Happy Saturday.
As I wrote last week, Branded has closed the books on the format and distribution of The Weekend Update and we’re now charging ahead with this new look and format.
Our readership has grown exponentially (thank you) so we needed to upgrade our distribution platform to keep up. We hope this new format proves to be even easier to navigate and read. Branded is committed to building and embracing the foodservice and hospitality community that we feel so extremely fortunate to have been part of for the past 3 decades. We love this industry, the people we work with and the role we get to play in the lives of our guests. As an emerging investment platform singularly focused on technology and innovation for this industry, we feel lucky to be working with such a diverse group of people as our industry is going through a much-needed transformation. The pandemic has changed NOTHING for our industry, but it has accelerated EVERYTHING.
Please dive into this week’s edition – The Big Platforms and as always, we welcome any and all feedback.
Finally, we continue to welcome subscribers to Branded’s Access Hospitality Network. This is our very own investment club & community that will be afforded unique and differentiated investment opportunities. Commentary shared with the Network will focus on the M&A and Capital Markets associated with this industry and this emerging alternative asset class. Access Hospitalityis exclusively for qualified and accredited investors. There are no dues or membership fees. Members of the Network will benefit from specialized publications, thought leadership, proprietary deal access, exclusive events and more!
If you’re interested in joining The Network, please click the link: Access Hospitality - powered by Branded Hospitality Ventures.
Okay…that’s enough of that…as always…LFG!!
MARKET COMMENTARY
Articles that caught my eye combined with some Branded commentary and insights.
Last week I wrote about Rémy Martin move into the Web3 / NFT space with the launch of its Usher x Remy Martin 1738: A Taste of Passion. I received a great deal of feedback and interest in that story and my commentary. So let’s keep that going. A small and up & coming coffee shop (sarcasm intended) STARBUCKS unveiled its Web3 initiative, which includes coffee themed NFTs.
Here’s the line I loved, and feel is MOST IMPORTANT (and if you choose to read the article, you’ll see it right up at the very top) – Starbucks is NOT just looking at NFTs as digital collectibles, but to have them provide their owners with access to exclusive content and other perks. The article hammers this point even further by adding that it sees its NFTs as an extension of customer loyalty. Do you know who is advising on this project for Starbucks? Adam Botman and just in case you don’t know Adam “The Bot” Botman (I admittedly just made-up that nickname…apologies Adam), he’s the architect behind Starbuck’s Mobile Order & Pay system and the Starbucks App. The Starbucks App was a pioneer and leader in the hospitality app space and has been one of Starbuck’s biggest successes with respect to tech innovation (and has personally saved me a tremendous amount of time when I travel with Schatz…who doesn’t even drink coffee, but is addicted to their ice tea).
Starbucks was one of the very first to introduce the concept of a digital wallet (even BEFORE Apple Pay). How important is Starbucks mobile ordering, according to Starbucks Q3 results, mobile orders, delivery and drive-through combined to drive 72% of Starbucks’ US revenue.
CEO Howard Schultz commented on this forthcoming web3 initiative during its earnings call with investors: “we believe this new digital web3-enabled initiative will allow us to build on the current Starbucks Rewards engagement model with its powerful spend to earn stars approach while also introducing new methods of emotionally engaging customers, expanding our digital third place community, and offering a broader set of rewards, including one-of-a-kind experiences that you can’t get anywhere else, integrating our digital Starbucks Rewards ecosystem with Starbucks-branded digital collectibles as both a reward and a community building element.
But it was Schultz’s comments on Starbucks using NFTs to attract and engage with younger customers that I feel is most important (and what I wrote about last week). Schultz said, “we don’t want to be in a business where our customer base is aging and we have a less relevant situation with younger people,” and then added that Starbucks has “never been, in our history, more relevant than we are today to Gen Z.”
This is the point and what I hope readers of The Weekend Update takeaway - customer engagement is critically important, and brands must meet their guests where they are at and where they wish to be. If the younger generations are looking for a differentiated and specifically digital engagement, then to win these guests and earn a share of their wallet (and Gen X, Y & Z represent a large freaking wallet), forward-thinking akin to what Starbucks is doing with web / NFTs needs to be explored.
