Friends of Branded!
Happy Saturday and I hope everyone had a good week.
An acronym was shared with me not so long ago – “IYKYK.” I had to Google it. Clearly, I didn’t know and wasn’t in the know. Thanks to the power of a Google search, I learned what the acronym stood for and now, well, I know.
This made me think of a “Dad Joke” and since it was told to me by my dad, and I’m now telling it you (and I’m a dad), I guess this officially is a second generation “Dad Joke.”
A wealthy Wall Streeter retires and builds himself a most beautiful home, but one of the antique floorboards in the expansive foyer makes a creaking sound. The Wall Streeter finds a Carpenter to come and help him address the creaking floorboard. The Carpenter walks on the floor, across the creaking floorboard, on the creaking floorboard and around it. He takes out a thin nail and taps it lightly in a spot on the floorboard. The creaking ceases and the retired Wall Streeter is happy. The Wall Streeter asked the Carpenter what he owes for the service. The Carpenter says the charge is $100. The Wall Streeter asks if the Carpenter could itemize his bill. The Carpenter says sure, “a penny for the nail and $99.99 for knowing where to put it.”
If You Know, You Know.
The foodservice and hospitality industry is complex and I dare say (bold statement coming), the MOST misunderstood industry I’ve ever seen. Why is that you ask? Because EVERYONE believes they understand it. Food and beverage is part of our lives just as oxygen and gravity are part of our lives, but here’s the real reason it’s so misunderstood. Because we all experience and interact with the industry, not just daily, but several times a day. We apply our experience as a customer and guest to it and project our experience onto it. We know how to feed ourselves, check in at a hotel, make a reservation, order food online, enjoy a beer at the ballpark or during an Eagles' concert at The Rock. Most of us can even navigate a wine list (my strategy, order the second cheapest bottle from the bottom). We’re understandably completely comfortable as a customer, guest and experiencing and navigating the hospitality landscape.
Do we feel the same way when we bring our car to the autobody shop or are you, like me, just hoping that the person we’re interacting with is honest? In college, one of the headlights of my 1977 Chevy Caprice Classic (with a dark blue Maaco paint job, white leather interior, a sagging roof and a hole in the floor of the back left passenger seat) went out. I purchased a new headlight at an AutoZone Auto Parts store in Middletown, CT. The salesperson asked if I’d like any help installing the headlight. “No thank you” I said. I could handle that myself (I thought). I went to my car and tried to change the headlight. I was unable to do it. Being too embarrassed to go back inside the store and admit defeat, I drove to a gas station next to the Dunkin Donuts (back in 1987 Dunkin’ stores were still called Dunkin Donuts) and asked the gentlemen that came out to greet me for help. The man took the new bulb with his lefthand and with his righthand removed the broken light and replaced it with the new one. It took him less than 30 seconds to get the job done. I asked him what I owed him for his work and he said “I don’t know, no one has ever asked me to do that for them.”
I gave him $5 and he seemed satisfied. I was with my college roommate during this entire experience. When we got in the car, he said, “don’t ever tell anyone this story.” Sorry UC, I’ve kept that story a secret for a long time, but I’m outing myself today.
I’ve made the statement here in the Top of the Fold section that the hospitality industry is complex, but I respect that you still may not be convinced that my statement is true. Maybe you feel I’m just trying to make it appear as such b/c it feeds the narrative of why Branded is an important industry insider and desirable partner.
If you still don’t believe me, let me ask you a question. Can you think of another industry where the manufacturing facility is only separated by a wall from the retail side of the operation? Come to think about it, the new trend in restaurants is all about open kitchens, so now we don’t even have a wall separating the manufacturing side from the retail side.
Everyone is an expert when it comes to hospitality and guests, as a result, have expectations of the industry that are often impossible to meet. But let’s be fair and please understand, none of this is meant to blame the consumers. As an industry, we don’t even call them customers, we call them guests. We want this close and personal relationship with our guests. We need this close and personal relationship. We want our guests to view our restaurants as extensions of their homes and to make it their own (their joint, their bar, their living room, etc). We, as an industry, are feeding (pun intended) this false sense of familiarity b/c it serves our purpose to capture a greater share of wallet.
