Carl Orsbourn is co-author of the bestselling book Delivering The Digital Restaurant. In the book he describes how restaurateurs must shift their thinking, behaviour, and investments to survive and thrive in the new digital arena.
If you would have proclaimed a few years ago that restaurants would be fully digital and even virtual, people would have assumed you were missing a couple of screws. Nowadays, it’s hard to imagine doing business without the help of technology or online sales revenue.
In this episode, Carl Orsbourn and Carl Jacobs discuss what it means to be a digital restaurant, how to avoid the pitfalls of a virtual operation, the importance of marketing and when restaurants will reach digital maturity. Finally, Carl and Carl discuss dynamic pricing, which has been around for decades in the hotel and airline industries but is new to the restaurant industry. Orsbourn is a forerunner with Juicer Pricing.
Carl: Hello, I’m Carl Jacobs and in daily life, I’m the co-founder and CEO of Apicbase. In this podcast, I’ll be looking for answers on how to grow and scale your food service business. I’m talking to numerous experts who’ve done the same in the past.
In this episode, I’m talking to Carl Osborne. Many will know him as the co-author of Delivering the Digital Restaurant, a bestseller book in which he and Meredith Sandland uncover a roadmap to the future of food.
Carl’s goal is to help restaurants thrive in a rapidly expanding market of off premise dining. In the past he led operations and customer support for Kitchen United, a large scale ghost kitchen network.
Today, he’s the co-founder of Juicer, a new company that aims to bring dynamic pricing to the restaurant industry. As you can imagine, we have a lot to talk about, so let’s get right into it. Welcome to the Food Service Growth Show. Hello Carl. Thank you for joining the podcast. It’s great to have you.
Carl Orsbourn: It’s great to be here Carl and as we were just discussing beforehand, it’s great to be having a podcast with another Carl.
Carl: Yes, it’s quite a unique opportunity, I would say. So as you said, it’s about time. Anyway, thank you for joining and maybe for the audience
Carl Orsbourn: Yes, great to be here. Thanks for having me on. So Carl Osborne, I’m a Brit originally. I now live over in California. My history actually is largely in the C store space, Carl. I spent 18 years with BP, the big oil and gas company of which 15 years were spent in C stores, gas stations and managing that particular business environment. And that culminated in me running a 1000 gas station business over here on the west coast of the US up until about 2018.
And then I got to a stage of my career where I was reflecting on the future and I was thinking, okay, I’ve achieved a lot of my short term objectives here, and I was at the age of 40, and I thought I thought back to a particular point of my MBA where they brought in this philosopher and they said “Whatever you do with your life, given the fact you’ve had this wonderful education, whatever you do, try and do something that can make a difference.”
And I thought, well, I’ve always wanted to get into the start up scene. And so at that point, I pivoted my career into ghost kitchens.
I met up with a mutual friend of mine who had recently left Yum! Brands, who had gone to work at a company called Kitchen United, which is one of the leading Ghost Kitchen companies over here in the US. And at that point I was really just interested in the transition from that person’s departure from a huge organization into a startup.
But then I started to learn about ghost kitchens and I thought, wow not only is that quite a fun and fancy name, why don’t you tell me a little bit more about it? And the more I learned, the more I was intrigued. And eventually that led into me running operations and customer success for that business. And really it was there where I saw just the amount of transition that the restaurant industry was having to go through. Even those that had the foresight to get involved in ghost kitchens, and of course this was all pre pandemic Carl.
So in that sense it was great to be able to see that challenge, the excitement, but also just a lot of the confusion that existed as well. And so when I departed Kitchen United alongside the aforementioned lady that introduced me to Kitchen United, we decided to to write a book. And, you know, the book was written largely out of a need state for us to be able to help each of the restaurant groups that was, there you go you’re holding it up delivering the digital restaurant, you know, and we wrote the book largely to help restaurants understand why they should be excited about digitization, why they should be excited about off premise and its potential. And of course, the outline was all set up and ready way before the actual pandemic actually happened.
And then the pandemic hit. And we were just getting the point where we were about to start writing and we thought, wow, we’ve got to get this book out ASAP.
And so the book came out on Kindle version in July of last year. October was the hardcover. I recorded the audio book and that came out in January of this year. And it’s gone on to become a bestseller in a number of countries around the world. It’s won a few awards and it’s really set out to do what we intended, which is to try and help the restaurant industry look from a very impartial angle upon everything to do with digitization, everything to do with off premise.
We spoke to over a hundred executives on technology and restaurant companies and got their perspectives and tried to tell the story. And so it’s that has then led to a number of other things.
