Jun 22, 2024 15 min read

How to Make 1 + 1 = 11

How to Make 1 + 1 = 11
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Friends of Branded!

Happy Saturday and I hope you had a great week!

The year was 2003, I was working at the French bank, Société Générale, and a business trip had me in the gorgeous city of Sydney Australia. Our host arranged a fun evening and wanted to show-off the night life of the Emerald City. The evening was great fun and took place almost entirely at the Hiton Hotel. I remember being slightly confused by the role the Hilton played in our evening for our dining and socializing together, but during that road warrior time of my life, hotels were a consistent destination for fine dining as well as cool bars, lounges, and rooftop experiences.

Paris Hilton's international stardom broke out in 2003...hmmmm.

The other night, at far less of a distance from my home in New York City than Sydney or the other parts of the world my travels took me, I found myself engaging in an evening where everything was experienced at the Ritz-Carlton NoMad (over on West 28th street). The Ritz has partnered with the José Andrés Group, who has assumed all food and beverage operations at the property.

I’ve written (often) about the depth and breadth of the restaurant industry, but to be crystal clear, there’s also great depth and breadth in the hotel industry. According to Smith Travel Research, a leader in data collection for the lodging industry, hotels can be categorized into six segments: (i) luxury; (ii) upper-upscale; (iii) upscale; (iv) midscale (with food & beverage); (v) midscale (without food & beverage); and (vi) economy.

Coming out of the pandemic, the economy and midscale segments were the strongest market performers, but this end of the spectrum has since lagged the luxury segment. In 2023, the luxury segment posted the highest growth rates (4.6% year-over-year) and the trend for outperformance has continued as we’re bringing the first half of 2024 to a close. Getting just a little more granular, the luxury segment in urban locations is showing the strongest growth.

For Branded, we sit at the intersection of hospitality, technology, and capital and it’s the myriad of ways that hotels and restaurants are coming together to engage and delight guests that is of most interest to us.

I hope readers of the H^2 remember that I don’t like assigning labels such as “expensive” or “inexpensive” (usually referred to as “cheap”) b/c I believe it’s all about “value.” Our customers (guests) understand that meals, drinks, and hotel rooms can vary dramatically in price, but there’s a subjective value that the guest assigns to these experiences and expects the venue to meet or deliver. Positive guest experiences with restaurants and hotels comes not from the price, but from the meeting or exceeding the expectations of the guest.

This brings me back to my experience at The Ritz-Carlton NoMad or even more recently at The James NoMad and its relationship with LDV Hospitality. At The James, the culinary operations are the responsibility of LDV Hospitality, known famously at this location for Scarpetta on the main floor to its speakeasy-style joint, The Seville, downstairs.

The relationship between hotels and restaurants is one that epitomizes the expression “better together.” Hotels have a love / hate relationship with food and beverage. On the one hand, they need to offer their guests dining options, but have understandably struggled to operate dining venues successfully or that can compete with the dining options that exist outside the hotel venue. (please note, for the many people who have heard me say how much I don’t want a two-handed accountant b/c I don’t know what to do with the expression “but on the other hand…,”sometimes, the expression fits & works). 😊

How can a venue that’s primary business is to create a comfortable (and safe) place for guests to sleep and relax compete with a business that’s primary business is to feed and delight guests with F&B? The truth is, the hoteliers can’t compete on this playing field (and to be fair, I think restauranteurs would fail if they tried to compete with hoteliers in the ‘sleep & relax’ category. In the spirit of the KISS Theory (Keep It Simple Schatzy), if you can’t beat them, join (partner) with them. And that’s exactly what some of the most savvy and successful hoteliers are doing, they’re partnering and bringing elite restaurant operators in-house and into their properties.

The most famous kiss! Don't believe me? Google 'Most Famous Kiss.'

A small digression, think about the food options that were historically available at sporting events versus what’s available to you now. No this isn’t a ‘woe is me’ or I had to walk to school uphill, both ways, but all Boomers and Millennials can admit that there are now superior food and beverage options available at sporting events. Stadium and arena concessions historically (and largely) existed to feed the masses and were an understandably secondary consideration b/c the on the field, court, pitch, turf, etc action was what the guest (fan) was there to see.

Today, the sports industry has raised its game (pun intended) and are delivering a far more interesting and dynamic culinary experience for its fans. The foodservice in stadiums and arenas today are no longer there to simply feed the masses, they’re now intentionally baked (again, pun intended) into the design. What team owners are doing with foodservice is to elevate the fan experience. There are many reasons to do this, but a simple one is to follow the money and by improving the F&B offering inside the venue, fans are no longer dining before the game outside the venue but are instead arriving early to dine at the venue. This not only creates a better experience for the fan, but it also allows the teams to capture a greater share of the guests’ wallet. (okay, I’m shifting back to hotels now and I admit my digression wasn’t truly a quick one). 😊

Readers of the H^2 know about my high regard for the American economist Milton Friedman, who received the Nobel Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the complexity of stabilization policy (thank you Wikipedia). Its Milton Freidman’s work on “self-interest” that has always been of interest to me, and I want to remind people or be clear that I’m focused on self-interest and not selfishness. Your self-interest is just that, your self-interest and it will drive your decision-making.

