What are the biggest impacts of Covid-19 on your business?. . .
How Two Food Franchisees Are Affected by Covid, and How They’re Responding
All mall-based businesses are obviously struggling with decreased foot traffic, but I see this issue as one that will be overcome with the development of new drugs and treatments in the near future. I believe our biggest long-term issue is on the labor side. We are having a very difficult time attracting and retaining crew members. This is probably due to a number of factors, including the virus and the negative impact that the government’s stimulus and unemployment subsidies have had on our ability to compete for people.
How have you responded?
We have revised our way of operating to rely on fewer crew hours than before. It is very difficult to achieve greater labor efficiency, especially with all the new health requirements, so we are also testing self-order kiosks and promoting ordering through our mobile platforms to increase efficiency on the order side.
Regardless of government mandates, attention to healthy practices and cleanliness is here to stay, and rightfully so. This is an area where I think Auntie Anne’s, Cinnabon, and Carvel have always been leaders; cleanliness has always been a top priority for these brands. Robby Basati is the CEO of RoboFran development, a multi-brand organization that operates 15 Mountain Mike’s Pizza; 2 branded gas stations; 1 Neighborhood supermarket; and 8 development agent stores for Mountain Mike’s with 4 new ones in development and 3 in the pipeline for 2021. At 35, he’s already been a franchisee for 15 years.
What are the biggest impacts of Covid-19 on your business?
Mountain Mike’s is known for its inviting, family-friendly atmosphere. So as a restaurant that focuses on entertaining the whole family, a local sports team, or a group of co-workers, losing the dine-in component of our business has brought on the financial strain, and our ambiance has changed significantly because our dining rooms are closed. We can’t wait for the day where the dine-in component of our business returns.
How have you responded?
Since the beginning of the pandemic, our franchise support center has been providing us with the tools we need to get through these unprecedented times. We continue to put the safety of guests and staff at the forefront of everything we do. To ensure that our guests feel confident about their experience, in addition to adhering to the strictest health and safety guidelines set by the state and the CDC (such as employees wearing masks and gloves), our dining rooms have been temporarily closed in counties that are currently in the “purple tier,” which restricts indoor dining. Previously, when our dining rooms were opened with limited capacity, sections of our dining rooms were blocked off to create physical distancing.
What changes do you think will be permanent?
Time will tell! Source: Franchising.com
Now is a perfect time for industry players to reevaluate and reconsider . . . .
How to Maximize Outside Legal Counsel to Drive Post-Pandemic Growth
Now is a perfect time for industry players to reevaluate and reconsider. Using the right outside counsel can provide the extra edge in both “on-the-ground” contract negotiations and the overall programmatic approach to successfully realize growth plans. Everyone loves to complain about lawyers. They like to talk (and talk). They relish in completely rewriting contracts. They love to argue. And they bill by the hour—often many hours. Yes, such criticism is sometimes deserved. However, there is no reason that outside legal counsel cannot be a collaborative partner and play a critical role in helping restaurants execute on growth plans coming out of the COVID-19 pandemic. As COVID case numbers trend downward and more vaccinations are administered every day, the quick-service industry expects a surge in consumer demand in the latter half of 2021 and all of 2022. Brands do not want to miss this tremendous revenue opportunity and should look to maximize usage of their outside counsel in negotiating lease and acquisition deals as part of an overall strategy to increase location counts. Now is a perfect time for industry players in growth mode to reevaluate and reconsider how they use outside legal counsel.
Capacity and Capability
Legal needs for a company adding one or two new locations per year will be vastly different if the same company expects to add ten or more locations in a year, especially if there are plans to expand into a new geography. Does current legal counsel have the capacity and personnel to take on a substantial increase in deal flow? The answer can make or break a company’s growth plans.
Outside counsel should have a deep bench of attorneys who are experienced in negotiating retail deals and have a track record of success handling clients with large real estate portfolios. A company’s desired increase in the deal flow should not be hampered by outside counsel’s inability to keep up with the additional workload.
Innovation: Technology and Data
Ask any quick-service restaurant development director how long it takes on average to negotiate and sign a new lease and the answer will usually be some variation of “three to four months.” That estimate is almost never accurate. Outside counsel should be tracking this data and be able to quickly produce the exact number of days for deal cycle time. Optimally, outside counsel should also track specific data subsets for average deal cycle time, including cycle time by an individual outside attorney, individual company real estate professional, city, region, and deal type. Such data tracking will allow a company and its legal counsel to analyze costs, trends, and training opportunities (both internally and externally) in order to collaboratively improve deal cycle time. If outside counsel is not using technology to track data, then it should. Otherwise, a client is flying blind with its outside counsel. Other data outside counsel should track and report on a real-time basis can include spent legal fees, the current status of active deals, and key contract dates and milestones. Ideally, outside counsel will develop an interactive client website tailored to the client’s specific data and reporting needs. Such a website can also be a repository for form documents, executed documents, and training materials. Easy to access information is critical for keeping track of goals and determining strategies to overcome obstacles.
Gone are the days when lawyers are expected to merely write up an agreement. Lawyers are now expected to be business advisors, therapists, and project managers. Unfortunately, most lawyers do not have those skills, especially when it comes to project management. The good news is that more and more law firms are hiring and utilizing legal project managers (LPMs). LPMs can provide services well beyond standard legal work such as Process Mapping/Process Improvement: A quick-service restaurant in the midst of rapidly expanding its footprint will likely need to revamp its various internal processes (e.g., lease negotiations, due diligence, and construction) to successfully scale growth. LPMs can assist in the rethinking and retooling of each process through process mapping and implementation of process improvement strategies. Technology Build-Out: LPMs will work with a quick-service restaurant to identify how technology can best address problems and pressing needs and then build out a tailored, technology-based solution, including individualized client-law firm websites, document automation, and the use of programmable bots that can analyze documents and even perform some basic drafting.
