Speaker 1: Welcome to Chopping It Up.
Speaker 2: I'm your host, Mike Hallon, the senior restaurant and food
Speaker 2: service analyst.
Speaker 1: At Bloomberg Intelligence.
Speaker 2: Today we're joined by Juwan George, co founder of eight
Speaker 2: five eight Partners, an investment firm and consultancy focused on
Speaker 2: restaurant tech.
Speaker 1: Thanks for doing this, Juwan.
Speaker 3: Yeah, thanks, Mike. Excited to chop it up with restaurant
Speaker 3: tech with you today.
Speaker 1: For sure, Man, I've been looking forward to this.
Speaker 2: We've been talking about doing this for a while, so
Speaker 2: let's just jump right in. There won't be an eight
Speaker 2: five eight Partners if OLO didn't exist, So why don't
Speaker 2: we start with your career experience at OLO?
Speaker 3: Yeah, for sure. So you know, my story is I
Speaker 3: joined OLO during the senior year of college back in
Speaker 3: March of two thousand and seven, and you know, had
Speaker 3: just turned twenty one years old. Didn't know what I
Speaker 3: was going to do post college, but saw a visionary
Speaker 3: leader in Noah and a company that was chasing an
Speaker 3: idea that I totally believed in. And it was the
Speaker 3: idea that one day customers were going to treat their
Speaker 3: phones as the remote controls for their lives and order
Speaker 3: and pay for their food in advance. So for me,
Speaker 3: it was a fifteen and a half year journey there
Speaker 3: that I would break up into three chapters. This first
Speaker 3: chapter is what I would label your kind of product
Speaker 3: market fit, trying to find that, and it was a
Speaker 3: seven year chapter in which it took to get to
Speaker 3: one million dollars in arr and. So we were based
Speaker 3: in New York City at that time, you know, one
Speaker 3: of the earliest restaurant tech but just tech companies in
Speaker 3: that ecosystem. And really during that seven year period, Olo
Speaker 3: was predominantly this twelve person company of people in their
Speaker 3: twenties who have now become friends of mine, and we
Speaker 3: were just simply ahead of its time, right, you know,
Speaker 3: they say you're twenty for learning. And we lost one
Speaker 3: hundred more times than we won in that era, but
Speaker 3: we held on to this Winston Churchill quote which was
Speaker 3: never ever ever give up, and ultimately we found this
Speaker 3: fast moving water in a customer out of Texas that
Speaker 3: at that point in time helped us take this B
Speaker 3: two C business into a B to B two C
Speaker 3: business and we got our first major win with five
Speaker 3: Guys burgers and fries that helped us get that elusive
Speaker 3: product market fit that every startup, every technology company hopes for,
Speaker 3: and that unlocked the second chapter, the rocket Ship years
Speaker 3: a million to forty five million an arr and it
Speaker 3: was a six year period in which we were doubling
Speaker 3: the company every year. We had just hired our first
Speaker 3: leadership team, including my mentor and current business partner, Marty Hantfeld,
Speaker 3: this head of sales, and during that period of time
Speaker 3: really Olo became the gold standard in enterprise e commerce
Speaker 3: ordering and really introduced new modules that were groundbreaking for
Speaker 3: the industry around third party delivery, a product called Dispatch,
Speaker 3: a product called Rails, and that really helped propel our
Speaker 3: lead forward past dozens of omline or green competitors in
Speaker 3: that era, and we largely focused on what I call
Speaker 3: the mighty middle of the market, right, so not the
Speaker 3: SMB's mom and pops and not the big guys like McDonald's,
Speaker 3: but rather fifty locations to three thousand locations, and we
Speaker 3: worked exclusively with restaurant brand HQs. So I spent most
Speaker 3: of those years on an airplane accruing all the status
Speaker 3: points and going to hundreds of restaurant brand HQUS and
Speaker 3: it unlocked the final chapter, Chapter three, an era of
Speaker 3: which we took the company from a private offering to
Speaker 3: a public offering. And this was you know, January twenty twenty,
Speaker 3: I got the Jersey call to lead the enterprise sales team,
Speaker 3: and so I was leading that team but also selling
Speaker 3: and we all know what happened in March of that year.
Speaker 3: Olo went from must have tech to mission critical tech.
