The Restaurant of the Future - A Panel at Cornell University

In a recent captivating episode, industry visionaries Carl Orsbourn, Meredith Sandland, Dan Londono, and moderator Kristen Hawley dove deep into the transformative wave sweeping across the restaurant and hospitality sector. Amidst a backdrop of relentless change propelled by digital innovation, consumer preferences, and the global pandemic, the panel explored how the landscape of dining and food delivery is evolving.

The episode, rich in insights, began with an emphasis on the pressing need for adaptation within the restaurant industry. Facing new cost pressures, shifting business models, and an ever-growing demand for technological integration, the discussion underscored the importance of resilience and creativity among restaurant operators. The panelists, representing a spectrum of expertise from startup ventures like Alfalfa to seasoned authors and analysts, shared their perspectives on navigating these changes.

Central to the conversation was the concept of delivering the digital restaurant experience. Carl and Meredith, co-authors of "Delivering the Digital Restaurant," shared their journey into writing the book and the necessity for restaurant owners to seriously consider digital adoption. Dan Londono shared Alfalfa's story, illustrating how a tech-enabled approach from the ground up can redefine the fast-casual dining experience, focusing on a balance between healthy eating and indulgent treats like salads and donuts.

A significant part of the discussion revolved around the challenges and opportunities presented by off-premise dining options such as delivery and takeout. With consumer behavior tilting increasingly towards convenience, the panelists delved into how restaurants could optimize their operations and customer experience through technology, without sacrificing the essence of hospitality that defines the industry.

Dynamic pricing emerged as a pivotal theme, with Carl introducing the audience to the concept of using data-driven strategies to adjust pricing in real time, mirroring practices from the airline and hotel industries. This approach, he argued, could lead to more efficient pricing strategies that align more closely with customer demand and willingness to pay.

The human element of the restaurant business, particularly labor issues and the changing workforce dynamics, was also addressed. The panelists shared innovative solutions to staffing challenges, including leveraging technology for training and operations, and fostering a culture that values and motivates employees.

As the conversation unfolded, the future of restaurants was painted as one of immense potential, driven by personalization, efficiency, and sustainability. The panelists envisioned a world where technology not only streamlines operations but enhances the dining experience, making it more tailored and enjoyable for consumers.

In conclusion,

Transcript

Speaker 1: 0:00

This week on a special edition of the Digital Restaurant. We're at Cornell University talking about the restaurant of the future. Joining us is Dan Londono, co-founder, co-CEO at Al Falfa Restaurant Group, and keeping us in check with moderation, Kristen Hawley of Expedite News. That's all ahead on this week's Digital Restaurant.

Speaker 2: 0:46

Good evening, ladies and gentlemen. I'm going to kick things off tonight to get things going. It's not a little precedence about why we're all here, but, guys, as most of you all know, the restaurant industry is going through an unprecedented period of change. New cost challenges, new business models, new technologies and new government policies are rapidly impacting the way we do business and the way our customers interact with us. Let us be clear the industry will never be the same that it was before the pandemic.

Speaker 2: 1:18

Now is the time to work together to build restaurants for the future. Do what restaurants have always done best, but in new ways Nurture the lives of our customers, build communities and create timeless moments of hospitality. So today, our panel will look at how we might grow our businesses and our customer impact to new heights in the digital era. Reflective of many of you, our panel represent startups, mid-size and multinational players and, just like you, they do not have all the answers, so let's not pretend. But like most of you, they are incredibly resourceful, creative, diligent and together they can overcome any obstacle, just like today's event. With the generous support of the Pillsbury Institute of hospitality entrepreneurship of Cornell University, we were able to make this event possible.

Speaker 4: 2:22

Hello, my name is Kristen Holly, I am a journalist and I am the founder of Expedite, which is a newsletter about restaurant technology in the future of hospitality. You can find it at expeditenews if you're curious, and I've been writing about the restaurant business for the last decade and I am thrilled. Thank you so much for having me to lead this awesome conversation about the future of our business. I am going to let our panelists introduce themselves and then we'll get into it.

Speaker 5: 2:49

All right, I am Meredith Sandland and together with Carl here, we are the co-authors of these two books Delivering the Digital Restaurant. I think the first one you'll take home, and it is about why all this disruption is happening, what's going on with the consumer and how things are changing. And then the second book is about how to take advantage of it. So we'll talk a lot about that tonight, I'm sure, but my background is with Taco Bell for YUM. I was a chief development officer there for several years and built lots and lots of Taco Bells. So I have a lot in common with those of you who are real estate developers and thinking about how food comes to life as our cities start changing.

Speaker 1: 3:32

If you want to get a newsletter, get Kristen's newsletter. It's fantastic, it's a big source of information. So, kristen, really pleased that you're here to help us tonight. Good evening everyone. My name is Carl Osborne Again, as Meredith said, co-author of Delivering the Digital Restaurant.

Speaker 1: 3:46

My background is more recently in restaurants, but before that in convenience stores. I used to run thousands of site locations by the name of AMPM over here on the West Coast, but I got into Ghost Kitchens with Meredith a few years ago, before digitization really had landed fully into our industry, and at that point Meredith and I met with pretty much every restaurant chain in America, I think, speaking about what's going on and why to take this thing seriously. And we were driving home from Pasadena one day and I said to Meredith it would be great if we could give these prospects and our customers an account as to why to take this seriously. Surely there's a book out there. And she said great idea. And I think this is where Meredith's experience of writing a book she thought it was going to end at that point, because I went on to Amazon, spent about 20 seconds looking for such a book and it didn't exist. And after we left Kitchen United we ended up writing it Today.

Speaker 1: 4:41

I'm one of the co-founders at a company called Juicer. We're a dynamic pricing company for restaurants. We have my co-founders all come from the kind of hotel and travel space and they have seen the lessons of what happened in that environment and how it now applies to restaurants, which is why pricing and using data to make more informed pricing decisions is what we're doing there. It's a real pleasure. Thank you to Jeff and Jackie for inviting us and thank you for all coming today.

Speaker 6: 5:08

Great. My name is Dan Londano. I'm a class of 2013 at Cornell. I wish it was the hotel school, but it was actually engineering so I've stumbled in backwards into the restaurant industry, but it's been a blast.

Speaker 6: 5:17

I'm a consumer of all of your content and I love it. I am halfway through your second book. Your voice is amazing on the audiobook, but, yeah, don't spell the ending, because I'm halfway through and so I'm a co-founder of Alpha Alpha. So we are a fast, casual startup. We are four locations bicoastally. We got our start out of a tiny little farmers market in 2018 in Hoboken, new Jersey. Open our second location in Santa Monica because we wanted to make life hard on ourselves and we are a deeply tech-enabled company, and my co-founders and I started with Blank Slate in the restaurant industry, and so we've built up a lot of the technology and operations that we use day to day ourselves, using some kind of third parties, but really just thinking from first principles, excited to share. I don't know much of anything, but I'm excited to share what I've been gathering the past five years doing this and excited to chat.

Speaker 4: 6:01

You left out that you're a salad and doughnut concept.

Speaker 6: 6:04

Thank you, yes, you are, so Alpha. Alpha is a salad and doughnut concept. Our mission is to inspire joy through balance, and so, yeah, we'd love for you to check us out.

Speaker 4: 6:14

Right lead. With that we're going to talk. We've been an hour and I'll leave an hour total and I'll leave some time within that hour for some Q&A at the end. I hope you all have questions because these people have lots of answers. But before we can talk about the restaurant of the future, I want to talk about the restaurant of the present. Thinking over the last three and a half years since COVID like the more changes than I can think of. I've written about them, you've lived them and things seem to have maybe stabilized, but they're far from perfect. So, without getting into the weeds yet, I'm curious what big problems need to be fixed or just where are we as an industry in restaurants right now? Anyone can answer.

Speaker 5: 6:56

Very big question, Kristen, I know I said don't get into the weeds yet.

