Diversification into new channels is not right for all brands, but for those that successfully stretch themselves, it is “a signifier of brand strength”.
That was a key message from Yasha Estraikh, associate partner - brand, Piper Private Equity, who was speaking at William Reed’s inaugural Omnichannel Foodservice Conference last week.
Speaking on an investor panel on the value of an omnichannel strategy, alongside TriSpan partner Robin Rowland, Estraikh told panel host and MCA contributing editor Peter Martin that for a brand to successfully move into new channels “it also says to me that as a business you have the capability and the talent in house to do it properly”.
That said, while having an omnichannel approach is increasingly becoming a plus, he said it wasn’t always essential for brands in the eyes of investors. “For us […] it’s about understanding growth – how are you going to grow this business, and therefore make it more a valuable business that you are going to get a return from.”
Estraikh said there were brands, such as Loungers, which have demonstrated that it can achieve significant growth through site expansion alone. “Not every brand in hospitality can have that many sites, so then you start thinking about what other channels you can get in to.”
“I think growing these days is harder than ever, it’s ever more competitive and ever more costly and so being innovative from that perspective is crucial,” Estraikh added.
Rowland said he believed the days of the mass roll out of brands utilising only one format was over, and that operators needed to be more flexible with their concept. He said TriSpan was keen to explore ‘express’ formats and also other avenues of growth such as franchising, although he said the latter was probably of the more complex routes to growth to get right.
The pair also discussed the merits of delivery and dark kitchens – areas which many operators moved into during the pandemic as a way to reach their customers while their sites were shut.
Rowland said that while Rosa’s and Pho got heavily into delivery during the pandemic, with it making up around 30-40% of sales, he said they were “weaning ourselves off it now as clearly it is not nirvana and not the solution to all problems”. He said unless businesses are making £12k - £15k a week from a dark kitchen, “don’t bother – it’s a lot of pain for gain. The buzz is off. The numbers are not there now.”
When it comes to growth from the perspective of an investor, Rowland said he wants to understand the business plan and make sure it makes sense financially, and that it is really thought through.
“And there is no point in going off on a tangent for six months to a year and burning up a lot of cash without anything to show for it, and most importantly diverting management’s attention from the core business,” he said.
“It’s about being really sensible about it and making sure you back the biggest bets and don’t get the team’s attention going crazy in three directions. Make sure the brand doesn’t get damaged by doing stuff badly. That’s the worst thing you can do, go off and do something that destroys brand equity.”