I expect the following to be in the category of Captain Obvious, but do you know what the definition of the word “hospitality” is? To be clear, there are several, but here’s just one and it’s from Merriam Webster’s Dictionary: the friendly and generous reception and entertainment of guests, visitors, or strangers.
This week I read a number of articles about the delivery space, and I’ve captured several below in the Market Commentary section. More than 50% of US restaurants weren’t online when the pandemic came crashing down on our shores. With off-premise being the only game in town for our industry, the criticality to get online and improve our off-premise offerings was the difference between life and death for a restaurant (actually, second only to working with landlords, but I digress).
Most guests didn’t know and to a certain extent, still don’t know about the complexity and issues that comprise the off-premise business of restaurants. Branded made the Off-Premise Omnichannel our most important vertical of focus when we first launched our investment business about five years ago, followed closely by Guest Engagement, Back of House and finally Data & Analytics. One of my friends, who in full disclosure is now an LP in our first fund, asked me why Branded was so consumed with technology to make the off-premise omnichannel a key part of our investment thesis. He said, true story, “why don’t restaurants just sign-on with Uber Eats and be done.” I told him I wish I had thought of that and that I should rethink Branded’s business plan (yes, it was a sarcastic response, but given the relationship with this friend, I felt it was the appropriate one).
Branded’s very first investment and still among our most favorite portfolio companies, PourMyBeer, the world leader (that’s NOT my opinion, as long as you judge the world leader by the player with the most taps in the world), is a company we first got to know b/c we installed the system in one of our restaurants on the Upper East Side of Manhattan (the City, JB, the City). From that operator experience, we saw firsthand how guests were LOVING taking care of themselves, the experience it created for them and the savings we secured by reducing waste, eliminating theft and saving on labor. I was at dinner when this specific company came up and the table started debating the legality of the self-serve system. The risk of consumers over-serving themselves, the risk of underage patrons gaining access to the system (and the alcohol) and a myriad of other risks and concerns they came up with.
I listened to all the concerns and waited until they were exhausted before I shared the fact that the self-serve system was approved in all 50 states (each state has the authority to regulate the production, sale and distribution of alcohol within its borders). In the category of TMI, according to my research (a Google search), Kansas’s alcohol laws are among the strictest in the US, while Missouri has the least strict liquor laws (how many of you were certain Nevada was going to be the least strict state in our union? Truth be told, I did!). 😊
I’m going to dive into the delivery space below in the Market Commentary section, but my point here and the reason I’ve chosen to use the acronym “IYKYK” as the title of this week’s edition of The Weekend Update is b/c we’re still very much in the Information Age and “knowledge is power.” That’s a phrase I know every single one of you know. What you may not know is that the saying is often attributed to Francis Bacon, from his Meditations Sacrae in 1597 and far more recently by Thomas Jefferson in connection with the establishment of a state university in Virginia. In 1817, Jefferson equated knowledge with power, safety and happiness.
Sticking with the OG (Sir Francis Bacon), the saying “knowledge itself is power” is the idea that “having and sharing knowledge is the cornerstone of reputation and influence, and therefore power; all achievements emanate from this.”
To all of our industry friends and contacts, I’ll close out this section with an African Proverb, “if you want to go fast, go alone. If you want to far, go together.”
Branded believes in community and that as always, it takes a village!
MARKET COMMENTARY
Articles that caught my eye combined with some Branded commentary and insights.
The Weekend Update is a team sport and in addition to my co-author Julia Suchocki, many folks on the Branded Team get involved and that includes the sharing of articles that also catch their eye.
This week one of Branded most important subject matter experts (thank you SVN) shared this article with me about the Delivery Service Platforms (“DSPs”) and the algorithms they use and how they work. As I wrote above in the top of the fold section, I believe the hospitality industry is misunderstood and that VERY much includes the off-premise business.
