Tech Talks Business Featuring Paul Brown

It's really great to be here. Thank you so much for the invitation.

Yeah, I've been fortunate. There have been quite a few moments where, if I look back, if I had not done that, I wouldn't be where I am today. I don't want to bore everybody by going through all of them, but a few big ones are big career moves. The first is I was a partner at McKinsey in London, and I was asked to go to Expedia.com for a strategy role. That was a really big move — deciding to leave as a partner in a consulting firm and move my family from London to Seattle. While the climates are similar, it's more or less the opposite side, and especially where they were. But that led me to really get deep in the travel sector. It gave me the opportunity after a few years for my first real P&L experience, ultimately got promoted to be president of Expedia.com. It's where I really learned a lot about e-commerce and actually consumer marketing for the first time under the tutelage of Barry Diller. And I would say that if that had not happened, that's what really put me on the track of being a general manager, a line manager, a P&L manager, which ultimately led me to be able to go to Hilton as president of brand and commercial, and then ultimately to Arby's and then here. A lot of what we're doing at Inspire — the business model that we have created here — really came from the learnings and the experiences that I had at Expedia and Hilton, quite honestly.

Well, I left Hilton to become CEO of Arby's. Arby's at the time was a typical private equity play — it had been spun out from the Wendy's Arby's Group. Roark Capital actually acquired it, and so we went through the process of turning around the Arby's brand. About three or four years into it, we were trying to decide what to do with the business. One of the things we looked at is: do we take it public as a standalone restaurant brand? And I started looking around at other standalone restaurant brand CEOs, particularly of brands that size, and started listening to their earnings calls and realized that they were not having a lot of fun. They were lamenting about the challenges of actually trying to make the investments that were needed, particularly in technology. This was seven, eight years ago. I'm like, I don't know if I want to be one of them. Maybe there is a different way of doing this. I looked around and there were a lot of companies like Arby's of that size that were having the same set of struggles. And so I and the private equity team sat down and said, maybe there's a real opportunity here. Maybe there is this moment in time where you have a really large, relatively fragmented industry that is at that point where particularly technology is coming in and transforming virtually everything around how customers interface with restaurants, and then ultimately what that enables from a business model transformation. Maybe there's an opportunity to play a role in organizing and consolidating this industry, and bringing together these great brands and products that have decades of great history but are going to have a struggle to be competitive moving forward. That's the moment we said maybe there is this opportunity, and then we sat and waited. It's one thing to say we're going to do some acquisitions, but that doesn't mean they're out there to do. Along came activists who were actually involved in the industry quite a bit and poking around at various companies, and Buffalo Wild Wings became an opportunity. That was our first acquisition, and that's when we created Inspire — changed the name of the company to Inspire and embarked upon this journey.

Well, that's one of the things that technology — basically the industry becoming fundamentally more digital — might enable. The number one thing that I actually took from the way the hotel industry is organized is how the brands are tightly integrated around a set of shared capabilities. They are distinct brands in the eyes of the customers in many ways, but behind the scenes they're actually sharing virtually everything. So how we're organized in a tightly matrixed structure and really building a platform underpinning these consumer brands is the biggest learning. But you just described one example around how this industry has gone from being, for lack of a better word, entirely analog. If you go back 15 years in the restaurant industry, your relationship with the customer started when they came on the property, and the second they left you had no idea who they were. There was only one way to price to them — whatever the menu board or the menu card said. You couldn't do any customization. Now you step forward 15 years later, and so much of the interaction is actually digital — loyalty programs, all those things that have come into the restaurant industry that look a lot like the hotel sector, airline sector. What that enables is a more personalized approach to discounting. If you join an app, you're getting increasingly personalized offers, which is really impactful financially in a company and in an industry which has tremendously high operating leverage. But that's just one example. Everything associated with marketing is fundamentally changed. You go back 10, 15 years ago, the only way to market in this industry was fundamentally mass marketing — you sent a message out through mass channels like television or newspapers and you hoped that it would reach the right person at the right time and that they'd take action on it. You couldn't measure whether they did or didn't because you didn't know who they were. So it was very analog, very traditional, and very expensive. Now it's fundamentally different. TV is still a big part of it, but most of the marketing and demand generation is spent in more direct and digital channels. The increased efficiency of that, combined with the ability to target offers and be more precise and make sure the right message is hitting the right person at the right time, is a fundamental transformation in an industry that is incredibly advertising-sensitive. You can tell I get quite excited about it because it is an industry where this transformation is still just occurring, but in most cases fundamentally positive to the business model.

