Latest / Choppin’ It Up by Bloomberg Intelligence / 858 Partners' George on SaaS, AI and Robotics

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858 Partners' George on SaaS, AI and Robotics · Choppin’ It Up by Bloomberg Intelligence

0:13
Speaker 1: Welcome to Chopping It Up.
0:15
Speaker 2: I'm your host, Mike Hallen, a senior restaurant food service
0:17
Speaker 2: analysts at Bloomberg Intelligence. Our research and that of bi's
0:21
Speaker 2: five hundred analysts around the globe can be found exclusively
0:24
Speaker 2: on the Bloomberg terminal. If you enjoy the pod, please
0:27
Speaker 2: do me a solid and give us a five star
0:29
Speaker 2: review on Apple or Spotify. Today we're joined by Juan George,
0:34
Speaker 2: co founder of eight five eight Partners, an investment firm
0:37
Speaker 2: and consultancy focused on restaurant tech. Welcome back.
0:41
Speaker 3: Really appreciate you having me back on here to defend
0:44
Speaker 3: the throne. You know, it's something that ever since you
0:47
Speaker 3: told me that Noah and Matt don't believe me, but
0:51
Speaker 3: it's earned me a little bit of bragging rights in
0:53
Speaker 3: the OLO alumni chat. So seriously, you know, those two
0:58
Speaker 3: guys though they're there on the mount rushmore of restaurant
1:01
Speaker 3: tech for me, but yeah, yeah.
1:03
Speaker 2: And they're actually they're two of the top performing episodes
1:06
Speaker 2: I think Noah. So when we had Noah back on
1:10
Speaker 2: the second time, his first archive, his first appearance like
1:15
Speaker 2: got hit big time in the archive, and that moved
1:17
Speaker 2: all the way up to number three. But you're still
1:20
Speaker 2: have like a fifty percent lead on everybody. So I
1:23
Speaker 2: think I think you're good. Man, I think you're good
1:25
Speaker 2: for a while.
1:27
Speaker 4: Let's beak Noah again.
1:30
Speaker 1: All right, man, and dude, you crushed it last time
1:32
Speaker 1: you were here.
1:33
Speaker 2: All your predictions were on point, particularly about some of
1:36
Speaker 2: the difficulties you saw coming for the restaurant tech industry
1:40
Speaker 2: and your call for all of that M and A
1:42
Speaker 2: activity that we've seen by the large public players.
1:45
Speaker 1: Man, So kudos to you, man, you crushed it.
1:47
Speaker 3: No, it's it's been a while two years for sure,
1:50
Speaker 3: like the the M and A for sure restaurant tech,
1:54
Speaker 3: how brands are approaching it. So excited to talk about this,
1:58
Speaker 3: I guess two years to the day or so since
2:00
Speaker 3: we last talked.
2:01
Speaker 1: Yeah, yeah, for sure.
2:03
Speaker 2: All right, For the listeners that might have missed our
2:04
Speaker 2: first interview, they're going to have to go back and
2:07
Speaker 2: listen to that one in the archives. Expand your lead
2:10
Speaker 2: a little bit. But what was the inspiration for eight
2:12
Speaker 2: five eight Partners?
2:14
Speaker 4: Yeah?
2:14
Speaker 3: So, I mean I spent fifteen and a half years
2:17
Speaker 3: at Olo helping build the company from a seed stage
2:21
Speaker 3: startup to one of the most critical operating platforms and
2:25
Speaker 3: restaurants today. So, as you said, if you want to
2:27
Speaker 3: listen to that origin story, go back to the first
2:30
Speaker 3: episode and you can hear how that went down really
2:33
Speaker 3: over fifteen and a half years. But a few months
2:37
Speaker 3: after I left back in August of twenty twenty two,
2:40
Speaker 3: my mentor and former boss, Marty Hanfeld, we both left
2:45
Speaker 3: Olo around the same time, and it wasn't the idea,
2:47
Speaker 3: but we started this new venture and so the only
2:50
Speaker 3: real asset at the time we had was trust. You know,
2:53
Speaker 3: we didn't have a product or anything at that time,
2:57
Speaker 3: but what we did have were these long standing relationships
3:01
Speaker 3: with the brand operators, with tech leaders and investors, and
3:06
Speaker 3: so we initially thought A five eight was going to
3:08
Speaker 3: be this h like go to market consultancy for restaurant tech,
3:13
Speaker 3: and over the first two years we completed a couple
3:16
Speaker 3: dozen engagements, but I think it became pretty clear pretty
3:20
Speaker 3: quick that the real need for us wasn't strategy only.
3:24
Speaker 3: It was access, you know, the access really to the
3:28
Speaker 3: right decision makers but in the right context. So we
3:31
Speaker 3: had really no interest in representing companies that we didn't
3:35
Speaker 3: believe in or we didn't want to join the social
3:39
Speaker 3: media arms race of who can yell the loudest. So
3:42
Speaker 3: we built really something different. So today a five eight
3:46
Speaker 3: is what I would describe as a mini Gartner for
3:49
Speaker 3: restaurant tech. You know, we act as a commercial middleware
3:53
Speaker 3: between restaurant brands and companies building infrastructure that powers them.
