Episode 84: The Rise of the Digital Restaurant with Ray Reddy

Restaurants are going to go back a bit. But I think I could argue that one of the first big technological breakthroughs was the word processor interpret their menus. They could change their menu every day at yo use a color printer and slap it into a flexible binder and then technology really evolved. I mean we got these customized order systems. They were kind of cumbersome to get install but now the wait staff to push a couple of buttons and place an order and do your billing and make it work but that was really about it and then all of a sudden we had breakthrough in a blanket argue that a big winner was Starbucks with their apps for ordering and paying but whatever everybody else looking at the evolution of such technology in restaurant, I think you're right. I think yeah there had to have been breakthroughs and efficiency and how and how restaurants are run their business, but you know, we would really argue that the last big

Was a credit card in the 80s. That was the last time that I was in there was a really nice adopted Knology. It really improve to me isn't changed how you interact with local businesses treatments to do our systems have been improvements to processes and insert a background things that that operators would be used to run the restaurant. But but none of them I really been consumer-facing. So we've been doing the same thing the last two decades there's no really good mechanism on unlike how you discover local businesses and restaurants, you know, you could have walking you have to kind of Parts through a menu board a bigger but you might like if it's a new place and anyway mine in any way to pay for this kind of this whole rigmarole that you've done for Four decades now and I think you know digital literally transformed that I was ready ready the co-founder and CEO of ritual company that we recently invested in a Georgian Partners, which was a fascinating consumer-facing social app Place really that that's what seems like a very simple thing.

IHOP it is so much more today on the show will be talking about the rise of the digital Restaurant & Howe Technologies, like artificial intelligence are changing the way that we purchase food. It's going to be informative and maybe mouth-watering show. So stay tuned. I'm John pryal welcome to the Georgian impact podcast.

We're ready. Welcome glad to have you on the show. Ya. No, thanks for having me excited to set up a beer yourself. Yeah, my name is one of the founders and the Sea of ritual. You know, this is this is the second company that that I built with my with my phone finder. So that started a company called push slice. It was a mobile Commerce platform to be licensed to start carriers Google acquired Us in 2011. I ran the audit team for mobile Commerce at Google for for 3 years after that prior to starting with you and then before that I worked for for Blackberry in their corporate strategy and of an 18 used to be but it's a spaceship to work to stay relevant. And obviously that's going to come down to Great user experience.

Hi to assist users and how they do all their directions marketplaces are unique businesses there. They're not really like Enterprise saucer or even normal consumer business is where you're selling a product one person. It's it's really about achieving liquidity on both sides. It is a sphere chicken-and-egg problem customers for a restaurant Partners Define invaluable to be on our platform and you need enough restaurant partners for your consumers to find your popcorn valuable argue that it Marketplace business is the single most valuable thing you can provide is the other side of the right and so so that's what that's what unique about a remote control for the real world. The reason why I choose as ritual over your competitors or or alternative is we have just amazing tents coverage and feels like it works everywhere when you launch your neighborhood for your city, so that should have been the first order problem that even working on, you know today, which is how do we get to liquidity? How do we how do we get from Z?

Go to one and I think now one of the unique parts of the platform is we actually have item level transaction data, right? So you don't just know about your purchasing patterns from the high-level in terms of what restaurants you miraculous. We actually know specifically what you're buying the types of ingredients you like the types of you know, that the notes you making the modifications you do and so we don't have millions of airplanes across the you know, the orders that we have and I think he's more machine learning approaches in a few areas. When is Discovery so giving your eating patterns and the things you like, how do we help you discover new places to go to but not just at a restaurant level. How do you actually get down to like dishes or items? You know, you like the spot? We did you like this very specific.

Dietary types and really understanding you know, what a person prefers to eat and the wavy kind of see the world is not that there's no 50 restaurants around you may be within our power to Norwalk. It's that there are a thousand things you could you could eat or drink within 5 or 10 minutes of where you are if you're in a denser than City and our job is to really no one helped you discover new things that you might like and and to provide, you know, really sucks in this experience when you can you find them into Frost. It's it's not that we have enough scale that we have the data part 2 of engineering problem now is how do we really use that to you know to do very useful things for people discover things help them find things they like I think that's that's the main focus as I mentioned earlier on with ritual individuals who plays food orders for pick up unless you believe the ritual does more and why it's so unique what makes ritual unique is the social aspect. So most of our customers are in who work at companies are in team, so there's actually internal teams.