Speaker 3: And you know, still remembering this earnings call from Wyman
Speaker 3: Roberts over at Brinker talking about seventy percent of transactions
Speaker 3: coming through the OLO platform. That is what we were
Speaker 3: seeing across the board for our customers. And so it
Speaker 3: was a difficult time, you know, a busy time, and
Speaker 3: I felt like I took a breadth in December of
Speaker 3: twenty twenty, looked up at the scoreboard. There were fourteen
Speaker 3: thousand new locations we added, and we doubled the company
Speaker 3: from forty five to ninety eight million in arr and
Speaker 3: it was really that which allowed us to take the
Speaker 3: company public that March of twenty twenty one. So, you know,
Speaker 3: a fifteen and a half year adventure, right the American
Speaker 3: startup dream. You know, over the last really decade, there's
Speaker 3: only been a few restaurant tech companies that have gone public.
Speaker 3: Think about your toast, your DoorDash, your square, your uber
Speaker 3: and Olo and Olo was the only one that did
Speaker 3: it as an enterprise focus B to B two C company.
Speaker 3: So I operated in that role for fifteen months. We
Speaker 3: acquired two companies, we beefed up the team, and you know,
Speaker 3: when it's time, it's time. I exited the company in
Speaker 3: August of twenty two as we were approaching about two
Speaker 3: hundred million ERA R and lots of stats that we
Speaker 3: could be proud about there, but seventy one percent of
Speaker 3: the enterprise market became customers. But the stat I'm proud
Speaker 3: of us about was this ninety nine percent retention rate
Speaker 3: of our customers. And it was really that retention rate
Speaker 3: that allowed us to build the relationship capital to do
Speaker 3: what we're doing today with eight five day partners.
Speaker 2: Very cool, man, It sounds like it sounds like it
Speaker 2: was fun, you know, and the time to take your
Speaker 2: shot is in your twenties, man, so it sounded like
Speaker 2: it lined up pretty well for you and your friends
Speaker 2: at all.
Speaker 3: It was a good ride and wouldn't have done it
Speaker 3: any other way than doing the one company thing.
Speaker 2: For sure.
Speaker 1: Very cool.
Speaker 2: So what problems was eight five eight created to solve
Speaker 2: and what opportunities can the firm and its clients take
Speaker 2: advantage of right now.
Speaker 3: So I mean after leaving Olo last year, Marty, who
Speaker 3: also lives in San Diego, I referenced earlier, had left
Speaker 3: OLO forty five days prior, and we started just conversing
Speaker 3: over cocktails and coffee in San Diego, and we started
Speaker 3: calling the restaurant brand operators, the restaurant tech companies, and
Speaker 3: the restaurant tech investors, and we kept hearing a lot
Speaker 3: of pitches for what we consider to be nice to
Speaker 3: have non essential tech, and we weren't hearing a lot
Speaker 3: of themes and pitches for must have or mission critical
Speaker 3: solutions to really solve the problems that our friends the
Speaker 3: brands were anxious to address. So really to help our
Speaker 3: own restaurant brand friends and technology companies, we formed eight
Speaker 3: five A partners this year January to really invest in
Speaker 3: one to three must have technology solutions, but also to
Speaker 3: advise the next generation of restaurant technology winners that were
Speaker 3: focused on that mid market and enterprise that we had
Speaker 3: focused on. But you know, like most startups, not everything
Speaker 3: has gone according to plan on the investment side. You know,
Speaker 3: this side of the business has been challenging, no doubt.
Speaker 3: It's not due to a lack of interest, but rather
Speaker 3: due to the current state of the markets and valuations. Right,
Speaker 3: it's a tough moment for a new investment platform to
Speaker 3: put on the training wheels and try to figure out
Speaker 3: what the right entry point and valuation is.
Speaker 1: So, you know, we.