Speaker 4: 6:59

But what's the biggest problem that needs to be solved?

Speaker 5: 7:02

Well, I think the restaurant in many ways, is having a wonderful year right. This is the first time that we are a trillion dollar industry. That's very exciting. I think all of the tailwinds are present to continue growth in the restaurant industry. People are only getting more and more time starved and that leads to using restaurants as a way of procuring food. By and large, that's a lot of really good news.

Speaker 5: 7:28

Now, having said that, obviously transactions are flat to declining because prices are up so much. That is not great. That is not really a sign of a healthy industry, and many of the transactions have shifted from on-premise to off-premise. Those off-premise transactions have not been as profitable as they. On-premise. Restaurants have responded by increasing prices further off-premise, and so now we find our place or place in this interesting state of affairs where prices are quite high. Consumers want the convenience of restaurants, they want the social interaction of restaurants, they want delivery, but not sure if affordability is going to be something that makes sense for everyone. So I would say probably the biggest issue we have is around that affordability. That ends up getting linked to so many other issues macro issues in our society, sustainability and healthy food and all those kinds of things but I would say affordability is probably the industry's biggest challenge right now.

Speaker 1: 8:36

I hate following Meredith because she always gives such great answers.

Speaker 4: 8:39

This is the big answer to the big question.

Speaker 1: 8:41

So look, I would say this I think there's a number of different perspectives that you need to look through. One is through the guest lens, one is for the people that are working in our restaurants and the other is for the restaurant owner operator. So let's go through those in reverse. The restaurant owner operator today is probably breathing a huge sigh of relief. The last few years have been incredibly difficult. I think Bill Gates said it best when he said that the seven to ten years worth of digital adoptions happened in a period of one to two years, and owner operators that had been resisting digitization for a long period of time suddenly had to learn super, super quick. And we unfortunately lost 100,000 restaurants through the pandemic. But in many ways, we actually have now got to a place where the industry is in a far better place. It's rather a crude term, but you know when sometimes they burn forests down for others to grow up, it feels like we're in a better place now. For those that have survived, those that had the flexibility and agility to survive through the pandemic, they're now in a much better place. But these owner operators today are having to deal with a litany of choices to service the omnichannel world. The fact that they're having to service, yes, the returning on-premise guest, but now all these additional channels and all the complexity that comes with it, and they're doing it with a very slim budget. We all know that restaurants struggle from the standpoint of how to allocate their resources appropriately to the next thing that they need to invest in, and so there are some very difficult choices to the restaurant owner operator out there.

Speaker 1: 10:11

The second thing I'll mention about those that are working in our restaurants around the staffing. My goodness, the pandemic has demonstrated better than anything before it that the folks that are working in our restaurants today need to be treated better. They have resisted coming back to work in our industry. Now it's coming back now, thankfully. But the reality is culture, pay, how we treat our people, how we engage with them so that they can see a future in their careers in this industry.

Speaker 1: 10:41

All of these things are coming to the surface.

Speaker 1: 10:43

That's something to be super excited about as opposed to a huge problem, but it is meaning a lot of folks that are having to treat the labor situation a lot differently to what they had to three or four years ago. And then, finally, when it comes to the guest, the guest, I think, has become even more expectant of what they get from their restaurants today because of other verticals, because of what we've seen from retail, because of what we've seen from travel, because of what we've seen from these other verticals that perhaps have adopted digitization faster Today. These folks are now saying I want that from my restaurant experience too, and restaurants aren't there yet. When you look at all the stats, whether you look at the companies like Tattle or Ovation, customer satisfaction when it comes to digital ordering and delivery has never been worse. So there's a lot that we need to work on, and I think it all comes about how we're going to try and embrace technology and make better decisions and work in that direction together, because it is a very bright future, but there are some problems ahead.

Speaker 6: 11:41

Yeah, and I would agree with everything that you said. And from an operator perspective, I think there's just been this proliferation of technology solutions and tools out there, and I think operators are honestly overwhelmed. We get hit daily with dozens of emails and messages that, honestly, we don't answer because we've been burned in different ways over the years and obviously benefited from many solutions that are out there, but there's this very heavy tech that a lot of operators have, and so that makes life very difficult for you trying to, for you vendors out there, but at the same time, I think it's also just a huge opportunity time to build something that obviously works and really works for a particular operator's tech stack. I think that's just a huge opportunity, frankly, because I think everyone is just overwhelmed and so I think there's opportunities in that.

Speaker 6: 12:23

And then, from a people perspective, it's well known that hiring in the restaurant industry is extremely challenging, and so I think one of the secret weapons that Alfaaf has always had is we've always been a very people-centric organization and we've really benefited from thinking of our people as our customers as well and building jobs that people actually want to work and in careers they actually want to pursue, whether it's in the back of house or the front of house, and anytime we bring in any kind of technology, where the rubber is going to hit the road is the person on the ground going to do the job right. And so the way we operate is we go through and make sure that we would do the job that we're asking our people to do, and we're maniacal about simplifying the day to day and making sure the jobs that we're creating are jobs that people actually want to do. Those are the main ways that we're combating some of these challenges in the industry.

Speaker 4: 13:07

Great, so a lot of room for growth and improvement. It sounds like, Meredith, you have a great way of thinking through two different paths that we could be taking in the future as an industry. We talked about them evolution or disruption. Can you talk through that thesis and how you see it and where we are now and where we might be moving?

Speaker 5: 13:28

towards. We've had a ton of evolution in the industry. It feels like disruption because I think for many of us it's happening to us right. Covid happened to us, all of these new digital tools happened to us. I think a lot of restaurateurs less so now, but a few years ago, when we started writing, we'd say things like, oh, if all the venture capitalists and tech companies would just go back and leave us alone, that would be great. And so it felt like massive disruption.

Speaker 5: 13:55

But really it was evolution and it was taking the existing box, the existing restaurant, the existing business model and adding technology on top of it. And that's what led to this complexity that you both were talking about, where you add this tech piece and then you realize, oh, I have this problem, and so you add another one. And oh, that creates this opportunity. And you add another one and all of a sudden, 15 to 20 pieces of software later you have a really complicated business. So it's very interesting to hear down that you are taking a first principles approach and that is what, I would argue, true disruption looks like.

Speaker 5: 14:29

And if we compare to, say, the automobile industry, if you took a combustion engine and you tried to automate it, it would not work. It would be too hard, you would have to do all kinds of crazy things to automate that car. And so what did Tesla do? They created an electric car. Now, did they create that because they love the environment? I don't know, but I will tell you. They created it because they wanted to create an automatic vehicle, self-driving vehicle, and the only way to do that was with electricity.

Speaker 5: 14:59

And so true disruption, I think, in the restaurant industry will look much more like that. It will look like an electrified kitchen that uses smart ovens and sous vide cooking and a bunch of things that maybe we don't even know what they are yet, that are heavily automated, and it will interact directly with the technology, the operating system that's running the restaurant, which again will be a first principles design piece of technology that's fully integrated with the restaurant, rather than 15 to 20 different pieces of software that restaurant owners are stuck trying to figure out how to make talk to each other. That will be truly disruptive. The other thing I think will happen is we really added delivery on top of existing restaurants.

Speaker 5: 15:47

We added delivery on top of existing restaurants and so we had a box that, as Greg created at Taco Bell would say, yam would say we had to learn how to think beyond the box. Our customer was now not just coming into the box, we had to be able to think about it, a whole trade area and how to get to them, which I think is true for an existing restaurant. But that tells you how evolutionary that was. Instead, if you were to think, wow, most of our transaction growth going forward is going to be off-premise and it's going to be bringing convenience to the consumer, the way in which you do that. If you went back to first principles would be totally different. You wouldn't think how do I retrofit my restaurant to put shelves in front so that people can come in and grab their food? How do I add a parking spot for Click and Collect? No, you would think of a totally different restaurant footprint and that is what you would build in order to fulfill that off-premise need.

