Friends of Branded!
Happy Saturday and I hope you had a great week!
I was up in Southport, CT on Wednesday this week meeting with an old friend from college, who is also one of the leading experts when it comes to investing in the restaurant industry.
We covered a lot of ground and topics while we shared a few pints at The Shoe (thank you Dino for your hospitality). One thing my friend and I both share, we love the hospitality industry.
Over the years (decades), I’ve heard several variations of the expression, “I didn’t choose the hospitality industry, it chose me.”
Attribution of this quote can be attributed to any number of folks, but I’ll attribute this saying to the CEO of Branded’s most recent addition to our portfolio, Mr. John Meadow of LDV Hospitality.
I expect my partner and Branded’s Head of MARCOM & Media, Julie Zucker, is going to throw a flag on me for front-running the soon to be released podcast we recorded with Mr. Meadow, but that’s a risk I’m prepared to take. 😊
In our PepsiCo Podcast Studio (Branded's Hospitality Hangout is #BetterWithPepsi, just saying), John and I were exchanging some of our favorite “isms” (or sayings), when he shared his thoughts on his journey in the hospitality industry, which was that “this business chooses you.”
John’s professional journey is something you can Google (or wait until this edition of the podcast is released), but it’s clear that he’s a hospitality-guy, it’s in his DNA and the industry that most certainly chose him.
To be clear, the hospitality industry doesn’t have exclusivity when it comes to this expression. What this saying really means is that sometimes a person is lucky enough to find themselves in a position that they may not have realized or considered to be a career choice, but that provides them with an unexpected level of self-gratification. If you’re lucky enough to be such a person that feels that way about your career, congratulations, you’re pretty darn lucky!
Now back to The Shoe.
My friend and I talked about the good, the bad and the otherwise of our industry and specifically all that has changed as well as all that hasn’t. A business has every right to stay true to itself and to remain its authentic self. Respect. And a customer, guest, client, or fan has every right to embrace or not embrace with said business. That’s only fair, right?
While all the above can be a precursor to an array of topics (and lord knows I’ve earned a reputation of trying to cover a bevy of topics in the Top of the Fold), my friend and I spent some time talking about the loss of the business lunch or the lunch hour, and how it’s one of the great factoids impacting so many restaurants in our country.
You know I’m about to mention the pandemic and the resulting most meaningful shift to remote work that has contributed to this most dramatic loss of lunch business for restaurants, but that would be akin to thinking that “the nail in the coffin” tells the story as opposed to it being the finality.
The Branded team owned a concept called Duke’s Original Roadhouse and we had three units in New York City. Schatzy started the concept in 1995, and I got involved in 2004. Lunch was a big deal for Duke’s and were super proud of the lunch business Duke’s generated before many of our neighbors had even opened their doors for Happy Hour (the OG of dynamic pricing 😊).
Our partner Dean likes to say, we pay rent 24 hours a day, 7 days a week. How many hours can we earn to cover that rent? My point, lunch was both important and successful for our restaurants. Until it wasn’t.
The lunch business started to erode during the great recession (2008) and has been on a steady decline every year since. For clarity, I’m not talking about the 3-martini lunches, the power lunches, or what shows like Mad Men glorified. I’m talking about the act of having a meal with your co-workers and taking a break in the middle of the day. The lunch business started declining before the pandemic as workers preferred to spend money when they were “off-the-clock.” The pandemic and the embracement of remote work was the “nail in the coffin” for the lunch business.
Consumer trends change and as a self-proclaimed dinosaur, I believe work productivity is stronger when people are together in the office, not to mention the chance encounters and unscheduled moments that are fostered when people are working in the office together. I wouldn’t be surprised to see in-office work re-emerge as best-practices (although I admit that might be wishful thinking on my part, but hey, it’s my wish and I’ll use it as I like).
According to an article in Bloomberg, office occupancy rates are on the rise and are expected to reach about 25%, which will reduce revenues for office landlords by between $8 billion and $10 billion when combined with the impact of lower rents and lease turnover. These occupancy rates are a most material headwind for restaurant owners at a time when the challenges of labor costs and food costs are on the rise.
