was Feast or Famine and how some brands are soaring while others are failing. Chipotle stands strong among the companies that are on the winning side of these two extremes and feasting (pun intended)!
The restaurant companies that have seen better days include, but aren’t remotely limited to, TGI Fridays, Hooters, Denny’s, and Red Lobster, who have closed underperforming locations, while Rubio’s, Tijuana Flats and Stickey’s Finger Joint have faced bankruptcy or are in the process of restructuring.
The expected record-setting sales number of $1.2 trillion in the US restaurant industry makes it clear that the consumer is spending. The failure rate, including by some of the country’s beloved brands, is what’s having the industry dig-into the cause and effect and specifically examine what’s contributing to the winners and losers.
In addition to the restaurant industry being over-supplied and saturated, I specifically pointed out last week that it’s the sheer number of dining options available to guests that has taken this saturation issue to a whole new level.
I never thought I’d make a reference to Robin Thicke (featuring Pharrell) in the H^2 (and one should never say never), but it’s the “blurred lines” in the foodservice industry that is exponentially increasing the level of competition. Consumers preferences and changing consumer behavior makes the hospitality industry as dynamic as the fashion industry and today, the consumer wants (expects) restaurant-quality meals anytime and anywhere.
I touched on this last week, but the leadership change that sent Mr. Niccol (who will be a first ballot Hall of Famer) to Starbucks and elevated Friend of Branded, Scott Boatwright (another expected first ballot Hall of Famer), from COO to interim CEO at Chipotle, has pushed me to raise the bar on this topic of the increased dining options available to guests today.
Restaurants aren’t just competing with other restaurants anymore (although that competition itself is fierce). Restaurants now need to compete with convenience stores, grocery markets and even retailers that have entered the fresh foods space to meet the changing demands from consumers. The competition for a share of the consumers’ wallet and the opportunities to win loyalty, increase sales and create efficiencies is enticing to venues on both sides. Purchase a t-shirt, coffee mug or gift from a restaurant? Sure, why not. Purchase a ready-to-eat meal from a retailer? Sure, why not.
According to its Retailer Confidential Report by our friends at Acosta Group, 71% of retail executives are doubling down on fresh foods to attract and please shoppers. The report shares some of the steps retailers can take to boost foodservice include the following:
- Enrich the in-store experience and create reasons to linger, sample and dine.
- Create cross-promotions to provide shoppers with meal solutions across all meal occasions.
- Elevate digital integration.
Retailers and restaurants have long coexisted and found harmony together in malls with the inclusion of food halls, but now retailers seem ready to bring the fresh food experience inhouse and compete directly with restaurants.
Going back to Starbucks and its hiring of Mr. Brian Niccol, you can bet your Venti Iced Caramel Macchiato with almond milk and an extra shot of espresso that Starbucks will be the newest player in the fast-food space. There’s been an internal battle at Starbucks for well over a decade between the company staying true to its original corporate ethos that its cafes were cultural “third places” versus its being less experiential and more transactional. It was just a few months ago (June 2024) that Starbucks launched its first ever value meal offering.
The legendary Howard Schultz (a first ballot Hall of Famer) has always protested the idea that Starbucks was a fast-food restaurant operator. This past May, Mr. Schultz issued a LinkedIn post (Howard Schultz post following Starbucks Earnings Announcement) where he identified US operations as the primary reason for the company’s fall from grace and emphasized that “the stores require a maniacal focus on the customer experience, through the eyes of a merchant. The answer does not lie in the data, but in the stores.”
I found Mr. Schultz’s LinkedIn post uplifting, passionate, and even exciting. The post concludes with the words: “There are no quick fixes. But the path forward should be what has guided the company over decades of financial success: Inspire your people, exceed the expectations of your customers, and let culture and servant leadership lead the way.”
Those words are inspiring and from my position at Branded, relatable, but are they realistic?
Starbucks is the number one coffee company in the world, but the world of coffee is ever evolving. According to Java Presse (What? You’re not a subscriber?), “The current state of the coffee market reflects a dynamic industry influenced by shifting consumption patterns, evolving consumer preferences, global and local competition among retailers, cafes, producers, and roasters. The market showcases a blend of traditional practices and innovative approaches in pricing, distribution, and sustainability to cater to the diverse needs and demands of consumers.”
