Happy Saturday!
When I left Wall Street to launch my own investment and advisory firm in 2008, my father told me I would learn, for the very first time, what business is about. I was admittedly surprised by his comment as I had worked in the financial and capital markets industry for 20 years and I thought I had learned a thing or two over the course of two decades. He explained that I would now be responsible for several things that I had never been responsible for before, including most importantly, meeting payroll.
I quickly learned that despite my “building” businesses at large financial institutions, I really hadn’t been an entrepreneur. I had been an intrapreneur. I had been building businesses on the platforms of well-capitalized institutions where I admittedly never really thought about meeting payroll, or paying for the computers my employees needed, the Bloomberg Terminals they all wanted (and those 2-year non-cancelable contracts) and of course rent.
As an intrapreneur, I was able to focus on the front of house (I wanted to bring a hospitality reference into the mix) and the business development side of innovative products, emerging markets and alternative asset classes. Everything that supported and made the opportunity for me to pursue "my business" was created by the platform I was working for.
I enjoyed my experience as an intrapreneur very much (and I did learn a great deal), but that’s different from being an entrepreneur. This isn’t to suggest one is better or worse than the other. They’re just different.
I don’t think I’ve ever met someone who didn’t like the word “entrepreneur” or want to believe that they possess at least some amount of entrepreneurial spirit and drive. I hope everyone is fortunate to have an entrepreneurial experience (regardless of whether you start your own company or join an early-stage company). Like most things, it’s all about the right fit and while I’ve gone on record that EVERYONE must respect the laws of gravity, the importance of oxygen (and I even took the liberty of correcting Benjamin Franklin by adding consuming food & beverage as a "promise of permanency" and something EVERYONE must do), being an entrepreneur is most certainly NOT for everyone. I dare say it’s for a relatively small percentage of the workforce and that’s absolutely fine.
When Branded started to gain some momentum and our investments started to increase in valuation, I felt pretty good about things. My father again shared some wisdom, and he explained that our investments were up "on paper" and that the only number that really matters is the ultimate return on the investment upon an exit. I replied, maybe with a poor attempt at humor, that I’d rather be up on paper than down on paper. My Dad seemed to acknowledge that being up on paper was better than being down on paper, but not by much.
Mark Twain may have said it best with his quote that "when I was a boy of fourteen, my father was so ignorant I could hardly stand to have the old man around. But when I got to be twenty-one, I was astonished at how much he had learned in seven years." Tim Russert said it more simply, “the older I get, the smarter my father seems to get.” I agree with both of these great men.
I was thinking about private company valuations a great deal this week as we brought our second emerging technology and innovation fund to a close and all the work we’ve been doing valuing Branded’s various portfolios.
One analysis we completed was based on two factoids: (i) which companies had less than 6 months of runway vs. the ones with more than 6 months of runway; and (ii) was the last round the company completed an up-round, down-round or flat-round. Branded is obsessed with these questions and we also focus a great deal on sales growth, low churn and the meaningful “wins” our portfolio companies are generating.
Multiples will always have some amount of volatility and no company can control what multiple the market will put on them. Securing capital to have runway, accessing the markets for capital in good times and otherwise, sales growth, low churn and “wins” are all things companies can control or at least strive to control.
Branded gets most excited about seeing strong sales growth from our portfolio companies. As an operator-centric investment platform, sales growth is a signal for how well a company’s product, market, fit is going. In good times and bad, strong sales growth is the most important signal for how a company is performing, but even that is NOT more important than runway. It’s therefore not surprising to see companies with the strongest sales growth securing capital even in this most challenging environment.
Founders, it’s not about whether you achieved an up-round, down-round or flat-round, it’s about staying in the game by securing the capital you need to extend your runway. And once you've secured your runway, then grow your sales!!!
I feel a particular kinship and bond, not only with the CEOs of Branded's portfolio companies, but so many other entrepreneurs b/c I'm walking alongside them and I'm in it with them. There's no off switch and no matter the challenges, obstacles or otherwise, there's only one way to go and that's to keep moving forward.