So I now sit on the board of a restaurant group in Saudi Arabia by the name of Alpha Co, helping them with their digitization agenda, and also my fellow co-founders for Juicer. Where is it? Up here on my side. They actually read the book. They were coming in from the hospitality travel sector and eventually we hit it off. And we’re now running a company that’s helping restaurants with dynamic pricing, much like you see in airlines, much like you see in hotels.
We think that can work for restaurants as well. And so we’re at the starting point of a business and trying to help restaurants look at pricing and building that competence up, which of course, again is helped through the advent of digitalization.
Carl Orsbourn: Yes, I’m glad you raised that question because a lot of people get confused. You know, there’s terms like Dark Kitchen out there as well that often gets used. Cloud Kitchen that gets used. For all intents and purposes, imagine a restaurant without any tables and chairs in the front of house.
It’s a purpose built location that is helping restaurants service the off premise community, the community that is having food for either delivery or pickup or carry out or takeout, depending on where you are in the world. Different terminologies. And for that reason, it’s helping restaurants expand in a way that they haven’t been able to perhaps do in the past, because typically restaurants have had to expand through a brick and mortar enterprise, which of course takes time, takes a lot of capital intensity.
And now ghost kitchens are being developed to help restaurants be able to have a presence which allows them to deliver to perhaps a new group of customers in an area where they don’t currently have a brick and mortar enterprise. And so in that sense, it’s helping grow the off premise reach of of restaurant brands.
There are lots of different types of ghost kitchen providers out there. I’ll tell you about the new book a little bit later, but we go into that in a little bit of detail because in many ways, having just one term to capture all the different models is not necessarily fair. For example, my old company, Kitchen United, when we started out, we didn’t touch the food at all.
You know, we were just a landlord, for all intents and purposes. But there are other ghost kitchen companies that take on the entirety of cooking the food, and there are other ghost kitchen companies that actually develop virtual brands and actually license those out. So there are a variety of different options that are existing.
I think quite honestly, Carl, there are a lot of models that are still trying to find their sweet spot, you know, to find which actually drives the right level of profitability based on the expectations of the business. So there’s a lot of things emerging in this space, a lot of exciting things, but it’s definitely in the center of the off premise world.
Carl Orsbourn: I get this question a lot because when you write a book called Deliver in the Digital Restaurant, people ask you, well, what is a digital restaurant? I put it very simply, and it might be a little cryptic, but it’s about being wherever your customers are.
A digital restaurant is about being wherever your customers are. Carl, do you know how many hours a day the average customer spends on their phone? The numbers I have about six hours. Six hours. And so for that reason, and I’m sure we know people in our lives, maybe the younger ones spend even longer.
Right. So when you think of that, that tells you where are your customers, where your customers are there on that cell phone. And if your restaurant isn’t there with them while they’re on that cell phone, then you’re missing out on a potential option to sell something to them.
It’s quite honestly the same reason why a lot of customers are intrigued or restaurants are intrigued by the metaverse these days because that again, is turning into potentially another environment where people see people to be hanging out and spending time. And so a digital restaurant is where your customers are, and that therefore means it’s not just about off premise transactions.
A digital restaurant is also about customers that are live there in the restaurant themselves, but how you can use technology to help them interact with your restaurant, how you can build a digital dialogue with them on an ongoing basis, how you can use technology and communications in a way to be able to drive the repeat rate and to be able to make them feel like they have an affiliation, almost a community of sorts with the restaurants that they they like.
That is what I think a digital restaurant is.
Carl Orsbourn: Yes. Well, there’s a chapter in the book which is called The Maturity of Markets. And in many ways, I’m sure you reflect on this yourself and across numerous verticals, is that the US is often put out there as the leading force, you know, the innovator that’s driving things forwards.
But we argue in the book that the US is actually playing catch up to the likes of China, India and the UK in terms of delivery adoption. And part of that is to do with digital adoption, the way in which cell phones and smartphones are adopted in different places, but also how certain technologies skip the landline like we’ve seen obviously over in India and how there aren’t many landlines and went to cell phone technology.
There’s also a number of other factors about how the UK and India and China are different. The UK, for example, is a very concentrated nation. I always laugh when I go back home because everything is so much smaller. The roads are smaller, the cars are smaller, the houses are smaller. But for that reason we’re, you know, I don’t know how many is these days, 60, 65 million people on a very small island. And so therefore, they’re all living together rather close. So that’s really great for a off premise delivery setup because it means you can deliver to a far higher populace of people in a much smaller period of time.
