Editor’s note: At this year’s National Restaurant Association Show, QSR caught up with restaurant executives to get their take on 2023’s biggest topics and what’s on the mind of operators. We’ll share their insights and observations from the floor, thoughts on the future, and what matters most headed into the back half of the year and beyond.
I have a random question to start. What’s it like running a smoothie and juice chain in the summer? Is it a rush to tighten the waistline?
Yeah, I guess so. Some of the things we’re working on is understanding that guest. Is it a frequency thing? Are they new customers? We have a lot of theories, but one of the things we did find at the restaurant show, which I actually thought about at MURTEC, and have been having ongoing conversations about, is really driving down to understanding our guests more. There’s a lot more tools out there that allow us to actually see that.
What are you starting to figure out from your guest data?
As I was listening to some of the other CEOs talk and then listening to other brands, it sounds like we’re all in the same boat. We’re in the era of having a lot of data because we set those platforms up to capture it. So now it’s like, ‘what do we do with that data?’ Once we have it, it’s creating the groups and creating a strategy behind it. What happened with us is we were, in the past, sending out offers to our loyalty base. We have a platform where I can take a look at top spenders, or who comes in most frequently. And I started noticing that our top tier who frequents us almost daily, never utilizes our [deals and] offerings. I thought that was odd and I started thinking about it and looking at it. They’re not coming because of the coupon or the offer—they’re coming because they like the product. And the price doesn’t matter.
Back in October, we started feeling a crunch on money. Costs were rising. If we go all the way back to June, July, and August, we saw prices rising. In October, they got to the point where they were extremely noticeable. That’s when I made a decision: ‘Hey, what can we do?’ All these costs are because of the product coming in. The quickest answer is, let’s just pass it on to the guest. I hated doing that, which is the reason we didn’t take price increases when they started to rise. I thought the prices would eventually come back down, we’d weather the storm, we’d be fine. I started saying, ‘what are the things we’re doing that we can do better?’ And then I also went to my supplier and asked the same thing. ‘What are you guys doing internally so you don’t have to keep passing the cost off?’
Because eventually it goes down to the consumer and eventually the consumer quits purchasing. And when the consumer does so, this whole supply chain, this whole egg, this whole arm, all of our relationships, will cease to exist. So I’m asking you—this could be the produce company, my mainline distributor—I put two things out there: right now you’re delivering to my store five times a week. What does it look like if you’re delivering three times per week? There has to be some savings there. What are some options with what we’re currently using that we can possibly substitute to get a better price break?
And then we started doing that ourselves—pointing the fingers back. It was costing us a certain amount of money to send information out to our customers and realizing that the customers we were targeting were the customers who were not using it. I thought, ‘why don’t we just target to the customers who we know are going to?’ And we were able to get the same, if not better, results and cutting, I’ll call it the marketing gun, in half. We were spending less money getting the same results and we actually got a better result because we were targeting the people in the proper way in which they wanted to listen. And when I’m listening to the guys at the conference, they’re all saying the same thing—‘what do we do with the data we get? And this is the year we figure out how to utilize that data and get a bigger bang for our buck.’
That’s where we are and it’s interesting to look at these patterns on the backend as to why they eat certain things and when they do it. Such as soup. If we look at soup and we look at the actual product mix, it really doesn’t sell that well. But what we found out is when we look around, what are all the other things that are being purchased when somebody orders the soup? We realized when somebody orders the soup, their average ticket price is $32. That means it’s an add-on. Our average check purchase is right around $17. So when they order soup they’re ordering a bunch of other things as well. It’s unique as to, OK, now you’re talking to a different customer who orders the soup as you do when you have somebody who is just ordering a smoothie or a juice when they come in.
Give us your take on the innovation cycle these days?
It’s coming. And it’s coming so fast that, in certain ways, I don’t want to say I’m afraid to take a leap, but as we get into one, four more will pop up. And you think, oh, those four are better than what I have here. It’s choosing one that you know—I just said this to them—it’s return on investment. Your software program is only as good as the return on investment. I said, ‘when you have that, it becomes a no-brainer. And when it’s a no-brainer, you’re going to sell more of this.’ Your future is our success, which they agreed. But what I got out of the last few shows, I’ve been going to this show, Danny Meyer was up there and talking about how he was there 30 years ago and talking about remembering the POU and I had to type in the POU to get it to bring up on the register. I’ve been going there for 27 years. He’s been for 30. It’s a wow thought. But now I go in a different capacity. I took eight team members with me, and they got to go experience things, but the one thing I came home with was relationships. I had more connections that play in our space that were willing to help one another out. When I look at that and I look at being able to talk to other brands that are either bigger than us or smaller, and helping them out, or them helping us out—having those types of relationships is invaluable. I can’t put a price tag on that.
I think moving forward it’s going to be the ones that can collaborate with one another. It’s not about ‘oh, I’m the only one who has this software.’ It’s, ‘how do I get this things to work right for me.’ That’s what I heard. It’s great data, but what do I do with it? And once we find out how to utilize it …. We bounce ideas all the time, did you know it could do this? You play with it, you test, and then you start seeing some results back on it. It lights up my team’s face when they know when they push this button, they see a certain result. And, of course, the product has to be great as well. It all comes together.
What was the show like 27 years ago?
