WEBVTT - Ghost Kitchen Growth and Food Delivery's Future 0:00:00.160 --> 0:00:03.760 Hi, Welcome to episode three of Chopping It Up. I'm 0:00:03.800 --> 0:00:06.880 your host, Michael Halen, Senior restaurant and food service analyst 0:00:06.920 --> 0:00:13.480 at Bloomberg Intelligence. It's my pleasure to introduce our guest today, 0:00:13.600 --> 0:00:16.760 my friend and chief business officer at Kitchen United, A 0:00:16.760 --> 0:00:20.880 tool sued a tool. How you doing today, Hey, Michael, 0:00:21.000 --> 0:00:23.639 it is uh. It is good to be here, and 0:00:23.680 --> 0:00:27.319 I'm glad you prefaced your introduction with the fact that 0:00:27.360 --> 0:00:33.720 we're friends. I uh definitely value back in my life. Yeah, yeah, 0:00:33.760 --> 0:00:35.479 a hundred percent. Man, one of one of the best 0:00:35.520 --> 0:00:38.440 people I've've gotten to meet through the years in the 0:00:38.479 --> 0:00:41.800 restaurants circuit. And and that's that's saying something because there's 0:00:41.840 --> 0:00:45.520 a lot of great people in the hospitality business. Well, 0:00:45.520 --> 0:00:48.000 thank you. That is nice to hear. And I'm excited 0:00:48.040 --> 0:00:52.519 about this conversation. I've uh listened to essoes one and two, 0:00:52.640 --> 0:00:54.920 and I know you're a great interviewer who knows a 0:00:54.920 --> 0:00:57.240 lot about the space. So good to be here with 0:00:57.320 --> 0:01:01.080 you today. Yeah, good stuff, and so let's let's jump 0:01:01.200 --> 0:01:02.800 right in it. For those of you who don't know, 0:01:02.920 --> 0:01:08.160 Kitchen United currently opens thirteen coach ghost kitchen facilities in 0:01:08.200 --> 0:01:12.640 the United States and plans to expand aggressively through your end. 0:01:12.920 --> 0:01:15.360 So just to get started a tool for the people 0:01:15.440 --> 0:01:17.880 that don't know Kitchen United, can you just kind of 0:01:17.880 --> 0:01:22.320 tell us a little bit about the core business model. Sure, 0:01:22.480 --> 0:01:25.960 So we were the pioneer in the ghost kitchen space. Uh. 0:01:26.080 --> 0:01:28.880 It actually didn't even have a term associated it with 0:01:28.959 --> 0:01:31.440 it when we launched the business about four and a 0:01:31.480 --> 0:01:36.080 half years ago, UM, which is when I joined the company. Essentially, 0:01:36.080 --> 0:01:40.840 what we do is we take over UM spaces that 0:01:41.000 --> 0:01:45.399 are in dense trade areas, so not necessarily Maine on Maine, 0:01:45.800 --> 0:01:50.360 but close by within a fifteen minute drive time radius 0:01:50.600 --> 0:01:55.640 of a big population of people. UM. We build out 0:01:55.760 --> 0:01:59.760 ten to twelve kitchens in those spaces, UM, and we 0:02:00.120 --> 0:02:03.080 populate them with name brand restaurants that you would have 0:02:03.120 --> 0:02:07.360 heard off or local favorites UM, depending on the city 0:02:07.400 --> 0:02:10.680 we're in, and we make their food available for delivery, 0:02:10.800 --> 0:02:16.440 pickoff or catering. UM. We've we've got their teen kitchen centers. 0:02:16.480 --> 0:02:19.920 As you mentioned, across the country today are making a 0:02:19.960 --> 0:02:24.120 big push into grocery UM, so we operate kitchens and 0:02:24.240 --> 0:02:28.240 grocery stores as well with Kroger, and we have engagements 0:02:28.240 --> 0:02:31.680 with malls. We have food halls. Very soon we'll be 0:02:31.720 --> 0:02:34.880 doing stadiums. So we're really the only player in the 0:02:34.919 --> 0:02:38.000 space that has an omni channel approach to this ghost 0:02:38.080 --> 0:02:41.840 kitchen industry and it's been honestly, it's been a lot 0:02:41.840 --> 0:02:43.839 of fun. You know, we were kind of a new 0:02:43.919 --> 0:02:48.160 thing when we launched the business, having to convinced restaurants 0:02:48.200 --> 0:02:53.040 that this was this was a worthwhile effort to investigate 0:02:53.080 --> 0:02:56.320 and then bet on, And in the four and a 0:02:56.320 --> 0:03:01.920 half years since then, we've essentially the mainstream. Uh. You'd 0:03:02.000 --> 0:03:05.320 