Rituals when you go grab a coffee or lunch your team is going to hop onto that order and have you bring back an extra coffee or once in a sec. It's almost quitting of a peer-to-peer coffee one network almost inside of companies for people can share pickups. And so it's it's really allowing you to both save time and be something super convenient for you to pick up and get something about that. That is very cool. And I think everybody understands the term Network effects or affects. They think about the macro level of how many fax machines ended up in the world for that level of network effects. But here we are thinking about these is a micro level impacts. And obviously your key selling point is the small co-worker Network effect. And which seems to me to be much more impactful than sing on Amazon other people bought this also bought that so your thoughts on this social retail. How would you describe that is it seems to be a very interesting space?

Yeah, I mean, you know, I think social and commerce it's a very loaded term you think about it more from the standpoint of convenience and cost. So the way you think about the world is for things to be adopted in a big way you have to increase convenience without increasing price and that's kind of Hearts Simple two-by-two Matrix and how we'd evaluate most products and Technologies. And so your name is on it even Uber something to eat. They managed to increase its adoption because otherwise you become a product for which of the one of the challenges with with food delivery today. It's very convenient, but you when you add an extra 10 or $15 for the pasta food to have her back to you, it's okay. It's in the top 5% of income earners. We are building a product that we understand that that means a price as to stay the same ago down at 10.

Actually the constraint be put on everything we do just how to be massively increase convenience for people without having them pay anymore and realized was the way that people were using which one set of offices were already exists it and it's everyone listening probably his and really all we're doing so using digital to to make about that happen at scale, you know, so there is an effect on your overall medical workers getting coffee flavor of the fear of missing out just like fear of missing my coffee. They said there's a whole new thing. We're going to get there.

Show today is it by eating socks match never going to go away. So let's stay on this user interface every day. So how do you design the platform trying to make that happen to make it something that somebody wants to pick up and use everyday terms of the type of things that you thought about it really came down to the choice of why we started with the food one of these are you be really believe in for Consumer products is that if it can be an everyday product just starts to the cycle starts to work against you and they can be if you wanted to Billy product that every day. You said you were would be start menu for users can use this to your four times today and I would say all the optimization to side like in station points all that stuff desert relations. I think the reason why we have an everyday product is because we started an everyday category. Let's go back to the little bit of the interactions a little bit then I'll get to data how you view the interface.

And where you see that going in terms of conversational Ai and then making this easier and I'm kind of driving if you know someone's going home in that a habit on Wednesdays of sopra pizza, but where you think this is going to evolve in terms of your user interface. We have our thoughts on how interfaces are going to involve. You know, I think the big three years ago. No one would have predicted that boys would have blown up the weight has with Alexa and Google home. It's actually hard to predict which interfaces are going to be the dominant one. There were the next 5 or 10 years and we're not at the shore chatbots seem like they would be a really big deal little while ago and it made if I stole well, it's just you know that by going to take that longer answer exactly which application, you know apple is doing some interesting stuff with my message has a lot going on in terms of conversation. When what's the time in interphase is going to look like needs to be an interface.

To the real world, right? I almost called it like that an API for the real world. If you if you want to push a button on digital and you want an a coffee or lunch in the real world to be prepared for you. If you took a risk of interface into the real world, you push a button on your phone and a car shows up at your doorstep. Well, what I would argue is valuable component of that Doan is that interface into the real world, Does it really matter to us with the digital overlay is whether that's a nap or that's voiceover. That's some comfort conversational interface and in some chat application in overtime. There is that there might be many different ways to interact. I thought it would be would be understand is ultimately we have to provide the service layer that allows maybe even third parties with us into the real world that causes something else. I'd have something actually happened on The Young and the physical and think about it talk about data a lot and it is

Killer space with food obviously individual restaurants have some data but you have more whether it's to your coworkers are the potential of a aggregating purchases across different entities. What's your view of kind of the bringing all the data together? And how do you approach that? I think about it. We think about data in two ways. We have two customers. We have restaurants in one side and and customer is on the other side. So maybe let's just break them apart and talk about what does David mean for each one of them perfect time for several customers the biggest ship that's going to happen. If for sure those listener to remember the early days of e-commerce when there was a site called Athenians where you rated seller seems like an observed things to do like what does that even mean to rate a seller of products in Amazon and end with the way that you cover sza?

