The Big Squeeze

Friends of Branded!

Happy Saturday and I hope you had a great week.

The Rat Pack that I feel so fortunate to be part of isn’t going to be happy with how I’m kicking off the Top of the Fold of this week (and I’ll add they’re not going to be happy with how the Deal Room section kicks-off either, but let’s not get ahead of ourselves).

Easy Money, a classic 1983 comedy starring Rodney Dangerfield (as Monty), with amazing support from Joe Pesci (Monty’s best friend Nicky) is about a hard-living baby photographer whose life revolves around gambling, drinking, and smoking with his friends (my mentioning of the Rat Pack isn’t looking so off, now, is it?). 😊

The plot of the film kicks in when Monty's wealthy mother-in-law dies in a plane crash, or so we think (you can’t really spoil the ending of a movie that’s 43 years old, can you?). The mother-in-law leaves behind a $10mm inheritance for Monty and his family, but with a major catch: Monty must completely reform his lifestyle for one year. This means no drinking, no smoking, no gambling, and he must lose weight.

At a dinner with his friends, who are indulging in a fully loaded Italian meal, Monty orders a side salad (with no dressing) and despite the meals of plenty in front of each of his friends, one by one they take off Monty’s plate (Rodney gets no respect!).

We’re moving on from this movie now, but Easy Money is what came to mind when some restaurant friends of mine were discussing how restaurants aren’t just competing with each other anymore. Nope, we’re competing with everyone who sells as meal.

There’s a quiet shift happening in American food spend, and it’s not subtle if you’re looking in the right places.

The competition is now coming from grocery stores (“G-stores”) and convenience stores (“C-stores”). It’s the economy stupid, right? Well, not exactly. It’s the “value gap” that is causing this meal migration shift and the gap is widening!

Let’s start with math (b/c that’s what everyone loves to do on a Saturday morning before the caffeine kicks in).

Restaurant prices are rising faster than grocery prices. I could reference the median price for a burger (about $15) or a burrito (about $13.50), but I don’t want to do that. 😊 So, let’s look at grocery inflation (about 2% to 3%) versus restaurant inflation (closer to 4%). Does this delta matter, you ask? Yes, it matters b/c when consumers feels pressure, they don’t stop spending, they reallocate where they eat.

Here’s what restauranteurs are seeing, grocery stores aren’t about “ingredients” anymore, they now foodservice platforms.

A figure that’s causing some stress among restaurateurs right now is the number 28% or the percentage of grocery prepared meals that are replacing restaurant occasions (and that percentage has more than doubled since 2017).

Please don’t read this as competition at the margin. This is direct substitution.

In the category of adding insult to injury, grocery stores have a few advantages that restaurants can’t easily match. Among them we have lower labor costs, scale purchasing power, built-in traffic, no tipping friction and take-home + heat convenience.

And if you think the G-stores are causing some stress to restaurant operators, the convenience stores are going full scale fast-casual and competing with restaurants on spend and proximity.

Look at what’s happening.

The C-store foodservice market is heading toward $78bn and chains like 7-Eleven are literally rebuilding their model around food (new 7-Eleven formats are driving about 18% higher sales vs legacy stores). This isn’t your dad’s roller grill 2.0. This is fresh sandwiches, made-to-order bowls, premium coffee, and grab-and-go-meals.

For years, restaurants competed on cuisine, experience, and brand. But today, the battlefield is different. Consumers are asking where they can solve for this meal faster, cheaper, and easier. And increasingly, the answer is grocery stores on the way home, the C-store on the corner, and the hybrid retail / food model in between.

Consumers are making more frequent, smaller, value-driven trips while dining out is becoming more intentional (and less habitual).

Let’s be clear, restaurants are NOT dead (and I’ll use some math to make this statement with authority). Restaurants still capture over 50% of the total food spend in the US, and when consumers splurge, restaurant spending spikes hard!

But here’s the shift, restaurants are becoming occasion-driven, experience-led, and treat yourself moments. Meanwhile, the G-stores and C-stores are winning with everyday meals, weeknight decisions, and impulse hunger moments.

This is where things might get a little uncomfortable for restaurant operators, b/c grocery stores and C-stores are doing something restaurants have historically owned, they’re capturing frequency.

How important is frequency? Great question.

Frequency is, well, everything! Frequency drives data, loyalty, and margin consistency. If restaurants lose frequency, we become episodic businesses.

But hold on young grasshopper, we don’t do doom & gloom here in the H^2 (and we’re not freaking victims, so don’t bring that negativity here).

