WEBVTT - Restaurant Loyalty Programs Need an Upgrade 0:00:21.880 --> 0:00:23.040 Welcome to Chopping It Up. 0:00:23.480 --> 0:00:25.680 I'm your host, Mike Hallon, the senior restaurant and food 0:00:25.720 --> 0:00:30.520 service analyst at Bloomberg Intelligence. Today we're joined by Zach Goldstein, 0:00:30.680 --> 0:00:33.640 CEO and founder of Thanks. Thanks for doing this, Zach. 0:00:34.240 --> 0:00:35.680 Yeah, I'm excited to Chop it Up. 0:00:36.479 --> 0:00:40.000 Yeah, man, listen, no pressure, but you participated in the 0:00:40.000 --> 0:00:43.360 most watched webinar I ever had at Bloomberg, so I'm 0:00:43.400 --> 0:00:45.400 expecting a banger today, hopefully to baby. 0:00:45.479 --> 0:00:46.760 Let you get some sleep this week. 0:00:47.880 --> 0:00:48.879 All right, let's do it. 0:00:49.479 --> 0:00:50.320 All right, good stuff? 0:00:50.680 --> 0:00:53.040 Why don't you tell the audience what Thanks does and 0:00:53.080 --> 0:00:54.920 what inspired you to start the company? 0:00:56.120 --> 0:00:59.880 Thanks as a guest engagement platform for restaurants. We help 0:01:00.560 --> 0:01:04.640 brands engage with consumers through digital so that's their app 0:01:04.680 --> 0:01:09.800 and web ordering experience, through other marketing channels such as email, 0:01:09.880 --> 0:01:13.399 push notifications, et cetera. And at the core of that 0:01:13.520 --> 0:01:17.360 is our loyalty CERM platform. Loyalty is a hot topic 0:01:17.440 --> 0:01:19.240 right now in the restaurant industry. I'm sure we'll spend 0:01:19.240 --> 0:01:21.680 a lot of time talking about it, but it's gone, 0:01:21.880 --> 0:01:24.240 in my opinion, from nice to have to must have, 0:01:24.760 --> 0:01:27.800 and that's why we're seeing so much attention on restaurant loyalty. 0:01:28.360 --> 0:01:30.800 Yeah, and so why don't you talk a little bit 0:01:30.840 --> 0:01:31.240 about that. 0:01:31.360 --> 0:01:33.199 Why are so many of the chains that we cover, 0:01:33.280 --> 0:01:36.280 Why are so many of the private chains revamping loyalty 0:01:36.280 --> 0:01:36.640 this year? 0:01:38.000 --> 0:01:41.240 Well, the revamping question is because their loyalty programs aren't working, 0:01:42.440 --> 0:01:45.520 and that's not an option anymore. We actually ran an 0:01:45.520 --> 0:01:48.320 assessment of a legacy loyalty program in the last month 0:01:48.640 --> 0:01:52.800 where right there in the dashboard it showed loyalty members 0:01:52.840 --> 0:01:56.760 spend five percent less than non loyalty members. And yet 0:01:56.880 --> 0:01:59.920 this restaurant wasn't in a hurry to make a change. 0:02:01.200 --> 0:02:03.680 That's not a way that you can survive in this 0:02:03.800 --> 0:02:08.120 industry right now. You have to be identifying ways to 0:02:08.200 --> 0:02:13.000 drive frequency. And it's mostly because we've taken check, we've 0:02:13.040 --> 0:02:17.640 taken price across the industry. That's creating some same store 0:02:17.680 --> 0:02:22.519 sales growth, but it's hiding very clear depression and frequency. 0:02:22.800 --> 0:02:24.560 And so if you don't know who your guests are 0:02:24.600 --> 0:02:26.800 and you don't have the tools to drive them back 0:02:26.840 --> 0:02:31.280 in for a second, third, or tenth purchase, you're kind 0:02:31.280 --> 0:02:34.120 of crossing your fingers and hoping your business will thrive. 0:02:34.240 --> 0:02:37.799 And that's not generally a good strategy. So the loyalty 0:02:37.840 --> 0:02:41.600 program is the answer to that. It's about knowing your guests, 0:02:42.040 --> 0:02:45.880 personalizing your interaction, giving them reasons to come to you 0:02:46.240 --> 0:02:48.960 as opposed to a third party or ultimately as opposed 0:02:49.000 --> 0:02:51.600 to a competitor. And that's the last piece that we 0:02:51.600 --> 0:02:54.240 could spend some time talking about, because if your loyalty 0:02:54.240 --> 0:02:56.560 program looks exactly like your competitors, and it's not doing 0:02:56.639 --> 0:02:59.240 you any good, So you need to be on brand 0:02:59.360 --> 0:03:02.960 and really perionalize what loyalty means to compete in twenty 0:03:03.000 --> 0:03:03.480 twenty four. 0:03:04.560 --> 0:03:06.720 And you mentioned to me when we spoke last week, 0:03:07.000 --> 0:03:09.520 what was it, sixty or seventy percent of customers make 0:03:09.680 --> 0:03:11.160 one transaction and that's it. 0:03:12.080 --> 0:03:16.800 Yeah. In fact, the industry wide, we see somewhere between 0:03:16.919 --> 0:03:20.240 seventy and eighty five percent of revenue comes from just 0:03:20.320 --> 0:03:23.880 twenty percent to customers. You better know who those people are. 0:03:25.520 --> 0:03:29.120 You know. The two ways that loyalty most directly affects 0:03:29.160 --> 0:03:33.920 frequency if it's working, is driving first time purchasers to 0:03:33.960 --> 0:03:37.480 a third purchase because third purchasers are like ten times 0:03:37.480 --> 0:03:44.080 greater lifetime value. Or identifying your true regulars and keeping 0:03:44.120 --> 0:03:47.600 them locked in and preventing that fall off, and you 0:03:47.680 --> 0:03:49.440 got to be doing one or both of those if 0:03:49.480 --> 0:03:52.920 you expect frequency to stay flat or go up. 0:03:53.640 --> 0:03:56.320 Okay, cool, So who's doing it right and who's just 0:03:56.400 --> 0:03:58.240 kind of putting lipstick on a pig. 0:04:00.440 --> 0:04:05.600 So Chipotle famously years ago said we don't need a 0:04:05.600 --> 0:04:10.120 loyalty program and fast forward and the Chipotle loyalty program 0:04:10.160 --> 0:04:12.720 has been a big reason why they outperformed Food and 0:04:12.720 --> 0:04:17.320 Beverage Index in Decease for the last couple of years. 0:04:17.880 --> 0:04:21.400 That is because loyalty was not, by x get y, 0:04:21.560 --> 0:04:24.240 a really boring program. Loyalty was about driving people to 0:04:24.320 --> 0:04:28.440 digital channels, making that delightful guac mode exclusive access to 0:04:28.480 --> 0:04:32.240 the case idea. They were innovating and they got the 0:04:32.279 --> 0:04:35.599 results from it. Now there's a different side of the 0:04:35.640 --> 0:04:40.720 Chipotle coin, which is that gap has closed some and 0:04:40.839 --> 0:04:44.200 this is the challenge for restaurants considering whether to build 0:04:44.240 --> 0:04:48.000 their own technology or not. It's a constantly evolving space 0:04:48.120 --> 0:04:50.840 and to stay ahead and to keep getting the benefit, 0:04:51.160 --> 0:04:54.200 you have to keep innovating, and that's expensive and it 0:04:54.240 --> 0:04:58.240 requires specialization. And so we've seen some brands catch up 0:04:58.279 --> 0:05:01.520 to Chipotle in their competitive of space. In some cases, 0:05:02.000 --> 0:05:05.800 we're thanks to blame because we're helping brands catch up there. 0:05:06.839 --> 0:05:11.560 But that's that's closing the gap. Some that said it's 0:05:11.600 --> 0:05:14.800 they're a perfect proof point on when you do it right, 0:05:15.040 --> 0:05:16.599 what kind of advantage you can get. 0:05:17.480 --> 0:05:20.320 Very cool, you know, and we talked kind of about 0:05:20.400 --> 0:05:23.359 revamping the look and feel but versus you know, being 0:05:23.440 --> 0:05:29.520 fundamentally different, you know. And I think you mentioned Duncan 0:05:30.120 --> 0:05:34.080 was one. But because they were taking some risks there, 0:05:34.120 --> 0:05:35.320 can you talk about Duncan a little bit? 0:05:36.000 --> 0:05:36.600 Yeah. 0:05:36.720 --> 0:05:40.120 I think there's two conclusions from Duncan and frankly from 0:05:40.120 --> 0:05:45.200 Starbucks before. If you need to change your loyalty program 0:05:45.520 --> 0:05:49.400 because it's not working or because the economics are not sustainable, 0:05:50.560 --> 0:05:54.360 you need to do it, and you're gonna see pushback 0:05:54.400 --> 0:05:57.560 from consumers if you've been locked into a program for 0:05:57.640 --> 0:06:01.360 ten years. So I think most of the coverage there 0:06:01.400 --> 0:06:04.599 actually drew the wrong conclusion, which is, Ooh, Duncan made 