Restaurant C-Suite Magazine | Winter 2019

WINTER 2019

INSIDE: THE FUTURE OF FOODSERVICE SUPPLY CHAIN 2019 FOOD TRENDS Q&A: MICHAEL ATKINSON OF ORDERSCAPE RESTAURANT TRENDS OF 2019 AND MORE...

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TABLE OF CONTENTS | JAN 2019 04 Editor’s note 06 What’s hot in the foodservice supply chain in 2019 10 2019 Food trends: From fruit as center of plate, to Aussie influence and snacking from the sea 16 Voice ordering and the future of foodservice: Q&A with Michael Atkinson of Orderscape 19 Restaurant delivery, takeout in the spotlight in Q3 20 Back to fundamentals: How to improve the franchisor-franchisee relationship 25 Robots, cannabis, sour, meal kits: Restaurant trends of 2019 29 Restaurant acquisitions update for Q4

BUSINESS Executive Editor Rick Zambrano contactrick@eaterypulse.tv Assistant Editor Roshan Thomas Eatery Pulse TV Editor Sean Cooper Editorial Designer Ashley McCarty Contributors Eric Nomis and Thomas Schaffner Restaurant C-Suite Magazine is part of the Eatery Pulse Network and distributed by Eatery Pulse Media, a fastgrowing information services, consulting and content marketing firm based in the Washington, D.C. market.

This new, digital magazine was specifically created for multi-unit restaurant executives. It will deliver the most highly-meaningful news for the industry’s top leaders of today, and the visionaries of tomorrow. Today’s C-suite executives and their managers need information that is carefully selected, meaningful and delivered in a seamless, cohesive fashion. Stay updated with all our content at subscribe.eaterypulse.tv.

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Powered by Top 2019 trend: fish as a high-protein snack or meal. Photo left by Lukas Budimaier.

Top 2019 trend: fruit as meat and center of plate. Cover photo by Catia Climovich.

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Editor’s Note We’re excited to bring you the latest issue of Restaurant C-Suite Magazine.

The team at Eatery Pulse Media is committed to bringing you the latest in restaurant news, data-driven insights, and a fresh & sustainable perspective on the restaurant business. This magazine is powered by nearly two decades of experience in the food business, a seasoned content community, visionary outside experts, and a pedigree in fast casual, research and analysis.

Restaurant C-Suite’s news will appear in digital format here, best enjoyed on the ISSUU mobile app when you’re on the move, or on any supported desktop browser.

What’s on your mind? Let us know at partners@eaterypulse.net.

With 2019 prognostications on everyone’s mind, it was only fitting they’d we discuss the trends that are shaping some of the most important facets of the restaurant business. In this issue, our writers discuss the latest takes on the future of foodservice. From voice ordering, to robots, to the new breed of fast casuals, we have it in this issue.

Part of my job and what will determine my own success it to make sure we cut through the bonanza of restaurant tid bits that are out there to give you the most meaningful restaurant news—this is a good segue into our latest web broadcast, called “Eatery Pulse Streem.” We’re taking news to where you are, on social and professional channels, rather than having you wade through processorkilling pop-up ads and cookies on a myriad of websites. Streem is about broadcasting the restaurant news out there, including curated news bytes and our primary-source news articles, delivering them in visual and audio formats in five minutes or less.

In the future, you’ll be updated on top restaurant-industry-shaping news in

IN THE FUTURE, YOU’LL BE UPDATED ON TOP RESTAURANTINDUSTRY-SHAPING NEWS IN FIVE MINUTES OR LESS, BUT THAT FUTURE IS ALREADY HERE. Photo by Alexander Jones Photography.

five minutes or less, but that future is already here. We look forward to having you tune in to our recurring restaurant news broadcasts month in and month out. To get all our news on all our channels, sign up at subscribe.eaterypulse. tv. Eatery Pulse Streem is designed to cut through the noise, bringing restaurant executives, owners and their operators and professional support teams the heart of what’s important in the restaurant industry.

I wish you the best and safest holiday season. May your time spent with family and friends

RESTAURANT C-SUITE | Restaurant news that’s fresh, informed, inspired (by you) 4

be a joyous and momentous occasion for you. In the business of restaurants, 2019 can be a great year if we are equipped with the knowledge, tools and support that we need, and on that front, Eatery Pulse will make its own contributions.

Sincerely,

Rick Zambrano Executive Editor contractrick@eaterypulse.tv

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What’s hot in foodservice supply chain in 2019

By Eric Nomis

What does the future in foodservice supply chain look like? Advances in blockchain, AI and digital ordering are developments that come to mind. Technology will certainly help suppliers and distributors. At the same time, cost pressures are mounting and the economic landscape for foodservice operators has been in flux. The restaurant industry today is not what it was just a few years ago. Large restaurant chains are reporting that delivery could be a double-digit piece of the business pie, outpacing growth of on-premises dining by multiples. And robots and self-ordering kiosks will quickly become a routine sight at most-chains.

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Still, the restaurant business, which is an $800B behemoth, according to the National Restaurant Association, has shown growth in the past few quarters. According to intelligence firm and sales-tracker TDN2K, its Blackbox reporting shows signs of a potential recovery, with rolling-average sales growing 1.06 percent as of November. Foodservice operators, which are largely made up of restaurant chains, independent restaurant groups, caterers and contract operators, make up a hefty portion of the foodservice supply chain business for broadline foodservice distributors. Read: Distributors’ successes will hinge largely on the livelihood of these clients.

A major theme in the foodservice supply chain world, currently, is transparency in pricing and in sourcing, as well as a concern to reduce food waste and conserve resources.