Special Projects: Every quick-service restaurant growth story will have its ups and downs and a share of surprises. LPMs become indispensable when aiding outside counsel to handle complex problems so that store growth is not interrupted. LPMs can quickly devise strategies and solutions to deal with unwanted bumps in the road so that legal counsel can focus on actual contract negotiation.
Lowest Cost Versus Best Value
Try to avoid too quickly pulling the trigger for the lowest-cost legal provider at the expense of the provider that brings the most value. Sometimes you get what you pay for. The cost of a single lawsuit because of sloppy drafting in a lease, for example, can wipe away the entirety of any savings realized by using the cheapest option. Additionally, painfully slow negotiations will lead to greater opportunity loss. Legal providers are now moving away from the traditional hourly billing model. There is a growing movement in the legal industry to offer “Alternative Fee Arrangements” and the trend has only been accelerated by the pandemic. Innovative fee structures can include:
Capped Fees: Legal fees for a deal cannot exceed an agreed-upon cap.
Fixed Fees: Legal fees for a deal will be a set fee regardless of how many hours are spent to complete a deal.
Portfolio Fee: Counsel is paid a set fee on a monthly, quarterly, bi-annual, or annual basis to be used for all deals handled during the applicable fee period.
These Alternative Fee Arrangement options incentivize outside counsel to be aligned with the quick-service restaurant’s own business and growth strategies.
In determining outside counsel needs, it is important to thoughtfully balance cost with provided value, including the considerations discussed above. The real estate market is starting to heat up and there will surely be fierce competition for much sought-after “Main-and-Main” locations across the country. Using the right outside counsel can provide the extra edge in both “on-the-ground” contract negotiations and the overall programmatic approach to successfully realize growth plans. Outside legal counsel does not have to be an unwanted impediment and instead can be an invaluable partner in accomplishing expansion goals. –Source: QSR.
Take advantage of all of the opportunities that are available to you . . . .
The 10 Commandments of Franchise
Some people buy a franchise with the belief that it is easy or the franchisor is going to make them successful. The franchisor has gone through a lot of preparation, work, and expense to create a franchise model that you can join and so you can achieve your own success story. Many people have become very successful and extremely wealthy through franchise ownership but is largely up to you to make it happen. You can implement the following 10 commandments to make the most of your opportunity as a franchise owner.
Historically, the most involved franchise owners tend to be among the most successful. Your first priority is to run your business, but you may find synergies with the franchisor that can help you learn more about the business and also benefit the franchisor.
Strive to be the top-producing franchise owner
Some say that the first step to becoming the top producer is simply believing that you can be the top producer. You made a huge investment of your time and money to join the franchise system, so you may as well endeavor to achieve the highest return on investment possible. Hint: The top common denominator found across most industries is simply the franchisees that make the commitment to religiously follow the franchise system.
Be a leader in the franchise-owner community
Remember how important it was for you to look up to the leadership of more experienced and successful franchise owners when you first joined the system. Remember that a wildly successful franchisor and franchise community will help you make your franchise more successful. Don’t be afraid to seek to become a leader among the franchisees to help them achieve their goals and dreams.
Be a mentor
Some franchisors have formal mentorship programs in place. Teaching is the best way to learn in most cases. Again, the overall health of the entire franchise network has a huge impact on each and every individual in the organization, so it pays to mentor other owners in more ways than one.
Volunteer to serve on the owner’s advisory committee
The Owner’s Advisory Committee for your franchise may offer an opportunity for you to participate, allowing you to gather feedback, ideas and concerns from other franchisees in your region and communicate to the corporate headquarters or attend regular meetings to make suggestions to influence the direction the company takes in the future.
I had the pleasure of working for the inventor of the Egg McMuffin when I was a young man. This is a great example of a franchise owner bringing something huge to the franchisor and reaping the benefits. Be sure to take your new ideas through the proper channels with your franchisor so the entire community can benefit.
Be a contributor, not a consumer
Be a part of the business’s “big picture” instead of standing on the sidelines. Contribute your genius and experience, and lend a hand whenever you can.
Participate in the annual convention
The annual convention has always been my absolute favorite event of the year. Since you are a member of a “party” and not so much a team, you rarely get to be on the same playing field together. Make the most of the conventions and pitch in if possible.
Build your enterprise and legacy through multi-unit ownership
Some of the most successful and wealthiest business owners that I know are multi-unit franchisees. Once you have proven to yourself and your franchisor that you have what it takes to launch, grow and thrive with one franchise, it may be time to add more units. Take advantage of all of the opportunities that are available to you. The franchise model is the most successful business expansion method in our history due to the common effort of many to build a common business success story. – Source: Entrepreneur . . . .
Restaurants and bars hired 176,000 people in March, the biggest increase of any industry last month . . . .
The Restaurant Industry is on a Hiring Spree as COVID-19 Recovery Continues
As COVID-19 recovery continues and dining rooms head back to normal capacities, restaurants are ramping up hiring. Multiple chains, including regional McDonald’s restaurants and Sonic Drive-In, have announced hiring drives over the past month in response to growing demand at this point in the pandemic. This trend is reflected by the latest hiring numbers from the Bureau of Labor Statistics. In March, restaurants, and bars gained 176,000 jobs, down from February’s increased pace of 309,000 jobs. But despite the month-over-month slowdown, hospitality led the way in the March U.S. jobs report and had the largest increase of any industry, as economic activity resumes while the nationwide unemployment rate dropped to 6%. Even though unemployment still remains high and restaurants are looking to hire amid increased consumer demand, many appear to be struggling to find workers. Heather Baba-Roe, owner of Baja Grill with two locations in Arkansas, told ABC News that over the past seven years of operating as a brick and mortar restaurant, “[this] is the first time that we have ever had a problem finding applicants.” In Western Pennsylvania, it’s the same story with “help wanted” signs hanging everywhere. “I think everybody is in the same boat trying to get employees,” Joe Kolek, owner of Anchor Inn in Harrison, Penn. Told Trib Live. We have rounded up a list of restaurants — from national chains to regional brands — that have announced hiring activity recently. – Source: NRN.