Speaker 4: 16:44

Carl, you're working in dynamic pricing, which, as a member of the media, I feel like it was like great idea, bad idea, great idea, bad idea, which is generally how things go. But how can you explain why? Dynamic pricing for restaurants, but also, how has the reception been? Are people interested? Are they scared? Because it is so disruptive to the status quo that we've seen for generations?

Speaker 1: 17:09

Yeah, I blame Taylor Swift for this, because Taylor Swift has created a bad feeling about the term dynamic pricing and we all know what we're talking about. Right, ticketmaster really helpful. But the whole idea of this is customers have different willingness to pay at different times and all of your restaurants today are doing dynamic pricing. If you offer DoorDash and Uber Eats delivery, they're doing it. Why? Because the delivery fees are different, right? So DoorDash and Uber Eats are doing dynamic pricing and guess what? The customers keep coming back and ordering through those platforms, so they accept it.

Speaker 1: 17:46

I think this is one of those really interesting ones about changing the language around it. It's about saying look, how do you price today? And the average restaurant CEO that I speak to about this topic they say we sit in a room and we have a chat about our costs and the margins that we're after, and then, when those costs change at some point, we have a view as to what we're going to increase them by, and then we close our eyes and wish and hope that everything's going to be fine. That's where we've been and that doesn't make much sense. And when I speak to them about what we're trying to do at Juicer, they go, yeah, that kind of does feel like the right direction, because what we're doing is saying why don't we use data to help us inform what those prices should be when? How about using the customers willingness to pay as an indication and not just the cost of product? When you tie those things together and then you perhaps overlay things like weather or events, you can actually get to a place where you can optimally charge the customer price that they are willing to pay, that doesn't gouge them, that doesn't create surge pricing, because we all recognize an alternative restaurant is a couple of clicks away. It is different to a certain amount of hotel rooms where there's a fixed capacity or a fixed amount of airline seats, where we also see this very prevalent. But if you can create an environment where you can say, when it's rainy out, guys, your restaurant actually tends to have a large level of delivery orders, but actually your on-premise orders perhaps decline because it's rainy out, maybe the pricing on those two different channels should be different.

Speaker 1: 19:16

We did a survey on this year Super Bowl Sunday, looked at 1,000 different restaurants across 16 different states, I think it was and we looked at how many changed their prices on Super Bowl Sunday. According to Olo, the online ordering engine, they said there's usually something like a 40% increase on Super Bowl Sunday. Guess how many of those 1,000 restaurants changed their price? Not one, not one. And what we're trying to do is say why don't we bring data science to help make better decisions around pricing?

Speaker 1: 19:48

The challenge from a lot of the folks that we're speaking to is going that's fantastic. Come back to us once 10, 20 restaurants will start and do it and then we'll be interested. So that's the challenge with disruption. That's the challenge with any kind of. We face the same with ghost kitchens. Come back and tell us once more people are doing ghost kitchens. That's the challenge.

Speaker 1: 20:06

I think this is something that's definitely going to stay, whether it be Jusser or otherwise. I think restaurants are going to embrace data to see how it's going to go forward. But again, it's about restaurants' willingness to embrace that disruption. Hi, carl, here Just to interrupt the show briefly to remind you that if you have yet to get your copy of either of the delivering the digital restaurant books, now is the time to get one. If you head to the digital dot restaurant, you're going to be able to get the best price available. You can also listen to both books with yours truly talking about them on an audible. You can get a copy of Amazon if you'd prefer to order through them, but if you haven't got the books yet, get them. They really are going to transform the way in which you look at the restaurant industry and the way in which technology is disrupting it.

Speaker 4: 20:52

Dan, can you talk through launching a brand new restaurant from your perspective, starting from zero blank piece of paper? How did you think about building a food business that was different and more applicable to modern life than a traditional restaurant?

Speaker 6: 21:09

Yeah, definitely, and I'll try to keep it short. It's a story still being told, but I would say that the most important thing is finding your core customer and your product market fit. So we started in 2018 with this thesis that in Hoboken, new Jersey, there were too many pizzerias, too many bars and not enough healthy places to eat. And I actually spent eight years doing management consulting, helped do a lot of research and realized that we're really early in kind of the health eating space. Right, you have all these 13,000 McDonald's, 20,000 subways and not enough health eating. So the way that we started to test our idea was really on the ground making our salads at a little farmer's market and talking to customers. And so, for budding entrepreneurs, I would really encourage you, before you go, sign a lease and you buy all this equipment which the restaurant industry is known for, of all this money being wasted is, just start doing your thing, talking to customers and refine, and it took us actually a year to do that and then to measure this point.

Speaker 6: 22:03

From there, we actually took a very first principles approach to then building out our whole operation.

Speaker 6: 22:08

So we started with, okay, we need these salads to come out, and we designed our entire kitchen from a first principles perspective, and then the jobs in order to make those salads from a first principles perspectives.

Speaker 6: 22:18

And so we came up with these jobs that were pretty straightforward, pretty simplistic, and over the years we just added, as we've added, a little bit more complexity. We've tried really hard to make sure that experience of that customer sorry, of that team member doing the job stays simple and stays easy. And today we're doing things like we actually have a kitchen dashboard that we've made at Alpha Alpha, which actually helps predict how many ingredients we're going to need that day for food to be fresh how many cucumbers, how many tomatoes. So we've taken it pretty far, always with that mindset of getting that final product really simply out the door. So, yeah, so to answer your question, I would just say talking to customers, really refining exactly who you're serving, what you're serving them, and then just being maniacal about how easily can you have that product come out the door for every single stakeholder involved, and that's where really technology can play a really big role.

Speaker 4: 23:07

Did you build the software that you use for that?

Speaker 6: 23:09

We did, and there's a lot of really cheap, easy, no code, low code solutions out there.

Speaker 4: 23:13

So yeah, pretty straightforward I'm going to switch a little bit.

Speaker 1: 23:17

He's a smart guy, though, so it might be straightforward for him.

Speaker 4: 23:21

Yeah, do you sell your technology, would you? Not yet. Then you'll be a solid donut and software company. Very related, something that goes along with the disruption evolution vein Omni Channel, which is the word that was already mentioned versus specialization Omni Channel, Meredith you described as and everything on top of each other, specialization obviously being focusing on maybe one or two of those things and doing them right. Do you want to talk more about that?

Speaker 5: 23:49

Yeah, sure, in the restaurant industry, because we've gone through this evolution, we have added channels to our existing store base and we have asked our existing stores to take on click and collect or take out. We've asked them to take on delivery, we've asked them to take on online ordering and kiosks and all these things. It's created a bit of a hot mess inside most restaurants, both technologically right, because you might have all these beautiful front end experiences, but by the time they all get combined at the back end in the kitchen it's a bit of a mess. But it has also created I think many of you have probably experienced as a consumer a bit of confusion in the physical space. I was in a restaurant the other day that literally there were probably four different channels coming in. The thermal printer was just throwing off tickets and the poor woman standing at the barista station was completely overwhelmed. Someone came out and said, oh, we're not running the POS today because we don't have enough people, so go use the kiosk. Like then. The KDS was just completely full of orders and the poor man who was working the line there was no way he could possibly keep up with everything that was coming in and they were just flooding, and I think that tells you how complex our restaurants have become.

Speaker 5: 25:05

And when you go back to the foundation of Domino's and what they created, they said, oh, you could probably send a pizza out the back door, and in fact that's how many pizza restaurants were doing it right. That's how, for example, pizza Hut was doing it these big red roofs, dynans, table top, ms Pac-Man's salad bars, a couple pizzas out the back door, right. Domino's came in and they said we're going to build something that exists only for delivery. And they made a little tiny footprint delivery, carry out. That's it no seats, no table top, ms Pac-Man, no salad bar. And they crushed it right, because everything they did was designed around how to make a better delivery pizza. At first that was footprint, then it was product, then it was packaging and then finally technology. And they just kept innovating in that direction.