0:06:04.640 --> 0:06:07.520 a change and it was bad. Duncan made a change 0:06:07.520 --> 0:06:09.440 that they needed to make because their program was giving 0:06:09.440 --> 0:06:12.640 away too many discounts, and I comend them for making 0:06:12.680 --> 0:06:17.440 that change. The mistake happened years earlier when they launched 0:06:17.480 --> 0:06:21.280 a program and then never evolved, it never changed it 0:06:21.320 --> 0:06:24.960 For a decade, loyalty programs have often been set it 0:06:25.000 --> 0:06:28.240 and forget it, and brands often spend a lot of 0:06:28.279 --> 0:06:32.760 time worried about getting the first launch right. In my opinion, 0:06:33.040 --> 0:06:35.599 the first launch is the starting point to collect data, 0:06:36.120 --> 0:06:39.479 and you need to create a dynamic, constantly evolving loyalty program. 0:06:39.560 --> 0:06:41.840 And if you do that, you train your guests that 0:06:41.880 --> 0:06:46.320 your loyalty program is dynamic, which means they embrace change, 0:06:46.680 --> 0:06:50.200 not fear it. And that's what modern loyalty programs are 0:06:50.200 --> 0:06:54.800 doing today. Much more personalized, much more choice, and much 0:06:54.839 --> 0:06:55.560 more dynamic. 0:06:56.520 --> 0:06:58.680 Yeah, Tim Hortons was a famous one because they came 0:06:58.720 --> 0:07:01.480 out pretty early and were like, yeah, we're just given 0:07:01.600 --> 0:07:03.640 discounts to people that were going to come anyway. 0:07:03.800 --> 0:07:04.000 Right. 0:07:05.640 --> 0:07:08.680 You mentioned a couple other names too. What about Sweet Green? 0:07:09.040 --> 0:07:10.840 What are they doing with their loyalty program right now? 0:07:10.880 --> 0:07:15.840 So I think sweet Greens strategy is a plus from 0:07:15.840 --> 0:07:19.120 a marketing standpoint. So one of the things that Sweet 0:07:19.120 --> 0:07:22.600 Green's innovated on is a concept called challenges, which we've 0:07:22.640 --> 0:07:25.520 now built into our platform as well. Identify a one 0:07:25.560 --> 0:07:28.560 time a month customer and get them to come twice 0:07:28.640 --> 0:07:33.160 and then give them the incentive. Identify a lunchtime customer 0:07:33.200 --> 0:07:35.440 and get them to try the dinner day part and 0:07:35.480 --> 0:07:40.040 then give them an incentive. That's the direction towards hyper personalization. 0:07:41.280 --> 0:07:44.080 Now you look at the Sweet Green stock price and 0:07:44.320 --> 0:07:47.200 you say, well, Zach, that's not paying off yet. I 0:07:47.240 --> 0:07:49.640 don't think that's because of the strategy. I think that's 0:07:49.680 --> 0:07:52.920 because iterating on that program when you've built all the 0:07:52.960 --> 0:07:56.400 technology yourself is just is very difficult. It's very expensive, 0:07:56.840 --> 0:08:00.360 and ultimately there's a lot of pressure on margins now, 0:08:00.400 --> 0:08:04.360 so that's one more place where there's pressure and margins. 0:08:04.680 --> 0:08:08.720 But whoever created that strategy, I believe you will see 0:08:08.720 --> 0:08:11.520 it work, likely at Sweet Green at some point, but 0:08:11.960 --> 0:08:14.120 you'll see it work elsewhere as well, because it's the 0:08:14.240 --> 0:08:16.520 right direction for the future of loyalty. 0:08:17.120 --> 0:08:20.880 Okay, Cole and the eight hundred pound gorilla McDonald's, how 0:08:20.880 --> 0:08:21.960 are they doing so? 0:08:22.680 --> 0:08:25.720 McDonald's is another one that said we don't need a 0:08:25.720 --> 0:08:29.960 loyalty program, and here we are fastest growing, largest loyalty 0:08:29.960 --> 0:08:34.640 program in the restaurant industry. I think the story of 0:08:34.679 --> 0:08:38.359 the McDonald's loyalty program is more a story of embracing 0:08:38.400 --> 0:08:42.080 digital than of loyalty specifically, though the two go very 0:08:42.200 --> 0:08:46.320 squarely hand in hand. There was an assumption in QSR 0:08:46.400 --> 0:08:48.840 that if you had great locations and an excellent drive 0:08:48.880 --> 0:08:52.760 through experience, digital