If you’re an operator, the takeaway isn’t panic, it’s repositioning (and the playbook is shift or get replaced). We need to compete on experience, not convenience. We can’t beat C-stores on speed (so don’t even try). We win on hospitality, energy, atmosphere, and human connection.

Grocery stores are winning dinner at home. C-stores are winning grab-and-go lunch. So where do we win?

Consumer aren’t asking “is it good?” They’re asking, “is it worth it versus my other options?” The G-stores and C-stores came into our space, so let’s return the favor and think like retailers.

The winners going forward are the ones who blur the lines. Restaurants with retail shelves, grocers with chef-driven menus, and C-stores with brand partnerships. The future isn’t categories, it’s convergence.

Restaurants didn’t lose the customer; we just stopped being the default b/c today the real competition isn’t across the street. It’s across the entire food ecosystem. And the players who win won’t be defined by what they are, but by how many ways they can feed the customer. B/c the real shift isn’t about food quality, it’s about decision friction.

On any given Tuesday night, the consumer isn’t asking “where’s the best meal?” They’re asking, “what’s the easiest win?” And the right answer is increasingly the grocery store with the restaurant-quality prepared meals, the C-store with a faster, cheaper lunch, and the place that’s already on the way.

Friends, that’s the game and restaurants used to own frequency, but now we’re fighting to justify the occasion. And here’s the mic-drop, if you’re not winning the everyday meal, you’re renting the customer, not owning them.

Don’t hate the players (the grocery stores and the C-stores), and let’s not hate the game either. Let’s change it!

It takes a village.

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The Top of the Fold kicked this week off with Easy Money, a 43-year-old movie.

The Deal Room has something to say, “hold my beer.”

When Branded launched its podcast, the Hospitality Hangout, our original sponsor was Chico’s Bail Bonds, the fictitious bail bond provider from the now 50-year-old film, The Bad News Bears.

This 1976 classic movie about a rowdy baseball team of misfits wouldn’t pass today’s family-friendly movie standard, but it’s still a film that Gen Xers love to quote!

Yes, Chico’s was our (unofficial) sponsor (b/c Chico’s isn’t a real company) but it made us laugh and that seemed to be good enough as far as Schatz and I were concerned. That was until our friends at PepsiCo thought we should retire Chico and begin what has been a wonderful media collaboration.

Over the last couple of weeks, a few headlines caught my eye and specifically, OpenAI buying TBPN and Beehiiv launching podcast infrastructure.

This isn’t just a deal or a product expansion respectively, this is a signal, from two different angles. It’s a full-blown land grab for attention, narrative, and distribution. Podcasts are no longer “content.” They’re infrastructure for influence.

OpenAI buying TBPN is about their wanting to own the conversation. OpenAI didn’t buy tech, it bought audience, credibility, and distribution. TBPN is where founders, CEOs and insiders talk in real-time and do so unfiltered. This acquisition signals that, at least according to OpenAI, traditional communications don’t work for them anymore. More to the point, for OpenAI, PR is dead and owned media is the new control layer. This isn’t marketing, this is narrative control at scale.

Beehiiv launching podcasts is the opposite side of the same coin and it’s about owning the audience. Beehiiv’s move is about collapsing e-mail, audio, and monetization into one creator-owned ecosystem. They’re budling podcasts with newsletters and subscriptions. The statement they’re making, the future is not platforms, it’s owned audience across formats.

Why am I focusing on these moves and why did it make it into the Deal Room? B/c podcasts remain a most under-leveraged asset in hospitality.

Restaurants historically rely on location, foot traffic and third-party discovery. Podcasts are flipping the script from being “discovered” to be “followed.” Restaurants don’t just sell food, they sell stories, and podcasting turns these stories into scalable emotional connections.

The real game here is first party data and Beehiiv nailed it: podcasts + newsletters = owned audience. For restaurants, the e-mail list is a retention engine, and the podcast is an engagement engine. Put them together and you’re no longer dependent on third parties to be discovered.

A podcast listener is more loyal, has higher frequency of visits and a higher spend b/c they feel like they know the brand.

Let’s bring this home, POS is table stakes, loyalty is table stakes and now content is becoming table stakes. But this isn’t just about content, this is about owned, personality-driven, multi-format storytelling.

OpenAI buying media, Beehiiv becoming a media stack tells me the restaurants that win won’t just serve customers, they’ll have an audience before the customer even walks in the door.

And in hospitality, the next great brand won’t just be fully booked, they’ll be fully subscribed.

To learn more about how to leverage podcasting, digital story-telling and opportunities to engage with us, please click here (or contact me directly).

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