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THE DIGITAL RESTAURANT: April 24, 2023

Dominos in car ordering, what stood out at RLC & NCR's cyber security attack. 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 last week’s hot news stories - subscribe today to The Digital Restaurant and register at www.deliveringthedigitalrestaurant.com for more bonus content.


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TRANSCRIPT:

Carl: Domino's in-car ordering. What stood out to me at RLC and NCRs cybersecurity attack. That's all ahead on this week's Digital Restaurant.

The Digital Restaurant 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 lead back to our book Delivering the Digital Restaurant. Are you ready? Let's go.

Hey Meredith, how are you doing today?


Meredith: I am so good. How are you, Carl?


Carl: Very good, thank you. It's been another busy week, so let's get straight into it. It's your week to go first. Dominoes who we talk about very often.

doing some more innovative stuff this time in car ordering. Tell us more.


Meredith: First of all, feel free to add to this, Carl, I know you know far more than I do about driving around in cars from your days in the convenience world. What I loved about this story is, Domino's is one of the original innovators in this space, and they continue to really push the envelope as they make it easier and easier for consumers to order a pizza from them.


And now, Most recently, they can order from their car, which is very cool. It is enabled by an Apple App store integration and all that's really required is making sure that you have the Domino's app on your phone and then having your phone hooked up to your car. Gotta have a certain kind of phone, gotta have a certain kind of car. But other than that, pretty straightforward. The other thing of course, is that you have to have an account with Domino's in your app, and you have to have some prior order set up, because then you can just press that button and food appears, which is fantastic. If you do not have a prior order, you can press a different button and call directly to the local Domino's and place your order the old school way via phone.


Very safe Domino's. Thank you for making sure that we are all keeping our eyes on the road. Also, Carl, this totally reminded me of the last chapter of the first book where we talk about the guy using his onboard smartwatch device.


Carl: Behind the ear.


Meredith: Oh, behind the ear. Is that what it was? To just imagine what he wanted to eat, not even do anything, and then have it appear through the sunroof of his car. We're on our way toward that incredible future world that we have imagined. And Domino's is taking us there.


Carl: No surprise. We we always think pizza leads when it comes to innovations like this. And it's great to see what they're up to.


Meredith: They've been doing it a lot longer. I think it behooves the rest of the industry to say, "gosh, pizza has been up to this for 20 years. They probably have figured out a thing or two."


Next question for you. You were at R L C this week, the Restaurant Leadership Conference, and I saw you posting up a storm, so I know that you saw a lot of interesting things. But please recap the most interesting for the podcast.


Carl: There were a lot of things going on. It was a great conference great amount of people there. It's certainly feels like the energy is back from the last few years. And I think one of the things, particularly about RLC that folks like is the chance to have space in between the sessions.


We're obviously heading off to Food on Demand pretty soon, and I actually love Food on Demand because of the insights that you get from the sessions. But this one was also really rich with content and there's a bunch of articles, of course, that Winsight inside have put out. But I wanted to share some little snippets if I may.


First of all, our friend Andrè Vener over at DogHaus was on a plant-based panel. And of course we talk about DogHaus and plant-based in the first book. And he had this line, Meredith, which I thought was really important. It was basically around. When you think about developing a menu and whether you want a plant-based menu item on that menu, he says, look, even if one in eight people might eat plant-based today, if you don't have something on your menu like that, you risk losing the other seven diners that may want to eat with a vegan friend.


And It was a line that just resonated with me in the sense that it doesn't always have to be so extreme of being completely plant-based or otherwise. And I think Andrè really hit home with that and clearly they're finding some great success with their burrito brand as as well, which was actually brought towards the hotel bar towards the end of the evening, which went down a storm.


Meredith: Nothing like a burrito at a bar. It, that's interesting. He's saying it's the new veto vote, right? We used to put terrible salads on our fast food menus, this whole industry, right? So we would say there's probably one person who wants a salad, so we'll just have it there, even though it's no good.


And he's saying, oh, these plant-based people are real. And give them something that's great that they would actually choose. Don't just put a crappy salad on your menu. Give them a real choice.


