Episode 12: Andrew Robbins

Paytonix Systems CEO Andrew Robbins started his career as an engineer who built jet engines but was drawn to the hospitality industry. The conversation centers around Paytronix’s 2022 Order & Delivery Report and explores the changing nature of online ordering and delivery in 2022. The interview notes that 33% of all restaurant orders are now digital. Andrew offers key insights into what the report means for restaurant owners. 

Episode transcription 

James: Thanks for joining me today Andrew

Andrew: Thanks for having me.

James: Yeah, my understanding is your background is in engineering and jet engines. Can you explain a little bit to me how an aerospace engineer ends up in the hospitality business?

Andrew:  I like people I think is probably the simple answer. Yeah. So from when I was 12 years old on, all I wanted to do was build jet planes. And I went to school for that, worked at General Electric, making the engines for it, and really got into control theory how to predict what the engine was doing and then give it the right amount of fuel and guide vanes so it wouldn’t blow up and it would take the pilot where they wanted to go. And then later I found that the innovation cycle was seven years and I looked for something that was faster than, you know, waiting seven years for your hard work of a new jet engine to make it live. And things took me towards the hospitality industry where the innovation cycles very fast. People embrace changes and run experiments and it’s very rewardin

James: So how did you found Paytonix? How did that come together?

Andrew: I founded it with Matt d’Arbeloff and Stefan Kochi, and we want it to be at the intersection of convenience, payment and loyalty. At that time, there was no public cloud. We wanted to bring the power of computing into the four walls, essentially from the cloud, and make things better for the consumer. And we started with our coffee chain and they wanted to put two loyalty punch cards together. So a buy one, get one free coffee and a buy six, get one free sandwich onto one card. And then it grew from there to be, okay, let’s add stored values so it can be a personal use card. Let’s add a subscription for mall workers so they can get lower prices. And we kept getting larger chains and it’s been a great ride.

James: So for this conversation, I wanted to focus in on the Paytonix 2022 Order and Delivery Report. Can you tell me a little bit about the history of that?

Andrew: Yeah, so we got into online ordering about three years ago and we did that with an acquisition and we brought on board Tim Ridgely, who’s a real pioneer in ordering and brought it in, made it to a single platform, and really started innovating and driving our knowledge from loyalty and artificial intelligence, like really knowing what guests like and driving that into the product.

James: You kind of decided then you would take that information and make it public in a report.

Andrew: So we do a number of reports, and as a leader, a technical leader in the market, we like to give back and share statistics best of practices with the rest of the industry. So we share it with our partners, our competitors, customers, so everybody knows what’s working in the industry and we can all drive each other for greater innovation.

James: Yeah. So in the intro you state our engineers are busy moving the technology to the place that will help brands exceed the customer’s expectations from the time they begin placing an order through the post delivery or pick up experience. Can you explain what you mean by that. I mean I’m guessing that people wanted basically that customers are expecting a quality experience from the beginning of the journey all the way to the end, correct?

Andrew: Yeah, that’s absolutely right. And it turns out what people really want in life is experience plus. So they have a base expectation. Let’s say, you know, you’re making a quick stop at a convenience store to pick up a cup of coffee. You’re not expecting the experience you get from a Morton’s Steakhouse or at The Palm or something like that. Right. You’re not expecting a wow experience, but you’re expecting it’s fast, convenient. You get hot coffee, it tastes great. So when we think of online ordering, we’re thinking about the expectations plus and we look at it all the way through. So for example, you mentioned the beginning of the purchase all the way through the end. So if I start at the beginning of the purchase, one example is how do they find you? They could download your mobile phone app, would you, that they could go to your website or they could start with Google Search. And so we have a partnership with Google and an integration with them where we will show up in Google Search as a little button or online. And when you click on it, the ordering experience is really managed by Google and when you get through the payment, you can pay with Google pay. And there are fewer clicks in this experience because you didn’t have to leave Google and go to a website and then navigate to find the right stuff. And when we do Google Food Ordering, what we find is that we end up with more people starting orders. More people completing orders and it’s worth about $6,000 a year is 180 extra orders that are coming in in a year.

James: For each location.

Andrew:  For each location. And that’s just because it’s easier to start the order, because you’re just staying inside of Google search.

James: So I also read in the report that 33% of all orders now are received digitally. What do you think that means for the restaurant industry?