Famous Dave’s plans first Quick ‘Que drive-thru . . . .
BBQ Holdings’ new Line-Service Model will Debut in Salt Lake City in June
BBQ Holdings Inc.’s Famous Dave’s will be adding a drive-thru to its second Quick ‘Que line-service model, which is scheduled to open in Salt Lake City, Utah, in June, the company said. Famous Dave’s, the 134-unit division of Minnetonka, Minn.-based BBQ Holdings, announced the new counter-service Quick ‘Que format in March, with the first unit now planned for Las Vegas, Nev. “A year after the arrival of COVID, we’re proud to continue finding new ways to evolve and better serve both our customers and our franchisees,” said Jeff Crivello, CEO of BBQ Holdings, in a statement. “The Quick ‘Que model is a prime example of that effort. Not only will this model provide a more convenient experience for customers without compromising the quality of the food, but its build-out should also prove to be more affordable and profitable for franchisees.” Crivello said the company expected to open five Famous Dave’s Quick ‘Que locations this year. In its earlier announcement, Famous Dave’s said the streamlined format is also panned for Coon Rapids, Mich., in September The new Las Vegas Famous Dave’s will be opened and operated by franchise partner Alejandro Orozco, who operates 10 Famous Dave’s. The Salt Lake City location will be opened and operated by franchise partners Elaina Morris Herber and Paul Herber, who operate seven other Famous Dave’s locations. For the fourth quarter ended Jan. 3, BBQ Holdings’ net loss widened to $2.8 million, or 31 cents a share, from $1.8 million, or 20 cents a share, in the same period last year. That was “driven partially by a decrease in same-store sales and franchise-related revenue caused by COVID-related restrictions,” the company said. Revenues in the fourth quarter rose to $34.3 million from $23.6 million in the same period last year. In 2020, BBQ Holdings added 18 Granite City restaurants, a Clark Crew BBQ, and a Real Urban Barbecue restaurant to its holdings. Same-store net sales at company-owned Famous Dave’s units in the fourth quarter declined 5.5%. The company said 59% of restaurants were fully closed at one point during the quarter. Franchise-operated same-store net sales fell 13.6%. As of Jan. 3, BBQ Holdings had four brands with 145 “brick and mortar” locations in 31 states and three countries, including 47 company-owned and 98 franchise-operated restaurants. In addition, the company has seven company-owned Famous Dave’s ghost kitchens operating within its Granite City Food and Brewery locations, and seven Famous Dave’s franchisee ghost kitchens operating out of the kitchen of another restaurant location or a shared kitchen space. –Source: NRN.
Del Taco President and CEO John D. Cappasola Jr. breaks down the chain’s latest earnings as well as menu innovation and franchisee success . . . .
Extra Serving: Del Taco’s Franchisee Success Soars
While so many restaurant operators are still struggling at this point during the pandemic, Del Taco recently reported a 3.8% increase in same-store sales for the fourth quarter reported on March 8. In this episode of Extra Serving, John D. Cappasola Jr. — president and CEO of Los Angeles-based quick-service taco chain — breaks down the how and why of their success over the past quarter, which he attributes largely to menu innovation and franchisee wins in response to the pivot to off-premise. “Early on we decided that communication and transparency [with franchisees] was key,” Cappasola said. “We upped the virtual calls we had, anything that company uncovered was shared with franchisees immediately, and we had a great relationship throughout the pandemic to the point where we were able to see acceleration at the end of the year.” The other pillar of growth Del Taco saw was the new menu category introduced last year: crispy chicken, which was introduced to multiple menu items. Listen below for more insight from Del Taco on franchise acceleration and growth through smart menu innovation. –Source: NRN.
The sustainable Borrow a Cup Program is being tested out at five stores from March 30 to May 31 in partnership with Go Box . . . .
Starbucks Tests out Reusable Cup Rental Service at Select Seattle Stores
Starbucks announced that they will be scaling up single-store tests of their reusable cup rental service, Borrow a Cup, at five stores in Seattle this spring, from March 30 through May 31, coinciding with Earth Day. In partnership with Go Box — which has worked with other smaller chains like Dig on returnable, reusable food, and drinkware — the program allows customers to opt in to spend an extra dollar to receive their drink in a reusable cup and then return it by scanning the cup at a contactless kiosk or through Seattle-era pickup service Ridwell. Upon return of the cup, customers get their dollar back as a Starbucks credit and 10 bonus stars on their Starbucks rewards account, and the cup is cleaned and sanitized. “Promoting reusability is an important part of Starbucks’ goal to reduce waste by 50% by 2030,” Starbucks chief sustainability officer, Michael Kobori, said. “We understand the interdependency of human and planetary health, and we believe it is our responsibility to reduce single-use cup waste. We will lead the transition to a circular economy.” The reusable cup is a new design that can hold hot or cold beverages. Once the cups are returned, Go Box collects them from stores every day, cleans and sanitizes them using commercial dishwashing equipment, and put them back into circulation within 48 hours. Whereas most smaller scale reusable cup rental programs require customers to be in charge of dropping off their food or drinkware themselves, this partnership with Ridwell makes it more convenient: “We are so excited to be partnering with a fellow Seattle company dedicated to making reuse possible at a much bigger scale,” Caroline Stanford, vice president of marketing at Ridwell said. “Our members have told us they overwhelmingly prefer to shop with businesses that are invested in sustainable practices – if we can crack the code with programs like Borrow a Cup there is such a huge opportunity to reduce the waste footprint in our communities.” Although Starbucks has had its own reusable cup discount program for decades, the company said that still the “vast majority” of their drinks are served in single-use cups, with very few being reused or even recycled or composted “due to infrastructure limitations.” Similarly, Starbucks Korea announced Tuesday a goal of reducing its carbon footprint by 30% and eliminating all single-use cups from stores by 2025. The cups will be discontinued and replaced by cup circularity programs like the Go Box test in Seattle. “Starbucks Coffee Korea is a leader in sustainability for the company globally, and we are excited to leverage the learnings from this initiative to drive meaningful change in our stores and inform future innovation on a regional and global scale,” Sarah Trilling, president of Starbucks Asia Pacific said in a statement. These initiatives are all part of Starbucks’ overarching goals to improve sustainability systemwide. In March, the company announced a new plan to achieve carbon neutrality for its green coffee and to conserve water usage by 50% by 2030. – Source: NRN.
