Hello!

3 Numbers

2/3s

The percentage of consumers who now have a negative view of tipping, according to a recent report by Bankrate. Consumers’ growing fatigue with tip prompts at a wider variety of establishments is having an effect on full-service restaurants: tipping in Q2 fell to the lowest level since the start of the pandemic.

5,000

Meals per day created by the Eatch robotic kitchen. The Dutch startup says its system is capable of making up to 15,000 daily meals, while also plating the dishes and (most importantly) cleaning the pots.

$20

California’s likely new minimum wage next year for chains with more than 60 national locations. Legislation setting the $5/hour increase was passed by the state assembly yesterday and is expected to be signed by Gov. Gavin Newsom.

Some takeaways from FSTEC

I spent the last few days bouncing around the FSTEC conference in Dallas (where “restaurants and tech connect”). Here are six immediate takeaways, originally scribbled down on a stained happy hour napkin:

• 2021 feels like a different world. Virtual brands and NFTs? Not huge topics. Inflation has created something like a siege mentality among both operators and technology providers. Even when bleeding-edge stuff like AI was mentioned, it was spoken of as a way to very quickly increase sales or save money. (For instance: Wingstop is using machine learning to upsell— ML is the juice that powers its online-ordering recommendation engine. ROI, ROI, ROI.)

• Technology should ease employees’ burdens. On a related note, execs went to great lengths to say that back-of-the-house technology investments should also be used to improve the employee experience. Brix Holdings CEO Sheif Mityas said their new concept, Pizza Jukebox, utilizes robotics to free up employees to interact with guests. His counterpart Carissa De Santis added that the goal with automation was to free employees from the most mundane tasks.

• “I think AI is the devil of this industry.” Quote of the week goes to Craveworthy Brands’ CEO Gregg Majewski, who I now love for bringing the hot takes to a technology conference. Some context: he’s not anti-technology per se, but he did express strong concerns that front-of-the-house AI can usurp employee hospitality.

• Having a loyalty program is absolutely necessary: Newks Eatery has 5,000 members per store and has been able to partner with companies like cruise lines to give guests unique rewards. Personalized offers are easier to send, too, when leveraging the data that comes from a large loyalty database.

• Having a loyalty program is absolutely not necessary: Fast-growing First Watch doesn’t have one. Neither does gold-tier brand In-N-Out (which also has foregone online ordering). And none of the participants in a day 1 cross-generational panel said they actively use loyalty programs. Confused yet? Eh, you’re not alone.

• 2024 feels acquisition-y. While this probably isn’t the conference where you find players hashing out the latest multi-billion-dollar restaurant tie-up, the Roark/Subway deal was fresh on everyone’s minds, and the most fun conversation to be had was speculation about where sidelined investor capital will be deployed next. One telling signal (among many) of the industry’s direction: former hotel execs seem to be increasingly well-represented among restaurant groups. And hotels, as we all know, have already had their consolidation moment.

Name That Chain!

You get three hints to guess this week’s mystery chain:

• This chain largely copied the McDonald’s model with a slight geometric twist — its hamburgers and buildings were both shaped like hexagons.

• In his autobiography, the founder writes that he drunkenly lost a controlling stake in the company to his business partners. After realizing what he’d done, he sold them the rest of the chain for $37,000. (It did over $2 billion in system sales last year.)

• In the ‘90s, the chain was purchased by another burger chain, which merged many features of both brands.

WHAT IS THIS MYSTERY CHAIN? (The answer lies at the bottom of the email.)

Quick Hits

• Getting that eighth refill may get awkward… McDonald’s confirmed this week that it plans to remove its self-service soda machines at all U.S. locations, which will require dine-in customers to request refills from the stores’ cashiers. Soda-mixing aficionados can take heart in McDonalds’ long phaseout process — the system doesn’t expect to fully eliminate the machines until 2032.

• Two words you love to hear: “Rat Boom”… An unexpected silver lining of Covid-related business closures was the deaths of hundreds of thousands of rats. But cities’ re-openings have brought along a rat rebound — here’s how restaurants and cities are tackling the problem.

• Raise an Oleato… Howard Shultz has retired from the Starbucks board, according to an 8K filed with the SEC on Wednesday. The founder ceded CEO duties to Laxman Narasimhan in March.

• New distribution player is formed… The creation of Legacy Food Group — a new “super-regional” distribution company — was announced last week, after the holding company disclosed equity stakes in four regional distributors. The group aims to use its scale to compete with national broadliners while still maintaining a local focus.

• Cash is king… In investor meetings at the Piper Sandler Growth Frontiers Conference this week, both Sweetgreen and Domino’s announced improvements to restaurant-level profitability, with the former reporting 20% margins in Q2, while the latter said franchisee profitability is up 8% year-over-year.

• Purty Smart… Later this month Cracker Barrel plans to launch its first-ever loyalty program, and it’s based on the iconic peg game that has frustrated generations of customers. Participants earn pegs for dollars spent in both the retail and restaurant sides of the business, with challenges and surprise-and-delight events offering additional opportunities for rewards.

#Content Recs

• Two excellent pieces from Restaurant Business worth a read this weekend: Jonathan Maze’s three-part series on Boston Market’s (shall-we-say) rocky last few years, and Joe Guszkowski’s deep dive on Marc Lore’s newest venture, the vertically-integrated technology/delivery/restaurant concept Wonder.

• How Michelin decides where to publish its dining guides.

• The looping impact of student loan repayments on restaurant spending.

• Via reader Ben, a drool-worthy field guide to the great regional hot dogs of America (Slaw Dog, forever and always).

• And finally, moving to a more high-brow space, did you know that Taco Bell has inspired its own literary quarterly? That its editor is listed as “Editor Grande Supreme?” And that it receives thousands of submissions a year?

See ya next week.

Trivia answer: Hardee’s