There’s an awful lot to cover in this week's edition including a new section we’ve added immediately below. We hope you enjoy it.
As always, let’s go!
MARKET COMMENTARY
Articles that caught my eye combined with some Branded commentary and insights.
Okay, so I know I don’t usually capture a press release in the market commentary section of The Branded Weekend Update, but there’s a first time for everything.
I was reading a survey from the NRA (the one that grills) and it reported that only 16% of the nation’s restaurants expect profits to increase in 2023. It also highlighted a third inflationary component to its “Big 2” of labor and food costs by including energy expenses.
The foodservice and hospitality industry is going through a most meaningful transformation. Technology and innovation aren’t “nice to haves” but rather “must haves.” This is NOT a self-serving comment. If you own or operate a restaurant, you need to consider how you’re going to address these rising costs of running your business and leveraging the right tech stack for your business is now table stakes.
This press release caught my eye not only b/c it’s Taco Bell that’s opened its latest Cantina restaurant experience, but its commitment to being a technology-forward digital dining experience that made me want to grab this release. The centerpiece of this Cantina experience, is digital ordering and having its guests take ordering into their own hands with kiosks.
Taco Bell’s embracement made me think about Shake Shack’s recent embracement of kiosks. A few months ago, Shake Shack announced that they’re committed to retrofitting all locations with kiosks by the end of 2023.
Other brands are also replacing cashiers with kiosks and you know why? Kiosks not only replace the costs and scarcity associated with labor, but b/c kiosks produce the highest in-store checks and offer better labor utilization rates than those without. This isn’t just about saving on labor; the guests appreciate and are preferring this method of ordering.
Branded is thrilled to have a partner company that is playing such a meaningful role in the embracement of digital ordering. Our friends and partners at Bite not only help address the labor utilization issues, but with their machine learning (Bite Lift), you can maximize order size and throughput with Bite’s intelligent recommendations. Why does this matter, b/c you will increase your check averages by 20% or more! Reduce labor and increase sales?!? I expect for many restaurants (never all), embracing kiosks is in your future and I suggest you make that future right now.
Eatertainment is NOT a new concept, but it’s one that’s gaining momentum and Branded expects the demand for venues that combine food, drinks and entertainment to continue to surge.
Sure, the pandemic was hard on this emerging segment of the hospitality industry, but that most meaningful headwind has now become an incredible tailwind Branded is betting on. In a post-pandemic world, consumers are demanding fun and social outings that come with the Full Monty (food, drinks and entertainment).
The key driver of this demand is coming from Generation Z (which includes folks ages 11 to 26). This demographic represents 30% of the world’s population and let me tell you what this most important customer segment does NOT want – as the article highlights, they don’t want to “flag down a waiter to get what they want.” They want self-service and technology and the absolutely most social-media-friendly atmosphere possible (everything must be Instagramable).
This category is growing exponentially and requires a tech stack that is aligned with this unique mix of food, drinks and entertainment. Of course, we’ve got the Museum of Ice Cream, Puttshack, Topgolf, and Punch Bowl, but there are more emerging brands in this space making a run. Camp Pickle, a pickleball-focused eatertainment concept is coming on strong and a Chicago favorite of mine, Flight Club, a social darts experience like nothing I’ve ever experienced (thank you John D for introducing me to Flight Club).
For the folks like me, that are well beyond the Gen Z demographic, look at what’s going on at stadiums and arenas across the country. The game isn’t enough, we want better food & beverage and we want a modern tech stack to make our experience more personal and efficient. The game or sport being played isn't enough to get us off our proverbial sofas, we want and need to be entertained by more than the game or sport itself.
Combing food, drinks and entertainment is NOT a new thing, but it’s being modernized, and I dare say democratized. So much of Branded’s focus is on emerging tech & innovation companies that will enable operators to delight their guests (and improve their margins and efficiencies). For folks in the world of eatertainment venues, please allow me to give you some of Branded’s greatest hits: PourMyBeer; GoTab; Minnow Pod; and Ovation. If you know these tremendous companies, then you know why I've included them here.
