Mine Data: Mastering the Art of Data in the Restaurant Industry with Andrew Smith of Savory Fund

The fascinating world of data within the restaurant industry unfolds with our expert guest, Andrew Smith, the co-founder of Savory Fund. His unique insights, stemming from an impressive blend of tech and restaurant industry experience, truly bring to light the enormity and complexities of data management spanning across multiple restaurant brands. Can you grasp the concept of data as the new oil? Join us as we navigate this intriguing landscape, tackling brand consolidation trends, the evolution of restaurants into e-commerce entities, and the art of breaking down vast data sets into actionable decision-making commodities.

We dive into the heart of guest acquisition and marketing strategies in the restaurant industry. Discover how the apparent burden of marketplace fees transforms into an ingenious marketing cost for potential customers and the role of A/B testing in guiding marketing expenditure. Listen closely as Andrew unveils the pivotal role of technology in growing a business and his personal journey of leveraging a suitable tech stack to fuel brand growth. He paints a vivid picture of how tech innovations heighten efficiency profits and foster a more targeted marketing approach.

This episode culminates with deeply exploring building customer loyalty and brand galvanization. Andrew emphasizes the significance of a carefully chosen tech stack in cultivating customer loyalty and boosting efficiency. Our discussion sheds light on how A/B testing can enhance our understanding of customer behavior and how marketplace fees can be deployed as a marketing cost. Andrew's experience in investing in a brand, scaling it through an appropriate tech stack, and the essential role of data in these processes is a journey worth listening to. This engaging blend of tech and restaurant industry wisdom promises practical strategies for business growth. We promise you this is one episode you won't want to miss!

Transcript

Speaker 1: 0:00

We're here at Create this week and recording some very special podcasts for Nations Restaurant News. We're going to be interviewing eight different executives from restaurants and also from the Ambassador Community to explore different themes of each of the chapters of the path of digital maturity. Okay, hi everyone. Today we are joined and thrilled to have Andrew Smith, who is the managing partner and co-founder at Savory Fund. Andrew is a former tech entrepreneur that then got into restaurant ownership and investment with Chainslake for Moe Betters, pinshow, my personal favorite Crack Shack, which, back in our kitchen, united Days was our go-to place for lunch. And so, yeah, we love it.

Speaker 2: 1:13

People always ask Crack Shack, what do you serve them? It's like well, it's not what you think.

Speaker 1: 1:18

Yeah, it's great. So today we're going to talk about some of the themes from our third chapter Mind Data. As they say, data is the new oil and I suspect you and your team have to go through lots of it to make the decisions you have to make on a daily basis.

Speaker 3: 1:30

So, looking forward to getting into it, yeah, so we're particularly interested to have you talk about this. Because of your tech background and we think restaurants are moving into an era where they're really becoming e-commerce companies, which they have not been before and because of your understanding of tech and bringing that vertical with you to the restaurant industry, we think you'll have a pretty unique perspective here, maybe.

Speaker 3: 1:55

I don't know we'll see, yeah, so first question is just you have several different restaurant brands across the portfolio. How do you handle the enormity of data that comes in with each transaction across all of this brand?

Speaker 2: 2:08

Well, first, to be completely honest, when I got into industry 15 years ago, I remember coming from the tech industry and I remember the first restaurant we built we were French Eziz and we had this shelf that was up above the drive-thru window and there was this little box on there and it would print out orders and they would come in like a little bed-sea scrolls. You'd open it up and I'm like, well, what the heck is this? And I'm like, well, that's your catering order. And so it was coming in on a fax mission.

Speaker 2: 2:35

And so, going from 15 years ago itself today is unbelievable to see how much tech has actually been layered into this industry. And I think that with all tech, even when I was in the tech industry, the thing that you have to do is you have to break it down. So, even if I have multiple brands with multiple layers of different regions and states and people working on it and different customer profiles, and you really have to break it down into what you're trying to decide on and look at that data specifically for that part of the business, and then go to the next part of the business and look at that data. You look at all of it. It's pretty enormous and it is it's overwhelming, so you have to break it down.

