Friends of Branded!
Happy Saturday and I hope everyone had a great week.
In last week’s H^2 I not only wrote about the goodwill and camaraderie that exists among restaurant operators as well as among ResTech operators (healthy competition and cheering for the competition), but it also gave me the opportunity to share a favorite image from Rocky III. With that in mind, I’m NOT going to say that I’m the world’s greatest fan of the Rocky filmography, but I will say that I rank pretty high on that most important list. 😊
Each week I welcome and appreciate feedback on the H^2. One long-term reader wrote that while he felt I somewhat covered it in last week’s Top of the Fold section, that I didn’t capture the full extent of just how tightly knit the hospitality community is and specifically how interconnected restaurant operators are with technology operators.
His point, that I agree with 100%, is that a technology company that wishes to succeed in the hospitality industry will win or lose by how they take care of THEIR customers (the restaurant operators). If successful, these restaurant operators will scream your praises from the mountaintops, but fail to take care of them, and it will be your death sentence. Well said AO, well said my friend!
Winning the technology game in the hospitality industry reminds me of the 1980s Faberge Shampoo commercial with Heather Locklear, and yes, they told two friends!
I’ve never seen an industry that's as closely knit as the hospitality industry, and I know statements like “this time is different” are dangerous and fraught with failures of those who subscribed to whatever they’re doing being different. I think this industry is different.
Let me explain and for avoidance of any doubt, I’m NOT talking about financial markets or an economic environment being different b/c such dangerous thinking has truly led to financial wreckage! It’s not the “this time is different” syndrome I’m referring to, but rather, that the hospitality industry, as an asset class, is different.
This industry being DIFFERENT comes from the (i) extreme fragmentation, (ii) the high-touch nature of foodservice, (iii) the thin separation between the manufacturing facility (kitchen) and the retail facility (the dining room), and specifically and uniquely from (iv) a most unique and personal relationship that people have with the product - food & beverage.
We’re not selling diapers, batteries, sweaters, or other non-perishables & staples in the hospitality industry (and we’re certainly not selling staples). We’re selling something that our guests will consume, and it doesn’t get more personal than that!
For emerging tech & innovation companies, I’m sorry, not sorry, to tell you, most restaurants don’t want to hear from you directly. Don’t take this personally, but it makes little sense for them to speak with you directly. They want to get recommendations first, from their peers and second, from other players they know and trust. There’s been an explosion of technology & innovation that’s been thrust onto this most analogue and antiquated industry and it’s not possible for operators to diligence each and every offering.
Branded has a portfolio company where 98% of its sales comes from inbound calls (that was NOT a typo, 98% of their sales comes from inbound calls). Creating market awareness and educating the operators and specific segments of the market is far more important than cold calls, cold e-mails, and other hand-to-hand types of combat.
It was only a few years ago that I was a believer that tech & innovation MUST BE SOLD. While I think that continues to remain true, I’m now a bigger believer in emerging companies educating the market on the need for the solution they’ve created and the value it will deliver for the operator.
I’ll ask or challenge every emerging technology & innovation company to analyze your own sales and the question how much comes from outbound vs inbound? This is NOT an attack on salespeople. I think everyone needs to embrace the criticality of sales, but today we’re armed with a more diverse set of tools to drive sales and market awareness than I’ve even had access to before (for example a Saturday morning newsletter). 😊
Away from the uniqueness of this close-knit industry, the specific topic I want to address in this week’s Top of the Fold is something I’ve written about before, but now have the luxury of pointing to one of the industry’s favorite restaurant companies, who is making it clear that operators must focus on “to-go” customers.
The story of Texas Roadhouse is worth reading about and from my experience in the industry, Founder W. Kent Taylor, a Louisville native, may be the Bill Parcells / Bill Belichick of the restaurant industry. In 2018, ESPN published an article that showed how 28 of the 32 NFL coaches were connected to Bill Parcells and Bill Belichick. In the hospitality industry, I’m always blown away by the industry leaders and executives that spent time and worked at Texas Roadhouse.
