Sep 23, 2023 16 min read

You Don't Know, What You Don't Know

You Don't Know, What You Don't Know
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Friends of Branded!

Happy Saturday and I hope everyone had a great week.

It was a fantastic and fully loaded week at B Works. The Branded Team had a joyous return from Dallas and a most memorable FSTEC conference and it was our first full week back in NYC.

Before we dive into this week’s Top of the Fold theme for the week, I want to make one mention about last week’s edition (Back to the Future) and specifically the overwhelming enthusiasm for the movie I drew inspiration from.

I clearly enjoy embracing films from my youth, but I had no idea how many diehard (pun intended) fans of this iconic Sci-Fi movie, were also subscribers of the H^2.

The responses and comments from last week’s edition inspired me do a little search and what do you know, Back to the Future ranks 135th on the list of The Greatest Films!

And before you accuse me of finding a “friendly” poll to support my enthusiasm for this film, please know, this was the lowest ranking of the 4 polls I found in connection with this search (Back to the Future ranks 12th on Hollywood’s 100 Favorite Films, 45thon Top Rated Movies by IMDb and 56th on The Greatest American Films by BBC).

I’m obsessed with fairness, so I took from the lowest among these 4 polls. 😊

With the above in mind (and then I promise to move on), here’s a clip that I will simply encourage you to watch: Tom Wilson - The Question Song.

The clip was shared with me by a dear friend (thank you UC), it's less than 2-minutes long and if you watch it and you don’t smile & laugh, I owe you a libation at one our restaurants.

For those who don’t know who Tom Wilson is, he’s the legendary fictional character and antagonist, Biff Tannen, in all three Back to the Future films. If you don’t know who Biff Tannen is, you can simply skip the clip and move on. IYKYK.

Now, this week’s theme, “You Don’t Know, What You Don’t Know!” There’s a lot to unpack here and there are so many directions this can go, but for Branded, this saying is foundational to our company, strategy, and investment thesis.

I admit I was surprised that the origin of this famous saying is most often attributed to former Secretary of Defense, Donald Rumsfeld, and the expression means one doesn’t know the extent of their own ignorance (you don’t know your unknown unknowns).

B/c I like to keep a happy and healthy home, despite what Google told me, I’m giving attribution NOT to the former Secretary of Defense, but to a the Greek philosopher, Socrates who is credited with being the founder of Western philosophy and among the first moral philosophers of the ethical tradition of thought (if you know where I went to grammar and middle school, this will all make perfect sense to you). 😊

Branded’s business was formed with the belief that not only is the hospitality & foodservice industry incredibly fragmented, but it’s also among the most misunderstood asset classes. There is fundamental and foundational reason for this – everyone thinks they understand it!

This false sense of familiarity is the result of the frequency in which people engage with hospitality & foodservice (3 times a day? 4? 5? More?). People know how to feed themselves and many are fantastic chefs, mixologists or otherwise.

Please note, I delineate cooks from chefs and bartenders from mixologists. I know how to grill meat. My wife knows how to BBQ. I know how to make a drink. Doug Quinn knows how to create a cocktail (cheers DQ).

Regardless of the level of one’s own skill in the world of F&B, people know how to feed themselves and therefore when engaging with a restaurant or other foodservice venue, there’s a level of expectation that may very well be unrealistic.

This is topic I can go on about for a while (and I’m sure many of you feel I’m already doing just that). I apologize.

So, here’s the key point: a guest’s expectation around hospitality & foodservice are often incongruent with the realities of a given venue solely as a result of their not knowing what they don’t know.

Restaurants are truly unique businesses b/c the manufacturing facility is on the other side of a wall separating it from the retail facility. And with today’s embracement of open kitchens, sometimes there’s not even a wall separating these two sides of the business (the back-of-house from the front-of-house).

Please understand, there is no blame or criticism being thrown at the customers. I would never do that (at least not so publicly). 😊

Our industry doesn’t even call these patrons of restaurants "customers." We call them "guests" and we want them to see and feel a kinship with our venues as an extension of their home and living room.

Branded’s business was born as a result of our belief that too much technology and innovation were being created and advanced without leveraging the very subject matter experts ("SMEs") that are the users of software and innovation (and for avoidance of any doubt, the people also paying for these services!).

