Speaker 1: 0:00

Welcome to another edition of Give an Ovation, the restaurant guest experience podcast. I'm your host, zach Oates, and each week I chat with industry experts to uncover their strategies and tactics to help you create a five-star guest experience. But stay tuned, because this episode is going to be slightly different. This podcast, as always, is powered by Ovation, the feedback and operations platform built for multi-unit restaurants. Get all the insights you need to improve without an annoying long survey for your guests. Learn more at OvationUpcom.

Speaker 1: 0:32

And today I am excited and this is a little bit of a different podcast because we have Mike Lukianoff here with us today. He is the CEO of Signal Flare and he's been all over the industry. He is a data guy. He's been around for I mean, decades in data and hospitality, and so Mike gave an incredible keynote at MEG, which is the conference right before NRA, because NRA isn't long enough. And after that I was like Mike, we got to get you on the podcast and I'd love to just talk about where you think the industry is headed. And so, first of all, thank you for joining us on the podcast and, second of all, tell us a little bit about SignalFlare to give some context to our conversation today.

Speaker 2: 1:15

Yeah, hey, zach. Well, first, thanks a lot for having me on Excited to be here and for our conversation. Yeah, so SignalFlare is a decision intelligence company, so we specialize in price optimization, market optimization, and we're taking really large data sets mobile phone data, credit card panel data, local economic data, all of the right prices are, what the right marketing strategies are, what the right expansion strategies are, and so forth and we're doing it with AI agents which, in the background, are pulling together the data and creating all the optimizations ideas.

Speaker 1: 2:01

When you go to LinkedIn and I look you up, Mike, and it says more profiles similar to Mike, the CEO of Snowflake is there. So just to kind of show you that Mike knows his data stuff. So, based on what you're seeing Mike, should restaurants be excited or depressed about the future?

Speaker 2: 2:23

I think they should be strategic. I think that if you like a challenge, then the future is for you. What we're seeing in the data and I think what I talked about at MAG is maybe a slightly different point of view, where I think the industry measures itself on same store sales. So it's always how do we do versus last year and how do we take the same comparative set this year and compare it to the same group stores last year? So we end up tracking these metrics that say, okay, well, we're down this much or we're up this much versus the same period in the prior year. But if you look at just aggregate growth, the industry is growing. You know it has been really almost uninterrupted a little bit of an interruption in 2020.

Speaker 2: 3:13

Oh why what happened? There was some of that. I think you slept through it.

Speaker 1: 3:17

Oh, okay, I must have missed it.

Speaker 2: 3:22

But even with that, there were a lot of closures, but then there were also a lot of opens, and I think that's there were a lot of closures, but then there were also a lot of opens, and I think that's what shifted a lot of the dynamics in the restaurant industry, because a lot of the full service restaurants ended up closing, but if you had a drive through, it was boom times, so lots of limited service restaurants got funded. So what's happening now is that restaurants are growing at a faster pace than population growth, and population growth is really starting to slow down. And that doesn't even include potential effects of decreasing immigration and so forth, right Just our natural growth in population. So what we're seeing right now is that if you were just to go back six years and compare the population that supports each restaurant, if you're limited service, you're about six points lower than you were in terms of the number of customers per restaurant in the nation, Right?

Speaker 1: 4:21

So you're saying ticket counts are down even though same-store sales might be up.

Speaker 2: 4:25

Well, not ticket counts. So total restaurant traffic in aggregate is growing right. We went from like $800 billion to we'll end this year at $1.5 trillion as an industry, right.

Speaker 1: 4:39

But in terms of like the actual people walking into an individual location, right, if you look at-.

Speaker 2: 4:44

Into an individual location right If you look at Into an individual location, right. That's where the issue happens, because six years ago you might've only had five competitors around you. Now you might have six, seven, eight, nine, 10.

Speaker 1: 4:57

And another five dark kitchens or delivery only options right.

Speaker 2: 5:01

That's right, and convenience is really upping their game. So really it's about the consumer. Isn't, I think, as weak as people say the consumer is.

Speaker 1: 5:11

It's more the big structural change is about how many options there are. Can you say that in an Austrian accent, please? The consumer is not weak. The consumer is not weak there we go, nailed it. Consumer is not weak there we go, nailed it. So it's just the fact that when people are saying, oh man, like things are tough for restaurants, it's more of a supply and demand problem than it is a people willing to spend money problem.