3:58
Speaker 3: And so on the tech side, we operate and work
4:01
Speaker 3: with a dozen or so must have categories, So think
4:06
Speaker 3: about like one company per category we're going to represent,
4:10
Speaker 3: and we do our commercial and technical diligence in the
4:13
Speaker 3: background and only represent companies that are really best in
4:18
Speaker 3: their field. And so on the brand side, you know,
4:22
Speaker 3: we try to serve as this connective tissue and be
4:26
Speaker 3: a problem solver where we can. So last year we
4:28
Speaker 3: completed our first ever brand side engagement with one of
4:33
Speaker 3: the top twenty five QSR brands in the country, and
4:36
Speaker 3: it was a build versus buy decision that they were
4:39
Speaker 3: going through, which now has evolved into a broader digital
4:43
Speaker 3: transformation project with them this year. And you know what
4:47
Speaker 3: makes our work work really isn't just theory, it's this
4:52
Speaker 3: ecosystem level understanding. Right We sit really again between the
4:56
Speaker 3: operators and tech companies, and so our of learning is
5:01
Speaker 3: really increasing every quarter. So we're seeing what's working, we're
5:06
Speaker 3: seeing what's not in breaking, and we're seeing categories evolve
5:10
Speaker 3: in real time. So that same feedback loop from both
5:15
Speaker 3: the brands and the tech companies really led us to
5:18
Speaker 3: formalize this executive events program at the start of twenty
5:23
Speaker 3: twenty five. So we hosted seven think about High Hospitality
5:27
Speaker 3: forums where we kicked it off at RLC in April,
5:31
Speaker 3: and we ended it doing our first ever CFO summit
5:35
Speaker 3: one day before the RFDPC conference in Vegas, and so
5:39
Speaker 3: that was our strongest, no doubt of the year. So together,
5:43
Speaker 3: you know, we've got this advisory practice, we've got this
5:45
Speaker 3: event's practice, and that reflects a role that we see
5:50
Speaker 3: in other tech sectors, but in restaurant tech it's largely
5:53
Speaker 3: been absent or fragmented, and so yeah, we're here to
5:57
Speaker 3: fill that gap, you know, thoughtfully and really selectively where
6:01
Speaker 3: we can provide a clear point of view of where
6:03
Speaker 3: it's headed.
6:04
Speaker 2: Yeah, I've noticed that you've you've done more and I've
6:06
Speaker 2: had the pleasure of attending you know, one of the
6:10
Speaker 2: summits that that you hosted. I think it was at
6:12
Speaker 2: Create But yeah, so, uh, it makes more, makes a
6:18
Speaker 2: lot of sense based on your positioning.
6:21
Speaker 1: How are you doing events differently?
6:23
Speaker 3: Well, you know, when I first started in this industry
6:25
Speaker 3: something like two decades ago, now, you know, conferences were
6:29
Speaker 3: the best way to get in front of brand stakeholders. Right,
6:33
Speaker 3: So these brand operators would walk up to a booth,
6:37
Speaker 3: they would attend a breakout session, and that would be
6:41
Speaker 3: the place that they would learn about new tech or
6:44
Speaker 3: ways to save money or make money and really think
6:48
Speaker 3: about it. That's how interest was signaled, that's how relationships
6:52
Speaker 3: were formed. But enterprise operators, they don't buy that way anymore. Right,
6:57
Speaker 3: before an exec shows up to a conference, they've already
7:01
Speaker 3: done their homework, they've formed a point of view, they've
7:06
Speaker 3: talked to other peers, and they've narrowed their options to
7:10
Speaker 3: maybe two or three providers before they ever step foot
7:13
Speaker 3: in the building. Right, So, if you look at a
7:16
Speaker 3: typical conference experience today, sort of this is what happens.
7:21
Speaker 4: Right.
7:21
Speaker 3: The restaurant brand operator registers their name and email immediately
7:26
Speaker 3: hits a list, and so now suddenly these operators they're
7:30
Speaker 3: flooded with emails. They get all these LinkedIn messages. Somehow
7:35
Speaker 3: their text messages got out and everyone's requesting a fifteen
7:39
Speaker 3: minute meeting in exchange for some Starbucks gift card.
7:43
Speaker 4: So they flip their badge right when they get it.
7:46
Speaker 3: You know, in the corner of their eyes, they've got
7:49
Speaker 3: the two loyalty sales guys that have been emailing them
7:52
Speaker 3: all week, you know, badgering them. And so they end
7:56
Speaker 3: up leaving the conference with a couple dozen business cards
8:00
Speaker 3: or really maybe two or three conversations that they wanted,
8:03
Speaker 3: and then a whole week or two of follow up
8:05
Speaker 3: emails they never asked for. So it's think about it, noisy,
8:09
Speaker 3: It's inefficient for operators, and they're a bit turned off.
8:13
Speaker 3: So you know, that said, like, the big conferences aren't
8:16
Speaker 3: going to go away, I believe, you know, especially in
8:19
Speaker 3: the age of AI, in person becomes more valuable think
8:24
Speaker 3: about deep fakes and all of that. So it's not
8:26
Speaker 3: less valuable, but it totally needs to evolve, right, And
8:30
Speaker 3: so twenty twenty six is the year where these peer
8:34
Speaker 3: to peer events become the preferred in person event for
8:38
Speaker 3: really bringing operators and tech companies together. And so we've
8:43
Speaker 3: listened to the operators and their message is consistent. They
8:47
Speaker 3: want to really pressure test ideas that are happening in
8:51
Speaker 3: their business and they really want to validate the path
8:54
Speaker 3: they're on or jump off if they're going down the
8:57
Speaker 3: wrong one. And yes, you know they do. You want
9:01
Speaker 3: to learn about tech and they want to meet tech partners,
9:04
Speaker 3: but they want them to come correct, you know. So
9:07
Speaker 3: if you're going to meet this operator, tell them what
9:09
Speaker 3: you do in five minutes, tell them who's using your product,
9:13
Speaker 3: and give them your contact info. You know they're going
9:16
Speaker 3: to reach out when they're ready, right, And so in
9:18
Speaker 3: twenty twenty five, like I said, we design these events
9:22
Speaker 3: really around I would call it three non negotiables. First,
9:26
Speaker 3: these have to be operator dominant rooms, so you know,
9:31
Speaker 3: people in other words, in the same role brands that
9:34
Speaker 3: are of the same size and scale. That enables real
9:38
Speaker 3: conversations because they're all going through the same thing, despite
9:42
Speaker 3: you know what their name says on their logo. So second,
9:46
Speaker 3: you know, these are really smaller intentional environments. So our
9:50
Speaker 3: events typically have think about fifty to one hundred people, right,
9:54
Speaker 3: so not big forums. And so with that there's a
9:58
Speaker 3: lot of personalization. I write a handwritten note for every
10:02
Speaker 3: operator that comes in the night's leading up. There's just
10:06
Speaker 3: a tension to detail for both operators and the partner
10:10
Speaker 3: so that they can maximize their time. So we bring
10:13
Speaker 3: in one tech partner that we work with from our
10:16
Speaker 3: advisory practice to underwrite the event, and we ultimately prepare
10:20
Speaker 3: them right so we understand who's coming, what they should
10:25
Speaker 3: say to them when they see them, and then how
10:27
Speaker 3: best to follow up. And so in enterprise, especially coming
10:31
Speaker 3: from MYOLO experience, you know, at a conference, you don't
10:34
Speaker 3: need ten deals or twenty deals to close, really you
10:37
Speaker 3: just need one. You know, we built OLO closing one
10:41
Speaker 3: to two deals per conference, and that, you know, story
10:44
Speaker 3: is history. So you know, the third thing i'd call it,
10:47
Speaker 3: which is different, is this peer to peer lens. So
10:51
Speaker 3: in other words, these are not built as selling environments.
