Latest / Choppin’ It Up by Bloomberg Intelligence / Craftable’s Cantu on Boosting Restaurant Profits

Transcript

Craftable’s Cantu on Boosting Restaurant Profits · Choppin’ It Up by Bloomberg Intelligence

0:13
Speaker 1: Welcome to Chopping It Up.
0:15
Speaker 2: I'm your host, Mike Hamon, the senior restaurant and food
0:17
Speaker 2: service analysts at Bloomberg Intelligence. Our research and that of
0:21
Speaker 2: bi's five hundred analysts around the globe can be found
0:23
Speaker 2: exclusively on the Bloomberg terminal. If you enjoy the pod,
0:27
Speaker 2: please do me a solid and give us a five
0:29
Speaker 2: star review on Apple or Spotify. Today we're joined by
0:34
Speaker 2: David Cantu, CEO and board member at Craftable, a back
0:38
Speaker 2: office platform built to protect and expand hospitality margins.
0:41
Speaker 3: Welcome to the pod, David, good to be here. Good
0:45
Speaker 3: to see you, Mike.
0:46
Speaker 1: Yeah, same, Always good to catch up with you.
0:50
Speaker 2: I've been excited for this discussion and the timing, frankly
0:54
Speaker 2: couldn't be better. You know, over the last month, restaurant
0:59
Speaker 2: investors have quickly shifted from focusing on higher tax refunds
1:04
Speaker 2: to asking a bigger question, Well, consumers spend anywhere beyond
1:09
Speaker 2: essentials like gasoline and what does that mean for restaurant margins?
1:13
Speaker 3: Well, I could tell you for the margins, it's taken
1:17
Speaker 3: a hit. And as you probably have seen and many
1:20
Speaker 3: have seen in some of the recent research from the
1:23
Speaker 3: NRA study, forty of restaurants didn't make money last year,
1:30
Speaker 3: and you know it was expected to be more of
1:32
Speaker 3: the same, But a lot has changed over the past
1:34
Speaker 3: month as well to where the it's not just the industry,
1:38
Speaker 3: the entire economy has taken a hit, so I could
1:41
Speaker 3: expect a little bit worse than more of the same.
1:44
Speaker 3: So margins are at an all time low, and you know,
1:50
Speaker 3: I would say that every brand is trying to figure
1:52
Speaker 3: out how to make things work with the conditions of
1:56
Speaker 3: the labor market as well as inflation and commodities going up.
2:00
Speaker 3: Oil are just fluctuating around, not just from what we're
2:04
Speaker 3: seeing over the past month, but just from the tariffs.
2:06
Speaker 4: So certainly interesting times.
2:08
Speaker 2: Yeah, that's for sure, man, And it's it's tough timing.
2:12
Speaker 2: I mean, inflation was was cp I was working its
2:15
Speaker 2: way down into the low two's.
2:17
Speaker 1: I mean, now we may see four before we see
2:20
Speaker 1: two percent CPI.
2:22
Speaker 2: Unfortunately, So you ran restaurants before moving to the tech side.
2:28
Speaker 1: What drew you to the industry.
2:30
Speaker 3: Well, I got back into about a year and a
2:32
Speaker 3: half ago, and I would say that you know, a
2:35
Speaker 3: lot has changed and a lot is still the same.
2:37
Speaker 3: A lot has changed in terms of you know, I
2:41
Speaker 3: would say the competition and a lot has stayed the
2:45
Speaker 3: same to where you know, restaurants are still people focused.
2:51
Speaker 3: They're still faced with a lot of the same challenges
2:54
Speaker 3: that I was faced with. Unfortunately, I would say that
2:58
Speaker 3: the skill set of the operator is probably not the
3:03
Speaker 3: same just because of the expansion has occurred so much
3:06
Speaker 3: that there's some gaps on skill sets that are needed
3:10
Speaker 3: to manage the business effectively to drive a healthy bottom line.
3:15
Speaker 2: Yeah, because people are absolutely critical to this business. You've
3:20
Speaker 2: had a lot of success at hot Schedules and black
3:23
Speaker 2: Box Intelligence. What specifically pulled you towards Craftable at this
3:27
Speaker 2: point in your career.
3:28
Speaker 3: You know, I didn't think I was going to get
3:30
Speaker 3: back into tech, and I went from restaurant to tech
3:33
Speaker 3: to back to restaurant, and you know, I still wanted
3:37
Speaker 3: to have, you know, my fingers in technology just because
3:41
Speaker 3: I love it. I love being involved on trying to
3:44
Speaker 3: advance the industry forward and tech that will do that.
3:48
Speaker 3: And I had joined the board, and you know, I
3:52
Speaker 3: was positioned to look for our next CEO or our
3:56
Speaker 3: co founder decided he was going to take time off
3:58
Speaker 3: had his first child, and I it just ended up
4:01
Speaker 3: getting a bug coming, you know, having been involved in
4:05
Speaker 3: a restaurant here in Austin. You know, I just I
4:08
Speaker 3: really saw a significant opportunity and really building you know,
4:13
Speaker 3: financial confidence in operators having done it in this beautiful
4:18
Speaker 3: restaurant managers from twelve to forty two years long. At
4:22
Speaker 3: this restaurant, there was just margin and revenue leakage. And
4:27
Speaker 3: you know, I put a lot of time and effort
4:29
Speaker 3: into teaching them the P and L and fix sating
4:32
Speaker 3: them on numbers, as well as guest experience and balancing
4:34
Speaker 3: those two things out. And you know, just it encouraged
4:38
Speaker 3: my me throwing my hat into the ring while I
4:41
Speaker 3: was looking for you know, the CEO for this this company.