Speaker 2: 5:36

It is. And it's not that there is no issue with some consumer weakness. That's what we would call a cyclical thing, right, that sort of comes and goes. But what we're talking about, with population growth and the restaurants that are growing simultaneously, that's structural right. So, as we get through maybe some patches of uncertainty or even go through another recession, possibly right, a lot of people are thinking that's what's coming up toward the end of the year. If that happens, then in some ways, ways it's the double whammy. There's some structural challenges because getting your message across as a marketer competing against more units that are out there, the consumer has more options than if they're simultaneously getting weaker, than when we talk about same store sales and scrapping to get your share of a growing market, but of a market where your competitors and the options are growing too.

Speaker 1: 6:32

Are you seeing signs that a recession is coming up? Because I mean, I think of the recession as fully autonomous vehicles where it's been something that is coming in the next year for the last 11 years now. Is there going to be a recession, or is this just kind of like will they, won't they? I feel like Ross and Rachel here, of the recession for a long time? Are you seeing anything in the data to suggest that it might be coming or it might not be?

Speaker 2: 7:00

Yeah, I think that one of the places that you tend to look is the bond market, and I think that's where, back in about a month ago, when the tariffs were announced and then they got I don't know if they were rolled back or if they were postponed Right Either way, it was a big victory, huge, it was huge.

Speaker 2: 7:19

Yes, but what changed that? What delayed those tariffs wasn't the trade war. It was because the bond market started to go in the wrong direction, right? Because instead of the market saying, okay, well, we're going to reduce yields because we might be going into a recession, there became some questions about the structural integrity of US debt. So that's when the bond market started going a little bit crazy. So that's what you really need to watch, because that's what changes the availability of liquidity and borrowing costs and so forth. So that'll be sort of the final word on whether we're going toward a recession. We might not, but I think that low growth and more inflation can sometimes be even more miserable than just negative growth on the economy for a shorter period of time.

Speaker 1: 8:10

So is the solution, then, to tell people to stop opening restaurants Like, or is it to tell bad restaurants to just close your doors? Stop taking the bottom of the barrel, people. Yeah.

Speaker 2: 8:23

You've seen a lot of record bankruptcies, lots of unit growth over a certain amount of time. I think that because we're driven by franchising, that's an important model. You have to grow in order to stay not just relevant but remain a good investment. I think we're going to continue to see the unit growth. I think that, to your point, there are a lot of zombie concepts. Right. There are concepts out there that probably should have closed down closed their doors in 93, and they're still hanging on. It took Howard Johnson's what 50 years to finally say we're closing our last unit, but that's because, jacques Pepin, you know what I mean.

Speaker 1: 9:20

How do you close something that Jacques Pepin has touched?

Speaker 2: 9:25

That's right. We're nostalgic, right. We'll hold on to the original, no matter what.

Speaker 1: 9:29

Yeah, well look, I mean cracker barrel still lets people camp overnight in their rvs, so they're staying around forever. But as you're thinking about this, mike, you said in the beginning kind of cheekily, that if you like a challenge, then maybe get into restaurants. As restaurants are facing these challenges ahead, what advice do you have for them? How should they be thinking about their menu, their marketing, getting new people in retention, like all of these levers and buzzwords are getting flown around at every trade show. What should I be focused on as a restaurant owner?

Speaker 2: 10:03

Know your concept, know your customer and know your local market dynamics.

Speaker 1: 10:09

Now the last one's really tricky. The first two, it's like okay, I get that, I get that, which are, by the way, those first two are hard enough as it is. So talk to me about what do you mean by local market dynamics?

Speaker 2: 10:19

So it's never been more important to be able to understand what's happening in your local trade area and even defining what that trade area is. It's sort of shocking how so many of the chain restaurants don't necessarily understand what's going on right outside their four walls in each trade area and this is an industry, especially at the chain level, that likes to they almost drive it like a giant tanker, right. It's like okay, well, here's the simplified rules for how we run our restaurants and how we think about our marketing. But if you're a 500 unit restaurant chain, you're running 500 businesses, right? 500 local businesses, and you need to understand that. You need to know who your competition is. You need to know how far your customers are coming. If you don't understand these fundamentals, you're at a disadvantage. And AI is a bit of a buzzword right now, but the true application is starting to surface and understanding that information, locally and granularly, is now possible.