10:55
Speaker 3: There's no booths, there's no hunting, you know, down the block,
11:00
Speaker 3: and so we really try to protect the space for
11:02
Speaker 3: operators and so when our tech partners are present, they're
11:06
Speaker 3: in listen mode. You know, if they can solve the
11:08
Speaker 3: problems that they're hearing, they're going to earn the business later.
11:13
Speaker 3: So half day forums, evening socials, and so the feedback
11:17
Speaker 3: has been great. We did seven last year, We're going
11:20
Speaker 3: to do eleven this year. Starting in a couple of
11:23
Speaker 3: weeks at the OLO Beyond four conference where it all begans. So, Mike,
11:28
Speaker 3: you know, I'd love to have you come this year
11:31
Speaker 3: to one or two of these and moderate one of
11:33
Speaker 3: these period of peer sessions. I think you do a
11:35
Speaker 3: great job obviously given the podcast format.
11:38
Speaker 2: Yeah, that's cool, man, I'd love to do it. And yeah,
11:40
Speaker 2: it definitely sounds like a much better way. This like
11:43
Speaker 2: spraying of email stuff has gotten absurd. Today I got
11:47
Speaker 2: an email from some guy saying he specializes in in
11:51
Speaker 2: you know, M and A in ten to twenty million
11:53
Speaker 2: dollar EBA doc companies and what I like to sell Bloomberg.
11:56
Speaker 1: I'm like, buddy, totally.
12:01
Speaker 3: I had a brand tell me today that they got
12:04
Speaker 3: an email with the headline saying saw you in the
12:07
Speaker 3: Epstein files.
12:08
Speaker 4: Like that's the type of people, Like everyone is trying
12:11
Speaker 4: to get attention. It's nuts. So like it's gone to
12:16
Speaker 4: another level.
12:17
Speaker 2: Oh that's wild man, that's wild.
12:21
Speaker 1: So you know, to your point, what do operators want
12:23
Speaker 1: from their tech solutions this year? Yeah?
12:25
Speaker 3: So you know, over the last year, we had roughly
12:29
Speaker 3: four hundred brands that attended our events that represented roughly
12:34
Speaker 3: one hundred and twelve thousand locations, and so at every
12:38
Speaker 3: single one of our events prior to them coming, we
12:41
Speaker 3: asked them what tech are you prioritizing over the next
12:45
Speaker 3: six months. So it's a multiple choice question, answer one minimum,
12:49
Speaker 3: maximum of three. And so what we heard and clearly
12:52
Speaker 3: saw on the data is that operators aren't chasing you know,
12:56
Speaker 3: shiny objects, right, Budgets are tighter, teams are leaner, and
13:02
Speaker 3: so they're really focused back on the fundamentals.
13:05
Speaker 4: And then these decisions.
13:07
Speaker 3: Are really being filtered through three you know, practical questions,
13:12
Speaker 3: let's call it. You know, does this drive margin to
13:15
Speaker 3: my bottom line? Does it reduce friction at either my
13:19
Speaker 3: headquarters or down at the store and employee level, and
13:23
Speaker 3: does it integrate to my partners that we want to
13:26
Speaker 3: stay with. And so the number one piece of interest
13:31
Speaker 3: that we heard was core infrastructure. So, in other words,
13:36
Speaker 3: point of sale came up more than anything else. And
13:39
Speaker 3: so operators, you think about these years of the legacy
13:44
Speaker 3: point of sales out there, they're no longer willing to
13:47
Speaker 3: tolerate what feels like a hostage situation, which some of
13:51
Speaker 3: these legacy systems that are limiting their integrations, you know,
13:56
Speaker 3: controlling their data and you know, ultimately governing the roadmap
14:00
Speaker 3: when they're not keeping up. And so if the point
14:03
Speaker 3: of sale is slowing you down, it's not a tech inconvenience, right,
14:08
Speaker 3: it's a true business constraint in twenty twenty six, and
14:11
Speaker 3: so we look at the point of sale as the
14:13
Speaker 3: heartbeat of the operation.
14:15
Speaker 4: And if you've got a bad heart, think about it.
14:17
Speaker 3: You know, outages happen, leakage happens in your business, then
14:22
Speaker 3: there's just drag operationally that follows. So brands are making
14:27
Speaker 3: an investment here. We've partnered up with Toast, which you
14:30
Speaker 3: know operates something like one hundred and fifty thousand locations today,
14:34
Speaker 3: and so that's number one. Number two is on the
14:37
Speaker 3: data side, you know, data, data, data, and more. And
14:40
Speaker 3: so customer data platforms specifically have gone from this nice
14:46
Speaker 3: to have in our industry to foundational loyalty programs used
14:51
Speaker 3: to be the solve for this, but they're only giving
14:54
Speaker 3: you really a fraction of that data. And so operators,
14:57
Speaker 3: if you think about where the data lives, it's living
15:01
Speaker 3: in point of sale, it's living in online ordering, it's
15:04
Speaker 3: living in your loyalty program, your guest feedback, even your
15:08
Speaker 3: credit card data. But they're all in disparate places, right,
15:12
Speaker 3: and so operators are looking for visibility on things like
15:16
Speaker 3: what's working on my menu and what's not. For most
15:18
Speaker 3: simplicity standpoint, they're trying to figure out promo impact. You know,
15:23
Speaker 3: if I run this promo or offer, clearly, guests want
15:27
Speaker 3: it what's working and what's not. And they want store
15:30
Speaker 3: level breakdowns of what stores are thriving and where they're not.