Amazon has become a leading online source for foodservice purchases, according to an e-sourcing report from Chicago-based foodservice consultancy, Technomic, Inc. But it would be difficult for the company to take on other advantages that distributors have, including convenience, an advisory relationship with restaurants and referral programs. Yet, restaurants are willing to tap into a variety of sources for their purchases, including Amazon, club warehouses, restaurant warehouses and GPOs (Group Purchasing Organizations).

GPOs were named a hot trend in foodservice sourcing by Pentallect last year.

Online ordering, AI pricing and food waste reduction Dining Alliance is one such GPO. With regard to pricing transparency, Christina Donahue, its president, suggests innovative pricing models will work, including pricing through algorithms and “cost plus” pricing. GPOs that deploy cost plus pricing give operators the peace of mind of knowing that any price changes are the result of real commodity fluctuations, not because of the whims of a distributor,” she says. “The relationship between the distributor and the operator has been purified, in a sense, by having the GPO present.” She insists operators appreciate the presence of a GPO to

establish trust and transparency, and to avoid competitors luring customers away.

Pricing via AI instead of DSRs (Distributor Sales Representatives) is another developing trend, according to Donahue. “There are massive algorithms in place that can decide, much more accurately than a human, what the optimal pricing is at one particular time for, say, hamburgers sold to a certain type of operator.”

Online order tools are another tech trend that is becoming more pervasive. Systems that track inventory and manage menus across multiple outlets are additional tech tools that are helping multi-unit operators, says Anurag Awasthi, Director of Engineering at Riversand, a company that supplies such data management tools to large foodservice operators. Real-time management of data, which could include stock levels and allergen information in menus, can create advantages for the foodservice operators that use them.

FoodBAM, a sister company of Dining Alliance, provides an online ordering platform for operators. “It’s a single online portal that allows operators to compare prices for items across multiple distributors, and allows them to order and keep track of inventory in one place,” says Dining Alliance’s Donahue.

“Working with a third party provider ensures transparency for the operator and lets distributors compete on a level playing field.”

Foodservice distributors are also developing their own proprietary systems.

As consumers look to manufacturers, suppliers and restaurants to reduce food waste, supply chain stakeholders are listening.

According to the 2018 Sustainability Report from the National Restaurant Association, more than half of consumers say that food waste reduction is important when choosing a restaurant and 22 percent of restaurants are donating leftover food. Food waste as a restaurant industry topic and challenge is coming to the forefront.

“Data collected in any MDM/PIM system can help distributors estimate the amount of food to be supplied to an operator, maintain their RESTAURANT C-SUITE 7

stock levels and reduce the shelf life of food to be sold,” says Awasthi. “It also helps them to stock the right amount of food thereby reducing food wastage.”

Blockchain, e-sourcing, data sharing Blockchain technology is one of the hottest trends in foodservice supply chain, allowing distributed tracking systems to help ensure food safety, integrity and bring additional confidence in sourcing and validate provenance. When healthy-eating fast-casual Sweetgreen tapped $200M in funding in November, it said those additional resources would be used to make advances in using blockchain technology. As an example, blockchain can help track coffee beans from the time they are harvested to the time they enter the final stage of food distribution.

Awasthi notes that the advantages of blockchain extend into food safety, allowing hyper-focused tracking of ingredients across the supply chain, and allowing for faster recall if there is any contamination. This helps supply chain members identify raw ingredients in the face of widespread bacterial or viral crop infections, greatly aiding in the pinpointing of products during a recall,” he adds.

Large restaurant chains have direct access to suppliers and can build a cost plus pricing structure that fits their needs, while sourcing food product for integration into their distribution system. Smaller chains, however, mainly rely on sourcing product from the existing supply chain of a distributor.

E-sourcing has become a top trend for independent foodservice operators and smaller chains, and has propelled Amazon to be a contender in the sourcing of foodservice supplies and food product. One reason that operators have embraced e-sourcing is the ability to gain additional visibility on pricing from food & supplies and make comparisons for themselves. Still, others see it as a way to better negotiate with their distributors.

Unfortunately, data sharing by distributors is only a developing philosophy in the RESTAURANT C-SUITE | Restaurant news that’s fresh, informed, inspired (by you) 8

Foodservice distributors recognize delivery as an important trend for restaurants.

Photo by US Foods.

foodservice supply chain world. GPOs typically can improve on this dynamic: The distributor relationship, pricing transparency, data sharing and visibility on manufacturer rebate incentives that many restaurant operators seek can be enhanced.

Donahue says that distributors have access to large amounts of data and should be sharing that information with operators. When a GPO, such as Dining Alliance, is involved, data sharing is a given. “We encourage our distributor partners to work with our data and theirs to gain more insight on pricing and trends, and to share that information with operators to help them become more competitive,” she says.

The restaurant industry is changing rapidly as customers continue to demand more ethical sourcing, less food waste and additional conveniences, including restaurant delivery.

The top tech trends in the foodservice supply chain can help operators navigate these consumer-led changes and today’s economic challenges. AI, algorithms, blockchain, online ordering platforms, PIM and MDM systems are notable trends that may help foodservice distributors and operators work together with greater success.

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The food trends of 2019 From fruit as meat, to Aussie influence, vegan cheese choices, and snacking from the sea

By Rick Zambrano

Fish can be positioned as a high-protein meal, including in soups and stews, in 2019. Photo by Elli O.

Food innovation firm, CCD Helmsman, released its list of nine food trends for 2019. Kara Nielsen, vice president, Trends & Marketing, for CCD Helmsman is one of the most respected trendologists in the country and is part of the team that dove into what’s emerging and trending in the food industry.