That’s what our “operator-first” investment thesis is about (do you see this DP and your positive influence on me!?!). A commitment and focus on B2B SaaS (business to business software as a solution) that will address the most pressing issues, opportunities and challenges facing operators.

In order to identify, vet and validate technology and innovation, Branded leverages our in-house subject matter experts as well as our Hospitality Network, aka our army of owners & operators (despite my profusion of words, I still chose them with a great deal of intentionality, and I mean it when I say ARMY).

In order to get capital from Branded, a company must first be embraced by Branded’s SMEs and then, be embraced by our investment team. Too many technology & innovation companies are missing the mark and have created a solution that is in search of a problem, opportunity or challenge as opposed to one that is addressing the most important issues operators are dealing with.

Branded believes this is often the result of a void of industry expertise in the creation and shaping of the solution itself.

Branded's commitment as an operator-first investment platform also means we will ONLY work with tech & innovation companies that are directly thinking about and trying to help operators. We've seen and are aware of too many software platforms that are trying to squeeze in between the operators and their guests.

Readers of the H^2 know that I’m a free-markets person, so people should go about their business as they see fit, but Branded will only support and get behind companies that are adding value and trying to help operators across the spectrum of independents, SMBs, and enterprise restaurant groups succeed.

While Branded’s primary focus is on technology and innovation, I’m thrilled to share that we're moving forward with our very first dedicated emerging restaurant brand strategy. There will be more to share on that, and it will be done in the proper place and time (meaning this is neither the proper place nor time). 😊

As I thought about the unknown unknowns, I couldn’t help but think about some of the most common misunderstandings and misconceptions around the industry.

My experience, when it comes to working in hospitality venues, is limited to my time as a busboy, barback, waiter and bartender. I of course have some of my own ideas around this topic of misunderstandings and misconceptions, but as Branded's Finance Guy, I decided to reach out to Branded's SMEs along with a few friendlies in the industry and asked them for some their favorite “don’t know, the don’t knows.”

To the members of our Hospitality Network and operator-community, how many of the below can you relate to, or do you agree with?

MACRO: The restaurant business is easy, fun, and all about common sense.

I’m hearing songs from Mary Poppins in my head right now.

Here’s the reality, for those who have ever thought this is an easy business, let me tell you how HARD it is to manage a retailing and manufacturing facility, handle perishable inventory, doing so with a workforce that is extremely transient and in a highly competitive industry with historically skinny margins.

To succeed in this industry requires experience, knowledge, and incredibly diverse skills. It isn’t easy, but we understand how many guests think it is because they know how to go out to eat and watch reality TV.

And carrying this into the Branded world of tech, this projection of the guest experience has also created the false sense of confidence to create and or invest in technology for an industry where their only experience or understanding is their dining experience.

A PERSONAL AFFRONT TO OUR WORKFORCE: Restaurant jobs are not “real jobs.” Oh, you work in a restaurant, when are you going to get a “real job.”

This is one of my favorites, so please allow me to make this point crystal clear.

There is no better preparation for whatever part of the workforce one envisions for themselves then working in a restaurant. Many employees handle products, cash, and need to engage with guests. These are all highly valued skills. The ability to prioritize, multitask, and work across functions in a high intensity environment are transferrable skills to any industry.

The work ethic of restaurant workers is second to none. The United States would do itself a good service if EVERYONE was required to work in a restaurant for at least 6-months.

Leaders in any industry, if you see a resume with a strong hospitality experience, give that candidate a serious look.

TO THE ENTITLED: When a restaurant says “no” to a guest, there’s a perception that the venue is being hostile, difficult or even worse (I’m keeping the H^2 at a PG rating, so use your imagination and fill in your own words here if you like).

This perception is almost always off-base.

There’s a famous slogan or maybe motto, “the customer is always right.” This motto exhorts service staff to give a high priority to customer satisfaction. Attribution for this slogan is given to the pioneering and successful retailers, Harry Gordon Selfridge, John Wanamaker and Marshall Field.

These leaders advocated that customer complaints should be treated seriously so that customers do not feel cheated or deceived. According to Wikipedia (what?!? you think I have all stuff in my head? Life is open book and open notes!), this attitude was novel and influential when misrepresentation was rife and caveat emptor (“let the buyer beware”) was a common legal maxim.