be hard pressed to find any restaurant boardroom today that 0:03:05.520 --> 0:03:09.760 isn't already in one of our spaces or actively considering it. 0:03:10.000 --> 0:03:13.200 So um, that's a quick summary, but you can definitely 0:03:13.240 --> 0:03:18.440 dive deeper as we continue the conversation. Sure, and thanks 0:03:18.520 --> 0:03:21.320 for that. So can you also tell us a little 0:03:21.360 --> 0:03:23.720 bit about your tenants, you know, who are some of 0:03:23.760 --> 0:03:26.240 your big tenants and how are they benefiting from a 0:03:26.240 --> 0:03:33.280 partnership with Kitchen United. Absolutely, so we work uh, primarily 0:03:33.400 --> 0:03:38.960 with enterprise class restaurant brands, So thank Chick fil A, Wingstop, Jersey, 0:03:39.080 --> 0:03:45.280 Mike Sprinker International, Um, Panera, brad Um brands like those 0:03:45.360 --> 0:03:48.080 which have you know, thousands upon thousands of units where 0:03:48.800 --> 0:03:54.320 UH everybody is familiar with the brand. The second demographic 0:03:54.560 --> 0:03:59.960 of our client base is fast growing brands across the country. UH. 0:04:00.000 --> 0:04:04.120 One of our shining stars there is Portillo's UM. They 0:04:04.160 --> 0:04:08.280 operate out of our Chicago River North facility. We're also 0:04:08.640 --> 0:04:11.520 in a multi unit deal with Doghouse, which is one 0:04:11.520 --> 0:04:14.000 of the fastest growing brands in the country, has a 0:04:14.040 --> 0:04:18.200 lot of virtual brands associated with it as well. UM. 0:04:18.279 --> 0:04:21.720 And then our third category of tenants is UH had 0:04:21.720 --> 0:04:23.880 a local favorite. So there are a number of local 0:04:23.960 --> 0:04:28.440 favorites across the country which are trade area specific, and 0:04:28.600 --> 0:04:31.960 we do about a third a third of third, so 0:04:32.080 --> 0:04:35.240 a third enterprise class, a third fast growing and a 0:04:35.279 --> 0:04:38.680 third local favorite. UM. One of the local favorites we 0:04:38.800 --> 0:04:42.520 just launched with today in Dallas is Monkey King Neodle House, 0:04:42.560 --> 0:04:46.000 which is a great um Asian food join out of 0:04:46.480 --> 0:04:51.080 out of the Texas metro George, Texas State. It's got 0:04:51.080 --> 0:04:53.960 a great name, so I love it. Yeah, it does. 0:04:54.240 --> 0:04:56.960 But that's why I say it not a great name. UH. 0:04:57.080 --> 0:05:01.640 Since we're on shopping it off is bad Mother Lucker UM, 0:05:01.720 --> 0:05:05.520 which is a doghouse, A doghouse friend I get in 0:05:05.520 --> 0:05:10.360 trouble for saying that sometimes, but it's a great name. Yeah. 0:05:10.440 --> 0:05:12.200 You know what, speaking of great names, I don't think 0:05:12.200 --> 0:05:15.600 we've spoken about it, but you know, Kitchen United acquired 0:05:15.720 --> 0:05:20.240 Zol and uh, you know immediately rang a bell with 0:05:20.400 --> 0:05:24.320 me Um from Ghostbusters. Zul was one of the ghosts 0:05:24.320 --> 0:05:27.560 and Ghostbusters then and uh, I'm when I met Sean 0:05:27.640 --> 0:05:29.800 Fitzgibbons that that was like the first thing I asked 0:05:29.880 --> 0:05:31.880 And I was like, wait, why are you called Zuel? 0:05:32.240 --> 0:05:38.560 And uh, yeah, he confirmed that it was due to Ghostbusters. Yeah. 0:05:38.680 --> 0:05:41.800 They they're a great team. It's been a lot of 0:05:41.839 --> 0:05:44.520 fun to work with them. I work closely with with 0:05:44.640 --> 0:05:49.320 Sean um and uh Corey who was his co founders 0:05:49.320 --> 0:05:51.400 on the team as well. And it's been a really 0:05:51.400 --> 0:05:54.520 positive acquisition. They had some great technology. We're opening their 0:05:55.360 --> 0:06:00.279 space and soho very soon. And and it's been you know, 0:06:00.440 --> 0:06:03.520 I've been part of various acquisitions during my career and 0:06:04.279 --> 0:06:06.840 it's uh seldom that they work as well as this 0:06:06.960 --> 0:06:11.240 one is going. Um, so that's been refreshing. It's great 0:06:11.279 --> 0:06:13.960 to hear. All right. So besides the fact that I 0:06:14.080 --> 0:06:16.280 enjoy your company, you know, I brought you on to 0:06:16.480 --> 0:06:18.520 kind of tell us where the puck is moving. So 0:06:19.200 --> 0:06:22.040 can you start maybe with the near term. So customers 0:06:22.040 --> 0:06:25.240 have returned to dining rooms this year, and you know 0:06:25.279 --> 0:06:28.160 what has has been the impact on your tenant sales? 