Speaker 3: Also had a big offset in the form of demand
Speaker 3: in the advisory practice, so that's where the focus has
Speaker 3: been and really will go for the foreseeable feature, so
Speaker 3: you know, to really fill that demand, we brought on
Speaker 3: in mid year Sep Hall, who was the former head
Speaker 3: of sales at OLO on the East Coast, and Jackie Berg,
Speaker 3: who was the former head of marketing at OLO, to
Speaker 3: lead this goat to market and marketing and brand practice
Speaker 3: here at A five eight, And between the four of us,
Speaker 3: we're responsible for closing more enterprise software deals than anyone
Speaker 3: in this industry over the past decade, right, So that's
Speaker 3: what we bring and so in a nutshell, A five
Speaker 3: eight helps launch and scale mid market and enterprise sales,
Speaker 3: marketing and customer success programs for restaurant tech companies. And
Speaker 3: so we're sitting here now at the end of December,
Speaker 3: we've helped close to a dozen restaurant technology companies on
Speaker 3: their playbooks for enterprise and mid market, and we're excited
Speaker 3: to double down on this industry that we love and
Speaker 3: help this next generation. So we'll bring on new resources,
Speaker 3: new customers going into twenty twenty four, and yeah, we've
Speaker 3: never been more fired up.
Speaker 1: That's cool, man.
Speaker 2: It seems like there's a huge opportunity for you there
Speaker 2: because the companies that have had successful exits seem to
Speaker 2: have great sales teams, and I feel like they're there's
Speaker 2: some really good products out there that took a long
Speaker 2: time to gain traction, and they really couldn't make traction
Speaker 2: until they brought on some experienced salespeople.
Speaker 1: To be clear, you.
Speaker 3: Know, it took a long time for Holo to get
Speaker 3: to where it got to, and it doesn't need to
Speaker 3: take fifteen and a half years for the next company
Speaker 3: to reach a milestone. You know, at Olo, we went
Speaker 3: through two sales leaders in that first chapter until we
Speaker 3: got it right with Marty, and I think about those learnings, frankly,
Speaker 3: the mistakes that we made way more mistakes than wins
Speaker 3: to guide those companies and not making the same mistakes.
Speaker 1: That we did. Yeah.
Speaker 2: Cool, So who is the ideal customer for your advisory business?
Speaker 3: Yeah, so we think about the ideal customer profile as
Speaker 3: you know, a must have restaurant tech platform, right, companies
Speaker 3: that ultimately we're hearing themes for. And so backing up,
Speaker 3: you know, we've created an advisory board of roughly thirty
Speaker 3: operators that represent forty thousand locations, right, So we have
Speaker 3: that benefit to hear firsthand from those operators what they're
Speaker 3: working on, what problems they're having, who they're having the
Speaker 3: problems with, what solutions they're looking for, and we act
Speaker 3: as a trusted back channel to those brand and resource
Speaker 3: So we take those themes ultimately and try to map
Speaker 3: those two solutions in our advisory practice. So to answer
Speaker 3: your question, I think we're hearing a lot of themes
Speaker 3: this go around largely to do with the back of
Speaker 3: the house than the front of the house. And so
Speaker 3: we've mapped ourselves to close again a dozen technology platforms
Speaker 3: that are addressing those problems.
Speaker 1: That we're here. Okay, cool, you answer my next question.
Speaker 2: Yeah, I was wondering if it was going to be
Speaker 2: consumer facing tech back of the house front of the house.
Speaker 2: So Yeah, we've come across some interesting solutions on the
Speaker 2: back of the house through our research, you know. So
Speaker 2: it's interesting how that that's evolving. Anything that you find interesting,
Speaker 2: maybe things that you're not invested in right now or
Speaker 2: but in that back of the house area.
Speaker 3: Yeah, I think, you know, kind of thinking about an example,
Speaker 3: third party delivery reconciliation. Right, So this was a problem
Speaker 3: that we heard over and over while at OLO, which
Speaker 3: was we now are omni channel businesses that accept orders
Speaker 3: from first party transactions, but now third party transactions for
Speaker 3: both catering for now takeout for delivery, and all of
Speaker 3: these different parties pay us on different increments, and our
Speaker 3: settlements aren't adding up to what our accounting teams say
Speaker 3: should or shouldn't be in there, right and so interesting
Speaker 3: that's such a pain point, and again we saw it,
Speaker 3: didn't address it during those years. But now we've seen
Speaker 3: half a dozen let's call it best of breed solutions
Speaker 3: pop up in that market, and so we've backed one
Speaker 3: called loop AI in our practice, which we believe has
Speaker 3: the best product but is attacking that head on as
Speaker 3: let's call it a delivery intelligence tool of sorts to
Speaker 3: capture offline customers. Right, so stores being offline when they shouldn't,
Speaker 3: stores to recapture chargeback data, marketplace facilitator taxes. And so
Speaker 3: that's just an example overwhelmingly that we're hearing from that
Speaker 3: advisory board.
