Few industries have sustained as many losses during the pandemic as the food service industry. And now, due to labor shortages and rising inflation rates, restaurant owners must brace themselves to face a new set of challenges as they attempt to reopen their doors. Fortunately, recent developments in technology are making the recovery process a little easier. In this episode, Gene Marks and Sam Zats, co-founder and CEO of Craftable, discuss how new hospitality platforms are helping restaurant owners regain their momentum despite the difficult economy.
Podcast Key Highlights
- Which Areas of the Hospitality Industry Are Being Transformed by Technology?
- Supply chain and procurement
- Inventory management
- Recipe costing
- Labor management
- What Sets Craftable Apart From Other Hospitality Platforms?
- Craftable serves as an operator’s profit management solution.
- Unlike other platforms that are geared towards accountants and owners, Craftable focuses on assisting beverage directors, chefs, and general managers.
- Its modules, entitled Foodager and Bevager, are designed to help your staff place the orders; receive the orders; automate accounts payable; receive inventory; and track recipes.
- These modules, which fully integrate into both the supply chain and the point of sale, will check every 15 minutes to tell you what’s in stock and what needs to be reordered.
- Craftable’s menu engineering capabilities offer a simple solution for managers who are struggling to price their dishes accordingly due to inflation rates.
- What Should Restaurant Owners Do to Prepare for This New Technology?
- Since Craftable has the potential to streamline your operational structure, it’s a good idea to inform all your stakeholders and co-owners before making any changes.
- You should also inform your staff about any restructuring that might occur once Craftable eliminates multiple levels of redundancy within your existing system.
- What Kind of Hardware Is Involved in Craftable’s System?
- Craftable is completely “hardware-agnostic.”
- It integrates with over 60 point of sale systems; over 30 different accounting systems; and over a thousand supply chain vendors.
- What Aspects of Post-COVID Recovery Are Driving Restaurant Owners to Craftable?
- Labor Shortages
- Highly Fluctuating Prices for the Cost of Goods and Labor
- How Can Craftable Alleviate Some of the Post-COVID Struggles That Are Impacting Hospitality Workers?
- For restaurant managers who are struggling with a limited staff, using Craftable to automate their administrative tasks will leave their workers free to focus on the customers.
- As for fluctuating food costs, the menu management and analytics functions will give owners the most profitable dish prices so that they can offset rising inflation rates.
- How Will AI Impact Future Versions of Craftable?
- Further developments in AI will allow Craftable to expand its automation capabilities.
- Depending on how sophisticated AI becomes, Craftable may also be able to introduce dynamic menu pricing.
- Future versions of Craftable will most likely require multiple data points prior to implementing any specific processes.
The views and opinions expressed on this podcast are for informational purposes only, and solely those of the podcast participants, contributors, and guests, and do not constitute an endorsement by or necessarily represent the views of The Hartford or its affiliates.
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Gene: Welcome to The Small Biz Ahead Podcast. We interview great experts, but offer advice and tips to help you run your business better. Hey everybody, it’s Gene Marks and welcome back to another episode of The Hartford Small Biz Ahead Podcast. Thank you so much for joining me today. I am speaking with Sam Zats. Sam is the co-founder and CEO of Craftable. Sam, first of all, thank you very much for joining me.
Sam: Awesome. Thank you so much, Gene, for having me on. Very excited to chat a little bit about Craftable with you today.
Gene: Yeah, I actually am as well. I’ve been all over your website. I think what you guys do is awesome stuff, and I want to dig into it. First of all, where are you calling in from? Where are you based right now?
Sam: We’re in Dallas, Texas enjoying 110 degree days here all week so if you’re cold there with your short sleeve, come on down.
Gene: I just saw that on the news that Dallas was going, it was like 110, 112 degrees, and I’m like, oh my God. Hey, happy summer in Texas. And the company is headquartered there, I’m assuming, correct?
Sam: That’s right. We started to be based in Silicon Valley, but now most of the organization’s here, we’ve got folks from coast to coast, from California to New York.
Gene: Got it. Moving, migrating out of California like some other businesses are doing as well. Tell me about Craftable. Tell me about what the company does.
Sam: Gene, it’s a great question. So we are a all-in-one profit management platform. We started in about 2014 realizing that restaurant bar owners, beverage directors, chefs, general managers we’re really spending their time on pen, paper and clipboard to make business decisions. And since then, we’re now serving thousands and thousands of restaurants from coast to coast, from quick service to full service and really helping them drive their margins. So we focus on areas of supply chain and procurement, inventory management, recipe costing, and labor management, all in order to increase their margins and help them help their business be as profitable as possible.