Speaker 3: 3:10

So you think about it as what business decision am I trying to make? How am I trying to impact the business? Then let me go find the data that's relevant to that question Correct, and some of them work interchangeably.

Speaker 2: 3:20

Right, you have to understand all of them, but we just break them down, so we're not thinking about all nine of our brands and the hundreds of restaurants we have. We look at what is the specific thing we're trying to solve and then what's the data that supports it.

Speaker 3: 3:31

That's very interesting because I think there is a big movement in the restaurant industry right now to consolidate brands, put them all under an umbrella, under the theory that there are certain things that can be shared, like finance and HR, but also IT and maybe how we think about data and loyalty, things like that. But each brand has its own unique personality, has a different set of consumers, a different frequency rate for the brand, and so, while some of the technology and approaches might be shared, the individual questions are going to be unique.

Speaker 2: 4:01

Yeah, it would be much easier if all of it worked the same, right, but every single brand is completely different. And when you look at real estate, for instance, and you're going on truck on real estate, people say, do you just go out there and stand there and kind of go like this, and this guy, you do do that. I mean, you have to have some gut instinct about it, boy. You look at so much data demographic data, sociographic data and that data is not the same across the board, right? So who's your customer? How are they communicating with you? How do they want to dine with you? All of that is very individualistic to each of the brands out there and I wish it was a little bit more the same, but it's not. All of them are unique.

Speaker 1: 4:35

I suspect it's even more challenging these days as well, because it's not just about the location where the restaurant is, because, of course, your service in customers three to five miles away from where that location actually is. And I guess that leads to our next question, which is around the fact that restaurant companies today are becoming e-commerce companies and when we learn from what other industries have taught us about e-commerce, where do restaurants stand today on utilizing e-commerce data, e-commerce metrics, to make better decisions?

Speaker 2: 5:04

Yeah, I think that we're still a little behind.

Speaker 2: 5:05

I mean, I think that with the thing that happened in 2020, we don't like to say the word anymore because it was awful.

Speaker 2: 5:11

Bc, yes, but during that time, though, I think that three or four years of technology was jammed down every throughout in two years, and I think that the consumer they adopted pretty quickly too, because they had to.

Speaker 2: 5:24

Nobody became Betty Cropper overnight, so they were like holy cow, how do I get my food? Still. And so I think that everybody has adopted quickly, much quicker than I think was happening previously, but I think still nowadays, people are still thinking well, do I have to go to the restaurant to get it, or can I order it or not? Do I order it on a 3PD app, or do I order it correctly with the restaurant, or can I go out to Google and just order it through Google as well? There's still a little bit of learning curve, I think, for a lot of consumers, because you have to remember a lot of consumers out there there are different levels of understanding technology too. When I was a technologist, you would always have to build something to the lowest common denominator. You always have to build it to the person that's you wouldn't say the dumbest, but just the person that understands technology the least.

Speaker 2: 6:04

It doesn't know as much they don't know as much, and so, although I would say my mom is on Facebook and probably runs that better than I, even know how to use Facebook right. So you can't just say age is the issue, it's just the understanding of technology, and so building things so that it's at the lowest common denominator is what I always say, and right now I think that we still have a lot of learning curve issues with our consumers for all brands. I really do.

Speaker 3: 6:24

Well, and it's so fragmented. Even the example you just gave first-party ordering, third-party ordering, order through Google there's so many different ways to do it.

Speaker 2: 6:31

Give us one portal. Yeah, we want one, even as I am a sophisticated consumer.

Speaker 3: 6:36

It's different for every brand and everywhere I go, so it is legitimately quite fragmented.

Speaker 2: 6:41

Yeah, it is still fragmented. I think it's coming together better and I think the aggregators out there that are pulling the other technologies to bring them all into one they're still trying to figure it out. I mean APIs with everything. All those technologies are not perfect, right. And having those bridges to all those technologies, those don't always support what you want and they're not as smooth as you'd like them to be.

