Friends of Branded!
Happy Saturday and I hope everyone had a great week!
As I was pulling my thoughts together for this week’s Top of the Fold section, I had an Agent Kujan moment. For those less or not familiar with Agent Kujan, this is the character played by Chaz Palminteri in the 1995 film, The Usual Suspects.
Anyone who has been in my office knows I have an arsenal of computer monitors (in full transparency, I have 5 monitors). Most people assume this overindulgence of computer screens has something to do with the markets or my Cosmo Kramer-esq moment where I wished to have always been a big-time trader (just as Kramer always wanted to be a banker).
Neither of those assumptions are accurate (and you really shouldn’t ASS-U-ME). I’m just a visual person and I like multiple screens so that I can keep various projects I’m working on open and in front of me. I also like to keep news stories, presentations and whatever information might have caught my attention that day up on a screen.
My moment this week, however, was not the one captured in the image of Agent Kujan above the title of this week's edition of the H^2. No! The title photo shows a man that is content. A man who has done a good day’s work, is feeling satisfied with himself, and is enjoying a well-deserved cup of coffee.
Those are awesome moments and when you find yourself in such a place of calm, peacefulness, and satisfaction, you should take it, enjoy it, and value it, b/c for entrepreneurs, it’s just that, a moment.
My moment was the one where Agent Kujan’s world comes crashing down as he realizes that something was sitting in front of him the whole time, but he didn’t fully see it.
Readers of the H^2 know that Branded believes (b/c our Hospitality Network tells us daily) that Labor and Supply-Side / Procurement are the most pressing issues hospitality operators are facing. In a survey conducted by our friends at R365, more than 80% of the respondents of the operators surveyed said they experienced a rise in food costs the past year, while over 89% said labor costs grew. According to the survey, food costs increased about 10% and labor costs rose by approximately 9%.
There’s no harder working or more creative workforce than the one that comprises the hospitality industry. As margins continue to be under pressure, operators have responded by digging-in and working to drive sales and find efficiencies everywhere they could to deliver value to our guests. Guest engagement, and specifically the technology that can contribute to enhancing the guest experience (which also happens to be Branded’s 2nd highest invested industry sector) continues to receive a great deal of attention from operators.
Is the emerging technology space for the hospitality industry seeing a saturation in software solutions for front-of-house (“FOH”)? There's a decent argument to be made there.
While I think we’re still in the early-innings of the digital transformation of the industry, I do agree that there’s been an explosion of technology and I dare say some of it represents solutions in search of challenges, problems or opportunities (as opposed to software that addresses actual high priority challenges, problems or opportunities). We're also witnessing technology platforms without much of any differentiation or competitive advantage from what already exists in the market.
On the inflation front, which is a contributor to the supply-chain issues, again, drawing from the R365 survey, some potential good news is on the horizon as 82% of operator respondents said prices would rise in 2023, but with inflation slowing, that percentage has now fallen to 61%. The outlook here is improving.
As we look forward in 2024, and going back to my Agent Kujan’s moment, one specific area that is now getting more attention from operators is employee experience and retention. Again, and for the last time today (at least in the Top of the Fold section), according to the R365 survey, the respondents chose employee experience and retention as the highest-ranking (38%) challenge in 2024, followed closely by sales volume (24%) and labor costs (18%). The R365 survey is telling me there's a meaningful group of operators that see employee engagement as the top answer on the (Family Feud) board.
I expect these survey results would make Mr. Danny Meyer very happy as his #1 rule, according to his book, Setting the Table (on sale at Amazon in paperback for only $12.99): “By putting your employees first, you have happier employees, which then leads to a higher HQ. A higher HQ leads to happy customers, which benefits all the stakeholders.”
How are operators going to address and manage these challenges?
Great question!
They’re going to leverage guest engagement technology including digital marketing (Targetable / Chowly), feedback platforms (Ovation), and loyalty programs (Spendgo). They’re also going to invest in back-of-house (“BOH”) technology which is not only the most critical part of the operation, but one that that since the pandemic has received less attention than its front-of-house sibling. Other areas of expected operator spending on technology includes business intelligence and analytics (Ingest.ai ), digitizing tasks and workforce checklists (Blanket) and accounting solutions (Dine Technology & MarginEdge).
But I want to go back to the very specific employment experience & retention priority operators are embracing. Is this prioritization of employees the right area of focus for the industry? 100% and for good reasons.