Speaker 5: 25:59

And I think what we'll find in the rest of cuisine types is that the same will be true that folks will come out with a purpose built vertically integrated. This is how you do delivery and we will separate out. And there will be folks who are really good at dine-in hospitality experiences and that's all they do and they don't have delivery going out the back door. I think Hellstone Group is a really great example of this here in Southern California. They do not do delivery, they will be grudgingly do takeout, I think, if you make them. But they're really about that in-store experience, that beautiful dining experience, and they're very good at it. And then you will have others who specialize in delivery and are very good at that and innovate the technology required, the product required, the packaging required, the process required to do that really well.

Speaker 4: 26:49

I think that could really change a lot of restaurants. And it may be a little unfair to ask you about Taco Bell, because you don't work at Taco Bell, but what's happening, I think with Taco Bell, with most fast food restaurants, that when I was a kid you had your birthday party at McDonald's. I don't think you do that anymore. Do you think that there are certain types of restaurants going to be completely changed? I'm thinking of the Taco Bells and how they are so digitally savvy and what they're doing Is this just is that they're going to turn to specialization and move in that direction, or do you think it's.

Speaker 5: 27:19

They have come out with a little teeny tiny footprint that is their mobile store right, and as has Whataburger has come out with one, chick-fil-a is experimenting with one. So there are several brands that are trying those to see how to make it work. I think they haven't gotten fully there yet, but certainly trying to pull that apart. We talk in the first book about the creation of the drive-through and how that happened. And with my personal background at Taco Bell, I will tell you I have spent a lot of time undoing things that Because I was there pretty late in its life cycle that were not a great idea or maybe were a really good idea at the time but we had outgrown Like what? And one of them I'm sure you guys have seen these around it did the old mission building right, and the old mission building was the original Taco Bell. It was amazing. It was a walk-up Taco Stand. It had a single production line in it and when drive-through first became a thing they slapped a window on the side and said we have a drive-through, same production line, same layout of the site, and that probably worked for a little while. Drive-through was a little bit of incremental business on the side but ultimately drive-through became the business right.

Speaker 5: 28:32

Typically in a fast-food restaurant somewhere between 70 and 90 percent of the sales will go out that window and they started to change and they now have two, sometimes three lines, depending on what's going on in the store. They'll have a line dedicated to drive-through, a line dedicated to dine-in and a line dedicated to delivery so that those aren't fighting with each other. The site layout is completely optimized for drive-through. It changed Now. It took many years for that to happen, but we think and the reason we wrote about it in the first book is we think that's a great analogy for what will happen in delivery. You start out saying I have this box, I'm going to slap a little delivery on the side and get some incremental sales. Sounds great. And then you realize later you probably need to rethink that because the volume of that delivery and off-premise has grown so much that you need to design the box or maybe a totally different restaurant to deal with that volume.

Speaker 4: 29:29

That makes sense. That makes sense when you're thinking and I want to say narrowly, but when you're thinking specialized, like specialization you have an idea, you're going at it. How do you choose, how do you find the right gross opportunities? Because I think that's when you start getting to the end, right, like we should be doing this or we can do this, or we can do this, and I would love your take on how to find the right stuff.

Speaker 5: 29:50

I think that's so true. I'd like to hear Dan's take on that, because he very specifically does salad and donuts. That's just one, and so how did you pick those two unrelated things and stop there?

Speaker 6: 30:03

It's a good question and I can maybe answer it from a product perspective. And then to your question on specialization, I also think that I actually have a slightly different point of view, so maybe we can talk about it. Yeah, in terms of finding your product fit, I think you have to understand ultimately what feeling you're trying to elicit from a consumer. And for us, what we landed on empirically just from talking to people, is that most people like eating healthy, but they also like eating balanced, and so your point, that's actually the reason why we added donuts and we come up with this whole idea of helping people live a balanced life, and we stopped there. And I think there's operational reasons why you don't want to go too crazy with your menu. And I love the Cheesecake Factory massive respect for that company and I'm in awe of how they pull it off. I know they pull it off really well and everything's fresh, but it's just like amazing and I could never do that. So I think you need to figure out with your people, with your operations, with your footprint, how can you be just the top 1% in what you do and stop there, and then tying that to your mission. And our mission is to inspire joy through balance. So I think, when it comes to specialization in a real estate footprint, I do think there might be brands that are bigger that will decide okay, we're going to get really good at delivery or really good at in person hospitality.

Speaker 6: 31:10

I do think most like smaller brands like Alfa-Alfa, are going to have to get amazing at both and will stay amazing at both, and it's really because you have this fixed labor, and so I think over time, what we're going to maybe see is a lot of these fast casual restaurants very much decrease their indoor seating and very much still be pumping out a lot of food but much more revenue per square foot.

Speaker 6: 31:30

And that's actually one of the key focus areas for us, as we've had the opportunity to grow through COVID and learn is we're now building our new locations that are actually getting really good at both and we're still having a seating area. It's smaller than it would have been pre COVID, but it's still there. We're still having an amazing hospitality experience in that front of house. That front of house just happened to be 30, 40% of our actual real estate because we pump so much volume. You know, for us, it's 60% of our volume is digital and we also want to get really good at digital. So I just think it's maybe more. I think more revenue per square foot where the industry is maybe going to go over time.

Speaker 1: 32:04

Just to add to that, I think there's also an angle on thinking about how you're designing restaurants going forwards. I was talking to Francis Allen, who's the CEO of checkers and rallies as a month or two ago and she was saying we started developing what is now being recognized as the drive through of the future, by starting with the kitchen first. You look at folks like Chipotle and why they're doing so well. A lot of their kitchens were set up and really optimized for the second make line, their digital make line. So I think the smaller brands are actually at an advantage because they don't have to remodel their footprint. They can actually design for that future.

Speaker 1: 32:42

The challenge comes, I think, around the Omni Channel specialization debate is that, ultimately, where does this land with the guest? The guest is the same guest. A Tuesday night, when you're running home from work late and you need delivery and the kids are screaming, that's one occasion. But on Friday night, for date night, it might be a dining occasion. What I think restaurants are still struggling with is being able to tie together those occasions and to be able to understand how best to remark it and to really help a customer get what they want, when Now the models to deliver it more effectively may well be through a more specialized path, and we saw this even with Kitchen United, where we had a Chick-fil-A only a mile away from our Ghost Kitchen location in Chicago who had to have a Ghost Kitchen location just to deal with surplus orders, and they used that location for catering, but the guest was the same regardless of where that guest was coming from.

Speaker 1: 33:42

But then Chick-fil-A decided are we going to do that through our brick and mortar location or through our Ghost Kitchen location? They optimized the choice as a result. So I think that's part of the challenge that we're trying to work through right now.

Speaker 4: 33:55

That was a really nice segue into what I want to talk about next, which is people experience hospitality. We talked a lot about the business part, but we haven't talked much about the people. And, carl, you mentioned, when we started, staffing and employees, and just the state of that is in a bit of disarray. What do you think is going on? Are we just in a period of great change, is it?

Speaker 1: 34:15

I think we're realizing now that we have a very different employee base that we're working with and they have different needs, and I think it's about recognizing how we can be flexible to those needs. Of course, you're going to hear things like pay and the certain levels, and that, of course, is an important factor. But when you look at the research, it says things like I want to know that I'm valued. I want to know that I can build a career with this company. I want to know that this company is going to invest in me. I want to know that this company is going to treat me like a person and recognize that I have my own challenges or an alternative shift that I need to be at my other job. When Meredith and I were at Kitchen United, she asked me to develop a staffing model that was one that wasn't the traditional multi-unit setup where you have a regional manager, an area manager and then a GM, and we had to embrace technology to be able to do that. We deployed things like video interviewing, for example, as a way of being able to say you know what? Don't come in and interview. When we tell you to come in for an interview, record the answers to the questions I'm going to send you and record them on your time, and we'll listen to your answers and determine then whether you're someone that should come in, because we all know that there's a ghostly aspect to this whole thing of around recruitment as well. That was fantastic. We had over I think it was what 900 applications for 20 different roles in one of our locations, and that enabled us to be able to get down to a place where then we were actually using our managers' time more effectively. When you use your managers' time more effectively, you can then allow them to spend more time in managing their team more effectively. So one example of how technology can work.