15:34
Speaker 3: And so they want this out of the box. They
15:36
Speaker 3: don't want to go into the ten dashboards that they
15:39
Speaker 3: used to go into to try and decipher all that.
15:43
Speaker 3: So that came up kind of a second, but you know,
15:46
Speaker 3: in a meaningful way. And then I know we talked
15:49
Speaker 3: about this last time I came on, But the shift
15:52
Speaker 3: to the back of the house is continued, right. So
15:55
Speaker 3: sales are soft, as you know in this industry, the
15:58
Speaker 3: consumer is pulling back and so when that happens, you
16:01
Speaker 3: have to control your spending. And so operators are tightening
16:05
Speaker 3: their belt. They're trying to run a tight ship, and
16:08
Speaker 3: so things like even kitchen display systems to improve order accuracy.
16:13
Speaker 3: We're hearing labor and scheduling kind of a top amongst
16:17
Speaker 3: all of them. ERP solutions have had their day over
16:21
Speaker 3: the last twenty four to thirty six months, and even
16:24
Speaker 3: things like insurance optimization, like there's leakage all over the
16:29
Speaker 3: back of the house, and those are all reliable cost
16:32
Speaker 3: levers that you can tighten. So, as my buddy Andrew
16:36
Speaker 3: Smith from Savory Fund says it, you got to control
16:39
Speaker 3: your controllables and that's where the margin lives. And then
16:43
Speaker 3: the last thing I would say here is then the
16:47
Speaker 3: digital arms race, right, so there's still this kind of
16:50
Speaker 3: tug of war between first party and third party delivery.
16:54
Speaker 3: So you know, one of your last guests on until
16:56
Speaker 3: Marou right, one of our longtime partners at Loop. Third
17:00
Speaker 3: party delivery is still driving the majority of digital volume
17:04
Speaker 3: for brands, and so with that, many brands describe those
17:09
Speaker 3: relationships as kind of structurally imbalanced. And so marketplaces are
17:15
Speaker 3: really more and more increasing like Google adworks or advertising platforms.
17:21
Speaker 3: So you have to pay for placement, you've got to
17:24
Speaker 3: offer deals to stay on top of the carousel, and
17:30
Speaker 3: you have to pay ultimately to defend your market share.
17:33
Speaker 3: So you have to invest in tools to make sure
17:35
Speaker 3: that this channel is a profitable and be effective, Otherwise
17:39
Speaker 3: you're just going to come down the rankings. So at
17:42
Speaker 3: the same time, operators again, if they could choose one channel,
17:46
Speaker 3: it would be first party all day, right, because that's
17:49
Speaker 3: the channel where you can own your customer data, you're
17:52
Speaker 3: not paying a commission, and so people are investing in catering.
17:57
Speaker 3: That's been massive over the last two years. Kiosk, you know,
18:02
Speaker 3: Kiosk feels like a must have for the modern QSR
18:05
Speaker 3: and fast casual with a touch of hospitality and just
18:08
Speaker 3: a better user experience because you know, when you go
18:11
Speaker 3: to DoorDash into breets, these things are like three clicks, right,
18:14
Speaker 3: and they want that same level of ease in their
18:18
Speaker 3: first party. So that's the common thread. That's what we're hearing.
18:21
Speaker 3: Bottom line, operators want more control.
18:24
Speaker 2: I'd like to shift gears a little bit to the
18:27
Speaker 2: stock market. The broader software segment of the stock market's
18:31
Speaker 2: been getting pummeled on AI fears for a few months,
18:34
Speaker 2: but it's kind of accelerated here in the new year.
18:38
Speaker 2: What do you see happening in the SaaS market as
18:40
Speaker 2: it relates to restaurant tech.
18:42
Speaker 3: Yeah, I mean, so far as you probably have seen
18:45
Speaker 3: on the terminal, right, a lot of the software as
18:48
Speaker 3: the service companies have been under tremendous pressure in twenty
18:52
Speaker 3: twenty six.
18:53
Speaker 4: And so when you.
18:54
Speaker 3: Look at the public markets in the last few weeks,
18:57
Speaker 3: even high quality companies like Salesforce, you know, workday Service now,
19:02
Speaker 3: I mean they're down thirty percent in the first forty
19:05
Speaker 3: five days of the year. So what's crazy here is
19:09
Speaker 3: that in most cases, all cases there, the revenue is
19:13
Speaker 3: still growing. But what's changing isn't revenue. It's where the
19:17
Speaker 3: market believes that the future value is.
19:20
Speaker 2: Going to be creative, right, Yeah, And it's rate of
19:22
Speaker 2: change too, Like the rated change of growth is slowing,
19:25
Speaker 2: and it's and the question is to your point, like
19:27
Speaker 2: in the future, how much more is it going to slow?
19:30
Speaker 4: Yeah?
19:30
Speaker 3: So I mean that's the talking about restaurant tech then,
19:34
Speaker 3: Like what operators need to understand is that AI is
19:38
Speaker 3: not going to wipe out your core restaurant systems. You know,
19:41
Speaker 3: in other words, I don't believe you're going to replace
19:44
Speaker 3: your point of sale or your labor system with some
19:47
Speaker 3: AI generated code from Claude or chat GPT. Restaurants today
19:52
Speaker 3: they're running on these systems of record, and those records
19:58
Speaker 3: really record what happened. Think about orders, think about labor,
20:02
Speaker 3: inventory sales. So those are foundational, like I said, but
20:07
Speaker 3: the leverage is really moving think about it, one layer
20:10
Speaker 3: above them, and it's moving to these systems of action.
