All right, So first of all, let's get into a little bit about
thanks. I think some of our listeners and viewers may be aware of thanks,
but maybe not fully give us a kind of a rundown. Yeah.
Thanks. As a leading guest engagement platform for the restaurant industry, we think
about all things coming from interacting with your guest through digital channels, the app
and web ordering experiences, the loyalty program the marketing that you send through push
notifications or email, etc. You know, capturing sentiment, all the information
you need to understand your guests and frankly to drive them back more often.
I like the you know, the customer engagement platforms usage there when you okay,
so when you say customer engagement the idea of around that is it really
on loyalty by itself or does it also include things like building the guest check
amount or does it include other CRM activities outside of yes, work, we're
the core CRM for a restaurant. We understand who the guests are, and
frankly, we're combining two concepts that restaurants have struggled with. The first is
loyalty programs, which we'll spend a lot of time talking about that are outdated
and more dependent on rote discounts and by x get y unchanging methods, and
that's what gave loyalty programs a bad name in this industry. But they were
just not being done right, and we've done some things to change that.
The other piece is marketing really meant spam email marketing for a long time.
For restaurants, it meant just blasting out the same message to all your guests,
crossing your fingers hoping they come back, or even worse, patting yourself
on the back when you get a really good open rate, as if that
has anything to do with how many people are spending money at your restaurant.
And so the ways that you use data for a restaurant today have to be
personalized. The actual digital ordering experience, show what I ordered last time,
so it's easier for me to order it again. Personalize those emails with segmentation.
Use mobile apps for your best guests. Not everyone will download an app,
but your top customers will and it will increase their frequency. And that's
why we've combined that into a single solution. I think that's so CRM is
so critical, I think, especially in this era of restaurant consumers because we've
seen the lack of brand affinity, you know, from consumers, just a
lot of moving around, you know, for many reasons. Price, sometimes
it's experience, et cetera. Do you go into the level of spend data
on the CRM, So can you take a look at John Smith and say,
I know what John has spent throughout his customer journey with us over the
last six months? Is that something thanks to us? That's exactly what we
do. And in fact, we have one hundred or so automatic segments that
our system creates on behalf of restaurants and infinitely more than a restaurant can create
using our tool, so that you're actually talking to guests based on what they're
doing, When are they coming in, day part, day of week,
what are they buying, how are they spending? Is it for themselves?
Is it for their family? Those are all triggers that should lead to different
forms of communication with the guests. If you're ignoring them, it's no wonder
that the guest is also ignoring you, right, I think that's a well
good point to the guests is ignoring you. This brings up another topic,
and that is gen Z dining so there's been some trends and some data that
are reporting gen Z's dining out quite a bit less in terms of frequency.
I know if this is something that's going to stick around, but it seems
to be a unique dynamic and how they basically eat away from home. What
are you guys seeing around that trend? Is this something that's short lived or
is this maybe just a new style of how these types of consumers interface with
restaurants today. Yeah, we've seen a shift in the way consumers engage with
restaurants, and frankly, digital and off premises is here to stay. That
behavior change during COVID, it's not going back, so restaurants need to adopt.
The good news is if you fast forward or relying four years ago,
I think there was a debate about what restaurants need to invest in digital and
enabling first party ordering. That debate's long gone. Everyone knows that they need
to have first party digital ordering or they're going to lose their lunch to the
third parties, and that customers demand it. Now. The question is how
do you take advantage of that to not just say check the box, we've
got a digital platform, but we're actually driving customers to us versus DoorDash er
Uber. We're actually making it convenient so that customers who actually liked their experience
want to come back and purchase again. And that comes down to using a
massive amount of data generated from digital to talk to guests personally. Now,
the question around that you asked around dining preference those gen Z and Frankly,
as we get even into the younger demographics, we're going to see more of
this in my estimation, but millennials and Gen zs are both demonstrating that showing
up at a restaurant, dining in the restaurant, and walking off when you're
done with your meal. They'll do it occasionally, but that's not the majority
of their dining occasions, and you have to be willing to embrace the multiple
ways that they want to engage. And the last point I'll make is to
that point, we see that guests who are omni channel, who dine in
the restaurant and who sometimes take their food off premiss either through pickup or delivery,
they actually have much higher LTVs. And so you're driving lifetime value by
helping your customer understand there are multiple ways you can use my brand is that
something. You know, I hear people talk about omni channel all the time,
and you look at some of this in the third party side. Some
of this maybe going to e commerce, which is, you know, just
another form of getting the order in the house for maybe an individual pickup.
