MONDAY MINUTE: September 12, 2022

More virtual restaurants than physical?

All these headlines and more represent our thoughts and views on the world of restaurants, technology and off premise food in our round up of the last week’s hot news stories - subscribe today to the Monday Minute and register at www.learn.delivery for more bonus content.



Articles mentioned in the video:

1. Nuro announce big partnership with Uber


2. More virtual restaurants than physical ones?


3. Domino’s using discounting to drive usage of its digital interface.


4. A War for Fast-Food Wages Takes Center Stage in California


5. New names on the growth list for delivery from Yipit data


TRANSCRIPT:


Carl: Nuro partners with Uber, Domino's cutting prices, and will we see a world with more virtual restaurants than physical ones. That's all ahead on this week's Monday Minute.


Monday Minute works like this. We're going to ask each other five questions about headlines that affect the world of restaurants, off- premise, and technology that in some way, relate back to our book, Delivering the Digital Restaurant. Are you ready? Let's go.


Meredith: All right, Carl, the first question is for you, you led with this in the teaser, Nuro and Uber have created a partnership. And first of all, remind us what is Nuro and what impact might this have on how Uber delivers?


Carl: Yes, Nuro is probably one of the most renowned autonomous vehicle manufacturers, Meredith.


I think they had $600 million in their series D funding, so they've got quite a lot of employees and they're certainly making lots of momentum. And of course this announcement from Uber and Nuro just this last week is fascinating, cause it's a 10 year partnership and they're, they're gonna start with deliveries in Houston and Mountain View in California with plans to expand it to the Greater Bay area.


But I think it's just, again, another reflection of the fact that Uber, as they have been saying for many, many years now, see autonomous vehicles being part of the Uber Eats family and actually being able to help, not just with food delivery, but things like

pharmacy and pet food delivery and these vehicles all support anything, not just food, it's any kind of retail goods that Uber is trying to support outside of restaurants. So these are going to run on public roads. There are others out there that just go on sidewalks. I think this is the third partnership that Uber has.


They work with a company called Serve in West Hollywood and Motional in Santa Monica, again, two California locations. But Nuro is probably the biggest partnership yet. And to announce a 10 year partnership tells us that Uber is very, very serious about this. So exciting times. And what does this mean for us as a consumer?


Well, it means that with autonomous vehicles, you've got to think that food and delivery become a little cheaper in the long run.


Okay, second question this week, Meredith, comes from a LinkedIn post that caught our attention, Sterling Douglass, who is the CEO of channel manager Chowly put out a article on LinkedIn where he said something about virtual brands and digital restaurants, potentially being more prevalent than physical brick and mortar restaurants.

So are we going to end up in a world where we see more virtual restaurants than physical restaurants?


Meredith: I think it's totally possible. This same guy said at the beginning of the pandemic, that according to the data flowing through their systems, there were, he estimated a hundred thousand virtual restaurants already in the US. And to put that in perspective, there are about 600,000 brick and mortar locations, maybe up to a million, if you include all other forms of kitchens, like hotels and B&I. When you put all of this together and say, wow at the beginning of the pandemic, when this was all just starting, there were a hundred thousand of these things and now people are starting to do it on purpose.


Companies have organized like nextbite, Franklin Junction and VDC, and WowBao that offer these things to restaurants. Restaurants are really starting to adopt them and not just the independents, but also big chains with folks like Chili's bringing out It's Just Wings at all of their locations or someone like Denny's with the Burger Den.


As you start to see these proliferate, let's just do a math exercise and imagine of those 600,000 restaurants, about half of them are chains. Not all chains are going to engage in this virtual restaurant craze. So let's say maybe 10% of them do, we've got 30,000 restaurant locations that each have one virtual brand and then of the independents let's say maybe half of them engage because why not add these additional sales layers to their business. So that's 150,000 locations. And if each one of them does two virtual brands, that's 300,000. He said there were already a hundred thousand. We added that at 350, we're up to 450 already, and we haven't even tried.


It is absolutely possible that we will end up in a place where we have more virtual restaurant brands than we do brick and mortar locations - certainly than we have brick and mortar brands since again, of those 600,000 half of them are chains where it's the same brand over and over and over again.