was less critical. I think we're seeing 0:08:53.000 --> 0:08:56.480 very clear now it doesn't matter who you are. Digital 0:08:56.559 --> 0:09:00.280 is critical and building that direct relationship with customers is 0:09:00.679 --> 0:09:06.760 a must have. Why because millennials gen Z they value convenience, 0:09:07.400 --> 0:09:12.559 and convenience drive through is convenient. It's less convenient at 0:09:12.559 --> 0:09:15.480 the end of the day than ordering ahead and swooping 0:09:15.480 --> 0:09:17.600 in and picking up your food and continuing on with 0:09:17.679 --> 0:09:21.000 your day. And then the other benefit is that drive 0:09:21.040 --> 0:09:24.480 through still anonymous. Most of the customers that go through 0:09:24.520 --> 0:09:26.280 your drive through, you have no clue who they are, 0:09:26.600 --> 0:09:28.520 So what do you do to get them back into 0:09:28.559 --> 0:09:32.480 your drive through? A digital transaction has the ability for 0:09:32.559 --> 0:09:36.560 you to understand that guest, target them, get them back in, 0:09:36.840 --> 0:09:39.120 and make it easy for them to one click reorder. 0:09:39.679 --> 0:09:43.959 That's what's driving the growth of the McDonald's loyalty program, 0:09:44.000 --> 0:09:47.320 and that's why when brands look at, well, what do 0:09:47.360 --> 0:09:50.280 we do at things? We're not just a loyalty program. 0:09:50.320 --> 0:09:53.880 We actually help brands launch best in class mobile applications 0:09:54.240 --> 0:09:58.920 digital ordering experiences, and that's because those are great channels 0:09:58.920 --> 0:10:02.240 for personalization as well. When you open up an app, 0:10:02.640 --> 0:10:04.959 you want to see your last order, and you can 0:10:05.000 --> 0:10:08.240 only do that if it's connected to your loyalty program. 0:10:08.360 --> 0:10:10.800 You want to see what rewards you have available to 0:10:10.960 --> 0:10:14.360 use so that it changes your perusing of the menu. 0:10:15.000 --> 0:10:17.400 If none of that's there or you don't see it 0:10:17.559 --> 0:10:20.360 till you're at the very last step of the checkout process. 0:10:20.400 --> 0:10:24.000 Because it's not a great experience, the brand's leaving money 0:10:24.000 --> 0:10:25.719 on the table. And this is the stuff that we're 0:10:25.720 --> 0:10:29.320 seeing McDonald's innovate on that others are catching up on. 0:10:30.600 --> 0:10:30.880 Yeah. 0:10:30.880 --> 0:10:34.479 Interesting, and it's so important right now because chains advertising 0:10:34.520 --> 0:10:39.280 budgets are creeping back up, so this cheaper digital marketing 0:10:39.600 --> 0:10:40.679 is definitely important. 0:10:41.360 --> 0:10:44.520 Well, there's an interesting concept of marketing budgets that were 0:10:44.559 --> 0:10:46.600 just a fixed percent of revenue for a long time, 0:10:46.720 --> 0:10:48.880 and some would say five and some would say two, 0:10:48.960 --> 0:10:51.440 and that number was completely pulled out of thin air, 0:10:52.360 --> 0:10:56.880 and that's not how other industries work. Your marketing budget 0:10:56.880 --> 0:10:59.600 should scale based on the return you're getting from your 0:10:59.600 --> 0:11:02.199 marketing budget, and if you can get a good return, 0:11:02.640 --> 0:11:06.600 you should keep throwing money against it. We're starting to 0:11:06.679 --> 0:11:10.040 see restaurants and they embrace that mentality. Wait a minute, 0:11:10.040 --> 0:11:13.360 my marketing, my loyalty program can be a revenue driver. Okay, 0:11:13.440 --> 0:11:17.240 then spending more money on the program is a good investment. 0:11:17.360 --> 0:11:21.080 I think as an industry, we're stuck thinking about Hey, 0:11:21.120 --> 0:11:22.720 the last time I spent a bunch of money and 0:11:22.760 --> 0:11:24.840 I upgraded my point of sale, it didn't drive any 0:11:24.880 --> 0:11:29.079 revenue lift. So I don't want to spend money. As 0:11:29.120 --> 0:11:33.560 we look at revenue driving technology investments, it needs to 0:11:33.600 --> 0:11:37.520 be evaluated differently based on ROI for sure. 0:11:38.280 --> 0:11:39.760 All right, I got one more for you, and then 0:11:39.800 --> 0:11:41.800 we can move on. Dominos. 