Are you seeing any trends around that in terms of people who are going online
ordering or mobile ordering and flipping over to picking up in restaurant versus the third
party delivery. Absolutely, it's all a matter of incentives. You know,
Pricing across the industry has gone up, so check sizes are going up,
people are delivering, restaurants are delivering. Sam store sales growth largely on the
back of taking price. But what's starting to be talked about is frequencies down
industry wise, right, and that's a major concern. It means customers are
value sensitive and one of the things that you can do with a well structured
loyalty program is give consumers a reason to come direct to you. Many consumers
are driving right by your restaurant on their way home from work. The idea
that with the right loyalty incentive, they would go two minutes out of their
way to get their own food instead of paying an eight dollars markup for delivery.
That's appealing to a lot of consumers, but not if you don't give
them a reason to do it. They'll default to convenience if it's all the
same. And that's where a loyalty program needs to be used as a tool,
not just a one size fits all. Yeah, I wanted to show
you some general data. I want to get your opinion on maybe the size
of the loyalty sector of the market. If you look at just the general
data right now, this coming over from Statista that and I still think this
might be a little bit underreported, but global size of the food service market
around two point five trillion, all right, that's in twenty one. This
is forecasted to go to four point four trillion in twenty eight. So I
just saw the report coming in yesterday or earlier this week from Hudson really at
the NRA that we've clipped over in the United States over one trillion in revenue.
Then you look at this data right here. This is Research and Market
so this is back in actually mid last year. But what they were talking
about, I'm kind of zoom in on that for people and share that tab
there. Let me zoom in on this a little bit. There we go
the a global loyalty market expected to grow like twelve percent annual basis one hundred
and thirty five. This is twenty three, and now we're looking at market
forecast of like two hundred and fifteen billion by twenty seven, so continuing to
grow at this pace. Here's my question to you, if you look at
those kind of stats that we're seeing there on screen right now, and you
look at companies like thanks, is this underreported because it feels like that's not
that seems loyalty wise, it just feels like it should be so much bigger
than what they're talking about here, two hundred and fifteen billion out of four
and a half trillion. So we're in the midst of a catch up period
in the restaurant industry. But the good news is we already know where this
is going to go because we've seen it in other industries. There was a
period where hotels could debate whether a loyalty program was necessary for their business or
whether it was a discount driver. Loyalty programs are ubiquitous in hotels now,
and they're necessary because of the arrival of online travel agencies which disaggregated hotels from
their guests and cost them margin. You know, I talked a lot about
this story and the four horsemen of the restaurant apocalypse. Loyalty programs create the
connection between a hotel guest and the hotel chain, and they've become a requirement
to exist. We are seeing that happen in the restaurant industry. Where it
used to be you could decide, am I a brand that has a loyalty
program or am I not? And frankly, there's some famous examples. There
are executives from McDonald's Chipotle who years ago said, yeah, we don't need
a loyalty program, it's not part of our brand. Those are two of
the fastest growing, largest loyalty programs in the industry, exactly, and so
loyalty programs are a requirement. What needs to change is that if a restaurant
is running a loyalty program, as I said before, that's one size fits
all. Hasn't changed in ten years. I can blindly guarantee it's not driving
revenue for their business. Right now. That means more investment, more specialization,
innovation from technology, and restaurants don't want to hear this is going to
be more spend on technology, margins are already under pressure. Here's the good
news. A loyalty program done right is a massive revenue driver. It's not
a cost center, and so it's not like investing in your point of sale
or other operational things, which are just cost centers. If you're doing it
right, it has many times multiple on returns in terms of driving revenue.
Coming out of a web three loyalty platform that was launched by a company called
Bubba Guys, we've reported on it a couple of times, and the numbers
that I saw coming back were almost I just couldn't believe them, you know,
So it was either just because it was a new thing. I wasn't
really sure. My question to you is, do you see that we're going
to see an expansion of other types of omni approaches toward loyalty other than the
traditional models that we've seen, say in the last couple of years. No
doubt we are indeed seeing that exact thing. And one of the insights we've
reported publicly is we've had several brands who have experimented, for instance, with
non discount reward models. One of the ones that I think is most interesting
are access to a secret menu. If I had told people several years ago
that a large chunk of consumers would happily redeem their loyalty points for access to
a secret menu instead of a five dollars discount, people would have said,
I'm crazy and that's why everyone was giving out discounts, and then you know,
shaking their fist at why is my discount line so big? You need
to think about loyalty differently. It turns out many customers prefer exclusivity, they
prefer access, and you can create programs around that that drive frequency and drive
attachment without a single dollar in discount. Yeah. This is something we've done
even within our own media companies, is we've created more closed groups and now
and we have's on how many people can be in those, and I mean
they're full, They're full all the time. You know, we have people,
you know, what can we do to get in this program? You
know, because it's usually access to additional research data all that kind of stuff.
