Friends of Branded!
Happy Saturday and I hope everyone had a great week.
This week was a uniquely strong one for Branded and I dare say for the hospitality technology market.
Readers of the H^2 are fully aware that Branded subscribes to the theory that “best-in-suite” will beat “best-in-class” every day of the week (and twice on Sundays). Our investment thesis remains focused emerging technology & innovation companies that are allies to operators and are working to optimize margins and address the most important pain points and opportunities.
We call such tech & innovation companies “operator-centric” and believe they will be the winners in connection with the digital transformation that's underway.
Hospitality businesses need to take care of their staff so that their staff can take care of their guests. Technology & innovation companies need to do the same, take care of their staff so that their staff can take care of operators (which enables operators to take care of their staff, so that their staff take care of their guests).
Yes, the redundancy above was both intentional and necessary. 😊
Here’s a quick refresher on a few of Branded’s beliefs and convictions:
· The hospitality industry is NOT a technology industry. We’re a people, food and service industry that is tech-enabled and tech-supported.
· We’re comprised the most JIT (Just-In-Time) people of any industry and we’re focused on the here & now b/c our guests are uniquely and most personally consuming what we manufacture on-premises (regardless of whether the guest is consuming our offerings on-premises or off-premises).
· We prefer not to let perfection be the enemy of good enough when it comes to our tech-stacks b/c (as I wrote above) we’re not in the technology business.
· We’re accused (correctly) of not being long-term thinkers & planners b/c competition for guests is fierce as a result of the saturation of the restaurant market and even if allocating time & capital to long-term planning would (could?) prove valuable, we can’t afford to do it if it negatively impacts our short-term and medium-term results & performance.
For all the above reasons, and as Popeye-the-Sailor famously said, “I (we) Yam What I (we) Yam & Dats What I (we) Yam!”
Despite Branded’s conviction that “best-in-suit” beats “best-in-class,” we remain committed to identifying, vetting, and investing in point-solutions or ‘features,’ as these companies that address a single issue are often called.
Why invest in "best-in-class" when we believe "best-in-suite" will win? Fantastic question.
To successfully become a “best-in-suite” technology platform, companies will need to either build or buy. Ask any large technology company what their preference is between a build vs buy strategy and the answer will often be “it depends” or “both” (which in my opinion, is the absolute correct answer).
The market consensus and forecast for the mergers & acquisitions (“M&A”) market in 2024 was predicted to be positive and Branded is in complete agreement. With Q1 2024 now done & dusted, the uptick we're seeing in M&A activity is proving these 2024 predictions to be absolutely correct.
Branded's opinion is not just the result of my wanting to talk my book (b/c a robust M&A market would be valuable to Branded), but b/c the consolidation in our industry is desired by operators and is therefore necessary. It’s not lost on me that there’s a meaningful backlog of assets that need to trade and this is the result of the many holders of assets that didn’t sell in 2023 b/c of the collapse of valuations.
If you read the research reports from some of the largest financial institutions, you’ll see predictions of deal volumes rising (10% to 12%) in 2024, following a decline in 2023 (8% to 10%), but they’ll highlight how far off we are from the 2021 high watermark (still down between 25% to 35%).
Please understand, these headlines don’t tell the story of what’s going on in the trenches of early-stage companies and specifically in the hospitality industry.
First, the largest financial institutions focus on and write about larger transactions (deals over $100mm is what they’re focused on). They’re also industry agnostic and the criticality of the digital transformation that is underway in the hospitality industry isn’t as prevalent across all asset classes.
Branded may be accused of being unfocused as a result of our commitment to our flywheel which is comprised of our investment, solutions and media businesses, but we play in only one industry – hospitality.
For the hospitality industry, tech-stacks have, for the most part, been built over time and have been somewhat piecemealed together. When decisions are made with a JIT mentality, then the typical tech-stack will reflect a kind of Frankenstein creation. But the times, they are a-changin.
Restaurant operators are now leaning in, and I dare say demanding bundled and integrated solutions. They want more unified and simplified digital solutions and this isn’t just a nice to have, this is a need to have.
Guests have more optionality today than ever before when it comes to buying decisions and experiences. Operators, as I’ve written before, need to meet these guests where they're at.
Payments are a critical, but I dare say often undervalued and under-appreciated part of the business. I've heard people say, "payments are the least sexy part of the business," but if you feel this way, you probably feel the same about oxygen and gravity.