I would come home with four bags full of stuff and I’d come back and dump it all out on my bed and my desk. And I’d try to narrow it down. I called it, way back then, ‘which $9 idea is in this bag?’ I tried many things. I still have bags that I bought for $1 and I bought 5,000 of them, that I was able to give away to customers and it was really cool to watch them all carry my bags around. There were these plastic lids. I was in a different mindset back then. I really catered to the customer. When we look at where we’re at today, I’ve got a great example for you. Danny Meyer said to the panel up there, ‘where does the industry look in five years?” He said, ‘the industry is going to be when the customer decides to start coming to your establishment that we start your order for you—in anticipation, whether it’s AI—anticipating what you’re going to order.’ I thought, ‘wow.’ That’s getting out there. Just as it so happens, it was my mom’s birthday. I call her. I was at the show. I literally just got out of that talk. I said, ‘happy birthday.’ My dad was a truck driver. And he drove trucks for 50 years.
My mom used to make my dad jerky and she’s got like 21 different flavors and he’d give them the jerky and he’d go on. Well, you know, he’d share it and then people would start saying, ‘hey, can I get some of that.’ Now, it’s my mom’s side gig. She sells a lot of jerky to a lot of these truck drivers from all over the country and they drive through Phoenix. I said, ‘mom, happy birthday, what are you doing today?’ She says, ‘I’m making jerky.’ Oh, what are you making. ‘This guy, he buys about 150 bags from me. He should be coming in next month.’ I asked where he’s from. ‘He’s from Seattle.’ Cool, when does he come? ‘Well, he usually comes like every other month. He buys 150 bags.’ So, you’re making his order before he actually orders it? ‘Yeah.’ How do you know what to make? ‘Whatever his order is, he usually orders 75 percent key lime.’ Really? So you outlay the money upfront, and as an anticipation you’re making the key lime for him. ‘Yes, I want to make sure that I can deliver his order quickly when he gets here.’ There’s no AI technology there that can replace that owner-operator who knows their guest that way. It was overwhelming. That’s what we were way back when we first started—we anticipated our guests’ needs and we were always there and thinking about what’s that next thing.
It’s inert learning. It just happens. You don’t need a computer for it or AI.
I agree it does feel like we’ve gone past the stuff-your-bags-full-of-pamphlet days into relationship building at the show. I guess it’s so much easier now to find that information before you ever get there.
That’s what I was talking about. Putting a name to the face. Being able to talk to them in the event. You can go out to dinner and talk more on the product as well as meet other people who are using it. Very rarely in there a product out there that’s the Holy Grail, but I got to meet IT directors and other big brands. We discussed things on different levels that I just never had those conversations before. CEOs of other companies and understanding where their vision and their direction is going. And being able to pick up the phone, send a text message, call, and get a relatively quick answer.
What are your overall thoughts on AI? There’s a lot of applications for it, behind the scenes, guest facing, so forth. What’s the right-now fit?
I appreciate it. I was telling the team, I remember when email came out. And MySpace came out. We’ve got to be marketing on here. I was saying, no, it’s not going to work. In the past, I was faxing my special sheets out every day. Then we go to a point where it was email, and I would email out what we’re doing. And then just looking at how far technology has come, I do believe if you’re not embracing it, you may be left in the dust here really quickly, as fast as everything is changing. So in our company, we asked them to find some sort of AI and use it on a daily basis. Whether it helps you draft it an email, whether it’s suggestions for names, whatever it might be. I use it for all kinds of things. And it comes back with a pretty decent result. I use ChatGPT the most. But I think it’s finding that one piece that’s missing inside your organization and being able to apply it. I know right now, for us, we just purchased one for site selection. We’re going to be using that with a few things. One is the visual, the human element of actually going out there and driving it and having eyes on it, from the real estate people. And then it’s going to be the AI piece that’s going to give us a lot of data on all kinds of things, which is very interesting—how they capture this data. And then there’s the gut feel as well.
I believe this can only make us go one way. Providing that what they’re saying is right and we continue to see the correct location be selected.
How many locations are you up to now?
What’s the growth look like near-term, mid-term, long-term, all of it?
We have about 10 in the pipeline. We have some down in Florida that’s been signed. Two have been signed down in Florida. We’re going into the Naples area, which we learned the Naples and Fort Myers got hit really hard right as soon as we signed the contract, with the hurricanes and the construction costs and the real estate out there is …
Yeah, pretty terrible. We’re going into Indiana. And some on the west side of the state here, we have a couple that are coming up here in the metro Detroit area. But since October, when we turned, I call it, we turned the fingers on us, it’s been about unit economics. During this time—the time of inflation—we need to be really, really focusing on unit economics for our franchisees and make sure cost of goods stay in line, labor stays in line, operating costs are in line. Real estate needs to stay in line. And if not, we’re not going to do that. We were able to drop our costs of goods since October and we’re starting to see some really good numbers. I’m happy for that because I want to make our Item 19 look good.
So what’s your final takeaway and thoughts on the opportunities ahead?
When it comes to the guest, I think the guest is still the king, and taking care of them as best you can. Having a training program to care about our guests. I feel in the world today, there’s a little bit of a gap there as it was when I was growing up. I think it’s the biggest opportunity. The AI is supposed to be accounting for that, but we’re still people. We all like a smile and a thank you—a little gesture of appreciate for dining with us.