Masters of the F&B Universe (F&B tech leaders reflect on 2023 and forecast 2024)

Ever wondered how the restaurant industry is evolving amidst the shockwaves of the pandemic and soaring labor costs? Brace yourselves for an enlightening conversation with industry mavericks - Zach Rash, co founder and CEO of Coco Robotics, Seth Cohen, president of Sweetfin, Jim Goodman of Bevy and Glenn Gerlich of Loop AI, and of course the irrepressibly impressive Alex Canter and our host, Saul Cooperstein of Virtual Dining Concepts.

We're also putting the spotlight on the intriguing tie-up of real estate and future delivery platforms in the restaurant industry in this episode. We delve into the potential of robotics in tackling high delivery costs and making it more profitable for restaurants. We also discuss the impact of technology such as drones and robots on the controversial topic of delivery platforms and their commissions. Our conversation takes a forward-looking turn as we delve into our expansion plans for 2024, the rise of virtual brands, and the importance of aligning with industry trends. We wrap up by exploring how vendors and suppliers can approach businesses in this fast-paced industry. So, join us for a thought-provoking discussion on strategies, industry trends, and the future of the restaurant industry. Be prepared for a hearty serving of knowledge!

Transcript

Speaker 1: 0:00

And we've gone and put the digital restaurant backdrop up. We've got a table for the masters of the food and beverage universe dinner. That's our people's teams putting on tonight and looking for a few special guests for our NDVS special. Yes, we have an NDVS special, with not one but six guests talking about their reflections on the year just gone. Join us as we chat with Zach Rash, co-founder and CEO of Coco Robotics, seth Cohen, president of Sweetland, jim Goodman of Derby and Glenn Gurlich of Loop AI and, of course, the impressively impressive Alex Kansar and our host for the evening, sal Cooperstein from Virtual Dining Concepts. It's the end of 2023. Let's get in to the final episode of the digital restaurant. Thanks for having us here at the masters of the food and beverage universe. Before we get started, sal, alex, tell us about what this event is, because there is a wonderfully long table of people that are changing the world of restaurants.

Speaker 2: 1:13

at the very least, how did you discover that I was having dinner with Michael Montagano?

Speaker 4: 1:19

probably two and a half years ago in.

Speaker 2: 1:21

Pasadena. We just had so many good tech people in LA that no one talks for a table. It's just kind of crazy.

Speaker 3: 1:31

You think about a lot of tech in San Francisco, but in LA we have now Sweet Creek, our kitchens, all the innovative companies coming out of this scene. We thought it would be a good idea to bring together the heads of the business.

Speaker 2: 1:46

There are six people to help you to focus on. We work our way up. There are 60 people now.

Speaker 1: 1:51

Good evening guys. Thanks for joining us. We've got Zach from Coco and Seth from Sweetfin. We'd love to have you guys here Before we get started with our questions. We'd love for you to share a little bit about yourselves and your companies with the audience. Seth, do you want to kick us off?

Speaker 4: 2:04

Sure Happy to be here the president and co-founder of Sweetfin. Sweetfin was founded in 2015 as a premium poke concept. We have locations all over Southern California. Our mission as a company is to feel like the freshness.

Speaker 1: 2:17

How about you, Zach? What's your story?

Speaker 5: 2:19

Yeah, I'm Zach Rash from the co-founder and CEO of Coco. If you're in LA, you've probably seen the pink delivery robots roaming around. We make these robots transport food and grocery at a much lower cost than they exist today.

Speaker 1: 2:30

Zach was very kind. He invited me to his launch party. How long ago was that now? I think two years ago. My goodness, what's happened in those two years, including bringing?

Speaker 4: 2:38

us on.

Speaker 5: 2:39

Yeah, that's right.

Speaker 4: 2:41

There's our focus all over the place.

Speaker 1: 2:42

So we're joined by wonderful Glenn garlic and also Jim Goodman. Thank you for being here, guys. We really appreciate you joining our end of year special here on the digital restaurant. Now let's first of all get a brief intro, if we could, about both of your backgrounds and which companies are you with these days.

Speaker 6: 2:59

These days I'm with Bevs. We are a SaaS platform and operating system for liquor convenience stores. Past history claim to fame I was conceptualizer and founder of Ticketmaster Online did.

Speaker 8: 3:10

Ticket did ticketscom and say you know a thing or two about marketplaces.

Speaker 6: 3:15

I'd been around the block and have a lot of gray hair and my beard.

Speaker 1: 3:20

Great for you to join us, Jim Glenn, tell us about yourself.