So I would agree with you. I think that that's going to be
an interesting tactic. You know, from the stance of how do you grow
you know, not only brand loyalty, because that gets here back to the
point I had earlier, which is where gen Z seems to be not very
brand, you know, consistent. Hey, what do you think about You
look at the impact on restaurants, you know, over the next couple of
years, and you think about the hot sectors and the sectors that have been
cooling off. And I'll give you an example, fast casual it's pretty much
been a hot sector for almost a decade and a half. Then you have
QSR, which really has started to change quite a bit, really positioning well
in a better way, Casual dining trying to make some move, and even
fine dining to a certain extent, traditional chain find dining probably a little bit
lackluster because we're seeing the independence kind of invating that space. What are your
thoughts in terms of the sectors that are hot right now? So here's the
good news. I believe they all have potential. And that's not just rosy
optimist. I actually believe that we have an industry that is behind in technology
and in behind in data. Yeah, and yet is a trillion dollar industry.
That's remarkable. You can't find that there are not massive, hundreds of
million dollar e commerce businesses who have a broken digital footprint and don't use data.
It literally doesn't exist. It's impossible. So we're doing a lot right
to create great experiences something that consumers want, which is great food in a
way that they don't have to make it. And now it's about adapt to
the way consumers are changing their behavior, which was accelerated by five six years
with COVID. Convenience. Convenience, convenience, and at the end of the
day, loyalty is there's only so much you can do from a marketing standpoint
if the actual experience of getting your product is not convenient and easy. Right,
Yeah, totally agree with that. You talk about tech and the restaurant
industry being some This has kind of been the knock on the restaurant industry for
a long time, is that it's slow to adopt new technologies, new methodologies.
I think COVID, of course, kind of changed the landscape of that,
but at the same time, we've had a lot of companies now starting
to regress a bit. Here's a story, you know, as an example
toast, you know, just cut like five hundred and fifty people and you
look at the tech sector as a whole do you think this is going to
be something that is going to stick around and we're going to need I mean,
because this has been I mean you look at Elon's he comes in and
he cuts ridiculous numbers on Twitter and X. You look at Mark over at
Meta, I mean, he kind of did the same thing. A lot
of repositioning in big tech. Now you look at these, you know,
more sub sector tech like what we deal with in the food service space.
Do you think there's going to be a reset here on the number of tech
companies and the number of products we're beyond the restaurant space. We are seeing
that reset for sure, as we see a market adapt from growth at all
costs to are you building a long term sustainable business? And all these tech
companies are adapting there, and you know the challenge is most of them sell
to other tech companies, so you get this kind of reinforcing cycle. The
good news is, in many ways, restaurant tech has not benefited from that
growth at all costs environment because restaurants are slow to adapt. And so I
actually think it's a healthier tech sector and one that has more growth opportunity than
more wax sliding opportunity. That said, one of the challenges speaking transparently for
this industry has been an understanding of what good technology looks like. Restaurants often
try to buy the cheapest solution, and unfortunately they don't get the results from
it, and there's a challenge there. And so I'll give you an example.
Your chicken costs go up. As a restaurant, you understand, Look,
there's inflation and this is the reality of the market, and I'm going
to have to make a decision to eat margin or pass this on to my
consumer. And there's not much I can do about it. And yet restaurants,
when they look at their technology platforms say I want more data analytics in
real time, I want to slice and dice my information more ways, and
I want my partner to be more dynamic in the ability to do that.
That's based on some very expensive engineers, some very expensive technology like snowflake,
and those costs are going up as well, and so restaurants have a decision
to make and we're trying to help make that easier by saying, can we
invest in technology prove that it drives revenue so that we get the right virtuous
cycle. Invest more in technology, get more revenue, continue to invest and
go the right direction because that's been a leap of faith. That's really scary
for restaurants. And understandably, you spend more money on the newest and greatest
point of sale, does it always mean you've driven revenue for your business?
Often? No, all right, Zach. So when when you think about
it that way. One of the things that there's been a handful of companies
that have done some acquisitions out there in terms of technology. This is an
example Aspire Brands. They acquired a tech delivery firm FROMO and there's been others
out there. You look at Chippota, who's invested in an autonomous delivery,
and a handful of others. Do you think that is something that is a
new normal for restaurant brands to actually starting to get into the tech industry.
It may be a direction we see restaurants go. These things go in cycles.
