The Secret Sauce of Local Restaurant Success With Mike Jacobs, Founder and CEO of Kitchen Data Systems
Mike Jacobs is the Founder and CEO of Kitchen Data Systems, a software company designed to help you create and scale your virtual food brand with very little upfront or overhead costs to focus on improving the bottom line. As a serial entrepreneur, Mike also founded Nextbite, Tapin2, Ordermark, Grilla, and Team Kitchens. His expertise includes innovation, crafting business models, product management, marketing, and building a positive company culture. Previously, Mike was a counterintelligence analyst for the FBI and was nominated for the Director of National Intelligence’s National Counterintelligence Award.
Here’s a glimpse of what you’ll learn:
Mike Jacobs explains why he started Kitchen Data Systems and how it works
The challenges Mike faced from launching Kitchen Data Systems in the middle of the pandemic
How Kitchen Data Systems is helping restaurants combat inflation
The changes Mike has seen in customer behavior and the shifts Kitchen Data Systems’ have had to make in its marketing efforts
How Kitchen Data Systems ensures brand affinity and loyalty through personalization
The obstacles Kitchen Data Systems is working to overcome due to a significant rise in the number of delivery-first restaurants
The best advice Mike has ever received
What you’ll learn in this episode:
The pandemic had a massive impact on our lives and forever impacted multiple industries. Arguably, the restaurant industry was hit the hardest and was forced to evolve as a result. Among the new restaurant industry developments is the emergence of virtual brands, whose business is based primarily on delivering cooked food to the customer. These restaurants don’t have signs or seating areas, so how does anyone discover them? What marketing strategies are effective for these brands?
According to Mike Jacobs, Founder and CEO of Kitchen Data Systems, 5% of restaurants in the US are using a virtual brand business model, up from 0% two years ago. How can a virtual brand effectively make restaurant customers aware of its existence? Mike says there are companies launching brands even though nobody knows they exist. You’re not going to be discovered by displaying a sign, so virtual brands have to find alternative ways of making their presence known. So, what can you do to get noticed?
On this episode of From Persona to Personal, Roger Hurni welcomes Mike Jacobs, the Founder and CEO of Kitchen Data Systems, for a conversation about how delivery-first restaurants are doing business as virtual brands. Mike discusses how virtual brands can enhance their bottom line by making customers aware that they exist, ways to create brand awareness, and how to build a meaningful connection with customers since food is only part of the total customer experience.
Resources mentioned in this episode:
This episode’s sponsor:
Today’s episode is brought to you by Off Madison Ave. At Off Madison Ave, we create meaningful moments of brand trust and influence how people interact and engage with brands.
There is a science behind tapping into your audiences’ motivation and desires. After all, if you’re not changing your audiences’ behaviors, you can’t truly unlock all of your brand’s potential.
The proven models and methods of Behavior Design is the strategic foundation for your brands’ success.
Episode Transcript
Intro 0:02
This is From Persona to Personal podcast. Today's episode is brought to you by Off Madison Ave. Off Madison Ave creates meaningful moments of brand trust and influences how people interact and engage with brands. The science behind their approach taps into your audience's motivations and desires. After all, if you're not changing your audience's behaviors, you can't truly unlock all of your brand's potential. Now, let's get started with the show.
Roger Hurni 0:33
Hello, everyone, I am Roger Hurni, the host of this show where I get to speak with top leaders in the food and beverage space. I have an amazing guest with me today in the business you probably don't know or may realize really helps out local restaurants on a national level. However, first, I'd like to let you know that today's episode is brought to you by Off Madison Ave. At Off Madison Ave, we use behavioral science to create meaningful moments of brand trust, which influences how people interact and engage with companies. Our behavioral approach taps into your audience's motivation and prompts them to shift behavior. After all, you're not changing your audience's behaviors, you can't truly unlock all of your brand's potential. These proven behavior models and methods are the strategic foundation for your brand success. Today, I am here with Mike Jacobs, who is the founder and CEO of Kitchen Data Systems. Mike is a serial entrepreneur to say the least. He not only founded Kitchen Data Systems, as I've already mentioned, but also Tapin2 and Nextbite. Mike focuses on improving the bottom lines of local restaurant operators across the country nationwide. Mike, welcome to the show.