The trends (see poster on page 12) are broken down into three categories: on the horizon, coming into view, and in view. Among those on CCD Helmsman’s list of food trends are Aussie influence, meet fruit meat, mushroom RX, abra-cassava, coffee cascara brews, nutrition of the sea, the veg spread, plant cheese choices, and egg power. Restaurant RESTAURANT C-SUITE | Restaurant news that’s fresh, informed, inspired (by you) 10

C-Suite dove into a few of these trends that have a high-impact on foodservice operators and restaurants with Nielsen.

Fruit as meat More individuals are consuming less meat. A report from GlobalData, highlighted by Michael Pellman Rowland in Forbes, says 70 percent of the world’s population is reducing meat consumption or taking meat out of its diet altogether. It’s no surprise that fruit is ‘coming into view’ as a good meat alternative or a way to reduce meat consumption. Jackfruit has been a darling plant-based alternative

to meat. Jackfruit, before it is mature, has a flaky, meaty texture that lends itself well in packaged products. Now, a whole new group of accessible fruits could be joining jackfruit at the center of the plate.

Consumers are starting to have fun with grilling and smoking fruit to replace meat.

Is watermelon the new ham? Nielsen says smoked watermelon can be a fun replacement for this pork product. Roasting strawberries and other fruits give them a caramelized texture. Restaurants that are keen on giving consumers what they want can adopt fruits for greater use in their meals, and make them the center of the plate altogether, including in appetizers, salads and entrées. This gives operators an opportunity to reduce costs, too.

With 14 percent of consumers already using plant-based alternatives at home, according to research firm NPD—and 86 percent of them not identifying as vegan or vegetarian—it’s a good time now to make fruit the new meat, instead of just treating it as a supporting cast member.

Coffee cascara brews Coffee fruit teas are infusions of upcycled, dried coffee cherry husks, or “cascaras”.

Coffee cascara drinks come from the coffee house culture, notes Nielsen, and have been used as teas in refreshing beverages ideal for the afternoons. Traditionally, coffee cascara drinks have been on the lighter side when it comes to caffeine and have been mostly adopted by beverage entrepreneurs in the consumer packaged goods (CPG) space.

From Australia, Caskai is one such beverage, which is made with “sun-dried cascara from the highlands of Nicaragua and Panama,” according to its website. Caskai started selling in the United States in 2017, notes Coffee Daily News. Carbonation and citric acid are also added by the manufacturer to make Caskai a nice pick-me-up beverage.

Nielsen has seen many products that use coffee ingredients, including coffee flour, come and go. Perhaps, they were ahead of

What else can you do with it (fish), and have the nutrition in it?

Kara Nielsen,

vice president, Trends & Marketing at CCD Helmsman RESTAURANT C-SUITE 11

their time, she says. Now, there’s definitely a rising interest in coffee, whether in beer or other CPG products. Coffee cascara brews are timely along this developing trendline in 2019.

R&D teams can try cascara brews, which resemble black tea, in housemade beverages.

A fast-casual brand would be well-served by adding a coffee cascara brew beverage to its selections. Restaurant chains have been making in-house beverages a staple of their offerings, and rotating beverages seasonally to drive interest.

Fast-food and fast-casual restaurant chains have been setting themselves apart with unique beverage offerings that identify with their brand. McAlister’s Deli carries a sweet tea, which has a unique, southern heritage.

Flower Child, a made-from-scratch, farm-fresh menu concept, carries refreshing lemonades and kombucha. Fast-casual chains, including Freshii and Sweetgreen, carry beverages

2019 Food Trends That Matter

with varying strategies, including functional messaging and drinks touting “in-house prepared” claims that fit well with their brand and can be stocked for the lunch rush or quick afternoon visits, or served as fountain beverages. Sweetgreen, for example, carries Kale Gingerade, Chai Iced Tea, Cucumber Ginger Lime Fresca, Jasmine Green Iced Tea, and Lemon Fresca. Freshii carries functional beverages, like vitamin water.

Quick-service operators can stock cascara beverages in grab-and-go spaces to create a highly-differentiated beverage lineup, and also offer them fountain-style. Coffee cascara drinks can also be incorporated into complex, alcoholic and non-alcoholic beverages, suggests Nielsen. Non-alcoholic beverages combining coffee cascara brews with fruit juice, tea, sparkling water, and other such combinations are prime for adding to a restaurant beverage portfolio. These innovative

CCD Helmsman, the combined agency of CCD Innovation and The Helmsman Group, presents its 2019 Food Trends That Matter, our outlook on what will be attracting eaters’ attention and influencing new product innovation in 2019. These nine trends matter because they reflect 2019’s main food values, grouped into three areas—Culinary Culture, The Source and Nutrition—and reveal what foods, beverages and ingredients are growing to impact our foodscape. In each area, we mapped the trends by maturity, ranging from those On the Horizon to those close In View to help you see ahead of the curve.

On the Horizon

Coming Into View

In View

Aussie Influence

Abra-Cassava

The Veg Spread

Australia’s love of real, delicious food and relaxed culinary culture has already trickled across our borders with more to happily come in 2019.

Meet the South American tuber being magically transformed into glutenfree goods, Brazilian foods and crunchy Southeast Asian chips.

>> monika grabkowska/unsplash

>> sietefoods.com

Going beyond the dip, brightly colored and bold flavored smears and swoops of vegetable spreads are brightening sandwiches, salads and meals. >> lacy williams /unsplash

Meet “Fruit Meat” Fruits are joining vegetables as creative meat substitutes, being smoked, grilled, shredded and seasoned for snacks, sandwiches and even (tomato!) sushi.

Coffee Cascara Brews

Plant Cheese Choices

Coffee fruit tea (yep, infusions of upcycled dried coffee cherry husks) continues to innovate refreshing, functional and alcoholic beverages.