That's awesome.


Carl: He's also a fiend on the pickleball court because I bet with him to say if I won, he was gonna buy 20 or so books for his friends and family.


Or if he won, I had to buy him a espresso martini with his favorite tequila. And unfortunately I lost. So congratulations, Andrè. The other thing I was gonna say was Subway, CEO John Chidsey was there and he said that Subway today, only have 15% digital sales and he hopes that the chain has the potential to more than double that.

So that really surprised me because, is it because they just don't have the presence of the marketplaces? The digital interfaces haven't been good enough, or had the execution of delivery not been particularly good, have the franchisees not embraced it? But then he went on to see, for QSR apps, it's the third most downloaded app behind Starbucks and McDonald.


Now when he started the app only generated 3% of sales. So it's 5x'd in three years. So you know, that's pretty good. And they're releasing app updates every six weeks. So he said they're still trying to figure it out. So for sure, there must be a big, long run runway here of opportunity to get Subway to what most other QSRs are doing, and that's at least 30%.


That is fascinating. They have such a huge footprint that it makes sense that folks would be downloading the app, but you would think that would result in more sales. Very interesting. One to watch for sure.


Yep. And then first time I've ever heard Greg Flynn speak I know you, you've told me about what a great guy he is from your times at Yum.


It was great listening to him because I guess when you've got the money that Mr. Flynn has got, he speaks his mind as freely as anyone, and it was wonderful to hear. For example, he was talking about loyalty, and he says, you're discounting your most loyal customers. They don't really see that as a benefit.


The audience was actually polled as to where should marketing attention be placed right now? And loyalty was the one that came out. I think 50, 60% of the audience said that's where most of the focus needs to be. And he said he was surprised. He thought most of the focus really needs to go towards social media and digital marketing.

But then he changed his mind a little bit because further down the line, there was TV advertising and he said, especially around live sports, it works better than all this other stuff . But I guess how measurable is TV versus digital? I guess again, you'll have had some experience with that with your Yum days.


And I think the challenge that a lot of the smaller operators in the room were thinking was like, yeah, I can't afford TV adverts and it's, is this really something that I can compete with? And of course with digital, it does arm every operator, no matter what the size of being able to actually have measurable marketing.


Sticking with Greg Flynn. Meredith, he also said "in 10 years, AI will have replaced human order takers in QSRs. And in five years, 70% of that will have happened. So no humans involved in pizza period. And it's gonna save our P&L's". So that one really stood out as one of the big lines.


And then I was in a panel in Sean Kennedy, the EVP of Public Affairs at the National Restaurant Association said this percentage of operators currently offer delivery. What percentage would you guess that to be? Meredith? How many operators across the NRA group of restaurants out there would you say actually offer delivery today?


Meredith: In some form or fashion?

Not necessarily first party. Yeah. I'm gonna go 75%?


Carl: I would've guessed that some or something around that. 47%.


Meredith: What?


Carl: "This is here -


Meredith: it's not going away"

Meredith: After all this money that DoorDash and Uber have spent on customer acquisition, what is happening? Wow.


Carl: This goes to show, doesn't it? That there is still some way to go of being able to get restaurants embracing delivery.

Alright, the last thing I'll mention cause I know I'm going on here. P PF Chang, CEO Damola Adamolekun said this and I'll play the video.


Do you end up collecting a lot of data? And then the question is it, how's it stored? How easily accessible is it throughout the organization and how's it helping you make decisions, right?


Because it doesn't do any good to have some some program that has a ton of data that, that is isolated to that program and now being used anywhere else, right?

So I think that is so on point, right? Data. Yes. We're getting lots of customer data today. How do we store it? How do we use it? How do we use it more effectively?

I think the Damola's finding that it obviously at PF Chang's, but every restaurant is in that space. We cover this in the new book about when to collect data, when do CDPs make most sense? When do you start to actually use data to use the right mechanisms to measure performance? And I think it's an area where many restaurants today still have a lot of opportunity to grow in.


All right, we're gonna move on. Question three. Meredith, back to you. Brita Rosenheim, we're big fans of Brita. We've got the latest tech ecosystem map is out, and let's get your thoughts on this.