During a previous professional chapter, I referred to the largest US financial institutions as the “Core 4”. I was referring to Citibank, Wells Fargo, Bank of America and JP Morgan. These firms are big, important, connected and while no one would ever call any of them the most agile or fast-moving platforms, when they enter a space or market, you need recognize that them as a potential force to be reckon with (and also note the direction they’re headed).
So let that headline sink in – JPMorgan Chase is putting together its own full-service travel business. They’ve acquired a booking system, a restaurant review company, and a luxury travel agent (well done JPM on the bundled solution). This is a clear sign that the travel industry is becoming an even more important market for the banks and credit card issuers. According to this article in the WSJ, JPM executives think the bank might be able to capture $15bn in bookings in 2025 (which would 5x what it previously recorded before these acquisitions). Even at this level, JPM would still be far smaller than the top two travel platforms – Booking.com (booking. YEAH!!!) and Expedia (both of which manage more than $70bn).
What’s JPM’s goal here? It’s to turn the travel customers into “lifelong Chase fans” who will spend more and do more with the bank!
From an economy perspective, CEO Jamie Dimon stated on an earnings call that the bank feels the US consumers are “in great shape” and even if the economy does go into a recession, the consumer has less leverage and is in far better shape than they were in ‘08 and ’09.
Here’s Branded’s take – the consumer wants EXPERIENCES right now. We’ve had over two years of COVID, and we’ve done a great deal of online shopping and ordering. We want to be together, and we want to travel, dine and have experiences (together!!!). Travel is Back, in Case You Missed It
Platforms that can help the consumer more easily and seamlessly enjoy travel, hospitality and entertainment are going to earn our loyalty. Friction and disjointed solutions are the enemy. Integrated and bundled solutions is what the consumer wants and we’re willing to pay more for it. That’s my takeaway from the article about JPM raising its game in this market and while the article put JPM in competition with Booking.com and Expedia, that’s where I feel it fell short. American Express is the current gold standard among the largest financial institutions in the integrated travel, hospitality, and entertainment space. That is who JPM is targeting to compete with this move, and we should expect the other members of the Core 4 to emerge in the space as well. Competition is good, especially for the consumer!
I must be in some sort of BIG COMPANY mood this morning b/c my third and final article is another BIG COMPANY!
The delivery service platforms (“DSPs”) get a lot of flak for the commissions they charge and also sometimes how they conduct their business (over a beer I’ll share some experiences of how they did more than just leverage SEO tools and actually acquired URLs to cut in front of the restaurants the guests were actually looking for), but they’re a VERY important part of the off-premise omnichannel and are a key source of discovery and ally for many restaurants (large and small). So, let’s give one of the leading DSPs some props and recognize the achievement that is Uber generating a massive amount of free cash flow. (For edification purposes and clarity, operating cash flow indicates how much a business’s operations consumed or generated, while free cash flow is the same metric, less capital expenses).
My interest in Uber is respectfully NOT so much about its ride-hailing business, but rather its food delivery business. Before the pandemic, Uber’s ride-hailing business was its leading unit, however, during COVID, Uber’s food delivery business took over as the growth driver. As the pandemic is waning, the ride-hailing business is once again center-stage and bookings increased by 120% in Q2 YOY while its food-delivery business increased a modest 7%. Delivery was still the Uber’s unit leader in terms of gross bookings with $13.87bn, edging out ride-hailing at $13.36bn and freight at $1.8bn.
The final thing that caught my eye in this article was what’s been identified as the biggest drag on Uber’s bottom line which is its stakes in other company and most notably, self-driving vehicles. Two weeks ago, I wrote (and have provided some additional color below) about self-driving vehicles vs delivery robots. As an operator-centric investment platform, Branded is VERY enthusiastic about impact delivery robots can make on the industry RIGHT NOW and we’re admittedly less interested in the autonomous vehicles b/c we think that is a solution that is further out the maturation curve. The article provides information on the losses associated with Uber’s autonomous vehicle investments, but these losses only reinforce my conviction that while self-driving vehicles are a promise for a better future, the success of delivery robots is here and now (and Branded LOVES solutions that help operators improve margins now).
