Higher Restaurant Profits Through Data-driven Decisions with Ian Christopher (Ep 125)

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Higher Restaurant Profits Through Data-driven Decisions

Introduction To Restaurant Profitability

Welcome to the show where we bring you the tips, tools, and techniques you need to make your restaurant more profitable and successful. I'm joined by guest, Ian Christopher, CEO at Galley, which is a food tech company that helps boost restaurant operations with their data-driven insights. We're going to get into a lot of stuff, but before we do that, Ian, just tell folks who you guys are. How long you've been around? How do you get started in this? What have you got?

It's a pleasure to be here with you, Jaime. Myself and my brother-in-law, Benji Koltai, co-founded Galley. We got our start in 2017 and it really came from Benji's previous experience in the food industry. Benji was an early hire at a company in San Francisco, actually a tech startup called Sprig. He was a principal engineer who had the unique opportunity as an engineer actually working within a food system, a running functional at that time, ghost and virtual Restaurant. 

It was a unique opportunity for someone with an engineering background to actually be embedded in the culinary operations of a food business and to be there with the sole purpose of developing software that helps food operators. Benji spent every day for about two and a half years putting on a hairnet, sitting next to line chefs, executive chefs, purchasing managers, inventory consultants, you name it. Really asking to really inquisiting us to what technology, and software could he build in order to enable a more productive and efficient workflow. The V1 Galley was literally born in a kitchen, which has differentiated us ever since. Now we're on a mission to help food businesses become more profitable by making data-driven decisions.

We have been covering this stuff for a while, obviously over the years, but you hit a couple of buzzwords there that we're going to get into, the go stuff, the virtual stuff. Where we are sitting with COVID is definitely giving that a push forward for sure as people are moving more offsite delivery, take out and curbside. There's a lot of changes. Let's get into where we are right now. 

In August 2020, we were really heavy on restaurants making a pivot. I'm sure you folks had to make somewhat of a pivot in your business as well but talk about how you have either changed with COVID or dealt with change. I know on your website, there's a link to a guide that says, “If you're pivoting with meal delivery or meal kits, here's a resource. You guys are obviously thinking about this stuff. How has it affected you? What are you seeing out there in the marketplace? 

Honestly, it hasn't affected our business as much as it obviously has affected the businesses that we serve. We feel really fortunate that we didn't really have to pivot our offering our model. What we did try to do was increase the accessibility of our platform. We did make the product more accessible from a price standpoint. We spun up a freemium offering so that we could be helpful to anyone in these times, trying to figure out food costing and menu engineering with this goal or ongoing multi-channel and to put it back on the survey of the market. 

That's what we've seen through the last few months. It started with caterers and SMB food businesses, smaller single-unit restaurants, and a couple of multi-unit restaurants. Really looking at how can they increase revenue. What new revenue opportunities are there? We had a massive uptick in businesses coming onto the platform to go after multi-channel opportunities, so potentially delivery or doing more takeout or delivering directly to the consumer. 

Now we're a few months into this thing and it seems like every single operator in the food service industry is trying to figure out how do they safely get their finished product one step closer to the end consumer. We're seeing Just massive iterations on operational and distribution models across all the segments and verticals within food. Whether you're an SMB a smaller single-unit operator multi-unit or some of the larger enterprise businesses in the field. Everyone now is just really understanding that they need to evolve or die trying to satisfy the demands of this new and really intricate and constantly evolving landscape that we find ourselves in today.

A couple of buzzwords there. Evolve and it's going to change. What we had before COVID is not going to be back to the landscape probably at least for a long time and maybe never because of all these changes. What we talked about on day one when COVID was that and the next day people were like, “I'm breaking my rent. We're closing down.”

It was like we did that panic. The first thing that we talked about really is the restaurants were just easy economic times before that. Things were just rolling. Life was easy. Everybody was making money, hand over fist. Not everybody. It's a challenging business always, but restaurants for the most part were doing well. The economy was doing well. It was easy but the reality is, and we saw within two split seconds, that the restaurant model is, it's broken. It's a flawed model. 