Gene: All right, that’s great. That is great. So it’s a platform, it’s a financial platform. It’s for order entry, inventory, supply chain management, labor management. It’s directed at restaurants, I’m assuming, big and small, right?
Sam: That’s right. We go all the way from independent restaurants all the way up to enterprise hotels and full service restaurants and even food courts if you imagine.
Gene: So there’s competition out there obviously as you know, there are other companies that provide platforms for restaurants to run their businesses. Tell me what sets you guys apart?
Sam: We see ourselves as a operator’s profit management solution. A lot of the platforms out there are really servicing and focused on the accountants or they’re focusing on the owners. If you really think about the restaurant, all of the business decisions on the day to day are done by the people in the four walls of the restaurants. That’s the beverage director, the chef, and the general manager. And they’re attacking that prime cost, that 70% of the business, of the cost of goods, the labor and being able to drive sales. And that’s really what we’re focused on.
Gene: Can you give me an example of how that works? I know you’ve got, as part of your offerings, you’ve got something called Foodager. Am I pronouncing that right? And Bevager, right? Yes. And so talk to me a little bit about what those modules do.
Sam: Absolutely. So what those modules are doing, they’re helping you manage the inventory that you have in your restaurant. If you think about it, the inventory is going to be the lifeline of the restaurant, it all, it’s going to drive what you’re buying at what price from what vendors. It’s also going to be dictating into your recipes around how you’re actually making the different menu items and then ultimately how much you’re going to be selling them. So if you think about it, it’s your bill of materials or your items that are actually going to be driving your costs and your revenues, all from the inventory management.
Gene: So when we talk about inventory management, the module itself is it’s maintaining it. You do physical inventories in it, I guess it receives inventory, does it interface as well with your purchase order management system and supply chain management system too?
Sam: So it’s all of the above. So the modules you mentioned, Bevager for the bar, Foodager for the kitchen, those are all in one purchase to pay platforms that we have that are tailored towards the bar and the kitchen inside of a restaurant. So we’ll be helping you place the orders, receive the orders, automate accounts payable, receive inventory, as well as track recipes, and we’re fully integrated not just to the supply chain, but into the point of sale every 15 minutes to tell you what’s on hand and what’s time to reorder.
Gene: Amazing. That is really cool. Tell me a little bit about how recipes figure into this. I mean, I have an idea of what that means, but I’m curious to see if that idea is what it actually does in reality.
Sam: Well, recipes are very powerful too. So all of your ingredients are ultimately going to be put into recipes. Recipes can be put into prep items or batches, but more importantly, it’s those recipes that are going to land on your menu. And if you start looking at how your menu is performing, that’s what we call in the restaurant industry menu engineering, which is one of the strongest ways to drive profitability in the restaurant. And that’s all about understanding what’s popular and what’s profitable in order for you to get the best margins for your restaurant business.
Gene: That is fascinating. So you are actually tracking then sales. This is almost like a job costing system where you’re tracking sales through your system based on the menu items that are purchased. You’re tracking profitability of those menu items, and therefore you’re telling the operator what’s making you money and what’s not making you money so they can adjust their menu. Am I describing that correctly?
Sam: Yes, absolutely. Not only are we doing that at the menu level and understanding kind of the menu mix and the menu popularity, but now you can also start to think about making other business decisions. If prices are going up, as a lot of them are, given today’s economic climates and inflation, it’ll allow you to stay on top of your cost of goods to see items that you may want to change the ingredients, or you may want to reprice or recost. Additionally, because we’re integrated to the point of sale, we’re also telling you what your on hand inventory should be. So when you take your inventory count at the end of the week or at the end of the month, we’ll let you know how much waste or variance you’ve got too. So that’ll be great in order to ensure that you’re not having high food cost, that’s wasted.
Gene: So it’s helping you manage your inventory, helping you manage your supply, helping you manage costs. From the point of sale, it’s giving you information as to what items are selling best and obviously what’s making you most money. And it’s also alerting you where you might want to make changes in your menus to make sure that you’re maintaining your margins. You’re doing all of this, which is awesome. It also seems like a lot of work to do. So I’m curious when you, I mean, you’re talking to restaurant owners here on this podcast, and I hope if you’re running a restaurant or you’re in this business, you’re listening to what this type of technology can do for you, what should restaurant owners be doing to prepare to really take advantage of a system like this?
