In this episode of the Digital Restaurant Podcast, we dive into several key industry trends and developments. We discuss Wonder's surprising acquisition of Grubhub at a steep 91% discount, exploring how this deal could bolster Wonder's vision of a "super app" for mealtime. The conversation shifts to the growing impact of Ozempic on the restaurant industry, with discussions around how reduced appetites might affect dining behaviors and prompt restaurants to rethink menu offerings. We also tackle the challenges CFOs face in financing restaurant tech, as the industry grapples with the high costs and benefits of tech investments. We touch on the rising trend of self-ordering kiosks, exemplified by chains like Bojangles and Shake Shack, and the potential for loyalty integration. Finally, we explore Serve's acquisition of Vebu, marking a potential shift toward a consolidation of automation technologies in the restaurant space
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TRANSCRIPT:
Carl: Happy Monday, Meredith. How are you doing today?
Meredith: I'm so good. How are you, Carl?
Carl: Good, thank you. I am actually having a week with very little travel. I've been traveling a lot. I've been to Boston for the first time. I was worried I was going to get lynched as a Brit, but the Bostonians were very nice to me. But, did a bit of that and traveled over to Phoenix, Atlanta. So I tell you, I'm getting all the air miles. How about you?
Meredith: I was in San Francisco last week. It was lovely. I was at the Google Food Lab, which is just an absolutely amazing and inspiring event talking about the future of food.
Carl: I guess we best move on to the first question because the number one topic that was being talked about whether you at the food labs or anywhere else maybe RFDC last week everyone has been talking about our first article which is why did Wonder grab Grubhub? What's going on here? Tell us all about this one.
Meredith: First of all, I love the title of the article that we put in the newsletter, which was Wonder Buys Grubhub for a stunning discount. 91%, right? 91 percent discount. That's amazing relative to what Just Eat Takeaway paid for Grubhub just a few years ago. Good on Wonder. They got a great deal. Now I think at some point Wonder had been trying to build a marketplace. And so this for them is fantastic to pick up all the technology that has one, the network of drivers, a bunch of restaurants who are already signed up to it. And of course, Grubhub via Seamless acquisition is quite strong in the New York area. So even though we talk a lot about how DoorDash and Uber have really gained a ton of market share over really the creator of this market, Grubhub. They remain very strong in the Northeast. So a lot of things to like about this business for Wonder. Now, Wonder is putting together an interesting collection of acquisitions, right? When you think about the Blue Apron acquisition, the Relay acquisition, and now the Grubhub acquisition. It feels a little bit like I don't know, a collection of subscale businesses that are not growing quickly, going all together into Wonder. I don't really understand that for something that's supposed to be a very high growth business, but I think what you have to believe here is that the secret sauce is Wonder is going to put all of these things together in a way that creates a lot more value than any one of them could have on its own. And when we go back to Mark Lore's vision of a super app for mealtime, certainly that would need some restaurants, that would need some drivers, that would need some meal kits. The only thing he's really missing is grocery, right? And of course, he hired Tony Hodgett, the head of Amazon Grocery. Who's now a COO. So then that makes you wonder, wait a minute. Now are they going to build something in grocery or maybe buy something there too? My prediction is that they will buy FreshDirect. I don't know. What's your prediction?
Carl: You're going early on predictions. We usually do that in early January. My goodness. I'm not ready to do that.
Meredith: What do you think they're going to buy? You think they're going to buy GoPuff or something like one of these rapid delivery?
Carl: I think it'll be interesting to see if they try and create even more of a vertical representation, right? Because don't forget where they started out with all those trucks that they spent a lot of money on, right? I wonder whether they go back into that space eventually, right? Maybe one of these robotics companies might be a plan. Yeah, could be. I don't know. I think the fact Mark was on a news channel earlier this week saying that he wants the company to be ready to go public I think in 2027, the newscaster was questioning him about something like a 30 billion market cap and how can he justify that? And he says I got 30 different brands all playing in different areas. So that's how we think about it. They're very bold. They're very good at getting the headlines. I think what I'm excited to see is how they can use the Grubhub platform to be able to take themselves to the next level using the information, the data that you can get from a Grubhub and how they can perhaps create a differentiated experience to the DoorDash and Uber, right? If they can do something in that space, which gives customers a choice around saying why don't I try Wonder? Because I know it's different for X, Y, and Z reason. That might be something worth playing into because Grubhub was facing an uphill battle and hence by that valuation being reflected in what Wonder were able to purchase them for.