Mike Jacobs 1:51
Oh, thanks for the invite. Happy to be here.
Roger Hurni 1:54
Great, you know you doing some research on Kitchen Data, not many people realize there's always that secret sauce *budumchich* behind behind many businesses and your particular case, I think local restaurants and there could be others that I have not realized, let's start by telling the listeners why you started the business and how it actually works.
Mike Jacobs 2:19
So after I sold my previous company, which is called Nextbite. It's a one of the largest ghost kitchen companies in the in the country at the moment. We, when my friends and I is named as Jonathan Hyung, founded a business where we were operating our own ghost kitchen out of cloud kitchens in Los Angeles, for a company called the Los Angeles Dodgers. Right, so it was brand called Dodgers Home Plates. And during 2020, you could order a Dodger Dog and get it delivered to your house through mainly Hollywood, etc. And then in 2021, we expanded to four locations all across LA. Now, we learned a lot when we launched restaurants in cloud kitchens across Los Angeles, mainly how it's just not a good business model. And there's been a lot of press recently about that. So I believe we don't need to delve into the pitfalls of launching a small business in a cloud kitchen. But while we were doing that, we realized a couple of things. One is I could train almost any restaurant in preparing a Dodger Dog and similar food that people get in stadiums, especially if it's like an American bistro or grill. So number two, it was a lot easier for me to operate because we had economies of scale and working with large businesses that like Levy Restaurants and through some of the other partners I had, who have 1000s of restaurants across the United States. So an example is a 35 litre bucket of fryer oil at the time, and these prices seem insane now, but at the time it was $12 for the purchase the oil filled fryer, the guy in the next, the next cloud kitchen that cost him $29 right so so and that's just one item and we we looked at our different order guides, were an order guide is really just all the items that a restaurant orders, gets and receives from their distributor. And we realized that every single item I was purchasing was about 50% or more cheaper than the same restaurant getting the same shipment from the same distributor on the same day, right? Just one stall over in the kitchen. So, so I realized that there must be a better way to get this meaning the restaurant industry done for small businesses, because ultimately restaurants are bottom line businesses. So anyone who can actually help a restaurant improve their bottom line is is basically their best friend. So first step was we needed to create a national restaurant chain, which is not easy to do. So, so we enlisted to help of some people that we knew that are celebrities. Meaning or they managed celebrities, and we launched virtual brands for them. So one of them is Brian Barkin, who owns a company called Pro Wrestling tees. And they're out of Chicago. Ryan has 1000s of professional wrestlers signed to do that merchandise. So when he heard that he could launch a restaurant brand, without needing to know whatever, like how to operate a restaurant. He said, Yes, so we launched something called Powerbomb Pizza, which has about 12, WWE Hall of Famers signed to it, where they're selling their pizzas at this point nationally in nearly 50 locations, right. And then, and then once anyone who's launched business or as an executive sales notes, once you make one sale, and a vertical, kind of everybody hears about it. So the next brand that we launched was, actually, it's called Wu Wings. So Ric Flair and its team from actually another podcast network called Podcast, he they saw the pizza brand, and they said, Hey, can we do a wings brand. And sure enough, we launched Wu wWings, it's, it's around 20 locations nationally right now. And we're growing it, you know, a couple locations a day basically.
So ultimately, the, you know, at this point, were in around 100 locations nationally, and we get economies of scale. So launching 100 locations isn't easy, but we were able to do it. And at that point, we’re able to open up enterprise accounts with all the major distributors. So any restaurant that signs up to be a partner with Kitchen Data Systems, immediately becomes a member of our network and gets access to our ordering system, which, which at this point is saving them around 25% on everything that they purchase.