0:06:28.400 --> 0:06:30.680 And then we're also hearing about a pullback and consumer 0:06:30.720 --> 0:06:33.680 spending in recent weeks. And so I know, obviously there's 0:06:33.720 --> 0:06:37.480 a lot of moving pieces right now with consumers returning 0:06:37.480 --> 0:06:39.840 to dining rooms. But you know, what are what are 0:06:39.839 --> 0:06:43.960 you seeing over at Kitchen United. You know, we've been 0:06:44.600 --> 0:06:49.200 honestly pretty surprised as dining rooms reopened across the country. UM, 0:06:49.279 --> 0:06:51.400 we did not see too much of a pullback in 0:06:51.480 --> 0:06:55.680 demand for our restaurant cuisine. UM. We have continued to 0:06:55.720 --> 0:06:59.120 see month over month growth. UM. We continue to see 0:06:59.200 --> 0:07:01.760 multi content orders, which is a big part of our 0:07:01.839 --> 0:07:05.000 value proposition where if you want fried chicken and I 0:07:05.040 --> 0:07:07.200 want Chinese, we can get that on the same ticket 0:07:07.240 --> 0:07:10.320 with the same delivery driver. One thing I would say 0:07:10.320 --> 0:07:13.440 that we are starting to see, UM, which is really 0:07:13.440 --> 0:07:15.640 what what one of the core tenants of our business 0:07:15.680 --> 0:07:18.280 model is. We are starting to see a few more 0:07:18.320 --> 0:07:21.760 customers pick up the food instead of how that delivered. UM, 0:07:22.160 --> 0:07:26.640 so that that's not a surprise. We located our kitchen 0:07:26.680 --> 0:07:30.480 centers in dense trade areas for that very reason. The 0:07:30.520 --> 0:07:33.800 sites are very consumer friendly. UM. They're welcoming. We have 0:07:33.880 --> 0:07:37.520 staff there to help match the consumer with the order. 0:07:38.480 --> 0:07:40.120 So we are seeing a little bit more of a 0:07:40.160 --> 0:07:44.000 tendency to pick up UM. But honestly, a lot of 0:07:44.040 --> 0:07:49.320 these UH gen Z and millennial customers are not afraid 0:07:49.320 --> 0:07:52.920 of spending money on delivery. UM. That is something that 0:07:52.960 --> 0:07:55.760 they've gotten used to during the pandemic. They don't see 0:07:55.800 --> 0:07:58.320 the five dollar or four dollar delivery fee. Is that 0:07:58.440 --> 0:08:01.680 much of an impediment to ordering food and having their 0:08:01.680 --> 0:08:05.520 meal UM and UH and so we're not we're not 0:08:05.560 --> 0:08:08.520 seeing to slow down or pullback. At the same time, 0:08:08.640 --> 0:08:12.960 what we're seeing from the restaurant side is UM a 0:08:13.000 --> 0:08:16.080 lot more interest. I would say the pandemic really put 0:08:17.240 --> 0:08:20.160 those kitchens on the map for a lot of brands 0:08:20.240 --> 0:08:25.400 and a lot of friends have recognized that a capex 0:08:25.520 --> 0:08:30.360 light approach to expansion is one that makes sense UM. 0:08:30.360 --> 0:08:35.959 So we're we're very busy fielding a lot of inbound interest. 0:08:36.080 --> 0:08:41.560 We are working on national expansion deals with every single 0:08:41.600 --> 0:08:45.360 one of our enterprise brands UM and UH and that's 0:08:45.559 --> 0:08:50.240 very reaffirming as well. Um, you know, we we've grown 0:08:50.280 --> 0:08:53.000 a little slower than some of our competitors, Mike, and 0:08:54.400 --> 0:08:57.520 we've been cautious and careful about our growth approach because 0:08:57.520 --> 0:09:01.439 we've been where that we need get the unit economics right, 0:09:01.920 --> 0:09:06.240 and uh, we don't want to be you know, well, 0:09:06.320 --> 0:09:08.600 we don't want to be equated to one of these 0:09:09.000 --> 0:09:12.800 ultra facts delivery players that raised a whole ton of 0:09:12.840 --> 0:09:15.920 money and then went out of business. Um, So