Meredith: Yeah. What a deal. And they said that Jet only got 50 million out of the whole thing. Cause most of it was taking on the debt that Grubhub had. Wow. And it does certainly give Wonder a revenue to grow off of. GrubHub was like a 2 billion dollar company, nothing to sneeze at. And Blue Apron was like a hundred million dollar company. So they're picking up these pretty decent deals to grow their own top line, especially if they can weave them, as I said, together in a way that creates value.
Carl: I think the Amazon relationship was going to be super interesting. Maybe the Amazon fleet is the piece that plays into this as well. That partnership might prosper still in the same way as we talked about GrubHub and Amazon when that was first announced.
Meredith: All right. This one has been speculated on a lot. I can't wait to hear what you have to say about it. What does Ozempic mean for restaurants?
Carl: Yeah, you might be saying, come on, Carl, this is supposed to be a digital podcast. What on earth are you talking about? The drug that's on everyone's minds these days, right? Ozempic. And it really just triggered for me because I saw this article in Franchise Times this last week. It was about just the increased usage of this drug and what its impact is on the restaurant industry. Of course, if you've been stuck in a cave and you don't know what Ozempic is, it's a medication which was originally developed for diabetes management and it's gained popularity for its appetite suppressing effects, leading to significant weight loss amongst the users that tried out. This trend has raised some concerns for restaurants because reduced appetites may result in decreased dining frequency and smaller meal orders and therefore affect revenue, as you can imagine. And the article I thought was quite interesting because it suggested that maybe this is a moment in time for restaurants to adapt their offering by thinking about smaller portion sizes, healthier menu options, maybe personalized dining experiences to cater to the changing consumer behaviors influenced by Ozempic usage. And maybe we'll also see a shift in the marketing strategies or even the types of restaurants that come about with the evolving preferences of health conscious diners. Yeah, I think fewer orders, smaller orders. Maybe an impact off premise decline specifically perhaps in those late night or impulse type occasions where clearly you don't necessarily get the same pang of hunger. Who knows? Maybe if the cannabis regulation starts to come in another direction we're going to get these competing forces of the snacking thing that comes from cannabis versus the suppressing side of Ozempic, but I don't know. I think it's worthwhile to all restauranteurs out there thinking about what does this mean for my menu? Given the value challenge out there, maybe smaller portion sizes, maybe the idea of a tapas type of concept is something that actually plays into consumers' mindsets whilst also addressing the health conscious customers out there as well. The main thing that I think it affects obviously fast food, known for its indulgent offerings, they may see greater pressure to introduce healthier items upscale casual, the experiential dining may be less impacted as people still seek to have the ambience and the social connections and those kind of experiential moments. Maybe dessert and snack concepts brands relying on indulgent purchases could face headwinds in this space but yeah I don't know I think we've got to pair it alongside the other trends. The fact that we are seeing more people interested about the food that they put into their bodies, making sure we think about the messaging and our marketing from a healthier packaging, maybe the meal kit side of things of how that plays into it. Maybe we'll start to see some brands that actually direct their focus to support those people that are on those types of diets. You don't often see that, or maybe it will be an e-commerce offering. But I don't know. I'm intrigued to see what happens, but I'm pretty sure that every restaurant executive out there is aware of it and is making some thoughts around what they should do about it. What do you think?
Meredith: There's a tremendous number of Americans who are even on it. That was a shock to me to find out how widely used the drugs actually are. And then I had heard recently that there is now become trendy to do micro dosing of it for we shall say more superficial reasons it could become very widely available. There are some scenarios where it becomes as widely used as statins, which later adult Americans are on statins post those drugs going generic to reduce their cholesterol levels. So if it became as widely used as those, especially after it goes generic you might see a real impact, a real change in behavior.