Now let me burst your bubble or as Captain Man says, “blow your mind.”

Yes, my young daughter is a huge fan of both Captain Man and Kid Danger (this reference may prove to be an easter egg for this year’s Halloween customer, just saying). 😊

The customer is NOT always right. Don’t get me wrong, the hospitality industry wants to do everything it can to make it right for the customer, but smart and successful restaurant operators believe a remarkable dining experience can be created that will inspire loyalty. That smart operator knows NOT to let the guests disrupt that experience.

25 years ago, I was at one of Branded's restaurants and I watched the general manager ultimately evict a party of 4 from the joint. He packed up their order, told them there was no charge and escorted them out.

After getting these guests out without further issue, he turned to me and said, “Frisch, you probably think the customer is always right, but that’s not true.” He went on to explain what had happened, how despite his going above and beyond for these guests, that he couldn’t get the table to settle down and they were disrupting the entire dining room.

I told the GM I’d never forget that experience and to my old friend MR, I keep my word and have always remembered that valuable lesson and experience with you.

On a separate, but very much related topic, as one of the keynote speakers at the Prosper Forum said, sometimes you need to "fire the customer" (SB - I told you I was paying attention!).

RESTAURANT ECONOMICS: One of the great misunderstandings is how a restaurant dollar gets split up among the various costs and how the menu price relates to both the experience provided and the cost to produce the experience.

Below please find a letter that one of my partners and a leading operator sent to a less than happy guest in response to an unpleasant e-mail that came their way about their menu prices.

RESTAURANT FAILURE RATE: I believe there’s a commonly used statistic that says 90% of restaurants fail in the first year.

That statistic alone is incorrect. According to the NRA (the one that does the grilling) the failure rate is 60% of restaurants fail in their first-year operations and 80% within 5 years opening.

Here’s why I’m raising this issue and why it earned a place on my list of misunderstandings. Most people think that what matters most in order for a restaurant to succeed is the right concept and then location, location, location. Of course, those things count, but here are three of the critical decisions that a restaurant operator must get right b/c they will NOT have the opportunity to do them over: (i) location, (ii) lease, (iii) capital investment.

  • Location: Clearly defined and proven metrics for evaluating the real estate’s appropriateness for a concept. Simply stated, can you reliably predict sales?
  • Lease: Rent 6% to 8% projected sales, good guy (person) guarantee (no long-term guarantees), assignability, term.
  • Capital Investment: 3-to-1 sales to investment ratio, with a 3-year pay back.

From our experience, Capital Investment is the number one reason restaurants fail fast. They move forward with an undercapitalized business. Better to raise too much cash and not need it then raise too little and not have it.

(please know, the above is for traditional rent deals, not management contracts where the economics are all different)

Once and ONLY AFTER all the above is successful, comes the concept! And here’s what our restaurant experts strive for EVERY TIME a new concept is being developed:

  • Design the right concept, executing on these key pillars: creating distinctive, appealing, and affordable menu; having stunning, signature design; and delivering consistent service with genuine hospitality.
  • The concept must project strong sales in as many day parts and channels as possible: breakfast, lunch, brunch, happy hour, dinner, late night, events, & delivery.
  • Menu designed for broad appeal, low cost of good (COG’s), speed of service, and low labor. Physical design, menu design and concept collaborate to generate a sales mix of at least 35% of sales in beverage.
  • Memorable, Craveable (that one is for you GM), Instagram-able (one of Schatz’s favorites), Operational (an SVN staple), and Profitable (SO’s obsession).

Congratulations. You made it the end of this week's Top of the Fold section!

I'm dedicating this edition of the H^2 to the Branded Hospitality Network.

My goal this week was the shed some light on the inner-workings and complexities of our industry and again, to highlight, why something that appears to be so simple, is anything but that.

On a separate, but very much related topic, a favorite TV Series of mine, The Odd Couple, starred Tony Randall, as the character, Felix Unger. I’m bringing up the character Felix Unger here b/c it produced one of my favorite lines of all time about the dangers of the word “assume.”