we 0:09:16.240 --> 0:09:20.400 focused a lot on unit economics and those have those 0:09:20.480 --> 0:09:22.920 have been fine tuned over the last few years, and 0:09:22.960 --> 0:09:27.040 we're now ready to stale pretty aggressively. Yeah. I think 0:09:27.080 --> 0:09:29.520 that's a smart play. You know, the restaurant business, they 0:09:29.600 --> 0:09:32.800 they call a bad location. The gift that keeps on 0:09:32.840 --> 0:09:36.320 giving right because of the ham is that it does 0:09:36.440 --> 0:09:38.480 right and the problem getting it off the book. So 0:09:38.840 --> 0:09:42.640 how important is site selection to to you know, your 0:09:42.679 --> 0:09:47.400 process and figuring out the unit economics Very important. I 0:09:47.400 --> 0:09:52.280 would say we have a entire team of data analysts 0:09:52.360 --> 0:09:57.040 that reviews every site that is UH on the radar 0:09:57.240 --> 0:10:00.719 for from our real estate team. We do our evaluation 0:10:00.920 --> 0:10:06.640 off um the site demographics. We have calculated our own 0:10:07.080 --> 0:10:12.640 proprietary metric which is called the Ai delivery Affinity Index, 0:10:13.200 --> 0:10:16.200 and that is the index of people in the area 0:10:16.360 --> 0:10:21.560 who order delivery cross referenced with the national average. So 0:10:21.920 --> 0:10:26.080 when that delivery affinity index is three times the national average, 0:10:26.480 --> 0:10:30.200 that's kind of our flag to pick a site, UM, 0:10:30.240 --> 0:10:35.280 and we then do a pretty thorough analysis of cuisine 0:10:35.960 --> 0:10:40.120 selection and diversity in that trade area. So picking the 0:10:40.200 --> 0:10:42.680 site is really important than picking the right plants to 0:10:42.760 --> 0:10:46.160 populate that site is equally important. So if there's a 0:10:46.360 --> 0:10:49.600 preponderance of Thai cuisine in the area, we will probably 0:10:49.640 --> 0:10:51.959 not have tie in that site. We want to give 0:10:52.080 --> 0:10:56.600 consumers in the area a diversity selection UM. So we've 0:10:56.640 --> 0:11:01.440 been fortunate in that we mostly picked sites the work UM. 0:11:01.520 --> 0:11:04.959 In a couple of more instances, we particularly or we 0:11:05.080 --> 0:11:10.600 on we picked sites that were a little less um, 0:11:10.640 --> 0:11:13.600 a little less busy. So we've learned from our mistakes there. 0:11:13.640 --> 0:11:17.240 But you know, we're a startup. Everybody everybody has got 0:11:17.240 --> 0:11:21.720 to make a mistake or two for sure. And uh, 0:11:22.000 --> 0:11:24.240 you know, I know that as you mentioned, data is 0:11:24.240 --> 0:11:27.920 such a integral part of everything that you do at 0:11:28.000 --> 0:11:31.520 Kitchen United and technology and one of the cooler things 0:11:31.559 --> 0:11:34.120 that I think you do. Is that the software that 0:11:34.200 --> 0:11:38.640 helps your tenants figure out fire times when you have 0:11:39.160 --> 0:11:42.079 customers that want to order from multiple brands at once. 0:11:42.120 --> 0:11:46.000 Can you talk a little bit about that. Absolutely, we 0:11:46.440 --> 0:11:50.680 when we launched the business cobbled together third party technology 0:11:50.720 --> 0:11:53.560 because there was nothing available on the market UM that 0:11:53.640 --> 0:11:57.480 could handle our needs specific to a ghost kitchen environment. 0:11:58.080 --> 0:12:00.880 And one of the things we realized is stomers really 0:12:01.520 --> 0:12:06.560 um appreciated the ability to order multiple cuisines from us 0:12:07.080 --> 0:12:11.320 back to the Chinese and fried chicken examples. So to 0:12:11.360 --> 0:12:14.360 get into a little bit more detail, UM, if you 0:12:14.480 --> 0:12:18.080 order a chicken sandwich that takes five minutes to fire, 0:12:18.600 --> 0:12:22.160 and I order a rackup ribs from Lucile's Barbecue, which 0:12:22.200 --> 0:12:25.920 takes twenty minutes to fire, um, we will actually get 0:12:26.160 --> 0:12:30.600 the chicken sandwich ordered by fifteen minutes, so both dishes 0:12:30.679 --> 0:12:32.679 come out at the