And I think for the US, one of the challenges, especially in the middle of the US, where you actually have a large amount of people spread over large distances, it makes it somewhat more challenging to be able to deliver within the magic 30 minute window. So in that sense there are having to be different levels of ingenuity, be thought through on how to be able to support different markets in different locations.
Speaker2: In the US, the rural locations are being supported perhaps in a way through more locally dispersed driver pools as opposed to having to just rely on the third party marketplaces for their logistics. Whereas in the cities, of course, as we see in the likes of India and China and in London, a lot of the logistics is actually managed through bicycles. And people actually just moving a very small amount of distance.
But a lot of time it will be up through skyscrapers and high, high buildings. So in that sense, I think there’s something around just the logistical footprint that is quite different. But I think the main thing is just that the customer adoption of technology, when you look to Meituan and Ele.me in China, for example, you’ll just see the fact that now a delivery transaction for food is actually cheaper than going to eat out.
And part of that is because of the way in which all the technologies have kind of come together and how now through Meituan, for example, it’s the the equivalent of where you can book your restaurant table, you can book your travel for your vacations, you can book your movie theater tickets all through one platform and also use the WeChat interface, the WhatsApp of China, to be able to communicate through all those different interfaces in one medium.
All of that removes friction, and that friction that’s being removed makes customers more willing to be able to play into that space. And I think that is why we’re starting to see, you know, the drive towards consolidation here in the US from a technology standpoint. As consumers become more and more aware of how this technology is helping them be able to get the Amazon experience across different verticals.
Carl: Interesting actually to notice these differences. Indeed. You could argue that you know with the digitization of the restaurant market, the restaurant industry becomes also a little bit of a commodity.
It the platform is actually you know dealing with the customers and you know the restaurant is just actually delivering the food. How is the restaurant going to behave and who is going to win this battle? Because it’s a platform, restaurant kind of battle. What, let’s say, what’s the status quo there at the moment and how is that going to evolve? Because in the end you need the restaurant, you know, to deliver the food.
Carl Orsbourn: Well, when you talk about the battle, especially in reference to marketplaces, you know, there is this uncomfortable relationship. We often call it the elephant in the room when talking about this particular subject. Because look, without the marketplaces during the pandemic, many, many more restaurants would have closed and never reopened.
So in that sense, they are a necessary evil, if you will. But a lot of what Meredith, my co-author and I referenced is that they are quite an important cog of the overall setup. The challenge is that many restaurants haven’t thought through how to be able to build another part of the interface for customers to engage with the restaurant more in a specific way.
And what I’m talking about here, of course, is first party ordering, the ability for a customer to go to the restaurant direct and to be able to get an experience that is as good, if not better than what you might get through a marketplace. So the way I look at this is marketplaces are a great tool for customer acquisition.
They are a place where these marketplaces have invested millions and millions of pounds, dollars, euros into attracting customers to say when you’re hungry, think of us. And so at that particular moment, a customer isn’t necessarily thinking about your restaurant.
And with that in mind, they’re going to that platform to look for food and look for options. So if you accept that argument, then the idea of a customer coming into your restaurant through that marketplace means they are, for all intents and purposes, incremental. And when they are incremental, you can then treat the economics of the profitability of that transaction a little differently to what you would if they were a current customer.
And for that reason, the rent of your restaurant, the labor that you had in place, all of those costs would have been paid out anyway. And that makes the the profitability a little bit more acceptable to handle. Now that all works well, but if that customer then goes back to the marketplace to visit you for the second, third, fourth time. That’s where you’re then having a bit of a more challenging argument around whether incrementality is true or not. And that is where restaurants really do need to develop that first party interface in a way that allows customers to be able to learn.
Look, if you like our restaurant, then here why don’t you come and be part of our loyalty program where we’ll send you, you know, special offers or we will actually create something for you where you can only get certain items through us that you can’t get anywhere else.
And as we’re finding in these inflationary times, this is the cheapest place where you can actually get our food. So many restaurants, I think, are still in this place of being able to build a frictionless first party interface. And then it’s about how do you actually tell your guests that are perhaps finding out about you for the first time through a third party marketplace about this first party platform? And that’s about using the bags, the packaging, making sure that you think about how every touchpoint within your brick and mortar restaurants also talks about this first party interface.
Because don’t forget this first party interface could be used for on premise transactions as well, because today’s modern guest is an omnichannel guest. And what is what does that mean? That means that a guest. Yes, might get food delivered to their home on a Monday night. But date night on Friday night may be actually at your restaurant. And there’s no reason why that first party channel shouldn’t be able to accommodate both occasions.