Sam: Yeah, great question, Gene. First thing I’ll say is that the restaurant owners are already spending 80 to a hundred hours a week at the restaurants really trying to manage a lot of these different systems or a lot of these different processes. What we most oftentimes see is that we’ve got an ability to eliminate three to five different systems or multiple levels of redundancy. So really I think the first question before you start to think about implementing one of these back office solutions or a platform like Craftable, is what are my stakeholders and what are my areas of responsibilities and owners? Making sure that you’ve got different folks or areas of the operations that are responsible for different parts of the business are critical. At the end of the day, the platform can help you drive those decisions, but you’re going to make sure that everybody’s on the same bus and headed to the same destination.
Gene: All right. That is great. That is a great answer. So you want to make sure that you’ve got people that are trained, that they are, they’re accountable for this. Tell me a little bit about the hardware that’s involved for a system like this.
Sam: So that’s the best part about it, Gene. We actually are completely hardware-agnostic. We integrate with over 60 point of sale systems, over 30 different accounting systems, and even integrate with over a thousand now supply chain vendors. So the whole spirit and the concept of Craftable is to be entirely neutral to whatever hardware or whatever decisions that you want to make for your business. We’re just going to be connecting everything that you’re buying, everything that you’re selling, and making sure that you’re able to improve your margins.
Gene: You had mentioned, you know, you were saying that Craftable is installed in thousands of restaurants around the country, and it sounds like a great system. I mean yeah, the restaurant business and the industry obviously has suffered so much during COVID. We’re now a couple years out of it there, certainly the restaurant industry is in recovery, and I want to see if that’s what you’re seeing. Is the recovery in the industry what’s driving your implementations of Craftable?
Sam: A few things are actually happening that we’re seeing. First is that the demand for restaurants has never been greater. I think coming out of COVID, you now have a lot of folks that have stayed away or stayed inside that are now coming back and spending more time outside celebrating special occasions and really wanting to have unique experiences. On the opposite side, if you look at on the restauranteur side, it’s never been more challenging. We are still faced with labor shortages across all different segments of restaurants. Even though demand has come up, we still have employee shortages and we still see that even, I think even in just this week, we’ve had the greatest increases of jobs continue to be in hospitality as they get back-filled. And when you step back and also think about all the different business factors, inflation continues to be a challenge. You have highly fluctuating prices for the cost of goods, and labor continues to keep coming up, not just at the cost, but at the regulation level as well.
Gene: Yeah, my clients they’re struggling with all these things and their biggest issues is what you just mentioned. I mean, inflation is having a big issue and just finding people, managing labor. I have a lot of restaurant owner clients that are close to giving up on restaffing to the levels that they saw pre-COVID. I mean, the people just aren’t out there, and there’s a lot of reasons why that’s going on. And I guess that’s where technology comes in. So if you’re talking to a prospective customer, somebody that runs a restaurant or a couple of restaurants and they’re coming to you and they’re telling you like, Hey, Sam, we can’t even staff at the levels that we were staffing a couple years ago, but the demand’s not going away, how’s Craftable going to help me fix that problem?
Sam: It’s actually become mission-critical. And because you have less staff and less folks that are able to operate the restaurants, you want to have your teams spending as much time as they can focused on the guest experience, hands down. And so the more automation, the more technology that you’re able to use in the back office to automate things like processing invoice, automatically recosting recipes, analyzing the profitability of your menu, those are things that are going to make you not only get back to your customers and spend less time on manual operations, but also make better business decisions when you are resource and staff limited.
Gene: And even on the flip side of that, the other big issue which you brought up as well is rising costs and inflation. I’m assuming the more that you implement Craftable, it will help you lower food costs and poor costs as well. Correct? And it’s going to do that by just better menu management and also better analytics?
Sam: Yeah, exactly right. So not only do we support and assist our clients on optimizing their own business. We’ve most recently launched a couple of additional services where we are now having a number of consultants that are on our own team that can help in operations or they can help in procurement, where we can leverage the power of Craftable and the community to understand where there’s opportunities in your business of how to improve. And we support all of our clients on one-to-one support like that.
Gene: Got it. Sam, where do you see the restaurant industry going over the next few years? I mean we can’t have a conversation now about technology without mentioning AI because God forbid you don’t mention AI when you talk about technology, and I’m sure, and I tell my clients when people are even inside and outside of the industry when they’re looking to learn more about artificial intelligence, ChatGPT, all that kind of stuff, I’m always like, you shouldn’t be investing in this stuff. You should be letting your platform providers, the Craftables of the world, they’re making those investments. So I’m assuming you’re doing, and you as the restaurant owner, your job is to beat Sam up about all the new features that are coming out that will help you automate your restaurant better. So having said that, where do you see where Craftable is going over the next few years? How do you plan on leveraging AI to bring more value for your customers, your clients?
