Launch of Hathway Podcast: Beyond the Counter | Hathway

Launch of Hathway Podcast: Beyond the Counter

Published by Kevin Rice, CMO
May 26, 2020

Beyond the Counter

COVID-19 is catalyzing massive industry transformation among food and beverage, restaurant and retail brands. Our new weekly podcast series, Beyond the Counter, takes us behind-the-scenes of these brands to discover what it takes to become the best in the business. Each episode, Hathway CEO, Jesse Dundon and CMO, Kevin Rice, will sit down with an industry expert to provide insights and ideas on the past, present and future of the industries that bring people together.

Drew Dill, Digital Transformation and the Future of QSR

This week, Drew Dill sits down with us to chat about the lasting effects of COVID on the restaurant industry and the dangers of setting a discount expectation. Watch below or listen on your favorite podcast platform:

Video Transcription

Kevin:

Hello everybody, and welcome to our first episode of Beyond the Counter: an ongoing series where we’ll take a behind-the-scenes look at the food and beverage industry, the brands we all love, and the people who make it all happen.

Jesse:

In this first episode we’re interviewing Drew Dill. Drew’s got a lot of insights into how COVID-19 is affecting the quick service industry and what it’s going to take to succeed moving forward.

Kevin:

Thanks for joining us today. We’re glad you’re here. So let’s jump into our conversation with Drew.

Kevin:

I am super excited about today’s interview. We’ve got Drew Dill joining us. Drew, welcome. Drew has been a friend for about a year now. We’ve gotten to know each other through some of our work together so we’re thrilled to have you on. As always, I’ve got Jesse Dundon, CEO of Hathway, my good friend and our co-founder. I see we still got the rally hawk going.

Jesse:

Yep, much to my wife’s dismay. I added in a little bit of mustache and goatee.

Kevin:

Is this facial hair and mohawk going to maintain post quarantine or is this a quarantine antic?

Jesse:

I don’t know. We’ll see. I got a little bit of a talking to yesterday that I have to choose either the facial hair or the mohawk.

Drew:

Which one are you going to choose?

Jesse:

I don’t know. It’s a tough question.

Drew:

Okay, well you have to provide an answer at the end of this.

Kevin:

Drew, how you hanging in for quarantine?

Drew:

Good. Good. Thanks for having me again. I’m doing okay. Just obviously, like everyone, trying to adjust to the new normal. Or find your new normal, right? And whatever that means. And so just kind of finding new, new activities or trying to just enjoy life. You know, in whatever capacity it is. Obviously, not able to give us many places, but at the same time kind of taking a second to smell the roses, right?

Kevin:

You know, you’ve had kind of a front row seat to the changes in the restaurant industry. So for anybody that’s not familiar, maybe you could just kind of give us, what’s the lay of the land for restaurants right now?

Drew:

Yeah, so from what I’ve seen, and obviously I’ve been doing a lot of research and reading, but also kind of just being in that space and, coming from a company that also is in the QSR space of fast food, I think it is different across the different industries and categories, but you know, the national restaurant association in March said that basically like 3% of restaurants were actually closed permanently and they were estimating an additional 11%, I think in April. So kind of seeing what those numbers actually come back as. And then even if you look at the lay of the land, about 60% of those jobs that were lost in in March were actually in the food and beverage space. So we’re really thinking of kind of that impact and how restaurants and businesses, but also just people, are responding to it. Sales are down, right? If people aren’t going out as often for safety reasons, but also due to saving money. So that’s across the board. And I think you see when you look at fast casual, when you look at fast food or even a dine-in it varies across the board.

Kevin:

What kind of restaurants do you see or do you think franchised organizations versus company-owned organizations are dealing with this better or worse? What do you think about publicly traded companies or independents, right? I think you shared an article on LinkedIn that independent restaurants are probably getting hit the hardest.

Drew:

Yeah, I think there’s something to be said when you look at economies of scale, right? I mean, that’s, as with most businesses you know, publicly traded, obviously they have different stakeholders. But also having that franchisee model, it definitely plays an impact on how revenue is coming in. When you do have these more independents or kind of smaller operations or even they’re not prepared from a digital standpoint, even from a physical standpoint — do they have drive-thru , or are they dining in? How are they actually adjusting to it? From, from my view, I think a lot of independents unfortunately, are being hit the hardest. And a lot of it is because they have smaller operations. Maybe less cash flow. And you know, I think there’s more sensitivity in their sales. And so when they’re not getting sales for a certain amount, they don’t have a certain cash flow that’s actually coming in.