0:11:42.559 --> 0:11:48.320 They revamped their loyalty They pointed to it as helping 0:11:48.400 --> 0:11:50.600 fourth quarter same source sales or trying to drive more 0:11:50.679 --> 0:11:53.400 light users and carry out users to. 0:11:53.440 --> 0:11:57.560 Come more frequently. You know, any opinions on that one. 0:11:57.679 --> 0:12:00.400 Yeah, I think it's a testament to doing change well. Actually, 0:12:00.480 --> 0:12:03.040 and you know, Dominos has said we're a technology company, 0:12:03.960 --> 0:12:08.280 and they have they have a very targeted reason why 0:12:08.320 --> 0:12:12.920 they've adjusted their loyalty program, and their early indicators show 0:12:12.920 --> 0:12:16.400 that it's working. And so I'm hopeful that the industry 0:12:16.480 --> 0:12:19.840 draws the opposite conclusion that that we drew when looking 0:12:19.880 --> 0:12:22.640 at Duncan. Here's an example of change is good and 0:12:22.760 --> 0:12:25.520 I think that's a better conclusion, as I mentioned before, 0:12:25.880 --> 0:12:27.920 than being fearful to adapt. 0:12:28.840 --> 0:12:30.640 All right, good stuff, all right? 0:12:30.679 --> 0:12:33.640 So should restaurant chains be building their own loyalty and 0:12:33.679 --> 0:12:36.520 their own restaurant tech or should they buy it? 0:12:36.640 --> 0:12:37.360 And you know? 0:12:37.520 --> 0:12:39.560 Or does the answer really hinge on the size and 0:12:39.600 --> 0:12:42.840 the resources of the company. 0:12:43.360 --> 0:12:46.480 I don't think there's a one size fits all. That said, 0:12:47.559 --> 0:12:51.320 I would speculate that you can count on two hands 0:12:51.320 --> 0:12:54.480 the number of restaurants that could actually pull off being 0:12:54.520 --> 0:12:58.600 a technology brand and being a food brand, and it 0:12:58.640 --> 0:13:02.360 may be one hand if we're honest. It effectively comes 0:13:02.360 --> 0:13:05.640 down to access to cheap cost of capital, because technology 0:13:05.679 --> 0:13:09.120 is expensive and it requires an upfront investment in order 0:13:09.160 --> 0:13:12.920 to get the long term return, and most restaurants don't 0:13:12.960 --> 0:13:17.440 have access to cheap enough capital to be a technology company. 0:13:17.480 --> 0:13:20.240 Then there's the second problem of you have access to 0:13:20.320 --> 0:13:22.400 cheap capital, do you know what to do with it? 0:13:22.720 --> 0:13:26.080 And recruiting top notch talent even if you've got the 0:13:26.120 --> 0:13:30.400 money to pay them. If you're a restaurant. In machine learning, 0:13:30.720 --> 0:13:33.839 data analytics. Some can pull it off, but it's hard. 0:13:34.200 --> 0:13:36.760 It's hard for technology to companies to compete with each 0:13:36.800 --> 0:13:40.480 other because that's the second piece. As I mentioned with Chipotle, 0:13:41.040 --> 0:13:44.520 it's not about launch an innovative technology and yay, we're 0:13:44.520 --> 0:13:47.200 ahead and we'll reap the benefits. You have to launch 0:13:47.240 --> 0:13:50.000 the technology, and then you have to keep iterating and 0:13:50.040 --> 0:13:55.719 staying ahead because the pace is just constantly evolving. So 0:13:55.800 --> 0:14:00.280 most restaurants can't and shouldn't be That's why SAW where 0:14:00.280 --> 0:14:03.000 as a service has taken over other industries where you 0:14:03.040 --> 0:14:06.320 focus on your core and you buy software as a 0:14:06.360 --> 0:14:11.199 service solutions, and frankly we do that as a technology company. 0:14:11.360 --> 0:14:13.880 There are a lot of things that we should be 0:14:13.880 --> 0:14:17.800 best in class at, and then there are things A 0:14:17.840 --> 0:14:21.800 lot of our back end data infrastructure we don't need 0:14:21.800 --> 0:14:25.600 to run servers. We should not be building data pipelines. 