Friends of Branded!
Happy Saturday and I hope you had a great week.
The holiday season is in full effect, and I want to wish everyone a wonderful Christmas, Hanukkah, Kwanzaa, Festivus, Boxing Day or whatever you might be celebrating.
My mom would always tell us to take joy where we can find it.
There will, however, be no New Year’s good wishes this week b/c just like NBA hall of famer and legend, Karl Malone (aka: "The Mailman"), the Branded H^2 will be delivering a Dec 30th edition next Saturday!
On that specific topic, can anyone explain why I was anonymously sent this image below after I announced to the H2^ team that we would in fact be producing one more edition in 2023? I’m not familiar with the below image. 😊
In all seriousness, the Branded team has enjoyed a festive (and safe) holiday season (thus far) and we’ve also remained incredibly busy. I keep waiting for the time when I can say that the last few weeks of December were quiet and easy going. As we bring 2023 to close, I’m once again still waiting.
Despite the title and image used for this week’s edition of the H^2, there will be no airing of grievances or feats of strength (Festivus).
This holiday season, I'm feeling extremely fortunate and a tremendous sense of gratitude to so many people.
With respect to the H^2, this newsletter and its subscribers are two of the things I’m very grateful for and specifically the engagement it creates with so many people in this wonderful community. Over the holidays, I’ve enjoyed and appreciated how many ideas, topics and areas of interest were shared with me for the H^2.
I love lists (seriously, I LOVE lists, I’m obsessed with them) and I now have a list of topics that I will be thinking about in connection with the H^2 for 2024!
Today’s theme for the Top of the Fold came from of a recent holiday dinner where questions were raised about the hospitality industry and specifically the fragmentation and diversification of the industry. The extreme level of fragmentation and diversification that almost uniquely exists to such a high level in this industry are key factoids that contribute to Branded’s investment thesis and capital deployment decision-making.
As Branded’s “Finance Guy,” I need to launch into this with some numbers around the topic I want to address. In the holiday spirit, below is an image I ‘borrowed’ from the Economic Research Service division of the US Department of Agriculture. Thank you, USDA!
Not to bury the lead, US Consumers are spending more on food, but that’s not even the part of the story that I leaned into. It’s NOT just the spending on food, but the changes in food spending trends that I believe are so important.
Tracking and following consumer food spending is NOT something I expect readers of the H^2 to be super excited about (although it really does make for some interesting reading), but the changing food spending habits is something you're all very much part of and contributing to directly.
The data from the USDA makes it clear that consumer spending habits are changing and specifically, consumers are spending more money on food away from home than for food at home.
This is a moment when I need to bring in a smart source to really hammer this point home and look at that, I’ve got economist Mr. Danny Munch, from the American Farm Bureau Federation all set to go! According to Mr. Munch, “spending away from home surpassed food at home spending by over $300 million last year, the largest gap ever. The biggest categories there are full-service restaurants at about 34% of spending away from home and quick-service restaurants at about 34% of food away from home. Food sold at merchandise stores and vending machines have gone up with the largest increase for food spending away from home.”
But wait for it, there’s more! Mr. Munch goes onto say, “Traditionally, grocery stores consistently captured the largest market share of what people were purchasing to eat at home. That percentage has gone down significantly. So, for instance, in 1999, grocery stores accounted for 72% of all at home expenditures. Last year, that had dropped down over the course of 25 years to 50% of at home spending. Much of that decline was because of the growth of warehouse clubs and supercenters and home delivery.”
Branded often embraces the KISS theory (Keep It Simply Schatzy) and draws a correlation between population growth and food spend. Of course, people can and will choose to spend more or less in any given year, but when looking at the food spend, the amount has been fairly steady year-over-year. How and where this relatively “fixed” pie is being spent is what we find most interesting. The US population has grown from decade-to-decade since its founding, but growth has SLOWED in recent decades.
To be clear, the changing consumer dining habits is a complicated topic and there's no simple answer (trust me, if the answer was simple, we'd find it and share it with you). Rather, there’s an array of factoids that contribute to these changing consumer habits including increases in prices at grocery stores, consumer pent-up demand as a result of the pandemic, and an overall belief that it's cheaper to order in from restaurants than to buy all the items needed to cook a meal.
We’ve been fortunate to hear and learn the opinions about the ‘future of food’ from a number of visionaries and long-term thinkers. One of the most interesting view shared with me and attributed to a Friend of Branded who works at a firm whose name I will withhold, but will identify by their acronym, AWS (😊), believes the kitchen will go by the way of the sewing room for the masses. A quick history lesson, most clothing was homemade or custom-made well into the 1900s (despite the availability of ready-to-wear garments being available from the late 1980s).