Speaker 7: 3:22

Yeah, tough to follow that. So I'm a zero to one sales guy, been working in different spaces such as accounting, healthcare, now hospitality, focusing on restaurants specifically at loop AI, we optimize the backend of third party delivery, make it more profitable, efficient and get better understanding. Clear data, yeah fantastic.

Speaker 1: 3:40

What has 2023 been like? What have been some of the challenges? What have been some of the surprises that you've come across from your conversations with people in the industry, jim?

Speaker 6: 3:49

I would say even more than just 2023. I think it was the realization of COVID and how the lockdown changed the industry on the whole, driving a lot of people to delivery, and that flowed right on into 2023. So it's that continuation on understanding where they need to be in order to reach their customers.

Speaker 8: 4:12

Yeah, the consumer has fundamentally changed.

Speaker 6: 4:14

Yes. Not just the pandemic blooms and overnight, but that adjustment to it doesn't resolve itself overnight, unfortunately.

Speaker 4: 4:21

What was a big year for us. We went from 15 to 20 units, so there's a lot of building for us. Our tech stack more or less remained the same, I think as a trend. All restaurant tours felt the pressures of cost inputs going up. Despite what the CPI readings may say, there's still inflation, especially in services, businesses with labor. Rents are still going up. Just the cost of doing business is challenging. So I think all restaurant tours are trying to find ways to be more efficient, both within the four walls of the restaurants, and just be more efficient with their tech stack. So that's something that we've been focusing on a lot.

Speaker 8: 4:55

Do you think that has a big implication for how much tech people are using the kinds of tech?

Speaker 4: 5:00

For sure as restaurant tours are evaluating technology at this point. Every piece of techniques have a really clear ROI and so we're being very mindful of what we're bringing into our tech stack and maybe what we're moving from our tech stack, and you want to make sure that the tech stack doesn't get too bloated for the size of the company that we're at.

Speaker 8: 5:18

What do you think, Zach? What happened in 2023?

Speaker 5: 5:21

Well, we manufacture hardware and this has been a record interest rate increase, so funding has gone a lot harder. It's a lot harder to move faster as an early startup we're about three and a half years old Balancing that with the fact that labor costs have come up dramatically and they're continuing to do so in California, restaurant worker minimum wage for his restaurant chains going up to $20 an hour. New York just is on the verge of passing this bill for door-to-door drivers or gig workers to make I think was like $29 an hour pre-tips. So huge increases in labor cost at a time where I think a lot of businesses are concerned about consumer spending in a recession or in a higher interest rate environment. So a huge need for the product. To combine that with how do we make sure that we can scale and meet the needs of these businesses, about getting overextended on costs and making sure we can do it cost effectively. So that's been a unique challenge, but I think we've gotten some good solutions.

Speaker 8: 6:09

I suppose you need to put the capital into the machines before you get the customers.

Speaker 5: 6:14

Yeah, robots are expensive to grow but in the long run you have to invest a lot of money up front but it can have a huge offset in costs because once you deploy them they're just out there and you have this fixed cost instead of variable cost. We still have some variable costs, but a lot of that cost is up front and fixed and then, as long as you start getting some volumes of the neighborhoods, you can start reducing a lot of the costs for our partners and our ecosystem.

Speaker 3: 6:35

I think 2023 was like your come to Jesus years. There's no longer big venture of funding, subsidizing costs. It's down to building sustainably. I think a lot of companies have done a wonderful job, glory days have grown up and all costs are gone 2023.

Speaker 1: 6:54

For most of the folks we've spoken to seem to be saying it's been a year of optimization. Everything before has been, oh my goodness, we need to adjust quickly. And now everyone's been out to take a breath and say, okay, this is this, we got to take this seriously and we got to run this properly and we got to do it more efficiently. So it feels like this is very much the theme that's coming through from what you're saying.

Speaker 7: 7:13

It's too big of a black box as it exists today. Right, you've got enterprises running the same software to manage third party deliveries, mom and pop pizza shops right, they're getting the clear understanding that, hey, if this is 18, 20, 30, 40% of my revenue, this cannot be a black box. We got to run an efficient and effective business here and we need the tools to support that.

Speaker 8: 7:32

So, coming in 2024, based on having seen this movie play out in other industries, what do you think going to happen with marketplaces both in restaurant and retail in the segment you're in?

Speaker 6: 7:43

What we've seen from the third party delivery services as well as from other angles in the business. I'm going to couch it all in one umbrella of inventory being better able to understand what they've got so that way they can sell it properly and track it and all of the bits and pieces that go along with that, because if they don't know what's in their store they can't offer it up properly. Then you get into your world of cancellations, tracking, recruitment, chargebacks, all that kind of stuff. So by being more efficient on the inventory side makes everything downstream smoother.