Kevin:

Yeah. Jesse, what do you think? You talk to most of the CEOs of our clients and there are large chain restaurants and some of them are franchise owned. Some of them are more company owned. Have you seen any difference between the company owned versus franchise owned and how they’re responding and able to react quickly or not?

Jesse:

Yeah, I mean, I think what a lot of people would tend to overlook is that franchisees, at least a good portion of them are small business owners and they have varying levels of support from the franchise org, but at the end of the day, they’re mom and pop and maybe the marquee hanging out is a well known brand but they are self-funded. There’s definitely larger franchise groups and there’s corporate owned stores but I think when look at it, there may even be a movement in your town to not order from a chain and instead order from a local restaurant without really realizing that that local chain may actually be just owned by somebody living in your neighborhood and hurting maybe more than a very well funded local restaurant. I think the interesting thing too is just seeing who has access to capital. And we’re starting to see right now that there’s a lot of restaurant chains are starting to raise large sums of money whether it’s just stacking up cash in case things get worse or actually to fund their current operations. And that, unfortunately, is just something that’s not available to to independent restaurants.

Jesse:

I think my hope would be that the chains will be able to support the local businesses and franchisees. But I think looking at recovery, I could suspect that the overall mix of restaurants will shift from independent, individual branded mom and pop restaurants to a lot more chains, whether they’re corporate owned chains or franchise operations.

Kevin:

Right. And hopefully the larger corporate-owned organizations are supporting their franchisees. You know, a lot of people don’t know that most of the franchisees don’t actually own their own real estate. They’re actually renting it from the corporations who actually are the landlords. And so if the brands are able to extend terms for or even just relief for rent, that’s a huge help for any of the franchisees that have had to shut their doors. And giving them grace periods on contributions for national advertising funds, things like that will go a long way for these franchisees.

What do you guys think are some of the lasting impacts that we’ll see coming out of quarantine as a response to coronavirus?

Drew:

I think, outside of franchisee relationships, cause I do think that that is a continuing factor in it. And I do think that that is something that is going to be worked through from a cashflow perspective. I also think how even some of the products, product offerings and you’re seeing kind of the way that restaurants, especially in the QSR space are adjusting even their menu mix right now. So for example, there’s an adjustment towards more family meals or even kits to make at home where they’re actually sharing their products with consumers and actually inviting them to, to enjoy that at their house and giving them recipes and content pieces. With that you’ll even see kind of restaurants like ‘Moes’ for example, they’re even providing some grocery staples, right? Knowing that chicken for example, is sometimes hard to come by at the grocery store so they’re actually offering chicken even at Moe’s market, right? So that’s a platform that they’re opening up.

Kevin:

Hey Drew, have you heard anything about any of the restaurants that are actually seeing that be profitable or driving traffic that otherwise wouldn’t have come in? I mean, I know a lot of the restaurants, California Pizza Kitchen has a concept like that too. But I’m wondering, as I haven’t heard anything around how successful the grocery concept has been for restaurants.

Drew:

Yeah admittedly, it might be too early to tell. I think that having that pivot was in an effort to pry something. So I do think and from a long lasting effect, I really think that long term, I think restaurants and the way that consumers are going to be engaging with restaurants moving forward, I really do think that that needs to be part of the way that restaurants do think about their business model and also their menu mix and just more product offerings.

Kevin:

Drew, what do you think about if we have changes to menus, how do you think this will affect LTO’s and more promotion? How do you think this will affect brands and their attempt to centralize their menus? Are they still going to be trying these kinds of new products?