It's about products not sell it. So I do that you're almost indifferent to The Cellar at this point. I think that's the most shift is going to happen in food wear today. There's a lot of focus with no it with other restaurant review sites, etcetera. The focus is on restaurant. What does it really mean to say that this that you you would like this restaurant will have 30 menu items may be based on your taste you like two or three of them and you might hate for an inch of the point is that we really do she was at restaurants as an entity don't really make any sense. We have to get one level beneath that we have to get down to your there are thousands of things at restaurants sell and how do we help you figure out here or even a restaurant that's waited three stars. There might be two things there that you really love and they might be a couple of things that you don't so what what does a 4-star rating meet, right? So it's I think that's the big shift on on how we think about it, which is why we have to move away from from restaurants down too many vitamins & Health people connect with and then discover your individual dishes that they would love with its drinks.

You know, whatever it is. So that's the big shift FBC really happening here, which ultimately means a discoveries easier like like everything just gets easier for people because you don't have to yell we can use machine learning and your passport is behavior. Did you say goodnight? You don't have to sift through 500 let you know things and then what you want me to be like this and you know, everything that's going to be a transformative side of the world. It's going to be a very similar transformation is eCommerce. So so ultimately you go from you can't measure anything because there's no data anywhere, but you have a POS view of the world. You know what your top sellers are but you don't understand who your customers are. How often do you visit you? You don't understand their customer satisfaction scores. What products do you like a blind? You're all pretty based on gut instinct in some some very weak signals from your POS over to the digital world. Where is perfect data makes you know exactly where your customers are. You can Market them. You know what their lifetime value is you can you can stand to GameStop.

If you think about what it means to run an e-commerce retail business today versus one a local retail business from a decade ago. Transformation in that shift is what's going to happen in restaurant space where this is going to primarily be digital and the difference between success and failure in the restaurant world over the next decade is going to come down to operators who embraced it up and understand that they can it's a huge Advantage stripe you stated to run your business scientifically you are just going to do better than the other guys and what about kind of the thought of privacy and Trust so you're absolutely right. We do not rather than knowing that the your top three items are this here's the 12 people every months that are buying these top two items and obviously you want to Market to them. But how did how are you going to manage issues of kind of trust and having the the restaurants and you can I convince everyone that this is a good thing. Yeah. I mean we take privacy very seriously. So I think it comes down to two things. It's giving people control that's you know, so you so transparent you in control is like part 1

It would be a lot of work to you know exposed at a time that we have on an individual customers and starting to be transparent about that. You know, what day do they want us to trade right data, ultimately helps make the experience better. But if people your people should be able to opt out of that if they if you don't want it anything for us at the Beverly explaining and having a good reason to collect it as if that's an internal process we had which is like do we really need to say that and what are we going to do with it until we actually go to make the experience better and is explaining that to customers rights and then I'll totally giving them the choice on on with Abby, you know, they want that extent experienced individual customers friends and they want to Target segments. They want to say tell me everyone who hasn't who's been a customer who hasn't come back in the last 30 days. How do I give them an offer to have to come try me out again?

Benthic about kind of what CEOs kind of want to hear a little bit. I think one of the one thing that's always at the top of mind and the challenges that all companies face or scaling so it's kind of dig into scaling a little bit more scale. What problems have you seen whether is cross-check or your sales team or marketing? How do you how have you approached scale? And what kind of advice do you have for our audience? I believe that accompanies ultimately have very few assets in your your assets are your people and the generally the companies with the best people tend to win in the long run because it is time I could just so much about knowledge of people and so that's probably our single biggest asset in the thing. We take very very seriously. So you spend an inordinate amount of time interviewing assessing Ultra fit and really hiring the very best people and an early markets Chicago establish a consumer brand it's easy for us to attract talent, but you're launching new markets is really hard people haven't heard of you. How do you attract good talent when?

