Friends of Branded!
Happy Saturday and I hope your first workweek of 2024 was a great one!
As I wrote on LinkedIn, my mom would tell her sons “To take joy wherever we could find it.” This coming together of not only two Branded’s portfolio companies, but two of the most operator-centric companies that are dedicated to addressing key pain points and challenges facing restaurant operators brought me great joy.
Here’s a link to the announcement: Chowly acquires Targetable
One of my yearend predictions was about the M&A activity and overall consolidation Branded expects to see in 2024. Of course, the Chowly + Targetable coming together was known ahead of that predication, but that wasn’t remotely the driver of the prediction. As I’ve written, the industry and specifically the operators are demanding that we reduce the sheer volume of ISVs (Independent Software Vendors) and create bundled and integrated solutions. I’ve previously said and still believe that “best-in-suite” will beat out “best-in-class” and I’ve received my fair share of feedback challenging this position (and I always welcome and appreciate feedback).
Despite Branded’s enthusiasm and investments in emerging technology and innovation, as longstanding owners & operators of restaurants for the past 30-years, we subscribe to theory and have conviction (which we hold tightly) that this is a food & beverage industry that is powered by great people. Of course, it can and must be tech-enabled and tech-supported, but that at its core, we are a food & beverage industry powered by great people.
Branded’s investment thesis recognizes the need (and I dare say the criticality) for this analogue and antiquated industry to embrace and welcome this digital transformation (like all other industries have experienced before us), but not to lose sight that our industry is more personal than others. The foods & beverages we consume are incredibly personal and the trust guests show the industry (and I sincerely believe the FDA deserves recognition here) in consuming food from a myriad of sources without any line-of-sight to the preparation of the food or knowledge of where the food comes from, is nothing short of incredible.
Did I really just use part of this week’s Top of the Fold to give recognition and praise to the Food and Drug Administration (“FDA”)?!? Yes, yes, I did!
But my prediction of this consolidation is not predicated on the demand from operators alone, it’s also based on the meaningful changes in the venture capital industry and specifically the scarcity of capital for early-stage companies.
As we launch into 2024, I want to use this Top of Fold to speak as directly I can with the founders and leaders of early-stage tech & innovation companies.
I was interviewed this week by a publication (the article will be shared next week) and was asked about Branded’s interest and our business model that’s focused on early-stage companies. The early-stage space is where I believe Branded can be most impactful and contribute as a most strategic investor. It’s also the area of the maturation curve I love and enjoy the most.
For professional service companies, including investment managers, small deals equal small fees. Early-stage investing is “small-ball” and it’s genuinely difficult for larger platforms to justify the allocation of the time, resources, and capital to small deals. In addition to small fees or earning potential, the early-stage space is risky as you need to “bet” on companies BEFORE they’ve truly established themselves and their business models. Small earning potential and greater risk?!? What the eff is wrong with me, right?
In answering the question of “why I do what I do?” the answer is b/c I love it and b/c I believe Branded is excellent in this specific domain. How fortunate am I that I get to be part of building businesses and supporting so many young and emerging companies. Readers of the H^2 know that I use sports analogies often (too often?) and I specifically choose the sport of baseball as my go-to sport the most.
Branded and other early-stage investors play the same “game” as many other investment platforms, but we play in a more youthful league. The early-stage or maybe the minor leagues is NOT the right league for you and your company if you don’t LOVE the phase where companies are still coming together and figuring a lot of their stuff out. Identifying, vetting, validating and then investing and accelerating early-stage companies is what Branded loves to do, and again, I think we’re darn good at it!
The last few years we’ve seen a number of large hedge funds (Major League teams) move ‘downstream’ in an effort to capture companies early and many tried to improve their odds of winning by placing many bets on the proverbial table. We even saw several large corporations attempt to play directly in the early-stage space.
Did they love this space? Did they love the grit and determination associated with playing small ball? Were they passionate about building businesses?
There are many reasons for the collapse of the early-stage market and specifically the drying up of capital. Certainly, rising interest rates were a key part of the story. But so was an overall lack of diligence and the deployment of capital in technology solutions that were in search of problems and challenges as opposed to solutions that addressed the hospitality industry’s most pressing and important ones.
Going back to my conviction around the consolidation and M&A craze we’re going to see 2024, in addition to the needs of hospitality operators, it also has to do with the funding available to many young companies – spoiler alert, while I see a thawing taking place, capital flows are still VERY light! Don’t get me wrong, there is and will continue to be capital for strong companies that deliver value to its customer base, but such will not be the case for companies that are still trying to figure out their respective product market fit (was too Captain Obvious for this crew?).
I wrote last week about the record amount of dry powder on the sidelines, and I want to say again this week, that capital isn’t going to save companies that don’t have their business figured out. According to Pitchbook, the amount of capital on the ‘sidelines’ has reached a record setting $280 billion, and that capital can absolutely remain on the sidelines.
Emerging technology and innovation company leaders, you want to secure capital? Show us you understand your customer, their needs, the challenges they’re facing and how you can deliver immediate or at least near-term value for them (the hospitality is very JIT or Just-In-Time oriented). Don’t tell me how much money you’ve raised, what prestigious accelerator you’ve graduated from or that your company will be worth a billion dollars (please note: I hate hearing the “B” word in meetings with early-stage companies). Tell me you understand your target customer and how you can help them. Tell me what value you can uniquely bring to your customer and that you’re addressing what matters most to them.