Hoteliers aren’t embracing José Andrés Group, LDV Hospitality, Major Food Group, Nobu Hospitality and Tao Hospitality Group to be nice or give their guests an elevated food and beverage offering and experience. This embracement and strategic partnerships are b/c these restaurant groups successfully drive traffic, increase occupancy levels and the price of room rates. These restauranteurs keep things fresh, bring energy, and can more quickly adapt to the changing preferences of consumers. And yes, they also delight and give their guests an elevated food & beverage offering and experience.

Just has the two hottest segments of the restaurant industry exist at the widest ends of the spectrum (full-serve high-end and quick-serve casual), so too is the hotel industry seeing the most action at the extremes. The luxury market needs to do more, with, well, more. The economy market needs to do more with less. What an amazing time to be in the hospitality industry as these two industries need each other more than ever. The luxury market will continue to partner with restaurant operators who are experts at taking responsibility for the food & beverage operations at the property and the economy market, by leveraging technology & innovation, will partner with local establishments to essentially expand its property and leverage the local F&B joints (and therefore NOT need to carry F&B in-house).

I’ve always found it interesting how some folks feel the word “hospitality” refers to the hotel business, while others feel it refers to the restaurant business. For our friend Will Guidara, he wonderfully defines “unreasonable hospitality” as “going above and beyond in pursuit of how you make people feel.” For Mr. Guidara, hospitality means “being more thoughtful” (and I LOVE his definitions). For Branded’s investment strategy, it’s a focus on where food & beverage is involved as the primary, secondary, or otherwise part of the guest, customer or fan experience.

As I close out this week’s Top of the Folds, this week (and specifically Thursday, June 20th), the CONMEBOL Copa America 2024 tournament kicked-off down in Miami (with Argentina defeating Canada by a score of 2 – 0). Also on Thursday, June 20th, the Official CONMEBOL Copia America 2024 Tamias Fan Zone kicked off at The Wynwood Marketplace in Miami, Florida. The entire Branded Team is thrilled to be a supporting actor to our friends and partners at ComAve; Tamias; and Libra Incentix in the pulling together of this event. We also want to thank our friends at the SWARM Entertainment Group for their tireless efforts to help us create this fan zone and what we expect will prove to be a tremendous fan experience.

I asked a few weeks ago (back on May 18th) Are You Ready for Some Fútbol?

Yes, I’m ready and I’m looking forward to spending time down in Miami at The Tamias Fan Zone of CONMEBOL Copa America 2024. If you’re in or around Miami during the tournament (June 20th to July 14th), drop me a line if you’d like to experience a little extra hospitality over at The Wynwood Marketplace!

It takes a village.

This week’s “Family Table” is fully loaded and that’s only b/c it’s our friends and portfolio companies that are making things happen in the industry Branded loves!

Fresh off the presses, our friends at Brizo FoodMetrics released its 2024 Restaurant Tech Map and if you’re interested you can access the map here: Brizo Restaurant Tech Map.

Readers of the H^2 know all about Branded’s love, respect, and appreciation for the team at Brizo. No platform offers greater access to the most comprehensive foodservice insights on the market. Brizo has the most market coverage and granular data and empowers industry folks to make informed decisions in this most fragmented industry.

As the role of technology continues to expand across the operations of restaurants, the importance of staying up to date can’t be overstated. The Brizo Team generously makes this annual guide available to help keep you not only updated, but also up-to-speed on the trends to watch.

Not to front run our friends at Brizo, but someone who may or may not have been familiar with Cliff Notes, I’ve shared the following below:

  • Digital Kiosks: As labor costs rise, the foodservice industry has hit an inflection point with kiosk adoption. In-store ordering via digital kiosks has exploded thanks to advances in consumer usage, UI design, and hardware development. Kiosks have become especially prominent across QSRs: Shake Shack now attributes over half of its in-store orders to kiosks.
  • AI Advancements: More than just a buzzword, AI is quickly permeating all segments of restaurant technology. Voice AI is one of the fastest-growing tools for optimizing restaurant operations, with practical applications ranging from drive-thrus to employee training.
  • Dynamic Pricing: Having made big headlines in early 2024, dynamic pricing is a hot topic. With the right execution, says startup JUICER, dynamic pricing has the potential to benefit operators and customers alike with “data-driven happy hours.”
  • Flying Food: It’s a bird! It’s a plane! It’s a…food delivery drone? That’s right: in addition to the hospitality robots already supporting staff on the restaurant floor, some brands are now testing robotics off the premises, from autonomous vehicles to delivery drones.
  • Delivery Partnerships: Previous years saw significant consolidation of delivery marketplaces. In 2024, we’re witnessing unprecedented partnerships between the industry’s largest players, from Uber Eats and InstaCart to GrubHub and Amazon. Who will announce the next big collaboration?

The second shoutout this week goes to and friends and partners at Lunchbox and specifically our friend Nabeel Alamgir.