Speaker 3: 6:58

Yeah, that's true. The industry today has very much been sold on this Open API. Everything should talk to each other and that will be fine. Okay, those integrations don't always go well. They become more complex the more of them they do. Yeah, for sure, I have it. As we increasingly transition into an e-commerce world, we start using words that are much more familiar to technology than they are to restaurants. Things like LTB to CAAC, which is something that I think we all throw around in software all the time, and restaurants are just starting to think about. Well, what do those words, what are those letters even stand for? What do they mean? How do we think about them? How do we calculate them? And so, for your restaurant brands, how do you think about let's just start with customer lifetime value. How do you think about how valuable a customer is to the brand?

Speaker 2: 7:45

Yeah, especially now where traffic is a little slower. I mean, everybody that says that they are doing just fine is probably lying at this point.

Speaker 2: 7:52

Well, the industry is flat to down, it's flat to down right now, and so I think, even more so than ever before, I mean, or to think that people are looking for well, how do I get my consumer to come back more often? So the lifetime value of your customer is probably the most important data set that we look at right now, and the only way you can do that is if you're communicating with them and you know when they're coming in, right.

Speaker 2: 8:09

So you really have to invest into and lean into your loyalty and your communication tools with your consumer and following that, when you see them coming in once a week or you know, we own Swig, so we like to see people come in two or three times a week because it's a habitual thing, like coffee is, but if you start seeing them go from three to two to one and then once a month, that's a big problem because trying to get another person in that customer acquisition cost can be very costly when there's so much noise out there with marketing and social media that investing and leaning into your consumers today is a technology you want to invest into, and we are heavily.

Speaker 3: 8:44

And what do you do with that customer lifetime value once you know what it is? What is that enable across the brand?

Speaker 2: 8:50

I think that then you look at how you're treating a customer when they're there, because that's the most valuable person that you have, is the one that's right in front of you. You start thinking do I spend more money in marketing and outbound, or do I spend more on internal culture, team training, speed? There are things that you do differently. When you say, well, we're losing the customers we already have, gaining them is really dumb to be focused on. Let's focus on internal operations or what does a consumer want, versus trying to get another one. So the long term value of a consumer for most customers I don't think people understand this, but most customers it can be in the thousands to tens of thousands. And if you think about that number and you're thinking, well, I'm going to go and spend $20 to try to get a new consumer, $5 or $1. Still at times, how many thousands of dollars you're spending. It just makes a lot of sense to keep you coming to Swig every day?

Speaker 3: 9:40

Absolutely, that's what we want. We used to say at Taco Bell that marketing brings them in and operation keeps them coming back and we're so focused on digitization and technology tools and personalization and all the things we can do to communicate with consumers. All these fun new marketing tools that we have at our fingertips, but really it's kind of the old school fundamentals that matter.

Speaker 2: 10:02

It is. And the thing about Taco Bell. I mean, who's done it better? I don't know if anybody's done better. You think Chick-fil-A has always done it much better than some of the old dogs, but I think Taco Bell is probably one of the best operating options.

Speaker 1: 10:12

They're consistent. She'll stall time. Thank you, you did great.

Speaker 2: 10:17

You did great when you guys were at work. I ate there two days ago. Yeah, I still ate there. I mean, why would you not?

Speaker 1: 10:24

One of the things about Lifetime Value, though, Andrew, is how does this work for something like Savory when you've got a plethora of different brands? Do you look at Lifetime Value across all of the brands or do you look at it on a brand by brand basis? All brands are the same.

Speaker 2: 10:35

So we look at all of them from the consumer data set. We look at it with the technologies that are working and not working, and it's interesting, some of the technologies work with some brands and they don't as much with other brands. And I think the CrackShack consumer is different than the Swig consumer, it's very different than a Pichot consumer and it's very different than the Sicilian butcher, which is a sit-down, table-side Italian restaurant concept. It's a very different consumer that's going in there and wanting to pair their wines with their foods and have an hour and a half experience, and they're going to probably go there once every couple of weeks. Three weeks is what we want.