20:15
Speaker 3: So the tools you know, not that the ones that
20:18
Speaker 3: tell you what happened, but the systems that will actually
20:22
Speaker 3: do something with that with that data. And so in
20:25
Speaker 3: other words, think about a system of action as rebalancing
20:30
Speaker 3: your labor automatically, you know, or a system of action
20:34
Speaker 3: routes orders based on if a school bus comes in
20:38
Speaker 3: full of kids to your restaurant, right like boom, everything's
20:42
Speaker 3: getting slammed today, that's a manager going in a dashboard.
20:46
Speaker 3: That will automatically happen in a system of action. And
20:49
Speaker 3: so that's, like you said, that's where the value creation
20:52
Speaker 3: is shifting. And so when that that's where I think,
20:56
Speaker 3: like pricing contracts and buying behavior is going to start changing.
21:01
Speaker 3: So if a system is just recording transactions, you know,
21:05
Speaker 3: think about it, it's going to get negotiated down like
21:08
Speaker 3: a utility. But if it's completing work, if it's protecting margin,
21:13
Speaker 3: if it's increasing throughput like in that example, now you're
21:16
Speaker 3: talking about value based economics. So that's why for operators
21:21
Speaker 3: I think what I'm hearing on the street is that
21:24
Speaker 3: they're worried about signing up for long term SaaS contracts right,
21:29
Speaker 3: not because again software is dying, but because they need
21:32
Speaker 3: flexibility because things are changing fast. And so what I
21:35
Speaker 3: would caution and tell operators is make sure that you
21:39
Speaker 3: have really strict service level agreements in your contracts, right
21:44
Speaker 3: from both performance and openness. The other thing is you
21:47
Speaker 3: got to start thinking about the end even when you
21:51
Speaker 3: sign a contract, in other words, like what do the
21:53
Speaker 3: exit terms look like? And how can you escape that
21:57
Speaker 3: contract even if.
21:59
Speaker 4: You signed for three to five years? Right? In other words,
22:02
Speaker 4: you can't be handcuffed, right.
22:03
Speaker 3: And so the winners I believe of the next era
22:07
Speaker 3: are going to be these modular, open systems that allow
22:12
Speaker 3: you to innovate, not these closed ecosystems that are going
22:17
Speaker 3: to try to do everything all in one. Didn't work before,
22:20
Speaker 3: I don't believe it's going to work this time. So
22:22
Speaker 3: operators need to recognize something today that they have more
22:26
Speaker 3: leverage than they think, they're just not exercising it. And
22:29
Speaker 3: so systems of action is really where the value is moving.
22:33
Speaker 3: But you know, on top of that, AI is the
22:36
Speaker 3: engine really that makes those systems possible.
22:39
Speaker 1: Yeah, that's great insight.
22:40
Speaker 2: And I was actually talking about Taco Bell's manager assistant
22:46
Speaker 2: AI driven manager assistant, Right, that would do exactly what
22:49
Speaker 2: you were talking about, like, you know, doing a better
22:52
Speaker 2: job of helping them staff the stores and you know prep,
22:58
Speaker 2: do meal prep, whatever might be, right, automatically ordering inventory
23:03
Speaker 2: and doing these action items to really enable the gms
23:07
Speaker 2: and free them up to touch tables a little bit
23:10
Speaker 2: more often, and you know, take good care of any
23:13
Speaker 2: employee concerns and whatever else it might be.
23:16
Speaker 3: That's right, I mean think about that, right, get back
23:18
Speaker 3: to hospitality And you said something key there, right, A
23:23
Speaker 3: AI is the assistant to the manager, and I think
23:27
Speaker 3: that's the thing that people got to think through, right,
23:29
Speaker 3: Like these in many cases are assistance and so yeo,
23:33
Speaker 3: we'll talk through that.
23:34
Speaker 4: Cool.
23:36
Speaker 1: How do you see this AI transition shaking out?
23:39
Speaker 4: Yeah?
23:39
Speaker 3: You know when Marty and I, funny enough, were starting
23:42
Speaker 3: a five eight at the end of twenty two chat,
23:45
Speaker 3: GPT just hit the scene, right. So for me, I've
23:49
Speaker 3: never been a founder before, and so it was like
23:53
Speaker 3: a force multiplier.
23:54
Speaker 4: Right.
23:54
Speaker 3: It wasn't just the search engine that we grew up
23:58
Speaker 3: with Google. It was a true thought partner, and so
24:02
Speaker 3: it's really enabled us to get to where we are today.
24:05
Speaker 3: Is another way, And so you fast forward to today.
24:08
Speaker 3: I've got a team of AI employees here at eight
24:12
Speaker 3: five eight, you know. I've got this thing called Granola,
24:15
Speaker 3: which handles almost my memory and transcription of all my calls.
24:20
Speaker 3: I've got another member called Howie. He does all my scheduling.
24:25
Speaker 3: And so a handful of those, like a half dozen
24:29
Speaker 3: of those do all the repetitive tasks and the drudge
24:32
Speaker 3: work that you would typically pay someone for. And all
24:36
Speaker 3: of those are something like thirty bucks a month, right,
24:38
Speaker 3: And so we've really moved past the era of chat.
24:43
Speaker 3: You know, I think if you think about folks that
24:46
Speaker 3: are skeptical of AI's maybe because they tried it early on.
24:50
Speaker 3: But in the last three to six months, there's been
24:53
Speaker 3: this material step change. I mean, every release hasn't just
24:58
Speaker 3: been better, it's like materially more capable, and that time
25:02
Speaker 3: between releases has now also compressed. So the what we
25:07
Speaker 3: saw with AI in twenty two was kind of like
25:10
Speaker 3: AI as a GPS, and the AI that's being deployed
25:15
Speaker 3: in twenty twenty six looks way more like self driving right,
25:19
Speaker 3: So it's not theoretical anymore, you know, it's happening. So
25:23
Speaker 3: when I look at the next three years, think about this.
