Friends of Branded!

Happy Saturday, and I hope you had a great week.

We had a lot of friends, clients and visitors come through B Works, our hospitality-focused co-working space, this week and one guest stopped my office to catch-up.

He mentioned some of things he’s focused on and that included how his company was very focused on an integration strategy to leverage the depth and breadth of their various areas of expertise. After sharing some of the ideas he’s advancing and before turning away he casually said, “integration is great to talk about in the boardroom but it’s a whole different thing when it comes to putting it into practice.”

BOOM!

The theme of this week’s Top of the Fold was found.

First and as always, words matter, so let’s define what I mean when I think of “integration” in this context. Integration refers to the combining of different departments, teams, technologies or even companies. It can refer to the post-M&A integration if the combining of companies is the focus of the integration or the unification of a technology stack. The most common use I’ve heard in the boardroom is cross-functional collaboration with the idea that such will reveal growth or untapped revenues, cost savings or efficiencies.

All the above is of course welcomed in the boardroom and I’d be surprised to find anyone that would take issue or be a contrarian of anything I wrote above.

If we were playing boardroom-bingo, we can check a few boxes with words like “optimize,” innovation,” ”synergy,” and so on.

But here’s where the rubber hits the road, putting integration into practice is a whole different thing and of course is far more challenging when it comes to execution.

From my 3 ½ decades of professional experience, integration tends to overpromise and underdeliver. Sorry, not sorry, but that’s been my experience.

Please don’t take my comments to mean it shouldn’t be sought after and aggressively pursued, b/c it should! I’ll also add that the value that comes from successful integrations is so powerful and valuable for an organization, or at least has the potential to be so, that boardrooms and executives are constantly looking for it.

As a Milton Friedman enthusiast, I have misalignment of interests as my top answer of the Family Feud board as the reason why integrations fail (b/c everyone is motivated by their own self-interest).

Sure, there are other answers on the board including technical incompatibilities or deficiencies; cultural differences; resistance from the team and my favorite, management incapable of managing change.

The challenges associated with integration are many, but the upside if successful offers tremendous value. And that’s why the topic is so loved in the boardroom, but like most things, it comes down to the discipline of execution. If you take only one thing away from the Top of the Fold this week it’s this, integration is NOT strategy, execution of an integration is strategy! Without execution capabilities and a plan, you’re setting your company up for confusion, friction, pushback, and a waste of your two most important assets - your time and your money!

There are so many areas we could dive into when it comes to integration in the hospitality industry, but the one on my mind is about the relationship between franchisors and franchisees. Franchisors see the value that can be unleashed from successful integrations, but the franchisees see interference, especially if the franchisor doesn’t have a sufficient number of corporate stores. The Franchisor having corporate stores is akin to their having skin in the game, knowing what the other side is going through or how decisions in the boardroom will impact decisions in the trenches. This is how you get buy-in or at least some initial acceptance, which is a prerequisite.

The franchisees often feel that decisions made in the boardroom aren’t in-touch with the realities of the market and they’re probably most concerned that the costs of the integration are going to get passed down to them while the rewards get passed up to the franchisor.

The friction between these two camps is real and as an active ResTech investor, we often see franchisors NOT wanting to impose new technology platforms into their organization and onto their franchisees or shying away from shared services. We understand the aversion to putting forward new ideas or integrations for fear of coming across as overreaching and intrusive.

Branded is committed to seeing restaurant operators win b/c if they don’t win, we don’t have an industry. The successful franchisors we know think the same. Their franchisees need to win and while they may have the best-intentioned ideas on what integrations will help their franchisees do just that, there’s risk in putting these ideas or even mandates on your organization forward.

And this is where the cream rises to the top and the best or elite franchisors standout. Like most successful relationships we all know, it’s partnerships that win and, in this context, it’s the partnership specifically between the franchisors and the franchisees that creates the best results.

What can a winning partnership between franchisees and franchisors accomplish? I think the better (and maybe cliché) answer is what can’t they accomplish?

Just for some fun and maybe (hopefully) the edification of at least some of the readers of the H^2, I’ve provided a few of my favorite WINS that have helped shape the industry that came from franchisees. That’s right, in response to thinking about the ideas that come out of the boardroom, I wanted to put a spotlight on some of the most famous changes that came up from the trenches and specifically from the franchisees.