I’m launching into 2024 with the conviction that this is a buyers’ market! Multiples are lower than they’ve been for the past few years and capital remains scarce. This combination shifts the advantage to those willing to deploy capital versus those that need it. Environments like this don’t last forever, in fact, they usually don’t even last very long, b/c greed and FOMO usually bring folks off the sidelines.
Environments like this, difficult environments and ones filled with adversity attract interesting bedfellows.
This conviction I’m carrying into 2024 allows me to pull a line from William Shakespeare’s play, “The Tempest”: “Misery acquaints a man with strange bedfellows.” The word misery is a bit extreme and I’m not expecting at least some of the consolidation I’m betting will take place b/c of misery, but b/c we all need to do more with less and that includes leveraging our respective infrastructure and overhead to cover more ground. This is a great moment and environment for creative thinking.
How excited am I about the year ahead? VERY!
How much do I love being on this journey with so many of Branded’s existing portfolio companies? EXTREMELY!
Is Branded open to meeting new emerging companies and bringing them into our community? ABSOLUTELY and I’ll go further and say that as several of our existing portfolio companies graduate and move onto the Big Leagues, we have a need to work, embrace and welcome new players onto our team and into our portfolio.
Let’s make 2024 a tremendous year for the Branded community and let’s do this together!
As always, it takes a village.
Readers of the Hospitality Headline, that are interested in learning more about Branded’s portfolio companies, investment strategies and future opportunities, are invited to explore becoming part of our Access Hospitality Network.
Join us for a special edition of Hospitality Hangout as we take a trip down memory lane with a special REWIND episode! In this REWIND episode hosts Michael Schatzberg, "The Restaurant Guy," and Jimmy Frischling, "The Finance Guy," were joined by Marianne Radley, the Chief Marketing Officer of Smoothie King. The trio engaged in a discussion revolving around effective marketing strategies and insights within the food and beverage industry.
This week's winner of the WITW is Branded contest goes to David Nichols and Alex Nichols from Colorado.
The Branded Team is fortunate to have a direct a meaningful relationship with both of these Nichols!
Alex was an outstanding summer intern and despite the college he attends, he was welcomed at Branded (Go Wes!).
David is the President at Spirits Network & NBTV Channels, one of Branded's portfolio companies and an owner at Kings County Distillery, a key partner of our Hospitality Hangout and a libation that is consistently poured at B Works!
Always nice to see a father-son combination wearing some of our best swag!
By: Zack Oates, Founder & CEO of Ovation
The restaurant industry is notoriously go-go-go, but one lesson from a homeless man in the early days of Ovation has taught me the power of pause. No matter what your life looks like, know that you’re living someone else’s dream. So why not make it yours?
By: Seth Temko, Solutions Services Partner at Branded Hospitality Ventures
Imagine success as a jigsaw puzzle. The big, splashy pieces are your triumphs, easy to spot and fit together. But it's the smaller, less conspicuous pieces - the failures - that often make the picture complete. In a culture fixated on winning, it's revolutionary to embrace a simple truth: failure is not just inevitable, it's essential. It's not a mark of defeat but a necessary ingredient in the recipe of maximized output.
Here's a radical thought: if you're not failing at something, you're probably not moving fast enough. This flies in the face of the traditional view that failure equals incompetence. Instead, it's a sign you're pushing the envelope, daring to think differently. In our fast-moving world, this isn't just a good idea; it's a survival strategy.
By: Rev Ciancio, Head of Revenue Marketing at Branded Hospitality Ventures
What is the BEST source for restaurant marketing tips? My weekly newsletter mostly because I update it weekly. 😎
What is the ULTIMATE source?
No more guessing what to do with your loyalty program, how to get your restaurants to come up higher in search or how to grow your database, what kind of content to produce on TikTok, here’s everything you need to master your marketing so you never have to worry about revenue again …
IN THE NEWS
Hospitality Tech and F&B Innovation IN THE NEWS:
We love to highlight Food Service & Hospitality news, especially when it’s Partners & Friends making it
- Chowly: Chowly Announces Acquisition of Targetable to Help Increase Demand for Restaurants
- GoTab: GoTab's Phone Only POS (no card reader needed)
- Ovation: Grilling up Top-Tier Customer Service With Laura Rea Dickey
- Incentivio: Harnessing the Power of a White Label Food Delivery App for Your Restaurant
- Incentivio: What to Look for When Choosing an Online Ordering System
- Incentivio: Maximizing Customer Engagement Through Mobile Apps in Restaurants
- Brizo Foodmetrics: Using Restaurant Database to Track Trends in the Restaurant Industry
- Brizo Foodmetrics: The Importance of Data Leads for a Successful Food Business
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!!
- Reuters: DoorDash plots expansion outside core restaurant business in US - FT
- Dive Brief: NCR outlines ATM spin-off strategy
- Gulf Business: Deliveroo expands reach to all major centres of Kuwait
- Marketing Dive: Third-party data loss could be problematic for SMBs: Here’s what the numbers say
- Restaurant Business: Is this the end of in-house pizza delivery?
- Restaurant Business: What Groot Hospitality is really good at
- Fast Company: Jack Dorsey axed annual performance reviews. Here’s why other leaders eventually will as well
- The Wall Street Journal: Bloomin’ Brands Names Two Directors in Agreement With Starboard Value
- Restaurant Business: TGI Friday's closes 36 stores, sells more to Ray Blanchette
🔍 Got Questions? We've Got Answers! 🌟
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!
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 January 2024