This focus on employee engagement (as opposed to guest engagement) made me think of the article put out this week by Friend of Branded, Luke Fryer, CEO at Harri and his focus not on the rise to the $20 minimum wage, and the cost of turnover. A link to Mr. Fryer’s article is below.
According to Mr. Fryer, “When you take a scientific approach to calculating the true cost of turnover (considering expenses associated with recruitment, onboarding, training, and wages), you’ll find that attrition in the first 90 days accounts for 15-20% of your total labor costs.”
The key takeaway from Luke’s article is about getting ahead of employee concerns and work to address them before they escalate. The goal? The need to reduce employee turnover. According to the US Bureau of Labor Statistics, accommodation and foodservices have the highest industry turnover rates at 86.3% and 84.9% respectively.
If you’d prefer not so many statistics on a Saturday morning as you’re enjoying your coffee (or whenever you’re reading the H^2 this weekend), please allow me to make this crystal clear - turnover is bad for an operator b/c it’s time consuming and expensive.
So, I'm reading the R365 survey, Mr. Fryer’s article and then all over my media feed this week, an announcement by Chipotle that they’re adding benefits to help Gen Z employees manage their debt with new benefits that includes a 401(k) match. You can read about it here: chipotle-adds-new-benefits-help-gen-z-employees-manage-their-debt
All three pieces of information bring greater attention and awareness to the importance of prioritizing employee-engagement.
According to the various stories on Chipotle, more than 73% of company’s employees are Gen Z and how this generation carries the highest level of indebtedness of any generation and the one with the fastest growing credit card debt.
Pulled from one of NRN’s article about the Chipotle announcement, the benefits Chipotle is rolling out are only the latest efforts from the company aimed at improving recruitment and retention. In 2021, the company began offering $200 employee referral bonuses for crew members and $750 referral bonuses for apprentices and general managers. The company also offers an educational assistance program, a virtual mental wellness platform, and more. The company said it promoted over 26,000 employees internally in 2023, and nearly 90% of its current restaurant leadership started as crew members.
According to friend of Branded and a fantastic guest on our Hospitality Hangout, Mr. Scott Boatwright, Chipotle’s COO, “Today we have many examples of crew members rising through the ranks and now holding restaurant leadership roles, which are among the proudest accomplishments of this organization. With 2024’s ‘burrito season’ approaching, there are more career opportunities than ever at Chipotle.”
Leaders are going to lead, and followers are going to, well, you know. Chipotle leads!
According to Ilene Eskenazi, Chipotle’s chief human resources officer “Empowering our talent is embedded in our company’s culture. As we push toward our long-term goal of operating 7,000 restaurants in North America, it’s crucial that we listen to and adapt to the needs of our team members, so they can grow with us.”
Focusing on employee experience & retention isn’t new and to be clear, the importance of employee engagement isn’t unique to the hospitality industry. However, when your industry is among the leaders in employee turnover, maybe we are an industry that needs to be reminded, especially as we’re undergoing a most meaningful digital transformation, that we need to put our employees first. Despite the over-embraced cliché, we as an industry know that the guest is NOT always right, but our dedicated teams try to make it so for our guests every single day and every single time.
It takes a village.
A few quick, but important and well deserved shoutouts this week!
Did anyone feel that Branded’s friends at R365 and specifically the survey they produced got a little bit of extra attention in this week’s Top of the Fold?
I know I write too much (and my stories are too long as well), but the words I use are selected with intentionality (the verbosity is an issue I continue to work on).
Branded was thrilled to participate in R365’s Restaurant Transformation Tour 2024 in NYC and we’re excited to be making a little road trip to Boston next week and be part of that leg of this tour.
If you’re planning to attend this event next week and would like to connect, please let the Branded Team know.
A picture says 1,000 words (no comments on my verbosity here, I said I was working on it) and this picture below didn’t just catch my eye, but it made me proud, and I feel this is a clear direction the industry is going.
“Best in Suite” as opposed to “Best in Class” is what operators are demanding from technology companies and for their tech stack.
You don’t have to believe me. Ask hospitality operators.
Of course, my bringing the above image allows me to remind H^2 subscribers of Chowly’s acquisition of Targetable , but my point here is to show how Targetable, a leading digital marketing and promotions (and guest acquisition platform) is now presented and included in Chowly’s tech stack. I’m on record with the prediction that 2024 will be a year of observable and meaningful consolidation in the foodservice and hospitality technology industry. With one month of 2024 now behind us, my confidence and conviction in that prediction is only growing stronger.