Carl: All right, next up this week we weren't there unfortunately, but I think a lot of our friends in the industry were and that was RFDC. You were talking to me earlier about some of the insights you heard there. What do you think stood out?
Meredith: It was very interesting hearing from some of the CFOs of restaurants, particularly Tiffany Furman, who's the CFO at Potbelly, and Steve Cerula, who is the CFO at The Habit. The one thing that was really, really big at RFDC this year was how the restaurant industry is embracing technology, and we see this all the time, right? We see the use of technology in all of these new solutions coming into the market, whether it’s for ordering, whether it’s for the kitchen, whether it’s for loyalty. There’s a lot of thought being given to how restaurants use technology in the back of house and front of house. And what was interesting this time around is that a lot of CFOs were talking about how they’re paying for technology. This was a huge challenge. Technology is really expensive, and so it's not just a matter of do you buy it, it’s how do you pay for it and how do you continue to fund these tech solutions that you’ve signed up for. And that’s been a real focus from what we’re hearing from CFOs. How do we pay for all this stuff?
Carl: And I think I was speaking to our friend over at Potbelly Steve and he said the same thing right? It’s interesting to hear how companies think about it from a financial standpoint because you think of the technology as being important but maybe not the biggest budget item in comparison to other things. But yet it is rising rapidly up the P&L and CFOs are saying we need the right solution and it’s not necessarily just a case of doing everything via SaaS and software. It’s about doing the financing component properly, especially given the unpredictable, tough headwinds they are all facing at the moment.
Meredith: Yeah, we talked a lot about financing technology. It’s a really hot issue in the restaurant world.
Carl: Which segues nicely into our next topic, which is kiosks, which are clearly a big part of the tech future for restaurants. It seems that in 2024 the kiosk was the tech that everyone is talking about.
Meredith: It really is. And what we’re seeing is more and more big restaurant chains like Bojangles making sure they are integrating kiosks. It’s still a lot of pilot programs out there, but I think a lot of restaurant executives are now asking, why haven’t we done this already? The benefits are really clear. When you think about the customer experience, the fact that you can get rid of some of those pain points in the line and in terms of ordering, improving speed, improving accuracy, getting that customer experience in a way that keeps people engaged, keeps them coming back. And it’s such a great piece of technology to use in the restaurant space.
Carl: The key question though is when will the loyalty piece come into it? Right? That’s the thing that I find fascinating because today it’s usually a case of adding a kiosk in, taking your order, paying for it. But I wonder where the kiosks are going to get to a place where the loyalty ID, whether it be the card, the thumbprint, the face, whatever it is, actually the identifier is actually shown at the start of the transaction. So that way, the customer, when they engage with these kiosks, you’re already seeing that loyalty hook almost immediately from the very start. That might be a nice win, wouldn't it?
Meredith: That would be really great. So I think we’re going to see more of that in 2024.
Carl: Yeah, no doubt. I think it’s going to be a busy year ahead.
Meredith: And last but not least, let’s talk about Serve Robotics buying Autocado. This one’s really interesting because it shows how robotics are continuing to evolve within the restaurant space. Serve Robotics, which already has its autonomous robot food delivery service, has now bought Vebu, which is the maker of the Autocado robot. And the Autocado is one of the few robots that’s actually been able to make and serve avocado toast in a restaurant setting. That’s one of the things we’ve been talking a lot about lately, right? What’s the next big trend in robotics? It’s not just food delivery anymore. It’s getting robots into the kitchen to help prepare food.
Carl: The automated piece in the kitchen is where the money is going to be. And the first task that I think we’re going to see robots perfecting is the prep. You don't see robots taking the final cooking portion, but certainly some of those more repetitive prep tasks I think are going to be huge going forward.
Meredith: Absolutely. It’s just so fun to see all this technology unfolding. And this acquisition really just proves how this is moving ahead at a fast pace.
Carl: I’m excited to see where all of this goes in the next 12 months.
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