Friends of Branded!
Happy Saturday and I hope you had a great week!
A few weeks ago, I wrote in the Top of the Fold about the oversaturation of restaurants and how the supply-side of the market dwarfs the demand-side.
Readers of the Hospitality Headline know my thoughts on the transformation that is not only underway in the hospitality industry but is very much accelerating. For hospitality operators, the digitization and need for automation are critical and that has resulted in technology & innovation no longer being “nice to haves” but key factors in determining the difference between success and failure.
Please don’t take my comments about the oversaturation as negative, b/c to the contrary, I’m incredibly energized and enthusiastic about the hospitality industry and as an active investor in emerging technology & innovation companies, I’ll share that I’m bullish on this alternative asset class (but that doesn’t change the fact that the over-supply of restaurants and food options is a reality).
One might expect that an industry with this type of imbalance would therefore be incredibly competitive, and such a position is absolutely correct. However, and despite the competitive landscape, the hospitality industry is among the most democratic and diverse of any I’ve ever experienced.
It’s where so many people experience their very first job and learn about teamwork, cooperation and getting your hands dirty (literally). It’s where many relationships (both personal and professional) started and continue to this day. It’s an industry full of stories where dishwashers and busboys grow up to own their restaurants or become CEOs of hospitality-tech companies (hospitality experience of a tech company CEO is NOT a requirement for an investment by Branded, but we love it when subject matter expertise exists in the C-suite).
This is a community that helps one another and genuinely celebrates the success of others, but despite all that goodness, it’s an incredibly competitive industry and this fierce competition comes from all sides and directions.
Think for a moment about the vast number of options you have available to you for a dining experience today versus the dining options you had available when you were younger. If you’re anything like me, I bet you’ll quickly think of the myriad of food options that are now readily available that you didn’t have growing up. Now think about how many of those food options have come to existence and fruition in only the past few years. While that question, I posed to you was rhetorical, I’ll still answer that there is now a plethora of food options available.
It’s not possible for me to write or say the word “plethora” without at least a smile and thought about El Guapo, Jefe and the rest of the amazing cast from The Three Amigos. I can’t share the clip, but it’s not hard to find if you’re interested.
Speaking of friendly competition, or should I say co-opetition …. The playing field is active in the physical and digital worlds and operators and landlords are feeling the pressure of creating new experiences in both realms.
As it relates to the physical world, a recent cover of New York Magazine caught my attention. The words “WORTH LESS” were printed large and bold across a visual of NYC's most popular commercial/business neighborhoods. The corresponding article, by contributing editor, Andrew Rice is one I highly recommend. The article and edition is loaded with interesting information including a section called “The Office Apocalypse in Miniature” (about a 3-block stretch on Third Avenue in NYC). Sure it was alarming to read about the millions of square feet available, or the space that appears to be in real trouble, but it was Mr. Rice’s success in getting Mr. Scott Rechler, Chairman and CEO of RXR Realty, to be so candid, specifically about the consequences of the growing vacancy and shrinking demand, that made the article a great read.
Fortune Magazine is also putting a spotlight on the looming commercial real estate crisis and featured the CEO of Starwood Capital Group, Barry Sternlicht, who called this a “category 5 hurricane.” In this interview with Bloomberg Wealth, Mr. Sternlicht talks about the nightmare scenario of surging interest rates and the rise of remote work.
Addressing the commercial real estate market, and the contagion a collapse of this market would cause, is not why these articles caught my attention or why I included them here in my Top of the Fold section.
As you know from last week’s edition of the H^2, I was up in the great city of Boston (yes, I’m trying to make a comeback with my Bostonian friends after last week's title and photos) and saw a number of similarities to what I see in New York every day and in cities all over the country in regard to real estate. Commercial real estate is under severe pressure, there’s an oversaturation of available office space and a great deal of new construction taking place.
To highlight one of these, I saw a large vacancy sign on one side of what looks like a newish construction building and a beautiful Puttshack on the other side. For those not familiar with Puttshack, this is mini-golf reimagined and specifically another example of an emerging sector of the hospitality market – EATertainment.