25:26
Speaker 3: We're about to have our iPhone moment for AI. I
25:30
Speaker 3: don't know what that's going to look like, by the way,
25:31
Speaker 3: but some new consumer AI device that will look make
25:37
Speaker 3: smartphones look kind of dated. Right, We're going to have
25:41
Speaker 3: robots in our homes, like you know, we're going to
25:45
Speaker 3: have a couple dozen AI employees that work for us,
25:49
Speaker 3: both on the personal level and on the professional level.
25:53
Speaker 3: And so when that happens, you know, consumer expectations aren't
25:57
Speaker 3: just going to evolve, they're going to totally reset. So
26:01
Speaker 3: guests today they browse apps, think about in that future world,
26:05
Speaker 3: they're not going to browse apps or figure out how
26:08
Speaker 3: to shop from there. They're going to delegate decisions. So
26:12
Speaker 3: you and I might you know, we'll have these personal
26:14
Speaker 3: AI assistants ordering food and grocery on our behalf. You know,
26:18
Speaker 3: that's going to be based on our budgets, on our diets,
26:23
Speaker 3: on what we want to eat that upcoming week. Some
26:26
Speaker 3: of that will come from restaurants, some of that will
26:28
Speaker 3: come from grocery. And I think when AI becomes the buyer.
26:32
Speaker 3: The rules of digital commerce are going to change. So
26:36
Speaker 3: think about a traditional marketplace like a DoorDash, right, like
26:40
Speaker 3: AI doesn't care about sponsored listings or doesn't care about
26:44
Speaker 3: pretty photos. It's going to optimize things like speed, value, quality, preference,
26:52
Speaker 3: dietary and it's going to make the call right. And
26:55
Speaker 3: so when our industry becomes majority digital, which for any brands,
27:00
Speaker 3: by the way, it's already there, it's going to start
27:03
Speaker 3: to resemble the hotel and airline industry. And so in
27:07
Speaker 3: those industries there's a lot of focus on what they
27:12
Speaker 3: call revenue optimization and channel management. And so that's explaining,
27:17
Speaker 3: in my opinion, why you see DoorDash, you know, building
27:20
Speaker 3: a point of sale, they're building white label ordering, they're
27:25
Speaker 3: pushing further for data, and so that makes total strategic
27:30
Speaker 3: sense from my perspective, right, But I think from an
27:34
Speaker 3: operator's perspective, you got to throw a caution flag up.
27:37
Speaker 3: You know, in that example, you typically pay twenty to
27:41
Speaker 3: thirty percent. I look at that as you are paying
27:44
Speaker 3: one hundred percent of commission. If you go that route,
27:46
Speaker 3: you know, you're literally outsourcing the ownership of your customer
27:50
Speaker 3: and all of the data. So yeah, I mean as
27:54
Speaker 3: personal ais, you know, begin to intermediate these decisions. I
27:59
Speaker 3: think again, the market place role compresses, and I think
28:01
Speaker 3: that's great news for restaurants and I think it's going
28:05
Speaker 3: to create more profitable, think about it, more efficient businesses
28:08
Speaker 3: when you can channel manage wherever these are coming from.
28:12
Speaker 1: Yeah, it's exciting, man.
28:13
Speaker 2: And to your point, I mean, I've been blown away
28:16
Speaker 2: with the improvement over the last like three to six months.
28:20
Speaker 1: It's it's been been phenomenal.
28:22
Speaker 2: I mean it's still still lacking kind of on the
28:24
Speaker 2: research side for me, but it's getting better on that
28:28
Speaker 2: end too, man. But just for even like to your
28:32
Speaker 2: point workflow stuff, Man, it's great and I'm kind of jealous.
28:36
Speaker 2: I don't have my my scheduler AI scheduling Assistant working
28:42
Speaker 2: unfortunately system for you, all right, man, I gotta yeah,
28:48
Speaker 2: I gotta figure out how I can get that thing
28:50
Speaker 2: to help me schedule my podcasts.
28:52
Speaker 1: And I've been saying forever I need an admin.
28:55
Speaker 2: Chains, including Chipotle, Sweet Green, Cova, they're all testing robotics
29:00
Speaker 2: different degrees. When will restaurant chain start to see an
29:04
Speaker 2: ROI on these investments.
29:06
Speaker 4: Yeah, I mean it's a good question.
29:07
Speaker 3: I mean when you think about those three brands that
29:09
Speaker 3: you listed, I can't go to those brands without spending
29:13
Speaker 3: twenty bucks. Like that's a lot of money, man. And
29:17
Speaker 3: so we're in this very labor heavy industry with massive turnovers,
29:22
Speaker 3: and consumers like me feel it, you know, and so
29:25
Speaker 3: they're trading down, you know, they're hunting for value, they're
29:28
Speaker 3: shopping for deals. I know, I am right, and so
29:32
Speaker 3: it's I think completely realistic to bring down those prices
29:37
Speaker 3: from twenty dollars to something like fourteen or fifteen dollars.
29:41
Speaker 3: But to do that, I mean, we've got to have
29:43
Speaker 3: the hard discussion about robotics, right, and so it's the
29:48
Speaker 3: biggest margin unlock.
29:49
Speaker 4: In front of our industry.
29:51
Speaker 3: So I'm an early investor in this company robotics company
29:56
Speaker 3: called Figure Robotics, and so they've created these humanoid robotics
30:01
Speaker 3: that have produced about thirty thousand cars at the BMW
30:06
Speaker 3: factory in South Carolina. And so when I hear that, right,
30:10
Speaker 3: it's like, if a robot can safely operate, you know,
30:14
Speaker 3: reliably on these high precision automotive lines for thousands of
30:18
Speaker 3: hours at a time, it can definitely handle high heat,
30:23
Speaker 3: high volume tasks in a prep kitchen. So that said,
30:27
Speaker 3: I don't think restaurants are going to win with these
30:30
Speaker 3: general purpose like humanoid things to start.