Drew:

What I predict is, just from a consumer standpoint, I think a lot of people are going back to basics and kind of leaning into the brands that they really respect or trust. I think there’s so much uncertainty in the world and I think that that’s just the way the consumer mentality is. So I, while I do think that LTO’s will continue to be innovative and you’ll see some different things, I think it’s also going to give a nod or lean into nostalgic or those comfort or even core menu items; that’s how I think that would go. So it’s interesting that you brought that up. I really do think leaning into that because people are looking for that comfort, those kinds of familiar products

Jesse:

Do you think that brands are training consumers to be even more reliant on deals and discounting right now? I mean, even just looking at all the earnings reports from the public restaurant chains coming through this week, a lot of them are touting, you know, Del Taco is a good example, touting their promos as something that’s keeping the chain afloat. But is that actually just training consumers to just bounce from deal to deal? I mean it’s a pretty common price war concern in crisis or recession. What are your thoughts?

Drew:

I do agree, I think it’s a delicate balance, right? Because I think that there’s the need obviously to look at sales at the moment and of course we know that promotions and offers and discounts drive business. I was reading some some studies that said consumers are willing to travel and do drive-through or purchase things on apps, but they’re actually really expecting a discount because of the safety issue, right? So they need that kind of threshold, there’s something in the consumer mindset where you think, “Hey, I need some that extra incentive to actually do that.” So I think that’s right now, but that might taper off. I do think it’s a challenge for brands because in a sense, we’re training consumers to actually anticipate that and interact and expect that from brands.

Kevin:

Obviously we’re seeing massive shifts towards digital ordering through this. Some of our clients and just, those we know in general, anecdotally, a lot of brands went from 10%, maybe 20% of their sales going through digital to, you know, 50, 70, 80% of sales going through digital.

Is that going to normalize? Is that going to continue on? Is this going to be the greatest spark of digital transformation in any industry that we’ve ever seen?

Drew:

There are some companies and some restaurants that I think were really primed or prepared unknowingly for COVID, and I think it was because they saw the need for digital transformation or digital properties and channels even before 2020, so they were already investing or they have already created platforms like loyalty platforms or omni-channel digital platforms.

That said, I do think COVID has actually propelled or skyrocketed the need for digital transformation, I think that that has been a huge catalyst for it absolutely, because that’s exactly how people are purchasing right now. And I’d imagine there are a lot of restaurants, not only just QSR space, but also dine-in , how are they actually transforming and using digital transformation in that way? So when you think of off-premise, so delivery and pickup, but also delivery partners, are they delivering themselves? .

So yeah, I do personally think that COVID has single-handedly really propelled a lot of restaurants, whether they were primed and ready to go or they were just like, “Oh, hey, we’re touching on this” and now they actually really see the need. So I’m curious to see what you guys are seeing as well.

Jesse:

Yeah, I think it’s a range. I mean, no doubt restaurants that were already in market with commerce platforms that could handle end relationships, and ecosystems that could support off-premise and delivery and online or app ordering and contactless payment. They’ve been able to pivot a lot more quickly. You know, right when COVID hit, almost every one of our clients who, you know, kind of by definition, if you’re working with us, you’re either already in market with e-commerce or you need to get to market. And what we saw was the ones who were already in market with a customized solution, were able to pivot really, really quickly and turn on specialized curbside functionality or contactless delivery functionality or adjust their menu or their messaging to highlight safety or handle some of these supply chain issues that we referred to.

And then the ones that we’re looking at in the middle of longer projects where there was a goal to either optimize a major system that they already had in market, but they needed to move to a new one, or they hadn’t been in market at all yet and they just figured, “Hey, it’s been years, we may as well slow down and get it right before we launch”. Well every single one of those clients shifted their approach to “how quickly can we get to market?” And then the clients that we’ve come across that are looking to get into digital, are looking to work with a company like Hathway have also almost universally changed their approach from, let’s say spending six to nine months really trying to get this right before we launch it, to a new model of ‘how quickly can we launch and then how can we make it better and optimize over time’.

Jesse:

And I think there’s a, there’s now a renewed focus on data and I think they’re all starting to realize that if digital orders are now well over 50% of their business, as Kevin mentioned, it could be 80, could be a 100% for some brands. Now they have this unique opportunity to actually see what their consumers are buying and how they’re interacting and potentially turn little knobs and levers to optimize those relationships and figure out how to make it as easy and convenient as possible, maybe not have to use price or offers as a way to incentivize customers to come back. I think everybody’s just kind of shifting to an e-commerce mindset, which is a different mindset than you might have traditionally seen from a kind of a ‘brand marketing’ play or a business that largely has anonymous consumers.