So similar to EF Hutton, when Texas Roadhouse says “to go” customers are becoming a bigger priority for its business, other operators should be listening!
I’ve written previously that pick-up is the new delivery. The margins on “to go” dollars are higher than both delivery and in-store dining. The obvious factoid contributing to this is the reduced labor a venue needs to serve its pick-up guests. To succeed in the “to go” game requires the pick-up experience to be as easy and frictionless as possible.
How important is pick-up? Let’s not forget that Domino’s, arguably the greatest food delivery restaurant company to play the game, is incentivizing its customers to pick-up their food as opposed to having it delivered to them.
Branded’s investments in Curbit which acts as your kitchen’s personalized air-traffic controller and utilizes predictive ticket times to optimize your kitchen output, is just one example of how technology can improve the pick-up experience for your guest.
Minnow Pod, another Branded portfolio company, addresses both contactless deliver and an improved pick-up experience. Guests can retrieve their food without needing to engage with the staff and do so in a secure and safe way.
None of this is to say that delivery is or should go away. It’s only that delivery will always be a premium. You want the convenience of food being brought to you home. There’s a price for that!
Branded is a BIG believer in deliver and our first two exits were in native delivery companies Bbot and GoParrot being acquired by DoorDash and Square respectively. Chowly; Incentivio and now Lunchbox represent our current commitments and acknowledgement of the importance of delivery in the hospitality space. Each of these companies are operator-centric and represent powerful and integrated solutions for different segments of the restaurant industry.
The DSPs (deliver service providers) remain critically important to restaurants when it comes to cashflows and these platforms can't be ignored. Despite the headlines the DSPs generate, there will be no DSP-bashing in the H^2.
However, Branded believes leveraging a white-label (or native) delivery platform and leaning into pick-up solutions that make it easier for your guest to engage directly with your venue is how restaurants will improve their margins. Assuming, of course, that improving margins is something you care about. 😊
I took the liberty this week of highlighting a few of Branded’s portfolio companies. If you’d like more information on these and other portfolio companies, please consider signing up for our Access Hospitality Network. Branded invests in emerging technology & innovation companies that are operator-centric and address the most pressing issues, challenges and opportunities facing operators. Access to our insights and portfolio companies is just one link away.
It takes a village!
Readers of the Hospitality Headline, that are interested in learning more about Branded’s portfolio companies, investment strategies and future opportunities, are invited to explore becoming part of our Access Hospitality Network.
With a treasure trove of episodes, our podcast has been a trusted source of industry insights and engaging conversations for some time now.
🔊 Catch up on all the latest episodes and dive deep into the world of hospitality. Don't miss out – click the button below to start listening now!
You can tune in on Spotify, Apple, Amazon, iHeart, or your favorite listening platform!
The Branded team believes in showing-up and the importance of in-person gatherings. Next week we’re putting our money where our mouths are and we’re hitting the road. I want to use this shoutout section to highlight not only the events we’re going to, but the companies and teams that are making this happen.
Schatz will be heading to Scottsdale, AZ for the IFMA's Presidents Conference. This is the premier industry event for foodservice management and senior leaders across the supply chain.
The Branded Team is excited to be engaging with our friend Phil Kafarakis, President & CEO and the entire team at IFMA. The importance of foodservice manufacturers can’t be overstated and the need to improve industry practices and the relationships with other segments of the industry is why Branded is jumping on board. IFMA prides itself as a partner that wants to improve communication and collaboration across the foodservice landscape. This a crew that’s speaking our language.
I have the privilege of hitting two events next week.
I’ll first be joining our friends at Winsight & Informa for the Global Restaurant Leadership Conference (“GRLC”) in Miami. GRLC is bringing together the top 150 executives from leading global restaurant companies to network, share insight and build partnerships. The Branded team has worked closely with Winsight on FSTEC and specifically the Innovation Alley. We’ve been consistent attendees at the Restaurant Leadership Conference and I’m now super excited to be part of Global RLC.
