Boring is Beautiful

Friends of Branded:

Happy Saturday and I hope you had a great week.

This week the Branded Team was down in Atlanta for WTWH Media’s QSR Evolution conference.

Did I have some FOMO because of my needing to sit this industry event out? As a person that subscribes to Woody Allen’s “80% of success is just showing up” philosophy, you bet I was feeling it and the feedback, posts I saw over LinkedIn and of course the photos from the event Branded was proud to host with our partners from Ayden, Amazon business, DoorDash and Olo only fed the FOMO beast.

But I needed to skip this conference b/c I was fortunate to be invited to a dinner hosted by our friend Mr. Jeff Millard and a wonderful dining experience prepared by my new favorite chef from the Second City, Chef Charles XXXXX.

Good people, good food and a bevy of discussions across a myriad of topics and industries. This why showing up is awesome!

I don’t know if I was included in the dinner b/c this “investment club” felt underrepresented in the hospitality or specifically the restaurant industry, but I was put in my place at the very start of the evening and as a result, I had the inspiration for this week’s edition of the H^2.

Restaurants are a sexy business, some of the folks at the event told me maybe in the spirit of a quick left jab even before I made a dent in my first glass of wine. And then followed with a strong right hook, and we don’t like sexy businesses, we like boring businesses (the boxing references here are attributed to and the result of friends at Phit Well making me put on the gloves recently. Damn you and thank you Team Phit Well.) 😊

This opening message got me excited (yes, I’m weird that way). You want boring businesses, I responded, let me tell you how boring the restaurant business really is. It just depends on the lens in which you’re looking at it.

“Boring is beautiful” represents a strong & disciplined investment thesis, so into the weeds of this “boring business” we went.

They wanted boring? As a hospitality-person, where we strive to deliver for and meet our guests where they’re at, I took out my Mr. Rogers sweater, slowed my roll, and shared just how “boring” this awesome, exciting, and comprised of so many amazing people the restaurant industry really is.

Let’s go!

First, let’s define what investors really mean when they say they like “boring businesses.” They are expressing a preference for businesses that are stable, have predictable cashflows, and are less vulnerable to hype or disruptive shocks. Boring businesses sell everyday products or services that people always need. These businesses may lack flash, but they tend to produce consistent revenues and profits, regardless of economic cycles.

By comparison, the other side of the “boring business” coin is of course the “sexy business.”

Sexy businesses live in industries that look exciting and often offer a promise of rapid growth, disruption, and cultural relevance. These businesses are customer-facing, brand driven and are wonderfully easy to talk about at cocktail parties. 😊

Sexy businesses show up in the press, on social media feeds and of course in investor decks. Sexy businesses offer emotional connections and stir excitement. Working in or investing into sexy businesses is often associated with prestige or signals status. Finally, and maybe quite simply, sexy businesses have stories to tell, and the media loves them!

Wow, this all does sound sexy, dead sexy.

Why was the group of investors anti-sexy businesses? Great question.

Sexy doesn’t always mean good for investors b/c they attract fierce competition, they can be trend dependent and valuations can often get ahead of themselves.

Let’s close out on the defining of these two-types of businesses (finally, right?):

A “sexy business” is visible, aspirational and hype-friendly.

A “boring business” is essential, durable, and sticky.

You want to know one of my all-time favorite boring businesses that is also incredibly sexy? Bloomberg, a market leading financial information, software and media company that provides financial analysis, news, and trading tools to professionals worldwide via the Bloomberg Terminal.

In addition to its core terminal services, Bloomberg operates a news agency, a television network, websites, radio stations and publishes magazines. The company is also extremely philanthropic and operates its efforts through Bloomberg Philanthropies.

Now to be crystal clear, this Top of the Fold isn’t about Bloomberg and in fact, during my decades in the financial markets, I was addicted to my Bloomberg Terminal, so even writing about it here is impacting me in ways I didn’t expect. 😊

Here’s the thing about Bloomberg and why I shared with the folks at this investor-dinner how it correlates to the restaurant industry, if you strip away all the glitter & gloss at Bloomberg, you actually have a fairly boring business.

At its core, Bloomberg is a bond data storage company. The Bloomberg Terminal (the device I was addicted to) is subscription-based and it’s NOT inexpensive! It comes with a serious-as-cancer two-year contract and it’s incredibly sticky. No matter the market cycle we’re in, traders, bankers, portfolio managers and analysts rely on the Bloomberg Terminal daily!

What drives the Bloomberg Terminal? Well, to be fair to Bloomberg, there’s a lot under the hood, but the crown jewel of the Terminal is the bond data its amassed. Bloomberg built its dominance by offering deep, real-time, standardized bond data that, wait for it, nobody else had at scale.

To outsiders, Bloomberg looks sexy b/c its associated with finance and has an array of media assets. To investors, it’s a boring, sticky, recurring-revenue giant!

What I wanted to share with my new friends from the dinner was that just like Bloomberg, and behind the glamour, the restaurant industry has a backbone, and it’s comprised of so many incredibly important & boring businesses.

I’m talking about payroll, pest controls, linens, waste hauling, regulatory compliance and let’s include the super-glamorous grease trap cleaning services. Our guests of course won’t post on Instagram about any of these foundational businesses that support the restaurant industry, but without these boring businesses, the sexy side of the restaurant industry couldn’t function or exist!

Sexy drives demand and in the case of Bloomberg, that translates into more terminals. For restaurants, sexy drives more restaurants, which means more linens, pest controls, waste hauling and yes, grease trap cleaning services.

Boring enables scale! For Bloomberg that’s its unique and unmatched warehouse of bond data that the markets need. For hospitality industry, boring services keep kitchens running.

Are you seeing this flywheel? The bigger and more successful the sexy side becomes, the more critical and valuable the boring side gets. Now we’re talking!

The image I included above and created with simple AI prompt is completely (and intentionally) wrong! This isn’t a fight between sexy & boring businesses, this is a partnership (I’m the “it takes a village” guy, you think I’m going to position segments of our industry at odds with one another?!?).

Hospitality’s sexy side and that includes all the trendy restaurants, the celebrity chefs, and the new boutique hotels opening, are of course the face of our industry. This is where visibility, buzz, and storytelling live.

Here’s the bottom-line!

Bloomberg isn’t sexy b/c of its Terminals (lord I still miss my Bloomberg Terminal, Mike B, let’s talk please 😊). It’s sexy b/c the financial world it enables.

We know restaurants aren’t sexy b/c of grease trap cleaning services (why am I obsessed with this particular boring / backbone business?) but this cleaning service allows chefs to shine and restaurant to thrive.

A sexy business is visible, aspirational, and hype-friendly. These are the kind of companies people brag about.

A boring business is essential, durable, and sticky. These are the kind of companies people depend on.

To my friends on both sides of the aisle, the Branded flywheel isn’t just about tech integrations. It’s an all-encompassing and fundamental commitment to aligning interests and creating value as a result of growing the pie for all stakeholders. Yes, our overarching focus is on the success of operators, but the opportunities that come from the success of operators creates an abundance of opportunities to create value for others.

Grease trap cleaners and the many other boring businesses that are the backbone of our industry, let’s connect and win together!

It takes a village.