Furthermore, I think, he very specifically said locations. He wasn't talking about sales volume and I think most virtual restaurant brands are designed to ride on top of an existing restaurant to be incremental volume. And therefore, maybe they're 10%, 20% of what the host restaurant is doing.


So putting that huge number in perspective about the number of virtual brands out there, we could still say that the dominant form of revenue flowing across the system is going to be traditional brick and mortar restaurants for some time to come.

Next question is for you, Carl, Domino's announced that they were gonna cut their prices by 20% on digital platforms. Tell us about that.


Carl: Yes, they're calling it. The "Inflation Relief Deal." It covers all menu items nationwide, and it's for anyone that is engaging with them on a digital ordering format.


So whether that be a company's slack channel, Facebook messenger, or of course, through carry out delivery channels for themselves. So it's it's a good move, but it doesn't surprise me. And it doesn't surprise me because I think in times of high inflation or at times where recessions are particularly prevalent, the brands that have more of a value orientation, whether that be the Domino's in this case or QSRs that have value meals, they tend to do pretty well. Right. I'm sure you saw this back in your Taco Bell days. And so they're actually taking advantage of the macro environment and putting a huge marketing message out there.


You know, 20% discounts are pretty significant is what I'm hearing here from Joe Jordan, their president. And he's saying, look, this is a great chance for you to reconnect perhaps with Domino's because also Domino's, as we know has been going through a bit of difficult times recently, the sales have been a bit rough, so this could be the very thing that brings Domino's back to the sales levels that we're accustomed to with them.


So I, I think this is not a surprise. I think it's great. I think if anyone loves Domino's, people are gonna be lining up to order. And of course, again, it's continuing to encourage people to engage with that brand through the digital channels and really embrace delivery.


Okay. Our fourth question this week, Meredith is about something that I think has got a lot of Californian restaurant owners a bit concerned, certainly conscious of what it perhaps means to them and their business. And it may well change the very landscape for restaurateurs in California as well. And it's all to do with wages. Can you tell us more?


Meredith: Yeah. So the FAST Act is requiring that minimum wages go to $22 an hour in California, which, I think people have a lot of opinions on both sides about whether a higher minimum wage is a good idea or a bad idea. But I think what's interesting about this particular law is the way in which it's implemented. Which is to say that if you are a member of a chain, even if you're a franchisee who owns a single location, if that chain has multiple locations, you have to pay the $22 an hour. However, if you have less than a hundred locations so you're an independent restaurant, or maybe even you are a chain, but you're just a regional chain with 80 locations.


You don't have to pay the $22 an hour. Instead, you would pay the prevailing minimum wage [00:08:00] in whatever your jurisdiction is. And to me, what's fascinating about this is that differential between the two types of restaurants. The state playing some favorites here, right? It's saying we prefer this type of restaurant over that type of restaurant.


We're gonna make it easier to be in business for this type of restaurant versus that type of restaurant. And there's a couple things about that are concerning to me. One is who's the state to say why some restaurants should pay higher wages than the others, right? If you believe in a minimum wage, you should believe in a minimum wage and it should be applicable to everybody.


The second thing is when I think about putting laws into place like this that have a differential impact on different types of businesses, we end up with a bit of a two-tiered system where if you are lucky enough to work for one of the companies that is required to follow these laws, you earn in higher wages, or maybe you get better benefits.


We see this in a lot of the laws that are structured where companies have to offer benefits once they're a certain size, but they don't, if they're below. And so if you're lucky enough to get one of those jobs, you fall into this category, you get all of these great things. But it's harder and harder and harder to get one of those jobs because they are more attractive and everyone else ends up in this other system where they don't get those benefits. They don't get those wages. And if we look out at other countries in the world who have done things like this, say France, you end up with a very two-tiered workforce where you've got a group of haves and a group of have-nots. All operating in a very different way.


The reaction that I'm hearing to this law is less about the number per se. Although 22 certainly is very high. But it's more about the way in which it's being implemented and what affects this might have on both different kinds of restaurants, as well as different types of workers.