We all know EATertainment isn’t a new thing, as it emerged in the late 1970s and 1980s with Dave & Buster’s and Chuck E. Cheese, but what’s old isn’t just new again. The bar is being raised in this category of the hospitality market and it begs the question, do EATertainment venues represent a white knight for commercial real estate landlords?
One of the biggest headwinds facing EATertainment venues was the sheer size of the operations and that’s traditionally and historically been a most meaningful barrier to entry. Can we agree that available space is no longer an issue and that we have a plethora of prime real estate available?
Away from the real estate side of the value EATertainment venues could afford landlords, let’s look at the consumer side of this equation. Consumers want an experience; they want to come together with friends and family and be entertained. The restaurant industry has always strived to meet the guests where they’re at and right now the demand is surging for elevated experiences. Especially in the area where physical meets digital!!!
Full-service restaurants are feeling the pressure to create experiential dining and essentially Instagram-able moments. No one should underestimate or undervalue the importance of social media and when it comes to the hospitality industry, and Instagram is the dominant platform.
Having an experience isn’t good enough, the guest needs to be able to show and share the experience with friends. Remember the competitive landscape I wrote about above, these EATertainment venues don’t want guests to eat elsewhere and then come play at their venue. They want it all and that means delivering premium cocktails, awesome meals, and fun activities that they can share with their friends on social media, is how EATertainment venues want to position themselves as a ‘one-stop-shop” experience.
It should not be lost on any of the readers here that the success of EATertainment venues is highly correlated to the tech-stack these companies embrace. I promised my dad that nothing Branded does will impact or change the way his favorite restaurants operate (and I will keep that promise). Old-school, single-unit joints can run with a minimalistic tech-stack (or with a pad and pencil if they wish), but these EATertainment venues, they need it all! The need for guest-engagement software is incredibly important and that ranges from empowering the guests to order & pay, be rewarded for their loyalty, be marketed to directly & personally, and be afforded the opportunity to seamlessly provide feedback & feel that they've been heard.
For EATertainment venues to succeed, they will need to create unique dining AND guest experiences. To deliver on this, they will need to address the digital transformation as fast as any segment of the hospitality market (and that's exactly what we're seeing).
The size of the operations and the available space is no longer a headwind or a barrier to entry. Besides, if commercial landlords want companies to bring their employees back to work, what better way to do it than by adding desirable food, beverage, and activity options in your building.
Back when I worked on Wall Street, some companies would provide carts with food options (for free) throughout the day or in other cases a subsidized cafeteria. One of the goals was to keep you at or near your desk working as a result of these perks. Now maybe the necessary perk to get folks back to the office is going to be a fun venue for your employees to visit with ease.
I’m not a matchmaker, but it seems this is a moment for commercial real estate owners and hospitality owners to come together like never before! Both industries are filled with such lovely people, have a cup of coffee together, mingle, get to know one another, talk amongst yourselves.
Friend of Branded and celebrated recipient of The “B” List, Atul Sood, recently wrote on LinkedIn about the world of grocery delivery and specifically how much has come and gone in just the last 3 – 4 years. He directed readers of his post to give Peter Backman's newsletter, the.Delivery.World a look. I enjoyed Mr. Backman’s newsletter and am now a subscriber. In the spirit of “it takes a village,” I’ve included the link to the newsletter here: theDelivery.World
Sterling Douglass - The life of an entrepreneur
I wrote above about the candor in the article by Andrew Rice. Last week I read an article about one of Branded’s friends and partners, Sterling Douglass, CEO at Chowly by our friends at Food on Demand. In full disclosure, Chowly was the second investment Branded made in the emerging tech space. As a new investment platform, we had to seek out our own opportunities (that’s a polite way of saying our deal flow was light).
My partner Schatzy, Branded’s “Restaurant Guy,” identified an issue that he wanted to solve. Delivery volume at our restaurants was growing, and we were using 8 to 10 different delivery platforms to capture and meet the demand. This resulted in “tablet hell,” which can be expensive and deliver (pun intended) a less than optimal guest experience. We vetted a few platforms to solve for these issues and became a customer of Chowly.
The success of this implementation and the value it delivered (yup) for our restaurants was meaningful. Our success with Chowly led to our making this truly operator-centric company Branded’s second venture investment.
