Episode 8: Collin Wallace

Episode transcription 

James: Welcome to the show Collin.

Collin: Hey, thanks so much for having me, James.

James: No problem at all. So you have a really interesting background in online ordering. Talk a little bit about your background and kind of the problems you are wanting to solve.

Collin: Yeah, sure. Funny enough, I didn’t intend to get into the food and technology space. I was actually in engineering school and I was playing a sport and I was in a really long lecture class on food and papermaking, so literally had to chew up trees and turn it into a paper. And it was a three-hour lecture and I texted a friend to ask him if he could bring me some food was in class because I had practice right afterwards and you know, he didn’t want to be any more late, so he didn’t bring me food. But I thought, Oh, what a great idea, you should be able to pull out your phone and text message and, you know, someone brings you some food. And that was sort of the original concept. And I started down that sort of rabbit hole of how do you make that happen? I think initially from a technology standpoint, I just was curious whether or not the tech could do it. And I found a couple of ways to sort of hack. It was BlackBerry operating system at the time. You know, built a little app for the BlackBerry OS and it would take the order, it would turn it into binary, it would text message it to a server and the server would decode it and then fax the order to a restaurant. And so kind of solve the technology piece. And then it became a question of, you know, operationally, how do you make this work at scale? Well, it didn’t work very well in college classrooms, but it turns out that stadiums and arenas were actually a really interesting use case because you had this captive audience and, you know, with stadiums and arenas, the issue was that you would have these large spurts of orders and they would clog up the phone lines for the fax machine, or they would run out of paper or out of ink. And so we realized we needed to integrate into the point of sale systems. But the point of sale systems were so rudimentary at that time, it was really difficult to get the functionality that you needed. It’s kind of a recurring theme now when you think about some of the systems you have to work with in a restaurant. And so on. One end, we had sort of micros and radiant where we were integrating the actual orders into their point of sale systems. But on the other end, we had built this tablet solution where you could manage the actual orders and what was coming in and sort of turn things off, 86 items, you know, that gave us full rein as far as functionality. So we built that out. We signed a number of clients and worked with everyone from Earmark to Lieb restaurants and Delaware North and a number of others. And it was hard to make money, though, because, you know, we kind of talking about this earlier. A lot of times you don’t get what you deserve. You get what you have the power to negotiate. And when you’re small and you’re negotiating against, you know, the NBA and the NFL and the unions and so on, it’s hard to hold on to a lot of the monetization of the value you’re creating. And so we started selling our product into hotels, airports, casinos and restaurants. And that was around the time that we met the GrubHub founders, a guy named Mike Evans and Matt Maloney. And they were really interested in the solution because they were having the same problem as they were trying to scale. They couldn’t get enough bandwidth through on these fax machines, which was the primary way that restaurants received orders. And we had this amazing in restaurant, you know, technology where, you know, you can you could interface with the order integrated with the point sale and all of those those elements. And so they had made a proposal to merge the two companies together. So in 2011, we did that deal and became part of GrubHub and I became the head of innovation there. And I think I was 24 at the time, so was pretty young, didn’t know a whole lot. But you know, that was kind of my foray into the food space and kind of been there ever since.

James: Yeah, I would imagine, you know, seeing everything that’s going on with GrubHub over the last few weeks, you have a lot of feelings on how that company has evolved and changed over the last couple of years.

Collin: Yeah, you know, I was a little green at that time in my career, but there were some things that I did not agree with, and I think in some ways those things have come to fruition specifically. I always felt that being more open was better, that you kind of wanted to find the level of transparency and openness that made you a little bit uncomfortable and then go kind of a half step beyond. And specifically, we’re talking about the rails that go into a restaurant. My feeling was that the technology we built, what you see today as tablets in restaurants, that was my first patent was actually like that technology. And my belief was that you couldn’t hold back all the different brands that wanted to access the restaurants because it was going to be this long tail of affinity groups are going to be, you know, bands that customers wanted to follow and like they would order food from whatever the band said. And they were going to be mothers and fathers that had their own affinity groups. And you wanted to kind of collect all of those in the same way that kind of Expedia does, where they have lots of different properties with different brands. And there was just a fundamental disagreement where I think GrubHub wanted to own 100% of that traffic, wanted to generate it, wanted to be fully vertically integrated. And I disagreed. And so, you know, I felt that it was kind of time for me to move on. And so I left and end up going to business school. And ironically, there were two guys in the class in front of me and they were working on a product called Power to Delivery dot com. And so we had a lot of conversations about that, you know, that ended up becoming obviously DoorDash. So it’s definitely a small world.

