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THE DIGITAL RESTAURANT: MAY 22, 2023

Underground deliveries, Sweetgreen's got Spycy and what is your loyalty program costing you? 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.


ARTICLES MENTIONED IN THIS EPISODE:






TRANSCRIPT

Carl: Underground Deliveries with Wendy's,, Sweet Green's got Spycy, and what is your loyalty program costing you? - 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 have caught our attention in the worlds of restaurants, off-premise and technology, that in some way tie back to our book series, Delivering the Digital Restaurant. Are you ready? Let's go.

Good morning, Meredith. How are you?


Meredith: I'm very good. How are you, Carl?


Carl: I'm very good. I'm in the Windy City right now at the National Restaurant Show, and my, my feet are tired. That's actually the truth. My feet are tired. This is a huge show and I've met a lot of great people and been enjoying sampling some of the great things that are on offer here in Chicago.

But let's get going with this week's episode. Lots of talk about, the first one is about an article we saw on understanding the cost of loyalty. I think Zach was involved in this.

So tell us what were your learnings?


Meredith: Yeah, Zach Goldstein of Thanx. He is a smart guy and I love reading everything that he writes. Of course, he wrote that original article back in the day - the Four Horsemen of the Restaurant Apocalypse, which was very prescient. He and I share a heritage at Bain & Company. He talks about that in this article, and the power of lifetime value of customers and how retaining a customer is so much more valuable than acquiring a new one. We increasingly, as we learn to understand the data in the restaurant space, are starting to learn that the point of it is to learn who's coming into your restaurant and how to get them to come back more frequently. So the whole article is about how most loyalty programs in the restaurant space historically have really been rewards programs and have been extremely expensive. And [00:02:00] not expensive in the sense of how much are you spending on a SaaS license fee to have the software, but expensive in terms of the actual redemptions.


And what was really interesting to me about this article is again, he compared it to travel. And said, look, for those of you who are in airline loyalty schemes, you probably value more the ability to get upgraded to first class, which cost the airline nothing. They were flying the plane anyway and that seat was going to be empty.


Now, they might give you the ability to get a free plane ticket. And that feels like a discount, and they're able to flex those so that if it's something everyone wants and a really expensive day to fly, it's almost impossible to get a miles ticket, if you're flying at a time when they've got tons of empty seats and the plane's going to be flying anyway, again, it costs 'em nothing. They go down. They really manipulate those points to make it much less costly for them.


Restaurants need to get to a point where they do the same thing, where they're creating other versions of loyalty, whether it's access [00:03:00] to items or experiences or merchandise. Or they're creating this sort of flex redemption and flex earning potential that allows them to reduce what Zach refers to as the effective discount rate of that loyalty program.


So really interesting article. I think it is a great way to think about loyalty in the restaurants space, and a great way to think about using all the data that we're getting.


Carl: Sounds fascinating. I think e-commerce opens up so many doors, doesn't it? To just do this differently and to do it more effectively and to have some fun as well.

And I think once restaurants really figure that out, it's going to be pretty exciting to see the high levels of consumer engagement that follows.


Meredith: Okay. Next question is for you, Carl. I know that you have gotten to do something pretty fun out there in Chicago while you've been there and actually see Sweetgreen's Spyce acquisition in action. So tell us about what you saw.


Carl: Yes. So, , it was [00:04:00] about a 45 minute journey out of the center of Chicago to actually go and visit their Naperville location.

And you're right, It is their Spyce takeover that we're talking about here. We refer to Spyce, of course, as the acquisition of the robotics company that they did in 2021, but it's actually called their Infinite Kitchen where they're trying to bring a frictionless experience for customers to be able to see how they can engage with making their own salad in a very customizable and fun way.

And I absolutely did record a video, but before I show my video, let's just see the nice fancy video that they put out. And I'll share that with everyone first.


Carl: That's what they said. And let me show you now what I said, because I can tell you I had a fun time.


Meredith: So they make a big deal in their video, Carl, about human hands being involved and that it's not a totally mechanized process. Was that your experience?