There have been calls for the government and private sector to force employees back to the office and only time will tell if that strategy proves to be successful. I question the likelihood of success using 'force' and feel that in-office work needs to be viewed as the better choice, but hey, that's just my opinion.
What I find interesting is that employees who do go into the office are now opting for takeout 75% of the time compared to 61% before the pandemic. While I expect the following is an obvious statement, takeout is a far less lucrative business for restaurants. Offices are often providing beverages and snacks to their employees which leaves only part of the meal to come from the restaurants and many full-service venues have had to adapt to takeaway offerings to meet the demands from guests.
The current version of lunch is not only less attractive to restaurants but requires them to embrace technology to meet the speed of execution that guests require. While that creates the need for restaurants to embrace tech, having a takeaway lunch business is better than the alternative, which is the absence of workers and no business at all (and that’s the biggest kick in the butt to restaurants).
So why all the doom and gloom today? No, not doom and gloom. This was all a set-up for the opportunities available to us!
Readers of the H^2 know that recognizing challenges aren’t defeatist, but rather are necessary to embrace and implement change. And that’s the discussion my college friend and I were having. We were acknowledging the challenges to restaurants as a result of the decline of a robust lunch business and the opportunities and need to re-think restaurant operations, strategies and more specifically, to do what the hospitality industry does best – creative thinking.
You can slice and dice the restaurant industry into many categories or types of dining, but at the end of the day, your restaurant needs to find its place and engage with your guests.
Operators, how are you going to surprise & delight your guests to draw them in? What experiences can you offer either in-store or off-premises?
You know the businesses that operate in your neighborhood want their employees to come back to the office (they really do). How are you going to partner with your neighbors and use your venue to help bring their employees (and your guests) back to the office?
There are a myriad of tools and strategies to deploy to win the guest. I’ve stated in the H^2 often that the guest is NOT always right, but we do need to focus on what the guest wants and expects. We need to listen to them; you need to know them, and you need to communicate with them.
What are their tastes and preferences? If 75% of meals are takeaway, can we re-think our footprints and physical spaces? We know catering is becoming one of the hottest growth areas of our industry, so how are you going to partner with the businesses in your neighborhood and become their preferred partner? You know how much Branded believes in loyalty and incentivizing guests to have your restaurant secure a greater share of wallet. What tools are you using, or should you be using to effectuate that strategy?
One of the definitions of insanity is doing the same thing again-and-again and expecting a different result. Don’t hope guests show up. Act!
As the lunch hour gets compressed, convenience and frictionless dining experiences will become even more important. You want to discuss the options available to you? Let’s explore how Branded can help.
It takes a village.
Since I shared in the Top of the Fold what I did this Wednesday, I’m going to use the Shoutout section to share what I did on Tuesday.
Branded’s portfolio company, Big Chicken, was over at the PepsiCo Design and Innovation Centre for some recording work and Schatz and I had the privilege of being invited down to spend some time with various members of the team.
Schatz and I want to thank our friend and partner, Mr. Josh Halpern for extending the invitation for us to be part of this afternoon and watch the Big Chicken team in action. Since I understand you (Josh Halpern) didn’t make The “B” List again this week, I figured I’d use a recent recognition that was bestowed upon you by our friends at Fast Casual. 😊
While this visit to the PepsiCo studio may sound like a boondoggle of sort, I must say, it was an amazing experience and one that helped me understand this company more than any presentation, spreadsheet, or previous meeting.
Yes, it was a fun, enjoyable and at times, hilarious afternoon, but it was also a most meaningful experience. The studio was full of people, but the focus and work were done by the O’Neal family. The stars of the day were Mr. Shaquille O’Neal, Lucielle O’Neal, and Taahirah O’Neal (and I also want to give a shoutout to Uncle Mike who was also part of the shoot).
