Welcome to Chopping It Up. I'm your host, Mike Halon, the senior Restaurant and Food Service analyst at Bloomberg Intelligence. Our research and that of bi's five hundred analysts around the globe can be found exclusively on the Bloomberg terminal. Today, we're joined by Meredith Sandlin. Meredith is a CEO of Empowered Delivery, a board director, an advisory board member, podcast hosts, and author of the Delivering the Digital Restaurant books. So
I'm not gonna lie, Meredith. Going through your LinkedIn profile really had me questioning my work ethic.
It's quite a few things. But I'm lucky to have a lot of great people around me.
That's awesome, all right. I was going to ask, are you one of those people that just doesn't need to sleep? And do you have any time management hacks you can share with me?
M time management hacks, I would say, definitely have a really supportive husband, so look into that. And then I am a batch processor and I think that is key, which what I mean by that is like I read my mail once a month, I read my email once a day. I do not let my phone tell me what it wants me to do. Ever, like, I've never looked at a notification in my life.
That's good, that's great. Yeah, phones can be very distracting. Emails can be very distracting. We also have some messaging on the Boomberg, so yeah, we're constantly getting pinged. I think that's a smart way to do it.
It's a lot. It makes it very hard to focus on one thing for an extended period of time, and your brain needs that in order to get all the way through an idea.
All right, good stuff. So you started at Young Brands, obviously a phenomenal brand and company.
What was your role there, Yeah, that's how I got into restaurants. Previously, I'd been in private equity, and I went to Taco Bell in a role in finance and went there primarily because I got the opportunity to work with Greg Creed and Melissa Laura. Greg was then the CEO of Taco Bell, subsequently the CEO of Yam. Melissa was the CFO. She sits on the boards of Canagra and Nvidia.
Cool. Yeah, I got to overlap a little bit with Greg covering the company. Obviously a legend in the restaurant space.
Absolutely amazing person.
Yeah, and then you made the jump to a startup at Kitchen United. What are your thoughts about the future of ghost kitchens. You know, their struggles over the last couple of years have been widely publicized. What do you think.
Yeah, there's been some spectacular failures I think in the delivery only space, both on the ghost kitchen side as well as on the virtual brands side, and we tend to focus on those failures because they have been so big. But I hosted a panel recently at a conference of folks doing virtual brands and delivery kitchens, and it was amazing. The room was filled with people who are just quietly doing this and doing it correctly and making it happen
and building businesses. And I think we've learned a lot from the spectacular failures. I would say many of them were just overfunded, funded sooner than they had the business idea proven. And that's what made the spectacular failures, you know,
that's what made the failure so big. But folks who are just building businesses that actually work and doing it the way that you would build a restaurant, where they build one and master it, and then a second, and then master that and then four and master that there's a lot of people out there making it happen.
What a novel thought, building your second and building your hundredth store, making sure you have the unit economics for your second, third, and fourth store in line, and working before you build your hundredth store. It's such a novel novel idea.
It's certainly hard, and it's a different it's a different kind of business in the sense that you must be good at digital marketing, both in terms of customer acquisition, but then also in terms of all the remarketing, and you must understand the e commerce economics and how e commerce marketing math works, and you must be able to measure all of those things. So that is certainly different,
but a lot of things are the same. You still have to be a great restaurant offering great food that connects with the guests in a genuine way and keeps them coming back because you're offering a great experience.
Cool. So what attracted you to Empower Delivery?