0:14:25.640 --> 0:14:29.360 There are there are technologies that do that better. We 0:14:29.440 --> 0:14:33.400 spend a lot of money on Snowflake. Our restaurants probably 0:14:33.440 --> 0:14:36.440 don't appreciate how much of a cost that is for us, 0:14:36.520 --> 0:14:39.680 but that's because if we were to replicate all that stuff, 0:14:40.320 --> 0:14:44.160 our solution would be way less innovative. We'd move much 0:14:44.200 --> 0:14:47.080 more slowly and frankly, we'd likely have to charge more. 0:14:47.720 --> 0:14:51.440 That's interesting, and yeah, Wingstop should be an interesting test 0:14:51.520 --> 0:14:51.800 for that. 0:14:52.400 --> 0:14:54.320 Yes, the billdo versus buy it? Right? 0:14:55.080 --> 0:14:57.800 That's right. I think that is a big, bold bet. 0:14:59.080 --> 0:15:03.320 They've publicly ported fifty million or something already sunk into 0:15:03.400 --> 0:15:07.720 their technology. That's a lot. But I think the bigger 0:15:07.800 --> 0:15:10.920 question is they're gonna sink another one hundred if they're 0:15:10.960 --> 0:15:15.400 going to really pull this off, and they may be 0:15:15.480 --> 0:15:17.000 able to get the return on that, but that's a 0:15:17.040 --> 0:15:17.400 high bar. 0:15:18.160 --> 0:15:20.120 Okay, there's a lot of pressure on some of these 0:15:20.120 --> 0:15:23.280 public tech companies to expand their wallets share with the customers. 0:15:23.360 --> 0:15:25.840 Right. Can you speak to the cycles of all in 0:15:25.880 --> 0:15:26.360 one tech? 0:15:27.360 --> 0:15:31.240 Yeah, all of this goes in cycles. But yeah, you're 0:15:31.240 --> 0:15:35.480 seeing Toasts and OLO talk about average revenue per location 0:15:36.400 --> 0:15:41.000 as a big metric for them, and it makes sense. 0:15:41.920 --> 0:15:45.600 Restaurants on the surface want fewer technologies that they have 0:15:45.680 --> 0:15:50.040 to buy and integrate because that's easier. On the flip side, 0:15:50.560 --> 0:15:57.760 restaurants are increasingly under pressure to drive comps up and 0:15:57.840 --> 0:16:01.600 traffic in particular, and when it comes to things that 0:16:01.640 --> 0:16:05.160 can impact traffic, they need best in class solutions and 0:16:05.240 --> 0:16:07.960 so we're going to see that tension play out. 0:16:08.080 --> 0:16:08.560 For sure. 0:16:09.880 --> 0:16:14.240 There's also risk. There's risk in consolidating, and so we've 0:16:14.320 --> 0:16:18.280 seen some indication that brands want to go with all 0:16:18.320 --> 0:16:21.520 in one, but we've also seen some indication of brands 0:16:21.560 --> 0:16:26.800 actually separating because they don't want their loyalty program tied 0:16:26.800 --> 0:16:29.560 to their point of sale vendor, or they don't want 0:16:29.680 --> 0:16:34.960 their ordering tied to their payments. And it's going to 0:16:35.040 --> 0:16:36.800 be at this stage in the cycle, we're going to 0:16:36.840 --> 0:16:41.000 see brands go both directions. But ultimately, I think that 0:16:41.280 --> 0:16:44.440 if it's an all in one, you're optimizing for cost 0:16:44.480 --> 0:16:48.320 and efficiency and you're willing to sacrifice on the long 0:16:48.440 --> 0:16:52.600 term results, but you're getting a much more efficient buy 0:16:52.680 --> 0:16:56.920 of software. If it's specialized, you're probably going to spend 0:16:56.920 --> 0:17:00.160 more money, but you're probably able to get more result 0:17:00.240 --> 0:17:02.760 if you use it well. And that's going to be 0:17:02.800 --> 0:17:04.480 a brand by brand calculation. 0:17:05.400 --> 0:17:07.119 Yeah, it's interesting, and you mentioned to me too that 0:17:07.200 --> 0:17:10.680 it kind of concentrates the risk for the technology company. 0:17:10.960 --> 0:17:13.399 For sure, and I think we're seeing that with some 0:17:13.480 --> 0:17:17.280 of these public comps. As you lose a big brand, 0:17:17.760 --> 0:17:22.560 a subway, a wingstop, it's pretty painful in the public markets, 0:17:22.640 --> 0:17:29.280 and that's probably fair. Those are big brands. On the 0:17:29.280 --> 0:17:33.400 flip side, this is a trillion dollar category. Now. Losing 0:17:33.480 --> 0:17:36.760 one customer does not make or break any of these 0:17:36.800 --> 0:17:38.600 software vendors. 