Speaker 3: 11:04

Certainly a very different occasion.

Speaker 2: 11:06

Very different occasion.

Speaker 3: 11:07

Even if it's the same person.

Speaker 2: 11:07

Yeah, exactly right, and so the way that you communicate with them and invest into them very different, and what they care for is very, very different.

Speaker 1: 11:14

Well, let's touch on the guest acquisition piece and they are the customer acquisition cost element. In the book we talk about a Roas best-in class that we've heard at around 10 to 1. I'm curious what it is for you guys and really, how do you think about spending on marketing? One of the things we often try to advocate for is saying, when you look at the fee on a marketplace, actually see that as a marketing cost, because that is acquiring potential guests, potentially to be acquired in, potentially to be converted into your first party channel. But how do you guys look at guest acquisitions? You said in the book that's 10 to 1. In the yes, in our past digital maturity that we say I would say that that's accurate.

Speaker 2: 11:51

I mean, it's very close to how we feel about it as well, and I think that when we look at how many dollars we spend acquiring it used to be a couple years ago, when traffic was good, but we wanted to get more Everybody always wants more that we would lean more into the marketing dollars of gaining new consumers, and right now it's actually shifted to where we're literally almost pouring all dollars into keeping the consumers that we have.

Speaker 2: 12:14

We think that if the consumer comes and then they bring their friends and say, hey, you got to come check out this place, that's going to be less costly than going out and trying to compete in a very noisy, crowded space of marketing right now with restaurants. I think a lot of the marketing tech that has come to me saying, hey, we want to put this in all the cyber brands across the board. There's too many of them and a lot of them are still, I think, early and so you don't know if they're going to work or not either. So marketing is very, very expensive and I think that the customer acquisition costs used to be better. I think it's actually going up right now and when I look at that I think it's going up because it's not working, If you ask me. I think that we have to consume the data that we have and we have to communicate with consumers.

Speaker 1: 12:55

We do advocate a lot in the book, again learning from e-commerce about the importance of A-B testing and actually the encouragement to restaurants to do small tests to be able to see what tactic, which promotional metric works, even to the degree of being able to test at different times of the week, which, of course, is something that's available now. Does that level of experimentation form part of the way you guys approach it 100%?

Speaker 2: 13:17

So A-B doesn't have to do number one. You'll usually say, Okay, I have $10,000 to spend, or whoever is listening $1,000 to spend because you don't always have to spend a lot to get results. But you do have to say there's two different strategies, which one from the tech company, which one is the one that's working the most Well? This one is working a little more effectively. Okay, then I'm going to do $7 to $3. And then we're going to test and then usually you can test it within two to three days to see what the reaction is, and then you can shift along the way. You don't have to go a month or two months or three months. The nice thing about technology is you can get that data quickly and then you can shift to whichever one's working better. But A-B testing is what we do with every dollar we spend on marketing right now.

Speaker 3: 13:55

That is such an incredible difference from the old days of I'm going to put something on TV. I'm going to test it an entire market, six months, how did it go.

Speaker 2: 14:04

Well, with A-B testing too, I think that people think that with A-B testing you send it out and then you wait for the results. I think with A-B testing or just testing technology and spend anyway, you have to watch it consistently every day. I think people get busy and they go Okay, I've got marketing channel going, you know, and I've got my loyalty dollars spent and I've got my marketing on 3PD channels going and they have all the things going. Then they just go back to work and I hope that they just come in the door. You've got to watch them and you've got to see which ones are working, which ones are not. And if you're not willing to visit or dial up one and then dial down another, then you've just spent money and you're probably not going to see the results you want. But that's what you want with that.

Speaker 3: 14:42

And do you feel, as you look across channels, that you're able to get that same feedback from a third party as from a first party order, as from Google order, as you were talking about previously?