James: Yeah, it is. I’ve learned that over the last couple of months about how small of a world it can be. Maybe you can transition a little bit about your current company ZeroStoreFront and how it deals a lot in data. It sounds like, well, from what you said, that you began thinking about data when you were growing up. But how did you really think that you could help restaurants with data?

Collin: Yeah. So, you know, after I got out of business school, I wanted to get a little bit better at the operations side. Actually running a restaurant, but sort of at scale. And so I joined a company called Farm Hill, and we were one of the sort of early ghost kitchen type operations. So around the time, like Muntari and like Spoon Rocket, I think a couple of others were were sort of emerging. And we had a facility in Redwood City that produce about 5,000 meals per day. And the thesis for this company was that we would serve corporate clients, you know, lunch. So you wanted to have lunch catered. And, you know, if you were a company of any decent size, you had this long tail of dietary needs. You know, people who are vegan or paleo farm, fresh, locally sourced. You had gluten allergies, peanuts. And for you to manage that as a company was really difficult. And so we had a technology layer that sat on top of food operation, and we supplemented our SKUs by sourcing different meals, different concepts from local restaurants. So we would bring it all into this central facility. We’d cook, you know, 5 to 7 SKUs of our own, and we would sort of reaffirm other products from local restaurants. And so, you know, we got to the point where this business was, you know, starting to scale in a meaningful way. And when I came in and we were struggling a little bit, we were having a tough time. And so my role or job as the CEO there was to just turn this around. And the primary way that we did that was by looking at the data. And one of the things we realized is, you know, we were carrying a lot of SKUs that weren’t being sold. We had a lot of food waste because we weren’t selling out of product that we were buying, that we were producing. And so by sort of optimizing those two ends of the equation, both, you know, selling out of the product when you have it, and then also being more conscious of where and how you sourced ingredients, how you source SKUs. We’re able to get to the point where we were achieving some of our profitability goals. And so we got to the point where that company ended up getting acquired. It was acquired by Eat Club, I think, 2018. And the facility that we built became the first DoorDash kitchen in Redwood City. So again, sort of a small world. When I left the company, I had this sort of aha moment where we realized that the data you ingested as a restaurant like that was the key to your growth. Every restaurant wanted to grow and that the keys to it were basically in their own point of sale, in their own phone repository, in their email account. And so we set out to try and build that product. And this was 2018, 2019, and it was really hard. It was hard because a lot of the data providers, they didn’t want to work with each other, they didn’t want to share the data. It was unclear to them who the data belonged to. I think they all kind of felt like it belonged to them. And it wasn’t until COVID happened, actually, that all of a sudden everyone started saying, Oh, wait, it’s really important for us to have this information because I just want to let my customers know that we’re open and I don’t even have any of their email addresses or their phone numbers or anything along those lines. And that was kind of the impetus that really, you know, put the rockets on on the concept and we started scaling from there.

James: That that makes a lot of sense, right? I think in restaurant tech, there is so much fragmentation and you talk about it being the center of the place. But then you have email, you have phone. I mean, there is all these different channels where there’s data coming in and how do you try and take advantage of all that? 

Collin: Yeah, it’s a great question. We see this a lot actually, where a restaurant brand or operation is trying to almost do too much. And I think I understand why. I think there’s a misconception that if you are 10% better than your competitors at, say, email, that you’re going to see that reflected as sort of 10% increase in your sales. What the data would show is that, you know, when you’re ten or 15% better, you actually end up doing, you know, ten or 12 times more revenue. And the reason why is in the digital world, the switching cost is so low that if you’re marginally better, it actually causes the majority of people to accrue to you. If your pictures are slightly better, if your email content or your subject lines are slightly better, you actually end up seeing a disproportionate amount of impact. So in a lot of ways, you’re better off being really good at a single channel than being so-so at five or six. And so, you know, we always try and coach restaurants to really figure out what’s going to be your super. Power as far as channels. Sometimes it’s Instagram, sometimes it’s emails, sometimes it’s the telephone. But making sure that you’re exceptional, that because, you know, 85% of the value is going to be in that one channel. And then sort of channel number two will probably give you another 10%. And then channel number three is probably like five. And so, you know, really just having that maniacal focus on the channels, that is going to be the big performer for you.