TECHNOLOGY
The Branded team likes to walk with a small stick, but we LOVE to boast about our Partner Companies.
Incentivio
Intelligent guest engagement for restaurants & virtual brands.
After successful exits with native delivery platforms Bbot (acquired by DoorDash) and GoParrot (acquired by Block), the Branded team felt incredibly fortunate to be connected with the team at Incentivio. This operator-centric tech platform has successfully and IMPORTANTLY bundled a number of critical pieces to help create value for restaurants and virtual dining concepts. The company enhances the guest experience and helps brands engage from the very first-time visitor and bring them on a journey to a loyal customer across commerce, engagement and with automated intelligence, to increase and maximize revenue.
In Q2, the Incentivio team was busy as any Portfolio Company Branded is fortunate enough to be partners with. The company was a triple threat as it (i) gained market share; (ii) scaled its team; and (iii) renewed its focus on SMB (while maintaining momentum in the mid-market space). A few highlights below:
· Incentivio had a strong quarter with respect to its adding new locations with an increase of 50% Quarter-over-Quarter. It also created an strong pipeline of opportunities that has Branded very about the second half of the year.
· The company crossed a most meaningful ARR threshold (you need to be a subscriber to Branded’s Access Hospitality Network to receive this type of information) and secured partnerships with the likes of Uber Direct, Lightspeed, Clover, Deliverect and Ship Day.
· The Branded Team is particularly excited to share that Incentivio strengthened our partnership with EatOkra and started launching digital ordering customers through their directory. EatOkra is the digital guide to Black-owned restaurants and is backed by our friends at Pepsi along with UberEats, Apple, Bacardi and Google(this is some nice company to keep). Thanks to the partnership with Incentivio, EatOkra will now be able to provide integrated digital ordering, marketing, gift cards, and loyalty to the 13,000+ black-owned restaurants and 475,000+ users already using the EatOkra App. Incentivio and EatOkra Partner to Enhance the Digital Guest Experience
Branded is excited that Incentivio will be joining us at the upcoming FSTEC conference in Dallas in September where it will be exhibiting, speaking and hosting events alongside Branded.
You should expect to hear much more about this company in the fall!
Bite
The BEST DAMN KIOSK software company anywhere! (please note, this is NOT the company’s tagline. It’s my own personal view of the company, but if Bite wants to use it, they can do so without any attribution or compensation).
Branded is happy to share that despite the downturn in the economy, the Bite Team is feeling up, engaged and scaling!
We know full well that when consumers move down with respect to restaurant categories, which leads to more business for Quick Serve Restaurants (QSR) market share, that operators are looking for more efficiency and automation to save of labor. Bite is focused on one of the two biggest challenges facing restaurants today – labor (with supply chain being the second greatest challenge).
To be crystal clear, Bite’s digital ordering software can help restauranteurs address the labor shortage. The Branded Team appreciates and values Bite’s commitment to helping operators improve margins and we’ve also recognized how our friend and the company’s CEO, Brandon Barton is emerging as a thought leader in this space. Brandon’s LinkedIn page is included here, and I’d like to invite readers of The Weekend Update to checkout his page.
Brandon also recently contributed to the growing discussion on why restauranteurs need to be paying attention to the Web3 space. I’ve shared the link to his post below here: leadership-foodtech-web3-activity
PODCAST
THOUGHT LEADERSHIP
Tuesday, August 2nd – Hospitality Hangout
In the latest episode of Hospitality Hangout | Foodable Network podcast, Michael Schatzberg “The Restaurant Guy” and Jimmy Frischling “The Finance Guy” are bringing their listeners a “Best Of” season series with all of your favorite segments. Frischling says, “We are bringing back Best Of old favorites such as Top of the Tech Stack and Which Came First as well as tried-and-true favorites Talking Back and The Crystal Ball Moment. And of course – we can’t leave out the most popular segment (at least according to Schatzy) The Branded Quickfire.” This episode features the Best of The Crystal Ball moments, with a special guest, the Amazing Kreskin. They ask their guests to put on their “Kreskin Hat” and predict the future as it relates to hospitality and technology. And now I was afforded the opportunity to ask the Amazing Kreskin himself the same question.