The disappearance or rethinking of the kitchen is unthinkable, right? Question for each of you: when you were in middle school, how many dinners did your parents prepare at home? Today, how many dinners are prepared at home? I’d be curious how this answer varies by generation from Boomers down to Genz Z. Just in case you’re not sure what generation you belong to, here’s a little image to help (the H^2 is a full-service newsletter or we at least want to be hospitable and spare you a Google search). 😊
Thus far in this Top of the Fold section, I’ve highlighted the hospitality industry is fragmented and diverse, that consumer eating and dining habits are changing and that the cause of these changes is complicated. I also made a whole bunch of people angry at even the notion that the cool kitchen you sought out in your home, apartment or otherwise is at risk of going away. I can hear several of the H^2's most loyal readers asking themselves where is all this going?
My friends, the key word here is “VALUE.” That’s what the consumer craves, and value is extremely personal and held in the eye of the beholder. I don’t like it when someone says a restaurant is expensive or cheap. Those words don’t mean very much to me or at least not nearly as much as the word value. It wasn’t random that I inserted the topic of generations (and even included an image). Value is personal and is also very generational.
Owners, Operators, Leaders, no matter what segment of the food industry you’re in, you’re either successfully delivering value or you’re not. I’ll add one additional point and key word here, you’re either delivering value CONSISTENTLY or you’re not. This is a moment where I like to bring up McDonald’s Big Mac and how consistent that ‘burger’ is no matter where in the world you experience it. That level of “consistency” is a VERY hard and complex thing to do.
As our industry goes through this digital transformation, personalization and knowledge & understanding of guests will only become more important to hospitality owners & operators. If you don’t know your guests, you won’t know what they crave, value and desire.
That’s why the digital transformation is only growing stronger and moving faster. Consumer dining habits are changing (and isn’t that a beautiful thing) and to succeed in this industry, the relationship between operators and guests is going to get even more personal and direct.
Any hospitality operators who would like to know how Branded can help navigate these challenging waters, please contact me directly.
Before I leave the Top of the Fold section, I want to test or try out a new potential section of the H^2. Taken straight from US Weekly’s “Who Wore It Best” section (imitation is a heightened form of flattery), I present to you, for the very first time ever (and probably the ONLY time) in H^2 history, Branded’s very own “Who Wore it Best this Week?” contest.
In the image below, on the left, my daughter is wearing my Santa suit and, on the right, I'm wearing it at my arrival at a little Branded team event we had this week with friend and partner Rev Ciancio.
H^2 subscribers: Who wore it best? I agree! Congrats kiddo!
Have a wonderful holiday.
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.
Join us for a special edition of Hospitality Hangout as we take a trip down memory lane with a special REWIND episode! In Season 3, we had the pleasure of hosting Phil Crawford, the Chief Technology Officer of CKE Restaurant, for an insightful discussion. Alongside Michael Schatzberg, aka "The Restaurant Guy," and Jimmy Frischling, known as "The Finance Guy," we delved into the dynamic landscape of the restaurant industry's digital revolution.
You can tune in on Spotify, Apple, Amazon, iHeart, or your favorite listening platform!
Was it a coincidence that I used a photo in the Top of the Fold that included my friend and partner Rev Ciancio? What would Sigmund Freud say about that?
The shoutout I want to give this week is to Branded's Head of Revenue Marketing Services ("RMS"), Rev Ciancio and his restaurant partners Chad Gaudet and Chris Delmond and their joint Handcraft Burgers & Brew.
In something that can be called a restaurant version of the story of "David and Goliath," along with some other amazing companies, Food on Demand recognized Handcraft as one of its "Outstanding Operators" for 2023!
Food-on-Demand/outstanding-operator-Handcraft Burgers & Brew
Handcraft is executing a most intentional digital and data strategy that is allowing them to stand alongside the other outstanding operators recognized by FOD including Papa John’s, Craveworthy Brands, Chipotle, Sweetgreen, Focus Brands and Wow Bao.
Yes, and of course, Handcraft has an awesome burger, but one of the key commonalities among FOD’s “Outstanding Operators” is how these tremendous brands embrace technology and are leveraging the available tools to engage with guests and create value for them (you knew I wasn’t going to leave the theme of the Top of the Fold alone). 😊
Congratulations to our friends at Handcraft, as well as our friends at all the recipients of Food on Demand’s honor roll.
I also want to give a shoutout to Friend of Branded, Mr. Tom Kaiser. We love what you and your team at FOD are doing and the value & insights you bring to the industry.
This week's winner of the WITW is Branded contest goes to a dear friend of Branded, Phil Crawford, CTO & CIO - CKE Restaurants, fellow member of the Lunchbox Food Tech Council and truly one of the hospitality industry's favorite sons.