The ever-growing number of plantbased cheeses regale conscientious eaters with milk-free choices that are big on flavor and style.

>> migle/flickr

>> miyokoskitchen.com

Nutrition of the Sea

Egg Power

>> oceanhuggerfoods.com

Mushroom Rx Mushrooms add a functional boost to new beverages, crunchy snacks, bars and meat blends, extending nutritional support to favorite everyday foods. >> monterey mushrooms

Access to nutritious, sustainable seafood gets easier with adventurous seafood snacks and new convenience meals, some even fish-free. >> williwawfoods.com

High-protein, low-carb eggs venture beyond breakfast in handy snack chips and bars, snack packs with seasonings, and creative warmed dishes. >> bantambagels.com

Prepared by Kara Nielsen, CCD Helmsman Vice President, Trends & Marketing | kara@ccdhelmsman.com | www.ccdhelmsman.com

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combinations can be presented as functional “refresher” beverages to energize sales in 2019.

Nutrition of the sea: fish as a high-protein, low-carb meal or snack Research from CCD Helmsman points to another important trend: fish—particularly sustainable fish—as a high-protein meal option. While some experts are looking to seaweed and sea plants as an opportunity in 2019, Nielsen suggests fish is a great high-protein, low-carb meal or snack that is coming into view in the middle stage of trend evolution in the CCD Helmsman barometer.

Salmon Cracklet from Williwaw Foods and Irvins Salted Egg Fish Skins are just two examples. These snacks in the CPG category hint at what is possible as entrepreneurs turn their eyes on fish.

“What else can you do with it (fish), and have the nutrition in it?” Nielsen asks. For restaurants with seafood programs, she says fish skin can be prepared “chicharrón-style.”

Restaurateurs can also look at seafood pâté as another option or continue adding fish to soups and stews—a cioppino, which is an Italian-American fish stew originating in San Francisco, is a great option for this. Use fish in salads and don’t just tap salmon. Leverage other sustainable fish options, including pollock, from the family of cod fish. Nielsen says restaurants should move away from limiting fish to fried and battered applications.

Meat pies could be trending in 2019 thanks to Aussie influence.

Photo by Australian Bakery Cafe.

Plant cheese choices For the vegan set, snack and meal options in the grocery aisle are growing. Restaurants must also strive to increase options along this continuum. While cashew cheese and other plant cheeses are fully in view, these options are not as numerous currently within foodservice. Companies like Daiya and Miyoko’s are producing tasty vegan products that can also be applicable inside restaurants.

The smooth, creamy taste of Daiya’s Plain Cream Cheeze Style Spread is a vegan option that may even have non-vegans skipping the real thing. Miyoko’s cashew cheese and butter products came into the spotlight at the MetroCooking DC Food show in Washington, D.C. in December. Two fan favorites, the vegan cheese wheel and vegan butter, which is a relatively new product, are made with organic cashews.

The best applicability for these plantbased cheeses is the breakfast category.

Restaurants can add vegan spreads to accompany bagels and increase the number of dairy-free options at coffee and bagel stations. In thinking about and assessing their own customers, restaurant chains of all sizes should ask themselves if increasing vegan cheese and spreads are good for their operators and will help grow their business.

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Miyoko’s offers tasty cashew cheese choices. Photo by Miyoko’s.

More 2019 trends Australians have already given us avocado toast, but the strongest Aussie influences have been in the coffee space, including the flat white latte. In the food trend context, Aussie influence on U.S. food evokes “feelgood” food sentiment if one were to base it on the foods already imported here. Think chill and relaxed. Expect more Aussie influence, which is very subtle now, but becoming increasingly pervasive, particularly since there is a growing Australian population on the West Coast. Look at meat pies breaking through and also spirulina lattes. Restaurant chains can draw inspiration and menu items from this budding trend, particularly as they relate to the java space.

Americans are also increasingly loving their veggie spreads, which is made possible by RESTAURANT C-SUITE | Restaurant news that’s fresh, informed, inspired (by you) 14

increased accessibility to Mediterranean foods. Veggie spreads and veggie bowls are good for experimentation within R&D at restaurant chains. Smeared dips and spreads that add appeal to vegetarian selections are in play. Going beyond the dip, “brightly-colored and bold flavored vegetable smears and swoops are brightening sandwiches, salads and meals,” says CCD Helmsman. Colors and playful combinations are bringing a new era of veggie spreads fully into view.

From fruit as meat and Aussie influence to high-protein fish applications, coffee cascara brews, colorful veggie spreads, and plant cheese choices, these 2019 food trends draw inspiration from trendlines already developing and hold a world of promise for restaurant operations that choose to experiment with and adopt them.

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Q&A Voice ordering and the future of foodservice: Q&A with Michael Atkinson of Orderscape

The process of ordering takeout & delivery isn’t something that many consumers would necessarily dissect as part of their dining experience. In fact, most are so used to just picking up the phone or opening a computer to place an order that they wouldn’t even think there could be a better, more efficient way to get food. After all, calling in ahead of time and placing an order online have been the two most commons methods of ordering out for years.

However, with the advent of smartphones and digital assistants in our constantly-connected social environment, a new method of ordering food is on the horizon.

In an interview with Michael Atkinson, the founder & CEO of Orderscape, we learned more about the Orderscape platform, which essentially connects restaurants and their menus with consumers via smartphone voice assistants like Siri, Cortana, Alexa and Google, their home digital assistant counterparts and through search engines. Orderscape makes voice search more intuitive, and facilitates voice food ordering. We discussed how this new technology will change the food landscape in the coming years.

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Restaurant C-Suite: Where are we going with voice ordering in three to five years from now?