4:46
Speaker 3: And it's been nine months and I haven't looked back.
4:48
Speaker 3: I'm excited about where the tech's at all.
4:50
Speaker 2: Right, good stuff, And if we could talk a little
4:52
Speaker 2: bit more about what you hinted at was your most
4:55
Speaker 2: recent restaurant experience right before you took the craftbal job.
4:59
Speaker 2: You know, you worked this project with the owner of Fonda,
5:02
Speaker 2: Sam Miguel, a famous Mexican restaurant Austin, you know.
5:07
Speaker 1: And I think you hinted towards it a bit.
5:09
Speaker 2: But what did that experience teach you and how is
5:12
Speaker 2: it coloring your vision of what craft the bull should build?
5:15
Speaker 3: You know, I would say from having been around restauranteurs
5:18
Speaker 3: for a long period of time, this was a unique,
5:22
Speaker 3: you know, partnership. I was introduced by one of the
5:25
Speaker 3: co founders of PF Chains and him met Tom Gilliland
5:30
Speaker 3: about seventy eight years ago, and he had built this
5:34
Speaker 3: beautiful restaurant interior Mexican cuisine, and seriously, it's one of
5:39
Speaker 3: the hottest restaurants in Austin.
5:40
Speaker 4: It takes two or three weeks before you can.
5:42
Speaker 3: Get in, and he and I just connected, and you know,
5:46
Speaker 3: I got involved helping him build a second restaurant, you know,
5:50
Speaker 3: with the design and everything else. And then he asked
5:52
Speaker 3: me to start helping in his restaurant.
5:55
Speaker 4: I'm like, what do I do.
5:56
Speaker 3: I mean, he's got great food, he's got great service.
6:00
Speaker 3: You know, there's one of those things it's a fifty
6:02
Speaker 3: years you know, you don't really want to touch much
6:05
Speaker 3: because I mean, people are just so used to the
6:10
Speaker 3: way that it always is. So the only thing I
6:12
Speaker 3: knew how to do was just like really get the
6:16
Speaker 3: business ready to install craftable and you know, it hot
6:21
Speaker 3: schedules was implemented like five or six years ago. So
6:23
Speaker 3: I got them on the labor side, but it was
6:26
Speaker 3: the inventory side. And I just saw a lot of
6:28
Speaker 3: areas of opportunity in the kitchen and worked with the
6:30
Speaker 3: chefs and was asking a lot of questions and was
6:33
Speaker 3: connecting the dots and how they were doing things that
6:36
Speaker 3: were very manual in nature. But you know, they were
6:38
Speaker 3: all doing what they knew from twelve to forty two years,
6:42
Speaker 3: a lot of recipes.
6:43
Speaker 4: In their heads, not on not in systems, and.
6:48
Speaker 3: I just went to work educating them and they were
6:51
Speaker 3: completely open to like just understanding the finance side of
6:55
Speaker 3: the business. They had been so fixated on the food
6:57
Speaker 3: and the service, and we felt that there was a
6:59
Speaker 3: lot of opportunity there, and you know, we set it
7:03
Speaker 3: on the path in a trajectory to reduce food cost,
7:06
Speaker 3: labor costs, comps, utilities, linen, chemicals and supplies, anything that
7:13
Speaker 3: was controllable. I was just communicating why it was important
7:18
Speaker 3: to really, you know, not waste, and we paired that
7:24
Speaker 3: with the guest experience. It was actually guest XM from
7:28
Speaker 3: Black Box Intelligence, because far too often restauranteurs look at
7:33
Speaker 3: managing food and managing labor is all about cost management
7:38
Speaker 3: when it truly really is about optimization. And optimization is
7:42
Speaker 3: you need the right amount of people at the right
7:44
Speaker 3: time and the right food at the right time that
7:46
Speaker 3: doesn't spoil, because that will drive a better guest experience.
7:51
Speaker 3: And it was connecting all those dots that just made
7:53
Speaker 3: me just like think, Okay, if I can do this
7:56
Speaker 3: just by coaching, what can technology do?
8:01
Speaker 1: You know?
8:01
Speaker 3: Just all my my, all my years of operations of
8:05
Speaker 3: seventeen years just came back to me through that. I
8:08
Speaker 3: was a little nervous getting back into it, but I
8:12
Speaker 3: tell you it was just fun. It was fun educating
8:15
Speaker 3: people and seeing how they're They were truly committed and
8:19
Speaker 3: you know, really invested in the business. I mean, they
8:21
Speaker 3: had been there for so long. This was just a
8:24
Speaker 3: different muscle that they were learning. And with Tom working
8:28
Speaker 3: with him through that time too, because he was he
8:30
Speaker 3: was intrigued of like what.
8:32
Speaker 4: Are you going to do? And you know, he.
8:35
Speaker 3: Learned a lot about his business in a positive way,
8:38
Speaker 3: and you know it's still the same successful he opened
8:41
Speaker 3: the second restaurant. We've got Craftable in both of them,
8:45
Speaker 3: and the teams are using it, and I just love
8:49
Speaker 3: this industry and I see the potential and so many
8:53
Speaker 3: you know, operators out there, and I think it's unfortunate
8:56
Speaker 3: that it's grown so fast that there's not a lot
9:00
Speaker 3: of the mentorship in place and the development that's needed
9:03
Speaker 3: because they're all you know, in separate locations, so they
9:07
Speaker 3: don't have somebody there working with them day to day.
9:10
Speaker 3: So I just I it's uh, it's led a path
9:13
Speaker 3: for us at craftable to take that into consideration and
9:16
Speaker 3: how we build and how we arm them with financial
9:20
Speaker 3: confidence to run a healthier bottom line so they can
9:23
Speaker 3: invest back into their business.