Speaker 1: Okay, cool.
Speaker 2: Another one I found interesting recently was a company using
Speaker 2: cameras and AI to get order accuracy.
Speaker 3: Right, Yeah, no doubt, We've looked at that space extensively.
Speaker 3: AI is no doubt a buzzword here. Can't tell what's
Speaker 3: actually AI and what's actually not. So for example, you know,
Speaker 3: we got a pitch for a restaurant technology AI video
Speaker 3: surveillance company that was ultimately looking to fight that same
Speaker 3: issue that I referenced earlier with chargebacks, And when we
Speaker 3: drilled into it, the AI was actually people in the
Speaker 3: Philippines that were watching the camera and would flag when
Speaker 3: an issue happened. Right, So I didn't realize AI meant
Speaker 3: to glorified security guards, but that's what it meant. And
Speaker 3: that specific.
Speaker 2: Example, Yeah, yeah, some of that news hit the wires. Man,
Speaker 2: it is pretty wild, right, so yeah, it makes you
Speaker 2: you know, it's it's funny, man. But when you see
Speaker 2: you know what we will call it a bubble and
Speaker 2: at least the use of the term AI. Right, Like
Speaker 2: when you see bubbles, you know, you have people that
Speaker 2: are trying to take advantage.
Speaker 1: Of some of the things they're seeing.
Speaker 2: But if somebody can make that technology work, man, it
Speaker 2: sounds like it sounds it sounds pretty interesting for sure.
Speaker 1: You know.
Speaker 2: Obviously, helping food waste and making your customers a lot
Speaker 2: happier is key for these restaurant chains that are doing
Speaker 2: heavy delivery business.
Speaker 3: You know, to be clear, we're bullish on that use case.
Speaker 3: We just don't think it's the first generation of companies
Speaker 3: that will win.
Speaker 1: Yeah. Yeah, interesting.
Speaker 2: You know, as we you know, all know, restaurant chains
Speaker 2: have been aggressively updating their tech stax post pandemic. I guess,
Speaker 2: big picture, where are we right now? Where's the restaurant
Speaker 2: industry with restaurant tech at the moment.
Speaker 3: Yeah, so I think about, you know, the years leading
Speaker 3: up to twenty twenty three, and they were really the
Speaker 3: years that I'd labeled the California gold Rush of restaurant tech. Right,
Speaker 3: So there was a wave of companies, some new, some old,
Speaker 3: that hit the market primed with solutions to sell to
Speaker 3: this massive total addressable market of SMB mid market and
Speaker 3: enterprise restaurant brands. And it's also i'd call it that
Speaker 3: zurp right, the zero interest era. So restaurant technology companies
Speaker 3: could raise capital at rich valuations from the venture capital community,
Speaker 3: they could hire staff by the dozens, and they could
Speaker 3: just burn through the cash in the bank, knowing that
Speaker 3: there was more at the end of that. And so
Speaker 3: again I remember seeing some of these pitch decks. Right,
Speaker 3: we worked with Burger King, we worked with KFC, We're
Speaker 3: in deep discussions with Chick fil A, when in reality
Speaker 3: it was random franchisees of those chains and they had
Speaker 3: one conversation with the innovation department at Chick fil A. So,
Speaker 3: you know, fast forward to today, you know, it's an
Speaker 3: incredibly difficult time to raise capital. Your companies have been
Speaker 3: forced to do more with less. This past year has
Speaker 3: been plagued with reductions and forces in the headlines from
Speaker 3: the large enterprise companies. Valuations have come back to earth.