Michael Atkinson: Voice ordering is already here today, but only with a few menus being voice ready. Restaurants need to accept the reality that voice is a new sales and customer engagement channel with multiple gateways (voice input) that millions of consumers already utilize.

My crystal ball is not three to five years from now but rather 18-24 months from now. That’s the inflection point where we will see rapid user adoption of voice search, and as a result, voice ordering (conversational commerce), from both stable devices like Alexa and Google Home, and on mobile devices—smartphones—with apps that are already installed on these devices.

There are four elements required to facilitate a food order in voice channel: (1) Actionable, voiceenabled menus, (2) Food-Centric taxonomy, (3) Pipes, and (4) Gateways.

1. Menus are messy data without any real structure or standard. Think of the Interactive Advertising Bureau and how they created a standard for banner ads for the web. Think of retail or grocery with UPC’s. Menus don’t have that. Until there is a unified standard for constructing a menu (ingredient matrices) and a universal way to access updated menus dynamically (and hopefully with automation), this will be a very difficult part of the puzzle to solve. What works in a traditional text ordering UX (think Grubhub) doesn’t necessarily translate to voice UI (VUI) to enable a good voice user experience (VUX). Voice needs a food first construct, meaning because we are consumers, 70 percent and more of the time anyway, we think of what we want to eat before where we want to go eat it, so in the technology world, we have to reverse the ordering convention.

2. Orderscape had to create a food-centric taxonomy that will work in a voice environment, from scratch. Then, connect this (points 1 and 2) to points 3 and 4 above. Not trivial.

3. The pipes are required to send the order from us at Orderscape to the restaurant in a way that is familiar. So, it’s best if we can integrate with their platforms (Olo, Monkey Media, etc...) which are integrated directly with their POS. Or, we can send data to a tablet, KDS, printer, or even an SMS if they are still living in the last century.

4. Gateways are voice inputs, like Alexa, Google Assistant/Home, Siri, Cortana, etc. Almost everyone has one on their smartphone which makes them highly useful.

RCS: Why is it important for restaurants to implement voice search on their own platforms when there is so much advancing on devices and search engines already being used by the consumer?

MA: 1. Restaurants don’t have a platform, they leverage SaaS. In my world, food ordering platforms like Olo don’t offer voice unless they partner with a a voice tech software company like Orderscape. Portals, even Grubhub, don’t have full-menu ordering like Orderscape.

2. Restaurants don’t need a custom, branded “vanity” voice ordering feature unless they want one. But, they should want one to be able to enable a customer to just say “Hey Google, open Chili’s”, or Alexa, open Chili’s”.

3. Voice gateways don’t offer food ordering.

They provide the device/gateway.Think of Alexa and Google Home like a smartphone.

They offer several “house” apps for checking weather, traffic, music, measuring teaspoons with cups, etc. These are like iPhone’s calendar, weather, book, stocks, etc. But if you want banking,shopping, or games, you have to download and enable a different set of “apps”.

The same applies with gateways. You have to design and develop and publish these skills/ actions before consumers can find/use them.

So, a restaurant must (a) voice-enable their menu for voice assistant use (restaurant discovery and menu item search), (b) design and develop a menu skill (non-trivial), (c) publish this skill/action, (d) connect to a food taxonomy, (e) connect to a payment gateway, and (f) connect to either a POS,or a platform or portal and facilitate the transaction in milliseconds.

Restaurants don’t do this.

For a restaurant to leverage this amazing new channel, they need a voice technology company that understands the restaurant industry and has the technical capability to originate and facilitate a voice order.

RCS: How are you implementing voice search directly into the tech platforms of restaurant chains?

MA: We need two things beyond a positive attitude and a willingness to suspend disbelief that voice is a real thing today, not a moon shot five years from now. We need the “keys” to their menus. We get these by permission, from the platforms, or even the portals. We need these digital menu keys to be able to voice-enable the menu and menu items. Then, we need access to a pipe; a platform/portal/POS to send orders to.

would be much more preferable, right? Even better: “Would you like to place an order to go?”

Or, more assertively, “May I take your order?”

Seems like food-centric search restaurant discovery and conversational commerce would be important. It’s just a matter of time before this becomes the common way of thinking in the business world.

RCS: Please talk about digital ordering companies, like Olo, and how you are working with these types of platforms/providers.

RCS: Robotics in restaurants is a top 2019 trend according to food consultancy Baum + Whiteman.

What is the intersection of your technology and robotics entering restaurants?

MA: Olo, Monkey, Tillster, Zuppler, Chow Now, NovaDine, Onosys, et. al., are B2B SaaS platforms. If we integrate with them, we can voice-enable all of their hosted restaurant menus. But, they don’t allow that unless the brands give us permission to do that with their public data. No secrets here. They are just menus, and if I were a brand, I would want my menus exposed in as many places as possible.

This is what Yext and Single Platform do with their listing data; address, hours, etc.

MA: Restaurant automation has been at the intersection of my personal and professional investment thesis for a decade now. Automation is everything—customer acquisition, sales, marketing, cost management, customer engagement, and data. IT’s the heartbeat of the restaurant industry today. It’s the center of the plate, if you will.

Try this yourself: Ask Alexa where the closest Del Taco is, or Chili’s, or Firehouse Subs. If they are listed with Yext, or with Amazon, she will recite some basic info, like “The closest Del taco to you is 1.6 miles away, they are open…”

Then ask Alexa “What’s on Del Taco or Chili’s, or Firehouse Subs menu. She will say “hmmm, I’m not sure.” That’s a problem, right? Well, we can fix that and are trying to do that now. But first, brands have to understand that by 2020, a year from now, over 50 percent of all voice search will need this information, else they will be missing a huge opportunity.