9:25
Speaker 4: And we did exactly that.
9:27
Speaker 3: We we invested in you know, buying new equipment, and
9:31
Speaker 3: they understood how it all worked. How you know this
9:34
Speaker 3: this notion of focusing on profits can lead to better things.
9:39
Speaker 3: And you know that's where I you and I have
9:42
Speaker 3: talked before about conscious capitalism, which we can get into that,
9:46
Speaker 3: but I there's a there's a a there's a bigger
9:50
Speaker 3: opportunity out here, and I'm hoping that we can teach
9:54
Speaker 3: that to the industry.
9:55
Speaker 2: Very cool and with some of that work you've done.
9:57
Speaker 2: Is that is that why fond the Sam Miguel continued
10:00
Speaker 2: their brunch.
10:06
Speaker 3: Tom loved having one day off. I mean, the man
10:10
Speaker 3: is there every single day. But let me tell you
10:13
Speaker 3: brunch it was really remarkable. But it wasn't profitable and
10:20
Speaker 3: there was a lot of waste because it was all
10:21
Speaker 3: you can eat. You imagine, you build all of this,
10:24
Speaker 3: but I wasn't the reason for that.
10:26
Speaker 1: I will know. Yeah, they'll come after you.
10:29
Speaker 3: This did.
10:29
Speaker 1: The people online will come after you.
10:31
Speaker 3: Anybody thinks that I was a part of that, yes,
10:34
Speaker 3: I will probably get you know, hate posts. Yeah.
10:42
Speaker 1: I had actually been to that brunch some time ago.
10:46
Speaker 1: It was fantastic, all right.
10:48
Speaker 2: And you also mentioned before you took the craftable job,
10:52
Speaker 2: you know, and then before Fanda Sam Miguel, and earlier
10:55
Speaker 2: in your career you worked in two restaurant chains out
10:57
Speaker 2: back in PF Chang's, which you had mentioned were gms
11:00
Speaker 2: operated with an ownership mindset, and Texas Roadhouse still leans
11:05
Speaker 2: into that today.
11:07
Speaker 1: What makes that model work so well for some chains?
11:10
Speaker 3: I learned so much, and I mean what great cultures
11:14
Speaker 3: out back in PF Chain's. I mean they really truly
11:17
Speaker 3: had core values, and I learned so much from core
11:19
Speaker 3: values on how they when believed in they turned into
11:21
Speaker 3: behaviors what I did learn about them, and I had
11:26
Speaker 3: worked at only a handful of other restaurants.
11:30
Speaker 4: There's a difference.
11:31
Speaker 3: Between an owner and a manager. And when you allow
11:36
Speaker 3: and invest in somebody to say you're one of the owners,
11:40
Speaker 3: and you really take that to heart, you look at
11:43
Speaker 3: the business in a different way in all aspects of it,
11:48
Speaker 3: from the focus on your employees, investing in them, driving
11:55
Speaker 3: a lot of loyalty which leads to an investment back
11:58
Speaker 3: into the experience, and a lot of loyalty from your customers.
12:03
Speaker 3: Every aspects of you know, all the small things matter.
12:06
Speaker 3: It's different, and I just I really believed that those
12:10
Speaker 3: models work, you know, to where somebody realizes. And the
12:16
Speaker 3: only reason why I did it, Mike, was not because
12:19
Speaker 3: I wanted to go join a company. My goal was
12:23
Speaker 3: join a company that offered a partnership because they they
12:26
Speaker 3: picked you, and then you had to invest, and then
12:29
Speaker 3: you served five years and they bought you out. And
12:32
Speaker 3: it was the buyout that I wanted to go start
12:36
Speaker 3: my own restaurant. That's the way I was going to
12:38
Speaker 3: fund my restaurant. But I think a lot of other
12:43
Speaker 3: operators were like me. They thought of the same thing.
12:46
Speaker 3: But once they got really like emotionally connected to the brand,
12:51
Speaker 3: many of them up their five years. Many of them
12:54
Speaker 3: stayed longer and chose not to sell out because they
12:58
Speaker 3: also realized how difficult it is to operate and run
13:02
Speaker 3: a restaurant, and it's easy when you have all the
13:04
Speaker 3: resources around you, and both of them did have all
13:07
Speaker 3: the resources. So it was a special time. But I definitely,
13:13
Speaker 3: looking back at it, now understood owner mindset versus manager mindset.
13:19
Speaker 3: It was special for sure.
13:21
Speaker 2: Why do you think more gms aren't trained to think
13:24
Speaker 2: like owners in this business?
13:26
Speaker 3: It's disappointing that that's not the case, and I don't
13:32
Speaker 3: know that it's. One of the brands that I worked
13:36
Speaker 3: with which was very impressive was Houston's Hillstown and at
13:40
Speaker 3: least from what I heard is I mean they were
13:44
Speaker 3: opening no more than a restaurant a year at one point.
13:48
Speaker 3: But the reason behind that was they wanted to ensure
13:53
Speaker 3: that they really had the right manager that would go
13:57
Speaker 3: and own and operate. That they were agms possibly, but
14:02
Speaker 3: that they were really trained on how to run the business.