Branded first began using DSPs back in the early 2000s and for us, it started with a company called SeamlessWeb, which was really an accounting solution for corporates to bring order to the chaos that was evening and weekend food delivery for their employees. To begin working with SeamlessWeb, Schatz was told he only needed a fax machine (check, we had one) and agree to pay a 5% commission on the orders generated from the SeamlessWeb platform.
At the time, our off-premise sales were less than 2% of our revenues and the only way to gain access to these corporate customers was to be on SeamlessWeb. We concluded this was akin to free money for our restaurants.
As the article highlights, fees from the DSPs now range from 5% to 30% depending on a myriad of things including marketing and placement on the respective DSP platforms.
For avoidance of any doubt, I’m NOT going to bash the DSPs. They’ve been trailblazers in the technology revolution for the hospitality industry and I’m a free markets person. If you don’t like the DSPs, don’t use the DSPs.
As I’ve written before in The Weekend Update, I have the privilege of making a once-a-semester visit to Columbia Business School and spend some time with Professor Zagor’s Food Entrepreneurship class. I try to make each visit a little different, but I always ask the following question: what do you use the DSPs for - discovery or execution? The class is usually mixed, but the students clearly use the DSPs for both discovery and execution.
This article does as good a job as any I’ve seen in trying to explain how the algorithms work and to a certain extent what it costs the restaurants that list and operate on the DSP platforms.
Branded has invested in an off-premise tech-stack that empowers operators to take control of their off-premise business and specifically have THEIR guests engage directly with them. The competition for guest loyalty and as I’ve said before, share of wallet is fierce! The DSPs are extremely strong and valuable when it comes to discovery, but for operators, you need to engage with your guests directly and therefore you need a powerful native (or white-label) delivery platform that will achieve such a goal.
For Branded, after successful exits with Bbot to DoorDash and GoParrot to Square, we’re all-in with our friends and partners at Incentivio. This is the only fully automated intelligence-driven guest engagement platform for restaurants & virtual kitchens that increases retention, maximizes revenues and enhances the guest experience for both first-time visitors and loyalists. IYKYK.
When a friend and CEO of one of Branded’s portfolio companies writes an article about the importance of delivery, you can bet it’s going to make it into The Weekend Update.
I think Mr. Brian Hickey did an outstanding job really giving a State of the Union on the delivery market including that 60% of Americans order restaurant takeout at least once a week and that food delivery in the US is projected to reach $231 billion in 2023!
I encourage you to read Brian’s article as I think it delivers (😊) a strong roadmap and addresses the many issues that restaurant operators have to be mindful of in order to maintain a successful off-premise offering.
I was tagged on a LinkedIn post this week in connection with this article (thank you DP) and the question of why the stock prices of the DSPs have been so challenged. It’s almost as if this person feels I’m the “Finance Guy” at Branded or something. I wrote in my comment on LinkedIn that I think there’s a real chance that the DSPs are in a race to the bottom and specifically that the relationship they have with their customers (the restaurants) is a most challenging one. I joked (truth in humor) that Apple’s stock price has done pretty well over the past few years, and I credit that with their customers LOVING Apple.
The last mile, the act of getting the food from the kitchen to your door is a most difficult issue to solve b/c it’s expensive. The delivery fees have to take into account the act of a human getting the food from the kitchen to your door. That fee, when looked at against the overall charge for the item or meal being delivered seems incredibly high to the consumer. Sticking with Apple, if the driver brought you a $1,000 iPhone for the same delivery charge as the burrito (and I mean handed it to you in the same amount of time it took to have a burrito delivered), I expect the customer would feel it was a great deal (b/c the delivery charge would be a fraction of the value of the item). Why does the driver that is bringing you any item care about the value of the item delivered? Is he/she doing anything different? They’re bringing you the item that you want and there’s a certain level of convenience about that (convenience = premium = costs more).
Again, the article talks about the importance of logistics and navigating dispatch and a delivery management system. It’s packed with great stuff (again, well done Mr. Hickey).