Speaker 2: 14:52

3PD has been hard. I think that it's. I'm not going to say everything I feel about 3PD. I think all of us feel one way or the other about 3PD. But 3PD the data is what they like to hold hostage a little bit and you really have to negotiate to get your data back so that you know how it's working when you do it through your own website and they're doing it on the order, even if you use dispatch through one of the 3PD services. Much better because you can actually see the inbound and you can see the ticket size and price and how frequent they are with their realty number. But data has been tough. Google is a little better. You feel like Google has been probably a better partner. Yelp is also very, very tough. It seems to me that you don't get the good data unless you're panicky. You want the good data and see if you get the good data and then you actually see, wow, people actually really do like this. It's not just all the negatives.

Speaker 3: 15:40

It's so interesting because you would think they would have a vested interest in having all of the merchants driving frequency driving basket on platform and they would want to give the merchants that data so that they could do what it takes to drive those numbers. Seems backwards and I can't tell if that's because they're busy driving frequency and basket on platform, you know, having nothing to do with the merchants, or if that's just because they're early in their creation of the platform and so they haven't gotten sophisticated around the release of that data.

Speaker 2: 16:07

I'd like to sit in those tech platform meetings talking about what we're building next, just to see what all the strategy is. I don't understand strategy.

Speaker 1: 16:15

Well, their loyalty program is all around. Dash Pass and the ability to get people to visit their platform more often, and whether they're vested in the recurring customer to a brand, I think is the big friction point there, definitely a friction point.

Speaker 3: 16:28

So the amazing thing about all of this data that exists in restaurants now is that it can translate all the way back through operations and get into things like predictive forecasting Across the savory brands. How are you using the data that you've received to make the operations better too?

Speaker 2: 16:46

Yeah, so every Q4, we do planning and budgeting, forecasting for the bummering, the money, and we have our board meetings in January and our investment teams for every one of our platform companies will sit down with the CFO or the VP of Finance of each brand and we actually look at all of the data that comes in, from the locations to the revenues, to the type of clientele that's coming in the door to the spend. We look at how much people are diamond in, how much you're going to drive through, how much you're ordering online. All of that data, then, is put into the forecasting models that we put in to say is it going down or up on digital? And then do we build bigger dining rooms in those locations or smaller dining rooms? Do we add a drive-through or do we take the drive-throughs away because those are costly?

Speaker 2: 17:28

On the inside of a restaurant, what things are you doing to your business itself to then build out more the following year? And then they fell down the year after that, because you're looking for real estate for a whole year of priority when you build, as you know. But those decisions are made in how we're going to project the business and how much we as a fund are going to invest into the business and how much cash flow gets out of that business. So data is the only way you live and breathe in restaurants. It used to be just like if I have extra cash in the till, at the end of the day I've made money. Now you're looking at I mean, I can't even tell you how many pieces of data sets we're looking at to make the decisions that we make with the following year.

Speaker 3: 18:03

And is that starting to get more real time? Are you starting to use machine learning and AI to be able to affect your scheduling, your forecasting more day-to-day things, or is it more a long-term view that you're?

Speaker 2: 18:15

taking. It's a long-term financial model. We call that an LTFM. Look at that. I know that's a great letter. You didn't even know that. So we do an LTFM and then we do a budget in actual. But we use a lot of the data to predict short term as well. So we'll predict for January where we're going to be. We give out those budgets to the leadership team and the data that's coming on a daily, weekly, monthly basis. It's then layered in over that and then we look at the variance and we figure out why AI is tough right now, because we looked at it, we try to hire AI specialists to build models within AI to get us information. I feel like it's still not there 100%. I think it's coming and it's exciting to me because it's going to take a fleet of people right sitting on desk trying to figure something out. It's going to be minutes instead of a month, but we just haven't used AI enough yet. I think it's coming. I don't think it's there. I don't think it's there.

Speaker 3: 19:05

I don't think it's that you haven't used it up. I think it's that it has not been used up.

Speaker 2: 19:08

I don't think it's not, I don't think it's there.

Speaker 1: 19:09

It gets a lot of air time. It's not true to AI.