14:04
Speaker 3: And I always say that Houston Sillstone was like the
14:08
Speaker 3: NBA of restauranteurs. Everything was done with intention every aspect
14:14
Speaker 3: of the workflow across any of the roles. It was beautiful,
14:20
Speaker 3: and you know, I just I think that unfortunately too
14:26
Speaker 3: many brands that went too fast, people got in positions
14:30
Speaker 3: too fast, felled and there's been a bit of a
14:34
Speaker 3: revolving door in not wanting to invest as much and
14:40
Speaker 3: trying to just be market competitive, which you know, I
14:44
Speaker 3: think is probably an area of opportunity because the right
14:49
Speaker 3: leader in place, and I would contest that a GM
14:52
Speaker 3: is equivalent to a CEO or should at least have
14:56
Speaker 3: that same respect because they're running a multimillion dollar business
14:59
Speaker 3: and might be too or three millions, so that might
15:01
Speaker 3: be a ten twelve million. I mean, if I knew
15:03
Speaker 3: a CEO that was running a two to three million,
15:05
Speaker 3: I would have a lot of respect for them. I
15:09
Speaker 3: do have it for the gms, because you know, they
15:12
Speaker 3: are running a serious operation and sometimes with not even
15:16
Speaker 3: close to the same resources on that front. So it's
15:21
Speaker 3: a it's an interesting thing. I hope to continue to
15:24
Speaker 3: elevate the awareness and the importance of that GM the
15:28
Speaker 3: ongoing development education, not just to be a good steward
15:32
Speaker 3: of people that will focus on the guess but being
15:36
Speaker 3: a good steward of the business, have the strong financial
15:40
Speaker 3: acumen to really run the business effectively and make good
15:43
Speaker 3: strategic decisions for the growth.
15:46
Speaker 2: Yeah, I mean to your point. You know, restaurants are small, complicated,
15:51
Speaker 2: labor intensive manufacturing facilities, really right, and so you know,
15:56
Speaker 2: it's a big reason why it's so important to have
15:58
Speaker 2: such you know, to have the good gms to have
16:02
Speaker 2: successful restaurants. Let's talk about the margin side of the
16:07
Speaker 2: business a bit here. You know, food waste is still
16:10
Speaker 2: a major issue across the industry. What's driving it? It's
16:14
Speaker 2: it's actually horrible.
16:15
Speaker 3: I mean, you know, I did research on this because
16:18
Speaker 3: I was really trying to understand, you know a little
16:20
Speaker 3: bit more. We had an inventory system at Hot Schedules Macromatics.
16:25
Speaker 3: I called it the diesel engine of inventory, powering some
16:29
Speaker 3: of the largest brands globally. And you know, I learned
16:34
Speaker 3: a lot about that, but I still needed to learn
16:36
Speaker 3: and I really caught onto the waistside of understanding like
16:40
Speaker 3: how much waste does the restaurant industry produce? And you know,
16:45
Speaker 3: I was it was staggering. You know, twenty to thirty
16:48
Speaker 3: three billion pounds is what I've read in the research
16:52
Speaker 3: and It made me really just start connecting the dots
16:54
Speaker 3: of thinking, like, Okay, I've been around the dish pit
16:57
Speaker 3: and I do see a lot of the you know,
16:59
Speaker 3: the trash that goes in there. A lot of this
17:01
Speaker 3: is from plates. And it just made me start to
17:04
Speaker 3: really put things together that I didn't understand one in
17:09
Speaker 3: most cases. And I saw the chefs do this every day.
17:13
Speaker 3: There's a time period of when they need to submit
17:15
Speaker 3: an order. It may either be their broadline vendor, it
17:19
Speaker 3: may be produce, it may be you know, some small
17:23
Speaker 3: obscure fish company that's doing the seafood. But they need
17:27
Speaker 3: a time period and they need to know what they
17:29
Speaker 3: have on hand, and a lot of times they're so
17:31
Speaker 3: busy running back to back, they kind of just have
17:34
Speaker 3: these stagnant pars.
17:35
Speaker 4: So they just order. They just order, And the.
17:41
Speaker 3: Reality is that they try and order enough to where
17:43
Speaker 3: they don't run out. And unfortunately that is the number
17:48
Speaker 3: one problem I see, which is a great opportunity for
17:52
Speaker 3: us that they don't have all of the they don't
17:57
Speaker 3: have all the data in the trends to be able
17:58
Speaker 3: to say, okay, it's here, it is a Tuesday. I
18:02
Speaker 3: got to order from a broadline vendor, I got to
18:05
Speaker 3: order by this time, I just have pars. So a
18:09
Speaker 3: lot of times they go after pars, but they don't
18:10
Speaker 3: even really go to count the pars. They're just so
18:14
Speaker 3: quick to order perishable goods that are produced. And produce
18:18
Speaker 3: is probably the biggest vender of waste, followed by dairy
18:23
Speaker 3: and protein, and they each have anywhere from two days
18:26
Speaker 3: to you know, four days shelf life, and obviously it expires,
18:34
Speaker 3: it spoils, they throw it in the trash. And in
18:37
Speaker 3: addition to that, they overportion. If we look at today
18:40
Speaker 3: and there's a lot of research even on what happened
18:42
Speaker 3: with GLP one and how people aren't eating as much
18:44
Speaker 3: or wanting shareplates or wanting smaller dishes, a lot of
18:48
Speaker 3: this food is being discarded. You know, at the end,
18:51
Speaker 3: I think it's about a half a pound that's left
18:53
Speaker 3: for every plate. To where this overportioning to present value
18:57
Speaker 3: when they can have a lower price still get the
18:59
Speaker 3: margin is there. So we are unfortunately just a very desensitized,
19:06
Speaker 3: wasteful industry. As kind as we are and as much
19:11
Speaker 3: as I see those that are focused on you know,
19:16
Speaker 3: investing in ending, you know, people that are are looking
19:20
Speaker 3: for their next mill. We kind of turned a blind
19:23
Speaker 3: eye to the very thing that we're doing is wasting.