Carl Orsbourn: Yes, there are several. I always advocate for what Chipotle have done. Chipotle, of course, is a fast casual Mexican concept over here. And they’ve done some amazing things with being able to tell the customers as you walk in through the door, the packaging itself has representation to the first party channel.
They also allow customers that are perhaps coming in to be able to order and pick up through the on premise occasion. And then they have developed these amazing Chipotelane locations which are a drive through for all intents and purposes, Carl, but you don’t actually stop to order the food. Everything is done through the first party interface and you drive up to a window and the food is passed through because of a geofence tag so that they know it’s you and therefore they can pass the order through to you.
It’s quite, quite amazing. And so again, can you get a Chipotle type experience through a DoorDash or Ubereats? No, you cannot. You can only get it through the first party channel.
Carl Orsbourn: Great question. Look, a lot of folks are certainly in the earlier days of the conversations I was having out there about this subject would often say “oh, I hate food delivery. It’s taking away from the guests coming to my restaurant.”
And I would say, no, no, you’re absolutely wrong. If someone wants to go out and eat out, they would go and eat out. What this is taking from is the supermarket. Right. So this is all an attack on the supermarket, grocery spend rather than going out and buying food to make yourself in the time that you don’t have.
It’s a lot easier to be able to have food delivered. So I’m glad you bring up this this particular topic. I think supermarkets are responding. They’re having to, certainly the rise of the grocer and the fact that there are restaurants now appearing inside of supermarkets is certainly a trend that we’re seeing here in the US.
But we’re also starting to see ghost kitchens in particular start to work with big grocers. There’s a Canadian ghost kitchen. Ghost Kitchen Brands working with Walmart. My old company, Kitchen United, is working with Kroger, where they have a number of locations in Ralph’s grocery stores. And for all intents and purposes, it’s the same deal, right? They are enabling customers to be able to go up to, that are perhaps walking by, to be able to order from a kiosk so they have food to take away with them, along with their groceries.
But similarly, those locations are great for drivers to come in and collect food for people that have been ordering online. And I think the beauty of that setup, is that you actually then have a location which has great ingress, great egress and ability for you also to hedge those times when perhaps people aren’t ordering as much online with the customers that are just walking by.
And so you have that high level of traffic volume inside a grocery store to tempt people to eat. And I think grocers are starting to see the opportunity for that now. Do I see some other opportunities in that? Yeah, for sure. You know, there’s probably a bunch of procurement opportunities. You’ve got a huge food supply chain, for example, going into grocery stores.
And so that clearly could perhaps play a role. And do I see a future where virtual brands and grocery stores could work together? Yeah, for sure. And again, maybe they could do that in their own location. You mentioned the term earlier that I didn’t define called host kitchens, and that is a restaurant that uses its own space to host other brands.
Well, the kitchens inside a grocery store could be a host kitchen for servicing other brands outside of the ones that are on the door.
Carl Orsbourn: Well, dynamic pricing is nothing particularly new. Quite honestly, Carl, because we’ve all experienced it, right? Today through airlines, through hotels.
You know, if you and I were to book a flight from the same departure airport to the same destination airport, and booked them at different times, we would likely pay a different fee. And so in that sense, what we’re advocating for, for restaurants, given the fact that restaurants have a particularly low margin environment to play in, is to be able to say, well, why couldn’t this work for restaurants as well? In fact, in a way, you could argue the happy hour is a form of dynamic pricing today.
Yes, it’s a certain period of time, low volume, low traffic where restaurants charge a much lower price point for a certain set of items to be able to drive either a higher basket value or higher trade value or perhaps some traffic volume to the location. So with that in mind, the same could be true of the busiest times.
You know, Meredith and I write in nationsrestaurantnews.com and last June we put an article out about throttling and throttling is a term that a lot of restaurants are using to turn off their third party marketplaces when their kitchen becomes too busy. For all intents and purposes, Carl, they’re shutting their virtual front doors to customers that potentially want to buy from them.
And that’s crazy. Now, what would I think, how does dynamic pricing play into this? Well, if you were to perhaps charge an extra £0.50 or cents on top of your item on a Friday night at 7pm, that might preclude a few value orientated customers from choosing to purchase from you, but at least it keeps your doors open.