Delivery is NOT going away. Not by a long shot! I do believe that pick-up, however, is starting to have its day in the spotlight and restaurants that work to create a frictionless experience for the guest to pick-up their own food are only going to gain market share at the expense of its more popular cousin – delivery. Pick-up will always be cheaper, and I expect restaurants to lean further into technology that improves the pick-up experience, and they will reward their guests for being their own source of delivery.
You know what small restaurant chain agrees with this assessment and the importance of pick-up? Domino's will pay you to NOT get your food delivered
For Branded, the key tools to improve the pick-up experience for guests are Curbit and Minnow. Respect your guests' time and you’ve shown them respect!
Talent is the ultimate asset.
As the world of work continues to become more challenging than ever it is paramount for brands large and small to unlock the potential of leaders so they can drive possibilities and performance. To secure top talent, boards and management teams need to approach human capital strategy as an area of investment and opportunity. High-potential, proven, and resilient leaders will fuel best-in-class companies, helping a brand evolve and win. In short, the right people can be a brand’s largest advantage.
The Elliot Group is a premier human capital services group known for its retained executive search work and strategic advisory. The firm’s promise is to harness human connections to power businesses forward. By specializing in the consumer and services sectors across hospitality, lifestyle, restaurant tech, and more, The Elliot Group’s team provides expert perspectives across the entire ecosystem of human capital.
Retained by private equity firms, family offices, and boards or leadership across public and private businesses of all sizes, The Elliot Group invests in understanding a client’s unique needs, opportunities, and culture to identify impactful leaders. It is crucial to not just explore what a business needs now, but to also develop a long-term vision to see where companies, competitors, and industries are headed toward tomorrow. Known and trusted for an unparalleled and successful track record, Elliot clients become partners well beyond executive search needs and gain access to deep advisory on human capital strategy and leadership development.
We make futures happen. ®
TECHNOLOGY
Have you ever been frustrated by the long lines and misheard orders at your favorite drive-thru restaurant? Well Branded partner, Valyant AI, a Denver-based startup, has come to the rescue with their latest innovation. Holly is an artificial intelligence-powered assistant who will greet customers, take orders and answer food-related questions.
Valyant AI has already partnered with several fast-food chains to test the technology and plans to launch in dozens more restaurants across the country by summertime. They even have an 18-month backlog of restaurants waiting to implement Holly. Valyant raised more equity to support the rollout, bringing its total amount of venture capital raised to $17 million.
We can't wait to see where Valyant AI takes us next!
Learn more about Valyant's raise HERE
FINANCE & DEALS
2023 Private Equity Outlook
The S&P Global Market Intelligence Private Equity Outlook is an annual report that summarizes and analyzes the results of a survey delivered to private equity and venture capital professionals worldwide. Each year, it asks questions covering deal activity expectations, changes in strategy, challenges, preferences in Environmental, Social, Governance (ESG) and technology adoption. This year’s survey saw record responses from 246 PE firms, 129 VC firms, and for the first time, 131 limited partners, giving the most well-rounded view of private market sentiment since launching the survey in 2017.
—Read the report from S&P Global Market Intelligence
Restaurant Industry Movers in the Market
—Data as of 4/7/2023
BUSINESS
So you or your company is considering a new project/investment but are unsure about its feasibility or potential risks and rewards. If you're at a crossroads in your venture then you might consider hiring a project counselor or pre-investment advisor. These experts can guide you through the processes of starting a new business.
- Feasibility Analysis: Before you even think about investing your hard-earned cash, advisors can help with analyzing the market demand for your project, and potential competitors and can provide some great recommendations on the resources required to launch your project.
- Financial Modeling: You can dream all you want but if there's no potential for money coming through the door then you might want to think again. Project counseling and pre-investment advisory can assist in developing financial models to determine the profitability and sustainability of the business. This includes analyzing revenue streams, operating costs, and capital requirements, and forecasting financial performance over time.