Speaker 3: In many cases, it's half or less of what the
Speaker 3: last valuation that was previously assigned to them, and growth
Speaker 3: has frankly stalled right from the past year, and in
Speaker 3: some cases, by the way, it's negative because of churn
Speaker 3: with their customer base. So ultimately, at the end of
Speaker 3: the day, restaurant tech companies are dealing with a buying
Speaker 3: freeze from the operators on all nice to have tech
Speaker 3: that the operators instituted in twenty twenty three. And so
Speaker 3: these restaurant tech companies that are nice to have are
Speaker 3: running out of cash and they're running out of time,
Speaker 3: and so this go around, there's not endless capital that's
Speaker 3: going to be supplied to them when they run out
Speaker 3: of cash. So it reminds me of the two thousand
Speaker 3: and nine to twenty twelve timeframe. Going back in restaurant tech,
Speaker 3: there were companies like Exit forty one that's going to
Speaker 3: be a throwback to some of your audience, but it
Speaker 3: was an online ordering company, a competitor of Oolo's at
Speaker 3: the time. They raised over fifty million dollars in that
Speaker 3: era and it just evaporated overnight. And so, you know,
Speaker 3: I think about the Brita Rosenheim Wheel right this like
Speaker 3: twenty twenty three restaurant Tech Ecosystem wheel that she put out,
Speaker 3: and there's over two hundred and fifty restaurant tech companies.
Speaker 1: On that wheel.
Speaker 3: So there's a lot of solutions to a lot of problems,
Speaker 3: and most of that wheel, we believe just doesn't need
Speaker 3: to exist and represents nice to have solutions in the market.
Speaker 3: So there's data recently that has come out of Karta,
Speaker 3: which is a table management software, and it showed in
Speaker 3: Q three of twenty twenty three that there were over
Speaker 3: two hundred startups that shut down and that's been steadily
Speaker 3: increasing quarter over quarter over the last four quarters. And
Speaker 3: so we expect in twenty twenty four for there to
Speaker 3: be a record number of restaurant technology companies that'll shut
Speaker 3: their doors for good. And I think in parallel, the
Speaker 3: next twelve months should actually prove super interesting from an
Speaker 3: M and A and consolidation perspective. You know, starting with
Speaker 3: the publicly traded restaurant tech companies, these companies spent the
Speaker 3: last year getting fit and now they're seeing their valuations
Speaker 3: rise just a little bit. Those companies DoorDash, for example,
Speaker 3: they've got four plus billion dollars sitting in the bank
Speaker 3: toast a billion dollars sitting on the bank. And we
Speaker 3: know companies like par have been known to be acquisitive
Speaker 3: over the last three to four years. So from my perspective,
Speaker 3: it's a great time for these operating platforms to put
Speaker 3: some of that cash and some of that equity to work.
Speaker 3: There's going to be companies that are available at a
Speaker 3: fraction of their value and really could help them do
Speaker 3: more with their existing customer base and push their lead further.
Speaker 3: And I think in the same vein there's going to
Speaker 3: be many private companies that realize that M and A
Speaker 3: is going to be the only option for them. Right.
Speaker 3: That should also make for some interesting deals. But think
Speaker 3: about as anario, Right, there's two competitors in the same space.
Speaker 3: They're both not getting meaningful traction. They could join forces
Speaker 3: and attack an operating platform together and they probably be
Speaker 3: better off than worse. Right, So it's an area that
Speaker 3: we're watching closely and looking to contribute in for twenty
Speaker 3: twenty four.
Speaker 1: Cool.
Speaker 2: Yeah, it it sounds like it. It'll provide you with
Speaker 2: some opportunities. But there's a lot of parallels with you know,
Speaker 2: my world with the restaurant space, you know, in terms
Speaker 2: of s sloads significantly, but you know, as those private
Speaker 2: valuations have come down and lending costs of risen, But
Speaker 2: the strategics with those those strong balance sheets especially seem
Speaker 2: to be poised to do most of the deals next year, right, All.
Speaker 1: Right, good stuff.
Speaker 2: So what issues are restaurant tech companies having with their
Speaker 2: go to market strategy at the moment?
Speaker 3: Yeah, well, you know, restaurant operators are dealing with serious
Speaker 3: tech fatigue at both the brand and the store level.