If current consumer behavior places a premium on convenience, then the explosion of options afforded to consumers at home and at the office at least offers a convenient alternative to coffee cafes. Factor in the demand for delivery and digital ordering (which adds to the convenience side of the ledger), and you can see how the experiential or “third place” that Starbucks has taken great pride in cultivating is losing ground.
The direction Starbucks elects to go and take its business is most certainly above my paygrade, but by bringing in the person credited with a successful turnaround effort at Taco Bell, who then took the helm at Chipotle where he helped double the revenues and increase profits 7x, leads me to believe that Starbucks isn’t going back to its roots of being experiential.
I don’t think anyone would argue with the position that we’re in a most challenging consumer environment and that when it comes to coffee, Starbucks is facing increased competition from emerging coffee shops, as well as specialty and artisanal ones. An emerging trend in coffee is an increasing number of consumers seeking sustainable and ethically sourced coffee options. As I read about all the options and the many ways in which consumers want their personal preferences met when it comes to their coffee, I feel particularly boring with my preference for coffee flavored coffee that sometimes has regular milk in it (and is often simply black).
I wrote last week, with attribution to my Mr. Wolf, that if you’re standing still, you’re falling behind. Starbucks has put up some weak numbers lately and they’ve responded by taking an aggressive action, and securing a future first ballot Hall of Famer when it comes to the foodservice industry in Mr. Brian Niccol. With this move, you have the right to feel that the board may have acted impatiently, but no one should accuse Starbucks of standing still.
We’ll be sure to re-visit this next chapter at Starbucks over the next few quarters, but my prediction is that we’re going to see a greater focus on their becoming a quick-service restaurant. Speed and specifically having its operations keep up with its digital ordering experience is going to be one area I expect Starbucks will be focused on.
And in the category of my talking Branded’s book, here's my BIG suggestion for Starbucks - they should embrace self-pour coffee taps (PourMyBev) for those of us who just want to pour our own coffee, pay with our phone, and go. We’ll take care of ourselves (and thank you for allowing us to skip the line and do just that).
Starbucks can let its talented baristas make the magic happen and take care of the bespoke, personalized, and complex orders (or any of their guests that wants the barista experience).
If only there was a platform that was singularly focused and could deliver a reliable self-pour solution (PourMyBev). Maybe I’ll be able to think of such a solution for them. 😊
Now that’s what I call a win-win-win, a win for guests, a win for Starbucks, and a win for the world leader in self-pour solutions (PourMyBev).
It takes a village.
The shoutouts this week go to a few Branded portfolio companies that are winning awards and forming partnerships to help operators win.
These companies are doing the hard and good work. I just have the privilege of writing and maybe boasting (a little) about them.
First up, our friends and partners at Leasecake, the markets leading lease and location management solution, was recognized as the Overall Lease Management Company of the Year by PropTech Breakthrough Awards.
This award marks the second consecutive year Leasecake has been given this honor.
Leasecake is the leading lease and location management platform that protects clients from missing critical lease renewal dates, contract deadlines, permit and warranty expirations, or other important location-related details. In an era where multi-unit operators face increasing complexity and heightened risk as their location count grows, Leasecake's AI-powered platform provides peace of mind by centralizing all location-related information in one location across an entire real estate portfolio.
According to Taj Adhav, Founder of Leasecake, "The market has awakened to how consumer-centric design is incredibly vital for today's modern workforce - accomplishing more with software that works for you and not the other way around. It's really hard to make things really easy, and we've delivered an intuitive and approachable experience designed for customers to reduce the risk of missing important dates, dollars or documents for any of their locations. We are honored to receive PropTech Breakthroughs' ‘Overall Lease Management Company of the Year' award and we remain committed to maintaining our high standards of excellence in lease and location management."
The mission of the annual PropTech Breakthrough Awards program is to conduct the industry's most comprehensive analysis and evaluation of the top technology companies, solutions, and products in the global real estate technology industry today. This year's program attracted thousands of nominations from over 12 different countries throughout the world.