Yeah, So I've known the founder of Cluster Truck, which is the company that Empowered Deliveries spun out of, for many years. I met him actually on another panel. He's a really remarkable human being, incredibly generative, always coming up with ideas and just ideas that no one else would ever have. Very very smart man named Chris Baggett. He was one of the co founders of a company called Exact Target, which was sold to Salesforce for two and
a half billion dollars. Subsequently found a Compendium, sold that to Oracle, and then, as you do, became a farmer after a couple of billion dollars of exits. I think that's what everyone does. And when he was a farmer, he found himself with too much Hamburger on his hands, and so he bought some restaurants. And as you do, when truly you're a software guy with a lot of ideas and you buy some restaurants, what you do is
you start making software. So he hired his CTO from Compendium, and the two of them together founded Cluster Truck, and Cluster Truck, for those people who don't know, it is the largest and most profitable delivery kitchen in the US. So when I say there's a bunch of people out there just quietly doing the work, this is a great example. They've made a delivery kitchen. The downtown Indianapolis location does eight hundred two thousand transactions a day, first party ordering,
first party delivery, absolutely incredible, and in power delivery. I was talking to Chris about what I should do with my life after writing the book and taking him through some job options that I had, and he said, Meredith, if you're going to go get a job, job, you should come work here and we'll spin out the company. And I said, oh, that's very funny. I'm going to go back to a big company. I think that's where I belong. And he said, well, just come see it.
Come see it. So I flew to Indianapolis and I walked into this kitchen that was doing eight hundred two thousand orders a day, and as a restaurant person, once you see it, you cannot unsee it. It's just so different from everything else. And it was obvious to me that that is how restaurants should run, not just delivery kitchens,
but frankly all restaurants. And what I mean by that and how it's different is truly it's like a smart brain is running the kitchen, and then because of that smart brain coordinating all the activity, all of the features that you might want in a modern digitally native restaurant radiate out from that brain, whereas in the rest of the restaurant industry it's individual, siloed pieces of software trying to go after different opportunities and solve different problems, and
then the poor restaurant is stuck on the back end trying to stitch it all together, which is very, very challenging.
Interesting, So can you talk a little bit more about that delivery kitchen doing eight hundred to a thousand transactions a day? So how many brands?
Yeah, they go to market all as Cluster Truck. That's really the main brand, and that's what they do all of their market getting to consumers. As they do have sub brands sort of underneath to help navigate the menu, but really Cluster Truck is the main brand. Cluster Truck is the only one that they list I think on DoorDash, and if you were to ask a consumer about any of the sub brands, they wouldn't recognize them, but they would recognize Cluster Truck. But it is a very complex
and extended menu. So there are items as different on the menu as pizza, hamburgers, salads, Thai food, fried rice. I mean, just like this incredible range pasta of different menu items, and part of their secret sauce is how they execute so many different items without having just complete chaos and a ton of waste in the back of the house.
Yeah, yeah, it sounds. It sounds like a mission serving an extended menu with a lot of different cuisines, for sure. So Empower was spun out out of Cluster Truck.
That's right. So they, in order to make all of this magic happen at the delivery kitchen, have really amazing software that Dan mcbadden our CTO and his team built custom for Cholester Truck. And so the idea was, let's spin it out into a separate company and offer it to other restaurants. Now a word of caution, because I think everyone who's built their own software has this idea, Oh, we'll just spin it out and sell it to other people, no matter what industry they're in. It sounds so easy.
It is not easy. So we've spent quite a bit of time rebuilding aspects of the software to make it multi tenant and configurable and really usable by someone else. You know, you can imagine how different it is if you're a restaurant with your own engineers working for you, and they live you know they work right outside of
right upstairs from the restaurant. You can probably make it so that only engineers can use it, right, But if you're go to be selling it to other people, you have to make it so that a restaurant person can use it.
Okay, So I guess who is Empower's target customer.
Anyone who does a substantial number of deliveries a day out of a single location will benefit from the empowered delivery approach. So I think it is becoming clear that delivery the way it is currently constructed in the US is not really working for anyone as a consumer. It's extremely expensive, it's unreliable, might be slow, might be fast, might be high quality, might be low quality, might be cold. When you get it, you might be missing items. If
something's wrong, it can't be fixed. So not a great consumer experience. And then from a driver perspective, you know, there's articles all the time about the drivers being grumpy about the situation and feeling that they're not being compensated well enough, and consumers aren't tipping. Of course, consumers aren't tipping because they perceive the fees to be so high already that they don't have room left for the tip,
and then it's not really working for the restaurants either. Right, the restaurants are losing so much in commission that they have jacked the prices to make up for that, which again is a terrible consumer experience, but even more than that, it's an incredibly disjointed operational experience for the restaurant. And what they've essentially done is seated control of their kitchen
to an outside party. Right, so that marketplace that's sending in orders, or multiple marketplaces that are sending in orders, are now sending them into the kitchen without knowing what's going on in the kitchen. And then on the back end, the driver's showing up. Maybe the item's done, maybe it's not. So if the driver shows up and the item's not done, they're waiting. If the food is done and the driver
hasn't shut up, the food is waiting. Both of those things are a bad experience for either the guest or the driver.
