Friends of Branded!
Happy Saturday and I hope you had a great week!
It was early in 2019, and Schatz and I were meeting with several executives from one of the largest technology companies in the world (and let’s say they know a thing or two about cloud computing and web services).
As investors in early-stage companies, we love collaborating and working with large companies b/c the areas of overlap are so limited and border on being non-existent (the overlap in this proverbial Venn Diagram is small, but that's what makes it so interesting, creative and I dare say valuable).
Think of these large companies as ocean tankers and the important role that such vessels play in the global shipping industry and world trade. Now think of Branded as a speed boat (or maybe even a jet ski). There’s a role for us too, but it can’t be the same one the ocean tankers play. But guess what, the ocean tanker isn’t going to be much fun out on the lake this summer!
Clint Eastwood, as Harry Callahan (and for the benefit of the H^2 more youthful readers, Dirty Harry) in the 1973 film Magnum Force, said “a man’s got to know his limitations.”
During the discussion with this large company, the topic of predictions around the foodservice and hospitality industry was raised and ideas started flowing and shared around the table. As you can imagine, (given the tech-DNA of both this large company and Branded) predictions around the embracement of technology and the digital transformation were a theme, and some specific ideas and expectations were shared.
Branded had just completed its second investment, in a youthful (and spirited 😄) company called Chowly, that we had used in one of our restaurants to address the challenges associated with “tablet hell.”
This was the issue caused by our utilizing 8 or 9 different delivery platforms which resulted in our having 8 or 9 different tablets. During peak delivery times, Schatz needed to have two servers manage the tablets and manually enter the orders coming into our restaurants via these delivery platforms into our point of sales (“POS”) system, which would trigger the preparation of the food process.
It was not uncommon (read: "typical") for the underperforming servers to be assigned 'tablet duty' and the whole process was, well, tablet hell. If you’d like to dig into “tablet hell” a little bit, here you go, a little blog about the issue from a wicked-smart tech platform: How-to-Avoid-the-Path-to-Tablet-Hell
Enter Chowly, its ability to automate the process, integrate with our POS and free-up the humans from managing the tablets to focusing on in-store guests. I specifically remember a member the staff, a manager at our Duke’s 83rd Street & Second Avenue location, telling Schatz he’d quit if we ever got rid of Chowly.
Branded proceeded to reach out to Chowly’s Co-Founder & CEO, Sterling Douglass, and we made an investment into the company. On a side note, that manager ultimately left Duke’s, but that had more to do with his access and overuse of the beer wall, powered by PourMyBeer, Branded’s very first investment, also coming to fruition after a most successful experience as a customer of the platform.
As we shared labor-saving benefits of companies like Chowly and PourMyBeer, and other shared their ideas, the head of the large tech company took his turn at predicting the future!
He said his prediction was that the kitchen would go by the way of the sewing room as food away from home would come to dominate people’s relationship with food and dining. He said food away from home would become so much more cost effective, convenient, and efficient, that the making of dinner would lose its value or need, just as making your own clothes did in the mid-19th century with the Industrial Revolution.
I remember pausing at this leader’s prediction and thinking to myself, I was playing small ball and predicting changes over the next few years. He was thinking BIG and about the next 100 years.
Bigger isn’t necessarily better than smaller, but when you’re big, you’ve got to make bigger bets. You’re not going to move the proverbial needle by positioning yourself for small changes, in the relative near-term, when it comes to consumer behavior. You’re going to think longer-term and about more meaningful or even seismic shifts, like the kitchen falling out of favor (or need) like the sewing room.
Branded continues to play in the emerging and early-stage space. We know our value-add and expertise is far more meaningful and impactful for companies coming to market and looking for their product, market, fit in the early innings of their journey. Helping these companies navigate the foodservice and hospitality landscape and reducing the time and cost of customer acquisitions is where we play, and I feel we play very well.
So, while it’s only been about 5-years towards our friend’s 100-year prediction, maybe in light of New York City’s recent mayoral volatility or turmoil, I’ll channel former Mayor Ed Koch’s expression and ask, ”How’s [that prediction] doing?“
According to the USDA Economic Research Service, total food spending reached $2.6 trillion in 2023 (up from $2.4 trillion in 2022) and the increase was mainly driven by growth in food-away-from-home (“FAFH”) spending. FAFH expenditures accounted for 58.5% of total food expenditures in 2023 (the highest share of total food spending observed in the series).