Meredith: First of all, Brita, thank you so much for keeping track of all of us. This is a lot of companies and a lot to keep up on and there's so many like fun logos and good, great company names.


How do you know what all 250 of them do? It's just incredible. So thank you for dividing us up into our little fiefdoms and helping the rest of the world understand.


Carl: I'll bring it up if you Meredith.


Meredith: Yeah, that would be great. We often say, Carl, and it's one of the stories in the book, that for many restaurant people, you walk into one of these conventions and you're just overwhelmed by the number of vendors promising to do all wonderful things.

And it's really difficult to tell them all apart. And having them categorized this way I think is a great place to start. So first of all, thank you Brita, for doing that. Second, I think what you've brought up here is 2021 versus 23. Honestly, it's such an eye chart. Anyone watching this on video probably can't see what the difference is.


But, according to Brita, There have been 50 new companies added into in those since last year, which is amazing. And 25 gone away. Either shut down or acquired by someone else. So continues to be a ton of innovation happening in the restaurant industry. And also according to Brita, a lot of that innovation is happening in back of house. So in places around hr, scheduling, operations, things that hopefully drive more attention and success at the bottom line. Whereas I think in the last few years, particularly with Covid, it was about accessing consumers and therefore much about driving the top line.


She also said in the article that came out with this which was published in The Spoon, that there has been an increase in the interest in integrated systems from the operators perspective rather than so many point solutions.


Obviously with the number of logos that you see on this page, there are a lot of point solutions out there. She also said in the article that we, I think everyone knows, are in a more difficult fundraising environment. She pointed to those who really were demonstrating driving value would be the ones that we see get funded.


And in related news, we had a funding this week, very exciting, Odeko, which does supply chain for independent coffee houses, raised a tremendous amount of money with a lot of just blue ribbon venture capital funds investing in them. And that is exactly their story, right? They're saying we can save an independent coffee shop a ton of money and a ton of time. And those are incredibly valuable in this day and age. So I think she's right. I think we're gonna see a lot more back house investment and I think we're going to see those companies be strongly funded over the course of the next 12 to 18 months.


Totally right.


Carl: Look at you sneaking in an extra article into our podcast this way. I saw what you did there.


Meredith: I'm so happy when I see funding news. I just wanna make sure everyone knows good things are still happening. There's a lot of innovation that remains to occur.


Carl: Yeah, absolutely. Hey, look, the thing that stood out to me was looking at the size of the segments and the labor crisis of course hasn't gone away. And the size of the HR staffing and training development segment here relative to what we saw in 21, it's clearly got bigger. And so as ever right, industry reacts to what's going on and we interesting to see if it gets even larger by the time we get round to 2025.


Meredith: All right. There was some very interesting research that came out this week Carl, about what restaurants are doing, especially some top brands as it relates to their pricing on third parties versus what they're doing in store, or at least on their first party menus.


Carl: Oh, this one got me going. I there's lots to say on this, according to a new study by Gordon Haskett Research Associates, who I hadn't heard of before, actually, but they've done this great analysis here, which is saying that delivery price premiums are on the rises, and the average delivery fee has increased 11% in the past year and it analyzed 25 different brands. It looked at three to five items on their menus and compared them in relation to the in restaurant price to the third party prices, and 23 of the 25 restaurants had a menu price premium in place. This is something DoorDash calls price inflation.

Now back in 2020, the average price inflation mark was 10%. Now the average is 19%. In fact, at Quick service brands of which I would say are more kind of value orientated or certainly lower value of from a dollar transaction perspective, the premium was 26% and the fast casual segment was 22% so it's surprising to me, right?


Because, and we'll include a link to the article here cause you'll see names like Chick-fil-A, McDonald's, Taco Bell ,Chili's on this. And I'm pretty sure Meredith, I'm pretty confident that these types of restaurants are not the types that are paying the fees when you hear 20% thrown away around by the marketplaces.


And so therefore, that for that reason, I'm not sure this is just about them passing through the marketplace fee to the customer. These types of brands just aren't paying those types of fees. So I think there's something else at play here, and it's probably what I call blunt instrument pricing.


