May 29, 2018

NRA Show - Restaurants Increasing Use of Customer Data, Lowering Costs through Innovation

CMG, CUIS, GRUB, ITW, MIDD, SEE, WBT
By Justin Pillette
Improving customer-data analytics, equipment innovation to lower costs, and immigration reform were key themes addressed at the National Restaurant Association Show.

Attendance was strong at the 2018 National Restaurant Association (NRA) Show held in Chicago, May 19-22, with exhibitors and attendees generally optimistic about 2018, despite a tougher-than-expected year for restaurant traffic in 2017 amid steadily increasing consumer demand for off-premise dining options.

One reason for optimism is a growing understanding of how to work and negotiate with third-party delivery providers like GrubHub Inc. and Uber Technologies Inc.’s UberEats, as well as how to avoid working with those companies if desired. In an educational session titled The Outsized Importance of Customer Data and Retention in a Delivery-Driven Restaurant World, Zach Goldstein, Founder and CEO of Thanx Inc. -- a customer-data-driven loyalty program -- argued that reliance on third-party delivery can be greatly reduced or eliminated for many operators if they have a way of capturing the right data on their customers. If an operator understands who the relatively small percentage of customers are that are driving a relatively large percentage of their business, they can use targeted rewards and messaging to grow that base without sacrificing margin to third-party delivery providers.

Zach’s guest on stage was Mike Speck, COO of The Halal Guys, who spoke about his experience with third-party delivery and the importance of understanding your customer. Mike said while his experience with third-party delivery providers has been good overall -- 50% of his company’s sales now come from delivery -- high fees (especially with GrubHub and UberEats, who Mike said are less willing than DoorDash Inc. and PostMates Inc. to negotiate rates), lower margins, increased competition and quality control all remain issues, and that kind of growth in delivery sales may not have been possible without the use of customer data from companies like Facebook Inc. and Thanx.

When asked if the recent press surrounding Facebook’s involvement with Cambridge Analytica had led to pushback by operators on the use of Facebook for data collection, Zach said, “Yes, definitely. But it has not hurt any of the other [data collectors] at all.”

Restaurant operators also are continuing to investigate the use of turn-key logistics solutions to help lessen their reliance on third-party delivery operators. However, while the transition from 100% reliance on third-party delivery providers to a blend of proprietary and third-party service is taking place, it is happening slowly, hindered by rising minimum wage, high wages paid by some delivery providers, like UberEats and Amazon.com Inc., and a tight labor market for people willing to work for minimum wage. “Labor costs are definitely an issue. Uber is paying drivers $22 an hour,” said an executive with a company specializing in last-mile delivery logistics. (Also see OTR Global’s May 23 snapshot on consumer labor trends; and May 29 note on managing labor efficiencies.)

Immigration Regulations a Key Concern             
New or shifting federal and state regulations on healthcare, immigration, paid time off and labor scheduling also are a concern for many and were the focus of various educational sessions throughout the conference. “Immigration reform is probably the most important issue facing the restaurant industry right now,” said an industry consultant. “The availability of labor is already a huge issue, so tighter regulations on immigration would be a serious problem.” A CEO with stores in multiple states said, “Immigration is one issue where the restaurant industry is much more left-leaning. We’re doing what we can [to lobby the administration] for a more open policy. We just don’t know what will happen until later in the year.”

In her keynote speech, former Secretary of State Condoleezza Rice spent a considerable amount of time on the importance of globalization, noting that one of things that has made our country great is that is has attracted people -- like the parents of Alphabet Inc. founder Sergey Brin -- from other countries where opportunities were not as prevalent. When asked during the Q&A what progress we have made since her 2012 Republican National Convention speech calling for compassionate immigration laws she said, “Sadly I don’t believe we’ve made very much progress at all.” She went on to say one of her great regrets was not getting comprehensive immigration reform accomplished while George W. Bush was in office. In December 2000, George W. Bush and Vincente Fox (president of Mexico at the time) met in Dallas, she said, and worked out the framework for comprehensive immigration reform. “The first visitor to the White House was actually Vincente Fox on Sept. 8. And then Sept. 11 interceded and we had to put just about everything on the back burner. …By the time the bill came to the president’s desk, it was too late,” she said.

Equipment Innovation
Welbilt Inc.
had a strong presence at this year’s show, with products from its Garland and Multiplex brands each winning one of 22 Kitchen Innovations Awards. Garland won for its Instinct Induction Countertop Line, which can cook and hold at precise temperatures on multiple cook zones on the same unit, sensing factors such as ferrous content and pan quality, optimizing performance. Multiplex won for its FreshBlender -- a compact countertop self-serve smoothie maker integrating refrigeration, ice making, blending and dispensing.

In addition, each time a user opened the NRA Show 2018 official mobile app, Welbilt’s banner ad displayed briefly.

At the Welbilt booth, a team member said he could not confirm any new deals to supply equipment to Chipotle Mexican Grill Inc. but suggested tests with the chain for new flattop grills may be underway in the United States. (A source in OTR Global’s April 20 Chipotle note said the company had been testing Garland under-fire broilers in Europe.)

Other Kitchen Innovations Awards winners included Sealed Air Corp.’s Cryovac FlexPrep EZ Dispensing system, which improves food safety while reducing condiment waste, and Vulcan’s SonicSafe Ultrasonic Scale Prevention for Steamers, which improves equipment life by reducing scale buildup on heating elements and generator walls. (Vulcan is a division of Illinois Tool Works Inc.’s ITW Food Service Group.)

The Middleby Corp. also had a very large presence at the show. New this year was an emphasis on sous vide cooking and partnership with sous vide leader Cuisine Solutions Inc. Chefs from Cuisine Solutions provided a tasting menu, featuring items such as an antibiotic-free sliced turkey sandwich with basil pesto, oven-roasted tomatoes, swiss cheese and arugula on a Bun’n Roll (from Bridor Inc.); and pork collar with collard greens, white beans with chicken and sausage and corn tortilla crumbs. Proteins were precooked using the sous vide cooking method and finished in under two minutes using TurboChef ovens.

The use of precooked sous vide product and ventless ovens, such as the TurboChef 1618 (pictured), could allow restaurants to operate in smaller footprint locations with fewer employees.

 TurboChef ventless oven

Additional Quotes

On Third-Party Delivery
“We're working with [a large quick-service chain in Latin America] on offering delivery, and our [software] just sits on top of their POS. We have no access to info they don't want us to have access to.”

“GrubHub was actually up to some pretty shady stuff in [the South]. When [GrubHub] would move into a market, the salespeople were using a sort of loophole in Facebook’s reporting practices to have the restaurant’s website [URL on Facebook] changed to GrubHub’s because they get a higher rate if the order goes through GrubHub’s site. GrubHub blamed the practice on a few bad salespeople and said they had put a stop to it, but it angered a lot of operators.”

On Healthcare
“I don't see Obamacare going away any time soon because to get rid of it would require legislation. But removing the employee mandate effectively kills it. What's going to happen is that in the fall all the insurance carriers are going to come out with new rates and they're going to be through the roof. [A large percentage of] the young people are not going to opt in if they're not required to.”

On Joint liability
“The NLRB has said they are going to review the Small Business Act , which now is essentially joint liability, so there could be some changes coming.”