Speaker 2: 19:11

It's not there. It's not that it's helping all the kids at high school right now, but it's not helping us.

Speaker 1: 19:16

What a last question for you, andrew, before we finish up. I'd love for you to put your investor hat on for us, because I was speaking to 12, 13 CIOs the other day about the challenge they have in their executive circles. We've been able to say, about how to invest in a piece of technology the dollar that you put into a piece of restaurant technology versus the dollar you put into a new site, how do you look at investing into digitization versus into a new unit or brand?

Speaker 2: 19:46

Yeah, it's a good question because I had a brand that we bought into and I looked at it and I thought we could do what we do, which is scale. We're a scaled shop, we know how to scale. We have 80 people back at our office. We're not a traditional product, we firm because we're operating GPS. So we buy into the brand, we partner with the founder and then we help scale and grow it, and the things that you have to put in place are the people, persons and systems to make sure that that happens.

Speaker 2: 20:07

We always look at the tech under belly of a business and we think, if we don't get the right tech stack in place and you don't have the right systems in place, you can't grow. This doesn't matter. So I always look at a brand and say do we need more stores or do we want more revenue and profits with what we have? We bought into this brand about five years ago and I thought we could easily add more units here because the cost of building them out was pretty low, and so the cash and cash returns were mind boggling. At that point in time. I thought there's another 10 to 15% of the store level that we could get out of these businesses that we currently have.

Speaker 2: 20:40

So where everybody was pushing, they said let's grow, let's grow, this is a fun brand. I said let's pause and perfect, let's plant our ground, let's get the right tech under belly on this and let's get the throughput of these stores and these drive-throughs much higher. So things like the timer on the drive-through alone and then you put the loop in the drive-through so that you know when they finally made their order, to what time they have fun and how long they have to window and then out. It was like a minute and a half for someone that should have been through there in 35 seconds in my mind. We got it to 50 seconds and then 40 seconds and then 35, and then we got it to 22 seconds at the window, which is fast.

Speaker 3: 21:15

That's amazing.

Speaker 2: 21:16

And you probably know what brand it is. But when we did that, we literally three times the profit on the same block of stores. I mean, it was millions of dollars, just because of technology throughput. And then learning what our customer wanted, and learning, when they had the linebuster out there with the iPad, that all they had to do is put in the number and it would come up and say, oh, I see that this is what your product is, is what you want again? Yes, put your credit card on there, not take cash anymore, send them through.

Speaker 2: 21:43

And then we knew that that customer was coming three to four times a week. But then we said well, we want to make sure that we can say Carl, so when you pull up with your phone number, put it in Carl, how are you doing? Would you still like this product? Yes, I would. Here you go, buy it and then you're through. That's what's spread it out and just because of technology and watching that data, it's three times the profit of that business. And then we started to grow it. But it's been a magical story because of that underbelly that we put there.

Speaker 2: 22:07

Yeah, those amazing cash on cash returns were too ridiculous, too ridiculous cash on cash. And then we hit the 2020 thing, and then logistics and supplies, and then now those costs have gone back up, which sucked.

Speaker 1: 22:17

The lovely thing about that is, yes, three X profitability, but also a nice little sprinkling hospitality as well. I'm not a person who has a consumer.

Speaker 2: 22:24

They're sending it much higher. They liked us more. They became galvanized with our brand, with our team. It helps not just for throughput and more money. It helps because you actually make a customer more loyal to you for a lifetime. Truly, you can have a copycat open across the street, doesn't matter, they're going to come to you, right.

Speaker 1: 22:43

Well, look, I think that's a great place to finish it up, andrew, thank you so much for joining us. Really appreciate it. Good luck to you and the team at Savory. We're looking forward to seeing what comes in there in the months and years ahead Still mine. The Digital Restaurant podcast is available for you to follow and subscribe. Wherever you listen to your podcasts, watch us, rate us and subscribe to the Digital Restaurant on YouTube, and follow along on all our social media digital restaurant channels. Thanks for listening.