But we were told consumers knew it was a worse experience and they were just going to accept it. Is that part of the issue is that, you know, restaurants were like, we'll just do it, and you know, people accepted it during the pandemic in times that they had to or when they were afraid to go to restaurants. And now that things have changed, you know that that's turning them off? Is that? What's is it a combination?
I guess it's a combination of that in terms of why the sales mix of a delivery into yeah drop right, yeah.
Look, the convenience is real and consumers love that. And I do think for a long time, pandemic or no, I do think for a long time, consumers were willing to put up with a variable experience because the convenience was so valuable to them. But now that the prices are really starting to go up, I think you're starting to see consumers push back on that. You know, if I'm going to pay that much more, I expect it
to be a good experience. And I don't know if you follow Lisa W. Miller and Associates, and they put out a recent blog post. Lisa is a consumer insights person and she does the same survey month after month, year every year, and so she has longitudinal data about how consumers are feeling about things going on in the restaurant industry. And she put out some data on delivery specifically recently, and a couple of things very interesting about it.
The percent of people who reported ordering delivery from a full service restaurant in the last three months was down ten points versus its peak in September of twenty three. And yeah, that's a huge stop, right, And she has a thesis that what consumers choose to do is things that are joyful, and what they choose not to do is things that are not joyful. And so she says, well, what's changed is that delivery is now not joyful. We're seeing a study increase and the people who say delivery
isn't worth it. That's up seven points versus a year ago. Eighty percent of people who've ordered delivery at some point have had an issue with that delivery. They cite slow delivery times. Thirty seven percent of people say delivery fees have gone up too much, and that's fees specifically, not just the underlying food cost. Twenty three percent said their order was not accurate, twenty four percent said food quality was worse than expected, eighteen percent food said food was
not the right temperature. I mean, those are pretty astounding numbers, right, and I think when the price was similar to what was in in store pricing, but you've got that convenience. Consumers were willing to say, well, it's not quite as good, but it's pretty good for delivery. But once those prices really start to go way, way, way up and the experience doesn't get any better, consumers start to question what
they're doing. And we've already seen order volume actually go negative in the UK for delivery both Jordash and Uber. It's very hard to te tell what's happening with their order volume because they conflate it with other countries, other verticals. There's a lot going on in their financials, so it's really hard to read between the lines. It would appear their order volume in restaurant US specifically is still growing,
but that growth rate is falling. I'm very curious after seeing Lisa's data come out if next quarter we actually start to see a decline in orders.
Yeah, i'd imagine, you know, to your point, it's more expensive, and you know you mentioned potentially the same experience. I'd imagine the experience is probably worse now that dining room traffic is back.
I think that's probably true. Yeah, it's gotten more expensive and worse, and the other thing that's happening is that the platforms themselves are making the experience worse on purpose. And I think everyone can identify, especially New Yorkers where you're at, can identify with the rise of Uber. And when it first came out, you got a black car and it was amazing, and it came right away and
it was like magical, right. And then over time they introduced all these new tiers of service, and all of a sudden, what you used to expect to be this is the experience became something that you got massively upcharged for. And now if you want your car to show up on time, if you want it to be a decent car, it's going to cost you twice as much as it used to, right. And the same thing is starting to
happen on the delivery platforms. In order for them to make their network economics work, they have to start batching orders, right, So they're putting two three orders in a car on its way out to be delivered. And what that means as a consumer is that you might get the second order, it might take longer, your food might be cold by the time that you get it. It's very frustrating, you know, if you're sitting there on your phone watching the driver
drive somewhere else. You can't figure out why, and you miss the quote time, like everything is just not as good. Well, have you noticed that you can now pay a two ninety nine fee to be the first person?