Speaker 1: 11:21

What kind of information can help me make a better decision and how do I leverage that? So, for example, you had mentioned did you talk about weather, or was that something I talked to Tammy about before about, like you know, what's going on in the local environment, what's going on in the local community? Where are you people coming from? What's the weather that day? How do you actually leverage this data in a practical way?

Speaker 2: 11:43

People think that you have to have a CDP or a loyalty program to understand who your customer is.

Speaker 2: 11:50

But with the mobile data sets and with credit card sampling data and weather data, local economic data, all of these things help to really identify why your sales are what they are mystery anymore, right, if you're actually tracking, where am I marketing, how much am I spending here and so forth? For us, there's a lot of companies that will sell the mobile device data or sell the credit card sampling data. For us, it's an input, right, so we're ingesting that to then understand okay, well, where are these pockets of customers that you should be targeting? What are the demographics that are growing or shrinking, and how far are people traveling to go and what other concepts are they going to when they're not visiting you? All of these things aren't just good in rationalizing what happened last week, but it's part of being able to then model out and understand what your strategy should be going forward. That's actually going to get you more than your fair share, because if you're just getting your fair share of traffic, then on average you're down 6.5% versus six years ago.

Speaker 1: 12:57

So what do I do with that data when it's like all right, what other restaurants do my customers eat at? What do I do with that that can help me bring in another 6.5% on top of what we did last year.

Speaker 2: 13:11

So one of the ways that we're using it specifically for that purpose is because we know where customers live and where they work, not just for each restaurant brand, but also for the segment that they operate within and bought this small cluster of customers in, basically, residences that are as low as like 500 people population and as high as 3,000, right, so it's pretty micro-targeted. If you target those neighborhoods through any of the social media platforms or any digital platforms at that low level, it's much less expensive and much more effective. It's been tedious, right, because it hasn't been the easiest thing to do. There aren't a lot of platforms been optimized for that type of a purchase, but that's all changing very quickly, right, and that is on the back of AI, because the micro-targeting and being very specific and automating all of that those are the types of things that agents are going to start bringing us with more ease in the very near future.

Speaker 1: 14:17

I mean, I had a conversation with a guy who runs a marketing agency and he was telling me he's like in one year, no local marketing needs to get done. Everything will get done with AI. The stuff that is getting released right now is just so good for local marketing, and I love the fact that you got to really think global but act local. It's a cliche that works, because when you have these multi-location brands, you can't think of it as just a brand, because the only reason that you're in business is because people in that community are supporting you, and so everything needs to be local, and I think that's a great reminder, no matter how big or how small.

Speaker 2: 15:01

That's a really good point, Jack, because I think that it's acting local right, but having the right strategy right, Making sure that you understand what's appropriate for your brand right, what's your brand messaging, Because if you just leave it, you know it 100% to AI and the agents. They can start reframing your brand for you. So you need to have very tight guide rails on how you're using these tools. If you use them right, then you have a real big advantage. If you don't understand quite how to use them, then you could go off the rails pretty quickly.

Speaker 1: 15:30

Yeah, and not the data rails. You want to stay on the data rails as well. So, mike, just to wrap things up, who is someone that we should be following? Who deserves an ovation in the restaurant industry?

Speaker 2: 15:42

Our friend Tammy Billings. I think her bite-sized and bossy podcast entirely for women in the industry. I think it's about time. If you haven't listened to her, you should, because it's a terrific podcast and she's always got really great guests, really talented women.

Speaker 1: 15:58

She's a legend, Mike. Where can people go to find and follow you? And Signal Flare.

Speaker 2: 16:03

So Signal Flare wwwsignalflareai that's our website and you can find out more about us there. I also have a sub stack, the Signal Flare, or you can search me, mike Likianoff, and a lot of the stuff that I presented at Meg and each week, I'm releasing some more data and some more information.

Speaker 1: 16:23

Awesome Well, mike, for giving us the data to make good decisions. Today's ovation goes to you. Thank you for joining us on Give an Ovation. Thanks for having me, it's been fun. Thanks for joining us today. If you liked this episode, leave us a review on Apple Podcasts or your favorite place to listen. We're all about feedback here. Again, this episode was sponsored by Ovation, a two-question, sms-based actionable guest feedback platform built for multi-unit restaurants. If you'd like to learn how we can help you measure and create a better guest experience, visit us at OvationUpcom.