Sam: So Gene, I appreciate you encouraging our customers to…
Gene: Beat you up. Not physically, of course.
Sam: Appreciate that, but no, you’re absolutely right. We think that the AI is more of an opportunity where we can integrate it into the hospitality stack and into the decision making, the planning, the understanding of where you can actually be able to drive the business and drive all that we’re constantly developing in areas where we’re able to benchmark and understand how different parts of the restaurant business can actually help each other and increase the innovation for it. Absolutely something that we are very attuned to, and you’re right, it’s more of a feature and a driver that’s going to unlock value and drive impact to a business versus a tool that you can walk around with a hammer and just strike at different areas.
Gene: But it’s safe to assume that you’re making your investments in certain AI related developments that’s just going to increase automation. I’m kind of curious, is there anything that a customer of yours can expect to be doing three years from now that they’re not doing now with Craftable?
Sam: I mean, there’s a lot of different things that we’re excited to come in. We’re going to be having a lot of different areas where AI is going to be taking a lot of complex functionality as well as complex decision making and being able to really make the best decisions. Because at this point, what we see in a lot of our clients, especially in restaurant [inaudible 00:15:18] is that they’re saying that they have the potential to have more data than they’ve ever had before. A lot of the different technological systems that are coming out and the rise of cloud computing resources inside of the restaurant. And now it becomes an opportunity of us, how do we innovate? How do we make realtime purchasing decisions, realtime staffing changes, realtime pricing or menu changes that we may want to make that’s not only going to create a more impactful and more exciting experience for the guest, but also a better business outcome for the operator.
Gene: Do you think that AI itself, and I’m just asking for your opinion, if we can expect to see more dynamic pricing in menus going forward. I mean, the days of the manual menu, I kind of feel like they’re going to be few and far between as we get on. And I envision restaurants, if you go into a restaurant, the price that you pay for chicken fingers and fries might be different at two in the afternoon than what you’re paying at seven o’clock at night. And that’s going to be driven by not only demand, trends in traffic as well as costs, depending on what the margins are for that product.
Gene: Do you think that we’ll one day see that kind of, and just to add on that, I think about the MLB when you buy baseball tickets, I mean, depending on the team you’re buying from, they fluctuate based on attendance, based on the weather, based on who the team is. I mean, there’s algorithms that go into the pricing of tickets all the way up to the time of first pitch. And I’m wondering if you think the restaurant industry might be heading that direction as well.
Sam: Yeah, you’re absolutely right. It’s not just in sporting events, but just think about airline. Yeah, airline, yeah. We’ve been seeing this for decades. I think historically the restaurant industry has been slow to evolve into this model, but we’re seeing a lot more of dynamic pricing. I think COVID and the online delivery experiences and third party delivery platforms are going to actually accelerate the prevalency of dynamic pricing. And for the operator, I think it’s a huge opportunity for them to be able to understand not just the time of day and the factors of demand, but you also have a whole supply aspect of it.
Sam: I’ve got inventory, and as we know, especially in the restaurant industry, almost all of your inventory is perishable. So if we’re not making it, we’re going to be throwing it out. And here’s an opportunity for us to provide limited time offers and specials, promotions, contests, things like that, reward loyalty members. And you can start to think about how very basic scenario around dynamic pricing can actually be a very complex optimization opportunity.
Gene: It really can be. And it fascinates me too, because I read somewhere where QR codes are being used less in restaurants now because COVID’s over. And I think that that’s dumb. I think if I was running a restaurant, I probably wouldn’t have any manual menus because it paints me into a corner. I’d be asking my customers, my guests to pull up an electronic version of a menu that has dynamic pricing on it eventually. So that, like you said, if I have perishable goods rather than throwing them out, if I can change the pricing on something to really entice people to buy something so I can still make a few bucks off of it, that to me makes the most sense. And you can’t do that if you’re in a paper world. You know what I mean?
Sam: Yeah, absolutely. And as a technologist, of course, I completely love the idea of having fully digital, fully innovative menuing and automations. But I’ll tell you, we have a lot of restaurant operators and owners that consistently, will come back to the paper menu, as something of nostalgia and that personal touch, personal feel. And it really just becomes a question of the experience versus what the opportunity that technology can provide.