I do not believe it will be a long term status quo for the
restaurant industry. Greg Creed for Mercy of Young is on our board and he
likes to say that restaurants do best when they focus on the things they're excellent
at, creating great food, great experiences and being a marketing organization. At
the end of the day, I tend to believe that's true. Our business
and building technology for restaurants is a whole lot different, and I think specialization
is often good for driving the best outcomes. So I think we'll see some
of this there. There was another news article about Wingstoff reducing some of their
technology and building it in house. You know, they're they're deleting Olo as
an example. That's a very expensive investment and the bar is really high for
that to pay off. We'll see some brands can pull it off, but
most probably can't in my estimation. Well, and you know, we look
a lot in the sector around new innovation in in tech and while I agree
somewhat with because I have a lot of restaurant operators that kind of tell me,
you know, we're not in the tech industry, and I'm like,
well, you used to not be in the marketing industry either, but you're
you know, you're in the marketing business now, and it's it's going to
happen. I think we're going to just see so much tech invasion that it's
just it's just a matter of time before technology kind of be comes like marketing,
you know, to h to restaurant operators. Whether it's as easy that
I don't know, but you know, so when you think about that and
you look at AI self ordering loyalty systems kind of shifting into that. As
I said earlier, we had the converse now guy on and I've had SoundHound
on one of a lot of these voice AI guys, which you know is
going to change some of the customer service equation. But I just wonder will
well this new evolution, especially when you think AI but in self automated order
cycles more, you know, mobile ordering, lead processes, et cetera,
is that going to also shift I just assume it's going to shift the loyalty
business into kind of a different thing. What are your thoughts on that?
Yeah, I think you know a lot of the public company restaurant leaders don't
want to say it, but the initial implication of AI and restaurants will be
cost savings initiatives, and ultimately that's in the face of rising labor costs,
and so it's not a popular thing to say, but that's what they're actually
targeting. And I think we're undoubtedly going to see more of that when it
comes to self ordering. When it comes to automating things that are expensive back
of house in the kitchen, that's coming and it's inevitable as far as I'm
concerned. The question then becomes on front of house application of AI. You
know, the big moment in AI right now is generative AI. There's these
incredible models that open AI is producing on Write three sentences and they can make
you a video. Do I think that's going to have an implication for restaurants.
No, it's sexy. People want to talk about it, but at
the end of the day, you actually hit on it. Before restaurants are
marketing organizations, they have to be unique. No AI model is going to
make you a world class marketing organization. Where I do think it's going to
be effective is the effort to treat your guests individually. Five years ago,
send out an email to your entire list of two million people, cross your
fingers and hope they engage. Today. Thanks offers you hundreds of pre built
segments so that you can treat your customers as unique groups of people. But
it's still not one to one marketing. The vision ultimately is you can understand
very deeply what makes Paul and Zach different and send the right message at the
right time. And by the way, e commerce has been doing this for
a while, sending ten thousand variants of the same campaign based on micro segments.
I think we'll get there in a way that it's not a restaurant marketer
slicing and dicing data and manually creating campaigns that will never scale. Yeah.
So I guess I'm still skeptical a little bit on where AI will insert,
but that is one of the areas that I do think could could open up
in this. I mean, we work now with some AI tools around some
of the big data that we ingest for some of our other businesses. And
one thing that I'm continuously surprised at at one at how inaccurate it is unless
you ingest a language model in that gives it a new learning tool. And
I guess that's my question is does the does the customer at some point,
you know, kind of like the personalization aspect of trying to create that customer
relationship. There's a lot of things that Chipotle doesn't know about me, but
I could be happy to tell them about getting my order right. I could
go down a litany of things all the way down to how you deliver it
to my front door. You know. So if they had that data and
an AI model, a language model could take that from millions of customers,
multimillions of customers and then create what you're talking about, which is kind of
this custom experience that truly is almost like another person that knows me personally and
says, I know that Paul can't take a delivery before five o'clock on Wednesdays
because he's got his kids in violin class. Yep, So why would I
come early on that? Which happens all the time? Okay, So those
kind of things that and that causes me to always kind of pause for a
second. Okay, am I doing takeout tonight with Chipotle? Or am I
going to go drive over there? Now you've potentially threatened your opportunity to engage
with me, because now I'm loose in the world. I can stop at
Panera instead of Chipotle on the way. It's just right here, I'm just
going to go there. That is exactly right, and that's why it requires
more and more data points. And by the way, going back to our
should restaurants be tech companies? That's also why technology needs to exist outside the
restaurant, because you could have as much data about what your customers doing with
you, But if you aren't testing it at what customers are doing with lots
of other brands, your training set for this stuff's just not large enough.