19:26
Speaker 3: Where I just did a calculation the thirty three billion
19:30
Speaker 3: pounds could feed seven million people in a year. Now,
19:33
Speaker 3: whether or not that's exactly accurate, it just kind of
19:36
Speaker 3: makes you really rethink, Okay, we have a big problem here.
19:40
Speaker 4: How do we solve for that, because it's definitely worth solving.
19:43
Speaker 2: For Yeah, seven million, that's a lot of people. Man,
19:46
Speaker 2: that's really really eye opening. So beyond better forecasting, where
19:50
Speaker 2: do you see the biggest opportunities to reduce waste?
19:54
Speaker 3: I think it's it's it goes to the fork. When
19:56
Speaker 3: you know a forecast and know you know weather condition
20:00
Speaker 3: are poor, it's raining, I'm not going to open up
20:02
Speaker 3: the patio. It allows you to have a suggested ordering
20:07
Speaker 3: that should have a higher degree of actor see as
20:09
Speaker 3: well as suggested prep and production when raw product comes
20:14
Speaker 3: in if it is over ordered, sometimes there's a partial
20:18
Speaker 3: cooking that leads to prep, which when you do prep,
20:22
Speaker 3: you have labor and you have utilities water, gas, electricity
20:28
Speaker 3: to produce that. So I think without a doubt, and
20:32
Speaker 3: some people have done this not to high degree to
20:35
Speaker 3: where the end user believes in the data, so a
20:38
Speaker 3: lot of times it's discarded or not used because they
20:40
Speaker 3: don't find it valid. A lot of prep items also
20:46
Speaker 3: go to waste, which I think twenty percent of all
20:50
Speaker 3: waste is prepped items. Again, think about the cost of
20:53
Speaker 3: labor keeping that going without again having the proper math
20:57
Speaker 3: to say, based on what we have and based on
21:00
Speaker 3: what's coming over the next two days, here's exactly how
21:02
Speaker 3: much prep you need to do for these batches. So
21:07
Speaker 3: I just that's the mathematical equation right now that we're
21:11
Speaker 3: highly fixated on, because I think that could drastically reduce
21:14
Speaker 3: waste five to ten percent. Portioning is just a different
21:18
Speaker 3: aspect to where just like you do poor tests with
21:21
Speaker 3: your bartenders to make sure that they're doing the right ounces.
21:25
Speaker 3: I'm not sure a lot of people evaluate portion sizes
21:28
Speaker 3: to where two ounces here there adds up very quickly
21:32
Speaker 3: when you have a large, multi unit brand, to where
21:34
Speaker 3: there's significant waste that's doing that. So it's just another
21:38
Speaker 3: aspect of a skill set, and I guess a task
21:42
Speaker 3: or things that should be embedded to where people know
21:45
Speaker 3: and understand the importance of portion control, the importion, the
21:49
Speaker 3: importance of ordering properly as well as you know, creating
21:54
Speaker 3: that prep and production for the day for sure.
21:56
Speaker 2: And you know, as we've seen for the last few years,
21:59
Speaker 2: price increases have really impacted traffic. And now, as we mentioned,
22:03
Speaker 2: inflation's back in a big way. Where can restaurants realistically
22:07
Speaker 2: take costs out without hurting the guests or the employee experience.
22:11
Speaker 3: Well, look, we have taught the restaurant managers and chefs,
22:15
Speaker 3: kitchen managers. We have taught them that prime costs are
22:19
Speaker 3: the way, and we kind of just made that the focus.
22:22
Speaker 3: Worry about the food cost and the labor cost, but
22:24
Speaker 3: there's a there's just so many other ways to lose money.
22:29
Speaker 3: And you know when you get beyond food and labor,
22:32
Speaker 3: because there's a lot to save there. It's in the utilities,
22:37
Speaker 3: it's in the linen, it's in the chemicals and supplies
22:41
Speaker 3: that are used everyday, Eco lab, Autocord, take your pick.
22:45
Speaker 3: It's it's used in the paper goods. Paper goods have tripled,
22:49
Speaker 3: you know since pre COVID, everything has gone up thirty
22:53
Speaker 3: to forty percent in cost across all of those things.
22:56
Speaker 3: I mean, you know, so that these are areas where
22:59
Speaker 3: there's a lot of margin, leakage that is happening that
23:03
Speaker 3: a lot of brands don't really think about because again
23:05
Speaker 3: they're just fixated on food cost and labor costs, and unfortunately,
23:10
Speaker 3: food costs and labor costs just kind of have this stagnant.
23:13
Speaker 3: Hey we hit a twenty eight point six this week,
23:15
Speaker 3: we hit a twenty nine point.
23:17
Speaker 4: Five, Well why will we over ordered?
23:19
Speaker 3: And we it's depending on what we had from our
23:21
Speaker 3: ending inventory and what our beginning inventory. So it's math
23:24
Speaker 3: that just doesn't add up. So it's hard to get
23:27
Speaker 3: emotionally connected to it. So, you know, just beyond that,
23:31
Speaker 3: I just I really feel that when they really look
23:34
Speaker 3: at all aspects of it. I did this in the restaurant.
23:37
Speaker 3: I walk into the restaurant, you know, and we had
23:40
Speaker 3: lights on during the morning, and I'm like, well, hey,
23:43
Speaker 3: we don't open until four thirty, so can we just
23:45
Speaker 3: shut the lights off.
23:46
Speaker 4: Hey, the ac.
23:47
Speaker 3: Doesn't need to be turned down all the way, let's
23:50
Speaker 3: turn it up. The gas burners don't need to be
23:52
Speaker 3: burning when you walk away from roasting Rihanno's or corn.