Branded has been working with Josh, Sam Stanovich and other members of the Big Chicken team for a while now, but this was our first time engaging and watching the O’Neal family’s work with this company.
The passion, energy, care, thoughtfulness, and engagement with and from the O’Neal family is something I wish others could see (or at least wish our investors could see).
I believe when people see the videos and clips of Mr. O’Neal engaging with his company, you will sense a closeness and connection, but then you check yourself and assume he's just good actor.
Spoiler alert, Shaq is a good actor, but on this set and in connection with this company, Mr. O’Neal is not acting. This is his company, his family’s business, and it will be part of his legacy. The O’Neal’s family work on the set was authentic, real and fun to watch (and the music and food were all pretty awesome as well). 😊
I was a guest at this shoot and the amazing work done isn’t mine to share or front-run, but I can tell you it was meaningful to watch that magic come together.
The second Shoutout this week goes to our friends at Qu Pos and the article they published on Loyalty 3.0: Elevating Guest Engagement Through Deeper Insights
Loyalty continues to be a big area of focus for Branded and we’ll continue to pound the table on the importance of loyalty.
In this Qu’s 5th Annual State of Digital (for QSR & Fast Casual Brands), the report revealed that 80% of brands say loyalty isn’t working for them. Qu also added that 50% of brands agree that loyalty is broken, and they plan to invest in new loyalty strategies this year. Top areas of interest include:
- Experience engagement (45%)
- Frictionless sign-up (39%)
- Guest payment variety (28%)
- Redemption innovation (27%)
- Automated recognition (22%)
- New loyalty technology provider (17%)
I enjoyed the report, and at the risk of upsetting many, there were two reveals I enjoyed the most.
First, I loved that “data is the new loyalty currency.” To this Qu shares (and Branded agrees): the industry knows change is necessary, and the restaurants that embrace data will gain a powerful competitive edge. With the help of today’s modern, API-friendly platforms, data is readily available to create seamless, integrated loyalty programs that are woven into every customer touchpoint. Unified ordering experiences powered by a unified commerce platform empower brands to dive deeper by analyzing customer history, online interactions, and feedback to serve up tailored recommendations, messaging, and offers across in-store and digital channels.
Second, Qu featured its Certified Loyalty Partners, which include Branded’s portfolio companies Spendgo & Incentivio, and a friend of Branded, Thanx.
From the report:
“Every customer touchpoint serves as an entry point for building loyalty. Requiring members to sign up before making a purchase, making the experience app only, or tying the program to a specific payment method adds friction to the customer experience and limits your loyalty program's ROI.”
– Ivan Matkovic, CEO & Founder, Spendgo
“We all know that acquiring new customers is several times more expensive than retaining existing ones. That's why any approach to loyalty needs to devote significant thought and resources toward driving Customer Lifetime Value — whether it's increasing frequency, average spend, or longevity.”
– Sash Dias, Co-Founder & COO, Incentivio
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.
In this episode of Hospitality Hangout, Michael Schatzberg, “The Restaurant Guy,” and Jimmy Frischling, “The Finance Guy,” sit down with Lisa Robinson, Vice President of Global Food Safety and Public Health at Ecolab.
At Ecolab, she is known for her data-driven approach to improving food safety practices and has extensive experience across various prominent food and beverage companies, highlighting her expertise in the field. Her role ensures that Ecolab remains a leader in providing innovative solutions for food safety, supporting restaurants, hotels, and other food service establishments in maintaining high standards of cleanliness and hygiene. Lisa’s career is defined by her dedication to enhancing food safety and public health.
You can tune in on Spotify, Apple, Amazon, iHeart, or your favorite listening platform!
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Discover the five essential tech features—user hierarchies, detailed reporting, location-specific data handling, seamless integrations, and data change staging—that can revolutionize multi-unit restaurant management.
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MARKETING
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I get asked all the time, "how do we grow our follower count on Instagram?" The honest answer is to have incredible service, incredible food, and use best organic growth practices.
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 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