I have not. I'm kind of old school. I stick with my you know, I'll use the apps for sure. Postmates or ber Eats is pretty popular by me in the New Jersey suburbs. So now I haven't noticed that, But I am kind of old school. I do have my favorite Chinese place and a couple of Italian places that are close by that have always done delivery really really, really well. And you know, I kind of won't sacrifice my quality as much as I think other people for convenience. To be honest, that's.
A classic New Yorker statement. I think, I mean, New York kind of invented delivery, right, the rest of us were just copying.
Yeah, yeah, so I have not noticed it, but yeah, just another fee, that's it sounds exhausting. I'm sure a lot of customers are fed up.
Yeah, pushing back on that. So so you have to ask yourself, like this disjointed system that results in a terrible and expensive experience, but consumers want it. That sounds like a situation for disruption, right, There's something consumers want. Current system is terrible at giving it to them. What if you could give it to them in a way that wasn't terrible. What if you could give it to them in a way that was cost effective and efficient and reliable. Oh my gosh, they would love it? Right,
And that's what empowered delivery does. And that's why you see Cluster truck doing eight hundred and two thousand deliveries a day because the experience is so magical. As a consumer, you can't believe. Oh my gosh, it came on time, it's still hot, everyone was nice. It was so cheap. They didn't charge me a delivery fee, they didn't charge me a service fee, they didn't charge me a menual. How were they doing this? This is like pizza delivery in the eighties. It's incredible.
Okay, So I mean part of it. How are they doing it right? How are you saving the customer money, saving the restaurant money, helping the drivers make more deliveries and more money as a part of it. You know, I know you've mentioned that like central brain part of the restaurant and how that everything builds off of that. But if you could talk a little bit more about how the process works.
Absolutely, it's about coordination of resources and when you have a lot of different pieces of software and a lot of different frankly companies and entities involved. Right, drivers don't actually work for the restaurant or for the platform. The platform is a totally different company from the restaurant. Everyone's running on different software. Everyone's trying their best to make
it work together, talk together. But that disjointed system inherently creates slack in the system right there, And slack is waste. Waste is cost, and that waste, that cost is what causes the experience to be bad and more expensive because now everyone has to get their piece of margin, everyone has to cover their cost, everyone has to pay for that waste in the system. If you you can get
rid of that, then everything gets better. And that's what you love about your local Chinese and Italian places, right I bet you. They have their own drivers, and having your own drivers allows you to control that whole experience, both in terms of how you're conveying your brand to the consumer, but also in terms of linking together what's going on in the kitchen with what's going on with the driver, Right, Why make the food till I know where the driver is and the empower delivery system does
that for everyone? Does it at scale? Now you have to be doing a lot of deliveries, probably not eight hundred a day for it to make sense, but you need to be doing probably one hundred a day for it to make sense. If you're doing five or ten out the back door, the software is not the right
software for you. But if you are doing one hundred deliveries a day or more, then being able to coordinate that activity of where the driver is with what's going on in the kitchen, and then being able to tell the consumer about it, give them a real time quote time that they can trust that is accurate every single time.
Because you control the whole process, it just makes the whole experience better, takes the slack out of the system, removes all that cost, and makes it so that the consumer doesn't have to pay as much, the restaurant makes more money, and the driver can actually make more money too.
Yeah, that part makes a lot of sense. I guess there'd be a couple of questions. I would have that some things that I think might be difficult at the moment. So number one, is finding drivers difficult for some of these restaurants, and what tools are they using to try to attract drivers.