As COVID-19 recovery continues and dining rooms head back to normal capacities, restaurants are ramping up hiring . . . .
Domino’s is hiring 20,000 more employees as coronavirus-era delivery demand grows . . . .
Domino’s Pizza has announced another hiring spree as the effects of the COVID-19 pandemic continue and is looking to hire 20,000 more employees, including delivery drivers, pizzamakers, customer-service representatives, managers, and assistant managers at both their corporate and franchised stores, as well as workers for supply-chain centers. This hiring spree follows a similar announcement at the start of the pandemic when Domino’s said it would be hiring 10,000 more employees to keep up with delivery demand. The new hiring spree is meant to keep up with continued demand, and this time around, Domino’s is emphasizing that the surge of new (or returning) employees will help those in the industry that have faced layoffs or unemployment. “We realize that these are tough times, and not only do we want to maintain strong service levels, but we also want to provide opportunities to those who have lost their jobs or are facing reduced hours,” Tom Curtis, Domino’s executive vice president of operations and support, said in a statement. “Domino’s stores offer flexible work options, which include part-time and full-time opportunities. If you’re looking for a steady income and want to be a part of a great team, we encourage you to apply.” The Ann Arbor, Mich.-based pizza chain reiterated that they continue to implement rigorous cleaning and food safety protocols during the pandemic, including the mandatory wearing of masks, the pizza pedestal for contactless delivery, and the continued closure of in-store dining options. “The health and safety of the brand’s customers and store team members is our top priority, and because of that, Domino’s is continuing to offer contactless delivery and carryout, as well as Domino’s car-side delivery,” Curtis said. The demand for a larger workforce matches Domino’s stellar performance during the pandemic, with same-store sales up 16.1% for the second quarter ended June 14, the strongest quarter for the company in nine years. – Source: NRN.
Nick Kokonas, CEO of the restaurant reservations platform Tock, is meeting a handful of new employees over Zoom for the first time . . . .
The Chicago-based company is tuning in from their apartments. He’s logging in from a house in Lake Tahoe that he’s rented for a few weeks in January in an attempt to take a vacation after an extraordinarily busy year. The plan is to welcome his employees to the company with an introductory pep talk. He’ll explain how his 6-year-old reservation system is designed to help chefs manage both their dining rooms and kitchens more efficiently. He’ll go on to tell them about the way it threw a lifeline to independent restaurants during the pandemic by allowing their kitchens to offer take-out and delivery service on better terms than other platforms. And then he’ll explain how the 140-person company is now taking on some of the biggest industry players with a tech platform that gives more control to chefs and restaurateurs. He is, after all, co-owner of Chicago’s renowned Alinea restaurant, along with several other eateries in the city, and has spent the past decade and a half thinking about what a restaurant needs to survive and even thrive. But before he begins, Kokonas wants to set one thing straight: He did not purchase the large wooden yin-yang that hangs above his head. “This is not my house. This is not my yin-yang,” he tells his new hires. “This is T. Harv Eker’s house, who wrote a terrible book called The Millionaire Mindset. I rented his house.” Yeah, Kokonas has some opinions. He also has a track record of being right. His strong views on everything from menu items to food delivery have helped upend the hospitality industry several times already.
The Chicago-based entrepreneur arrived on the food scene 16 years ago as an outsider: a former derivatives trader who was looking for a new career and had a few thoughts on what a great meal should taste like. After eating a couple of meals cooked by Grant Achatz, he offered to give the young chef a restaurant. When it opened in 2005, the now three-Michelin-star Alinea changed fine-dining forever by taking cues from Spain’s legendary El Bulli to turn meals into spectacles (edible balloons, olive oil lollipops, scented pillows to infuse a dish) and dining into an experience. Kokonas took the concept of dining as theater even further in 2015 by launching the restaurant reservations platform Tock, which pioneered the notion that restaurants should charge diners a deposit to hold a table (or even have them pre-pay for their meal) and use dynamic pricing for more coveted tables. Within a few years, Kokonas had signed on some 3,000 restaurants in 28 countries and was managing both his Chicago restaurant empire and a burgeoning competitor to OpenTable. But it was during the pandemic that Kokonas may have struck upon his most industry-transformative idea yet: Tock To Go, which helps restaurants offer now-essential takeout and delivery meals, but doesn’t charge the onerous fees of services like Seamless and DoorDash, which can take up to 30%. Instead, Tock charges restaurants a flat monthly fee of $199 plus 2% on orders, or just 3% on orders without a subscription. (The service offers a “pro” plan for $699 a month, charging nothing for bookings and 2% on Tock To Go orders.) Tock also, crucially, lets restaurants retain their customer data, so they can establish their own relationships with diners.