TECHNOLOGY
Now that the Big Game has come and gone, are you ready to increase sales and make 2023 your big win…without wasting a dime on advertising? We know this sounds more aspirational than practical. Enter one of our partners, LuckyDiem which is part fintech, part adtech, and 100% crushing it for its clients. LuckyDiem is an innovative performance-based advertising solution, akin to Amex Offers, that drives new customer acquisition with zero upfront cost and 100% online-to-offline attribution. The platform analyzes the purchase history of over 200 million debit and credit card users to help marketers identify, reach and influence consumers at scale–and unlike Amex, can target these consumers based on their clients goals, ie, only present offers to consumers that have never shopped or dined with them before.
As restaurant operators, what we love about LuckyDiem is that there is no perceived discount; the customer pays full price and existing customers never even see the offer. Interestingly, because guests feel like they are saving money, operators typically see a 10-30% increase in average check size. Equally important, implementing a LuckyDiem campaign is frictionless with no hardware or software integration required. No employee training is required either…now that’s a relief.
As we know all too well, consumer sentiment has fallen due to the economic impact brought on by inflation. When this happens, businesses tend to cut costs and consumers look for ways to save. One of the first things to go is typically marketing. However, marketing during a down market can offer tremendous growth opportunities while your competitors cut back.
LuckyDiem's clients know this and it's why their marketing budgets are growing this year, rather than being cut back. In fact, one of the largest hospitality brands in the country has increased their spend with LuckyDiem by more than 500%.
LuckyDiem offers brands a win-win during these challenging economic periods: Efficient, cost-effective marketing that ties every dollar spent on advertising back to a purchase; and offers guests a way to save money by putting cash back onto their credit or debit cards once a purchase is completed at your restaurant. In fact, in a recent digital commerce study, consumers and marketers alike prefer cash back rewards over any other option.
Brands are adding Card-linked Offers (CLO) to their marketing mix at a feverish pace
As economic headwinds continue, C-suite execs have been demanding more data and
proof that their marketing dollars are delivering sales as effectively and efficiently as possible.
For 2023, LuckyDiem is adding a powerful loyalty iOS and Android app to their platform that integrates gamification with large prizes and instant wins with your brand’s own gift cards. The result, ongoing brand engagement, effective guest referrals, and the opportunity to connect the consumer’s moment of happiness with your brand–all at no additional cost to clients.
Click here to learn more about LuckyDiem and receive a complimentary Revenue Lift Report for a Top-Five Burger Chain.
Follow LuckyDiem on their social media.
FINANCE & DEALS
Global private equity entries plummet in January
—Read the article from S&P Global Market Intelligence
The volume and value of global private equity and venture capital entries got off to something of a weak start in January, according to S&P Global Market Intelligence data.
Deal value stood at $25.32 billion, down 62.1% year over year from $66.88 billion. Total entries were 921, representing a 44.6% decrease from 1,663 in January 2022.
Restaurant Industry Movers in the Market
—Data as of 2/17/23
BUSINESS
Have you ever thrown spaghetti at a wall and hoped that it would stick? Me neither..but if you've ever tried to build a go-to-market strategy I'm sure you can relate. Luckily there are solutions that can help you succeed and stop the spaghetti flinging. From building a solid sales process through understanding your customers to diving into some vital analytics to optimize your performance, building the right team to strategize with is the first step to nailing your go-to-market strategy.
As someone who works closely with startups and has helped businesses navigate growth challenges, I know how crucial it is to have a solid go-to-market strategy in place. It can mean the difference between success and failure. So if you're a founder looking to level up your GTM game, click HERE to start connecting with experts.
Want some tips for your next GTMS? Click HERE!