Payments are a precursor to analytics & data and that leads to the opportunity for personalization & loyalty and that leads to securing a greater share of the guests’ wallet & margin optimization and that’s how winning is done!
You don’t have to believe me (but you’d be wrong not to at least consider the following), hospitality operators VALUE bundled, integrated and ideally all-in-one solutions. Why you ask? B/c hospitality operators didn’t enter this industry to be technologists, data miners and analysts.
According to friend of Branded, Gregg Majewski, CEO at Craveworthy Brands, who shared a stat by SmartBrief, 76% of foodservice operators believe that technology is a key driver in business competition and relevance. Yes, I know I could have just referenced the statistic by SmartBrief, but then I wouldn’t have been able to recognize one of the industry’s hardest working CEOs who is building an emerging juggernaut at Craveworthy (we see you Gregg and Team Branded loves what you and your team are doing!).
One more stat on this topic, according to PYMNTS in collaboration with Ingo Money, 75% of restaurant operators plan to adopt new technology in 2024 to specifically address labor & cost challenges.
Friends and fellow investors - restaurant operators need a more straightforward and unified tech-stack. The start of the digital transformation led to an explosion of technology & innovation options for the industry. We’re now in the midst of a high-end game of musical chairs where technology companies need to come together to create the unified tech-stacks that the industry is craving (see what I did there for you Gregg). 😊
My writings are always too long (and filled with too many typos), but there is intentionality and the “s” that made “tech-stacks” plural was just that, intentional! This fragmented industry will never allow or accept a one-size fits all model, so there will be multiple tech-stacks for each segment of the industry.
This coming together I’m referring to is not about ‘kumbaya’ or some nice gesture that the technology industry is going to do to help and deliver on the needs of operators. This is going to be cut-throat and those that move faster to create a more unified tech-stack will be the victor and we all know that to the victor go the spoils.
Several articles and announcements about acquisitions and partnerships inspired me to write about the consolidation that is only gaining momentum in the hospitality industry. There were also a myriad of Branded portfolio companies and strategic partners that were involved in this spike of activity that made this my theme for the Top of the Fold this week.
Back-office tech supplier Restaurant365 acquires ExpandShare training system
Back-office powerhouse R365 acquired employee training specialist ExpandShare to enhance its suite of services. Friend of Branded and R365’s CEO, Tony Smith, could literally be writing my segments of the H^2 for me with his comment on the ExpandShare transaction: “we’re confident that adding best-in-class training to our one-of-a-kind back-office system will allow leaders to holistically grow their business in a way the industry has never seen.” Well said Tony, well said.
Shameless plug, but if you want to hear more about R365's strategy, make sure you check out The Hospitality Hangout with R365 Co-Founder Morgan Harris which we recorded LIVE from the Restaurant Transformation Tour. You can Tune in Here to check it out!
Chefs Love Wonder, the Latest App Trying to Disrupt Delivery. Will Diners Follow Suit?
One of Branded’s favorite industry journalists, Kristen Hawley, wrote a great article about Wonder and their drive to disrupt the delivery business. There’s a lot of great stuff in the article, but it was the part about Wonder acquiring Relay, a NYC-based delivery service that particularly caught my eye as Wonder looks to deliver orders quickly, accurately and affordably.
Olo partners with Curbit.ai for order management
Close to home, Branded portfolio company Curbit.ai announced a strategic partnership with Olo, a leading restaurant technology platform offering ordering, payment, and guest engagement solutions.
Branded fell in love with Curbit.ai b/c it enables restaurant operators to leverage real-time operational intelligence from the kitchen to efficiently manage capacity and ensure guests and delivery drivers are informed with accurate promise times and order progress.
With over 20 Olo brands already benefiting from the Curbit solution, Curbit has been recognized as a Gold Partner as part of Olo’s exclusive program, Olo Connect.
Final thoughts: Not to give away any confidential information or company secrets, none of the above transactions involved $100mm deals, but all highlight the consolidation and integrations that are going on in the emerging and early-stage segment of the hospitality industry’s technology ecosystem.
There will be nothing easy about capital raising and M&A in 2024, but it also isn’t going to boring. As Gene Wilder said in the 1971 film, Willy Wonka & the Chocolate Factory, “Oh, Boy. This is going to fun!”
It takes a village.
I’d be lying if I didn’t admit that the action and announcements this week by several of Branded’s portfolio companies didn’t influence and drive the theme for the Top of Fold.