Gene: How you want to run your business. All right. I’m going to let you go in a minute. Just have a couple more questions for you. Maybe you can help me out. I’m actually working on a piece for Forbes right now. I’ve been writing a lot about AI and ChatGPT and one of the biggest Achilles heel I feel, and I’m curious to get your feedback on this, when it comes to systems like yours, particularly if they rely in future on automation, AI, is the data itself. AI is great man, and it sounds like it can do all these great wonderful things and automate and increase productivity, but if the data ain’t great, your AI is going to, it’s going to fail.
Gene: It’s going to be performing tasks and procedures and doing things based on wrong and incorrect information. And I’m curious how you feel, because if you’re dealing with smaller restaurants, you are really relying, that automation is going to relying on employees, updating for purchases, taking inventory, putting in data the right way so that you can really take fully advantage of AI. And I’m just wondering if you have any thoughts on that, if that’s a concern of yours or if you even agree with that point of view.
Sam: No, absolutely. I think that there’s a couple of things if you were to unpack it, I think the first thing is the more data points that you can get, the easier it is to reconcile.
Gene: That’s a good point.
Sam: So if you can take the technology, not have it be kind of a feature or outside of the core business, but if you’re really using that technology to power your financials, power your operations, make day-to-day business decisions, you have a less likelihood of having bad data. The second thing that I’ll mention, and we don’t need to go too technical, but I think back to the early days of AI in the seventies and the eighties, it was nowhere near as sophisticated as it is today. And so as generations continue to evolve, we’ll continue to be tuning. I’ll tell you, the first time we did our sales forecast, that was purely off of a forecast model. We got about 80% of the way there when we actually tracked it for the next two weeks. Sam: Guess what happened about three months later, we were over 98%. So it’s not a question of where you are today, it’s a question of starting to collect the data, being able to have that be part of your overall business operations and then be able to give it the feedback that it needs in order to continue improving.
Gene: That is great advice. Actually, I’m going to use that. I mean, I didn’t even consider the concept of multiple data points. To your point, if the AI gets smarter and smarter, it won’t just take one point of data at its face value, it’ll validate it against multiple points of data before it then performs an action. So maybe that will hopefully compensate for human beings putting in bad data.
Sam: And one of my operators actually says that technology, especially in restaurants, can create really big challenges because at the end of the day, the operators, if they’re focused on guest experience, they need to be making those decisions and driving them. So you may not have the AI or the systems be driving all of those decisions automatically. They’ll be providing more insights and then the operator can make the decisions that make most sense. That’s not a bad outcome, especially as we are exploring new territories.
Gene: Yeah, I like that. I like that a lot. All right, well, before I let you go, Sam, your thoughts on the outlook for the restaurant industry. I am assuming they’re somewhat bullish. I mean, you’re investing your life in a platform that’s focused on the industry itself, but pretty much optimistic as to the industry as well. And I’m wondering if you’re seeing any specific areas or trends or types of restaurants that you’re going to be focusing on that you think has potential for more growth than others?
Sam: We continue to focus in all different segments of growth for restaurants. I think as we move forward, it’s going to be the restaurants that are going to be, being able to leverage technology, implement it, and make the best business decisions to them that are going to be most successful and the ones that are going to be able to stand out and create guest experiences that are going to keep people coming back. And so if you think about where COVID took us and where a lot of the online delivery and a lot of the online age happen, it’s going to be about that relationship between the guest and the restaurant and how that bond is formed. And you’re going to keep seeing a lot of innovation happening around that, those areas and about driving that stickiness and that repeat guest visit.
Gene: I’ve been speaking with Sam Zats, he’s the co-founder and CEO of Craftable. Sam, it’s craftable.com correct?
Gene: That’s great. Thank you very much. That is very, very, very interesting information about the technology that’s really driving the restaurant businesses. I think your platform is great. I think you’ll be very successful with it, and I hope to stay in touch with you.
Sam: Absolutely. Gene, thanks so much for having us here today. Really excited to share with your audience a little bit about Craftable. Thanks so much.
Gene: Yep. I appreciate it as well, and we learned a lot. Everybody. Thank you so much for joining us. You have been watching The Hartford Small Biz Ahead Podcast. If you need any advice or tips or help in running your business, please visit us at smallbizahead.com or sba.thehartford.com. My name is Gene Marks, we will see you again soon. Take care.
Sam: Bye Bye.
Gene: Thanks so much for joining us on this week’s episode of The Hartford Small Biz Ahead Podcast. You like what you hear, please give us a shoutout on your favorite podcast platform, your ratings, reviews and your comments really help us formulate our topics and help us grow this podcast. So thank you so much. It’s been great spending time with you. We’ll see you again soon.
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