- Look for opportunities both inside and outside of your existing market
- Conduct a thorough and critical evaluation of your business
- Asses viability on a small scale
- Hire an advisor
- Analyze strengths, weaknesses and barriers to success
- Assess your competition
- Keep your organization nimble and work in real-time
- Understand your KPIs
- Does your strategy pass the "duh" test? Make it make sense
- Select clear Milestones
- Evaluate Risks and Rewards
- Perform a scorecard evaluation
PODCAST
Monday, February 13th- Tech This Out: It's no secret. The Branded team has a thing for Hospitality Industry Technology ("HI-Tech"). What do we love about technology? We love that HI-Tech can help improve the guest experience with arguably less effort on your part. We love that HI-Tech can allow operators to reduce labor costs and increase sales. We love that HI-Tech can help us to truly understand the needs of our guests and improve operations through data. We love to see customers, staff and operators adapt to new technology and understand that while most technology is in its infancy, the implications are huge.
Most importantly we love working with the best and brightest minds and companies in HI-Tech that spend their days improving the industry as a whole. Just like you can't ask a parent to choose a favorite child (we love all ours equally 😉), when it comes to tech, we love it all. So we asked a few friends to share their thoughts on why THEY love hospitality technology.
Click HERE to read the full article!
Tuesday, February 14th- Hospitality Hangout: In the latest episode of The Hospitality Hangout, Michael "Schatzy" Schatzberg “The Restaurant Guy” and Jimmy Frischling “ The Finance Guy” chat with Sterling Douglass, Co-Founder & CEO of Chowly.
Douglass says “Chowly is a leading point-of-sale integration company. We're enabling restaurants to expand and maintain different off-premise capabilities. So you know today we're seamlessly integrating orders from all the biggest platforms. So, Grubhub Uber Eats, DoorDash, and when Google food ordering came out last year and we've got a couple of hundred other integrations on different platforms.” He adds, “We've got over 12,000 restaurants on our platform and they're increasing their revenue. They're improving their operational flow and they're saving on labor costs.”
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.
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!
- Copia: Davidson Weekend: 5 Happenings This Weekend
- Ecotrak: Ecotrak Announces Latest Funding Round
- Galley: Benji Koltai interviewed by Total Food Service Magazine
- GoTab: Simplify Your Shifts With The GoTab Manager Dashboard
- Incentivio: The Virtual and Ghost Kitchen Playbook: Essential Tools
- MarginEdge: MarginEdge gives restaurants real-time data to succeed and thrive
- Ottonomy: Ottonomy.IO & Goggo Network Partner to Bring Fully Autonomous Robot Deliveries to Europe's Streets
- PourMyBeer: Benefits of Self-Pour in Hotels: Hyatt Regency Orlando
- Vromo: VROMO Creates New Level of Delivery Efficiency for Nation’s Restaurants
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!!
- Expedite: Beware the 'goodbye table'
- MarketWatch: Pernod Ricard first half sales hit 7.12 billion euros
- MarketWatch: Outback Steakhouse parent Bloomin’ Brands tops profit estimates for Q4 and offers upbeat guidance, sending stock up 5.8% premarket
- CNBC: Chipotle Mexican Grill to launch new spinoff, Farmesa Fresh Eatery, in a ghost kitchen
- Entrepreneur: Fast Food Icon Subway Looks for New Ownership
- Insider: Restaurants are now using generative AI to create menu photos that could convince customers to order more
MARKETING
US Presidents Day Hours: Update Now!
Will your restaurant hours of operation be any different on President's Day, Monday, February 20th?
Your customers need to know and that's why you should log into Google Business Profile and Yelp and confirm your holiday hours for Washington's Birthday RIGHT NOW... even if your hours are the same as any other Monday.
lt'd be really bad is if you are actually open, but Google makes people searching for your restaurant think you might be closed ... and they drive over there just to be disappointed!
When you confirm your holiday hours, like you'll see on my Google listing for Handcraft Burgers & Brew, you give your guests 100% confidence on your operating hours.
Update your holiday hours for President's Day now!
PS. I know a secret tool that will make this even easier. Reply if you want to know what it is.
Thanks and have an AWESOME DAY!
- Rev
That’s it for today! I wish you a wonderful weekend!
See you next week, 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_Feb 2023