I know so you are right. So I think we found hiring in New Markets to be or not to be challenging. It gets better as your as your overall profile increases and we do more PR and we can another intensities in ten people. I've heard of us before we get there was any breaks down when you multiply it by ten X and I think that the hardest if I if I would a kind of summarize it in like one one sentence about what makes going hard. It's that the obvious problems are that you will have new problems as you scale. Right? So so that you can have to solve a lot of problems if you haven't solved before but what makes it. The part I wasn't anticipating is that the solutions that you put in place?

Flu outbreak because it's in and that's the part that that I didn't really I just fit in a good example was you know that we had a process we we we are more like a hundred and with a smaller team and a lot of the process of interaction between sales and Ops in the team that launched them. He was sort of informal Ikea liquid work, but it was a document did but it didn't it wasn't like in manufacturing light, right it was the team has had one place in to build and then all the sudden we went we multiply that by 5 time so we went from no from turn up volume to like five or six hundred bucks a month, like literally everything broke down communication broke down everything was going to end it didn't make any sense at first, but it was very obvious that we had that the process that worked for that team of people in that scale just wasn't go

You work when you multiply that by 5 times 1/10. I'm going to go back to the drawing board your Wii to a lot of things and it was a very painful of a painful month because you know growth doesn't stop and so you going to have to like do you have to shoot? You have the sheets fire? You need to put out as you're stealing a little bit but I left a to recap a little bit more on kind of the future of the digital restaurant. And what do you see is you look at? Yes. Oh look at in the restaurant space. I think you know, I think there's a few things that are that are already hot Mesa to the funny thing is we've already crossed over into most restaurants being digital-first versus walking Force. If you if you look at the number of restaurants in in many cities, do you add up ritual plus the delivery Partners they work with digital orders typically make up more than 50% of their store volume if you got it all up together. So so I'd argue that the shift has already happened and that and you know for a long time at Google we talked about when would when would search volume exceeds 15

Turn mobile rights and MMF crossover shifted when when the world really was was mobile first versus desktop and everything have to start to be built for the default Boost Mobile in terms of how you build an optimized things restaurants are now in in that same spot where when restaurants you work with open new locations. They design around how do we build a a a restaurant and a pick-up area? That's friendly towards digital ordering versus Watkins. I think what we're seeing is the fundamental layout of restaurant is going to change over the next five years. And in fact, the layout of food court is going to change where I should go a lot of work with large property managers who are when they were going to be building food courts, and we work alongside them to to design food courts that are that are optimized for traditional and so basically means three big things in terms of how stores are laid out. When is creating a lot of separation between where people order and pay and where they pick up because for every one is picking up you don't want them kind of either one.

Congestion in that area. So they're kind of your kind of separating thoughtful about store designed to make sure those are very different ends of the store. The second is ideally enabling people who have pre-ordered do not have to like go all the way to the back of the store to pick stuff up to seeing a lot of pickup areas being put first almost even ahead of where people ordered they were just like almost a reversal of cuticle Star Trek II. The last is that went a lot of our partners when digital release kills they can have they can have 50 to a hundred orders waiting for pickup at a time and pick up counter or just wasn't built for that to pick up shelving starts to become in for she can actually have enough orders with it at lunch bags. Would he be able to pick up Center and then we're actually seeing a shift in and how labor in a store and restaurant work. So the good news actually is that digital means that restaurants no longer need to pay people to transpose orders from a person into a POS, Australia.

Value Place to pay someone to do it in in and it's kind of annoying for everyone for the president after going to repeat the order. It's it's an unnecessary cost for a lot of restaurants and errors are made when things get prints Bozeman to a POS. And so with the one that sing with digital is people are their own cashier's there their they're choosing what they want and pay for it all by themselves in their phone. So that actually no longer a lot of money and what that means is they can put that lifts labor to better use. I love it. I hadn't really thought about it till I heard you wrapping this up in terms of how much the digital has a spin spectacular physical impact from pick up areas and shelving and ordering. There's a lot on the physical. I hope they get the digital right? I still want to get my BLT with mayo on this side not on the sandwich and they got to allow me to ask that and I'm sure we will get there a tray ready. What a pleasure to talk to you. Thanks for spending the time with his it's been great. Thank you John. Thanks for having me.

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