Speaker 3: There's multiple dashboard fatigue. There's one hundred and ninety nine
Speaker 3: dollars per month per service fatigue. There's finger pointing fatigue
Speaker 3: amongst all these different providers, and in many cases, with
Speaker 3: the solutions they're purchasing, the operators they're only using a
Speaker 3: sliver of the services, they're over paying for them, and
Speaker 3: there's a steep learning curve to both getting them up
Speaker 3: and running from a deployment perspective and maintaining them. So,
Speaker 3: you know, at the same time, I think about from
Speaker 3: an operator perspective. Operators these days could barely open up
Speaker 3: their emails without literally getting dozens of new emails from
Speaker 3: vendors every single day trying to sell them something. You know,
Speaker 3: they try and find solace and go to LinkedIn and
Speaker 3: connect with their peers, and they're greeted by a bunch
Speaker 3: of people in an ever escalating social media contest. Who
Speaker 3: could yell louder and they go to a restaurant conference
Speaker 3: and get accosted by half a dozen sales guys that
Speaker 3: are selling them some AI solution. So I think restaur
Speaker 3: operators are fed up, you know. So here's the big
Speaker 3: problem for restaurant tech companies. You know, Ultimately, they're banging
Speaker 3: their heads against the wall because they're not selling anything, right,
Speaker 3: and they believe the solution is to send more emails.
Speaker 3: And these same companies show up to that restaurant conference
Speaker 3: praying for a different outcome, but they show up with
Speaker 3: little to no preparation. They're staring at operator badges, and
Speaker 3: they're just hanging out in the lobby bar with all
Speaker 3: the other restaurant tech people that are not selling anything.
Speaker 3: So it's just not working. And so this is part
Speaker 3: of the work that we're doing in this go to
Speaker 3: market advisory and marketing and brand practice here at eight
Speaker 3: five eight, you know, we've entered a new market and
Speaker 3: a new era of go to market. It's all about
Speaker 3: if at least you're serious about mid market and enterprise.
Speaker 3: That's my qualifier. Focus segmentation and creative messaging, your quality
Speaker 3: over quantity, that's what's going to win and restaurantech tech
Speaker 3: companies that want to win in this market need to
Speaker 3: align themselves, in our view, with influencers and advisors that
Speaker 3: can help them understand the accounts and really create these
Speaker 3: multi threaded game plans on their ideal customer profile accounts.
Speaker 3: So that's what we're doing here at eight five eight,
Speaker 3: and we feel like we're we're seeing that trend overwhelmingly
Speaker 3: very interesting.
Speaker 2: So the restaurant chains on the advisory board, should they
Speaker 2: be looking for an all in one tech solution or
Speaker 2: would they be better off cobbling together a bunch of
Speaker 2: best of breed options or is it?
Speaker 1: Is it you know, case specific?
Speaker 3: Yeah, So I think overwhelmingly going back to that advisory board,
Speaker 3: you know, we hold calls with that group once a
Speaker 3: quarter and so it's just individual calls and we hear
Speaker 3: from them what they're working on, what's must have, what's
Speaker 3: nice to have. And I think the themes that we're
Speaker 3: hearing a lot of are around all in one versus
Speaker 3: best and breed, and then back of the house versus
Speaker 3: front of the house. So I'll start with the all
Speaker 3: in one versus best of breed. I think about my
Speaker 3: first decade in the industry, going back to the two
Speaker 3: thousand and seven you know, kind of those few years,
Speaker 3: companies like NCR Micros. You know, they were the one
Speaker 3: boat to choke operating platforms that ruled the industry, and
Speaker 3: as they signed up to play a bigger role, this
Speaker 3: is when the first generation of POS companies really started
Speaker 3: to tumble, right. The contracts became too big, the products
Speaker 3: that they released to compete with the best of REED
Speaker 3: solutions didn't keep up with the times. And it's like
Speaker 3: the dreaded TV VCR combo of the nineties, right, you know,
Speaker 3: when the VCR stops working, you hate the whole device.
Speaker 3: And so, you know, fast forward to today. I think
Speaker 3: we're amidst an economic slowdown akin to two thousand and
Speaker 3: eight to twenty ten, and there's a new wave of
Speaker 3: operating platforms out there, companies like par toast Olo, Door Dash,
Speaker 3: and everyone of those companies is in a digital arms
Speaker 3: race and trying to do more with their existing customers.
Speaker 3: So it's a very tense time in the world of
Speaker 3: restaurant tech. It's what we refer to as frenemy behavior
Speaker 3: technology companies that are actually true competitors but have to
Speaker 3: partner in many of the same accounts, so it's going
Speaker 3: to lead to a lot of deception and confusion, frankly
Speaker 3: amongst the operators who are hearing mixed messages from various parties.