30:33
Speaker 4: It's what I believe, these.
30:35
Speaker 3: Specialized robotics think about machines that do one job really well.
30:41
Speaker 3: So I was I think a few months back, I
30:45
Speaker 3: went up to La from San Diego and I went
30:49
Speaker 3: to this casual dining brand, a national chain that was
30:52
Speaker 3: piloting a dishwashing robotic system, and it was fascinating.
30:58
Speaker 1: Right.
30:58
Speaker 3: So the background is that location spends about seven thousand
31:02
Speaker 3: dollars a month on dish labor, so you think about
31:05
Speaker 3: that's constant turnover. Also, they can't hold that dishwasher for long.
31:10
Speaker 3: And you know this is a twenty four to seven operation,
31:13
Speaker 3: and so they are they piloted with this robotics as
31:17
Speaker 3: a service dishwashing service, it was about thirty five hundred
31:20
Speaker 3: dollars a month. Think about it. It runs twenty four
31:23
Speaker 3: to seven. There's no one calling out, there's no one training.
31:28
Speaker 3: Dirty dishes go out or go in and clean dishes
31:31
Speaker 3: go out. And so I sat there for one hour.
31:34
Speaker 3: I just like watching this thing and it worked. It's
31:38
Speaker 3: just one workflow that seems simple enough and there's no
31:42
Speaker 3: kind of like romanticism around that job. It's a tough,
31:46
Speaker 3: drudge work job. You can't find people like that feels
31:50
Speaker 3: like a win. And so if you can find some
31:52
Speaker 3: use cases like that, that feels like the move. And
31:55
Speaker 3: so if you kind of zoom out for a second,
31:59
Speaker 3: like these ways are all over the place now or
32:02
Speaker 3: they're coming, they're serving a million drivers a month right
32:07
Speaker 3: at this point, and so that's crazy. I mean, there's
32:10
Speaker 3: more of those in San Francisco right than cabs. Tesla.
32:15
Speaker 3: They're deploying their robotaxis in Austin. And then you're starting
32:20
Speaker 3: to see in our industry the sidewalks delivery robots like
32:24
Speaker 3: Cocoa starting to really pilot. I think they're in Jersey
32:27
Speaker 3: City near you, in these like dense urban markets. And
32:31
Speaker 3: so think about it. Transportation is being automated, and I
32:35
Speaker 3: got to think, you know, food prep's going to follow.
32:38
Speaker 3: So my challenge here is like stop asking when robotics
32:42
Speaker 3: is ready.
32:43
Speaker 4: It is ready, right, It's just.
32:45
Speaker 3: Thinking about what are the workflows that are repetitive, what
32:49
Speaker 3: are the workflows that are margin sensitive and harder to staff.
32:52
Speaker 3: And you have companies that are that are building something there,
32:56
Speaker 3: so take something to pilot because it's going to hit you,
32:59
Speaker 3: like the chat ChiPT moment like I think about, you know,
33:02
Speaker 3: February twenty twenty, like COVID's coming, Like yeah, okay, you
33:07
Speaker 3: know what is that? And then March just hits right,
33:09
Speaker 3: Like that moment is going to happen in both AI
33:12
Speaker 3: and robotics, and so you know, when when operators start
33:16
Speaker 3: to test, they can at least feel it out for
33:19
Speaker 3: when the moment does arrive.
33:20
Speaker 1: Yeah, it's your.
33:21
Speaker 2: Point, man, I mean you could you can eliminate you know,
33:25
Speaker 2: riskier things, right, you could take the knives out of
33:28
Speaker 2: out of your cook's hands right by by you know,
33:32
Speaker 2: using automation to chop things. If you're buying this equipment,
33:36
Speaker 2: it's it's got much better tax treatment than paying your employees, right,
33:41
Speaker 2: It's it's really a no brainer once you know, once
33:44
Speaker 2: the price kind of gets gets to that that right
33:48
Speaker 2: level man, And yeah, totally it's a low value job.
33:52
Speaker 1: You know, like washing dishes is really seems like a
33:55
Speaker 1: no brainer. Man.
33:56
Speaker 2: I think I saw Denny's was testing testing some of
34:01
Speaker 2: that technology out. So our last discussion, you spoke about
34:05
Speaker 2: tech and dashboard fatigue. That restaurant execs were suffering from.
34:09
Speaker 2: Has there been any improvement on that end?
34:11
Speaker 3: So you know, yeah, there's still dashboard fatigue is what
34:15
Speaker 3: I would call it, ninety nine dollars a month fatigue.
34:19
Speaker 4: You know, there's absolutely been you know, this all in.
34:24
Speaker 3: One versus best of breed argument since we last talked,
34:29
Speaker 3: and that's still happening. Kind of the argument is still happening.
34:34
Speaker 3: But no, you know, ultimately, the dashboard fatigue is real. Right,
34:38
Speaker 3: Managers are still logging in everywhere. It feels like a
34:42
Speaker 3: massive opportunity for someone to just come in. And you know,
34:45
Speaker 3: by the way, maybe you and I should vibe code
34:47
Speaker 3: this like a dashboard to be the master of all
34:51
Speaker 3: dashboards because operators have to go into multiple accounts, and
34:56
Speaker 3: so I think about almost like a CDP as a
34:59
Speaker 3: master dashboard in that at least it has all your data.
35:03
Speaker 3: You know, operators are thinking about that single source of truth.
35:06
Speaker 3: And so in this industry, you know, you have a
35:08
Speaker 3: lot of kind of apps and point solutions, there's not
35:12
Speaker 3: this underlying foundational layer or this shared services layer that
35:17
Speaker 3: exists underneath. And no, it's again still a problem frankly
35:23
Speaker 3: and an opportunity. And so at the headquarters level, I
35:27
Speaker 3: would say it's not a big deal.
35:29
Speaker 4: But if a GM you know, in a busy lunch
35:33
Speaker 4: rush at twelve o'clock.