Carl: Yeah, it was, look, I think it was fun. That's the first thing I'll say. It was fun, it was different. It was engaging, it was fast. It definitely was frictionless.

And I think the way in which they've allowed the consumer to be engaged on the conveyor approach all the way down the process makes you feel like you're not missing something as well. But there were definitely people around, this didn't feel like one of those labor cut exercises. This was more about just enhancing the experience of eating out.

And I think sweetgreen are definitely onto something here.


Meredith: To be honest, I secretly hope that eventually it does cut labor costs because I would love to see automation used in restaurants to bring better and more food to people at a lower cost.


Carl: Well, before we move on to our next question, I must ask our viewers, our listeners, to subscribe to the Digital Restaurant Podcast if you haven't, sometimes you'll actually hear us through LinkedIn. Sometimes you might find us through YouTube or our own website. But if you haven't yet subscribed, do us a favor. Please subscribe. Click on the little bell, subscribe to us on your favorite podcast platform, whatever way you'd prefer to.

But if you do that, that's really helpful for us so let's move on.


Question three. GrubHub have announced that they're handed out more customer data. Now we know the marketplaces Meredith, get a lot of attention about not only the fees, but also the way in which they hold customer data.

So are Grubhub doing something particularly special here?


Meredith: Well, it's interesting. I would say it is early days of sharing information. They're not giving out customer level data like that actual detailed individual customer data. They're giving customer segmentation data and at this point in time, very basic segments, it's are they a GrubHub Plus member? Or are they not? And are they a new customer to that restaurant or a repeat ? So you [00:07:00] start somewhere, you got a little bit of information. I think that's good. But you can imagine what this could become. And if you go back to the chapter in our book called Mine Data that talks about restaurants becoming e-commerce companies and what kind of data e-commerce companies use.


You could imagine this getting to a point where number one, As a restaurateur, you can measure ROAS - that is return on ad spend- and you can see I spent ad dollars here and this is what happened, and did I get the ROAS that I need to justify continued ad spend. Then number two, you would be able to spend your ad dollars in very segmented places the way you do on say Facebook or Google or LinkedIn as you go in and you find just those audiences that you really want to reach out to.


That will then enable A/B testing so that restaurants can start to say, oh, I get the highest ROAS in the segment with this type of message. I should do more of that. Right? So while the GrubHub announcement doesn't take us [00:08:00] all the way to that end state vision, you can see how these baby steps towards it could get us to a place where restaurants are much more sophisticated, e-commerce marketing companies.

Carl: And ultimately I suspect it will encourage restaurants to see how they can be a good partner as well with third parties recognizing that a bunch of customers are going to want to stay on third parties.


Meredith: For sure. Yeah. Those guys that are bought into these loyalty programs - whether it's a DashPass, UberOne, GrubHub Plus -they have every reason in the world to order on those platforms.


And so figuring out how to get the most out of those platforms to access those consumers, I think is an important thing for restaurants.

Okay, .Carl Wendy's. It seems like they're trying things all the time. And they had some news both on pullback and on lean-in in the last two weeks here. So share with us what they're doing.


Carl: I couldn't agree more. I think they're doing some fabulous things.

Of course, we've reported on them in the last year or so with relation to their relationship with [00:09:00] Reef, but in the last few weeks they've announced that they're pulling back from that relationship and they're focusing on other items, but that isn't putting an end to innovation at Wendy's. If anything, they're steamrolling in into the future with plenty of other things.


So there are two elements I wanted to touch on here, Meredith, quite honestly, because the first of all last year they announced a relationship with Google and using Google to help test a, a drive through chatbot. I believe they, they started in June in Ohio. And this chatbot is really there to enhance the order and experience for customers using AI technology, which is something we've talked about in the past as well.


And it's around providing personalized recommendations. They're gonna just test this in two locations at first, and it will be a chat bot, digital display at the drive-through. So, you know, nothing too different beyond that. But the chat bot is there to try and improve order accuracy and speed, and therefore also reduce wait times.