James: Now would you start talking to restaurants like where do you like to I mean, know, you talked about like going after the thing they do the best, but where do you find some of the best data exists and that you can work with to help the operation?

Collin: So normally we start with trying to understand what are they trying to accomplish? And it sounds kind of trite, but it’s a really important question because, you know, a lot of brands will say something like, oh, we want to grow. Okay, well, what does growth mean? You want to grow your units, you want to grow your revenue, you want grow your head count. And these are all very different things. And based on your answer to that, that’s kind of going to determine some of the data sources that might be able to help you. I think it’s really important to think about data in the context of what questions are you trying to answer? And it’s to go sort of one layer deeper. If you look at a business or a restaurant, in this case, it’s basically the sum of all the decisions that are made about that company, right? What food to sell, what corner to build on, what people to hire and so on. Your effectiveness as an operation is really a function of how high quality of decisions are you making. And so the data really falls in the context of how is it going to help you make higher quality decisions? And so you kind of have to know what questions you’re trying to answer. Otherwise you just end up with, you know, big bucket of data. And it’s not actually turning into information or any sort of like wisdom about what to do or not to do. And so that’s usually where it starts, is what are you trying to accomplish? And making sure we’ve dug sufficiently deep into that question that we’ve got a good understanding and good basis for what they’re trying to accomplish. And then we start thinking about where might we find the data. That’s going to give you a really high level of certainty about these important decisions you need to make to achieve those goals.

James: That makes a lot of sense. I think that, you know, larger operators really, you know, have the ability to do that, you know, because they have the resources. But what tips but would you give to smaller operators that maybe don’t have the, you know, in-house IT staff or people to actually mine and manage the data. What kind of tips do you give to small independent operators?

Collin: Yeah, I probably tell them to use Thanx. I you know, I’m half kidding, but I think some of these problems are solved. Right. And I think that’s the challenge for a lot of independent operators is they’re so overburdened with their existing infrastructure and operations and legacy products that they don’t necessarily go on that journey of seeing what else is out there. What are the other options? For me, in some ways they’ve kind of hardened in the ways that they’re doing things today. And it’s not until something like COVID happens that they get kind of forced out of that comfort zone. But there are a number of products, I think, that can help with this. You know, obviously zero storefront was one in our part of things. There’s a product called Vicky by K. Why? I think that’s quite good at getting you on the first rung of the ladder to sort of building your data independence and sort of understanding of it. I think probably the biggest mistake is trying to optimize for too many things. You know, again, like we talked about before, what you typically are going to see is a disproportionate amount of the value comes from a single channel. And so you want to focus on getting really good at that channel before you move on to the next level because it’s just going to be diminishing returns after that. And so, you know, common channels or common sources, they’re probably of your point of sales, a big source of data. So making sure that you chose your point of sale, that’s going to be accessible. Right. There are a number of legacy point of sales. You know, I’m not going to rattle them all off, but they don’t have an API. They don’t have open documentation. You know, they’re you know, they charge you for software upgrades for their operating systems. You kind of want to avoid those because they’re just not going to be able to keep up with the pace of technology. And I know you can find some of them really cheap at Costco for 200, $300. But you kind of have to think of the big picture. And so going with a solution like that on the sale side, then after that, you’ve got, you know, sort of online ordering is probably going to be one of your big sources of data. Again, I think you want to optimize for openness. And the reason being, if you look at other ecosystems and how they’ve evolved, other industries, you know, cell phones are a good example. You know, the BlackBerry operating system, the Android operating system, the iPhone operating system, almost all of them started from open source project. That is the fastest to develop. And they allow a tremendous amount of composability right. The ability to sort of copy already salt solutions into your product, right? So things move faster. So you’re looking for kind of the same things. So we talked about point of sale is something where you want to go with something that’s open. We talked about online ordering where you want to make sure that it’s, you know, something that you’re going be able to grow into because they have some flexibility and they have openness. The next is probably email. For most restaurants. That’s probably going to be their next, you know, sort of generator. And then, you know, telephone tends to be a pretty big one. People don’t realize that, you know, 46, 47% of restaurant orders still come in over the telephone. And in a lot of cases in restaurants are not capturing that information. That information can be used on Facebook. It can be used on SMS campaigns or on Google to help you acquire customers. So there’s lots of things that you can do there. The last thing I’d say, James, is you wanted to spend a little bit of time looking at each of these channels, and then once you have a hunch that one of them is going to be good for you, then go all in. Don’t try to do all five or six or seven of them at the same time. Instead, just, you know, can be really very deliberate, very focused.