same time and are hot, ready 0:12:32.760 --> 0:12:36.920 for delivery or pick up. And UM, that's not as 0:12:36.960 --> 0:12:39.760 simple as it sounds. You know, the technology there is 0:12:39.800 --> 0:12:45.319 not simply a clock. Um. The technology there also takes 0:12:45.320 --> 0:12:48.040 into account how busy the line is. So if there 0:12:48.080 --> 0:12:50.720 are a lot of orders backed up, we know that. 0:12:50.920 --> 0:12:55.480 And uh, if there's a staff shortage, So somebody's off 0:12:55.480 --> 0:12:59.400 the line, we know that UM. So if there's an 0:12:59.559 --> 0:13:02.640 ingredient out of stock, we know that UM, and we 0:13:02.720 --> 0:13:06.640 will eighty six the item from the menu. So there's 0:13:06.679 --> 0:13:09.040 a lot of moving parts to that technology. And one 0:13:09.040 --> 0:13:13.120 of the things we're finding, Mike, is if the consumer 0:13:13.160 --> 0:13:16.760 has given a choice to order across concept, they will 0:13:16.800 --> 0:13:20.560 generally take it. And one of the great results of 0:13:20.600 --> 0:13:24.960 that is our ticket sizes are pretty dramatically higher than 0:13:25.080 --> 0:13:28.800 the third party delivery players. So UM we make on 0:13:29.000 --> 0:13:32.840 average about fifty eight bucks for a multi concept order. 0:13:33.240 --> 0:13:35.160 It's really a family of three or four that are 0:13:35.240 --> 0:13:40.600 ordering UM, or three or four friends watching Netflix, whereas 0:13:40.640 --> 0:13:45.960 the delivery service providers tend to make around dirty bucks 0:13:46.040 --> 0:13:50.480 and a ticket UM. So when you take that into account, UM, 0:13:50.760 --> 0:13:53.520 what that does, really, and I'm sure you're curious about this, 0:13:54.040 --> 0:13:58.120 is it makes the unit economics of delivery UM better 0:13:58.160 --> 0:14:02.480 as well, because there's more there if if you're ordering 0:14:02.480 --> 0:14:05.920 a bigger ticket size UM to cover the costable delivery. 0:14:06.000 --> 0:14:10.320 So we're seeing very positive results from that. Yeah, that's great. 0:14:10.320 --> 0:14:13.440 It makes you an attractive partner, and it makes delivery 0:14:13.520 --> 0:14:17.600 drivers more eager to pick up deliveries from Kitchen United. 0:14:17.880 --> 0:14:21.480 It sounds like a win for everybody. It is, and 0:14:21.760 --> 0:14:24.880 ultimately it's a we're in for the restaurants as well, 0:14:24.960 --> 0:14:29.720 because what we do is we charge less than the 0:14:29.760 --> 0:14:33.960 than the third parties. We charge a fifteen percent commission, 0:14:34.080 --> 0:14:39.360 whereas as you know, the third parties, um So, the 0:14:39.400 --> 0:14:44.520 restaurant pays lesson pees um, the driver makes more in tips, 0:14:44.600 --> 0:14:47.480 and the consumer gets a variety of selection at a 0:14:47.520 --> 0:14:51.920 flat board all our feet um so. So it works, 0:14:52.240 --> 0:14:57.280 it works well across the ecosystem. Great, and it's you know, 0:14:57.400 --> 0:15:00.000 I think it's it's a big reason why you're seeing 0:15:00.560 --> 0:15:02.800 you know, aggressive growth in the industry on top of 0:15:02.840 --> 0:15:08.640 the impacts of the pandemic. Right. Absolutely, we've been, uh 0:15:10.080 --> 0:15:12.360 we've been very bullish on the industry from the beginning. 0:15:12.360 --> 0:15:16.320 When g V Google Ventures invested in us UM, they 0:15:16.360 --> 0:15:20.200 thought we could have hundreds two thousand plots fights all 0:15:20.240 --> 0:15:23.400 over the country. We still believe that, particularly with our 0:15:23.440 --> 0:15:27.320 growth and grocery um and in second gen spaces. So 0:15:28.000 --> 0:15:31.960 we really believe that our model is the new approach 0:15:32.000 --> 0:15:34.920 to food halls or food courts in the country. UM 0:15:35.200 --> 0:15:38.280 and if some of them are entirely virtual, that's Uh, 0:15:38.520 --> 0:15:44.200 that's just cheaper for everybody involved. Love it alright. So 0:15:44.560 --> 0:15:48.239 since we're talking about the third party delivery UH providers 0:15:48.280 --> 0:15:51.240 a