Roger Hurni 7:53
So it's Kitchen Data, always the engine behind all those initial startups.
Mike Jacobs 8:00
And that's, yeah, so what so we're basically a platform, you can think of us as like Shopify, for the restaurant industry, because what Shopify did for direct to consumer and other businesses where you could just drop a e-commerce website without knowing how to code, et cetera, we can do that for delivery restaurant.
Roger Hurni 8:21
Got it? Got it, you started in Kitchen Data like, right in the middle of the pandemic. What were some of the challenges you faced?
Mike Jacobs 8:31
Well, one of the biggest challenges was actually when I was running the restaurant is, is actually very dangerous. Right, we'd have hundreds of drivers coming in other people coming in, you know, keeping, actually paying attention to the different health requirements for running a restaurant during a very serious pandemic was challenging. We only had really ever had individual cases of people getting sick. And thankfully, nobody got that sick. Right, but so we're very lucky as a company. And then when we pivoted to, they were actually a new company, but when we pivoted to being a tech company, the, the challenges were that the everything they had done in the software business as far as creating and launching a company from the structure of what the employees were expecting, actually changed. And I had to change my management style. I had to change expectations for even showing up to the office and as someone who didn't take a pandemic and wasn't wasn't really in my house, right. It was a little bit different culture.
Roger Hurni 9:51
Got it. Got it. Well, now you're facing a new challenge, right? You're, you know, inflation starting to you know, weigh down heavily probably on restaurants, how are you helping businesses or those restaurants combat that?
Mike Jacobs 10:07
Well, that's that's a good question. So like that same bucket of oil that was, let's just say $30, before the pandemic for a typical restaurant is now $50. They're usually spending $50 to $55. for that. So when they're purchasing on our network, unfortunately, it's not $12 anymore, but, but they're purchasing those for, you know, closer to $35.
Roger Hurni 10:35
So, all right, so there's a great cost savings there. So I noticed on the site, you mentioned, bargaining and helping the restaurants in other ways, since you're involved in so many restaurants, the pandemic has shifted, I know a lot of dining behavior. What kinds of changes are you seeing in that customer behavior? And has it shifted your marketing efforts for restaurant owners?
Mike Jacobs 11:01
Yeah, so as far as delivery, first marketing, you know, it's, it's actually very difficult and different from what you'd expect as a brick and mortar. You know, there's, but there's some similarities, like even, even hanging up a door hanging all across your neighborhood, will drive better results than most digital marketing agencies claimed that they can do with like a Meta business or Facebook ad, right. So, you know, some of those changes are related to the pandemic, some of them are just related to Apple, entering the digital marketing business in a different way, and changing what people have to do to be successful. But ultimately, the biggest challenge for our delivery-first brand is awareness. And there's entire companies that are launching their brands, and nobody even knows that the brands exist, right? So. So number one is you don't have a sign. Nobody's driving by your restaurant, if you have a virtual brand. So you have to figure out how to become part of pop culture. And the one that that's stands out here is actually virtual dining concepts with one of their brands, and only one of their brands, which is the Beast Burger, right, Mr. Beast Burger. So ultimately, they do a great job. That's a one example. But that's because the, the YouTube star himself is promoting the brand and doing it quite heavily. And in a lot of the other instances where you see these delivery-first brands, there's really nothing happening to create any awareness. And then once people make their first purchase from the brand, there's another challenge, which is generating second purchase, which really only happens with a strong loyalty or affinity program.