James: Yeah, I have heard several people. I guess there’s two things I think about. One is that I definitely agree that open architecture is the future of food tech. I mean, I think if it wants to evolve, but I’ve also heard people talk recently about how the CRM needs to be the center and not the place of a restaurant. Can you talk about that a little bit or your thoughts?

Collin: Yeah, I’m definitely seeing some of that movement where people are moving towards sort of a point of sale, this architecture, you know. So even when you’re in store, you know, the customer’s pulling out their cell phone and they’re effectively checking themselves out. You know, it’s funny when you think about it, it’s kind of silly that you walk into a restaurant, you say something to someone at a counter, they listen to what you have just told them. They then type it into a machine and then maybe they, you know, double check it with you and you hand them a credit card and take the card, stick it into a machine. I mean, talk about inefficiency. And, you know, ironically, this is one of the things I think that’s been a challenge for restaurants in this current age is there was a misconception, I think, that restaurants are bad businesses and it’s not really true. They’re just businesses. They’re good businesses that have a tremendous amount of inefficiency just in almost every aspect of the business. There’s incredible amount of inefficiency. And when you remove it, you get pretty strong. Businesses like McDonald’s is a great example. And certainly the the movie The Founder, I think sort of covers some of that. And so all of these opportunities to remove that inefficiency, you know, help you to build really a strong business. And some of those inefficiencies are at the point of sale, right? So namely, you having to go through this process of pulling out your credit card, sticking into this machine, waiting for it to process those couple of seconds, you know, times five or six or 700 times a day, that’s real money. And you’re paying people literally to stand there and wait for this credit card to process. It’s actually it’s absurd, honestly. So I do think that we’re moving away from traditional stack where the point of sale is at the center of that ecosystem. It’s probably going to something where I don’t know if I would call it the CRM, but more like a repository of all the customer’s CRM tend to just have the customer and their contact information. But really what you’re looking for is kind of a history. What’s our the nature of our relationship, what’s the legacy of my relationship with this customer that a lot of times is in like a customer data platform, like a CDP or something like, you know, thanks or some other like loyalty products. We’re going to have that information. Usually a CRM is not going to get you all the way to where you want to be. The tricky part, though, is the pace of evolution, right? There’s always this gap between what the technology is capable of and what the market’s ready to adapt. And right now, a lot of operators, they’re just trying to figure out how to do online ordering or trying to figure out whether or not to put wi fi in their physical locations. And so even though it may make sense for them to move away from the traditional point of sale, that decision point might not come for another five or seven years. And so I think that’s that’s kind of the PC you have to balance in terms of what you roll out and when.

James: Well, yeah. I mean, you figure legacy POS systems dominated the industry for I mean, how long? I mean, that’s only been in the last few years that oh my gosh, people even start to move out of post. Right. I mean.