Speaker 3: So with all this front of meb behavior that's happening
Speaker 3: in the background using a single provider, But at the
Speaker 3: same time, those same operators want the cost efficiencies that
Speaker 3: come with bundled solutions and don't want to have to
Speaker 3: manage all these different relationships and dashboards and partnerships. So
Speaker 3: I think the best of breeding solutions, no doubt, they
Speaker 3: have a shot, but they're up against a wall that's
Speaker 3: compared to three to five years ago. So there's an
Speaker 3: argument that the pendulum has already swung to the operating
Speaker 3: platforms because of that advantage on distribution. They've got large
Speaker 3: balance sheets, they've got large R and D development teams,
Speaker 3: and again they've got the existing customer relationships that the
Speaker 3: best of breed companies just don't have. So our prediction
Speaker 3: here is the cycle continues, and operators are going to
Speaker 3: choose to do more business with fewer providers if and
Speaker 3: when they choose to open their wallets.
Speaker 2: Cool very interesting proprietary tech versus SaaS solutions should restaurants
Speaker 2: build or buy?
Speaker 3: Yeah, well, there's a story that has come out recently
Speaker 3: with relation to Wingstop, and you know, disclosure, I'm a
Speaker 3: little close to that story. I helped architect the Holo
Speaker 3: and Wingstop deal a decade ago and no doubt one
Speaker 3: of my favorite projects and deals of all time. So
Speaker 3: if you missed the news, Wingstop announced on their last
Speaker 3: earnings call that they were leaving OLO in lieu of
Speaker 3: a build your own system called my Wingstop and they've
Speaker 3: to date spent fifty million dollars on that built. So
Speaker 3: backing up, you know, OLO helped Wingstop really become a
Speaker 3: digital ordering juggernaut over the past decade. When they came
Speaker 3: to Olo, they were at seven and a half percent
Speaker 3: of sales, about forty million dollars of sales annually, and
Speaker 3: up until this announcement, they've gotten to sixty six percent
Speaker 3: of sales, which is two billion dollars annually coming through
Speaker 3: that platform. So it was no doubt a success. And
Speaker 3: OLO came out and into that system at a time
Speaker 3: when their previous digital ordering platform it crashed on Super
Speaker 3: Bowl Sunday. Imagine that to twenty thirteen, probably the worst
Speaker 3: day in the brand's history totally right, like no, imagine
Speaker 3: how many parties got ruined that day. And you know
Speaker 3: they came to Olo for reliability, for stability, and for innovation,
Speaker 3: and that's exactly what was delivered. I think it was
Speaker 3: a true partnership. Somewhere along the way, though, Wingstop believed
Speaker 3: that it was such an important channel to them to
Speaker 3: outsource that they could do a better job than Olo
Speaker 3: to really digitize the remaining third of the customer base
Speaker 3: that was still analog. So I think time will tell
Speaker 3: if that was a good move. I'm grateful for the
Speaker 3: bonds that were forged between the companies, and I wish
Speaker 3: the companies handled it differently from a breakup perspective. But
Speaker 3: you know, in my opinion, the new generation of digital
Speaker 3: leaders are Panera, Chipotle, Sweet Green Shakeshack, and Wingstop, and
Speaker 3: up until now, only two of them have successfully built
Speaker 3: their own platforms, while the others have outsourced that to
Speaker 3: best of breed providers. And you know, I'll kind of
Speaker 3: use Dominoes right now as a punching bag. People talk
Speaker 3: about them being a leader, but I don't know if
Speaker 3: you've used the Dominoes app recently. You know, if you
Speaker 3: haven't take a look at it. It sucks. Frankly, it
Speaker 3: feels like it was last updated in twenty sixteen, and
Speaker 3: they just announced this month this massive investment that they're
Speaker 3: making and a partnership with Microsoft to improve things. But
Speaker 3: it just goes to show you how tough it is
Speaker 3: right for restaurant restaurant companies to keep up with tech,
Speaker 3: even for the you know, I guess appointed technology company Dominoes,
Speaker 3: and so there's just way more examples of failed programs there,
Speaker 3: and there are successful ones appointed Jack in the Box,
Speaker 3: Papa Murphy, Sweet Green, Brinker, Cheesecake Factory. These were all
Speaker 3: customers that we had during OLO that had tried to
Speaker 3: and in some cases did build their own platform and
Speaker 3: then came to a SaaS platform because it just wasn't
Speaker 3: working out. So I think, you know, for the rest
Speaker 3: of the industry that's minority digital, the idea of building
Speaker 3: your own digital platform is just crazy. You know, OLO,
Speaker 3: for example, spends ninety million dollars a year on R
Speaker 3: and D. Now that's hundreds of engineers, product managers, customer
Speaker 3: success managers. So it's just tough to recreate. But there
Speaker 3: is a sliver of brands I think those brands that
Speaker 3: are majority digital that absolutely should keep an eye on
Speaker 3: what Wingstop is doing. And it's no doubt easier to
Speaker 3: build than buy than it was a decade ago. So
Speaker 3: there are a whole host of things that those companies
Speaker 3: are going to have to consider. But right now, again,
Speaker 3: I think this build versus buy dynamic really applies to
Speaker 3: let's call it five to ten restaurant brands. So the
Speaker 3: bottom line for most operators, there's just so many must
Speaker 3: have low hanging fruit opportunities around labor, employer retention inventory. Again,
Speaker 3: aroun themes in the back of the house that build
Speaker 3: your own is just not a serious consideration.