Optimizing Costs With Data-Driven Decisions

Restaurants doing well, making 5%, 10%, if they're lucky 12%, and 15%. We looked at it as “This is an opportunity to flip restaurants and hopefully build a better future.” I know you guys are helping with that because it's flawed. How can we raise margins to be a sustainable business that doesn't close down after one week of struggles? I know you guys talk about food costs, big deal. We focus on that stuff, raising margins. What are some of the key insights you guys use both to your clients in general when you talk about food costs, menu development, and raising margins, what do you think?

That's just where you have to start your focus. I think this isn't necessary. I completely agree that there is this reshifting and reordering and settling of the restaurant industry as a whole, but I think everything that we've learned from our customer base and the market and thought leaders out there is that this is a time to get back to the basics more than anything. Even if you're exploring these progressive new emerging markets of ghost and virtual and all those things, this is a time that if you don't understand the core dynamics and mechanisms of your business, you're going to have a really difficult time surviving and staying viable in the future. 

Getting it, not necessarily that we have a way of doing food costing and menu engineering that obviously stems from our platform, but just the notion of getting back to those core principles of do you understand your food cost? Do you understand your menu level margin? Are you optimizing that menu for delivery and off-premise? That is the first place we need to start as food businesses because this is an unknown time and to be able to deal with the ups and downs that are going to be associated with revenue and then trying to pursue new opportunities like ghost and virtual. 

Every restaurant should be optimizing their menu for delivery and off-premise sales right now to stay competitive.

That takes a lot of time, energy, and effort spent on marketing and brand awareness, all of these other things that potentially take money. At the end of the day, if you don't have a really tight operational core then you're going to have a much more difficult time approaching these new opportunities and these new revenue streams. For us, it's just putting the focus back on the basics first and foremost. 

That's a really big challenge in this space. As you know, you've covered this plenty of times. I mean, food costing is an art and science, and menu engineering, is the same thing. It's not easy to do. Otherwise, everyone will be doing it and we would have 30%-plus, margin businesses everywhere. Everyone would be in food, but it's a difficult thing to do well. 

Have you seen then as folks are optimizing their menu, is it one, or is it streamlining the menu sometimes? Is it going through that analysis to say, to realize, “Our best seller actually is costing us a dollar every time we sell it? We're actually staying.”

We've had people cry on a demo because they were mistaken that they thought they had a potential loss leader that was underwater by a dollar or two and ended up being underwater by $4 plus I mean. Just to understand that, to really have high fidelity and high accuracy and understanding your food costs is step one, of course. When it comes to menu optimization, of course, you have to be looking at the menu margin blend and understanding where do you have those opportunities for loss leaders. Where can you recruit that revenue? 

All of that. It's looking at all of the new ways to really service your customers. There are just so many more people that are going after multi-channel, new people groups, new demographics, younger, older, couples, families, all of that. Do you have a menu offering that actually serves all of those diverse people groups that might have been going on to, might be accessing multi-channel or delivery for the first time as a customer? Are you optimized for that? 

Multi-Channel And Ghost Kitchen Trends

Let's stay there for a second then. I wanted to come back to something, but that reminds me of a question. You talk about multi-channel and you have different target audiences. You've already used the phrases ghost kitchen and virtual kitchen. Is it a trend to run one kitchen, a ghost kitchen that can simply put out 4 menus that focus on demographic A, 4 menu items that clearly focus on group B, 6 items to focus on C, and then you're running those all from the same facility? I think it's probably what you guys do but is that a giant trend? Do you see that's going to be more and more and more?

There are a lot of different concepts mashing up here, but that's what the big guys are doing. That's what the ones that see themselves as the restaurant groups of the future are doing. They're curating menu items and even just full concepts around people groups and menu trends right now because of the agility and flexibility of spinning up these ghosts and virtual offerings, they can have multiple within a house of brands. 

That's really where you see, and we work with a handful of these companies that are really leading the way and progressively setting the stage for the next restaurant group of the future, which is a house of brands that services a large percentage of the dining population to a very exacting degree of specificity or do you have a full gluten-free offering. Are you getting into some more ethnic cuisines that are more on trend now? All sorts of all sorts of variables, but the big guys are taking that multi-concept approach that's highly curated.