There are several drivers of this growing trend and while I’m going to list a few of them below, ask yourself, how many of these do you relate to? How many of the drivers below do you believe are gaining momentum versus being a fad and likely to lose steam?
· The rise of the Delivery Services and Technology. How much easier has ordering food become as a result of delivery apps like DoorDash, Uber Eats, and Grubhub? How much more restaurant variety is now available online (we’re a long way away from pizza, Chinese and Greek diners being the only delivery games in town). Third-party delivery apps have boosted accessibility and that’s contributed to the growing demand for FAFH.
· Who has time to cook? In the late 1970s, a friend of my mom’s, who was a wonderful cook, wanted to start a business where she would make prepared meals for people to bring home for family dinner. At the time, my family ate at home at least 5 nights and my mom cooked dinner. She couldn’t see the value in her friend's prepared-meal business b/c that was her job in our home. I don’t think there’s been a decade since where we didn’t talk about lifestyle changes and how people are leading busier lives. This continues to make dining out and ordering-in more convenient. From a generational perspective (and you know how I’ve been leaning into generations lately), this is particularly true in younger generations like Millennials and Gen Z who are eating-out or ordering takeout more frequently.
· We no longer just want to go out for a meal, we want / expect an experience (experiential dining)! Dining out has become a social activity, and an experience and guests expect restaurants to provide them with more unique or interactive dining experiences. As this trend continues to gain attention and momentum, dining at home will struggle to compete.
· Similar to comment about the restaurant variety available to guests online, the sheer number of dining options has expanded. Similar to experiential dining, it’s hard to recreate these meals or satisfy the craving for diverse diets by cooking at home. I wrote last week about the drop in demand for alcohol, particularly by Gen Z and Millennials. Here again, we have more dietary preferences, and the range of dining options has grown significantly. This variety encourages people to explore dining options they may not prepare at home.
· The biggest advantage food-at-home (“FAH”) has over FAFH is the price! While both restaurant and grocery store prices have increased significantly, restaurants prices are climbing faster than grocery store prices. This creates a choice for the consumer and their need to balance the cost of food-at-home with the convenience and lifestyle needs associated with food-away-from-home.
While I of course respect the prediction from our Big Tech Friends (and with 5-years now past since the prediction was made, I’d have to say this prediction is “in the money”), the Branded team knows that the hospitality industry is comprised of some of the most Just-in-Time (“JIT”) people of any industry. It’s not that operators don’t like to look down the road, but with fierce competition for the guest and a most challenging environment (please see the first shoutout below), a win now or at least living to fight another day needs to be the priority.
To my tech and innovation friends trying to sell into this industry, like all sales, know your audience, understand their priorities, needs, and wants. I think you’ll find that the vast majority of them (and certainly the over 70% of restaurants that are classified as SMBs), the here & now is where they live, what they’re focused on and where they’ll spend on technology. Address the most important and current challenges, problems and opportunities, and you’ll find embracement of your solution.
I'm not disagreeing or challenging my Big Tech friend, but emerging tech needs to focus on the Here & Now if you want to be embraced by this most JIT community that is the hospitality industry.
And finally, on a completely different and I dare say far more important topic, the devastation caused by Hurricane Helene is simply unreal and our hearts go out to all the people and families impacted by the destruction.
Friend of Branded and a fellow board member with our own partner, Julie Zucker, at the Women in Restaurant Leadership, Caroline Skinner, the COO of Tupelo Honey, reached out to us about sharing some information on how you can help in the relief efforts if you were interested in doing so.
Tupelo Honey is working with Western North Carolina communities who have been devasted by the storm to help provide additional aide and support. They’re directing people to give to one of three main charities in the area that are raising funds to assist.
Caroline provided us with the link below which has consolidated the links the three charities: World Central Kitchen; Red Cross; and Eblem Charities.
Tupelo is also accepting contributions to help towards feeding these communities in need. The plan is to give away $50,000 in food and their efforts have thus far raised $25,000 to cover the costs.
Tupelo Honey is not a non-profit, but if you’re interested in helping with this project, you can use the same the link below.
Tupelo Honey Cafe - Western North Carolina Relief
It takes a village.
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I’ve been asked why I often reference other thought leaders in our industry and share their content in Branded’s H^2. It’s b/c we believe this is a team sport and that it’s important to share good ideas and strong content.