0:17:38.640 --> 0:17:38.880 Cool. 0:17:40.280 --> 0:17:43.760 When these fourth quarter earnings call, new CEO Kirk Tanner 0:17:43.880 --> 0:17:48.040 spoke about testing dynamic pricing next year and people went berserk. 0:17:48.280 --> 0:17:52.359 So you know, the restaurant industry doesn't have the same 0:17:52.400 --> 0:17:57.280 supply constraints that impact hotels and airlines. Will restaurant customers 0:17:57.320 --> 0:17:58.959 ever accept dynamic pricing? 0:18:00.040 --> 0:18:05.040 Strung customers have been accepting dynamic pricing for eternity. This 0:18:05.240 --> 0:18:10.280 was a messaging problem. What do you do with effective marketing? 0:18:11.040 --> 0:18:15.440 You drive customers to do things that you don't think 0:18:15.480 --> 0:18:21.200 they would have done otherwise, often with discounts. That's dynamic pricing. 0:18:22.119 --> 0:18:24.119 At the end of the day, when you know that 0:18:24.200 --> 0:18:27.359 you are slow on Wednesday, when you know that you 0:18:27.440 --> 0:18:30.520 are slow at the dinner day part because you're thought 0:18:30.520 --> 0:18:34.160 of as a lunch brand, you create incentives, often through 0:18:34.200 --> 0:18:37.320 your loyalty program, to get consumers to think of you 0:18:37.400 --> 0:18:39.920 in a different way, and then you hope that behavior 0:18:40.000 --> 0:18:45.760 sticks without a dependency on the incentive. That is dynamic pricing. 0:18:46.200 --> 0:18:49.720 I think the mistake here is thinking about it, and frankly, 0:18:49.880 --> 0:18:52.720 Wendy's got caught up in a rough pr cycle that 0:18:52.800 --> 0:18:55.879 I'm not sure they did anything wrong. But when you 0:18:55.880 --> 0:18:58.080 think about it as surge pricing, because as you said, 0:18:58.160 --> 0:19:01.399 this is not an industry where there's really a supply 0:19:01.440 --> 0:19:05.320 and demand need for surge pricing, but dynamic pricing that 0:19:05.359 --> 0:19:08.359 goes the other direction whatever. The opposite word of surge 0:19:08.480 --> 0:19:11.679 is where it goes down when traffic is low to 0:19:11.800 --> 0:19:15.720 create value. That is a smarter way to apply a 0:19:15.840 --> 0:19:19.160 value menu. That's a way loyalty programs have been succeeding 0:19:19.200 --> 0:19:21.880 for a long time, and this new industry of dynamic 0:19:21.960 --> 0:19:25.360 pricing is about applying machine learning to do that type 0:19:25.400 --> 0:19:30.560 of iteration way more quickly. But it's not, at any 0:19:30.600 --> 0:19:34.280 end of the day, some thing that consumers should be 0:19:34.320 --> 0:19:37.600 scared of. In fact, I expect consumers would embrace it 0:19:37.680 --> 0:19:39.440 and have been embracing it for years. 0:19:40.000 --> 0:19:42.679 Yeah, look a happy hour, Right, you're leverage in the 0:19:42.720 --> 0:19:46.520 box at a time where people may not be using it, right, 0:19:46.640 --> 0:19:51.280 That's right. Yeah, that's it's interesting, and that's an interesting take. 0:19:52.520 --> 0:19:52.960 Talk to me. 0:19:53.119 --> 0:19:55.879 Everybody talks about it, but you know, I think you 0:19:56.000 --> 0:19:57.920 have some interesting insights about it. Can you talk to 0:19:57.960 --> 0:19:59.919 me a little bit about AI and the restaurant business 0:20:00.080 --> 0:20:02.160 right now and what you think is going to work 0:20:02.240 --> 0:20:04.520 and what is maybe just hype? 0:20:05.040 --> 0:20:09.840 Yeah, public restaurant leaders don't want to say it, so 0:20:10.000 --> 0:20:14.080 I'll say it. Which is the most obvious application of 0:20:14.119 --> 0:20:16.480 AI is on cost savings back of house and it's 0:20:16.520 --> 0:20:21.040 about combating labor costs. And we're going to see more 0:20:21.080 --> 0:20:24.720 and more of that absolutely, whether it's voice ordering so 0:20:24.800 --> 0:20:28.360 that a human doesn't have to take that order, it's kiosks, 0:20:29.160 --> 0:20:32.919 it's reducing rote prep time of things in the kitchen. 