By Jimmy Frischling, Managing Partner at Branded Strategic Hospitality
It is estimated that the global pandemic has cost the restaurant industry roughly $240 billion in 2020. With the acceleration of the vaccine rollout, the industry is expecting a meaningful spike in business because of pent-up demand from consumers looking to get back together in person. At the end of the day, we’re social creatures and we want to get back to socializing in-person and in restaurants and bars. Some industry experts are expecting version 2.0 of the roaring twenties and the team at Branded doesn’t know a single operator who wouldn’t be thrilled to see that prediction come to fruition.
The lessons from the pandemic will still very much be with us and when it comes to technology and innovation, let’s all just understand the genie is NOT going back into the bottle. So, while our brothers and sisters across the hospitality industry are gearing up for our guests to come back with enthusiasm, the acceleration of investment, capital markets and M&A activity is already well underway. The financial community anticipates high returns on investment when the industry recovers from the pandemic and a gold rush appears to be taking shape.
Private equity players are looking for franchisor and franchisee opportunities that were stalled because of the pandemic. Hospitality lenders are also going to be eager to participate as they have substantial dry powder to put to work. This is a lethal combination that are sure to drive not only P/E investments but substantial buyouts of businesses.
The Venture Capital community is love with tech and the consolidation that is taking place in the industry. The online food delivery marketplaces have dominated the activity, but with the announcement of Uber expanding into the alcohol delivery space with the acquisition of Drizly for $1.1 billion, it’s clear that the importance of convenience and making people’s lives a little bit easier is in vogue and not going away anytime soon.
Branded Strategic Hospitality is a unique platform that is exclusively focused on early-stage technology and innovation companies in the hospitality space. As a longstanding hospitality owner & operator and now investor in the space, Branded’s ability to identify, vet and validate the most hospitality-centric companies in the industry that are allies to the operators is proving valuable. Branded closed 2020 with 16 direct investments and already completed investment number 17 in January 2021. With a pipeline of best-in-class technology and innovation companies, the launch of Branded’s investment management platform and this first fund couldn’t be timelier and more necessary.
When the world is chasing gold, Branded’s strategy is to secure the leading picks and shovels to ensure the industry is prepared for the rush and what will prove to be the new normal. Every restaurant will need to do more with less and leveraging technology to engage with guests and promote your own brands is going to be critical as restaurants compete for a percentage of your wallet. Restaurants will need to create additional sources of revenues beyond the traditional relationship it has with its customers. This will include using excess capacity to create virtual restaurants, fulfillment centers and curate experiences that embolden the relationship the brand has with its customers.
To be nothing less than blunt, at the start of the pandemic, the restaurant industry was saturated and there were quite simply too many seats available for customers. The pandemic forced a number of weaker groups out of business as well as some great companies that were caught on the wrong side of a landlord or had understandable liquidity issues (the hospitality industry has never been one to keep big cash positions on hand). With the spike in demand for online delivery for food, alcohol and groceries, the industry will still be under tremendous pressure for new sources of competition and will need to leverage every tool available to succeed.
Branded will use this first fund as well as the ensuing investment vehicles to partner with technology and innovation companies that are allies to the owners and operators. At Branded, we subscribe to the theory that it takes a village. If you’re interested in exploring investment opportunities with Branded, please contact us directly.
Branded Strategic Hospitality is an investment and advisory company exclusively focused on Hospitality Technology, Food & Beverage Innovation and Emerging Concepts. For more information, please go to our website: www.brandedstrategic.com.