That’s why friend of Branded, Lauren Fernandez, the Founder and CEO at Full Course, an investment platform focused on building an equitable and inclusive restaurant industry, is getting the first shoutout this week.
I specifically want to share a LinkedIn post this week from Ms. Fernandez b/c I thought it articulated so well this incredibly challenging environment facing restaurants right now.
From Lauren’s post: So why exactly is profitability tanking this year?
- Labor is up since 2020, over 20%.
- Food costs are up 30%.
- We cannot take any more price increases.
- Foot traffic is down.
- Debt is more expensive to carry.
- Occupancy costs (rents) are up.
Lauren invited people to comment and if you go to her page (the link to the post is below), you’ll see the engagement she helped generate.
At the end of her post, she wrote that “we need to be having real and open dialogue in this industry!” I wanted to share her post in the hope that I contribute, at least a little bit, to the dialogue Lauren is trying to have us have.
2024 is crushing restaurant profits—could this be worse than 2020?
For today’s second Shoutout, I want to share some exciting news about one of Branded’s portfolio companies, Curbit.
Curbit is the market's leading solution for restaurant capacity management and specifically helps restaurants manage their pick-up and delivery orders more efficiently.
First, this fast-food restaurant software company has partnered with Microsoft and have its software hosted on its Azure cloud platform. From the article below, Microsoft will provide critical digital infrastructure and AI, with real-time capabilities, enabling Curbit to offer enterprise-grade speed of service analysis, accurate guest expectations, real-time order progress, robust kitchen performance and sentiment analytics.
With this partnership in place, the goal is for Curbit to be in 100,000 restaurant locations by 2027.
Curbit to Expand to 100,000 Locations by 2027
You want to know the most attractive and valuable delivery business for a restaurant? It’s called pick-up and it's when you act as your own delivery driver! I think if you embrace pick-up, you’ll find your relationship with the venue / brand you’re ordering from to become stronger, and your food-away-from-home will be better.
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.
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Featured Episode:
Join Michael Schatzberg, “The Restaurant Guy,” and Jimmy Frischling, “The Finance Guy,” as they sit down with Jennifer Dodd, an industry leader shaking up the health and wellness scene as she leads Main Squeeze Juice Co. Jennifer shares how building an authentic brand, like blending the perfect smoothie, requires the right mix of passion and heart. With a focus on cold-pressed juice, plant-based foods, and a new protein smoothie line, she dives into the brand’s commitment to clean ingredients and health-forward products. Her leadership philosophy? “Serve it forward.” Empowering her team and franchise owners to succeed is at the heart of her approach, making sure they thrive while she clears the path for them to shine. From Rockstar's to Juice Bars.... Jennifer has truly seen it all.
Tune into the episode and subscribe to our channel here: Hospitality Hangout with Jennifer Dodd
Re-Run of the Week:
Throwback to an exciting episode of Hospitality Hangout as Michael Schatzberg and Jimmy Frischling sit down with Gregg Majewski, CEO of Craveworthy Brands, to discuss his 23-year+ career in the food and beverage industry. Majewski, former CEO of Jimmy John’s, expanded the brand from 33 to 300 outlets and revamped its marketing with the "Freaky Fast" delivery slogan. Now leading Craveworthy Brands, Majewski continues to cultivate scalable concepts, including Wing It On, The Budlong, and Genghis Grill. He shares his strategic insights on building crave-worthy food, fostering positive culture, and his innovative approach of aiming for the number two position in industry segments. With the addition of Greg Creed, former CEO of Yum! Brands, as an advisor, this episode is packed with industry insights and innovation. Don't miss "Foodservice Feud" on Hospitality Hangout!
Tune into the episode and subscribe to our channel here: Hospitality Hangout With Gregg Majewski
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Tired of playing catch-up with competitors? It’s time to ditch benchmarking and focus on deeply understanding your ideal customers. Success comes from caring about your tribe, not just the competition.
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Catering is great. Catering has great margins, its a great use of fixed costs, can expose you to new guests and can add to your bottom line. We love catering. We want more catering orders! If it was only that easy.
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That’s it for today!
See you next week, 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 solutions platform at the intersection of foodservice, technology, innovation and capital. As experienced hospitality owners and operators, Branded brings value to its partners through investment, strategic counsel, and its deep industry expertise and connections.
Learn more about Branded here: Branded At-A-Glance