23:57
Speaker 3: Can you just turn them off? The water leaking on
24:00
Speaker 3: the sink, Let's get a plumber. That's expensive. No, what's expensive.
24:04
Speaker 3: Is the water just leaking out? So there was little
24:08
Speaker 3: aspects that led to twenty percent savings. So it's just
24:14
Speaker 3: we saw a lot of that leakage. So I just
24:16
Speaker 3: think really looking at the business in a way that
24:19
Speaker 3: is measurable. And I'm not just talking about price, I'm
24:23
Speaker 3: talking about the each When you have that math and
24:26
Speaker 3: when you have that data and when you have something
24:28
Speaker 3: to drive an insight to say, hey, your linen went
24:31
Speaker 3: up and for some reason you had fifteen percent more
24:36
Speaker 3: aprons than you normally do, or you you know you
24:39
Speaker 3: wasted one hundred and fifty gallons more than you typically did,
24:44
Speaker 3: or killowatts, it just has a different meaning to where
24:48
Speaker 3: it just makes you more conscientious about like what where
24:52
Speaker 3: Where is there an area of opportunity that I can
24:55
Speaker 3: just start to communicate and tell people about where we're
24:59
Speaker 3: losing money because every dollar, say, it goes back into
25:04
Speaker 3: the business. And I just it's there, Mike, I mean
25:08
Speaker 3: for me to see it, and not to say that
25:11
Speaker 3: many of these brands don't have some type of leadership
25:14
Speaker 3: that focuses on these things. I just think there's a
25:17
Speaker 3: significant opportunity there. But it's also even know and like
25:21
Speaker 3: the commodity changes, like they don't know like when lines
25:25
Speaker 3: come in, they didn't know that it's like twenty percent,
25:29
Speaker 3: and how that's going to be an additional one hundred
25:31
Speaker 3: and eighty dollars taken out of the bottom line for
25:34
Speaker 3: the month.
25:35
Speaker 2: Yeah, it's it's staggering how many P and L line
25:39
Speaker 2: items there are.
25:40
Speaker 1: I mean, as an.
25:40
Speaker 2: Analyst, you know, we see these public documents and it's
25:43
Speaker 2: like food, labor, occupancy.
25:46
Speaker 1: And other, right, and it's uh.
25:48
Speaker 2: I did a project some years ago for a deli,
25:51
Speaker 2: not even a full service restaurant, and I was like
25:55
Speaker 2: amazed at how many light items were on that P
25:57
Speaker 2: and L for things that I never would have thought about,
26:00
Speaker 2: like knife sharpening.
26:01
Speaker 1: Hood cleaning. I mean, you name it, man.
26:04
Speaker 2: There was a lot of more lines on my EXCELS
26:07
Speaker 2: spreadsheet model that I built for that deli than I
26:10
Speaker 2: had for McDonald's.
26:11
Speaker 3: It's when you're not the owner in these things and
26:15
Speaker 3: nobody states anything. What most gms get is they wait
26:19
Speaker 3: for the end of month reconciliation, which is usually like
26:22
Speaker 3: a week or two after to where they just get
26:25
Speaker 3: this line item of variances and they're just like, what
26:28
Speaker 3: do I do Those little things add up. But if
26:31
Speaker 3: you have a series of signals throughout the day to
26:34
Speaker 3: say this is what's changed, this is what's happening, you
26:37
Speaker 3: can take those into action to immediately stop the leakage.
26:41
Speaker 4: So I just I believe.
26:42
Speaker 3: That's an area of opportunity that an owner would no
26:47
Speaker 3: one understand without having insight speech it's just because they're
26:52
Speaker 3: maniacal about we need to make money.
26:55
Speaker 4: Yeah, a manager might think a little bit differently.
26:58
Speaker 1: Yeah for sure.
27:00
Speaker 2: Okay, So why, in your opinion, is the back office,
27:03
Speaker 2: you know, purchasing inventory ap the next big thing in
27:07
Speaker 2: restaurant tech.
27:08
Speaker 4: I believe the toolsets.
27:09
Speaker 3: Have always been there, the intelligence behind the toolsets have
27:14
Speaker 3: not always been there until today. I think the advancements
27:19
Speaker 3: that we're seeing with AI to be able to take
27:22
Speaker 3: large data sets, understand pattern recognition, be able to take
27:27
Speaker 3: the historical which maybe let's just say a manager that's
27:31
Speaker 3: been in a restaurant for five, six, seven years. Managers
27:37
Speaker 3: like that understand pattern recognition of I understand seasonality, I
27:41
Speaker 3: understand the day before and after holidays. I understand all
27:44
Speaker 3: aspects because I've understood over years that that pattern recognition
27:49
Speaker 3: is far and few between, because you know, I think
27:53
Speaker 3: the management turnover is I think fifty five percent for
27:57
Speaker 3: limited service, around thirty eight percent for full service, So
28:00
Speaker 3: they're cycling management. But you know I do I do
28:04
Speaker 3: think intelligence in back office, automating the entire workflow is
28:10
Speaker 3: the future. And you know, according to ht tech study,
28:13
Speaker 3: I've been I review that every year, you know, where
28:16
Speaker 3: they evaluate where you're going to invest. I think with
28:20
Speaker 3: the commodity prices and things that have gone up, food cost,
28:24
Speaker 3: you know, people are really trying to figure out how
28:25
Speaker 3: do we manage this food cost that's gone up. I
28:29
Speaker 3: mean prime cost have shifted like five percent. You know
28:33
Speaker 3: was typically around sixty to sixty five to where it's
28:36
Speaker 3: jumped up to sixty five to seventy. So you know
28:39
Speaker 3: it's labor's another opportunity. You know, we've seen the wage inflation. Again,
28:44
Speaker 3: turnover has an impact. So I just I think that
28:49
Speaker 3: again beyond prime cost, understanding that that where that leakage
28:54
Speaker 3: is occurring, that is I just think that's the next
28:57
Speaker 3: frontier that a lot of people have not been able
28:59
Speaker 3: to solve beyond. Here's an analytics tool. A GM and
29:03
Speaker 3: a measured do not have time to go dig into
29:07
Speaker 3: an analytics So I feel like back office, we're having
29:10
Speaker 3: to work to make it work or it should be
29:12
Speaker 3: just working for you, and you know, providing the information
29:16
Speaker 3: the signals of where that's occurring. You know, I think
29:20
Speaker 3: just beyond that, it's you know, the other opportunity is
29:24
Speaker 3: revenue leakage. And what I mean by that is if
29:28
Speaker 3: you really took your entire service team, I would say,
29:31
Speaker 3: having run a tech company, we have a sales team.