When I think about a couple of things whenever I order from a place, it's like I pick like 1, 2 or 3 things. People are probably pretty similar. If I'm in the mood for a meatball sub, maybe I'm like MeatballSubs.com or whatever. That is just solved by someone who's curating a list for that. It would go back to the flaws of a restaurant business where a giant expense is rent. Having the right location costs a lot of money, it's got to be big and all that stuff. 

If you start to take that out of the equation by building a so-called virtual kitchen in a cheaper location that doesn't have to deal with all those costs and then just produces the menu items, ships them out via all the things that are popular now, third party delivery, this guy, that guy, or maybe you do it in house. Do you see people grabbing profit by taking some of those expenses out of the system?

Absolutely, I think that there's definitely room for higher margin profiles within ghost and virtual, just given some of the inherent efficiencies that come. Also, you're not running a dining room. You've taken out a whole cost center of your business. That said, it's not a one-for-one transfer of those savings into a backup house or into profits, or into revenue. You have to incur new costs around brand awareness and quality control and all these other things. Ultimately, if you're a day-zero ghost kitchen coming onto a delivery platform. 

How does a consumer know how to find you? How do they feel comfortable in your offering? That's really a shift even over the last couple of weeks. Uber has now started putting tags on their delivery on the application that will show the parent company of an associated brand so that the consumer can start to get some confidence and what parent company, what brand is spinning up these other offerings. Do I feel comfortable purchasing from them? The other thing is that consumers are going to drive a lot of this behavior too. 

Future Of Restaurant Transparency And Traceability

As those cost savings happen, but then there's also going to be this other side of transparency because the beautiful thing about a restaurant is we can physically go there. I can interact with a bartender. I can meet the chef. I can understand the wait staff. I have a more personal relationship with my food when I'm eating, or dining in a restaurant. When I go ghost and virtual, these days, I'm not even saying hello to my delivery driver. It's being left contactless at my front door. What interaction do I have with my food? 

Very little besides consuming. I think consumers are going to start driving us towards behavior about full traceability. Like where did this food start and how did it end up on my fork? Can I see that through this journey of real data transparency? Can I understand that it came from this farm? It was actually produced in this kitchen and then it went to this delivery partner and ended up at my front door. Those things I think are just going to become more of a necessity rather than a nicety in the future, which is going to be driven by the consumer ultimately. 

Transparency and traceability are becoming essential. Consumers want to know where their food comes from.

I have a question that I'm just thinking of now is, I think you're in San Diego, I'm in Orlando, pretty metro populations that have quite a bit going on, in New York obviously dense and so forth. If you move to the suburbs and you move even more rural, is this trend we're talking about, ghost and virtual, it more suited for the high population stuff versus, I'm thinking where I grew up in the suburbs, it was more like you drive out to a restaurant, you're going out, there wasn't delivery, of course, not that I'm old but that's a whole different thing right now than it is now. I guess what I'm getting at, is the trend more urban than rural and so forth. What do you think about that?

It comes down to your delivery window mainly. Most delivery operators right now are trying to target at a minimum a seven-minute delivery window from the point of production to the end consumer. If you're outside that seven-minute window, you start getting into just some other higher-level complexities, not to say that it cannot be done. There are folks that are doing that. 

They're just optimizing for last-mile delivery greater than seven minutes, which means you're probably not ordering a grilled cheese sandwich or something that's not going to taste delicious within seven minutes of being delivered. It's definitely feasible. I think you're just going to see different iterations of the model. You're going to see other types of distribution models coming in, you're going to see pop-ups. You're going to see food trucks as distribution centers. You're going to see more modular-type kitchen infrastructure come into play. 

It's only made more efficient by density, but there will be varying models that help make up for the lack of density. The beautiful thing is that this has never been a more exciting time to be in food because of the amount of innovation and entrepreneurship that's happening. People are every day trying to figure out these problems, and I've just been overwhelmed by seeing how creative this industry is and trying to get food to the rest of us, honestly. It's pretty impressive. 