If the likes of Chipotle and Chick-fil-A who are measured at 30% higher on third parties, they've gotta be using price as a reason to condition the customer to go direct to their own first party channel. They're almost saying, if you want to pay it, go right ahead. But as we heard from Q4 Chipotle earnings report, maybe those price increases have had a bit of a negative effect on Chipotle sales overall.


We talked about this in the second book, if you remember, and, maybe those third party prices, which many customers will go to when they're hungry see those prices, those higher prices, and they form a connotation of what the restaurant price is across ALL the channels, thereby harming brand perception, 20 mc McDonald's nuggets, if you were to go in on their first party platform would cost $22.87 on average, but if it was delivered would cost $28.97. It's quite a large difference. And I think the customer on these third party platforms is certainly more agnostic. We're seeing that at JUICER, but they're also looking at the final price because of all the component paths that get it added on, like delivery fees, tips, and the like.


But one price at all times. At JUICER, this is why we think, this isn't the smartest way of doing it because maybe there's a right time of day to be at 20,25, 30% higher, but not all times of the day. That just doesn't seem right. That seems like it's harming the long-term value and perception of your brand.


And I think this is, again, coming back to data and data science and how technology can inform the right price at the right time, and helping customers understand that. I think that's gonna be more welcome and understood by customers because otherwise you're potentially risking losing that customer's choice of where to eat through the medium of where they're ordering.


And we know that many customers love third party marketplaces as a place to order from. And I don't know, it feels to me like there is a big warning here that if we don't get better at pricing, we risk losing a lot of customers certainly on third party channels.

Okay, last question. NCR had a bit of a rough week and those on NCR. Cybersecurity, this seems to be the term that came up. And it came up unfortunately, at RLC when this poor guy had to come and speak in front of the entire audience about what was going on where with some operators actually suffering with I think eight days of outage.


Meredith: NCR, for those who don't know them, are the original POS. NCR stands for National Cash Register. That's how long they've been around. Many years. They are the largest, dare we say, the most austere. They're big and established and wow. To have them have an attack is extremely surprising and makes you wonder, is everyone else doing what they need to do to take care of security? If the biggest can be attacked, then anyone can be attacked. And I think that's something that is important for everyone in the restaurant tech industry to be mindful of. The other thing that really struck me in this article is the number of restaurant locations on NCR's Aloha product.


They said it was a hundred thousand. Wow. I think that was as of maybe two years ago. But still it's an incredible number. One in six restaurants in America are on this established platform. I'm sure they continue to keep innovating, but what we tend to hear about is all the new companies and how quickly they're growing.


So very surprising to me to read that a hundred thousand are still on NCRs Aloha.

And then the third thing that this article really called to mind for me is just how many points of potential failure there are out there, right? So there's 600,000 restaurants in America. If each one of them has 30 employees, if each restaurant is running 15 pieces of software to run its business in some form or fashion. You're talking about 270 million potential points of failure every year, right? Because we've got a huge turnover rate. So you just keep having 270 new million new points of potential failure. That's an incredible number and really makes us pause and think about how do we make all this restaurant technology work better?


Going back to Brita's point about all the point solutions versus something more integrated. There are just a lot of opportunities for things to go wrong. For those of you who have not been mindful of your onboarding and offboarding practices now it's probably time to start with all those pieces of saas that you have out there and make sure that we take this as seriously as we take things like our credit card compliance.


Carl: Yeah, it's what this, I think is the first time we've talked about cybersecurity in two years of doing this podcast, and I think it's going to be a theme that many restaurant executives are gonna have to take even more seriously going forwards, because this is maybe one of the first ones that we've heard about recently, but it probably won't be the last.


Okay, look on that somber note. That's the end of this week's Digital Restaurant podcast. We'd love to get your thoughts. If you were at RLC, what did you love about the conference? What did you take away? What are you going to be doing for your restaurant when it comes to cybersecurity?


And then similarly, if you've got any thoughts about what you'd like us to cover on a future edition. But until next time, thank you for listening. 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.

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