The platform presents a compelling alternative to the third-party booking and delivery services that have been eroding restaurants’ revenue and autonomy in recent years—a trend that has been exacerbated by the pandemic. A July report from food services consultancy Technomic and Uber Eats found a 27% increase in restaurants using third-party delivery services since the pandemic began. As restaurants that are new to these platforms wrestle with how to stay in the black while paying such high commissions, regulators in cities across the country have responded by placing temporary caps (usually 15%) on the fees that third-party services can charge. Pre-pandemic, most restaurants using Tock were on the higher end, but as Tock To Go came online, the platform brought on neighborhood gems and even dive bars looking to stave off closure. In 2020, Tock more than doubled the number of businesses that use its services to roughly 7,100 restaurants and nearly 1,000 wineries. It expects to hit $1 billion in gross merchandising volume in 2021. “What makes Tock such a strong player is that they’re both on the reservation side and the delivery side,” says R.J. Melman, president of Lettuce Entertain You, which owns and licenses more than 100 restaurants across the country and was an early investor in Tock. “So when things open back up and take-out business becomes a lower portion of what you’re doing and your reservation business will increase, [Tock] will help you on either side.” He says that 40% of his company uses Tock for reservations, while between 80% and 90% use Tock To Go. For Kokonas, who expresses frustration with people who complain that restaurants are a bad business, the hospitality industry may be challenging, but it’s not impossible, even in a pandemic. “If you’re [a restaurant] owner who says, ‘We could barely make it [in 2019],’ to me, that says you weren’t running it right. You’re saying it was boom time and you could barely make it,” he told me last spring. “I want these restaurants to reopen in a sustainable manner.” Restaurant owners, in other words, need to take better command of their businesses, whether they’re running a beloved local joint or a Michelin-starred, travel-worthy establishment. And Kokonas is positioning Tock to be their essential tool.
THE PANDEMIC PLAN
Kokonas knew that 2020 was about to go off the rails when he saw, last February, reservations for the 60 or so Hong Kong restaurants on Tock go to zero in a single week as the island struggled to contain COVID-19. It was clear: Once the novel coronavirus spread to the States, the same would happen here. A few weeks later he noticed the same pattern in Seattle, one of the first cities hit by the pandemic. Then it spread to the rest of the country. When Illinois issued stay-at-home orders in late March, Kokonas and his team had already worked out a plan to turn Alinea and the other restaurants in the Alinea Group into carry-out places. He furloughed some 300 restaurant employees but remained hopeful about rehiring them. After all, the appetite for restaurant food was still there. Those meals just needed to be consumed at home—and Kokonas needed to adapt his technology to enable that. He pulled together a team of nearly two dozen engineers and designers, who worked around the clock to transform Tock into a platform to book and process carry-out orders. Within eight days in mid-March, the team had a working prototype of Tock To Go and started piloting pickup orders at fine-dining restaurant Canlis in hard-hit Seattle. Three days after Chicago shut down, Alinea was selling takeaway Beef Wellingtons for $35—an unheard-of price for the establishment. Kokonas had figured out that customers uncertain about their futures did not want a $375 meal; they wanted comfort food. He pushed Alinea’s chefs to create a simple carry-out menu with the price of each meal under $40. By April, the restaurant was selling 1,250 meals a night, making about 75% of its previous revenue, and it had rehired 62 of its 85 employees. Alinea hosted diners in an outdoor rooftop space over the summer but closed those operations in the fall as the weather turned and COVID-19 rates rose; by the end of 2020, it had served 135,587 to-go meals via Tock. As restaurants throughout the country began closing their doors last spring and the pandemic’s grim toll on the hospitality industry became evident, Kokonas was advising chefs on Tock to lean into takeout and delivery. For many of the fine-dining places on the platform, creating meals to be eaten at home—something previously inconceivable—became essential for survival. Chef Kyle Connaughton, of Healdsburg, California’s acclaimed SingleThread Farm-Restaurant-Inn has used Tock To Go as a stopgap to keep his luxury restaurant afloat, offering more affordable take-out meals through the service. “When you go from a $500 checkout to a $50 checkout, it’s hard. We can’t support a 75% reduction in revenue. But this has allowed us to stay open.”
Tock To Go has also allowed Kokonas to expand his company beyond its fine-dining base. Pat Odon, the owner of Chicago’s oldest sports bar Nisei Lounge near Wrigley Field has used the service to sell mixology kits and to manage reservations as indoor dining opens up. “Tock’s fee is better than the cut other apps take,” he says. He plans to keep using the service to generate extra revenue even after the pandemic recedes. Tock also partnered with the city of Chicago in October to offer Tock To Go for free to restaurants in low-income neighborhoods, to help retain the city’s small-business fabric. Tock To Go is different from services like Seamless, Postmates, and DoorDash in two crucial ways. First, instead of taking up to 30% in commissions, which can break a restaurant’s margins, Tock charges between 2% and 3% on all orders. On the back end, while other delivery services submit orders as they come, Tock asks users to select pickup and delivery times in 15-minute intervals. It’s the same way that Tock schedules reservations: to prevent kitchens from becoming overwhelmed. Since Tock To Go has launched, the service has added even more features, including two-way texting from within the dashboard to limit face-to-face communication. It also integrated last-mile deliveries with DoorDash and Postmates—charging diners the delivery fee. Just as important, the platform allows restaurants to keep their customer data. Noticing the negative impact that platforms like Booking.com have had on the hotel industry, Kokonas is wary of restaurant reservation and delivery services that insert themselves between chef and diner, making restaurants subservient to their brands. One of his “core beliefs” about the hospitality industry is that “businesses should ‘own’ their customers, not rent them from third party middle persons.” He compares Tock to a company like Shopify, the commerce engine behind many direct-to-consumer brands that is increasingly positioning itself as a platform for entrepreneurs. It’s known as the anti-Amazon. “Tock empowers restaurants to actually sell what they produce,” Kokonas says. If there’s one class of professionals that Kokonas dislikes, it’s intermediaries. He has a history of avoiding them. When he and Achatz published The Aviary Cocktail Book in 2018, a gorgeous tome with photos and recipes from their boundary-pushing Chicago cocktail bar, they produced the book entirely themselves. Kokonas just couldn’t stomach the terms that most cookbook publishers offer authors:
They put the risk entirely on the chef, while reward goes almost entirely goes to the publisher—a fact that Kokonas laid out in a popular blog post at the time. Kokonas and Achatz found their own graphic designer and visual artist, raised funds on Kickstarter, and went from there. The result: They have kept most of the profits of book sales and pulled back the curtain on the publishing industry. Likewise, after corresponding with Kokonas for a while, I realized that, unlike most restaurateurs I’ve emailed, he doesn’t have a press person. “A PR person from a firm has several clients, and they have to please all of them,” he explained to me when I asked about it. “So they might pitch publications in a very rote way. I figured I could just do that outreach myself.” The man behind the curtain of the Alinea Group and Tock’s press releases is, well, just him. It’s also clear that he has little patience for restaurateurs who don’t prioritize their finances. (Another of his core beliefs. “Art and commerce are necessary for one another and improve each other. “) While Kokonas supported Paycheck Protection Program (PPP) loans to help restaurants weather the pandemic, he’s openly critical of owners who didn’t use that financial support to plan ahead. “They had no expenses for two months. No rent, no payroll. If you’re doing any carry-out business at all, you did really well those couple months,” he says. “When I see some of the chefs on TV and they’re now going, ‘The PPP is terrible. It doesn’t work.’ What they’re really saying is ‘The PPP didn’t work for me because I didn’t do anything [with it].’” At the start of the pandemic, he joined the leadership team of the Independent Restaurant Coalition, a trade group formed last year to lobby all levels of government for restaurant relief, serving alongside the likes of chefs Tom Colicchio, José Andrés, and Nancy Silverton. But he has not been active in the group since the early days of the outbreak.