That's right. That is what silver lining for lack of a better word. You've seen a couple of good things come out of it. One has been innovation, the way people are going to learn how to figure out cost better. Delivery systems obviously have ramped up incredibly. For people who know how every single restaurant now knows how to do takeout or delivery because they've had to learn that. Whereas before they met have been resistant to it. 

People are learning and then now you're talking about different models and different innovations that absolutely are happening. This industry is going to be creative. Let's back to half of the conversation here, but let's go back to, to data-driven stuff that's in your tagline. If I'm a newbie from the outside and I hear that what the hell does that mean? Give an example of a data-driven decision that helped a restaurant in terms of what you guys do. 

We've already touched on it a little bit and understanding of we've created a system of record or a source of truth for all your food data. What we do is we steward your ingredients, your recipes, and your menus, and our ingredients are associated with vendor items. At any given time within our system, you can look up the cost of a recipe. You can scale that recipe to whatever scale you want, and see food costing happen in real time. We do that at a menu level as well. What it really is creating a beautiful place to interact with that food data. 

A lot of these food operators are doing this and capturing a lot of this data, but they're doing it in spreadsheets that are just not usable, not scalable, clunky, broken, and really hard to get the value out of them that they're intended to do, which is to help you make better decisions around core activities. For us, one of the main activities that we're trying to gain the most efficiency around is purchasing. The idea of a food business knowing when and understanding how much of what to buy at what time is one of the hardest questions in food service to answer. 

First and foremost, that's our stake in the sand is our whole platform is optimized for essentially semi-automated purchasing. You give us your recipes, we marry it with your vendor, and your purchasing data. Then we map that to your production plan. You tell us how many chicken dishes you want to make next Tuesday will tell you exactly when and how much of what you need to purchase in order to execute that offering, which is completely different than any other system out there that is literally asking you, “How many cases of chicken do you think you need to buy in order to execute on this chicken dish in two Tuesdays from now?” 

It's putting purchasing on its head, moving away from a par-based purchasing system to a more demand-based purchasing system, which is highly relevant right now when demand is shifting so rapidly. You cannot just go off of par-based purchasing and say, “I bought nine cases of chicken last week, I'm going to do the exact same this week and hope it works out.” It's just that that's not viable in a COVID economy. First and foremost, better decisions around purchasing behavior, better decisions around inventory behavior, better decisions around production behavior. When we understand your offering at a high level, and again, a menu is an abstraction.

Restaurants with streamlined operations and optimized menus are the ones thriving in today’s market.

It could be your menu for the week, it could be your menu for the month, it could be a menu for your entire year. We give you transparency and insights into the dynamics of that menu, like how much cross utilization are you using? What pricing has happened across carrots over the last six months within this offering? By the way, you need to make 700 pounds of carrot soup next week. Are you going to bash that? Do that your onions can be made two weeks ahead because they hold better in the walk-in and you can reduce that time, and so on and so forth. It's driving towards efficiency across the entire workflow from recipe R&D all the way through last-mile delivery. 

As you're chatting, I was just taking a few seconds to scroll on your site. We can pop out there for two seconds. Is there anything you want, we'd want to specifically show, or should we just give them the website address and have them come out? 

No, I think it's a great place for people just to explore. We try to be as helpful as possible. There are some great resources there. You mentioned it there, some guides on pivoting. There are some resources on how to approach delivery. There are resources on food costs, all of that. The website is definitely a great place to get more familiar with us and our offerings. Then just hopefully some valuable content there for operators as well.

Hit them with that address as well as any other social stuff you guys have or anywhere else you'd want to point folks. 

We're we're searchable at Galley Solutions, www.GalleySolutions.Com. Then we're also really active on LinkedIn as well. Hit us up there and our teams are always happy to answer questions anybody has. 

I see there's a demo right on the side all that fun stuff. Definitely check that out. Folks, that was Ian Christopher of Galley. You can find them on the web at GalleySolutions.com. For more good restaurant marketing and operations, service people, and tech tips, stay tuned to us here at RunningRestaurants.Com. We'll see you next time, thanks.

Important Links

• Ian Christopher
• Galley
• LinkedIn - Galley Solutions