Next question is for you. The new Yipit data came out, which we're always excited to see when they release something [00:10:00] new. Tell us what's on the report.


Carl: Yeah, we we love the team over at Yipit and the information they share. And look the information this time isn't really startling Meredith, let me bring up some of the representation here, so that folks that are watching us on video can see. It gives the latest data through the second quarter of 2022, where it's telling us that DoorDash still lead as the top third party delivery platform.


But they've actually gone up over the course of the last year. Now they're just, just over 60%, I'd say. And it seems like in terms of the market share, at least they're taking that away from GrubHub. Uber eats has stayed around the 30% mark and GrubHub has dropped down a little bit, but it is interesting this data because it does point out the various different markets and Metro areas that are starting to see change and growth for all intent and purposes


These secondary areas that are starting to see huge levels of growth. So for example, here, you see Memphis and Sacramento, the two fastest grow metros in third party delivery sales in the second quarter. And then you see other cities there mentioned like Austin, Richmond, Nashville. the point [00:11:00] here is that we're seeing more and more food delivery happening in areas across the country. And that is not a huge surprise, but it's encouraging to see. And it's also therefore going to continue to demonstrate the way in which convenience is required by every American, no matter where they live.


The other thing I thought would point out is at the very bottom, they talk about some of the fastest growing brands. And look at some of the names here. Meredith. Pizza Hut is at the top Crumbl cookies, Cava, Round Table Pizza. We don't talk about those brands that often- what they've been able to do, the digitization of their offer. We've talked a bit about Cava and their interface from a first party perspective being very impressive, but it's great to be able to see some of these emerging brands that really are doing some great things and seeing their sales grow as a result on third party.


And you've gotta hope that as a result of that, they're also being able to develop clever and smooth first party platforms as well.


We're out of time, Meredith. But before we finish, before we finish, I have to say a big congratulations to you. We had my news a few weeks ago, but now we've got some news that's come out this week, a press release about your new gig: CEO of Empower Delivery. Why don't you tell everyone a little bit about what Empower is, because I think everyone's going to be really interested. if we were biased as a podcast host, we would've probably put this in as one of our five articles this week. So I'm going to give you 30 seconds to tell us why you're excited and congratulations again.


Meredith: Thank you. Well, no pressure there. So I am very excited to be coming out with the Empower Delivery story. This is the software that powers the cluster truck ghost kitchen in Indianapolis and a couple of other cities as well.


We are spinning the software out into a separate company so that it's accessible. Any restaurant that wants to use it, which is very exciting because of how powerful the software is and what it does enables order to delivery times on average of 29 minutes without charging menu markups or delivery fees. The back of house is also more efficient and effective operating at a [00:13:00] 19% of sales labor cost, 26% in total spent on the back of house labor, as well as the delivery. Let's just note that that is less than what most restaurants are running at when they are running a restaurant.


So that is very exciting. I'm super thrilled to be part of it. I'm sure you'll all be hearing a lot more about it as we go. But that's the story.


Carl: Yeah. Well, congratulations again, my friend, I think it's fantastic news. And to have you leading the way with this and touching on many of the themes that we've been discussing and writing about over the last few years, it's they're in great hands with you.

So well done, again,


Meredith: the main reason that I chose this company is because I feel like we've been, you and I, talking about this is what needs to happen. This is what the world needs to look like someday. It will be like this and some day is here, like Empower Delivery is actually doing all those things already, which is pretty exciting.


Now I would be remiss not to note that we will continue to do the Monday Minute. Even though both of us are now fully employed and engaged on other activities. [00:14:00] We will continue to put this out. We are actively working on the, bonus chapter. And we'll expect to see that come out here soon.


So you'll still hear from us As we start to get more focused on these other ventures we'll still be here for you always.


Carl: Great stuff. Okay. Thank you for listening. Hopefully you found this week's edition interesting. As always would love to hear your comments, any questions, what you've agreed with, what you've disagreed with and perhaps what you'd like us to cover in a future edition.


But until next time, thanks for listening.


The Monday minute is available for you to follow and subscribe wherever you listen to your podcast. Watch us on YouTube and follow us on all our social media learn channels. Thanks for listening.


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