He’s been increasingly vocal about supporting the $15 minimum wage and the elimination of tipping in restaurants, which puts him at odds with some members of the group. He’s also “not a huge fan” of the 2021 American Rescue Plan, which includes putting $25 billion towards grants for struggling independent restaurants and bars. His assessment: “Too much pork, no accountability.” When it comes to delivery, he’s equally blunt. If a restaurant is paying a third-party service too much, it’s choosing cheap convenience over price. It’s up to the restaurant to switch to another service. He doesn’t believe cities should step in to set price caps on delivery fees. When Jason Heltzer, a managing partner at Chicago VC Origin Ventures looked at his portfolio last March as the coronavirus began rolling across the country, the company he was most concerned for was Tock. Heltzer should have known better. After all, as he told me, he liked the product, but he really bet on the founder. “[Kokonas is] a contrarian, but what I have learned over time—and he’s demonstrated this over and over again—is that he knows the restaurant business. He can figure it out.”
NOT ALL SEATS ARE EQUAL
Kokonas has always had an appetite for fine food, but his tastes can be particular. His Wikipedia page prominently mentions that he “finds peanuts and peanut butter to be repulsive.” Though his father owned a grocery store and diner, Kokonas didn’t come from great food—he describes his mother’s cooking as “terrible, so bad”—or wealthy background. He recalls that when his terminally ill father came to visit him in New York, he was blown away by a bowl of soup served as an appetizer at a tony restaurant. Then he saw the price: “He was like ‘$18 for a bowl of soup! What is in this soup?’” Now Kokonas owns a restaurant where meals go for hundreds of dollars ahead. Kokonas’s path to restaurants was anything but direct. After majoring in philosophy as an undergraduate at Colgate University, he turned down a spot in a JD/Ph.D. program at the University of Pennsylvania to sell posters to sororities and small businesses—which turned out to be surprisingly lucrative. “I was a 22-year-old dude in a van, going sorority to sorority,” he recalls. “I sold hundreds of thousand dollars worth of posters.” He followed up with a stint as a derivatives trader, then, in the early ’90s he started his own firm, Third Moment Trading when he realized the system could be optimized to be even more profitable. He installed the first closed-cellular network so that his firm’s traders in different cities could speak directly from their respective stock exchange pits, giving them a split-second advantage over others in the pit who relied on hand signals to communicate. But when his wife told him he was “at risk of turning into an asshole,” Kokonas quit and put his money toward traveling and dining at some of the world’s best restaurants. His meeting with chef Achatz is now something of a legend. After enjoying a couple of meals at Trio Restaurant near his Chicago home, Kononas asked to meet the chef—who was then on loan from Thomas Keller’s The French Laundry. Kokonas offered Achatz his own restaurant on the spot. In 2007, less than two years after Alinea opened and a year after Gourmet named it the best restaurant in America, Achatz developed Stage IV tongue cancer.
Miraculously, he recovered after undergoing an experimental treatment at the University of Chicago, though he was missing his sense of taste. Slowly, it came back. While Achatz was battling cancer, Kokonas was learning how to run a restaurant. He approached it like he did a trading floor: finding patterns in what might seem like chaos and then optimizing the operations. Alinea was a hot restaurant; as soon as reservation times were released, the phones, which were manned by a staff of three, would ring off the hook. Even so, some customers wouldn’t show up. This was an industry-wide trend—according to Kokonas, typical no-show rates are between 15% and 18% in normal restaurants. He looked at existing reservation solutions, like OpenTable, but determined they weren’t actually helping restaurants. To his mind, they were just wrestling away control of the customer relationship and not delivering much in exchange. “[OpenTable’s relationship with customers] bodes well for the business selling the software, but very poorly for any future innovation or features,” Kokonas wrote in a 2014 blog post. He decided to expand on these thoughts at the 2014 Tech Table conference—sponsored by OpenTable. While Kokonas says he dislikes conflict, public feuds with Iron Chef host Cat Cora and Esquire food writer John Mariani might suggest otherwise. Perhaps a better way to put it is that he dislikes conflict, but he really, really, really loves being right. At the conference, speaking to an audience of restaurateurs and OpenTable execs, he brought up how “a clusterfuck of bad software” can destroy a restaurant’s efficiency.