- Risk Assessment: You know that tingly feeling in your stomach when you're nervous as to whether a decision you make is the right one. Now wouldn't it be nice to have at least some control over that feeling? Luckily professionals can help identify and mitigate potential risks. This includes financial risk such as startup costs and cash flow, as well as legal and regulatory risks.
- Investor Readiness: Wouldn't it be nice to get that pitch down on the first shot? While there's nothing wrong with trial and error, I prefer following the 5 P's - Proper Preparation Prevents Poor Performance. Advisors can help you develop a solid business plan, create financial projections, and do market research to present a compelling case to potential investors.
Learn more about advisory services here
PODCAST
Tuesday, April 4th- Hospitality Hangout: In the latest episode of The Hospitality Hangout, Michael "Schatzy" Schatzberg “The Restaurant Guy” and Jimmy Frischling “ The Finance Guy” chat with the authors of “Delivering the Digital Restaurant: The Path to Digital Maturity,” Meredith Sandland and Carl Orsbourn.
They talk about digital maturity and how an operator can recognize where they fall on the digital maturity scale. Orsbourn says, “A digitally mature restaurant is, and there's a story that is told in this, Jimmy, as you go through it because, in many ways, a fully digitally mature restaurant is one that in many ways needs to reorient its entire business model towards what it's gonna take to become digitally mature.”
Listen to the full episode on Spotify, Google Podcast, Apple Podcasts, or Amazon Music
Are you looking for a tech solution? A new partnership? Or maybe an easy way to build your tech stack??? Check out BOOM a food service marketplace!
BOOM a food service marketplace! is a digital ratings and review platform providing best-in-class technology, innovation, professional services and suppliers for the entire spectrum of the hospitality industry.
We're excited to highlight our new Marketplace Partners in the data and analytics space!
Want to learn more? Click HERE or contact us at boom@brandedstrategic.com
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!
- Brizo: Brizo Data raises $12 million in Series A funding to fuel data-driven intelligence across the foodservice industry
- Galley: Why Great Inventory Tracking Should Always Include Spoilage Dates
- Gotab: The New Standard For Hotels Is Flexibility
- Incentivio: Mobile Apps Are Essential For Restaurants in 2023
- Leasecake: Leasecake Wins Multiple #1 Awards in G2 Spring 2023 Reports
- meez: Reem Assil on Building Culture, the Value of Poker Strategy in Business, and Arab Hospitality
- PourMyBeer: The Growth of Automation in the Hospitality Industry and How to Use it to Your Advantage
- Spendgo: Invest in growing your audience size or optimize your conversation rate?
- Tablz: Restaurant Dining Rooms are “NOT” Created Equal each has Valuable Real Estate
- Valyant: Valyant AI Raises Funds for Restaurant Voice Assistant Expansion
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!!
- Fortune: Restaurants say they can’t hire enough servers due to the labor shortage. Some are turning to robots
- Restaurant Business: How do delivery app algorithms actually work?
- Restaurant Technology News: McDonald’s Tests New Technology to Reduce Waiting Times for Mobile Orders
- Retail Dive: Boxed files for Chapter 11 bankruptcy
MARKETING
PLEASE HELP JACK
Did you know that 771 Million people don't have access to clean drinking water?
My son Jack turned 7 years old yesterday and he decided to dedicate his birthday to helping kids who need access to clean water by setting up a campaign with Charity: Water. {Hyperlink: https://www.charitywater.org/david-ciancio}
He came up with the campaign name, the image and landing page copy!
Being in the restaurant biz we all know the need for clean water.
My restaurant, Handcraft Burgers & Brew is donating $1 from every hot dog (Jack's fave menu item) sold this weekend to the cause.
Could you please consider making a donation or sharing the campaign with others?
We would be so grateful!
Have any questions or want to get involved? Drop me an email rev@brandedstrategic.net Thanks!
Rev Ciancio
Head of Revenue Marketing
That’s it for today! I wish you a wonderful holiday weekend!
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 April 2023