I’m kicking off this little list with McDonald’s and how its signature sandwich, the Big Mac, and how it was invented by franchisee Jim Delligatti, in 1967 in order to offer a more substantial sandwich to guests. But wait for it, the Filet-O-Fish, was created by franchisee Lou Groen, 5 years earlier in 1962. The Filet-O-Fish was created to appeal to Catholic guests who avoided meat on Fridays.

Quick side bar, is there a better commercial for the Filet-O-Fish than the one with Frankie The Signing Fish? I don’t think so, but you be the judge! ‘Frankie The Fish’ McDonald’s Singing Fish

I’m putting Chick-fil-A next on the list which I think is particularly appropriate as they’ve done for chicken sandwiches what McDonald’s has done for burgers. I’m talking about consistency, reliability, value, and the confidence of knowing there’s a clean bathroom associated with a stop (thank you GM for that most important factoid 😊).

Chick-fil-A is well-known for its incredibly tight corporate controls, but they also embrace feedback from franchisees and that’s what led to the development and eventual rollout of its Spicy Chicken Sandwich which is now a core menu item.

I’ll end this little walk down memory lane and hall of fame worthy menu changes thanks to franchisees and the franchisors who embrace their partners, with Dunkin Donuts.

Do you know what percentage of Dunkin’s sales comes from beverages? The answer is over 60% and that’s the reason Dunkin’ dropped “Donuts” from its name in January 2019 (and I’m sure the waking up early to make the donuts may have been another reason altogether).

This seismic shift in Dunkin’s business model came from franchisees pushing hard for a greater focus on beverages over donuts. This move helped shift the brand from a donut shop into a coffee forward competitor to Starbucks.

The commonality across all the above franchisee-led initiatives and changes is that the franchisees are often closer to the guest than the franchisors are. This in-touch and high-touch position leads to real-world insights and that can prove to be a win for franchisors and the entire organization, if, and only if, the franchisors are willing and open to listening.

This is why organizations that see the franchisor and franchisee relationship as a partnership are so important and why they increase their odds of winning exponentially. As usual, I’m focused on the corporate & in-the-trenches relationship within the hospitality industry, but this partnership isn’t remotely exclusive to the hospitality industry. Regardless of your industry, what happens in the boardroom is of course important, but the need to reduce the tension and friction between top-down integrations and frontline realities is when the magic happens and the organization wins.

Best ideas need to win, and the best ideas can come from anyone and should be welcomed by everyone.

It takes a village.

The FIRST shoutout this week is a big, caffeinated high-five to our friends at Adyen and good people at Joe & The Juice.

The big news: Joe & The Juice is going full throttle with Adyen, rolling out their payment tech across every single location. If you’ve ever waited in line at Joe’s for a shake or a sandwich, you know speed and style are their thing now the checkout’s about to match the vibe. Hats off to both teams for not just keeping up but setting the pace.
Want to see how these two are mixing it up? You can check out the announcement here: Joe & the Juice to Implement Adyen’s Payment Tech

Want to know my daughter’s favorite sandwich at Joe & The Juice, it’s the avocado sandwich, but hold the tomatoes b/c she feels it makes her sandwich a little wet. Just saying.

The SECOND shoutout this week is to our good friend, Kelly Esten, the CMO of Toast and as of this week, one of the few people to land on The “B” List of the 5th time!

Kelly just joined the Board of Directors at C-CAP (Culinary Careers Program) and we want to give her a Laurel and Hardy Handshake! 😊

Kelly’s not just showing up, she’s showing out putting her know-how and hustle behind the next generation of hospitality leaders. If you know Toast, you know they don’t settle for “good enough,” and neither does Kelly. She’s rolling up her sleeves and getting in the trenches for the future of food.

You can read the announcement here: Empowering the Next Generation of Culinary Leaders with C•CAP

Kelly, we see you, we appreciate you and we’re cheering for you on all the way!

The THIRD and final shoutout this week goes to a crew that’s putting purpose before everything—the CEOs backing the No Kid Hungry pledge to end summer hunger.