While I know it was completely coincidental, on Tuesday, April 9th, three of Branded’s portfolio companies announced the successful closing of their respective capital raises. Ironically, on the same day, Branded was working with a fourth portfolio that actually closed on its raise on April 9th (that announcement will be coming soon).
Capital flows may still be lower than many would like, but it’s Branded’s conviction that technology companies that are driving value to operators, are demonstrating strong sales growth and are priced right, will continue to be embraced by investors and will get funded.
Just like the NCAA men’s and women’s basketball champions, sometimes the best teams do win.
Kiosk ordering provider Bite raises $9M as kiosks hit 'inflection point'
From the article: Kiosk ordering provider Bite has raised $9 million to help it grow, the company announced Tuesday.
The Series A funding round led by Staley Capital is a big endorsement for Bite and for kiosks, which have seen growing interest from restaurants as they look to operate more efficiently amid rising costs.
“There’s always a natural inflection point when a nice-to-have becomes a must-have, and I think some of the macro explains that,” Bite CEO Brandon Barton said in an interview.
New York City-based Bite was founded in 2015 and is used by more than 1,100 restaurant locations, including Fazoli’s, Newk’s Eatery and Taco John’s. Its kiosk ordering software is designed to help restaurants better manage their labor costs while also increasing sales.
Wage inflation in particular has given Bite momentum as restaurants look for ways to keep costs down. Barton said the technology isn’t intended to replace employees but rather to free them up to do other things.
Dynamic pricing startup Juicer raises $5.3M
From the article: Dynamic pricing startup Juicer has raised $5.3 million as it looks to bring its pricing optimization technology to more restaurants. The seed funding found was led by venture capital firm York IE.
San Francisco-based Juicer uses AI, machine learning and historical sales data to adjust restaurants' menu prices in real time. Its products include a dynamic pricing tool that can automatically change a restaurant’s prices on third-party delivery apps based on demand. The system raises prices during busy times and lowers them during slower periods.
The data-driven approach has caught the industry’s attention as restaurants try to strike the delicate balance between driving traffic and protecting margins with their menu prices. Meanwhile, the growth in online ordering and digital menus has made real-time price adjustments feasible.
Leasecake Secures $10 Million Series A Extension to Fuel Growth and Reinforce Market Dominance
From the article: Leasecake is proud to announce the closure of our $10 million Series A extension round, a testament to our commitment to simplifying and safeguarding the complexities faced by multi-unit operators.
Led by PeakSpan Capital and Las Olas Venture Capital, with additional support from Silicon Valley Bank, a division of First Citizens Bank, this significant investment underscores Leasecake’s mission to revolutionize lease and location management solutions for franchise and corporate entities.
“In today’s fast-paced business environment, multi-unit operators face unprecedented challenges,” remarks Scott Williamson, CEO of Leasecake. “Our cutting-edge technology not only alleviates these concerns but also empowers our clients to concentrate on expansion.”
Leasecake’s AI-driven platform offers much-needed peace of mind, ensuring that lease and contractual obligations are never overlooked, thus mitigating potential risks. This infusion of capital will facilitate further enhancements to our platform, catering to the evolving needs of multi-unit operators while expanding Leasecake’s offerings to accommodate its growing customer base.
Over the past year, Leasecake has witnessed remarkable user growth, doubling its platform users and spanning thousands of brands and tens of thousands of locations throughout the United States and Canada.
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 Ricky Richardson, CEO of Eggs Up Grill.
Ricky discusses the brand’s origins and rapid expansion since he took over. He provides background on Eggs Up Grill being started by a third-generation diner operator and becoming a 100% franchised system. Ricky highlights the importance of maintaining a consistent brand culture as they grow through franchising, including implementing a new proprietary digital training platform. He also shares an “untold story” from his international restaurant experience involving an unconventional way to access water during an opening.
You can tune in on Spotify, Apple, Amazon, iHeart, or your favorite listening platform!
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MARKETING
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By: Rev Ciancio, Head of Revenue Marketing at Branded Hospitality Ventures
Discover the secret sauce behind Handcraft Burgers and Brew Handcraft Burgers and Brew's customer experience success! By harnessing the power of real-time reviews with Marqii and guest feedback through Ovation, they've turned salt into satisfaction. Find out how these tools are not just game-changers but essential lifelines for restaurants navigating today's competitive dining landscape.
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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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