Chowly has advanced its platform significantly since then and is doing even more incredible things for operators and specifically for the SMB segment (small & medium sized businesses) of the industry. I’d like to say Branded has advanced our own platform significantly as well since then.
The article (you can find here: Standing Among Giants, Chowly Scales Up) is wonderfully open and honest. Sterling has also been sharing over LinkedIn his journey with Chowly and specifically the good, bad, and otherwise of his experiences with the intention of helping other founders on their own journey. The Branded Team is thrilled to be in Chowly’s corner, and we know they’re in ours.
All of this is a preamble to our having Sterling Douglass as a guest contributor to the Hospitality Headline this week. Branded's engagement with Sterling in this way is not a new thing and no one has been a guest on our podcast (Hospitality Hangout) more than Sterling (so much so that he earned his own dedicated nickname, “The Technology Guy”).
I hope his contribution this week proves to be the first of many contributions, but before we get ahead of ourselves, I’m just thrilled that he volunteered to be part of this week’s edition.
With respect to Branded and Chowly, no matter what either platform does, our intentions are always to bring value to the hospitality industry.
It takes a village.
Answer also revealed at the end of the newsletter
By: Sterling Douglass, Co-Founder & CEO of Chowly
I recently wrote a series of Linkedin posts for Chicago Tech Week documenting the early and grueling days of Chowly. While from the outside everything always looks up and to the right, on the inside I was poor, stressed, and completely out-gunned. Most entrepreneurs go through this in the early days. Although most of us rarely talk about it. This is me pulling back the curtain to show everyone what it’s really like on the other side when you’re first getting started…Read More
MAXIMIZE VALUE, IMPROVE PERFORMANCE
Learn how the Hospitality Industry advisors from CohnReznick can put you at the forefront of advanced financial, operational, and risk management strategies.
By: Julia Suchocki, Partner at Branded Hospitality Ventures
If you've ever been to the Brooklyn Mirage you may remember a fun evening of endless drinks and easy payments. I'm sure the next morning you took a look at your bank account and said "jeez I had a great time." We've all been there and unregretfully so. And you might want to thank RFID technology for that. Read More
Robert Irvine Foundation
Supports and strengthens the physical and mental well-being of our service members, veterans, first responders, and their families.
FINANCE & DEALS
By: Noah Stern, Associate at Branded Hospitality Ventures
Opening and operating a long-standing restaurant is one of the harder things you can do. Margins are incredibly small (most restaurants fail within the first 6-12 months), so you need a lot of customers to generate substantial revenue. Rarely am I perplexed by a business model, let alone a food related business model, in the way I was by Mark Bittman’s concept of a community kitchen. Read More
Restaurant Industry Movers in the Market
—Data as of 8/4/2023
By: Rev Ciancio, Head of Revenue Marketing at Branded Strategic Hospitality
As a restaurant marketing consultant and as a restaurant influencer (I have 117k followers on my Instagram account), I get asked all the time about using influencers to help market a restaurant. Influencer marketing is a great way to get awareness in your local market from a trusted source. Its also a great way to get outstanding user generated content that you can share on your social channels. Read More
Hospitality Hangout with Andy Hooper, CEO of Hart House
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!
- Brizo: Mastering the Summer Foodservice Market
- Chowly: Standing Among Giants, Chowly Scales Up
- GoTab: San Diego Beer Conference
- Incentivio: Boosting Restaurant Efficiency and Success With a POS System
- MarginEdge: Why [me]: Tiffany’s Story
- Meez: Ethan Frisch and Ori Zohar on Ending Inequality and Exploitation in Food Systems
- Ovation: Technology Stack Expertise with Tamy Duplantis
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!!
- Financial IT: NCR Unveils New Names for Businesses Ahead of Planned Separation
- Fast Company: DoorDash is bringing Apple CarPlay to its delivery app
- Restaurant Business: Lawmakers propose raising the federal minimum wage to $17 and killing the tip credit
- CFO Dive: Zaxby’s snaps up Dollar General, Yum Brands alum for CFO
- USA Today: Chick-fil-A to build new restaurant concepts in Atlanta and New York City
ANSWER: 92% of American consumers read restaurant reviews, and roughly 33% of diners won’t eat at a restaurant with less than four stars reviews.
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.