Andrew: That’s a great question, and it’s really part of a pretty long trend that would go back 20 years, that people are looking for more digital experiences and experiences that are also more convenient for their lifestyle and outside the restaurant in some cases. So more pickup and delivery. Some of this is good for restaurants because of this. You can do things like have a ghost kitchen where you can run on a very small footprint store with low fixed costs and you can pop one up in a different region very quickly and experiment with it. You can be like, wow, and you can franchise your concept to 500 locations within a year because you’re, you know, you’re letting it be an add on service in a pizza place. Can all of a sudden sell tremendously tast wow food. So I think that’s the real plus that it can let people grow faster and extend further than they could before while still making customers happy. And I think there’s also a negative side and you’re seeing some of the negative with what’s going on at Starbucks.

James: Oh, when when the app went down or whatever. Right.

Andrew: Well, I’m thinking more in terms of like it can harm the on-prem experience. And I think a lot of people use Starbucks only as an order and pick up and that as a result, Starbucks has lost some of the magic of the third place. Right. They always used to talk about the third place that you could hang out a Starbucks and, you know, have a chit chat with a friend or do your homework, prepare for a meeting. And a lot of the magic of third place has vanished. And the people that were not brought along for the ride were the baristas. It’s a different job than it used to be, and some of that is the use of the technology.

James: I mean, that’s been my experience with Starbucks. I used to work at one of the neighborhood Starbucks pre-pandemic, and I got to know a lot of them over there at the local Starbucks. And now I don’t do that as much. So, I mean, I assume my experience has changed with Starbucks. So, you know, the baristas also have a very different job where takeout and drive thru are a big part of it.

Andrew: Yeah. And so that pre-pandemic, even if you went back probably five years, it’s a different job than it is now. Taking orders off of a computer, print out, make it, slap a label on and put it in the pick up area. And then sometimes you can’t draw the smiley face on the cup anymore and and write a nice note and cool things that they used to do.

James: Yeah. I read in the report as well and I’ve seen other data supports this, that there’s more trend from online ordering for pickup and away from delivery. Any thoughts on why that might be or what that means for an overall trend?

Andrew: Yeah, so lots of really interesting trends. You know, we certainly saw curbside have a big uptick at the beginning of the pandemic and that’s really gone away where if you’re going to drive in, most people prefer to go the extra ten yards and actually pick up the item and make sure they got the right thing. That’s one trend. And the other one is that more people are interested in ordering directly then going through the marketplaces. And it’s really for two reasons. One, they know that it’s less expensive for the restaurant and even things like there’s been a lot of press on this about the margins that the third party marketplaces take as well. Sometimes Google Food Ordering will make sure it’s clear that the direct method is cheaper and then some consumers are wise to the fact that prices are actually higher, that there might be a 15% price increase when someone is putting, you know, the same hamburger might cost 15% more when it’s on GrubHub than if it’s sold directly. And so that’s really those are two of the reasons. And then the third is that in some cases, restaurants are actively shifting people. They’re encouraging people to order from our app and things like that.

James: Yeah, moving from third party to first party. I mean, I definitely think but I also think to the overall guest experience can be better with pickup, right? You don’t have to worry about, you know, 45 minutes to get your food and it’s cold. I mean, you control a lot more of the experience, I think, with online ordering and pickup.

Andrew: Yeah, I think I think you’re right there. You probably hit the nail on the head that there’s less variability when you have the pickup and maybe your experience is better.

James: So I found it interesting that the size of the overall order through delivery was bigger. What do you think that means? Especially since delivery appears to be more loyal customers?

Andrew: Yeah. So the size of the order for delivery, I think, you know, a lot of that’s the occasion. I think that on these things there’s always some self-selection and that in certain situations, if you’re having a larger group of people over to your house and you’re entertaining or could be even small entertainment versus large entertainment, right? It could be your kid’s bar mitzvah or graduation or it could be just a bunch of people coming over to watch football. That in that situation, maybe you don’t want to take the time to pop out and do the pickup. Right, because you’re entertaining and then you place the delivery order and then those orders tend to be larger. So I think there’s a little bit of the self-selection that’s going on in that stat. I’ll give you another stat. I think that we didn’t publish, I guess it’s exclusive to you, which is we saw tips go up and it was really interesting. When the pandemic started, tips to restaurants went up even for pickup orders where people might not have tipped. And they did that because they wanted to support the staff at restaurants. And it it amounted to like a buck 50 an hour for the staff that were working. As the pandemic went on, tips went right back down to the normal levels, you know, like nine months in and then actually dropped below as we came out of the pandemic. And then the day people took their masks off and you could see your server smile, tips popped back up again to about a buck 50 an hour more than the pre-pandemic levels.

James: That’s interesting. I mean, I think that one that it fluctuated, but two, that people are valuing the service they provide.