Mr. Crawford is not only representing a strong piece of Branded swag from his office down in Franklin, TN, but I don't think I've seen anyone wear this winter hat better or with more pride.
Phil is a leader and as someone I've had the privilege of spending some time with at various events, he's authentic, real and passionate.
Mr. Crawford, if you'll agree to keep making Branded's swag look this good, we'll agree to keep making it!
TODAY'S TRIVIA
Answer also revealed at the end of the newsletter!
TECHNOLOGY
Restaurant Industry Vets Make their 2024 Predictions
By: Julia Suchocki, Partner at Branded Hospitality Ventures
7 industry vets reveal their predictions for the hospitality industry.
Digital Restaurant Association
We champion restaurants to thrive in a digital world
BUSINESS
End of Sprint is Start of Marathon: Seven Steps to Getting Your Partner to Generate Revenue
By: Seth Temko, Solutions Services Partner at Branded Hospitality Ventures
When your sales channels include selling your products and/or services through partner companies, signing the partnership agreement may seem like the finish line. In reality, it’s the start of your marathon. Want the trophy? Consider these steps to get you there.
Donate to CORE this Giving Tuesday
CORE: Children of Restaurant Employees needs your help this Giving Tuesday! Giving Tuesday is an internationally recognized day of giving, and we're asking you to participate by making a donation to CORE - a nonprofit that provides financial relief to food & beverage service employees with children when they face a life-altering medical crisis or natural disaster. Will you show your support for qualifying restaurant families this Giving Tuesday? Learn more and donate by clicking the button below!
FINANCE
Hospitality Predictions for 2024: Smaller Restaurants, Increased Market Activity, and Consolidated Technology
By: Noah Stern, Associate, Branded Hospitality Venture
While 2023 could be seen as a year of stagnation within the industry, I believe 2024 will be remembered as a year of strategic and thoughtful progress. As we close 2023, reflecting on the year, I’d like to offer three predictions going into 2024.
Restaurant Industry Movers in the Market
—Data as of 12/22/23
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
Holiday Marketing: One Thing Your Restaurant Needs to Do RIGHT NOW
By: Rev Ciancio, Head of Revenue Marketing at Branded Hospitality Ventures
Santa does not have an Elf that magically updates your holiday hours of operation online. He does need to know if you’ll be open (and serving cookies) on Christmas Eve ... as well as Christmas.
Christmas is a couple days away. New Years is only a few days later. Boxing Day is in between (this does matter). How will customers know when you’re business will be open and when you’ll be closed?
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
Ovation: HT Talks Tech: How Daily Provisions is Ramping Up Guest EngagementOvation: Celebrating 250 Episodes with Five Industry ExpertsIncentivio: Effective and Efficient Restaurant MarketingBrizo Foodmetrics: Maximizing Business Growth with Restaurant Data LeadsLeasecake: Leasecake’s Remarkable Journey in 2023: A Year of Achievements and GrowthYumpingo: Why poker face diners might be the true path to guest satisfactionSpendgo: Price Competitiveness Unleashed: The Strategic Advantage of Transparent Loyalty Platform PricingGoTab: 2023 Reflections: The Year That Was in Restaurants, Part OneCut + Dry: Bite by Byte: The AI-Driven Evolution of Foodservice
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!!
Reuters: Exclusive: Restaurant chain Chuck E. Cheese explores sale, sources sayInc: Former Cisco CEO John Chambers on the X Factor Necessary for All Successful Company MergersTasting Table: Chobani Is Acquiring Coffee Company La Colombe For $900 MillionTasting Table: Costco Is Selling One Of The World's Rarest Wines, But It Comes With A Hefty Price TagRestaurant Business: Golden Corral likes what it's learning from its new Homeward Kitchen conceptCNBC: Olive Garden owner Darden beats earnings estimates, hikes guidance as sales climbRestaurant Business Online: Sweetgreen’s chief development officer Jim McPhail departs the companyBloomberg: An AI Chatbot Will Take Your Order at More Wendy's Drive-ThrusRestaurant Business Online: Grubhub reveals the most popular takeout and delivery orders of 2023Restaurant Business: Here's another pickleball concept, this one backed by NRD CapitalThe Wall Street Journal: The Fast-Food Industry Wants to Be the Fast-Drinks Industry, Too
ANSWER: 18.9%
Total tips for restaurants we observed on the Toast platform averaged 18.9% of total check amounts in Q3 2023, the same as Q2 2023. FSR tips, where tipped employees may make a lower hourly wage in the U.S. than other establishments, also remained steady at an average of 19.4% in Q3 2023, as well as quick-service restaurant (QSR) tips, which averaged 16.1%.
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 December 2023