35:34
Speaker 3: Going back to that school bus example, if if the
35:37
Speaker 3: school bus comes in right now, they've got to log
35:40
Speaker 3: into a dashboard and put that in. And if they've
35:42
Speaker 3: got to you know, put a refund on a loyalty transaction,
35:47
Speaker 3: they've got to go in another dashboard. That's where managers
35:49
Speaker 3: are feeling it. And so again a big opportunity.
35:53
Speaker 4: Cool.
35:53
Speaker 2: So, since you were so prescient with your call outs
35:56
Speaker 2: for twenty twenty four twenty twenty five, what do you
35:58
Speaker 2: see for restaurants to this year.
36:00
Speaker 4: Well, I think, uh.
36:02
Speaker 3: It's a little bit of back to the fundamentals, you know.
36:06
Speaker 3: I do think folks are going to start experimenting on things.
36:11
Speaker 3: You know, people are looking to solve real problems when
36:14
Speaker 3: it comes to again the themes that we talked about, right.
36:18
Speaker 3: So I'm curious also as we go to our eleven
36:21
Speaker 3: events to kind of get the real pulse from what
36:24
Speaker 3: the operator community is talking about. There's still what I
36:29
Speaker 3: would call it tension amongst the restaurant tech community at
36:34
Speaker 3: whole you think about, you know, an OLO for example,
36:37
Speaker 3: just bought a loyalty company, you know, par just bought
36:40
Speaker 3: a CDP company. Door Dash is rolling out a point
36:43
Speaker 3: of sale and they're rolling out on mine ordering. You
36:47
Speaker 3: have Toast, which is doing a deal with Uber. So
36:50
Speaker 3: alliances have been formed there and so on the the
36:54
Speaker 3: brand side, and like they want, coming back to what
36:57
Speaker 3: I said earlier, like ways to find you know, easy
37:02
Speaker 3: wins margin. You know, at that at that level, they
37:06
Speaker 3: want ways to you know, really solve problems for both brands,
37:13
Speaker 3: you know, or stakeholders at both the store level and
37:15
Speaker 3: at the headquarters level. And you know, ultimately simplifying operations.
37:21
Speaker 3: Like we often hear of all of the fun things
37:25
Speaker 3: you could be doing, but at the end of the day,
37:28
Speaker 3: you and I as a customer want to make sure
37:30
Speaker 3: that we go into Chipotle and our food taste delicious, right,
37:34
Speaker 3: like consistency quality that's going to beat everything else. And
37:39
Speaker 3: so operators have a good kind of like you know,
37:42
Speaker 3: blinders right to just say no, that's cool, that's cool.
37:45
Speaker 3: But I don't have enough resources, so you know, professional
37:49
Speaker 3: services remains a big opportunity. In other words, I think
37:53
Speaker 3: about operators still remain understaffed at the headquarters level, and
37:59
Speaker 3: at the.
38:01
Speaker 4: And at the store.
38:02
Speaker 3: Level, and you know people are looking for help in
38:06
Speaker 3: you know, what to do with tech, and so tech
38:09
Speaker 3: roadmap help. You know everyone, no one's really figured it out,
38:13
Speaker 3: is what I'd say. And even by the time you
38:15
Speaker 3: figure it out, things are going to change. And so
38:17
Speaker 3: having a thought partner there I think continues to be important.
38:21
Speaker 3: So yeah, again, I'm in listen mode versus prediction mode
38:25
Speaker 3: here these days and hoping to give you the answers
38:29
Speaker 3: next time.
38:30
Speaker 1: All right, that sounds good, man. And how are you
38:32
Speaker 1: feeling about the Knicks.
38:33
Speaker 2: It's been a roller coaster over a week, you know,
38:36
Speaker 2: losing over time at home to the to the decimated Pacers,
38:40
Speaker 2: then we trounced the Sixers.
38:42
Speaker 4: Where are you at?
38:42
Speaker 1: Man?
38:44
Speaker 3: I'm loving it man, since we last spoke. You know,
38:46
Speaker 3: the team has come a long way.
38:48
Speaker 4: You know.
38:48
Speaker 3: I've got two young boys and a six and a
38:51
Speaker 3: four year old. We watched every nixt game together. It's
38:54
Speaker 3: kind of like our bonding things. It's the it's the
38:57
Speaker 3: best and so love this team. I think they can
39:00
Speaker 3: make a deep run. The East is wide open, assuming
39:05
Speaker 3: somehow Tatum doesn't magically come back and like make that
39:08
Speaker 3: team make that team good. But you know, I'm worried
39:12
Speaker 3: about Detroit, worried about Boston. But I think, you know,
39:16
Speaker 3: there's a shot that we can get out of the
39:17
Speaker 3: East and from there, let's see. But I trust in
39:22
Speaker 3: Leon and Leon we trust I think if we can
39:25
Speaker 3: go get a stud this summer and you know who
39:28
Speaker 3: I'm talking about, you know, the freak that would that
39:32
Speaker 3: would make me, you know, come back home for a
39:35
Speaker 3: victory parade.
39:36
Speaker 1: Yeah. Man, I'm excited. Leon's done a great job. You know.
39:40
Speaker 2: Hopefully they can stay healthy, right, That's that's going to
39:44
Speaker 2: be a big part of it.
39:45
Speaker 3: Yeah, for sure, man. But it's probably the best team
39:48
Speaker 3: since I was fourteen years old.
39:49
Speaker 4: So I'm loving it.
39:51
Speaker 1: Yeah, I'm with you, man, JG. Thanks for doing this, Man.
39:55
Speaker 4: Appreciate you having me back on Man. See you later
39:57
Speaker 4: this year.
39:58
Speaker 1: I'm looking forward to that. I want to thank the
40:00
Speaker 1: audience for tuning in. If you'd like to learn more
40:02
Speaker 1: about eight.
40:03
Speaker 2: Five eight, go to eight five eight partners dot com.
40:06
Speaker 2: If you liked our discussion, please share it with your
40:08
Speaker 2: friends and colleagues. Check back soon for another interview on
40:11
Speaker 2: chopping it Up.