Sure, this is NOT breaking news, but it deserves attention and a spotlight all the same!

We want to recognize some of our friends, partners as well as some friends we just haven’t met yet, that are making all this happen in partnership with No Kid Hungry.

Christin Barone (Chief People Officer at Dutch Bros), Scott Boatwright (CEO at Chipotle), Paul Brown (Co-Founder & CEO at Inspire Brands), Noah Glass (Founder & CEO at Olo), Shannon Hennessy (CEO at Habit Burger), Barry McGowan (CEO at Fogo de Chão), Danny Meyer (Chairman at Union Square Hospitality Group), Aman Narang (CEO at Toast), John Peyton (CEO at Dine Brands), Mark Politzer (CEO at NORMS), Kelli Valade (CEO at Denny’s), and Russell Weiner (CEO at Domino’s) are all-in, taking the pledge and fighting to make sure kids eat this summer.

This is hospitality with real heart, and it makes us proud to be part of this industry.

You can check out the full list and see how you can get involved here: CEO Pledge to End Summer Hunger

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

My mom would tell her three sons to take joy wherever you can find it. This week I had great joy and even took a little pride in the coming together of two of Branded’s partners, Craveworthy Brands and Vistify.

I don’t know a restaurant company that has done more over the past couple of years than Craveworthy and that includes and isn’t limited to their going from 0 to 19 brands.

As operator-centric investors, Branded takes its lead from the feedback, insights, and intel that we’re fortunate to get from our partners and our network of operators. One area of feedback we’ve collected from quick-service and limited-service restaurants is the desire and need to either embrace or level-up their digital signage and menu boards.

Yes, digital signage and menu boards aren’t new, but the impact they’re having and the value they’re bringing to operators is only increasing and with this heightened importance and roll they’re playing, is the need to raise the game when it comes to a digital signage platform!

Schatzy likes to say, “we test before we invest.” In this case, the testing was done in part by our partners at Craveworthy and with its endorsement and embracement of Vistify’s vMenu system across its portfolio, we’re thrilled to announce our investment in partnership with Craveworthy into Vistify.

Our friend at Restaurant Business, the talented Lisa Jenning, wrote about this partnership and you can read her article here: Craveworthy Brands invests in digital menu board developer Vistify

Interestingly, I wrote above that Craveworthy has 19 brands, but in Ms. Jenning’s article, she wrote the company has 20 brands. Why don’t we table this discrepancy and revisit it in next week’s H^2 over a cup of coffee.

The Top of the Fold this week of course stands on its own, but I was thinking a great deal this week about the franchisor and franchisee relationship and how when these two sides of the coin operate in partnership, magic happens.

Craveworthy isn’t just growing its brands and units, they’re embracing technology and working with their brands and franchisees to make sure they’re platform includes a best-in-class tech-stack.

This partnership which brings Branded, Craveworthy and Vistify together is an example of what a successful collaboration among investors, operators, and technology companies can have.

Those interested in exploring opportunities with Craveworthy and Vistify and the work Branded will continue to do in the emerging restaurant and technology can contact me directly.

This week on Hospitality Hangout, we sit down with Frank Paci, CEO of Newk’s Eatery, to explore what it takes to lead — and grow — a fast-casual powerhouse in today’s competitive food scene. Frank dishes on strategic investments, operational excellence, and how brands can scale without losing flavor (literally and figuratively).

Brought to you by our friends at DIRECTV for Business, this episode is packed with fresh insights, industry trends, and a few laughs along the way. Tune in now and get inspired

Listen on Spotify:

Listen on Apple Podcasts:

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That’s it for today!

See you next week, same bat-time, same bat-channel.

It takes a village!

Jimmy Frischling

Branded Hospitality Ventures

[email protected]

235 Park Ave South, 4th Fl | New York, NY 10003

Branded Hospitality Ventures ("Branded") is an investment and solutions platform at the intersection of foodservice, technology, innovation and capital. As experienced hospitality owners and operators, Branded brings value to its partners through investment, strategic counsel, and its deep industry expertise and connections.

Learn more about Branded here: Branded At-A-Glance