Then, he outlined his plans for a rival restaurant reservation service (eventually Tock) that would share customer information with restaurants and structure reservations to make it easier for the kitchens to manage orders. He also introduced his idea for prepaid reservations and dynamic pricing. Next interior At Alinea, dining is experienced like a theatre. And as in a theater, not all seats are equal: Some are closer to the door, others are near the kitchen. On top of that, demand changes depending on the day, rising on weekends and falling midweek. Kononas reasoned that the best tables at the most popular times should cost more money. He had begun testing the idea of variable pricing at his restaurant, Next when it opened in 2014. When prepaid reservations on the rudimentary system he had built in-house sold out, he knew he was onto something big. Tock launched in 2015, backed by investors that included chef Thomas Keller, former Twitter CEO Dick Costolo, and Kimbal Musk. The app took root among restaurants that valued its novel embrace of ticketing and dynamic pricing, its informed approach to scheduling reservations in a way that’s mindful of how a kitchen works, and its customer relationship management assistance. Early adopters included some of the world’s most prominent chefs and restaurateurs, such as Daniel Boulud and Jean-Georges Vongerichten. SingleThread’s Connaughton built his three-Michelin-star restaurant with Tock running in the background. “I had worked in restaurants and could understand how it solved the challenge of booking,” he says. “When we opened in 2016, we used it to book seats all prepaid in advance.” Though it only had a small fraction of OpenTable’s 60,000-strong clientele, Tock commanded outsize attention, thanks to the caliber of restaurants on it and Kokonas’s one-man PR show. It was poised for even more growth after announcing a deal with Chase in February 2020 that would allow cardmembers to book Tock restaurants through a dedicated dining page and access exclusive pop-ups and dining experiences. (The hub launched in October.) Then COVID-19 hit, and Tock became two killer platforms in one: OpenTable meets DoorDash.
THE SAUSAGE FACTORY SUCKS
The person responsible for much of Tock’s growth over the past several years is chief operating officer Jeff Kaplan, who joined the company in 2017 after founding and selling two healthcare startups. He quickly set up Tock’s formidable sales and customer service teams. Asked about what attracted him to Tock and what made him stay, Kaplan delivers an almost Frank Capra-esque speech, “I believe in capitalism. I believe in it in the sense that I enjoy creating jobs for people, and making money for the business, and doing right by the customer. I believe you can do all of those things.” In less than a year, the company has found success doing just that. It has also tripled its number of employees. (Kokonas admits that he used to know everyone’s names.) Wineries, ski resort operators (including Vail Resorts), and even car dealerships are now using Tock for bookings. Kokonas is looking to expand the number of restaurants and purveyors that use Tock as a marketplace to sell meal kits and other goods. He’s even toying with a Spotify Wrapped-style service that would recommend experiences based on users’ dining habits. But Kokonas has never run a company so big or for so long. He admits that he might sell Tock. “We get inquiries every day, and I have investors. If I never sell it or liquidate part of it, then I never get their money out. They had faith in me and they deserve that return.” (Tock’s current valuation is private, but a source close to the company puts it about $500 million.) Kokonas seems to love big-picture problem-solving more than the daily grind of managing employees. He offers a story, by way of explanation. “In 1996 Wilco’s Being There came out, and it was punk, country, and bluegrass. I listened to it three times and threw it in the garbage. I was so angry at myself. I was thinking you’re never going to make anything that good in your life. I eventually got to know [bassist] John Stirratt. When I told him I loved the album he was like, no aspect of doing that was fun. And I was like, ah, that’s the part you don’t get to see, right? Nothing’s like it seems.
The sausage factory sucks. That’s true of Tock and that’s true of the restaurants. It’s true of everything.” It makes me think of the book and film script that Kokonas told me he was working on in one of our first conversations. (Several people have told him not to write both simultaneously, but he won’t be deterred—besides, as he explains, he wants his book to read like a movie.) In it, a man wakes up from a coma and realizes his wife has been cheating on him with his best friend. He decides to leave everything and travel the world. One day, as he rests his head against the swirling marble pattern of some shower tiles in a Florence hotel, he wakes up in a hospital and realizes . . . it was all a lucid coma dream. And having dreamed about the alternative life he could be living, he embarks upon it for real this time, leaving his wife and setting off. Sometime later he ends up back in the shower in Florence, looking at the swirling marble pattern and it hits him: What if this was all a dream again? There’s always another problem to figure out, whether it’s the most efficient way to get posters to college students and messages to derivatives traders or how to maximize profit on book sales and restaurant tables. Perhaps the most intriguing question when it comes to Nick Kokonas is which one he’ll decide to solve next.
A quote about author T. Harv Eker and a Wilco album title was updated. Additionally, a description of Next was updated to reflect that it is a restaurant. To see Fast Company’s list of the Top 10 Most Innovative Companies in dining for 2021. –Source: Fast Company.
The Covid-19 pandemic led to the digital element of KFC’s business becoming increasingly important, says the fast-food retailer’s chief digital and technology officer . . . .
CIO Interview: Nitin Chaturvedi, Chief Digital and Technology Officer, KFC Global
It’s been a busy year or so for Nitin Chaturvedi, chief digital and technology officer at KFC Global. He joined the fast-food giant in September 2019 and was just getting stuck into a global digital transformation program when the Covid-19 pandemic hit at the start of last year and some of those digital-led projects became even more important. “As much as 2020 was the year of the pandemic, for us it was the year when we delivered rapid digital growth – and more important than the ‘what was the ‘how’ of it,” says Chaturvedi, who spoke to Computer Weekly in a video call following his recent virtual presentation at The Economist’s Innovation@Work event. Dealing with the impact of the pandemic has been “the tale of two cities” for KFC, says Chaturvedi. On the one hand, the restaurant sector – the traditional core of the firm’s business – was hit pretty hard in 2020. He says a lot of the firm’s markets around the globe were hurting when it came to sales, especially if they were mall-heavy or dine-in-heavy. But on the flip side, the digital element of KFC’s business really exploded. “As consumers shifted to off-premise, our restaurant teams and our franchisees fundamentally pivoted the ways of working and our business model to capture the Covid tailwind,” he says. “And we saw multiple years of progress in less than nine months.” KFC’s year of digital growth was centered on three core areas, says Chaturvedi. First, the company diversified its approach. Where dine-in was not possible, KFC went to what Chaturvedi calls “full aggregator penetration” around the globe, using big-name specialists such as Uber Eats and Just Eat, and other local providers. Second, the company built to scale very rapidly. Traffic to KFC’s web app increased significantly and it rolled out new mechanisms to help serve customers safely and effectively, such as kerbside and click-and-collect across the globe. KFC used these methods so that its staff could pass food to customers outside the store in a safe, socially distanced manner. Third, KFC innovated much more rapidly than it had historically, says Chaturvedi. Like most incumbents, the firm sometimes struggles to bring new ideas to market quickly. But 2020 was a year when creativity became the norm, with lots of new-to-market innovations, such as using the internet of things (IoT) and sensors to help improve operational efficiency in the back office, and testing robotics in the drive-through to provide contactless serving. “When we think about digital metrics, pretty much every element was accelerated – sales grew by multiple billions,” he says. “We diversified our digital channels to make our business stronger for the future. We built to scale very rapidly. And we innovated at much faster rates. So, all in all, there has been a very rapid pace of progress over the past nine months. “Our digital business has exploded. We have gone from digital being a part of the business to be one of our biggest bets in the market. We have up-leveled its visibility. I think elevating it, and then driving growth from it has been probably the business impact of my time here. And that’s not just about me, that’s been the work of everyone.”