Nabeel and the team at Lunchbox are doing great things for the industry and that very much includes catering and this most important segment of the market. As I’ve written before, I fear the delivery business is a race to the bottom as the costs and challenges of delivering meals remains costly. For those that challenge me on this, I will concede that as soon as autonomous vehicles are embraced and the DSPs (delivery service platforms) can eliminate its human-drivers, deliver of meals will soar in terms of popularity. In the meantime, delivery of meals will continue to soar, but it will also remain expensive.

Catering on the other hand, offers a far more valuable opportunity for all parties to the transaction.

Not only is Lunchbox working hard and leading the democratization of catering, but they’re addressing the shift in workplace dynamics that was the result of the pandemic and is here to stay. Lunchbox’s Co-Founder & CEO contributed an article to Forbes on Addressing The 'Food At Work' Boom and How Technology Is Shaping The Future Of Workplace Meals.

I invite (and dare say encourage) all business owners to give the article a look. The restaurant industry is one that will continue to innovate and adapt to the changing landscape. The industry, thanks to companies like Lunchbox, have solutions that address the rising demand for food at work. I do not believe ‘food-at-work’ is a fad or trend but is quickly moving to be the standard.

I enjoyed Nabeel’s article very much and have provided a link here if you’re interested:  How Technology Is Shaping The Future Of Workplace Meals

And finally, this week’s final shoutout goes to Branded’s friend, Gregg Majewski, the Founder & CEO at Craveworthy Brands.

I could easily think of many reasons why Gregg deserves a shoutout in the H^2 (and despite my attorney's frustration with my use of the word 'guaranty,' I can GUARANTY that there will be more mentions of this outstanding industry leader and visionary), but his inclusion this week in the Shoutout section is far more personal.

We had a somewhat spontaneous “bring your kid to work" day on Thursday this week at Branded (or at least our CMO, Julie Zucker and I brought our kids to work).

Despite an array of activities, engagement by many folks in the office (B Works) and festive lunch down at Isabelle’s, the highlight of the day and one thing both kids said was their FAVORITE part of their visit to Branded was their engagement and time with Gregg.

To be clear, Gregg’s visit to B Works was business and he’s as serious a professional as I’m fortunate to know. So, the engagement between with Mr. Majewski and our kids was not only fun to watch and enjoy, but it was also transactional in a way that I can only describe as lovely, generous, and kind.

The image below is the conclusion of the transaction negotiated between Gregg and our kids and specifically the moment where the kids delivered their work product to Gregg and when they received the agreed upon reward.

Yes, there’s nothing easy about operating, growing, and investing in the hospitality industry, but as I’ve said often, this is an industry filled with awesome people.

Did Gregg travel to NYC and spend time at B Works to entertain and engage with our kids? Of course not (and I think his Craveworthy stakeholders would be confused and / or angry if he did 😊).

I’ll therefore leave the main driver of my time together this week with Gregg as a small teaser or ‘Hanging Chad’ which will revisited and shared at a later date and proper time, but this shoutout to Gregg is my appreciation for his not only being part of our kids’ day at B Works, but beyond that, for being their FAVORITE part of the day.

ABC (Always Be Closing)!

Branded invites readers of the H^2 that are interested in learning more about our portfolio companies, and investment strategies to become part of our Access Hospitality Network.

In this week's edition, we not only want to recognize the tremendous work and momentum that our newest portfolio company, Big Chicken, is generating, but also the recognition that this brand and fast-growing company continues to earn.

Big Chicken was named in the Top 50 of Entrepreneur’s Top New & Emerging Franchises 2024 list!

The company is also charging ahead with its global franchise expansion: Big Chicken's World Tour

Pulled from the Entrepreneur article and in response to the question on how Big Chicken competes with more established franchises, friend of Branded and CEO, Josh Halpern responded, "To set ourselves apart, we've embarked on various initiatives that inject energy into the brand. For example, our partnership with Blue Origin. What other concept can say that their consumers can send postcards into outer space? It's all about embracing creativity, leveraging our connections, and constantly seeking opportunities to surprise and delight our guests."

Branded feels truly fortunate to be on this journey with the outstanding team at Big Chicken. It’s already been an incredible year and it’s not even halftime yet!

In today’s episode of Hospitality Hangout, Michael Schatzberg, “The Restaurant Guy,” and Jimmy Frischling, “The Finance Guy,” are joined by guests Nick Bishop Jr, co-founder of Hattie B’s Hot Chicken, and Todd Williams, co-president and CFO of Hattie B’s Hot Chicken.

A partnership that took flight over a few rounds of golf eventually grew into the beloved Hattie B's Hot Chicken. Nick reveals his family's 50-year legacy in the restaurant business, starting with his grandfather and continuing through his father and uncles. Todd shares his transition from accountant to partner in the restaurant. Todd emphasizes the inspiring and motivating nature of working with Nick and his father, describing them as the kind of people you want to "kick the sheets off every day for.”

You can tune in on SpotifyAppleAmazoniHeart, or your favorite listening platform!

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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.

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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
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

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