Collin: Yeah. I mean, I think it’s hard if you’ve got anything that’s older than ten or 15 years old, there’s probably a good chance that you’re leaving a lot of opportunity on the table. It’s just incredibly hard to make it through multiple lifecycles of product successfully. The number of examples, I mean, look at the car companies, look at the department stores. There’s just a life cycle to it, you know, a life cycle to their ability to keep pace because the business just gets bigger, it gets more bloated, it just gets harder to keep up and eventually it just gets dropped. And, you know, something similar happened, you know, like GrubHub. GrubHub was a very dominant platform right up until, I don’t know, 2016, 2017, and in many ways just stopped innovating as quickly and got relatively comfortable, I think, in their position. And so, yeah, to your point, I think if you’re looking at your technology stack, you’re looking at that ecosystem and you’ve got stuff that’s been in there for ten or 15 years, it’s probably time to go shopping. And it might seem like money that’s not well spent because the upside from those investments, they’re not immediate, right? You don’t see it in your bottom line. And I think this is a challenge for restaurants because they tend to be cash flow intensive businesses. You end up seeing the benefits of that over time. And what’s happening right now, again, is the results for restaurants is extremely polarized. Right. So if you do well, you do really well. If you’re doing poorly, you don’t really poorly. There’s not a whole lot in the middle. And so you almost have to arm yourself with whatever you can to make sure you’re on that, you know, sort of top crust of the field. Otherwise, it’s going to be a struggle.

James: Yeah. Now, in this omnichannel world that we live in, where you have phone orders, you have takeout, you have online ordering. How do restaurants try and get customer feedback now? Because it’s not the old days of like the walk around and the manager says, Hey, how are things going? Do you talk to restaurants about how to make that communication with data two way?

Collin: So again, there are some great products out there for this stuff that are not super expensive. I mean, you’re talking about, you know, 50 $100 a month. You know, there’s ovation, which you can find. I think it’s ovation up dot com. Kind of a Zack Oates started that great product. There’s a similar product called Tattle by a gentleman named Alex Beltrani. And both of those will let you not only get feedback from customers and you automated so you know, you have a toast transaction or square or something like that and it automatically text messages or emails to customer ask for feedback. If they’re willing to engage, it’ll run them through maybe a smaller short survey to get you a little bit more information. You can book some time with that customer to be able to have an interview or proper, you know, conversation about what went wrong. You can, you know, send different incentives to that customer. You have something went wrong, you know, maybe they didn’t get their order the way they were supposed to. You can issue a gift card directly through these platforms. Right. And these are you know, they’re 5000 dollars a month products. And if you save two customers, one customer from leaving at a month, it’s paid for itself. What I consistently see is restaurants that say, well, you know, $100 a month in pay, that it’s too much money. And I think the mentality is they can’t measure what’s being lost right now. So the assumption is that it’s zero. There’s a saying we had in our company, right, that if you can’t measure the important things and there’s a tendency for people to make the things that they can measure important, they just kind of call those important. Right. So we have this many reviews or, you know, we have this many downloads or it’s many people in our email list and you know, that’s great. But you’re in the business of selling pizzas. How many pizzas of this review selling you right. Or selling for you? You know, how many pizzas are being sold through email program? And that’s where, you know, again, it comes back to sort of measuring what matters. But to your question on on customer feedback, you know, I would certainly recommend tattle or Ovation as great products there. I believe Becky may have some solutions in there, too. They’re not exclusively focused on feedback. And so they may not be as advanced as some of the others. But, you know, certainly Title Innovation are great products.

James: Yeah, definitely. I’ve met Zack at a conference last week and he’s in a good guy to get to know. So finally, let’s finish this up with there’s a lot of money that’s flown into food tech over the last year or two. Where do you kind of see this industry going and how it will impact the restaurant industry?