Speaker 1: 35:52

But ultimately and I have to give credit to Josh Halpern from Big Chicken for this he said we've got to stop using and treating our employees with millennial tools when most of them are Gen Z today, and what he meant by that was saying that's not about taking the big manual off the shelf to try and train them. It's about giving them an interactive training through their smart phones, gamification and trying to create an environment that they're used to in the way in which they engage with their friends and family outside of work. And if they can do that and they can engage in a community with their colleagues, then that's fun and that's something they want to be part of, and I think that that's the kind of direction that we're heading towards. If we create the right environment, create the right culture, then they'll keep coming back and if we can solve for that, then we can get away from the incredibly damaging churn factor that we have in this industry that we have turned a blind eye to for way too long.

Speaker 6: 36:47

Yeah, so much. What you're saying resonates tremendously. We're really proud of only having 25% turnover, versus industry averages up to an exceeding 100%. And, to your point, around consumers wanting more post-COVID. I also think team members and employees are absolutely asking for more and I think if you're able to meet them, you're going to have just incredible results all the way down to the product and that customer experience, which is ultimately what we're all out here trying to provide in this industry.

Speaker 6: 37:13

And you mentioned training. We leaned into that. We now have these video-based TikTok style training videos that we've created in-house for our new team members to understand our culture, our brand. We've also tried to make spent a lot of energy trying to make our GMs and our leaders' lives easier. So we actually built up these offshore teams to take a lot of the boring aspects of their job that they didn't want to do off their plate. And we've actually spent a lot of energy crafting the right communication strategies within the restaurant.

Speaker 6: 37:42

And a lot of dissatisfaction, if you talk to your average kind of restaurant worker, is sometimes they don't feel like they're in the loop or they don't have a voice or they don't really know especially if it's a bigger chain what the latest thing is and we're on all these platforms to make sure that everyone were disseminating information and giving people a voice in everything that they're doing, and so I do think I think our view at Alphalfa is the future of restaurant will have smaller teams that are better paid, because I think you can have people working 80 hours a week, two different jobs, at the current kind of average periods.

Speaker 6: 38:11

I think automation technology will actually help drive a lot of efficiency in a restaurant and ultimately, people like Alphalfa are going to want to pay above market for great people that are maybe only going to work 50, 60 hours a week and earn a great living and raise a family. Our baker bought a house last year in Hoboken, which is something we're super proud of, and so that's something that we're really, really focused on to make sure that people can build a career in doing what they do within the restaurant.

Speaker 5: 38:32

You are only the second independent restaurant I've ever heard say they have an offshore team, and I think that is something that we think about especially independent restaurants. They don't have a big infrastructure back at headquarters figuring out how to offshore things right, because you, you and your partner are doing that and that's one of the things that technology has made so easy. But now that is possible to offshore it's possible. Carl and I use a virtual assistant for the book. Also offshore Could not have been done 20 years ago.

Speaker 1: 39:04

The virtual assistant did not write the book.

Speaker 5: 39:07

Just to be clear, she does many wonderful things for us, but not write the book.

Speaker 4: 39:12

I'm glad that you brought that up because I was going to ask about it, but I also want to. I'm very curious about these TikTok style training videos. Can you just like quick version, like what Can you do one of the dance?

Speaker 6: 39:21

for us quickly.

Speaker 4: 39:21

Could you show us right now?

Speaker 6: 39:23

Definitely cannot. But thank you, no, honestly. We had a Gen Z intern who understood who our customer is, who is the new employee, and we armed them with all the content that we wanted and let them have some fun. And, yeah, arm your people who are at that age group to do the thing you want to do.

Speaker 4: 39:41

That's so cool. Yeah, give the intern the keys. But so surely, when you're ushering in these new changes, new ways of doing things, you probably maybe have employees that are harder to convince or sell on a brand new process that they're maybe not used to. Do you have experience with that also?

Speaker 6: 39:57

All the time. Yeah, any change is just very difficult to implement, and so I think one of the other, maybe broad themes is restaurants are just going to have to be nimble and build it into their DNA. That changes the only constant, and we definitely have had lots of employees who struggle and don't want to use the tool and don't even want to use their smartphone for apps and all these different things. And it's from the very beginning setting that expectation with team members that like, hey, it's exciting, no week is going to be different. There's always going to be something new happening and getting people to embrace that is really important. And that's also from a team perspective where people begin to self select out if that's not a culture and a DNA that they want to have. But yeah, it is a struggle.

Speaker 4: 40:34

How does that go? Are you just? This is the way it is. Are you changing things? Are you adopted?

Speaker 6: 40:38

Yeah.

Speaker 6: 40:38

So there's definitely a layer of empathy, I think anytime and for any product builders out there in this industry, just really put yourselves in the shoes of these folks.

Speaker 6: 40:46

And I think that patience is really important to make sure that you're not just like shoving all these new processes and all these new like tablet things that you're doing down onto people. I think, starting with conversations, with down to the individual of what's we still want to make, do they want us to make as leaders and vendors, before something is finalized? And then feedback loops. And another thing that we implemented that's been really popular is we have monthly polls, surveys down to every single employee at AlfaFa, where they give us an NPS of how they're feeling and then we're able to capture problems before they become problems. So I think the more proactive restaurants can be with identifying those problems so you're not just playing whack them all day long like trying to solve a thousand fires at once. It does give you that fighting chance to have a weekly meeting where you're proactively talking about a potential problem for a change. I think that's also where we need to go.

Speaker 1: 41:38

Just to also add to that, I've seen a lot of really cool things happening now with regards to translation because we know a lot of the folks that work in our restaurants also don't have English necessarily as their first language and thinking about how you accommodate your tools to be able to deal with that, but also for those with learning difficulties as well, and really recognizing that challenge so that you can use different mechanisms of learning. Here we're talking at the Cornell alum event, using different ways to be able to teach people things beyond the ways that those of us that perhaps have had more higher education have been gone through a certain process on. There are ways to be able to teach that don't always conform to the traditional form. I think that's why the TikTok video probably is working. So well.

Speaker 6: 42:19

It's a great call. I'm sure everyone has seen these videos of I think it's. Spotify now can translate to different languages with the same voice. These things are going to really be instrumental in this industry. One of the benefits of offshoring some of what we do we have admins on the HR side that can onboard someone on video in Spanish because they happen to be in Colombia, and they can communicate really well with some folks in the restaurant who only speak Spanish. It's seamless. They work for Alfa, they understand what's going on and that's been a huge unlock for us. Obviously, google translate that app. All our GMs are pro users of that app. I think, over time, better tools like that to really remove any kind of barrier with language I think is going to be really key in this industry because unfortunately, I think we'll always have or maybe fortunately we'll always have lots of restaurant workers in this country that are not going to be born here. I'm not originally Colombian, so I love that, but it's something that we really need to solve with technology.

Speaker 4: 43:10

I thought I was going to make it the whole way through a future of restaurants panel without saying AI, but I'm going to say it because that is the AI and generative AI is spectacular for translation and will continue, I think, to be spectacular for translation to really reach as many people as possible. I'm going to ask one more question and then we can go to Q&A and maybe, jeff, can you help with the mic situation. This is my favorite. Final question what are you most excited about for the future of restaurants? I'm excited to see the world around Sure.