Kevin:

I was literally just thinking about that, it’s going to be interesting to see what kind of skill gap arises from this. You’ve got a lot of brand marketers in the restaurant space that don’t have eCommerce marketing skillsets; it’s a very different skill set. There’s a lot of different, more tactical capabilities around analytics, attribution etc. I would venture to make a wager that most restaurant marketers have no idea what multivariate testing is. So there’s going to be a lot of things that you where these skills are going to need to be developed or brought into the industry for brands that are taking this seriously.

Yeah. I think that the brand that comes to mind when we’re talking about data operationalization, and being able to operationalize their data is Starbucks, right? And Starbucks made some announcements that they’re going to open up 85% of their stores within the next week. What do you guys think? Too early, too soon, too fast? I mean, maybe they didn’t actually need to close a lot of those stores in the first place. What do you guys think about starting to open up dining rooms across the country?

Drew:

As long as restaurants are adhering to consumers and their trust in brands, that’s something that I’ve been reading a lot about and kind of the shift towards, consumers thinking that brands should be stepping up or even trusting brands more than the government as far as their involvement in the way that businesses are about to reopen again. I think that that’s really one thing that brands can step up to, and especially in restaurants, by not only looking out for customers, but their employees and putting people above profit, right? I think that’s something that customers are really kind of keeping their eye on, listening to stories about how brands are not only giving back to communities, customers, frontline workers you know, doctors, nurses, etc.

But also how are they treating their employees? And I think when they do reopen (and Starbucks, I’m sure will do the exact same thing) where they’re actually thinking safety and transparency, right? So are they looking at social distancing within store? Are they only opening up in a phased approach, where you can do pickup and then a couple of weeks later they’ll allow maybe more people to sit down but they’ll maybe take some of the chairs out, so therefore it’s not as full. So I really think that that’s what consumers are going to be looking for as well. And and I do think brands need to be thinking about that too.

Jesse:

Yeah, I was talking to one one brand the other day and they mentioned that like, we’re not really actually going to have to do anything differently in store. It’s more of just making a show of it. So, you know, previously you might’ve said to your busser, “Hey just try to get in and out and wipe down the table and just don’t spend a lot of time, you know, don’t be as visible.” But now it’s like, “Hey, make sure you’re visible. Make sure people see you scrubbing each of these tables.” Obviously everybody cares about food safety, and if you don’t trust the food at the place you’re ordering from, you probably shouldn’t have been frequenting there before; it’s just making sure it’s actually visible.

I mean, we’re seeing some interesting things, right? Like, nobody wants to reopen too early and then have to roll back. But there’s an enormous pressure to be able to reopen. And we’re seeing it in different ways. We’re seeing that some restaurants, or even brands, are saying, “Hey, technically we could reopen in this area, but we believe that the governor is being a little bit too aggressive with it so we’re going to hold back”. But then you’re seeing the other side, I think it was today I saw a headline that an independent restaurant owner in Dallas reopened against the regulations and was arrested and they said it was an act of civil disobedience. But then like the lines get blurred because is it civil disobedience or is it just somebody who needs the income? But it’s, it’s interesting like how those things are going to be played. And then what’s your obligation at a corporate level to to prevent people from maybe making a decision that isn’t out of desperation but maybe is, you know, ill-advised.

Kevin:

I’m more excited than ever. I mean five years ago we kind of made a conscious decision to shift our business and really understand and develop solutions for the restaurant industry. And that was because we saw the writing on the wall, you know, e-commerce was going to happen. There was going to be this transformation and it was already happening. If anything, this is just going to be an accelerator that’s really going to spark that transformation to happen faster. So I’m, I’m excited and grateful to be working in this industry.

Drew, has this changed your perspective on where and what you want to do, do you want to continue to work in the restaurant industry? Like longterm?