Are people going to be willing to do that? I would argue yes. This isn’t surge pricing. You know, we’re not trying to advocate for surge pricing that you might be more familiar with, with the likes of Uber for example, because this is about small incremental changes of price based on a number of different factors. The demand, as I’ve just mentioned, but also things like weather when it’s raining outside, are you going to get a higher proportion of customers ordering food delivery when there’s a particular big game on?
We have the World Cup playing right now, for example. And so can you imagine what have we just had the French game? Haven’t we just been played out on the television? You know, imagine everyone’s at home watching that. So therefore, I bet food delivery in France right now has been going through the roof. Is that a chance to sell your items a little higher because the demand is there? So with all that said, Juicer, JuicerPricing.Com.
My co-founders and I are trying to help bring this technology to restaurants and my co-founders have all come from the travel and hospitality sector.
And so they’ve seen it. They’ve built businesses like this for those sectors. So they know the journey that hotels and airlines have gone on and they see the same parallels with restaurants. It’s for sure going to take a period of time. This isn’t something that entry level restaurants should get involved in because some of the components that we talked about earlier in terms of digital marketing and the understanding of how to build that first party channel is definitely a priority in my mind before things like dynamic pricing.
But dynamic pricing I think is going to be something that is going to be more common than it is rare in the years ahead. And what we’re trying to do is build the interface and more importantly, build the algorithm that allows restaurants to be able to do this without any huge amount of work on their behalf, because the algorithm is really the artificial intelligence, if you will, to to basically make the right decisions based on the data. And as we know right now, restaurants are awash with so much data, they don’t know what to do with it.
And so we’re trying to basically build this algorithm that’s going to help restaurants have a far better ability to price their menus in a more dynamic fashion every day of the week, every day of the year.
Carl Orsbourn: So we started the business in February, so I started with the business in February. The business has been around now for about a year, and we’re working with what we call pioneer partners, and they range from restaurant groups in their thousands to independent locations with 3 or 4 locations.
And so we’re going through a trial right now with each of those folks being able to help them understand what we’re doing, how and how it can help, and being able to measure the uplift opportunities that we can address through through pricing. It’s probably a little too early for me to be able to share uplift percentages with you today.
But what I can tell you is, is that there’s definitely an ability now to be able to distinguish which products are elastic, which products are inelastic, and therefore where there’s opportunity to price in a more dynamic way. And we’re really excited to be able to bring this to to restaurants. We’re working with restaurant groups in the US, in the Middle East and Europe, and helping them find the opportunities that can come to, yes, grow their volume in the quieter times and hopefully grow their margin in those busier times without impacting the customer experience.
Carl Orsbourn: Yes. The new book comes out in the early part of next year. It’s called Delivering the Digital Restaurant The Path to Digital Maturity. And we realized that we’re in a new period of time now with the pandemic in our rearview mirror.
Restaurants can now almost settle and think of their technology roadmap in a way that they perhaps couldn’t do during the midst of the pandemic. In many ways, a lot of restaurants that weren’t digitally forward had a bit of a spray and pray strategy during the pandemic, like get whatever we can just to keep our doors open here.
And what we’re saying through the digital maturity pathway is to say “Okay. Take stock. Breathe. Where are you at right now and where are you competent and where should you focus your time and attention to become competent before moving on to the next stage of your own digital evolution?” And a lot of that comes back to some of the topics we’ve already spoken about today. You know, don’t think about having a ghost kitchen until you have a first party ordering channel.
You know, it doesn’t make sense for you to have one before the other. And so therefore, make sure you actually have a great first party platform and have the conversion tactics in place before starting to think about things like ghost kitchens or virtual brands. How do you handle things like capacity?
You know, the challenges I’ve been mentioning about throttling in the sense of now you’ve got to be able to develop an operation that can accommodate a huge amount of extra orders, because once you do nail digital marketing, once you do nail all these additional platforms and the channels for how consumers are going to engage with you, more orders are going to come.
Can your kitchen and your operation actually manage that? And so we set out in more of a playbook fashion. It’s not the intellectual work that perhaps the first book was. It’s more of a playbook to help restaurants in a very tangible way.
Think about each of these steps. Some of the tactics that we’ve heard about, learned about through our networks over the course of the last couple of years. And really, it’s there to help restaurants find their place and build their path, along the path, to digital maturity at the pace that their own capacity can handle.
And I think that is the important piece because it’s a marathon, it’s not a sprint. And hopefully this book is going to help restaurants understand that.
Carl: That’s really interesting stuff, actually. I’m looking forward reading that playbook because I think it’ll give a lot of useful insights. Carl, thank you very much for this interview. I really enjoyed it. I think it was very insightful and thank you again for joining me in this podcast.
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