Collin: Yeah, so the last probably ten years can be very much characterized by sort of free flowing capital, right? Low cost free flowing capital. And you know, now it’s sort of the discourse has caught up to that in terms of inflation, in terms of, you know, the stock market. And what’s happening is after the financial crisis and sort of oh eight or nine, everyone kind of pulled their money off the table and they said it was too much risk. Let’s just put it in the mattress. And then, you know, around 2010, 2011, there was a big rush to get those funds back into, you know, meaningful investments. And so we saw Airbnb get formed. We saw Uber eats, we saw DoorDash. We saw lots of these products come out where in many cases they had negative operating cash margin, but they could fuel their growth any way because there was really cheap and readily available cash. It was coming from all over the place. Now that’s kind of pulled back again because of inflation, because of COVID and a couple other macro factors. And so businesses now are being forced to actually find an operating model that generates real cash flow, that generates real profit. And so to your question, I think one of the things you’re going to see in the restaurant space is this return back to some of the fundamentals. What are your unit economics? How much does it cost you to acquire a customer and how much are they worth to you over their lifetime? Being able to measure that, being able to optimize for that, and that has a lot of, you know, pieces to it. But at a very high level, I think we’re going to see a return to that because for a while it’s been kind of just spend money and see what sticks growth at all costs. And I think the models kind of swing back the other way where the fundamentals of running business are coming back. I think you’re going to see technology continue to play a larger and larger role in restaurants and hospitality and so on. You know, it’s been true for every other industry. I can’t imagine why it would be any different for restaurants. I think we’re already seeing it in some ways. I liken the restaurant industry to basically the e-commerce industry, but maybe 5 to 7 years removed. I think we’re a little bit behind, but we tend to follow, I think, a very similar trajectory. One of the things that I’m seeing certainly with us, you know, thanks, is the return of loyalty and loyalty sort of redefined. And the way we think about loyalty is more around how do you incentivize customers to do the things that you want them to, to be a part of your brand, a part of your ecosystem? And how do you do that without devaluing yourself as an operator, as a brand? And traditionally, the model’s kind of been, you know, spend $100 and get $10 off. And what operators haven’t realized is that, you know, when you discount your product, you kind of just come in your brand at same time. Sometimes it’s worthwhile, sometimes it’s justifiable. But the idea of introducing a concept of loyalty where discounting is not the only tool that you have available to you, and this is something I’m seeing pick up where it’s getting a lot of a lot of steam. We released a product called, you know, hidden menus where it’s like you can create a loyalty program where you earn a certain number of points or maybe you’ve ordered everything on the menu at least one time and unlocks a hidden menu that has additional items. Now for you as an operator, you know, this has effectively zero incremental costs for you, right, to have this sort of hidden menu. But the perceived value to the customer is really high. And this is kind of where loyalty comes from that sort of points on an airline or what have you. It’s this gap between the actual cost and the perceived value. And so I think some of these concepts that again have been in eCommerce world, they’ve been in the credit card world, in the airline industry for a while. They’re starting to make their way into restaurants. And hopefully, you know, for us it thinks like that we have the opportunity to be, you know, one of the leaders at the forefront of that. But I think it’s part of a bigger trend of those solutions and technologies coming into the restaurant space.

James: Yeah, I have heard more of that in the last few months about like making loyalty more of a VIP experience than just make it like, you know, you buy five and get the six one free. And that definitely seems to be starting to trickle into the industry from what I’ve heard.

Collin: Yeah, I mean, that rope point system is just not differentiated. And you know, again, to some of our prior conversations, what has happened in a lot of restaurants is competition has not gone away. It’s just moved to a new venue and that venue’s primarily online. And so, you know, even if the actual consumption of the food is not online or it’s not delivery or what have you, that process still starts online. 80 to 83% of cases. Right. Starts on Yelp or it starts on Google, you know, food near me, pizza near me, you know, open reservations, something along those lines. And so you’ve got to find this way to differentiate your product on a dimension besides where your storefront is. That used to be kind of the only logic was like you had decent food and you would just find a decent storefront and that was enough to have a pretty good restaurant. And now that’s completely on its head because again, the switching costs to go from one brand to another is so low, it’s literally one click to the right and there. Ordering from someone else. And so to the extent that you can offer a little bit better service or a little bit better email content or copy or an SMS program that has, you know, funny blurbs, it’s a company called Slutty Vegan down in Atlanta in their ethos is we send you really funny text messages, like that’s their shtick and it works extremely well. Right. And so finding your differentiator, whether, again, it’s the VIP service or whether it’s emails or whether it’s, you know, some other element that’s going to be key, it’s going to be key to the longevity of restaurants and brands. And so, you know, hopefully we can continue to help them build out those those differentiators. 

James: Well, thank you so much. I really enjoyed the conversation.

Collin:Yeah. Thank you. Really appreciate you having me.