29:35
Speaker 3: The sales team for restaurants is servers, bartenders, cashiers. You know,
29:40
Speaker 3: we have the digital footprint of everything that they're ringing in.
29:43
Speaker 3: I can tell you what servers an order taker versus
29:46
Speaker 3: what server is providing an experience based on what they're
29:51
Speaker 3: choosing in the menu. I can tell you who's selling waters,
29:56
Speaker 3: who's selling non alcoholic beverages, attachment rates for over glasses
30:01
Speaker 3: of wine, appetizers, deserve sides, specialty items, to where I
30:09
Speaker 3: can get a baseline and I can show you how
30:12
Speaker 3: much revenue leak ise in a week, and who are
30:15
Speaker 3: the team members that you need to coach just to
30:19
Speaker 3: give them a little bit of development and you know,
30:22
Speaker 3: with the right data to where they can start suggestive selling,
30:26
Speaker 3: they can start not only providing a better experience for
30:28
Speaker 3: the customer because the customer doesn't they don't want to order,
30:31
Speaker 3: they want to be guided, and when they are guided,
30:35
Speaker 3: not for every restaurant, some people want to order themselves.
30:37
Speaker 3: I get it, but I'm saying that server or bartrain
30:41
Speaker 3: that provides an experience. They're not only providing a better
30:44
Speaker 3: experience by being informative and letting them know what's good
30:48
Speaker 3: or what's great or what they suggest, they're also increasing
30:52
Speaker 3: the sales per labor hour to where it's just higher productivity.
30:57
Speaker 3: And the data is there, we just haven't unveiled it
31:01
Speaker 3: as technologists until today.
31:03
Speaker 1: Yeah, that's one of the more interesting use cases.
31:06
Speaker 2: And you know, a full service chains we covered aren't
31:09
Speaker 2: anywhere close, but some of the quick service names have
31:11
Speaker 2: these like AI GM assistants basically that'll.
31:17
Speaker 1: I'll talk to them throughout the day. Right.
31:19
Speaker 2: These things are obviously still in tests and not fully
31:21
Speaker 2: implemented yet, but that's a really really interesting use case
31:26
Speaker 2: for AI. In my opinion, it's it's interesting what AI
31:29
Speaker 2: is bringing to this, and there's definitely a layer on
31:32
Speaker 2: top of that, you know, But what I would what
31:34
Speaker 2: I would state, Mike, and I'm following this very very closely.
31:40
Speaker 2: You know, there's still is there still is software that
31:45
Speaker 2: have workflows that have tool sets that are utilized day
31:48
Speaker 2: to day.
31:49
Speaker 3: It's the intelligence that they're lacking. So I'm curious as
31:53
Speaker 3: you think about the technology, when you think about costs
31:57
Speaker 3: there you have old tech with APIs that now has
32:02
Speaker 3: a presentation layer. So what they're doing is exponentially spending
32:06
Speaker 3: for more tech when we're looking at the tool sets
32:11
Speaker 3: to have the intelligence to have that that AI. So
32:14
Speaker 3: it's an interesting case. And I think a lot of
32:16
Speaker 3: people are testing right now these and you know, I'm
32:21
Speaker 3: curious on you know, what experience and what opportunities they're
32:26
Speaker 3: seeing because I've learned a lot over the past years
32:31
Speaker 3: as we're building here leveraging AI. They're there, it's fraught
32:34
Speaker 3: with with areas of opportunity if if it's it's not
32:39
Speaker 3: pulling the right data set, and sometimes a PA's APIs
32:44
Speaker 3: are not necessarily pulling the granularity necessary to provide accurate information,
32:50
Speaker 3: and if an operator gets inaccurate information, they they don't
32:54
Speaker 3: trust the data unfortunately.
32:57
Speaker 1: Yeah, yeah, for sure.
33:00
Speaker 2: I mean I can tell you I was slow to
33:03
Speaker 2: adopt AI just because of so much bad data I
33:07
Speaker 2: got in the early stages. I'm not going to name
33:10
Speaker 2: names which LLLM it was, but you know, you know,
33:17
Speaker 2: without trust, you know, to your point, employees, I'm not
33:19
Speaker 2: going to implement these tools. All right. If you look
33:23
Speaker 2: across your data and your customers today, what's the single
33:26
Speaker 2: biggest blind spot operators have about profitability?
33:29
Speaker 1: Right now?
33:30
Speaker 4: There's a lot of blind spots, Mike.