Yeah, well, maybe let's back up and say, just reiterated exactly what you said. This is a tool that requires you to have your own drivers. So just like your favorite restaurants in New Jersey, this is a tool that requires restaurants to have their own drivers. Now, I think the W two driver model is fundamentally broken. I think we see that with you know, the largest pizza hut
franchises in California laying off their drivers. I think we see that with someone like Papa John's using surge capacity from the third parties when they're unable to get enough drivers. I think drivers just don't want to work W two anymore. They've been shown a better way. And as much as some drivers you know complain, oh I'm not getting tips, I'm not making a lot of money driving, there's also a lot of people who love doing it. And they love doing it because it's flexible, they can do it
when they want or need to. They love doing it because they are not you know, sort of beholding to a specific company where they have to wear a uniform and show up on a certain day at a certain time. Right. Ten ninety nine Contract driving is just a better way to do that job. And so what this software does is make it possible for any restaurant to have its own ten ninety nine gig fleet of workers, So a
dedicated on demand fleet. Everything that's easy about door, dashnuber and someone just showing up and taking an order, that's the same. Everything that's hard about that where it's disjointed and you don't know where they're coming or going, that's different. Right. So then now to your question, how do you get these drivers? How do you find it? Well, first, again, you have to start with the assumption that people actually
want to work this way. And I think because we hear the noisy, bad cases of you know, I didn't get a tip or I waited a long time. Because we hear those, we tend to think, oh, driving is terrible. But when you actually talk to the drivers and ask them what they think. And I don't know if you do. I do this because I work in the industry. Every time I get in an uber or lyft, I ask my driver about their experience, why they do it, what their story is. It's very interesting and I call it
the gig ATM. A lot of people do it like, oh, I need a few extra rects to buy a gift for my kid, or oh I'm saving up for a vacation, or oh, I'm trying to pay off my student debt, or oh this week, I just ran a bit short of money, so I'm driving a few extra hours. Right. It's literally it's so easy just to get in your car, go do something, or on your bike, go do something,
make a bit of extra cash, and move on. People want to work this way, So start with that assumption and then go out and say, hey, I have a better gig for you. This one's better. You're not going to be driving all over the place wondering where your next job is coming from. You're going to get when you're engaged, a regular set of jobs and pretty regular pay. That's pretty reliable and you know what it is, and
our system protects you. So the way the system is optimized, it is optimized for that driver to make sure that anyone who's in the system is going to get enough jobs per hour. It's not going to let the driver pool get diluted, which happens in the Uber DoorDash lift systems. Right, they let way too many drivers in and then the average driver can't make money because everyone chooses to drive at the same time. Right. The system won't let that happen.
It only lets the right emberve drivers in because it's dynamically matching ordered demand with drivers supply.
It's interesting and it's really interesting that the gig economy seems to have really broken the W two model. Right, people you know kind of want to work on demand. How often can they get paid?
We currently paid drivers out daily. There's a little bit of a leg on just money getting transferred, but there's also just like undoor Rusher Uber a daily pay option where they can pull the money down there.
Yeah, that's cool. And I've heard of you know, some companies working on hourly payment.
Yeah, right, And just that alone is huge. And when you think about it, like how did we end up in this place? Like how did we design our economy so that you have to work for two entire weeks before you get a paycheck? That is so crazy?
Like what it probably was first created when interest rates are really really high, so that the employers can carry the float.
Made money on the float. I don't know. It seems nuts right now now that you can get paid daily, Like who would wait two weeks to get paid and what did they do for those two weeks? How did they eat?
I don't know for sure, And so all right. The other question I would have would be about for driver insurance. You know, I've heard of some restaurants, especially smaller mom and pop shops, maybe having an issue in terms of acquiring driver insurance. I'd assume that would depend on the state in the region. But is that an issues sometimes for customers?
Yeah, insurance is a state by state thing. For sure. It's called hired non owned auto insurance or each and away. It's the same insurance that a pizza place would carry that has their own drivers. And I have heard in some places it can be more or less difficult to get, but we have not seen any of our customers have trouble yet.
Okay, good, all right. And we spoke about delivery mix and how it's falling. You know where do you think and obviously it's going to be dynamic, it's going to be changing, but you know where do you think the delivery can ultimately shake out as a percentage of total US restaurant sales in the intermedia. In the longer term, well.