Speaker 4: 8:23

I think it's a lot of the same. Like businesses are trying to figure out ways to be more efficient, I think the consumer is going to be driven more by value. So I think Zach's solution with Coco is amazing, because we can really promote our first party delivery service utilizing the robots and not having a huge incremental increase in cost for our customers to order through first party. So we're really excited about that. I think there may be some green shoots in the real estate standpoint as the economy gets a little bit more shaky. Unfortunately, businesses have challenges and I think it just opens up some good real estate opportunities for us potentially and just in general, for all restaurant tours.

Speaker 1: 9:03

About yourself.

Speaker 5: 9:04

We're going to try to capitalize on a lot of the investments we've made in 2023 so that we can start expanding and, like I said, I think the timing is really good for robotics. Right now there's a lot of these kind of headwinds for businesses and for the delivery platforms to start adding more technology and, along the lines of SES point, there's a lot of different products that people are trying to add to reduce their cost, but I feel like there's this narrative of you know, delivery platforms are evil. The big delivery marketplaces are evil because they're taking a lot of our money. Right, they're taking this 30% commission. The cost of doing delivery is just really high. So until someone fixes that, none of that's going to change.

Speaker 5: 9:39

You can use 10 different SaaS products to try to market to your customers and build your first party volume, but you're still using DoorDash drivers to deliver them. You know you didn't really solve anything. You're just probably paying a couple more SaaS fees. So we're really trying to work with the big platforms to say how can we actually be a solution here so that brands like Sweetfin can invest some of the savings into marketing or make their prices more attractive to consumers and a worse in the economy. So I think there's a lot of good benefits you can get from that in a world of higher interest rates, but the only practical solution to this is you just need to reduce the cost of moving the goods around, because that's the most expensive part.

Speaker 8: 10:12

I could not agree more. I think when you look at first party versus third party now, because restaurants have taken so much price on the third party marketplaces, it may be that first party is actually the less profitable channel because the cost of delivery has remained the same whether you're doing a first party or third party. And until you figure out how to dramatically reduce that cost of delivery, either the efficiency or robots or whatever it might be you're going to end up in the same situation.

Speaker 5: 10:41

Totally and I think that's not super clearly identified. It's all annual contract for this and it adds up and a lot of people don't do this math because it's confusing and a lot of the pricing is not super clear. But there's this stigma of you know big delivery platforms are evil and their commissions are just evil but, like, the margins of food delivery from the big companies are not great. So you know clearly something needs to change there to make this work for the restaurants, and I think we're on the verge of it. I think drone delivery in some less urban markets and I think stuff like Coco is really going to help.

Speaker 2: 11:10

I think they were going to start seeing a lot more of the use of word love at the product. It's actually a different consumer. I think that's probably where I think the most convenient thing to go. I think people are going to really start reinvesting that product.

Speaker 6: 11:22

Great. We were there in the early days when DoorDash made a move into liquor convenience stores and small independent groceries, so we were day one with them. The others are behind them and getting there and we're the partner that they're teaming with. We've got a platform with a whole bunch of stores and we work really well with them all and they love us because we've cracked the nut on mom and pop, awesome.

Speaker 8: 11:49

And then personally, either for your own self or for your company. What kind of B-Hag do you have for 2024? If you haven't heard the term before, it's a big, hairy, audacious goal. And what are you planning?

Speaker 4: 12:01

The goal from the company is to move from our Southern California roots and go to some other markets. There's a lot of white space in our category. I think there's a lot of tailwinds for people that want to eat healthier. I think we're at a great price point. We're fast in our service, we're customizable, we're great for delivery, so all of the buzzwords that people talk about are right on trend. So I think it's time for us to move outside of LA.

Speaker 5: 12:24

Yeah, seth's expanding everywhere, so we need to expand with him. So where Bakel is for next year is just more markets, more countries. We really like these dense environments where the robots do about two miles. We can be competitive on delivery times with the driver within about two miles. So we need a dense urban environment where two miles is a majority of the deliveries, or at least a significant portion of the deliveries. So that's not just in the US, but internationally too. A lot of cities in Europe and Asia are perfect for this sort of a model, so we're trying to expand as fast as possible. We're really prioritizing places like New York and California, where the cost structure is going to get pretty painful for the delivery platforms and for the restaurants in the next year. So I think this is California. The new wage bill starts in April, so we'll be trying to move as fast as we can in that time frame. You're changing the rules for these two items here Now.

Speaker 1: 13:06

This is just the idea for advocacy of CDC virtual brands. They've been very muchochin of focus this year sapphon. But is there going to be a good?