Speaker 6: 43:42

I can be quick. The good news is, people are always going to have to eat and I think over time, people want to eat better and better. I'm really excited to see the innovation. It's a massive industry. It's over a trillion dollars now. I think the level of just innovation is going to continue growing and so we're going to have better food, better experiences, and what I really love is we're going to have better jobs within the restaurant industry over time, and that gets me really excited. I do think we're going to get to a point where someone is making close to six figures and they work at a restaurant and maybe they're not even like the person running the restaurant, and I think that's possible and that's really exciting.

Speaker 1: 44:20

So the way I look at restaurants and the future for them is that we are heading deeper and deeper towards an e-commerce future. The analog I try to use is think of our Amazon homepages. Each of our Amazon homepages has a very different set of products on it, based on what's each of us have purchased in the past. Our profile, the credit cards that we're using All of those things are basically trained in an algorithm to tell me what I might be interested in. So if I'm interested in value, then I'm going to probably see more value-orientated products on Amazon. If I'm buying the latest brand or I'm triggered by the latest limited time offer or sale, I'm going to be told about those things. That's where our menus are heading.

Speaker 1: 45:02

In the final chapter of the book you'll get tonight, we talk about a future where things like your Apple Watch or your doctor's profile or things around allergies and nutritional elements actually will have an effect on how your menu on DoorDash will appear. When you go to a Taco Bell today, in the top right hand corner you can check Veggie Mode, so if you're vegetarian, you can see the vegetarian menu. It's going to go much more in that kind of direction on the consumer's terms. But there's also another thing around delivery in this, which is, today the delivery transaction is not particularly economical. It's not something that really has got a particularly smooth economic footprint, and to deal with that we either need to go through the pathway of having holistic technology, or with what we were discussing earlier, in being able to move away from Frankenstein technology together, and or we might have to get to a situation where ultimately we realize that our customers are going to only vote to eat where they get the best food Delivered.

Speaker 1: 46:09

Food today isn't as good as it can be. If you have a situation where holistic technology is working in such a way that actually the food can get out to customers faster, that it's actually been created in a way that is perfect for delivery transaction, then ultimately customers are going to have a lot of good and ever better experience. And then, coming back to what I mentioned earlier, if you tie those experiences together so that when you know that I'm a vegetarian for my DoorDash transaction tonight, when I visit that same restaurant 100 miles from here at a certain brand at the weekend, they will know that same piece of information about me, if we can do that, then we're going to get closer to an e-commerce future.

Speaker 5: 46:50

I agree with all of that. I think absolutely personalization, and the thing that I am most excited about is just the explosion in multicultural cuisines, a nutritional science that we have adopted over the last probably 10, 20 years in our culture, and, looking just at my own child and his friends and how they eat, it's so different from how I was raised, so different, and they have such a much greater awareness of what's good for them and of international cuisine types. And I think, as all of that continues to find its way into our food, it will find its way. Of course, it starts at the high end and all of the amazing dinin sit down restaurants, but I think it is now trickling down into a salad donut concept. I bet that you I haven't been there and I really want to go, but I bet you have some amazing, super healthy salads with international influences on them.

Speaker 6: 47:53

Our Peruvian chicken salad is our top seller right now, absolutely. And we have Beyond Chicken Tenders in our Beyond Fari salad, which is an Asian-inspired salad, and yeah, we're always trying to innovate, trying to make our food deliciously gluten-free, deliciously vegan. That's definitely the future and, to your point, I honestly was so surprised and this is back in 2018, we started the farmers market and we thought we were going to have all these healthy parents coming by to get a salad and we'd have these like 11-year-olds or 12-year-olds and this is in Hoboken, New Jersey, so maybe that's why but they were like, oh, like, what's in the dressing? Is that olive oil? And wow, oh, my God.

Speaker 6: 48:26

So it is, the future is like definitely heading in that direction.

Speaker 4: 48:28

Yeah, man, as the parent of a four-year-old and six-year-old who have eaten the finest butter noodles that America and Europe have to offer. I look forward to that time, because it has not arrived yet in my home, but I am excited to hear that it's coming. Great. I'm going to open it up for questions. Okay, thank you.

Speaker 2: 48:46

All right for anyone who has questions. Go ahead and raise your hand. Start right here.

Speaker 7: 48:49

With the adoption of this technology, you're really refining your business processes and I guess my question is there's always going to be some emergency. Where do you have an emergency playbook where it's more of a Frankenstein process, that you're not so reliant on technology?

Speaker 6: 49:06

Yeah, it's a good question. Is that, when you say emergency, is that like something as big as COVID, or is that like COVID?

Speaker 7: 49:12

or maybe you don't have any power, for example, and you're for some reason climate change, give any number of reasons, right, you don't know, we can't anticipate it, and so your technology is down for a week. That's two and a half percent of your week.

Speaker 6: 49:25

It's a great question.

Speaker 6: 49:26

We've had the range of running the power goes out or internet goes out, or COVID obviously was a huge disruptor.

Speaker 6: 49:31

I would say we're really not there yet in terms of having great playbooks, and things do affect us, like our ovens are smart ovens and so they very much cook on their own things to perfection.

Speaker 6: 49:41

We definitely have had times where, like, that's not working and people have to manually cook, and so we do rely on the creativity of our team and we do try to give them the right tools to be successful through cloud-based recipe management and being able to just like FaceTime. People in that can help them out in a given situation. But we've absolutely had times where our POS system is down and we bust out the little booklet and no pad and take orders that way. But yeah, I think we're definitely, as we get more technologically ingrained in your operation, I think you do remove a little bit of the problem solving DNA that a lot of restaurant people need to have, and it's probably something that we need to invest more in, frankly, and make sure that people can adapt in these situations where all these different tools that we set up for them don't end up working. That's something that that's never going to go away.

Speaker 1: 50:24

There was a session was it last week at FS Tech, where the technobic analyst was talking about decision redundancy and all these different forms of automation kicking in and what happens when something stops working, and he was flagging that as a call out to a lot of the executives to say you've got to think about these things. The one thing I would say is that I think we're getting to a place where data in all its different forms we often talk about it from customer or transactional level, but data in all its different forms should enable us to almost identify when a problem is going to happen before it even happens. So you take it for something like kitchen equipment and be able to have appropriate preventative maintenance profiles or things where a temperature setting might be dropping on a particular refrigerator which therefore triggers a call out to an engineer before it even goes down. Those same types of things could happen with regards to the ways in which I was describing earlier with regard to weather, for example. If the weather is going to be changing, should that change the procurement decisions this week for what's coming this weekend?

Speaker 1: 51:34

Otherwise, you're having to rely on what is, quite honestly, the most undervalued resource in our restaurants, and that is our general managers and their agility to adjust very quickly in the moment, because it is them in those moments that enable you to be out of cater for it Again. The example I use in the book around holistic technology is where we say imagine you've got a situation where two line cooks call out tonight. Now me I would panic like crazy if that was happening. But ultimately GMs today manage it because they've been there, they've done it, they know how to roll up the sleeves to get through it. But if our technology can help us in such a way that then that kind of has a link to OpenTable to reduce the amount of OpenTable reservations tonight, to be able to reach out to other folks at other nearby locations to perhaps see whether they can bring across someone without the GM even having to be involved. So I think part of this is how technology can help us get more proactive and almost the preventative piece as well in advance.

Speaker 8: 52:39

Good evening. Thank you so much for taking the time to speak with us. I'm curious, with so many of us in the hotel industry, if you all have any insights about what the future of food and beverage concepts looks like specifically for F&B within hotels. So, for an example, since COVID it seems like a lot of hotels have gotten rid of your traditional in-room dining menu and rather have had food and beverage concepts that cater both towards customers that are seated and that can be delivered to the guest room themselves, so almost like an inner Uber eats. So with that, I'm curious if you've seen any similar insights for those types of products.