In my opinion, FOH (front-of-house) robotics will, for the foreseeable future, be entertainment.

Making cocktails and coffee, sure, why not. But the real opportunity is BOH (back-of-house) and not necessarily stationary robots, like Flippy.

The real opportunity, I think, is fully-autonomous restaurants with single product offerings; like 100 square-foot food-maker robot restaurants making bespoke pizza, burgers, sandwiches, smoothies, lobster corn dogs, grilled cheese sandwiches, sushi, burritos, etc. Better ingredients, lower prices, 24/7 availability and conveniently located—absolutely by 2020 this can be possible.

Think of the missed opportunity here for a commerce event. If someone asked where the closest Chili’s is and then asked what’s on the menu, one would think having Alexa respond with what’s the order versus a general answer

Voice ordering is a no-brainer for kiosk robot restaurants. We did informal exit surveys in London asking over 100 McDonald’s customers if voice ordering would be easier than a Kiosk touch screen. A staggering 100 percent said yes.

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Restaurant off-premises business in the spotlight Delivery and takeout sales in Q3 Dine Brands Off-premises sales grew 37% in Q3 vs. prior year Currently, off-premises sales are 7% of sales

McDonald’s Delivery orders average 1.5 - 2.0 times average in-store orders Restaurant delivery is already 10% of sales in UK, France and Australia

Bloomin’ Brands Management says off-premises could amount to 25% of sales Currently, off-premises sales are about 15% of sales

Dunkin’ Average delivery check is 50% higher than otherwise The chain is focused on the catering aspect of delivery RESTAURANT C-SUITE 19

Back to franchising fundamentals How to improve the franchisor-franchisee relationship

By Eric Nomis

Jack in the Box historic store picture. Photo by Jack in the Box.

The restaurant franchising relationship should be a mutually-beneficial endeavor given so many potential rewards and benefits.

The franchisor has created a brand that can be easily replicated and managed, and brings the resources to market it across many geographies. The franchisee is able to realize a dream, invest in a brand that is already established, and get a leg up on operating a restaurant, especially compared to starting a concept and business from scratch. This RESTAURANT C-SUITE | Restaurant news that’s fresh, informed, inspired (by you) 20

hasn’t appeared to be the case, most recently, with big-name chains contending with franchisee revolts and lawsuits and being accused of neglect and poor management.

These disputes are being aired out in the public domain for customers and fellow restaurateurs alike to witness.

Jack in the Box and Tim Hortons are two big quick-service chains facing the ire of franchisees, according to reports by QSR

Magazine. Aiming to change the structure of leases across its system and assigning leases to a subsidiary, Jack in the Box has been dealt a blow by franchisees with a lawsuit challenging the move. Franchisees are concerned the reassignment of leases to a non-franchisor subsidiary could threaten their leases in which they currently sublease. Furthermore, franchisees are seeking transparency as to how rent payments are being used. Tim Hortons franchisees challenged Restaurant Brands International, the chain’s parent, in its use of advertising funds—namely how those funds are distributed and the extent to which the franchisor could raise the allocations they charge franchisees, while prohibiting them from raising prices to pay for them.

Restaurant franchisees must have confidence in brand leadership and their vision,” says Paul Segreto, president of Franchise Success Group and Franchise Foundry. Very public restaurant franchisor-franchisee disputes indicate there is a breakdown of communication as nearly all decisions are made top-down by restaurant franchisors. Communication and participation with franchisees is key. “We must have back and forth communication of what is going on in the trenches,” says Samuel Stanovich, president, Stanovich Hospitality Inc and area representative, Northern Illinois Northwest Indiana Firehouse Subs. “Although we are all selling the same menu, the same look and feel, challenges and opportunities are different in each economic market. Only through communication can we stay on top of the action and be forward thinking.”

Communication, integration and participation Stanovich values the Firehouse Subs system, in which franchisees are a critical voice in operational processes and where communication lines are kept open. “We

recently rolled out several operational changes that were presented from franchisees, “ he says.

“In addition, the idea of a donation for our Pickle Buckets, instead of throwing them away, for the Firehouse Subs Public Safety Foundation, was an idea generated and communicated from the field.”

Communication between franchisors and franchisees may be undervalued in today’s fastmoving restaurant deal market, especially with heightened pressure from activists. It certainly could be useful when dealing with crises, whether from food safety or due to tensions.

Many are all too familiar with the Papa John’s chain dispute with its founder, John Schnatter, who it displaced as the spokesperson after several untimely PR debacles. Schnatter has claimed Papa John’s executives have displayed overreach and usurpation of control. Each has sued the other and franchisees have been left on the sidelines, feeling the negative impact of bad press. Stores in urban markets, notes Forbes, have seen steep declines. As a Result, Papa John’s executives pledged $15M in reduced royalty fees in Q3 and Q4 of 2018.

Segreto says that franchisees should seek to work with franchisors that have a crisis plan and leadership succession plan in place. “Understand the organization you are building a relationship with and the boundaries of creativity,” says Stanovich. “Depending on your style, you may or may not mesh with certain brands.” Both Segreto and Stanovich believe bad relationships can be traced back to the origin of the franchise agreement. Under such a perspective, questions that now might reasonably be contemplated include: “Did all Papa John’s franchisees that were impacted by the current crisis fully understand the brand and the extent to which its founder controlled communications and impacted marketing?” and “Were they familiar with some of his belief systems?” Stanovich also recommends that franchisees review all

Jack in the Box is facing a challenge to lease reassignments by its franchisees. Photo by Jack in the Box.

franchising agreements carefully, even though they are often quite lengthy.