We've sent way more campaigns out than any one of our restaurants could ever send
on their own, so we have far richer data to understand what is predictive
of future behavior than any single restaurant could. Yeah, this is going to
be interesting to see how this evolves in them, you know, in the
coming years, because I think it will take some time for a lot of
operators. When you look at the operators that are out there right now,
is there anybody that sticks out in your mind? I hate to put you
on the spot, but in terms of companies that even if it's just give
me an example of somebody that is doing it right, who would you say,
maybe one of your best customers, Who would you say this guy is
really they got there, They've they've zoned in on what the future is and
they're they're locked and loaded. Well, i'll give you. I'll use public
comps because it's probably easiest. All my insight is not quite as exclusive as
you might like. But Chipotle was ahead here, focused on what I would
consider the new definition of loyalty, what we call loyalty three point zero status,
convenience, exclusivity. They ran GUALC mode. They created access to their
case ada through digital and you couldn't get it intore. They were doing a
lot of stuff that put them way ahead, and their stock price benefited.
They were head and shoulders above the Food and Beverage index for a while.
Now is Chipotle missing on their execution right now? In my opinion, know
what's happening is others are narrowing that gap, and that's partially what's driving the
current trend. I'd say the other sorry, go ahead. That's interesting because
I think you're right. You know, we've seen it not only in sales
numbers, but also consumer sentiment, which has been ironically trending down with Chipotle
here over the last three to four months, we've seen ticks in the armor
starting to trend down. I don't know if that's the customer just getting fatigued
or what's happening, but there's some interesting things happening. I think that's the
challenge of building tech yourself. The bars constantly raising. You can't just get
ahead and then it just sustains. You have to keep pushing innovation because others
will catch you. And that's very challenging. That's a constant rat race that
you have to be on to stay ahead or that gap starts starts trending down.
And I think we're seeing that in what you described. I think that's
the burden of success here. There are other stories. I actually think Sweet
Green's loyalty strategy is excellent. Whoever's thinking and designing that strategy around challenges that
are truly personalized, so that a three time customer gets an incentive only when
they come a fourth time in a month. That is absolutely the direction we
see things going from a loyalty standpoint, and yet it's not yet driving the
results that I bet that that brand would want to see. And I think
partially my guess is that's a lot of technology that had to be built on
their own, which means innovation is burdens I think so quickly. Yeah,
I mean you guys are constantly developing, reiterating things of that nature. You
know, from a tech side, this is part of what a tech company
is, you know, it's it's constant reinvention of Okay, everything that happened
in two point zero is doesn't really matter. Three point zero is the new
version. So I get that, you know. I remember the day is
when I worked with Microsoft and we were running you know, the original you
know, launches of a lot of the OS systems, and it was that
very same thing. We almost ended up doing complete new engineer teams in many
cases, even though there might be a lead engineer that jumped over from the
existing version set that we were on, a lot of times it was a
brand new team, you know, because they're dealing with a whole new model
and they wanted fresh ideas. So I get that for sure. This is
always fun to chat with people in the in the business like this, Zach.
So it's going to be it's gonna be great. But thank you so
much for coming in on the show today. We appreciate it. Absolute pleasure,
you bet all right. So, if you guys are tuned in right
now, maybe on the audio version of this podcast. You can catch the
video version of the podcast just by going over to save dot fm. This
is our sub stack, so make sure and subscribe on to the substack.
You'll get an email you'll get in the loop of a lot of our other
podcasts that we have on there, including art which is our Accelerate Restaurant Hospitality
technology podcast. We also do h of course Restaurant hospital or excuse me,
the Restaurant Report, and then also a Fast Casual Nation. You don't want
to miss that one big one. So all you have to do again Savor
dot fm is all you have to do and you'll be there. Hey,
Zach, it's been great having you on the show. If anybody wants to
check out Thanks, what's the best way they can find you? Check us
out at thanks tha n X dot com. And I talk a lot about
this stuff on LinkedIn, which has been a good platform for us to try
to educate the industry. So look for me there and follow me there.
You got it. We'll see you later. Thanks again for stopping in.
Zach, were absolutely all right. So guys again, like I said,
you know, the first of all, thanks for all the comments on the
show. We appreciate your input and you know, sometimes we'll throw out ideas
that we're working on. One thing I want to make a represent a recommendation
to you guys, is we have a new program that is launching this year
called Brand Breakers, and it's a it's basically an award mechanism that's going to
look at the best brands and marketing technology and branding those three elements and selecting
the top ten every quarter and then at the end of the year, we'll
be doing a big award system. So check out. We'll be talking a
lot more about it. We'll have stuff on the website soon talking about brand
Breakers, But make sure and check that out when you guys get a chance,
and we'll catch you next time right here on the Restaurant Report