little bit. You know, as as we know, last 0:15:51.280 --> 0:15:54.400 mile delivery is is a very very difficult business. So 0:15:55.160 --> 0:15:58.200 outside of autonomous vehicles, what what can the providers do 0:15:58.280 --> 0:16:02.560 to reduce their costs? Outside of autonomous vehicles and partnering 0:16:02.600 --> 0:16:06.240 with Kitchen United and other ghost kitchens, I should say? 0:16:06.320 --> 0:16:09.320 And then, um, what else are are you doing to 0:16:09.360 --> 0:16:13.480 be a better partner to those third parties delivery partners? Sure? 0:16:13.640 --> 0:16:16.800 So a lot of the ways that they can reduce 0:16:16.880 --> 0:16:21.280 their cost is actually by increasing their revenue UM. So 0:16:21.640 --> 0:16:25.520 batching orders is an important part of it. UM. When 0:16:25.520 --> 0:16:29.680 you batch orders, you need to be conscious off the 0:16:29.800 --> 0:16:33.560 UM quality and food decordations. So you need to make 0:16:33.600 --> 0:16:37.640 sure you have a volume of orders that is great 0:16:37.800 --> 0:16:43.000 enough that there are concentrated orders from the same UM 0:16:43.040 --> 0:16:46.960 you know, three four or five block radius. Does it work? Um? 0:16:47.120 --> 0:16:49.680 Where we play into that is because we have so 0:16:49.760 --> 0:16:55.040 many restaurants UM, the volume of orders is greater UM 0:16:55.320 --> 0:17:00.360 and the number of deliveries UM a driver and make 0:17:00.560 --> 0:17:03.920 per hour increases. So I don't know about you I've 0:17:04.080 --> 0:17:07.320 I've been a door to ask driver before. Uh. Definitely 0:17:07.400 --> 0:17:11.679 a tough job, you know. Uh. It requires a lot 0:17:11.760 --> 0:17:13.560 of parking, a lot of getting out of the car, 0:17:14.080 --> 0:17:17.760 a lot of hunting for the consumer. UM. Where we 0:17:17.920 --> 0:17:22.160 provide value to the third parties there is we make 0:17:22.200 --> 0:17:26.960 parking very easy for the driver. We have very clear signage. 0:17:27.240 --> 0:17:30.440 The driver is in and out in under UM about 0:17:30.560 --> 0:17:35.560 ninety seconds back to the parking spot. UM. And the 0:17:35.680 --> 0:17:40.600 cause of the order frequency. One of the challenges in 0:17:40.760 --> 0:17:42.800 being a driver is once you drop off in order, 0:17:43.200 --> 0:17:45.119 you don't know where you're gonna go to pick up 0:17:45.200 --> 0:17:47.639 your next order. UM, so you kind of drive around 0:17:47.640 --> 0:17:50.040 and the act gives you little hot spots where there 0:17:50.119 --> 0:17:53.760 might be workers coming U. In our situation, once a 0:17:53.840 --> 0:17:57.480 driver drops off one order two UM, they basically just 0:17:57.560 --> 0:18:01.440 circle back to kitchen United because there's probably another order 0:18:01.480 --> 0:18:05.880 waiting there. UM are customer service people know that driver 0:18:06.040 --> 0:18:08.680 by name, so we make it very easy for the driver. 0:18:08.840 --> 0:18:11.080 And as you know, if you better serve the driver, 0:18:11.240 --> 0:18:14.840 you better serve the delivery service provider. So that's one 0:18:14.880 --> 0:18:18.679 of the things. UM. Just order volume and dashing another 0:18:19.400 --> 0:18:24.320 area UM, which is which is beneficial to the third parties. 0:18:25.000 --> 0:18:31.200 Is we UM or or beneficial to beneficial to us 0:18:31.320 --> 0:18:37.160 as we have in our restaurants, is we have teams 0:18:37.200 --> 0:18:43.520 that do UH deals with nearby offices and residences, so 0:18:44.000 --> 0:18:47.879 UM for our restaurants, they set up catering deals with 0:18:48.119 --> 0:18:54.440 offices which increase the predictability of restaurant revenue for launch 0:18:54.520 --> 0:18:58.040 day parts for example. And UH and that's been going 0:18:58.119 --> 0:19:01.200 really well. That's kind of our mixed initiative we call 0:19:01.280 --> 0:19:07.160 it UM starting to work with hospitals, university campuses, uh, UM, 0:19:07.600 --> 0:19:12.520 other other businesses or big residential buildings where people can 0:19:12.600 --> 0:19:15.240 order catering from a bunch of different options instead of 0:19:15.280 --> 0:19:20.000 just one. UM. That's very beneficial to the restaurants as well. UM. 0:19:20.080 --> 0:19:22.399 But what we're seeing in the third party delivery space 0:19:22.440 --> 0:19:26.120 outside of kind of the advent of autonomous delivery sometimes 0:19:26.200 --> 0:19:30.639 in the next few years is UM. You know, restaurants 0:19:30.640 --> 0:19:33.920 are just are pushing back against these uh these missions. 