Monday, July 28, 2014

Is ‘Smart Money’ Betting Big that Restaurants Aren’t Needed ?

Back in the day the old adage was ‘follow the smart money’ and you will find success. Foodservice Solutions® team has been inundated with queries from chain restaurant operators and technology companies on the undercurrents and sea change in consumer acceptance, adoption of non-traditional fresh food outlets, and the role of technology-marketing-messaging.

In an Omni-channel cross-channel retail world simply doing what you have always done and doing it the same way does not work. Why are they calling us?  Simple we sold, placed the first 7 restaurant national accounts for On-line ordering in 1991 and continue working with innovating companies and products.

Today, the ‘smart money’ is focused on consumers and fresh prepared Ready-2-Eat and Heat-N-Eat Grocerant Niche food.  Once again Foodservice Solutions® is at the center of the action having identified, quantified, and qualified the fastest growing sector of all retail foodservice the Grocerant Niche filled with Ready-2-Eat and Heat-N-Eat fresh prepared food. So just what is ‘Smart Money’ today?

Here is how Taylor Soper of GeekWire explains smart money today: “Back in 2011, when Scott Stanford and Shervin Pishevar led separate investments in Uber’s $37 million Series B round back in 2011, fellow investors and other friends scoffed .“Why are you guys investing in a limo company?” the naysayers asked… Today Uber is now operating in 128 cities and valued at $18 billion, Stanford and Pishevar went on to start a venture capital firm called Sherpa Ventures. One of their first big bets was a $28 million Series B round that Sherpa led in a San Francisco-based food delivery startup called Munchery.”

Munchery makes the meals themselves and delivers them within in one hour.  There is an ever increasing number of ‘smart money’ venture-backed startups the ilk of  Munchery,  which is now at $40 million raised; Caviar, $15 million raised; Spoonrocket, $13.5 million raised all are similar to Uber and Lyft in that they’re using technology to improve a service that restaurants have not used or refuse to try.  Regular readers of this blog know we highlighted our 20-20 that’s 20 technology companies plus in the last year and 20 non-traditional fresh food retailers alone. The fresh food marketplace is evolving fast.

Now $28 Million would build how many Papa Murphy’s? How many Chipotle’s? How may Smashburger’s? In an Omni-channel cross-channel retail world the questions becomes: Why build a restaurant? Why hire, train, and maintain a staff when technology can edify the experience for less and do it faster?

Note: (Its simple consumers like restaurants they are not going away. However don’t get me wrong they will diminish in numbers, volume per unit, and value. They will look much different in the future,  they will smaller but they be here.) 

Technology Once a Friend of Restaurants Now a Foe

Sherpa Ventures co-founder Scott Stanford said “When you introduce something like Uber or Munchery, you change the paradigm with not only how that service or product is consumed, but how it is provided,”…. “If you can change the underlying economics of that delivery platform or that value chain, it puts you in a really interesting position from a financial perspective.”

When Red Lobster opens a new restaurant in 2014 they do it very much the same way they did 46 years ago?  Sure an up-dated menu, décor, and messaging but the business model has not been updated. Red Lobster and maybe your company’s business model might just look more like yesterday’s business model than tomorrow’s business model. Legacy hedge funds are buying into companies the ilk of Bennigans, Sbarro, and Taco Del Mar all are here. Are these companies the past, present, or future of Food Retail?

Soper went on to say “Similar to how Uber and Lyft let consumers hail a ride by pushing a few buttons on their smartphones, Munchery and others are doing the same for food delivery. It’s part of a growing trend of companies that, thanks to smartphone technology, are providing efficient and innovative on-demand services. “Consumer expectation has changed as a result of greater connectivity,” Stanford said. “When you think about what the Internet did to media and changed consumer expectation and requirements, the same thing is happening to commerce.” 

Foodservice Solutions® Grocerant Guru™ believes that companies the ilk of Lish, Peached, Spoonrocket, and Munchery will not only survive they with thrive for they provide “authenticity in being local, personal, while providing fast service.”  There is a new retail food business model unfolding today that model is mobile; it is creating disequilibrium for restaurateurs and reorganization or bankruptcy for others.
Consumer adoption of mobile and non-traditional retail food platforms has created discontinuity for Chevy’s Fresh Mex, Buffets, Round Table Pizza, Fuddruckers and Red Lobster to name but a few.

The Informational Superhighway is fast becoming a Mobile Neighborhood

Lish CEO Aakhil Fardeen stated: “Customers care about having a variety of the highest quality food, timely delivery, and a delightful ordering experience at an affordable price,” “Chefs also get really excited about the opportunity that Lish offers them. It gives them an avenue to make extra money — about two or three times what a restaurant job pays them per hour. They love the ability to get direct customer exposure, develop a following, and ultimately to build their brand in the community.”

Are restaurants dead no, they are however becoming very expensive to own and operate. Red Lobster is but one example. Yesterday’s business model is not the future of the restaurant business. Opening the same restaurant brand the same way you did 40 years ago does not work.  Companies the ilk of Starbucks that have evolved from coffee house to food merchant have consumer relevance and have successfully evolved with technology as well.

The food space is exciting it is dynamic not static.  The food sector is a market that is huge and too large to be consider just one market place for sure. The ‘smart money’ is today focusing on technology to bring customized, personalized, fresh prepared food to you for less. There are companies targeting the high-end, middle, low-end markets, each offering staples the ilk of Burgers, Pizza, Mexican, Sushi, Thai, Chinese, and Italian  to name but a few. 

This is becoming a land grab for share of stomach without the cost of the land.  Think about it Americans spend $151 on food each week.  With technology today consumers never have to leave home, or work and can eat with or without cooking, or doing the dishes. Does your restaurant have ‘braggability’? Without braggability why would anyone come to your restaurant? Do you know how to create ‘braggability? We Do.

From Hand Held Food to Hand Held Food Ordering

“The takeout and delivery market today is estimated to between $70-to-$100 billion today, and a small fraction of these orders happen online today even fewer on mobile devise.  ‘Smart Money’ is considering how frequently people purchase food and how technology can improve the way people get food, you start realizing why entrepreneurs and investors are simply funneling money into the Grocerant Niche opportunity.

In our Omni-channel retail world there can and will be many winners particularly in the food space.  The competitive force driving change /adoption today is the consumer.  The retailers that succeed with have a blended balance of efficient technology, fresh flavorful food, and the ability to deliver that food to your office or home in minutes, not hours or days and an integrated brand marketing messaging with relevance.

Restaurant Customer Migration Can Be Stopped

Starbucks and Chipotle each do three things better than almost any other company they continue to evolve with smaller units, faster service, maintain authenticity.  Has your company completed one of Foodservice Solutions® Grocerant Niche Assessments or a Grocerant Scorecard?

Are you trapped doing what you have always done and doing it the same way?  Interested in learning how Foodservice Solutions 5P’s of Food Marketing can edify your retail food brand while creating a platform for consumer convenient meal participationdifferentiation and individualization? Email us at: or visit: for more information.

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