Speaker 1: 53:18

It's a really interesting point when you look at the likes of MGM Grand in Las Vegas and the huge kitchens that they have to service that, what is it? A 5,000-room hotel. They're looking at ways as to how they can utilize those kitchens to not just service the residents in their hotel but also act as surplus capacity to cook food for those in the nearby area. So I think there's ways in which to look at not just servicing the guests staying in your hotel, but also to use them almost as a ghost kitchen for intense and purposes.

Speaker 1: 53:50

The second piece I would say is how can you create more of a customized experience? You know, when we all walk into a hotel and you hello, mr Osborne, thanks for staying with us we appreciate the status or that status. Imagine now where again, you can use the customer information that you've been able to amass from their buy inhabits from all their previous stays, to be able to give them that custom menu that I was referring to earlier. Ultimately, I think hotels are five, 10 years ahead of where restaurants are. I really do. I think they've got a lot of better grasp on things from the standpoint of how to utilize technology and data. But I think the bigger question for me is how do you utilize the capacity of the kitchens that you've got For things outside of the hotel itself?

Speaker 5: 54:30

Yeah, and then for newer hotels, will they have that same in-room dining? I don't know. I am a million mile flyer on two different airlines. I've spent a disproportionate amount of my life living out of a hotel room and I will tell you that I have not ordered in-room dining in probably seven years. I think the consumer is changing because you have the availability now to get anything you want via DoorDash or Uber Eats. Why would you be restricted to the menu that's on the in-room dining? So I imagine that many hotels are seeing my personal consumer behavior writ large on in-room dining trends.

Speaker 5: 55:09

And yet I think hotels have a fantastic opportunity to create that experiential dining and to use that same kitchen capacity and that same space to bring people out of their rooms and bring them together. Many of the newer hotels do, I think, a fantastic job with their lobby spaces, activating those and bringing the people out of their rooms into them. I think that's been a big change. And then, for those who do have existing kitchen capacity, what can you use it for and who can you serve out of that kitchen? But I think if you are an old school hotel with in-room dining, that is declining and your response to that decline is to increase the prices, hoping to offset the declining transactions. That's not going to be a winning recipe. It takes a complete rethink about how to program those spaces and how to use them.

Speaker 6: 56:01

And maybe one idea I would add and I'm not a hotel expert at all, but I do think there's an opportunity over time to really get intimately connected to your consumer and understand the app.

Speaker 6: 56:11

Not only do you prefer a high floor or a room next to an elevator, but what are your dietary restrictions, what are your allergens? And there's actually startups out there right now that are tracking. We're actually partnered with a startup right now that tracked our entire recipes and all our menus, and what they do is they go into an alfalfa and you scan a QR code and you get a version of our menu that fits your preferences and your allergens, and so it distills all that for you, so it makes it easy for you to order. So what would it look like for your hotel chain? And you have a really curated ability, not just through Breeds or DoorDash, but it's like a platform of a curated list of hotels, restaurants near your hotel that the hotel has deemed that is a great food for their guests, with a menu that's specific to you and your dietary restrictions with laid out in there. I think that could be a future that would be worth building towards.

Speaker 1: 56:58

There's a few other operational elements that I think are relevant.

Speaker 1: 57:01

There's a company up near where you live called Bear Robotics that have just released a new version of their robot that is specifically meant for high-rise apartment buildings and hotels, whereby the DoorDash driver or Breeds driver can actually plop in the room number and it goes and calls the elevator and takes it up. There's a lot of DoorDash drivers and UberEats drivers, and I did DoorDash driving for a week in research for the book. It wasn't fun but I did it, and you learn very quickly that the restaurants that look after you in terms of getting the food ready and minimize the amount of time of the drop-off are the ones you want to work with. They're the ones that you want to pick up and drop off, for Hotel customers are awful because you've got to go and wait. Go, you have to park somewhere, drive up and then drop it off into someone's room, which is potentially 20 minutes of your hour. The more you can make it easy for a guest to get their food is probably why and obviously Robotics is working for those larger hotel chains.

Speaker 3: 57:57

Hi, I want to say thanks Been very enjoyable hearing you all talk. So thank you, and Daniel, listening to you talk about your concept. Congratulations. I'm looking forward to visiting it and it sounds like you're on to something great with a very clear vision. So well done.

Speaker 3: 58:12

I have two questions for Carl in particular. We're talking about the shift to off-premise, so that's done a lot right. Originally I thought it was incremental sales to a large part of the business, which is shifted now, in my opinion, to being a core part of the sales, to the business model. It comes with a high association of fees, even when you're part of national chains, and it's definitely changed the business model, whether that's through third party, direct channel or pickup, whether it's packaging cost or delivery cost. I have two questions for you. My first is under the consumer's willingness to pay more. When we talk at Chipotle Acava, they're now significantly 50% more priced. Chipotle has huge pricing loss. They've even been able to take price, maintain transaction counts. But so the question is, where do you see the consumer willingness to pay for that delivery being in the restaurant's ability to price it up versus pickup direct?

Speaker 1: 59:08

It's a great question. You're right. Chipotle Chick-fil-A recently reported to have something like a 30% increase in price relative to their in-store prices. Now, I think they can perhaps afford to do that because they've also got such a compelling first party channel and they're therefore telling their consumers if you want value, we're going to give you loyalty, we're going to give you easy payment, come to us direct. That is a benefit that someone of their size can certainly get towards.

Speaker 1: 59:34

When it comes to the willingness to pay part of your question, look, I think ultimately what we have to really understand is every item in every location has a different profile. It's crazy. When we look into the data today of some of our current customers at Juicer, we see that, for whatever reason, one particular item is particularly busy at 6 PM on a night, but 8 PM on DoorDash. And the analog I often use with folks is for those of you that are Costco members, I'm sure all of you have seen the hot dog and Pepsi. Does everyone know the price here? Pretty much we do, right? Yeah, there you go. That is something that clearly, if Costco tomorrow were to put an extra $0.50 on that, or even $0.10, there'd be uproar. But how much is the gelato About four feet to the right of it.

Speaker 1: 1:00:24

Not everyone can answer that as easily, and so the reason I use that explanation is that I think every item has a different level of behavior and I think when you look at the customer's willingness to pay and, ultimately, historical data that backs it up, what we try to do is do it in a very gentle approach, so we do it in such a way that you don't see a huge swing at any particular one point in time.

Speaker 1: 1:00:48

We get it I guess the crude way of describing it is like boiling the frog right. So rather than throwing it in and putting a 20% increase, we do increments of 5% over a number of months to see whether you have a negative relationship to that price increase, and when you do that, you then get to a place where you can see what we're seeing of increases in 5% to 10% in off-prem margins without any impact of volume or without any impact to guest sentiment. But of course, if we were to do that to the hot dog and Pepsi at Costco, we would definitely see an incremental issue, we'd see PR issues, we'd see guest sentiment issues and probably, more pertinently, we'd see a bigger issue from a lifetime value perspective in guest retention and frequency, and that is something we do because of that gentle approach.

Speaker 3: 1:01:32

What thanks for that answer. First party is where I was headed next for my second question. So converting that consumer from third party to first party selling channels. And obviously there's ways to get to lower fee structures through the technologies with all low and whatnot. But when you look at a Chipotle again, a Starbucks, high frequency businesses, loyalty et cetera compelling high frequency Now shift into a lazy dog, a Chili's. Everyone wanted to get into the loyalty game to try to drive first party, yet these businesses have inherently low frequency. Any thoughts on how in that segment, that casual dining, mid-scale segment, to drive first party purchasing behavior versus third party?

Speaker 1: 1:02:15

Yeah, look, it's a challenge. Anyone that says they figured it out, I'll lie into you. Especially in full service, I think ultimately it comes down to building a relationship with your guests. So, rather than thinking about it as an order in transaction funnel, think about it from the standpoint of I get you, I know who you are and using the different ways in which you're going to be able to communicate with your guest because of the first party relationship as a means to help them recognize that you don't take them for granted.