The intermedia maybe in the short term, I think it's actually going to go down, right. I think consumers are getting to a place where, as we said, it's not worth it delivery specifically, but generally, prices have gone up so much on so many things. They have to save somewhere, and that's probably one of the easiest places to save is to go procure their own food rather than having someone bring it to them. So I think in the
short term it will go down. I think in the intermediate term it'll kind of settle out to a pretty stable place wherever that is. But then in the long term, I think innovations like empower delivery and what we're talking about that allow delivery to be higher quality and cheaper will cause delivery to actually go up to a new high. And I think, you know, we look in countries that have really low labor costs, and delivery can be as
much as seventy percent of restaurant sales. Right. Kitchens are smaller, people eat out more often. Restaurants don't have a front of house. They might have a very significant ghost kitchen or delivery kitchen build out. They're kind of skipping ahead directly to the next generation, if you will, right, skipping
the landline. In the US, we have an install base of six hundred thousand restaurants that are built the way they're built, and we're not going to throw them all away and start over, right, So it is more likely in the US will never get to that like seventy percent of sales, but I wouldn't be surprised if we don't get to fifty percent of restaurant.
Sales, Okay, cool. I enjoyed that in your books, kind of the case studies talking about the different dynamics of different in national markets and their percentages of delivery and what kind of factored into some of those things. I think the examples in India with some of those like food runners in Indi India was were like super super interesting to me.
Yeah, isn't that amazing? Amazing They've been doing that for a very long time. They've got it totally dialed in, and they've been doing it without software. They have like some weird like mental software. I think, very able to do it.
Very impressive for sure. All Right, And what do you think about Amazon taking a bigger stake in Grubhub and the recent edition of Grubhub Plus to Prime.
I think it's pretty exciting. I agree with the way Kristin Holly said, are we watching the world's slowest acquisition. I think it'll be very interesting to see if they end up owning it. I think it's huge for grub ab access to all of those customers. I think Amazon's been trying to get into this space for a very long time. It's hard to be the everything store and not restaurant food, right, It's such a big part of our economy. I've tried it. I thought it was pretty good.
What I didn't love about it is that all the advertising said free grub Hub Plus, and certainly there was no delivery fee, but there was still a service fee, so that's not totally free. And then even weirder, the service fee changed in between the cart and the checkout page, so it went from like three dollars and sixty cents service fee, and then once I got to the checkout page it said something like other fees, they had changed the name and I went to five sixty. Oh wow,
I thought that was very odd, very odd. Didn't seem like an Amazon like experience. I'm not sure if Amazon knows that grub Hub's doing that. Yeah, so Amazon, if you're listening, I want to look into that.
I mean, transports so important when I when you're dealing with customers. You know, That's why the discussions about dynamic pricing so many heated discussions. I guess about about it, right, because transparency is so important and I think factors into your decision making when you're going to go out for lunch, right.
Yeah, absolutely. And I think the thing about the service fees is that when you're comparing options online, you don't see the service fees. So you're comparing, Oh, this one has free delivery, this one has reduced price delivery, this one has full price delivery. You're making your choice based on what you can see, and then you get to the end and there's a fee that you weren't aware of. That I think is what is so annoying about it.
Yeah, not a great customer experience, but very cool. Meredith, this is a very interesting conversation. Where can our listeners go to find out more about empower delivery?
Yeah, we would love to have folks visit Empower dot Delivery. On that website, you can take a video tour of how the software works. You can schedule a demo, reach out to us, speak with us directly. We would absolutely love to share the software with anyone again who's doing lots and lots of deliveries every day and who is just fed up with having other people's drivers and orders messing up their kitchen.
I love it, and I love it that it's an option for a better option for even independent restaurants. Anybody that's helping out the smaller mama pops out there, you know I support and appreciate, So thanks again for doing this. You're great. A big thanks to the audience for tuning in as well. If you liked the episode, please share it with your friends and colleagues. Check back soon for a conversation with Christine Barone, CEO of Dutch Pros