We appreciate our friends at Winsight, now owned by our friends at Informa. The company names may be changing, but these B2B foodservice and hospitality events remain the gold standard.
After spending a couple of nights on Brickell looking out on Biscayne Bay, I’ll make my way north to Palm Beach and the Palm Beach CorpGov Forum. This is a new event for Team Branded and I’m excited to be speaking on a panel titled the P/E Edge Kickoff: Fundraising and Value Creation.
I’ll be on stage with Rafique Jiwani, Vice President, Private Equity, Goldman Sachs; Tom Nolan, CEO, Kendra Scott and moderated by John Jannarone, Editor-in-Chief, Capital Markets Media.
Branded takes great pride in the company we keep and the community we continue to build. I’m LOVING this crew gathering for the 3rd Annual Palm Beach CorpGov Forum and thrilled to have our name associated with this event.
The winner of this week's WITW is Branded contest, our friends Sam Stanovich and Josh Halpern (where is your Branded swag Josh?!?). The photo is from Houston, TX. Does anyone where Branded swag better than Sam? Maybe. Does anyone do it with a bigger smile and more joy than Sam? Nope!
Branded considers Sam and Josh to be among the finest gentlemen in the hospitality industry and we absolutely love what these folks are doing over at Big Chicken. See you in Vegas for RFDC fellas (but that's a shoutout for next week)!
To participate in the contest: Email marketing@brandedstrategic.com or contact your friend at Branded to submit a photo of yourself wearing a piece of Branded "swag" and let us know where in the world you are!
ACG MIDDLE MARKET WEEK
ACG NY's Middle Market Week will bring together leading global middle market dealmaking professionals to develop and enhance their dealmaking activities, strengthen their long-term relationships, and provide numerous opportunities for networking. Make sure you are in New York for this can’t miss week of non-stop deal opportunities November 6th through November 10th.’
TODAY'S TRIVIA
Answer also revealed at the end of the newsletter
BUSINESS
My Team is Better Than Yours...
By: Julie Zucker, CMO & Partner at Branded Hospitality Ventures
Despite the title of this article, I am not here to pontificate on my team, rather how great teams stem from a great leader.
Over my career thus far, I’ve had the privilege of learning from many amazing colleagues, and an even greater pleasure of being a mentor/leader to others. I’ve taken the “good” from my mentors and incorporated those skills into how I lead. I’ve taken the “bad” I’ve seen in the workplace and used that as motivation on what not to do. Somewhere in between, I’ve found my own groove.
In addition to sharing my favorite 5 Tips on Becoming a Better Leader by Gary Vaunerchuk. I will share my favorite tool in my box, something I use both as a leader, friend, daughter, sister and mother. Start each day (or most days) with a motivational quote. Sometimes we just don’t have the words, so whether you use an app, or just google, within minutes you can find the perfect quote wrapped up in a nice “screen shot” package that with a click of a button or "send" on a text – you can start someones days on a bright note. And you’ll never know just who needed to hear what you have to share.
Digital Restaurant Association
We champion restaurants to thrive in a digital world
TECHNOLOGY
To Avoid Marketing that Underperforms, Budget for Some ‘Marketing R&D’
By: Seth Temko, Solutions Services Partner at Branded Hospitality Ventures
When it comes to marketing planning and budgeting, I believe that most companies get stuck trying the same things month after month, and seeing results that are less than optimal. Here’s how it goes down. The organization agrees on an annualized assumption of marketing spend and marketing return. The head of marketing allocates dollar amounts to specific marketing channels or line items: online ads, events, personnel, contractors, design, and so on. This gets turned into a marketing plan / calendar and spend gets broken down by quarter and month for specific tasks, programs, campaigns, etc.
Budget becomes plan, becomes marching orders.
This is all well and good, and it is the right approach with the majority of a company’s marketing funds. However, I advocate for setting aside a portion of a marketing budget as discretionary. Think of it as Marketing Research & Development. Let me describe where I developed this belief, and then explain why this approach can work.