Roger Hurni 13:10
You know, I think so many businesses, even outside of the restaurant industry, they latch on sometimes that new shiny object or digital marketing or this social media blitz, or we should hit. And I'm not saying there's not value there, there, there is value there. But there's some blocking and tackling that needs to happen in business, you know, getting a sign up, making sure that it is visible I off shoot, I can never have a conversation as trade line. So I actually worked on a restaurant chain, and they had this exponential growth. But this one restaurant wasn't doing so well. And they sent us down to Atlanta to like, take a look at it. We did like a survey, we're looking at their marketing material being interviewed customers. And during that process, we realize that the solution to their problem was a chainsaw. Because the city had planted the tree on the corner and a group has their branches group has to find where it was hard to see from the intersection. And once they turn to the tree, business picked back up again. So the blocking and tackling those early things are really, really smart. Getting that second purchase. I love what you said there, because you can get someone in the door. But getting them back time and again, usually is is two things. It's the operational customer service, like you have a great product and you're servicing it well. And correct me if I'm wrong. And the other and everybody is struggling to do this today, but in a relevant way is personalizing those communications to a one to one service. Are you able to help restaurants do that? Like through their apps or you building apps for them? How are you how are we handling personalization to ensure that brand affinity and that loyalty program?
Mike Jacobs 14:58
Yeah, so we've actually launched a web three products, it's with the right now with the Harmony block chain where, you know, one step the brands can elect to create NF T's, which I know are a trigger for many people. But instead of it being just a picture, the NFT is more of a passport to a community connectivity with, with the brand itself, meaning you make a purchase, you enter your information into the loyalty program, and then you get your NFT and you get access via that NFT to you know, basically whatever digital product or service the brand thinks will create a community, it could be a discord channel for people that purchase wings, that could be you know, as far as Pro Wrestling tees go, where we're going to create some additional products that get shipped to them in person that gets bundled with the pizza purchase. And we can do that, basically monthly. There's all sorts of really cool things that we can do there that you that are unique to web three, just around building a better connection to the brand, the the food. Now, you can think of it, it just sounds like a digital bundle. Right, so, so the food itself is part of the experience, but it's only part of the experience.
Roger Hurni 16:39
You know, so that's great advice on sort of that, you know, getting that awareness and getting that level of having that entity and that repeat program. Let's put it back on the Kitchen Data. How are you attracting new restaurant owners to your business and growing your business? Because it's not like you can put a sign outside?
Mike Jacobs 17:01
No, no. So we're, I mean, we're a tech company. We're also an operations company. Right, but, but ultimately, we're technologists. So we know, every single restaurant in the United States that actually launched virtual brand, are what I like to call delivery-first restaurant. You know, typically, those restaurants have about three brands that you see on like DoorDash, or UberEATS. And across the board, it's five, about 5% of the restaurants in the United States are using that business model to be more successful. And that's grown from a precisely 0% a couple years ago. So so you know, that's actually pretty earth shattering growth, even though it doesn't sound like it, because those 5% of restaurants are taking up 15% of the screen space in one of the aggregators of your aggregator of choice DoorDash or UberEATS.
Roger Hurni 18:07
So that kind of growth creates its own set of problems and what challenges you're facing now, because of it.
Mike Jacobs 18:17
Well, there are a lot of companies that have sprung up that have done a bad job at providing a digital first brand without naming names, right. So some of the restaurants that are still running the brands are completely burnt out, or they don't feel like the brand itself could generate any revenue from them. So so a lot of it is explaining how we're not one of these other companies and that we're here to help them and part of that is through sharing the, what we're doing with the loyalty program but but also our what we're calling your pitch savers program. And then and then walking them through the different opportunities we have to launch digital first brand for them. Basically whichever one makes the most sense like for instance if someone's opening as a diner or grill or something like that will offer them Man vs Fries which which is a really cool digital-first brand that is well known on Tiktok and Instagram and but it was known for is having huge burritos like this that are filled with fries and you know in the food's actually quite tasty but definitely not, definitely not a low calorie meal.
Roger Hurni 19:51
I don't believe that anything fried in oil genuinely tastes good.
Mike Jacobs 19:57
It tastes great. My favorite item on the menu is actually, they, they deep fry Oreos inside of pancake batter. And unfortunately that tastes great.
Roger Hurni 20:11
And of course, it's low calorie.