0:19:33.920 --> 0:19:37.280 They've been doing it for a while UM and UH 0:19:37.560 --> 0:19:40.760 and UH and I think there will continue to be 0:19:41.400 --> 0:19:46.240 margin pressure on the delivery companies to give restaurants a 0:19:46.240 --> 0:19:48.920 better deal, and in order to do that just about 0:19:49.000 --> 0:19:52.320 to increase their chicket sases. So um, that's one thing 0:19:52.359 --> 0:19:57.760 that we are confidently figured out. Very cool and I 0:19:57.840 --> 0:20:01.040 love that you worked as a every driver to help 0:20:01.040 --> 0:20:04.520 you understand the business. It's great. I Uh, Domino's has 0:20:04.560 --> 0:20:08.200 something similar. They have a working store in the basement 0:20:08.280 --> 0:20:12.520 of their headquarters in Michigan, and everyone, whether you're a 0:20:12.520 --> 0:20:16.000 software engineer, the CEO, every new employee has to has 0:20:16.040 --> 0:20:17.520 to work down there for a couple of weeks. And 0:20:17.560 --> 0:20:21.560 I think it's it's critical to understand your employees and 0:20:22.080 --> 0:20:25.960 the difficulties that your employees and your UM partners might 0:20:26.040 --> 0:20:31.639 face on during the day to day. Absolutely. You know, 0:20:31.680 --> 0:20:35.480 I've worked at McDonald's in my prior job, and McDonald's 0:20:36.280 --> 0:20:40.760 suggests pretty pretty firmly that you do two days in 0:20:40.800 --> 0:20:44.560 a store UM when your employee there and uh, and 0:20:44.600 --> 0:20:47.840 I kind of learned from that, and everybody on our 0:20:47.880 --> 0:20:51.320 team's works in our in our sites every so often 0:20:51.400 --> 0:20:53.960 we actually give the gms or other staff members of 0:20:54.040 --> 0:20:57.480 break um. It's called given day, take a day, UM 0:20:58.200 --> 0:21:00.840 or take a day, give a day and duh. And 0:21:01.240 --> 0:21:03.680 every employee kind of cycled through that which has been 0:21:04.480 --> 0:21:09.400 which has been great for all involved. So how did 0:21:09.400 --> 0:21:11.320 the anytime you want to work any time you want 0:21:11.320 --> 0:21:13.520 to work in a anytime you want to work in 0:21:13.560 --> 0:21:16.119 the center, might you're You're welcome to come work for US. 0:21:16.119 --> 0:21:17.840 Thirty eight and eighth in New York is a great 0:21:17.840 --> 0:21:20.320 center to work in. All right, I'll let you know. 0:21:20.920 --> 0:21:24.200 That's Uh, that's a little shorter commute than my typical 0:21:25.040 --> 0:21:26.800 trip up to fifty nine and lexs So I may 0:21:26.840 --> 0:21:29.960 have to take you up on that. I'll buy you lunch. 0:21:32.119 --> 0:21:35.479 Sounds great, man. So, how did the automous delivery tests 0:21:35.480 --> 0:21:40.480 with Westfield go? And and are you planning anymore? Uh? 0:21:40.520 --> 0:21:44.760 It went well. We worked with Serve Robotics UM, which 0:21:44.800 --> 0:21:47.399 is a Silicon Valley based company that's spun out of 0:21:47.440 --> 0:21:51.880 Postmates maneuver um and UH, and it went well. There 0:21:51.920 --> 0:21:55.320 was great consumer feedback, lots of consumer interest in seeing 0:21:55.480 --> 0:22:00.320 little robots run around on their four wheels. UM, goodustomer 0:22:00.359 --> 0:22:05.399 satisfaction ratings. We will probably do more tests UM in 0:22:05.480 --> 0:22:11.720 the near future. UM. These UH Serve Robotics vehicles are 0:22:12.160 --> 0:22:15.800 able to do street deliveries as well. You don't need 0:22:15.840 --> 0:22:18.840 to be in a closed loop environment like like them 0:22:18.840 --> 0:22:24.920 all UM, so likely to likely to expand our partnership 0:22:24.960 --> 0:22:28.960 of them. UM and UH very happy with their sults. 