Speaker 2: 13:13

year, in 2024, for virtual brands Also. I've said for many many years the as many ways it's different and it's possible, and virtual news is one of the ways that you can do that.

Speaker 1: 13:34

So let's think about this from the standpoint of as a vendor, as a supplier to C stores or to restaurants. What do they need to be thinking more about in 2024? If they were to change something in the way they approach, the way they speak to companies like yours, what would they be doing differently? I mean?

Speaker 7: 13:52

it's a very bold statement to make anything I would say, but I would say probably, from my observations. Third party is not going away. Right, these marketplaces are not going away. They've built the infrastructure, they've got the customer. The customer always reverts back to the meeting. Right, it's simple. So if you have this ecosystem that you must work in and essentially it's very difficult to extract data from it, can't just throw your hands in the air, right, with the data that is available. What insights can you extract from it to deliver the best possible experience to your customer? Because, at the end of the day, they're on there, they're looking to spend money, their order volumes are going up, their total basket sizes are going up, so let's make sure that we give them every tool possible to really understand that customer and deliver the best possible experience so they keep coming back.

Speaker 6: 14:33

And for us it's an extension of that because we deal so much more on getting the catalog and menu into the third party delivery systems. So it's creating packages and bundles that the consumer wants, it's making sure that they've got the accurate pricing there, the reporting that goes along with it, so that way they can act upon it and deal with it and getting a better experience for them on the whole with these third party delivery systems to onboard smoother, to onboard faster, to have a better response time and a lot of white glove treatment. Because they're not techies, this is not what they do and they get very frustrated when they call customer service and get bounced around.

Speaker 4: 15:18

I think, with just the cost of the tech stack, there's going to be a lot of consolidation. I think less is going to be more. I think vendors can do a better job of providing more services, a better ROI, explaining different products within their suite of services to restaurants, so restaurants don't have to look outward to other solutions. So I think there's going to be more consolidation on the tech side and I think that we're going to be working with less tech providers next year than we were this year, and I think that trends are only going to continue.

Speaker 1: 15:53

And as a for yourself, when you think about what restaurants could do perhaps a little bit better or you'd like to see more from them to help not just your product, but just generally, the folks that are bringing technology and innovation to the industry. What do they need to think? Yes, same thing.

Speaker 5: 16:07

You just like we need to master the, consolidate the tech stack, and so it just gets really confusing and we have to integrate with the PLS delivery platform, is to integrate with all these different components, and so you get in the weeds of this all and you're like this is a nightmare to manage, and so I do think you're probably going to get a lot of consolidation as people start scrutinizing Do I need this extra monthly SaaS spend for this product?

Speaker 5: 16:27

I think that would be really good for the operators. I think a lot of these products have matured and duplicated their features, so I do think some bundling is probably going to happen, where they're going to get much lower prices from one company to offer all those features, and I think that would be really good. I just think a restaurant doesn't need 10 different software providers for things and accordingly, coco, we've been trying to integrate with the top players as much as possible so we can make that very seamless for the operators. They don't need more confusion or to do more accounting to understand where their economics are. So fewer providers, keeping it really simple and then making it really obvious where the value is being created. I think that's gotten a little crazy in the last few years, so that could probably relate to that even more than me. They've avoided that, but there's a lot of brands with pretty complicated tech stacks and I don't think I've tried to keep it simple.

Speaker 4: 17:11

I was just thinking about trends, and one thing I've been thinking about lately is this tech ecosystem. It's kind of like you have this divergent path between the haves and the have nots and, with inflationary pressure on costs, I think the haves the companies that have the resources to invest and develop their own technology and automation, which probably is maybe even the sweet greens going to be able to create a boat that is going to be challenging for the smaller fast casuals or any restaurant really to compete, and so I think that is going to be interesting to see if the technology that they're creating is going to be democratizing, eventually pushed to smaller guys, or if there's going to be this divergent path where they can take price and the rest of us so the speaker and stuff, with costs that are continuing to increase.

Speaker 8: 18:01

Well, it's certainly been the case so far. Someone like Chipotle has been able to dramatically outpace price increases versus the rest of the industry, and I think consumers have been wanting to pay it, in part because the process is so frictionless, it's so convenient, so easy to get, that you make that trade up.

Speaker 1: 18:18

Yeah, definitely Great stuff. Well, guys, thank you for joining us tonight. Enjoy the meal here at the Master's of the Food and Beverage Universe table. We've got a big, long table in front of us. Hopefully we'll have a nice meal ahead and happy holidays to you both. Thanks, guys. Guys, thank you so much again for inviting us and putting this on. This is amazing. I really appreciate you guys having the podcast with us. We can talk to some of you guys. Thanks, eric. Thanks. 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.