Mike Jacobs 20:13
Yeah and then for the restaurants that we're working with, it's actually a super high margin item, right?
Roger Hurni 20:20
So when you have a new restaurant, try to recap this for the listeners, you really are that engine that helps get them onto those third party, you know, digital platforms like DoorDash, and gets their business up and running and makes it functional for them to actually, you know, just cook food and make sure that it gets delivered.
Mike Jacobs 20:44
Exactly. And and the way that I see it is, we're upgrading their top line and their bottom line. Right. So you know, Man vs Fries is actually a very high volume delivery concept. For instance, you know, any restaurant that launches that will generate more, significantly more sales, through their delivery channels, the on the, and then on the back end, were saving them, typically around 20% to 25%, on everything that they're purchasing, if they're a small business. And nobody's ever put together a program like that, for small businesses that are restaurants in the past.
Roger Hurni 21:34
That's fantastic. And I do a lot of work in consumer behavior, and behavior modification. People don't realize that you've actually just described that model only on a b2b setting, because these restaurant owners are highly motivated to make, you know, have these businesses run well, you are not just prompting them, you're giving them the ability to make it easier to do business. And that is classic behavior modification designed for b2b. So congratulations on that. Wonderful. What, what's getting you excited today, you know, but the Kitchen Data like what's happening, it's like, we're looking forward to this?
Mike Jacobs 22:12
Well, actually, today's the day that we're emailing the restaurants in our network, about the Kitsch Savers program that I've been talking about. So very excited about that today, we'll be will basically be contacting every single restaurant in the United States that has opened the virtual brand and giving them the opportunity to increase their bottom line. And ultimately, I think we're going to save a lot of restaurants, the people that, that run, the restaurants are going to be able to take home, they're going to be able to take home more pay for themselves annually, they're also going to be able to hire more people at a higher salary, which, you know, while there is a labor shortage in the restaurant industry, if you're able to pay people a little bit more, there isn't much of a shortage. So, right. So, so we'll be able to help our restaurants be more competitive in the labor market and I think it's a huge win win for the entire community.
Roger Hurni 23:26
Well, it's a fascinating business model. And, and I appreciate you sharing with everybody I had, I had one last question you, you've given some really golden nuggets of advice in between your answers, What's the best advice you've ever gotten?
Mike Jacobs 23:43
So I've gotten a lot of bad advice. I've gotten some good advice. And usually the best advice is either coming from people that really care about you, or people who've been super successful themselves and are just freely sharing it. So there's a little bit of advice from Warren Buffett about how he does business. So Warren Buffett will only do business with people that he likes that he trusts and that he admires. And I think that's a really great filter for anybody that's looking to start a business or run a business. Just before you get started with anything consider those three filters there. Do you like who you're working with? Do you trust who you're working with? And do you admire them? Do you want to be around them? And do you think you can learn something from them?
Roger Hurni 24:40
Very smart. I think that also goes probably for the staff you hire to push that on.
Mike Jacobs 24:45
Oh, everybody when I'm when I say doing business with somebody, you know, anybody in the office is going through that, that filter when I'm hiring them.
Roger Hurni 24:57
Yeah, I agree. 100% Well, I have been speaking with Mike Jacobs, who is the founder and CEO of Kitchen Data Systems. Mike, where can people learn more about you and teaching data?
Mike Jacobs 25:09
Just go to Kitch Data kitchdata.com. Or if you'd like, I have email mikejacobs@kitchdata.com. Feel free to shoot me an email.
Roger Hurni 25:25
Excellent. Excellent, well again, thank you so much. I'm Roger Hurni. This is From Persona to Personal and we will catch you next time.
Mike Jacobs 25:32
Thank you, Roger.
Outro 25:35
Thanks for listening to From Persona to Personal, the podcast that takes a closer look into how organizations personalize their marketing. We'll see you again next time and be sure to click Subscribe to get future episodes.