33:31
Speaker 3: I mean I would say that there's I still think
33:34
Speaker 3: the biggest blind spot is the waste. And you know,
33:39
Speaker 3: I think in Europe there's more advancements to where there's
33:42
Speaker 3: more of an interest in really truly measuring that. I
33:46
Speaker 3: do think it's a huge opportunity here.
33:49
Speaker 1: You know.
33:49
Speaker 3: The way that we manage metrics is another opportunity. And
33:54
Speaker 3: there's a couple of things I see here. A lot
33:56
Speaker 3: of brands look at food costs and labor cost as
33:58
Speaker 3: the metrics, and you know, I really think that the
34:02
Speaker 3: right metrics are more productivity, sells per labor hour. Sales
34:06
Speaker 3: per labor hour tells you a lot over labor percentage.
34:09
Speaker 3: That's just a percentage of cost, and when you're driving
34:13
Speaker 3: down to that, you're going to impact your cells, your traffic,
34:16
Speaker 3: your guest experience. But sells per labor eror tells a
34:19
Speaker 3: different story shows that level of productivity.
34:24
Speaker 4: On the food side.
34:26
Speaker 3: I mean really evaluating actual versus theoretical down to the item.
34:31
Speaker 3: And the reason why I think I say that is
34:34
Speaker 3: a lot of people look at Inventoria to think that's
34:36
Speaker 3: something that I have to do at the end of
34:38
Speaker 3: the week or month to document what we have so
34:41
Speaker 3: I know how much I have on hand and I
34:43
Speaker 3: can compare it to what I bought and I have
34:45
Speaker 3: a variance of that. But the truth is, like twenty
34:49
Speaker 3: percent of your items are driving sixty to seventy percent
34:52
Speaker 3: of your revenue. I think the true number to know
34:55
Speaker 3: and understand is your actual versus the theoretical of those
35:00
Speaker 3: high selling items that are moving a lot of the revenue.
35:03
Speaker 3: Because it's much more meaningful if I say, you know,
35:07
Speaker 3: I actually have, you know, twelve bottles of Tito's. Theoretically
35:12
Speaker 3: I should have twenty four. So in your mind, you're like,
35:15
Speaker 3: what happened to the twelve bottles of Tito's? Are we
35:18
Speaker 3: overpouring that's our will? Are we giving it away? Are
35:23
Speaker 3: we drinking it? Our bottles being taken out that we
35:27
Speaker 3: don't know because all of a sudden when you truly understand,
35:30
Speaker 3: like where am I losing the money? It's thought of
35:33
Speaker 3: in a different way. So I just think the metrics
35:36
Speaker 3: are an area of opportunity. One that I'm curious about
35:41
Speaker 3: is the metric of profitability, Because profitability I would love
35:49
Speaker 3: to say that managers are emotionally connected to it, but
35:55
Speaker 3: I don't know that they are. I don't know that
35:57
Speaker 3: if they think that the profitability is attainable. I don't
36:02
Speaker 3: know if many of them think of it as a
36:03
Speaker 3: black box, because I remember bonus structures were just like,
36:07
Speaker 3: I don't know, if we just manage food and labor
36:10
Speaker 3: and drive sales, we're going to get something and it's
36:12
Speaker 3: going to either be good.
36:13
Speaker 4: So it's a bit of a black box.
36:15
Speaker 3: And you know, I'm on a quest right now to
36:18
Speaker 3: determine how do we not make how do we make
36:21
Speaker 3: it like live into where they can see how their
36:25
Speaker 3: day to day initiatives are driving profitability. And then then
36:30
Speaker 3: can you get emotionally connected to metric if you realize
36:34
Speaker 3: you get a share of something that is known and
36:36
Speaker 3: seen and understood. Because without the math behind it, I'm
36:40
Speaker 3: not sure they're going to be necessarily motivated.
36:45
Speaker 4: To get to the right outcome.
36:47
Speaker 1: Now, it's cool. It's cool. It's an important mission.
36:50
Speaker 2: So if you could give one piece of advice to
36:52
Speaker 2: restaurant operators for the rest of twenty twenty six, what
36:56
Speaker 2: would it.
36:56
Speaker 3: Be, Build a financial acumen at the GM level. And
37:02
Speaker 3: I say at the GM level, the GM should be
37:04
Speaker 3: there to coach develop mentor the management the chefs, you know,
37:09
Speaker 3: to displace themselves. I just I think that's the greatest
37:12
Speaker 3: area of opportunity. Look, we are all starving for knowledge
37:16
Speaker 3: and development, and I think it's a It's an area
37:18
Speaker 3: that you know, the industry has not done a good
37:22
Speaker 3: job of, and I think when they do that, they
37:25
Speaker 3: will see, you know, significant change if they can emotionally
37:28
Speaker 3: connect them with that profitability and how to get there.
37:33
Speaker 3: It allows for a healthy bottom line where you can
37:35
Speaker 3: vest back into your people and vest back in your restaurant,
37:39
Speaker 3: fix things that you didn't think you could fix. I
37:42
Speaker 3: think that's the greatest opportunity is that education.
37:46
Speaker 1: That's good stuff. Man.
37:48
Speaker 2: Listen, man, I'm excited to see what you do at Craftable.
37:50
Speaker 2: They're lucky to have you. Thanks for joining the pod.
37:53
Speaker 4: Appreciate it, Mike, It's been a pleasure. Thank you.
37:56
Speaker 1: I also want to thank the audience for tuning in.
37:58
Speaker 2: If you'd like to learn more about craftable, got to
38:00
Speaker 2: craftable dot com. And if you liked our discussion, please
38:03
Speaker 2: share it with your friends and colleagues. Check back soon
38:06
Speaker 2: for an interview with Andreas Reptopolas, CEO and founder of Matternet.