According to Bryan Vaughn, Managing Director of PropTech Breakthrough Awards, "With a million things to do, Leasecake makes managing your real estate simple and easy. Lease management is often associated with complexity and manual effort, and losing a popular location is a mistake that no franchisee or other multi-unit operator wants to make. Leasecake helps real estate professionals save time looking for lease details and spend more time growing their business. Their solution is helping to safeguard real estate interests and streamline location management tasks."
This week’s second shoutout goes to our friends and partners at Curbit, the capacity management solution for restaurants that helps operators manage their pick-up and delivery orders efficiently, ensuring “Happy Handoffs” for all guests.
I’m proud to share that Curbit announced a collaboration with Microsoft to broaden the market reach of its innovative service. As part of their agreement, Microsoft will provide critical digital infrastructure and state-of-the art AI and real-time capabilities, enabling Curbit to offer enterprise-grade speed of service analysis, accurate guest expectations, real-time order progress and robust kitchen performance and sentiment analytics.
According to Fran Doughtery, CEO at Curbit, “Curbit has consistently been at the forefront of capacity management and guest experience solutions since its inception in 2019. Integrating deeply with Microsoft’s global infrastructure and Microsoft’s enterprise footprint was the obvious next step in our evolution. As we continue innovating and further developing our technology, our collaboration represents a critical step in realizing our vision of powering 100,000 restaurant locations by 2027.”
According to Keith Mercer, General Manager, WW Retail and Consumer Goods, “With Curbit’s rapidly expanding footprint in the restaurant ecosystem coupled with its unique solution using Microsoft Azure and Azure AI, this collaboration represents a natural opportunity for Microsoft to support digital transformation in the restaurant industry at scale.”
Curbit solves a pressing problem for restaurant operators and delivery service providers by analyzing real-time speed of service to accurately predict order readiness. The result is fresher food, minimal wait times and streamlined operations. Curbit’s real-time data provides insights into kitchen performance, highlighting areas for operational enhancement, like optimization of order flow and fulfillment processes.
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.
The Cloud-based Software Keeps Your Kitchen Moving
With ConnectSmart® RecipesPlus, your kitchen keeps up. Easily update recipes across every restaurant, search recipes instantly, and more.
New Release:
In this episode of Hospitality Hangout, Michael Schatzberg, “The Restaurant Guy,” and Jimmy Frischling, “The Finance Guy,” sit down with Gregory Zamfotis, founder and CEO of Gregory’s Coffee. Gregory shares how he built his brand on the foundation of family values and entrepreneurial grit. Following his passion for coffee, he launched his first café in New York City in 2006 - with a focus on quality, innovation, and authentic customer experiences, Gregory's Coffee has grown into a beloved chain that still carries the heart and soul of a family business.
Tune into the episode and subscribe to our channel here: Hospitality Hangout Featuring Gregory Zamfotis
Re-Run of the Week:
We are thrilled to announce that Scott Boatwright, a former guest on the Hospitality Hangout podcast, has been promoted to interim CEO of Chipotle! This is a huge milestone for Scott and a testament to his incredible expertise and leadership. To celebrate, we’re revisiting our engaging conversation with him, where he shares insights that are even more relevant now. Don’t miss out on hearing from Scott as he takes on this exciting new role.
Tune into the episode and subscribe to our channel here: Hospitality Hangout Featuring Scott Boatwright
You can tune in on:
Spotify: Click Here
Apple Podcasts: Click Here
Watch on Youtube: Click Here
Are you loving the Hospitality Hangout? Make sure to subscribe, download + leave us a review!
TECHNOLOGY
The Dangers and Warning Signs of Toxic Sales Environments
By: Seth Temko, Solutions Services Partner at Branded Hospitality Ventures
Toxic sales environments erode morale, stifle innovation, and drain top talent, creating a vicious cycle that ultimately undermines long-term success.
MARKETING
4 New Guest Acquisition Strategies That Actually Work!
By: Rev Ciancio, Head of Revenue Marketing at Branded Hospitality Ventures
It’s rocky waters in the restaurant business. Competition is super high, the guest dollar doesn’t go as far as it did even a year ago and costs of operation are rising. The need to drive top line revenue by new guest acquisition is vital. Easier said than done, right?
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