Monthly Business Update - December
Been awhile... here are 30 takeaways from 3 weekends (9 days) of service since we launched (we took Christmas/New Years weekends off).
In general, I'm super optimistic that we're onto something special here. We are actively exploring "What comes next".
The pop-up runs til 3/5.
Consumers care about transparency. I've posted 2 "carousel style" instagram posts: 1 on the day after we launched explaining what we'd do better on day 2, and one this week explaining we wouldn't reopen this week for COVID. These are our 2 most liked posts of all time. Check them out here:
Your first bad piece of feedback stings. Absolutely sucks the wind out of your sails. But with the right tools in place, you can take that feedback and immediately act on it, and get better right away. Feedback is growth and without it we stagnate.
We’ve seen a majority of our sales come from native channels (eatsmashbrothers.com). Which is usually hard for off-premise only businesses to achieve - In the “Virtual brands” space, its almost always 3p app dependent. Now we need to see if we can maintain that. TBD...
It’s feasible to grow sales through your own native channels if you’re committed to it. It’s a fair bit of work, but there are ways to do it.
We had good sales week 1, small decline week 2, then were at our highest week 3. We had 27 pre-orders before we opened on our last day!
3rd party apps don’t contribute that much volume when you just “turn them on”… and even with promotions turned on sales don’t come easy. Gotta fight for every sale, nothing is “given”
Customers are more sensitive to service fees than delivery fees -> we’re able to pass along more delivery fee % to customer than initially thought, which helps us stay margin positive on delivery orders, but we never add a service fee (3p apps have both)
Return on ad dollars on 3p apps hasn’t been great so far, curious to see if this gets better over time as we get more reviews and become naturally more “visible” on these apps. 3x on some, 6-7x on others. Add that on top of a 30% commission and half your margin evaporates.
People don’t care at all about “Free delivery on your first order”. We get minimal clicks on those promotions. I don't know if thats true for everyone, but it's true for us. I guess it's just not compelling.
Promos that “work” on 3p apps are sponsored listing promos. Just get in front of people. I put “work” in quotations because the objective there is conversions. Not profitable conversions. So, as expected, 3p apps might only ever make sense as a marketing vessel for the biz.
Our existing SaaS stack does about 60% of what we need it to. The more complex/bigger we’re getting, the more limitations we’re seeing and starting to feel handcuffed. When you're trying to do a business action, and your software limits you, it’s incredibly frustrating.
That said, Ovation's customer feedback software is a great investment each month. We get immediate feedback and react mid-service, all enabled via smartphones, and add a human-response to upset customers
Growing a brand is extremely hard. Kudos to anyone who’s ever built a brand that lasted. We've got a playbook we think we can re-create, but that doesn't mean its easy.
No data behind this, just observation from working the expo role at the window/POS every night -- 80% of people like our “online orders only” model, 20% don’t. Of the 20% that don’t, 5% walk, and 15% order anyways but voice their unhappiness.
Demand is king. Volume drives literally everything. If you don’t have volume, no other problem matters. If you do have volume, you can start working on the margin problem.
Sliders are a demand magnet, but more operationally complex than intended. This knowledge will shape what we do next.
We don’t really get many phone calls each night -> we think we’ve done a good job communicating that we are online only. When people do call it routes to google voice, then to me. I answer and direct them to order online.
We’re doing less orders per night than we thought we would (40-45 was peak) but at higher basket sizes than we thought we’d get ($27-29ish). I like this tradeoff.
Our customer data/email list is growing at a significant pace because 100% of orders are online orders, and consumers are opting into marketing emails upon checkout. Drive thrus don’t get that.
Baskets tend to be higher in native channels than on 3rd party apps -> gives us even more incentive to drive orders through native channels
COVID is really hard on small businesses. We had to pull the plug on service this week because of positive tests and exposures. Being so small, everything is fragile, and the house of cards can fall quickly.
Lead time management across custom packaging, equipment, and buns has been extremely challenging; delays or stockouts or poor forecasting on our end leads to a lot of hiccups here
Any business person trying to design food concepts without intricate knowledge of food safety and health requirements (hold times/temps, glove changes, etc) will fail. Need that knowledge. Go learn it or partner with someone who knows it.
Our success will depend on our ability to grow demand, which we think we can do more effectively than most restaurants because we're 100% online/digital. So far so good.
It will also depend on our ability to keep variable costs in check. Food and packaging should get better as forecasting gets smoother and scale kicks in. And we're betting that we get more efficient with labor by dropping in brands 2/3 (make better use of existing hours).
Unit economics of mains will carry the business. Unit economics of everything else should be an afterthought. Make sure you get this right. If you're a mac and cheese concept and expect to "make up your margin on drinks", you're dead.
Pricing is really challenging, and we’ve learned to think in terms of the pricing vs. complexity tradeoff “does pricing lower and driving more volume help or hurt us here”. The answer is almost always "Sometimes"
Biases get in the way a lot, and you need to make a conscious effort to squash that. Do that by following data.
E.g. - which social media channels are most relevant, which items will sell the most, what flavors people will like, what price points people are willing to pay...
A lot more of our business is coming from pickup than delivery. People seem to be completely comfortable with the idea of "order ahead -> drive and pick it up" aka the Starbucks model.
Thanks Starbucks, for training our customers. This knowledge shapes what we'll do next.
I don't have enough data points yet to know how well we're doing in terms of getting repeat customers. Only done 9 services. We are seeing repeats, which is great, but we need to give it more time.
Our hypothesized location (a big reason for wanting to partner with The Ohio Taproom) seems to be a good one. Hard to tell bc we can't compare it to what would have happened had we located elsewhere.
But location is only half the battle anyways - execution is the other half.