Andrew: And how a smile is so humanizing, it actually changes the hospitality experience.

James: Yeah, well that kind of goes into my next question about what do you think the role of customer feedback is in the growing off premise world? How do you know if your customers are satisfied or not satisfied after ordering online and doing pick up or delivery?

Andrew: That’s a super important thing. And if you think about how people run a restaurant, they’re very visual. They walk the restaurant, they look, are the tables clean? Right. Let me look at the dishes that people leave a lot of food on their plates. Maybe there’s a problem in making that type of item in the kitchen. Right. It’s not as tasty because people are leaving on the plate. So they’re very visual in how they manage. Well, when you talk about online ordering, they’re going to eat at home. And so how do you control all those things? How do you know that the presentation was great, all the things were in the bag and in the right order and they didn’t, you know, fall on their sides and get all slopped together. That came hot, that that they ate all the food. And so surveys to do end to end control. Right because you’re only as good as your last meal is super important. And we’ve always been surprised on the importance of feedback and getting feedback to managers so they can fix it right away. Because, you know, when people are upset or you get upset if it gets fixed right away, you know you’re okay. But if you don’t, sometimes people tell a friend and then they put it on social media and they blush on Yelp.

James: Yeah, Yelp or Google or whatever. Right. I mean, that tends to be people post online reviews when they’re upset, not so much when they had a good experience or that’s kind of what it seems like.

Andrew: It does seem like it, seems unfair.

James: Yeah. So I know another thing in the report it talks about was what can I do and how can it help the overall experience with online ordering

Andrew: Yeah. So one thing I can do is help you on the feedback process and we’re doing some scoring of the feedback and some people who, you know, give you four stars in the comment field really are upset. And so we do some natural language processing and score. You know, is this really an upset customer or not? And we can then do triage and help do AI driven responses. And we found that you can get people with a note of I’m sorry and maybe a little coupon. You can fix a problem and keep people coming back. And we have an example of a Bryan where Bryan was very upset and we got him back with a $10 coupon and an appropriate note of apology that came out within 5 minutes. And Bryan is still a customer and has spent $1,000 at that restaurant and everybody has these Bryan experiences. Another example for AI is little things like reordering the menu. What are the odds that a menu someone has put online is the perfect order of things and helps you get to what you want to buy? And so we’ve reordered the menu for different people and that helps people find the things they want faster, you know, fewer clicks, higher conversion rate. And that can mean about $6000 a year. More orders per location, just changing the order, using AI to reorder things and then changing the selection for you based on your preferences is even more powerful. You know, making recommendations based on what you like. And again, we do recommendations, hey, if you buy a pizza, let’s offer the person a two liter bottle of coke that has a take rate of maybe three and a half percent. When we do AI driven recommendations, the take rate is almost twice as high at 7%.

James: That’s great. So like one of the questions I try and ask guests on this podcast kind of to conclude the conversation is if you were talking to a restaurant owner and they felt overwhelmed by all of the choices with restaurant technology these days, where would you tell them how to start improving their restaurant capabilities and their overall online ordering experience?

Andrew: Yeah, I mean, I think it’s always good to look at the playbooks of brands you admire. And I think that Chick-Fil-A, McDonald’s, Panera, you’ve all just done a tremendous job. And if you pick up their playbook and try to do it in a simpler way, perhaps, than they’ve done it, but, you know, you need an online ordering program that’s tied to loyalty so you can learn about people and provide more relevant communications. You need to digitize experiences and extend them to mobile phone apps, right? So like follow that playbook and then you should mystery shop your competition as a consumer, find what you like and don’t like and try to drive the likes into your business, your digital experiences, and try to take out the dislikes. And if you make little changes, you can be a constant student of it. It really matters. You make it a little better, a little better, a little better, and the little things add up over time to make big differences.

James: Yeah. Process improvement is a big part of any business, right? I mean, I think manufacturing has historically been known for that, but definitely needs to make its way into other businesses.

Andrew: Yeah, right. From automotive to electronics, that Six Sigma process and continuous improvement.

James: Yeah. You’re an engineer. You know all about that stuff.

Andrew: We’ve gone back to jet engines.

James: Yeah, exactly. We come all the way back to jet engines. I actually worked in process improvement when I first got out of college for a book publishing company that published some of the early Toyota Production System books.

Andrew: That is cool.

James: So, well, I’d like to thank you so much for giving me a couple of minutes of your time today. And and I hope you enjoy the rest of your day.

Andrew: Thanks, James. Thanks for having me. I want to do it again.