And as long as we’re all talking about Chowly, there was an announcement that also caught my eye. (I know I brought up Chowly, but now we’re all in this together and talking about the company). 😊
Here’s the link to the announcement that Owner.com grabs $33M Series B. This is fragmented industry and despite the desire of many, there will never be a one-size-fits all when it comes to hospitality technology.
The Branded team celebrates the successes of others who are doing good things for operators, and I want to do that here and congratulate the Team at Owner.com. This capital raise is yet another sign that companies that are delivering value for operators are getting funded and without more details on the round Owner.com closed, it at least appears to me that this was a successful Series B.
When I was reading about Owner.com, it was their focus on “mom-and-pop” restaurants that specifically caught my eye b/c that is a difficult segment of the market to serve. The bundled and integrated solutions Owner.com offers was also not a surprise as the importance of “Best in Suite” becomes even more mission critical for smaller operators.
Well done Team Owner.com and to our friends and partners at Chowly, Lunchbox, and Incentivio, I take the information contained in the article about the Owner.com capital raise as a welcomed signal for each of your respective roadmaps!
As more restaurants, all along the maturation curve (from “mom-and-pops", and up through enterprise), embrace technology platforms that offer "Best in Suite" solutions, we will win together!
My final shoutout of today (yes, just one more), goes to Friend of Brands, Mr. Julian Riley, CEO & Founder of Harlem Blue, New York City’s hometown beer (that’s right JB, NYC has our own craft beer, it can't be Sam all the time).
How a Craft Beer Company Is Making Black History in Harlem
According to the article, later this year, Mr. Riley will announce the details behind the planned opening of the first brewery in Harlem since Prohibition. Harlem Blue plans to open his 5,500-square-foot brewery inside the Mink Building, where German immigrants began brewing in the 1830s, long before Harlem became the Black cultural mecca. Thanks to brands like Yuengling, the oldest operating brewery in the United States, the Mink Building was, prior to Prohibition, one of the largest brewing facilities in the country.
I for one look forward to this opening!
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.
In today’s episode of Hospitality Hangout, Michael Schatzberg “The Restaurant Guy” and Jimmy Frischling “The Finance Guy” are joined by George McKerrow, CEO of Ted's Montana Grill.
You can tune in on Spotify, Apple, Amazon, iHeart, or your favorite listening platform!
20 Years Of Hope
Join national non-profit CORE: Children of Restaurant Employees in celebrating 20 years of supporting food & beverage families.
This week's winner of the WITW is Branded contest goes to our friend Tara Stein, from Houston, Texas!
Tara has been showing off our Branded hats are various events including all sorts of races and fitness classes.
We appreciate you Tara and your entire beautiful family! A new care-package of swag is on the way. If you continue to wear our swag, I'll keep sending you new gear!
Schatzy's latest is creation is a strong addition to our arsenal of headgear!
Make your drinks go viral!
Craft personalized drinks for an unforgettable guest experience!
Digital Restaurant Association
We champion restaurants to thrive in a digital world
BUSINESS
Hypergrowth Defined, and Three Steps to Avoid Flubbing It
By: Seth Temko, Solutions Services Partner at Branded Hospitality Ventures
What keeps every entrepreneur up at night? A lot of things. But it can be boiled down to this: How do you achieve revenue adequate to exceed your expenses, in an acceptable time frame?
Welcome to the new IFMA
The future of food-away-from-home is evolving—and so is our membership structure.
MARKETING
5 Ways Guaranteed to Get More Direct Online Orders For Your Restaurant
By: Rev Ciancio, Head of Revenue Marketing at Branded Hospitality Ventures
Getting more direct online orders to your restaurant starts with making sure you of course have online ordering. But then making sure you’re online ordering link is everywhere it needs to be in order for a guest to choose ordering directly from your restaurant.
About ACG New York
Founded in 1954, ACG is the premier M&A deal-making community with a mission of driving middle-market growth. ACG’s global network operates within 61 local markets worldwide and comprises more than 100,000 middle market professionals who invest in, own and advise growing companies. ACG provides events, conferences, bespoke meetings, deal-sourcing forums, unique experiences, educational seminars, and numerous benefits to non-members and members alike.
ASK THE HEADLINE
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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 February 2024