Going back to the start Consolidation has played a big factor in many disputes in which franchisors are quickly moving to extract more profit from the franchising relationship in response to investors or due to mergers and acquisitions.

Fast-paced deals and actions may leave restaurant franchisees spinning their heads.

Franchisee organizations are responding and displaying a heightened amount of activism in response, leading to many public disputes and calls for more transparency. “Investigate RESTAURANT C-SUITE | Restaurant news that’s fresh, informed, inspired (by you) 22

how the communication channels work with the franchisor and what are the protocols,” Stanovich adds.

Restaurant franchisees may not be able to stop large franchisors from acting in their own best interest at the expense of franchisees, but they can find ones that are more in line with what they are looking for in a restaurant system and brand.

Segreto says, “Due diligence should focus on speaking with current franchisees—Are they happy? Would they sign again?—and also contacting former franchisees. Why did they leave the system? What is the one thing they wish they knew before signing on the dotted line?”

He says multi-unit franchisees can also be a big resource. Prospective franchisees should ask these multi-unit operators what made them stay with the franchisor and what the deciding factor was in choosing to open a second and third location.

Franchisees should be keen on searching news stories, says Segreto, in addition to sites that market the franchisee or franchising directories. News stories can offer up both good and bad news about the franchisor. As for franchisors, Segreto offers three key rules:

Coming Soon MARCH Dissecting the 2019 forecast

1. Develop a sales system that acts as a barometer to how well the franchisee can fit into the restaurant’s franchise system

Executive profiles Consumer preferences

2. Find franchisees that believe in delivering memorable experiences to customers

Crafting culture Restaurant tech update

3. Turn the tables, and offer a positive experience to franchisees—deliver open and transparent communications at all times Positively memorable experiences are not just essential for the customer relationship.

Strive to make the franchise relationship positively memorable at all times, as well.�

When prospecting a franchise system, franchisees can be more proactive and get a clearer picture of the franchise system, while reactively, they can demand more communication and participation in decision making. This can be done when expressing their voice and ideas with the operational and training leaders of the franchisor and through their franchisee associations. Franchisors in turn, can develop a better system, and one that is not combative by improving the matchmaking process and committing to principles of openness and transparency.

MAY Spring trends blossom R&D profiles Beverage trends Cocktail infusions Veggie immersions

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RESTAURANT C-SUITE | Restaurant news that’s fresh, informed, inspired (by you) 24

What restaurants can expect in 2019 Robots, cannabis, sour flavors, meal kits, polished fast casual

By Thomas Schaffner

Shrimp and Grits Chiko-style. Photo by Chiko, Washington, D.C..

Baum + Whiteman’s 2019 trend report highlights 13 trends that promise to reshape the market of the immediate future. While some of these trends are continuations of factors that are already playing a large role in the contemporary hospitality market and others are more speculative, they each represent larger potential disruptions to the current food and beverage environment.

One such emerging trend is increased automation in restaurants and hotels that,

while still highly speculative, will have a huge effect on way that food and beverages are produced, ordered, and served. Baum + Whiteman specifically name automated pizza and burger production machines, as well as a robotic barista in San Francisco, but it is important to understand, however, that these are still rather gimmicky one-offs. As of 2018, business have yet to scale up these prototypes to a level where they could be viable replacements for manual food production within large-scale restaurant operations.

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Eatsa, a vegetarian restaurant that had no front-of-house staff—instead opting for an environment without any direct customer to staff interactions—closed its two Washington D.C. locations after failing to attract expected interest. This leads to an important question: What effect will a transition to more complete automation have on both the labor and consumer markets? Would consumers be willing to order on a tablet rather than talk to a waiter in an upscale eatery? Would customers long for the “old-fashioned” charm of handprepared burgers and pizza?

These questions will have to be answered in time. Despite some early hiccups, automated food/drink perpetration and service is not expected to decrease presence anytime soon.

While we wait for the bots, fast-casual dining has looked to other ways to stay profitable. A new niche of moderately-priced, high-quality fast-delivered food has developed over the last decade in upscale fast casual. These eateries have exchanged the tablecloths, flowers, reservations, and waiters for counter service and take-out, without deviating from the quality (or price) that you would expect at an average sit-down restaurant.

By eliminating most of the service elements, establishments like these make the dining experience entirely food-centric. And there are notable examples called out by Baum + Whiteman. In Washington, D.C., there is Chiko, the popular Chinese and Korean-inspired restaurant, with tasting menu reservations that go nearly as fast as they become available, and which opened a second outpost on the West Coast in Encinitas, Calif.

In Oakland, AlaMar Kitchen & Bar is serving up Cajun-style dishes, and Kish-Kash, a posh, designer-styled fast casual in New York’s West Village, offers Mediterranean-style RESTAURANT C-SUITE | Restaurant news that’s fresh, informed, inspired (by you) 26

offerings in a quickservice setting.

The Baum + Whiteman report does raise the prospect of an “oversaturation” of the larger fast-casual category, but it is important to consider the economic reasons that we are seeing so many eateries like this. Having a smaller dining area and less supporting service staff drastically lowers rent and labor costs, which are two of the largest expenditures that most restaurants have. With the recent real estate crunch in many cities, there is even more incentive for restaurants to cut down on floor space and ditch the hosts and bussers. And adding booze to the mix does offer another compelling reason upscale fast casual can compete against casual dining and polished casual restaurants.

Asian flavors are making a dazzling debut on the American market. Rus Uz, an upscale Uzbek restaurant, has become a local favorite in Arlington, Va. Rus Uz also operates a market where customers can select and sample imported products. The menu features Russian salads and, of course, plov, a hearty rice, meat, and vegetable mix which is the national dish of Uzbekistan.