Hospitality Hangout kicks off the Best Of with Brian Anton, Managing Director at Citi, who was the first official guest to get the official Crystal Ball moment on season one, episode ten. Anton’s response to the question was, “People will want to go back to dining in-person. People will want to be with their friends and share terrific experiences. BUT behaviors for dining in person will shift as customers now value convenience and technology. Friction points around health and speed will shift – fewer menus will be printed… it will be easier to pre-pay… and more menus will be on the phone.”
The next guest Andrew Smith, Managing Director of the Savory Restaurant Fund, answered the question and said, “restaurants will strengthen their foundation, have a better tech stack, be more touchless, and less interaction with humans. On the menu side…food qualities will improve, and we’ll see more foreign ingredients. On the experience side…. People will enjoy being together in person…. He believes everyone wants to get back in-person and restaurants will thrive better than ever.”
Robert Earl, of Earl Enterprises and Virtual Dining Concepts, shares his crystal ball moment saying “restaurants will become more impersonal. Robotics will make operations more efficient, but we will lose personal interactions...restaurants will have to turn to tech to make operations more efficient at the cost of personalization. Continue to see more types of foods integrated into one dining experience.”
To hear all of the guests' crystal ball moments, including Kimberly Grant, now with Four Seasons Hotels and Bars and who at the time was with FAST Acquisition Group, Brita Rosenheim, Partner at Culterra Capital, and Bryan Solar, General Manager of Restaurants at Square check out this best of the episode on Hospitality Hangout.
Check out the full episode: Best of the Crystal Ball Moment
MARKETING
Top of the funnel marketing and customer acquisition strategies.
NFTs, Cryptocurrencies, Decentralization, the metaverse ... there's a lot of buzz around what's happening with Web3, especially with the early adopter brands. But what the heck is Web3, how is it relevant for restaurants and where is it headed? Do you even need to care about blockchain technology yet?
Join our own Head of Revenue Marketing and Restaurant Evangelist, Rev Ciancio live on LinkedIn for a discussion around all things Web3 for restaurants with Bite CEO Brandon Barton, Tech Consultant and podcast host Skip Kimpel as well as Devour Co-Founder Chad Horn this coming Tuesday at 3 pm EST.
For more information to and to RSVP, please click here: Devouring Web3 Event
IN THE NEWS
We love to highlight Food Service & Hospitality news, especially when it’s Partners & Friends making it!
Hospitality Tech and F&B Innovation
• Ovation: Ovation introduces Insights !
• Ottonomy: Ottonomy selected by Aeroporti di Roma
• MarginEdge: Welcome Juliana Sanches to the team
• Minnow: Pickup Pod selected as finalist fir CSPS 2022 Retailer Choice Best New Products Contest - Vote here
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!!!
• TechCrunch: Uber exits Zomato investment for over $390 million
• PYMNTS.com: JPMorgan Takes Connected Commerce to Travel
• TechCrunch: Starbucks to unveil its web3-based rewards program next month
• Restaurant Business: Danny Meyer Steps Down as head of Union Square Hospitality Group
We had a great week and added Saniones, Doshii to our growing Branded Marketplace community! BOOM!
That’s it for today! I wish you a wonderful weekend!
See you next week, (about the) same bat-time, same bat-channel.
It takes a village!
Jimmy Frischling
Co-Founder & Managing Partner
Branded Hospitality Ventures | Branded Restaurants
jimmy@brandedstrategic.com
235 Park Ave South, 4th Fl | New York, NY 10003