Serve Up Hope with CORE
Children of Restaurant Employees is a national non-profit and direct provider that is dedicated to serving food and beverage operations employees with children. CORE provides financial relief when the restaurant employee, their spouse, or child faces a life-altering medical crisis, injury, death, or natural disaster. To learn more about how CORE helps, and how you and your company can get involved, click the button below
FINANCE
The State Of Restaurant M&A in 2023: Historical Environment Could Define The Next Decade
By: Noah Stern, Associate, Branded Hospitality Ventures
2023 has seen a sharp uptick in restaurant M&A. Why do investors believe this is the best time to invest in the last decade?
In October of 2023, private equity firm Apollo Global Management acquired The Restaurant Group, the London based company that owns Wagamama, for $623 million. In August, Fogo de Chao, the Brazilian steakhouse, was acquired by Bain Capital for an undisclosed fee. This was in conjunction with Fogo de Chao’s plans for an IPO, which is expected as early as 2024. In May of 2023, Olive Garden parent company Darden Restaurants acquired Ruth Chris for about $715 million.
It is exactly these types of deals that can differentiate winners and losers. While this environment will not last forever, and terms will eventually come closer to equilibrium, deals in 2023 could prove to shape the next decade of the restaurant industry.
Restaurant Industry Movers in the Market
—Data as of 11/3/23
MAXIMIZE VALUE, IMPROVE PERFORMANCE
Learn how the Hospitality Industry advisors from CohnReznick can put you at the forefront of advanced financial, operational, and risk management strategies.
MARKETING
📍Want your restaurant to come up at the top of search results on sites like Google and Yelp?
By: Rev Ciancio, Head of Revenue Marketing at Branded Hospitality Ventures
There isn't much I don't know about how your business profile works on publisher sites like Google, Yelp, Bing, Yahoo, Siri, Apple Maps, Facebook, Alexa, Tripadvisor and more ... seriously, ask me anything about local search.
Taking everything I have ever learned about local search, I can share that if you want your restaurant locations to come up at the top of "near me" and menu item searches on these apps, maps and sites, follow this playbook.
IN THE NEWS
Hospitality Tech and F&B Innovation IN THE NEWS:
We love to highlight Food Service & Hospitality news, especially when it’s Partners & Friends making it!
- Tattle: Tattle Partners with Lunchbox to Streamline Multi-Channel Feedback Challenges for Restaurants
- Ovation: Keeping The Human Touch with Andrew Simmons
- Brizo Foodmetrics: How Food & Beverage Distributors Can Leverage Menu Data
- Pour My Beer: Craft Beer and Pickleball: The Perfect Pair
- Cut + Dry: Introducing Cut+Dry AI
- Incentivio: How Restaurants Can Optimize Birthday Offers
And in other News…please see some of the stories that caught our attention and that we’re paying attention to. This week was loaded with headlines and news!!
- Food Network: The Phrase ‘Taco Tuesday’ Can Now Be Used in All 50 States
- Food & Wine: Danny Meyer Claims AI and Human Hospitality Can Peacefully Coexist
- Nation's Restaurant News: Authentic Restaurant Brands completes acquisition of Pollo Tropical parent Fiesta Restaurant Group for $225 million
- Nation's Restaurant News: FAT Brands is likely to take Twin Peaks public in 2024
- Nation's Restaurant News: Why Texas Roadhouse is focused on to-go customers
- MarketWatch: McDonald’s stock climbs after earnings and sales rise above expectations
- Fast Company: DoorDash just had its best quarter since its IPO
ANSWER: McDonald's
McDonald's was the first fast food restaurant to introduce breakfast items in the early 1970s. The Egg McMuffin, a breakfast sandwich created by Herb Peterson, a McDonald's franchisee in Southern California, was introduced in 1973. The Egg McMuffin was first tested in 1972 at a price of 63 cents. It was rolled out nationally in 1975.
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 Frisch & Julia Suchocki
Branded Hospitality Ventures
jimmy@brandedstrategic.com & js@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 October 2023