Satisfying Saturdays 🍔🍜🍜
Escaping From the Radar, but for How Long?
Hey there and happy weekend! 🌞 I hope everyone's had a fantastic week!
Some 5 years back, Branded proudly unveiled our integrated investment and solutions platform, focusing on one straightforward investment thesis: we'd invest in and back emerging tech & innovation companies that were beneficial for operators of foodservice and hospitality venues. In simple terms, we only backed businesses that boosted profits for the kitchen crew and helped them navigate operational hurdles.
Our portfolio companies have been ace at generating margins through increased sales, cutbacks in costs and sorting out operational inefficiencies. These operator-friendly ventures tackled the most crucial and pressing issues, ensuring our Hospitality Network was tackling the most significant and impactful challenges.
That was about it. Our investment thesis, in a nutshell, was all about tech and innovation that benefited operators and addressed urgent concerns.
The Family Feud folks would probably give us a hard pass on this simple thesis, but we love the show and draw inspiration from its zany antics 😊 Speaking of which, the "sudden death" rounds in Feud are always intense with only a couple answers on the board — it's a fitting analogy for Team Brands!
Our top priority when we first launched our platform was issues surrounding off-premise business for restaurants. We vocalized this focus with strategic investments like Bbot going to DoorDash, GoParrot joining Square, Chowly skyrocketing as a major player in the SMB sector, and Vromo partnering to streamline delivery operations.
Flashback to a chilly, rainy night over 20 years ago, I contacted Schatz to chat about a new piece of software called SeamlessWeb. Launched way back in 1999, Seamless was designed to give companies a web-based system to order meals from restaurants and caterers. For my day job at the time, SeamlessWeb represented a practical method of controlling food orders during non-traditional work hours.
Before SeamlessWeb, evenings and weekends had a bit of chaos going on with meal expenses stretching far reaching, cuisines varying wildly, and a lack of organization. SeamlessWeb introduced order structure and made the process more manageable while also making budgeting easier.
A canny banker once insinuated that my analyst class was padding our incomes by hanging around for dinner on slow days. An analyst retorted with the question of whether the bank would be happy if we didn't capitalize on opportunities — he went on to question our commitment to capitalism. That enterprising analyst player later became the CEO of a Fortune 500 data-driven company. Guess they had a point! 😏
When we introduced SeamlessWeb to our restaurant, off-premise business represented only 1% of our sales. The prospect of accessing a wealth of corporate clients in the neighborhood was too good to pass up, and all it took was a fax machine and a 5% commission!
Today, off-premise business makes up a significant chunk of our sales, and Brands made it our first and most significant investment vertical (guest engagement now holds a close second, lagging off-premise by just a smidgen). Off-premise business remains one of the industry's central challenges and when both the Washington Post and New York Post publish articles about the division of delivery dollars, it's absolutely worth diving back into.
To avoid a public fuss, I'll keep things civil and not criticize the Delivery Service Platforms (DSPs). I'm all about free markets and believe businesses should figure things out for themselves. Instead, I'll lob a complaint against NYC regulators trying to play judge and jury with respect to selective employment. Regulators, it's your job to stay out of the way and let us solve our problems.
It wasn't so long ago that the airline and hotel industries were disrupted by third-party aggregators until they got their act together and leveraged their own technology. While the hospitality industry is way messier than either of these sectors, it'd be far better for everyone if the industry sorted things out without outside intervention.
New York City is considering a proposal to increase delivery drivers' pay to $33.27 per hour for time spent on active delivery, which would hike the minimum wage to twice the current rate and potentially cost consumers $5.18 per order. I imagine serving over $70,000 a year is a tough ask for a New York Police Department's first-year recruit, but hey, there's no arguing with the powers that be!
Restaurants are somewhat caught between a rock and a hard place with regard to wages, struggling to staff kitchens at the $15 per hour minimum when delivery drivers might be making almost double that delivering food.
For deeper insights on the delivery market, go for a read of "Which delivery apps eat away at your wallet the most" by the Washington Post. This detailed piece provides valuable intel on the state of the delivery market and the division of fees across players. To recap, pick-up remains the least expensive option for the consumer and the best deal for the restaurant.
When you're ready to get your hands on that scrumptious off-premise goodness, I encourage you to skip the delivery part and go with pick-up. You'll save your wallet, see first-hand where your food's coming from and might even make some friendly connections at the restaurant itself. Remember, G#d is a fair guy, and your local eateries are eager to serve you!
We at Brands continue to lean towards the takeaway side of off-premise business, rolling out offerings like pick-up pod solutions, waitlist management solutions, and order accuracy tools. Had got.ai been around in 1989, the classic movie "When Harry Met Sally" would have been spared Joe Pesci's drive-thru joke, as got.ai eliminates those pesky errors that often leave us scratching our heads.
The pandemic catapulted the spotlight onto off-premise business, leaving many restaurants without an online presence. Brands believes the pandemic simply kicked things into high gear, as restaurants have been transitioning from a "best in suite" to "best in breed" philosophy. Translation: things are changing and the existing delivery model still has problems plaguing all parties.
The newest issue raised by the New York Post is about a single deli in NYC playing the role of 27 different restaurants across numerous delivery platforms. To be clear, this isn't illegal, but it has resulted in frustrated customers claiming they were "duped," "tricked," and deceived. Like I said, no bashing of the DSPs here, but this practice raises questions about the honesty and transparency of the ghost kitchen scene.
My bottom line: if you want to know exactly where your food's coming from, get off your couch, throw on your sneakers, and pick it up yourself! ☘️😉
Your experience with restaurants, whether on or off-premise, is more within your control than you might think. So make the most of it, and approach it as a relationship rather than a transaction. This strategy will lead to more enjoyable experiences and stronger connections with your favorite restaurants.
As always, a big shoutout to the fantastic team at Brands. It takes a village!
Until next week, stay classy!
Your pal,Jimmy Frischling 💫
- Strides in the hospitality industry are being made through investments in portfolio companies that focus on improving guest experiences and addressing operational challenges, such as optimizing dining out processes and implementing ghost kitchens.
- To complement the strong focus on off-premise business, Brands has also prioritized education-and-self-development, having introduced solutions like pick-up pod solutions, waitlist management solutions, and order accuracy tools to enhance the dining experience.
- In the debate around the future of the hospitality industry, there is a call for operator-friendly ventures to take the lead in addressing concerns like the transparency of ghost kitchens and the division of delivery dollars, rather than relying solely on regulation or external intervention.