0:20:33.480 --> 0:20:36.400 We're going to see robotics in AI in those places 0:20:36.400 --> 0:20:41.280 and it's directly for cost savings and opportunities. People will 0:20:41.359 --> 0:20:44.639 dance around it. We can redeploy labor, et cetera. But 0:20:45.119 --> 0:20:48.520 we know what they're actually focused on, and it makes sense. 0:20:48.760 --> 0:20:52.639 Labor costs are rising rapidly. Where I think it's a 0:20:52.640 --> 0:20:54.919 lot less proven is what does it do for front 0:20:54.920 --> 0:20:58.159 of house? You know, consumer facing tech today. You know 0:20:58.200 --> 0:21:01.199 the big moment we're in an AI is driven by 0:21:01.240 --> 0:21:03.400 open AIS hype cycle right now, and it's all about 0:21:03.480 --> 0:21:06.000 generative AI. I mean, you can write three sentences and 0:21:06.000 --> 0:21:09.719 get a sixty second video that is mind blowing that 0:21:09.760 --> 0:21:14.000 has no value to restaurants. Any restaurant that believes that 0:21:14.040 --> 0:21:17.280 they can then use that forgets that at the end 0:21:17.320 --> 0:21:20.480 of the day, they're a marketing business. You produce good food, 0:21:20.520 --> 0:21:23.199 but your brand is key in your a marketing business, 0:21:23.200 --> 0:21:26.520 and great creed formacy of young is on our board, 0:21:26.520 --> 0:21:29.560 and he reminds us constantly that that's our job is 0:21:29.560 --> 0:21:32.679 to help restaurants be great marketers because that's core to 0:21:32.760 --> 0:21:36.240 what they do. So I don't think generative AI is 0:21:36.280 --> 0:21:41.720 the breakthrough there that said five eight years ago marketing 0:21:41.720 --> 0:21:44.240 and restaurants will send the same email to every single 0:21:44.240 --> 0:21:46.800 one of your consumers, pat yourself on the back when 0:21:46.840 --> 0:21:49.800 you get a good open rate, no clue whether it 0:21:49.880 --> 0:21:54.719 drove revenue, and spray and pray marketing Today, with technology 0:21:54.760 --> 0:21:58.879 like Thanks, brands are doing much more personalization out of 0:21:58.880 --> 0:22:00.680 the box. Thanks has about a hund undred pre built 0:22:00.720 --> 0:22:05.000 segments that divide your customers into. But still that's not 0:22:05.240 --> 0:22:10.320 one to one personalization. And I think machine learning will 0:22:10.359 --> 0:22:15.600 give the opportunity to really build hyper segmentation in marketing 0:22:15.880 --> 0:22:19.200 that doesn't require the manual effort or insight of your 0:22:19.240 --> 0:22:23.040 marketing team. We're working on doing more and more of 0:22:23.080 --> 0:22:25.560 that right now, and I do think that's an opportunity 0:22:26.600 --> 0:22:28.760 and it's going to be a reason why brands want 0:22:28.760 --> 0:22:32.240 to use a SaaS solution like thanks as opposed to 0:22:32.240 --> 0:22:35.560 build it themselves, because the ability to train a machine 0:22:35.640 --> 0:22:40.040 learning model across brands and then to the benefit of 0:22:40.080 --> 0:22:43.560 each individual brand, it's just much easier than trying to 0:22:43.640 --> 0:22:46.800 train on just one brand's data, where you might draw 0:22:46.800 --> 0:22:48.399 the wrong conclusion about your customer. 0:22:49.000 --> 0:22:50.160 Yeah, that's very cool, man. 0:22:50.480 --> 0:22:52.400 I'm sure a lot of restaurant chains and looking forward 0:22:52.440 --> 0:22:56.280 to getting to that day, you know, because loyalty has 0:22:56.280 --> 0:23:01.159 been such a you know, important topic business for a while, 0:23:01.320 --> 0:23:05.280 right and the first cycle was I don't know, twenty seventeen, 0:23:05.400 --> 0:23:09.160 twenty eighteen, and as you mentioned, a lot of them, 0:23:09.320 --> 0:23:12.359 you know, have been unsuccessful in you know, getting to 0:23:12.440 --> 0:23:16.760 that one to one marketing spot and they're given another 0:23:16.800 --> 0:23:19.840 shot right now. So it's going to be really interesting 0:23:19.880 --> 0:23:21.119 to watch. 0:23:21.240 --> 0:23:25.440