While these restaurants offer dishes unfamiliar to most Americans, we are also seeing an expansion and an upscaling of foreign cuisine that is more familiar to the American palette.

American Chinese food is no longer just greasy take-out. Hot-pots, dry-pots, and even crepe-like flatbreads called bings offer a more diverse take on favorite American cuisines.

With respect to specific flavors, the Baum + Whitman report argues that, if last decade was the decade of bitter flavors, then the next ten years will be defined by sour flavors. The rising popularity of Filipino, Korean, and Persian cuisine has led to an increasing abundance of vinegar-based sauces, and other strong sour flavors, like rhubarb, in American cuisine.

Upscale fast-casual concepts elevate popular foods with chef-inspired interpretations (Orange Chicken). Photo by Chiko.

Another ingredient that will cement itself in the food and beverage scene is cannabis (Eatery Pulse News DC, Winter 2018). As nationwide cannabis legalization moves forward, the active ingredient, CBD, is slated to appear in beers and baked goods. Nonetheless, much still depends on the response from the FDA. The rising price of restaurants compared to home cooking signals a potential decline in the traffic that traditional restaurants receive.

In 2018, food prices at restaurants rose by 2.6 percent, compared to only 0.5 percent at grocery stores. This economic incentive to cook at home has also led to a boom in the meal kit business, but again, here we also see an oversaturation of the market, perhaps even a bubble. There are over 150 meal kit

subscriptions, each with their own style, that are vying for a market where keeping customers beyond the initial subscription period is critical and extremely difficult. 2019 promises to be a make or break period for this novel and innovative industry. If a few can emerge, in their own niche, then a stable market might be the result. Otherwise, the “giants� of the market, that is, Blue Apron and HelloFresh, might leave no room for competition.

As meal kits show, the monopoly that traditional restaurants hold over the dining experience is fading fast. Increasingly, nonfood businesses are creating cafes or other food and beverage services. CafĂŠs at banks, RESTAURANT C-SUITE 27

restaurants, clothing stores like Neiman Marcus, and even barbershop bars, are some immediately apparent examples of this phenomenon. The spacious Capital One Café across from the Gallery Place/Chinatown metro stop in downtown D.C. offers a combination that may have seemed absurd just a few years ago. The branch is a great monument of “capitalist realism”—it removes all of the illusory wall art of Starbucks and instead offers ATMs and loans alongside pain au chocolate and lattes. Capital and consumption can be tied together, and Capital One has proved that there is no reason for either to be exclusive to a singular enterprise.

Finally, on the most speculative end of the predicted trends is the promise of “synthetic” or “motherless” meat. This is meat grown from the cells of animals without slaughtering them. Although still highly experimental, if correctly operationalized, this tech promises to change the market permanently and profoundly.

This technology still seems a little far off for 2019, but these trends indicate that we are experiencing a massive flux in the way we eat. Tech giants are shaping distribution, increased automation is changing the way we make food, and concerns about time, money and health are all contributing to structural changes throughout the market.

It’s still not clear which restaurants and providers are equipped to adapt and survive through a truly seismic food shift.

Top Photo: Capital One Café. Photo by Capital One. Bottom Photo: CBD-infused cuisine continues to be top, emerging opportunity for food manufacturers and restaurants. Photo by Abigail Lynn.

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2018 NOTABLE ACQUISITIONS Q1

• Elysium Management acquired Huddle House from Sentinel Capital in January.

• Butterfly Equity acquired fast-casual Modern Market in February.

• Barington/Hilco Acquisition Corp agreed to acquire Papa Gino’s and D’Angelo’s Sandwich Shops in February.

• TriSpan acquired Rosa’s Mexicano in March and revamped management team.

• In February, Inspire Brands, a Roark Capital whollyowned subsidiary, is created after Arby’s finalizes acquisition of Buffalo Wild Wings.

• Spice Private Equity acquired Bravo Brio Restaurant Group in March.

Q2

• Rhône Capital completed acquisition of Fogo de Chão in April.

• Earl Enterprises acquired Bertucci’s out of bankruptcy in June.

• High Bluff Capital acquired QZE (Quizno’s LLC) in June.

• Mlllstone Capital Advisors acquired Native Foods Cafe in June.

• DFRG completes acquisition of Barteca Restaurant Group for $325M.

Sources: Unless indicated otherwise, Duff & Phelps Q3 Restaurant Quarterly Update, Eatery Pulse Media and public sources.

Q3

• Oprah invested in True Food Kitchen in July.

• High Bluff Capital acquired Taco Del Mar in July.

• Roark Capital, through its Focus Brands subsidiary, finalized acquisition of Jamba Juice.

• Elite Restaurant Group acquired Patxi’s Pizza in September.

• MTY acquired Sweetfrog in September for $28.9M + additional debt assumption and withheld reserves.

• Carlisle Group sold LYFE Kitchen to L3 in September.

• Del Frisco’s Restaurant Group sold Sullivan’s Steakhouse in September for approximately $32M to Romano’s Macaroni Grill.

Q4

• Elite Restaurant Group bids to take Noon Mediterranean out of bankruptcy in October (Restaurant Business) • Quick-service chicken chain Bojangles’ sold to Durational Capital and The Jordan Company.

• Cava Group finalized its acquisition of Zoe’s Kitchen for $300M. • Sonic’s $2.3B acquisition by Inspired Brands, a whollyowned Roark Capital subsidiary, became final.

• Fat Brands acquired the Yalla Mediterranean chain for an undisclosed amount. (Restaurant Business) • Papa John’s shops for buyers. (Restaurant Business) • Jack in the Box confirms it is reviewing strategic alternatives, including putting itself up for sale.