As Felix went on to say in the episode, My Strife in Court, that if you assume, you make an ASS out of U and ME. In my opinion, this is akin to the unknown unknowns and in the hospitality industry, the ease and fluidity of assumptions is both massive and erroneous.

And finally, (yes, Schatzy, finally), the cover photo of this week's edition is from the 1987 American political action thriller, No Way Out. The film was based on the 1946 novel The Big Clock by Kenneth Fearing.

For those that have seen this film, you know why No Way Out was chosen for this You Don’t Know What You Don’t Know theme.

And if you’re among the MANY that have not seen the film (and I expect that's a large group as the percentage of Millennials and Gen Z on the H^2 subscriber list is absolutely meaningful), do yourself a favor and check it out!

As always, it takes a village!

This week's shoutout section is quite simply for all the Branded portfolio companies that I spent time with last week out at FSTEC and all the ones I connected with this week.

The journey we're on together is one that I take seriously and have great pride in. As I've said to each of you, we win or lose together (and I have no intention of losing).

The value you each bring to this industry that I love is incredible, and we enjoy nothing more than boasting, bragging and telling your stories.

The emerging and early-stage space is never an easy one. There's a reason people shy away from early-stage companies and it's NOT only b/c of the risk & return profile associated with this stage of the maturation curve.

For professional firms, small deals equal small fees.

For institutional investors, deploying meaningful amounts of capital is simply too difficult and taxing in the early-stage space. The early-stage market doesn't afford these investors the opportunity to invest the meaningful amount of capital they're responsible for and they'd need to diligence and invest in too many companies.

But the opportunity to be part of building and creating a company and seeing it breakthrough, well that is just a beautiful thing to be part of.

Of course, it's not easy, but then again, it was never supposed to be easy.

The life of an entrepreneur is anything but boring and there's no off switch! And that's why Branded, itself an emerging investment platform, loves working with emerging technology, innovation and now emerging restaurant companies.

We see you. We value you. We appreciate you. And we will win with you!

"Definitely A Thing of Beauty" Mickey Goldmill


Answer also revealed at the end of the newsletter


Buyer Beware of SMB Software Providers Trying to Move Upmarket

By: Seth Temko, Solutions Services Partner at Branded Hospitality Ventures

Whereas SMB sales is a volume game, Enterprise sales is all about account-based marketing and complex sales. It’s much more complicated and slow moving, but, like an iceberg, it has a huge impact. Read More


The Debate Over Tipped Minimum Wage Continues. How do Operators Financially Adjust?

By: Noah Stern, Associate, Branded Hospitality Ventures

Chicago looks to approve a law that would abolish tips credits, while California wants to enact a law that could raise minimum wage for fast food workers to $20. This week, I want to examine the financial implications to owners and operators. Read More.

Restaurant Industry Movers in the Market

—Data as of 9/21/23


10 Traits of a Successful Founder

By: Chris Hjelm, Partner at Connetic Ventures

Startup success is never guaranteed but based on more than 2,400 startup outcomes the most successful founders are more likely to demonstrate these traits: Leadership, Drive, Confidence, Honest, Uniqueness, Communication, Outgoing, Humor, Proactivity and Resiliency. Read More


Learn how the Hospitality Industry advisors from CohnReznick can put you at the forefront of advanced financial, operational, and risk management strategies.

Learn More



By: Rev Ciancio, Head of Revenue Marketing at Branded Hospitality Ventures

If you’ve never been to FSTEC, it’s a trade show that happens every year in the Dallas area, just after Labor Day, hosted by Winsight. As the name would aptly lead you to believe, it’s about where Food Service and Tech meet. My biggest takeaway? Guest Retention. Read More.


Hospitality Hangout with David Birzon, CEO Snooze an A.M. Eatery

Flipping the Breakfast Script | Season 10, Vol. 5 – The Hospitality Hangout Podcast


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!

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!!

ANSWER: Online Airline Reservation

The first online booking system was created in 1994 by Southwest Airlines. However, restaurant reservations were not that far behind when Opentable introduced diners to online reservations in 1998.


🔍 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!

Jimmy Frisch & Julia Suchocki
Branded Hospitality Ventures &
235 Park Ave South, 4th Fl | New York, NY 10003

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 August 2023

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