Drew:

Yeah, so in my career I’ve had the opportunity to work in a couple of different industry verticals.I’ve worked in tech, in automotive, I’ve worked in consultancy and, food. I really do enjoy food. I think for a number of different reasons. I think one is food, from a consumer standpoint and just B2C standpoint, is we all eat right?! It’s also one of those very tangible products, like it’s very sensual You can smell it, you can eat it you know, visually pleasing. And that’s definitely one of the things that we’ve leaned into from a marketing standpoint. And I also think food is a passion point, I think it brings community. And then I think the last point is exactly like you were talking to. I think there’s a lot of white space in the way that restaurants in the food industry, there’s still a lot to do, I think the food industry can look at some retailers and maybe CPG industries and see from an eCommerce standpoint that there’s a lot of room for for a lot of brands to tap into and move in that space. And so I really, I really enjoy it from that perspective.

Kevin:

Awesome. Well, I think that brings us to a wrap today. Drew, thank you so much for joining us. That was fantastic. And I don’t know. I don’t know how to close this out. Jesse, what do you think?

Jesse:

Oh, we need like a, “that’s the way the cookie crumbles!”

Kevin:

That’s exactly what we need a tagline…. Drew, thanks so much for joining us. Stay safe out there and we’ll see you when things start opening up again.

Jesse:

Yeah, Drew, thanks a lot. Good seeing you! Looking forward to visiting out in Nashville when the world opens back up.

Drew:

Yeah. Well thank you guys very much. I really appreciate it. I’m looking forward to seeing the different hairstyles very soon!

Kevin:

Yeah, maybe I’m going to have to get on the mohawk train!

Drew:

I know, I know. I kind of gave myself a little bit of a haircut today too, but I should’ve gone like full….

Jesse:

That’s a self haircut?! That’s pretty good!

Drew:

Yeah, I’ve been practicing for a long time. But now maybe I’ll do the mohawk next time, but yeah, great seeing you guys and really hope to see you guys soon!

Jesse:

All right. Thanks man. Bye.

Kevin:

Great conversation today, it was really nice kind of getting some insider industry perspective on what’s going on in response to COVID-19 and really some of the lasting changes. Jesse, what do you think, I mean, we talked a little bit about it, but maybe you could elaborate. What do you think is going to happen long term coming out of this?

Jesse:

Yeah, I mean, we’ve talked about how there’s going to be the potential for consolidation of real estate or just overall market share from mom and pop’s potentially into larger brands. I think we’re going to have to take some time fighting our way out of the discount chasing mentality that brands kind of have no choice but to turn to right now. I think we’re seeing that the savvy brands are really highlighting differentiation in their fulfillment models and their food, focusing on value and safety, and trying not to use discounts as the number one tool in their arsenal, but turning to things that they can control and leverage, things they can pull related to loyalty and optimizing transactions.

Kevin:

Totally. I completely agree. I think this is going to be the single biggest accelerator of digital transformation for the restaurant industry. I mean, we’ve seen it in our business. Virtually all of our clients are leaning into digital and we’ve actually brought on some new clients over the last few months. That’s really going to be the new battleground; today’s consumer chooses convenience over quality 9 times out of 10, and having the right digital experience is what leads to the most convenient experience for consumers.

Kevin:

Thanks everyone for tuning in today. This was the first episode of Beyond the Counter, tune in for more episodes. We’ve got some fantastic speakers and guests lined up. Until next time, stay safe out there.

Jesse:

And if you’d like Kevin to also shave his head into a mohawk, feel free to let us know.

Kevin:

That’s going to be a tall order!

Jesse:

But is it going to be this tall..?

Kevin:

If you want to learn more about Hathway, check out our website. You’ll learn more about what we do and the solutions we provide to the restaurant industry. Check us out on LinkedIn, like us on Facebook, I don’t think we have a MySpace page? But what we should get Jesse’s mohawk on Tik-Tok.

Kevin:

Thanks so much Jesse, that was a lot of fun. I can’t wait for the next episode. Super excited to continue on with our next guests. Thanks everybody for joining. I’ll see you again soon.

Producer:

Thanks everyone for tuning in today. You’ve been listening to Beyond the Counter, a new podcast created, recorded and produced by the team at Hathway. Your hosts today we’re Hathway’s CEO Jesse Dundon, and CMO Kevin Rice. A big thank you again to our good friend Drew Dill for his time. We hope you enjoyed today’s episode. Thanks again for listening everyone, stay safe and we’ll catch you on the next Beyond the Counter.