Now, I'm curious about this because you've got a bit of experience with drivethru as well. They're, they're hoping, according to the Wall Street Journal, at least, to try and get order accuracy to 85%. Which again, according to that same newspaper, is about 5% higher than what McDonald's thought was particularly poor at 80% when they tested this last year. So, you know, is 85% a good number? I don't know, but it's interesting to see they're at least exploring this and we know there's plenty going on this space. Presto have been doing things with checkers. C K E have been testing with three different providers as well.

So it seems to me like drive thru AI and technology in that space is definitely an area of focus in, in 2023. So, uh, we'll keep our eyes peeled on that. But it's not just that, that they've been in the news for, they've also been in the news for something around underground food delivery. Now, I don't mean underhanded food delivery.


This is, and it's probably best for me to bring up a picture here. This is in relation to a company that we featured last year called Pipe Dream. But in the context of last year's report, we said about Pipedream helping food get into people's homes, well, this [00:11:00] is a little bit less of a pipedream,


this is about getting the food from the Wendy's restaurant into some pickup cabins, if you will. Right by the front of the store. So it's a enhanced pickup experience, I guess, is what they're trying to do here. And I think it's a fascinating one. I don't know whether the economics of something like this will stack up relative to a pickup shelf or two, but it's certainly driving, again, more innovative thinking and for them to really think about how can they drive more traffic, drive more theater into the off-premise experience and enabling guests not just to experience drive-thru and pick up in the traditional ways that we've come used to.


Meredith: Yeah. Amazing. I, I mean, what I love about this is, You aren't pushing the envelope unless some of the things you try don't work, right? And that they keep trying new and interesting things. And even when you say, yeah, maybe Reef wasn't what we wanted to do, well, we've got some new things that we're going to experiment with and I think that's just wonderful. And says a lot about Wendy's, but honestly says a lot about the restaurant industry [00:12:00] generally, that it is constantly trying new things and seeking better ways of serving the consumer, which makes it a fun place to be.


Carl: I think that's right and it's so important to have the innovation mindset at times like now, and clearly the team over at Wendy's have got that.

Okay, last question. Another acquisition in this space, which I suspect it won't be the last of 2023, but Deliverect have acquired a company called Chat Food. Who are ChatFood, and what do you think is going on here?


Meredith: So we all know Deliverect. They're an order aggregator and one of the leading order aggregators actually in the world. They're much more global company than US-centric. For those of our listeners who are here in the US, you've probably never heard of ChatFood, but they work in 3000 restaurant locations in the Middle East, so they are not an insubstantial company and they enable ordering through things like pay a table through social ordering, which I'm imagining is how they got their start and hence the name Chat Food.


And I think what we're seeing [00:13:00] here is the order aggregators realizing they need to play a much bigger role than just sucking in orders from the third parties and putting them all on one tablet, which was their original business. That was hugely important, three, five years ago. But now the third parties are integrating directly into so many POS's that having a tablet that brings in all the different third party orders maybe not quite as important. You're also seeing both Uber and DoorDash become stronger and stronger and stronger. Postmates essentially almost going away through the Uber acquisition. It's basically becoming Uber. And GrubHub as a percentage of total orders getting smaller and smaller as well.


So you've got concentration among these two players in the us you're seeing that in other countries as well. And then you've got direct integration with POS. Well, in a world like that, Why do you need Deliverect? What is it for? Right? Why do you need OrderMark? Why do you need Chowly? And so we've started to [00:14:00] see these companies really diversify and get into other things.


I think Ordermark was first becoming nextbite and rolling virtual brands into what they do. Then we had Chowly recently acquiring Koala, which was a first party ordering platform. We reported on that a few weeks ago. And now with Deliverect, they're essentially creating a multi-pronged way for consumers to get orders into restaurants, whether it's first party ordering or social media ordering, or third party ordering, and to have those all come into one place.


So a very interesting acquisition. I think it probably says as much about the underlying Deliverect business as it does about the future.


Carl: Great stuff. Well look another full episode this week, Meredith. Thank you for your time and thank you to you for joining us. Hopefully, you've enjoyed this week's edition.

We'd love to hear your comments, your thoughts about what we've covered. And if you've got any thoughts around what you'd like us to cover in a future edition, please do get in touch. But until next time, thanks 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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