Taking on a fresh challenge
Formerly with tech giant Google and consultant McKinsey Chaturvedi joined KFC to take on an IT leadership role in a blue-chip business. He recognizes that his move to KFC in 2019 was a radical shift in career direction, yet it also adds to his breadth of experience. “If I step back and look at my career, it’s been in four chunks,” he says. “I’ve been a technologist, a strategist, an operator running a business, and now a digital and technology leader. For me, this position at KFC was pretty left field from what I was doing and what I should have done logically. “The reason I took this role is I saw this massive potential to modernize mainstream companies after working in Silicon Valley. I saw the gap. I thought it would be a good opportunity to start modernizing the mainstream from the inside.” Chaturvedi leads KFC’s digital transformation in 150 countries. He is in charge of a range of key business areas, including product and engineering, e-commerce, automation, data and analytics, digital marketing, and digital partnerships. He is also a member of the firm’s executive committee and reports to KFC CEO Tony Lowings. “I’m enjoying it a lot,” he says. “We have a pretty decentralized structure, and that gives you speed to market, which is amazing, but it also means you have to rally an entire organization before you get something done.” About 85% of KFC’s business is based outside the US. Chaturvedi says the business is also “highly local” – brand, food, people, and operations are run autonomously in different regions and nations. That split creates an interesting dynamic, he says. “I think that’s also been one of the challenges – how do you move at pace in a very decentralized and complex environment?” says Chaturvedi, who adds that the scale of the challenge becomes even bigger when thinking about transformation: “That’s thinking about how do you stay ahead of the market because everybody’s moving faster in digital.”
Leading cultural change
The past 12 months have clearly provided some crucial lessons for how KFC will use digitization to drive business growth in the post-Covid age. Yet Chaturvedi is quick to point out that the boom in online channels has not been his only impact since joining the firm. He has also driven crucial change on the people side of the business. “We’ve managed to transform the culture of the organization to much more of an agile culture,” he says. “And that is a massive task to do across 150 countries. So I think that’s been a very broad transformation on the people side.” Chaturvedi says the importance of these cultural change programs has been clear in the past 12 months. In many ways, the move towards iteration has helped the business and its IT team to cope with the rapid pace of change. “Like many companies, we are organized functionally, and often the greatest breakdowns and leakages happen at the intersections of these functions,” he says. “But we fundamentally changed our ways of working over the global crisis. “We worked in cross-functional ways, we were much more iterative – progress over perfection, progress over credit. So, those kinds of things really helped move our teams much faster because there were none of the historical leakages that we used to see.” Rather than making digital growth the mandate of one team, KFC made digitization the mandate of every function, whether it was operations or marketing, or real estate. Chaturvedi refers to this approach as democratizing digital: “And as a result, we could open up multiple battlefronts at the same time, and make progress a lot faster.”
Providing heart-led leadership
Chaturvedi says the past 12 months have also seen a “top-to-bottom transformation” of KFC’s strategy and operating model, and one of the keys to success was maintaining the company’s culture and values, which the c-suite team refers to as “heart-led leadership”. “This really came to the forefront during the crisis, when instead of taking control and trying to drive in a more central way, we ceded control down to the restaurant teams, and our franchisees,” he says. “They could make progress much faster because we weren’t bottlenecking any decisions and they had a lot more autonomy. “In a time of crisis, there is often this groundswell to do more. As a management team, we were very disciplined and focused on two or three big things that captured most of the Covid tailwind, and that helped our teams get more focused and move faster.” Like all business leaders, Chaturvedi recognizes that making those choices was far from straightforward. He says what might have been perceived to be the direction of travel was changing all the time, whether in terms of disease patterns, lockdown rules, or government mandates. “We couldn’t really prepare and plan for any given future,” he says. “So we just increased the optionality in our business model to be able to react to whatever future came our way, whether that was things like payment choices or ordering choices or fulfillment choices. We just expanded all of them, so that we could react to whichever way the wind blew.” Across all these reactive approaches, one thing remained constant – the need to support customers. Chaturvedi says the pandemic has been a time when consumers have fled to brands they trust. KFC ensured it dialed up the trust factor across the board, from the use of contactless technologies through to marketing communications and on to configuring food pick-up at its stores, so consumers would feel safer.
Looking forward with confidence
Chaturvedi says the coping strategy KFC has adopted during the pandemic has important lessons for the future of the company. As he looks beyond Covid and towards the direction of travel for the business during the next couple of years, he says there are a few key areas where he and his c-suite colleagues will be directing their attention. “We need to better utilize our scale across markets to find the right balance between global scale and local responsiveness,” he says. “I think the second big thing that I want to focus on is picking a few bets to go really big on in terms of innovations. “I think there are a lot of things you can do. There are a lot of technologies out there, but there are only two or three that are going to allow us to start outpacing the market. And then the third big priority I have is the people side and to make sure we have an organization and talent pool that is future-ready.” – Source: Computer/Weekly UK.
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