Speaker 1: 1:02:45

A word we haven't used much tonight is hospitality, and I think there's still a lot to be done in terms of creating digital hospitality. And I'll give you an example of what I mean. It's not from full service, it's from Chipotle, but I received an email a year after I signed up to their first party channel and they said to me congratulations, carl, on your one-year Chipotleversary. You're on Team Guac, not Team Queso. You like particularly spicy food. And they gave me all these different informations about who I am and then gave me a reason to order from them again.

Speaker 1: 1:03:20

I think there's just ways in which full service can do that, and maybe it's about special occasions, maybe it's about being better listeners, when the guest does come to engage with you, to understand why they're there, their preferences, and to try and use that in the best way that all of us have experienced in our best full serve occasions. Think about your best restaurant dining experience. Most of it will have probably happened in a full service, probably an independent environment, and really a lot of the time it's, yes, probably about the occasion, probably about the environment, but it's also about how they made you feel, the way in which they listened to you and your own preferences. So why can't we do that by using customer data and the digitization? A lot of folks get drawn into first party because of the profitability benefits of it, but, quite honestly, the biggest benefit of first party is knowing who your customer is.

Speaker 3: 1:04:14

I think that's a fantastic answer and I'm glad you mentioned word hospitality, because it's easy for all of us to get caught in the tech stack which is important to supporting hospitality. I think that's a great answer and we're seeing that in the hotel side of our business right now with running ahead of restaurants, with how we're using technology to support personalized experiences. So thank you for your answers. Really appreciate it.

Speaker 2: 1:04:38

We have time for about two more questions.

Speaker 9: 1:04:43

Hello everyone. Thinking on the profit and loss, I go to human resources and labor costs, and I was impressed by the fact that we can outsource part of the team internationally. I've tried to do the same. I'm wondering if automatization is coming with robotics and part of the production can be automatized and then we can reduce labor costs. If we can automatize the head chef and we can outsource it to the point that we can check on all the processes and we can be on top of the team with someone which is not on premise, which is not 100K in the US and it's maybe 40K in Colombia or in Peru, and can speak in Spanish with the rest of the team Very precise, can we automatize the head chef and bring significantly the labor costs?

Speaker 5: 1:05:43

I would say that A lot of people hear the word automation and immediately go to robotics or Like what you're saying with the offshoring, and I think there's so much that can be done with software and when I think of something like automating the head chef or automating the expo inside of a restaurant To determine what needs to be prepared when, what needs to be cooked when, so that it can turn out at the same time, is the other item, what needs to be refired because it doesn't look right, all of those things can be done with software.

Speaker 5: 1:06:17

Right, we can use advanced computer vision and AI to be able to see the product. We can use software algorithms and AI to determine what items get cooked when, what items get prepped when very much like what you've put together inside your restaurant. So I think that software automation is probably the easiest and, frankly, the cheapest to do, and then you will Move it to automation that looks a lot more like smart ovens and we won't go full robot for a very long time, if ever, because that will be so capital-intensive for such a small little business.

Speaker 6: 1:06:56

Yeah, and I would echo everything you said. And to the automation point, we're using tools like zappier. So, and on top of even having an offshore team, there's a lot that happens within the restaurant that you can use a tool like zappier to Email comes in automatically, ping the right people that email came in. If it's customer Feedback or we need to provide digital hospitality, things are just happening automatically. Catering order comes in, tell the right person to do it at the right time. So all these different ways you can automate that are maybe not hardware.

Speaker 6: 1:07:26

And then to your question around Culinary we actually don't have a head chef at alfalfa and we're able to lean on a lot of tools that help our product be fantastic. Meese is an amazing tool that we use, being that we're a bi-Colstall brand. We have not just the recipes but tons of videos Describing exactly how to make something, what it should look like, describing what it should taste like, and these are just like we have iPads in every kitchen and we're able to arm. People wake up Every day who work at a restaurant and they want to do the right thing, they want to be successful, they want to make people happy and if they don't, they at least they don't work enough. Alpha, they probably work at a restaurant If you can arm them with the tools to be successful. Maybe it's not a chef, maybe it's just a resource to so that they can be successful.

Speaker 1: 1:08:09

The only thing I would say is that how many celebrity chefs did we know? 30, 40 years ago? Not many, I think it's fair to say. Today the chef is A lead character in the brand of a restaurant, especially for the independence to be able to have the head chef Come to your table at the end of a dining experience my goodness, that's amazing.

Speaker 1: 1:08:29

I think it's about Maybe lying cooks or ones where the the dish is such a repeatable dish that the biggest risk that you have in your operation is one of consistency. If you have a number of consistency issues where you've got accuracy issue Problems attributed to the item. Always going back to the kitchen, that's where technology from a hardware perspective might be of interest. I, the infinite kitchen sweet greens infinite kitchen, over out just outside of Chicago, is a is probably the best example of where I've seen Humans and technology coming together to create a really fun experiential experience, and for sure they're going to be able to tighten a little bit on the P&L from a labor perspective, but ultimately what it's been able to do is been able to enable the humans to again create a more hospitable experience for their guests.

Speaker 6: 1:09:20

And one quick thing I'll add is I think the future of restaurant will have a lot more collaboration with Tastemakers in the community. We do this a lot, where we partner with local wellness people and they become our chefs and they're the ones creating all these new creations. And I think a lot of restaurants are going to begin thinking of their kitchen and their product as really paint on a canvas and you're going to really have all these people and tick-tock people Making. You're creating your food and you can just put it out there to the world. That that's something. That's another big trend that I think is coming.

Speaker 2: 1:09:49

We're gonna have our final question here, no pressure.

Speaker 3: 1:09:54

So for the average restaurant owner of five locations or less, how cost prohibitive or time prohibitive is it to implement these new technologies for the restaurant?

Speaker 1: 1:10:07

It's why we was that good enough.

Speaker 1: 1:10:11

They're not. They're not during you, so you're good look. I think this is why we wrote the second book, because we would go to pretty much every restaurant conference out there and would see an operator of five or units Go into a big hall of all these different vendors, all these different technology solutions and they'd look like deer in the headlights. Where do I start? Where do I start what we try to do in the path to digital maturity? Our second book is to really help navigate the path to more of a digital restaurants outcome, and Part of that is about focus, recognizing it's a marathon, not a sprint. Part of it's recognizing that you don't have infinite resources, and it's about really focusing on the area of what's most important to your business now, as opposed to trying to do everything.

Speaker 5: 1:10:59

All I was just gonna say. Poor restaurants have been in a state of emergency, though, because of COVID, and it felt, I think, to most restaurants like they had to do everything at once with regards to technology, having Not had it and then suddenly meeting it, and the wonderful thing about where we are now is that everyone can breathe this. I have relief and step back and Think about what technology, what I actually like to have, and make purposeful decisions. In some places, you'll limp along on the thing that you have, and that's fine, while you focus over here that is a really important problem and do exactly what you're describing.

Speaker 6: 1:11:36

And I would actually add that you asked about cost of dollars and time. I think it feels like the price of software is dropping. I think we're getting more features for less cost. There's amazing tools that there are seven shifts that begin to just do it all for you. Something like toast, obviously, is work super well. For a lot of people. It's really a time question and a skill set and a Trying to get unbiased opinions is so hard in restaurant. Any anyone you talk to like to have a point of view because they're a vendor in this or that, and so I think that's where there's like a lack of cohesion of Someone that's truly in the has the restaurant tours best interests, especially for you asked about sub five units. They just don't have the time or space to think about this, implement it, and it's something where I think increasingly, owners are gonna have to bring in very tech savvy GM's and other people in their organization Actually implement anything that they do. That's gonna be another huge trend.

Speaker 2: 1:12:35

Ladies and gentlemen, we do have to call things. At this point, I want everyone to put their hands together for Kristen, merritt, carl and Dan.

Speaker 1: 1:12:46

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 you.