0:22:29.000 --> 0:22:33.080 I do see, you know, I see autonomous delivery as 0:22:33.080 --> 0:22:35.720 being a big game changer for delivery. I see that, 0:22:36.320 --> 0:22:40.359 um being more and more utilized in the next couple 0:22:40.400 --> 0:22:44.080 of years. The drone thing that we've all talked about, 0:22:44.119 --> 0:22:47.720 I just I don't necessarily see that anytime soon. I 0:22:47.840 --> 0:22:51.200 worked on a drone initiative at McDonald's when I was 0:22:51.240 --> 0:22:55.200 there seven years ago. Um and I'd say the advancement 0:22:55.240 --> 0:23:00.480 in drone delivery is minuscule in that seven year gap. 0:23:00.880 --> 0:23:03.879 Um so Uh. You know, the f A needs to 0:23:03.960 --> 0:23:08.200 regulate things, and um the economics need to work for 0:23:08.600 --> 0:23:12.359 a pilot right now flying a drone to delivery drop 0:23:12.359 --> 0:23:15.520 off spot if you're getting a fifteen dollar meal delivered, 0:23:16.119 --> 0:23:21.879 um it. I don't know. The complexities are great, the 0:23:21.960 --> 0:23:26.760 return is questionable, um and uh and the regulatory environment 0:23:26.840 --> 0:23:30.920 is tough. Yeah. Um so how long do you think 0:23:30.920 --> 0:23:34.080 it will be before food is delivered via a little 0:23:34.680 --> 0:23:39.479 you know we four wheeled robots? I think, well, it's 0:23:39.520 --> 0:23:43.359 already being delivered via four wheel robots in places like 0:23:43.520 --> 0:23:46.640 l A, Santa Monica, um and a couple of other 0:23:47.040 --> 0:23:51.239 computees across the country. UM So I think I think 0:23:51.280 --> 0:23:55.560 we're there. When when it gets to scale, UM, I 0:23:55.600 --> 0:23:58.680 think it will mirror but be a little faster than 0:23:59.440 --> 0:24:03.560 UM than autonomous vehicles in terms of cars. Uh. So 0:24:04.280 --> 0:24:08.200 I would I would suggest it will grow slowly UM 0:24:08.200 --> 0:24:10.600 over the next couple of years, three years, and then 0:24:10.600 --> 0:24:13.840 there will be a tipping point where UM it's all 0:24:13.880 --> 0:24:20.040 over the place three three plus years from now. Very cool. Uh. 0:24:20.080 --> 0:24:21.919 And you know in our discussions in the past, that 0:24:21.960 --> 0:24:25.320 you've mentioned before that virtual brands are overpopulated. You know, 0:24:25.359 --> 0:24:28.439 I know a lot of the publicly traded chains that 0:24:28.560 --> 0:24:32.920 I cover have invested UM pretty aggressively since the beginning 0:24:32.960 --> 0:24:36.919 of the pandemic and virtual brands. So when I'm analyzing 0:24:37.040 --> 0:24:40.640 these brands that have been created, how can I figure 0:24:40.680 --> 0:24:44.760 out which ones are going to be successful? You know, 0:24:44.840 --> 0:24:49.440 I have been off the opinion that UM, but there's 0:24:49.480 --> 0:24:54.320 an overpopulation of virtual brands. If you UM you know, 0:24:54.359 --> 0:24:57.360 if you I live out in the suburbs of San 0:24:57.440 --> 0:25:01.919 Francisco and Oakland, and if you look on my apps 0:25:02.119 --> 0:25:06.359 or door to Ashue Reeds grub UM. I'm using group 0:25:06.400 --> 0:25:09.720 a lot more now that that Amazon has their partnership 0:25:09.720 --> 0:25:14.440 with it UM. There there are a lot of restaurants 0:25:14.480 --> 0:25:17.960 that UM I cannot I cannot go to. I know 0:25:18.119 --> 0:25:21.240 one of my local high places has three virtual brands 0:25:21.280 --> 0:25:24.919 for example, UM, and I think that is UH. I 0:25:24.960 --> 0:25:26.840 think that's just going to die down. I don't think 0:25:26.880 --> 0:25:29.719 they're going to be able to sustain the value UM. 0:25:29.840 --> 0:25:33.159 I think the third party guys are gonna are going 0:25:33.200 --> 0:25:36.000 to decommission as a were brands that don't have a 0:25:36.000 --> 0:25:39.399 certain volume because it's just taking up real estate on 0:25:39.440 --> 0:25:42.600 their site. What I do think it's gonna continue to 0:25:42.640 --> 0:25:48.080