Speaker 2: Very cool, Yeah, it's fascinating how fast the technology has changed.
Speaker 2: You know, they mentioned Dominoes in twenty it feels like
Speaker 2: twenty sixteen, or in twenty sixteen it was like Dominoes, Starbucks, Panera,
Speaker 2: and like, yeah, nobody was even close, right for sure?
Speaker 3: And again at that point in time, Panera had spent
Speaker 3: five million or sorry, five years and forty two million
Speaker 3: dollars to build their own OLO at that point in time,
Speaker 3: and Starbucks something like a few hundred million dollars to
Speaker 3: build their own platform. So again a big spend that
Speaker 3: comes with that. And you know, I don't think frankly,
Speaker 3: you could tell me that Sweet Green is a or
Speaker 3: Panera is a better program than Sweet Green, right, and
Speaker 3: that's a bill versus by decision.
Speaker 2: Yeah, good stuff, man. All right, last question, are you
Speaker 2: happy with the direction our Knicks are taken?
Speaker 3: I have never been more optimistic, is what I'll tell you. Man,
Speaker 3: talk about pain. I feel like the last twenty five
Speaker 3: years have just been painful to be a Knicks fan.
Speaker 3: Excited about the direction. I feel like we're one superstar
Speaker 3: away from being a contender. Hint, hint, we should just
Speaker 3: trade Randle or something and get one of the superstars.
Speaker 3: But yeah, I'm liking it. And not a great time
Speaker 3: to be a Giants fan, but a good time I
Speaker 3: think to be a Knicks fan.
Speaker 1: Yeah, for sure, man, I agree.
Speaker 2: I think we're one in the big wing stud score
Speaker 2: that can play some defense and create his own shot away.
Speaker 1: Yeah.
Speaker 2: So I'm with you, man, I'm happy. I love Brunson
Speaker 2: and come on over and be right and yeah, and
Speaker 2: you know, the Nick Giants and the Jets stink. But
Speaker 2: I grew up in Cedar Grove and Tommy DeVito's from
Speaker 2: Cedar Grove. So there's a lot of Tommy DeVito and
Speaker 2: chicken cutlet hype.
Speaker 1: Going on around here.
Speaker 2: All the all the restaurants are are creating Tommy DeVito
Speaker 2: pizzas and Tommy Da Vito chicken cutlet sandwiches.
Speaker 1: It's fun, man, to.
Speaker 3: Be happy about, you know, despite a four win team, right.
Speaker 2: Something something to be happy about, you know. But listen, man,
Speaker 2: this is great. Thank you so much for doing it.
Speaker 2: And you know, I'm very excited about what you and
Speaker 2: already have created and I'm looking forward to to continuing
Speaker 2: to follow you guys, and I wish you nothing but
Speaker 2: success man, And thank you Mike.
Speaker 1: Sure thing.
Speaker 2: So I'd also like to thank the audience for listening in.
Speaker 2: If you like the podcast, please like and subscribe. Be
Speaker 2: on the lookout for a special episode.
Speaker 1: Next week.
Speaker 2: We'll be recording from the RCR conference in sunny Orlando, Florida.
Speaker 3: Muh