Well, it didn't start out entirely opportunistic. We did start out thinking about if we were going to put a portfolio of brands together, what type of brands make sense as part of that portfolio — both from the types of experiences to the customer, but also the type of capabilities they bring to the organization. We wanted them to be distinct, as different as possible, bringing in different day parts, different occasions. That's important because it gives us a view of the customer across a broad range of experiences, but also in a franchise business it's a lot easier to get existing franchisees excited about us when we buy a brand that they don't see as a competitor. It also makes it a lot easier in a franchise environment when you're bringing these brands together. So we've been able to be very thoughtful around what we want. Now that's great — you can have that on a piece of paper, but that doesn't mean they're going to be available for acquisition. So it is this intersection point. But in M&A, if you're a CEO, the worst thing you can do is a bad deal — bring something into the portfolio that doesn't fit, either from a capability standpoint, a business model standpoint, or obviously a brand portfolio standpoint. We have looked at many, many more things than we've actually taken action on, and I feel really good today of the portfolio that we've been able to put together in a short order — again, the combination of what we would like to have versus what happens to be available.

I think that's the biggest trick in M&A — how do you keep all the good things that come with the businesses that you're buying, particularly when you're buying brands that have been around for 50, 75 years and franchise businesses where the franchisees joined that brand and many of those franchisees have been part of that brand for sometimes generations. So how do you not dilute that, yet also build the value off of the platform? There's a lot of cultural things that go into that as well. We try to be very thoughtful around what remains brand-specific, both organizationally as well as from a decision standpoint — what are things that we don't change and we respect the integrity of — and then what are things that we can actually utilize on the platform side. And then culturally, how do we create a culture at the Inspire level that is additive to the cultures that come along with us from a brand level, and respectful of the values and the purpose and the belief systems that come along. It is a balancing act, and I think it's the first thing we really started thinking about when we actually acquired Buffalo Wild Wings — really what is going to be the belief system, the value system of Inspire, and how does that relate to the value system that came along with Buffalo Wild Wings. We've really tried to keep that part of the process consistent as we've gone through.

Well, what's interesting about Ben is it's quite authentic because he has been a customer and a lover of Dunkin' for a long time. Ben has come apparently for many years to Dunkin' wanting to do some things with them. But it is tricky, right? Because once you attach the brand to a celebrity, you've got to do it in a very careful way for a lot of reasons, particularly one that is already so related to the brand. But the story there — I guess you're referring to the Super Bowl ads — is that Ben and Matt Damon actually created an agency a little over a year ago to actually go and do production. So they came to us — Ben came to us — wanting Dunkin' to be the first customer. He brought a lot of great ideas. My team has done an amazing job executing on those, around how he could bring his persona to Dunkin'. And J.Lo helped a little bit too — he's converted her to a Dunkin' customer. She used to be a big customer of the other brand, and she has converted lots of people here. But now she's a Dunkin' customer.

Well, the restaurant industry, particularly QSR, is very much a top-of-mind type of business. You just have to always stay on the top of mind of customers, and the way you do that is generally having new news to talk about and having interesting ways of talking about that new news. So new products really create that opportunity. Now the trick is to not have just disparate sets of new products out there. The trick is how do you have the products — whether they be limited-time products or permanent products that you're introducing — layer up to the overarching theme and value proposition of the brands themselves, and actually every time you talk about a new product, does it actually reinforce the overarching story you're really trying to tell and the value proposition you're trying to tell? So there's a lot of strategy that goes into that before you even get into the culinary process. It is a very long cycle to really do it right. But we launch as a company hundreds of new products a year across the various brands — some big launches, some small launches. But it's that new product and innovation that really keeps it going. One reason Dunkin' has been doing so well over the past several years since we acquired them is some of the new products that we've launched, particularly on the beverage side, which has allowed us to keep new news going but also tell a more interesting story about the brand, creating even more interest in customers that weren't necessarily Dunkin' customers even three years ago.

Well, yeah — two-thirds of Baskin-Robbins is outside the US, so it's a primarily non-US-based brand. And a lot of its business outside the US is actually not in the stores themselves but actually in grocery, so it's a very different brand outside the US in many ways.

We've been utilizing AI obviously behind the scenes significantly. A lot of what we're doing from a personalization of offers, being much more intelligent around dynamically scheduling labor based upon forecast — that is a really big driver of value. And again, the more digital the industry becomes, the more powerful as a tool that becomes. From a generative AI perspective, I think we're still at early stages. Where we're seeing some real opportunities is in the productivity of our frontline team members. If you think about this industry, it is a very labor-intensive, relatively high-turnover industry. If you look at us plus our franchisees, we are hiring over a million people a year. So you think about bringing a million people a year into the organization, bringing them up to speed with productivity tools, making sure they have ready access to the information they need, and helping bring them up to productivity — that's a real opportunity, and we're just at the early stages on that side.

Well, I think it's been really transformative in how we're running the company. I'll go back to 2022 — it was a really interesting year for us. We were about a year and a half into the Dunkin' integration, and if you think about it, we had brought four companies together in very short order. When every company came in, it came in with stuff that it was already doing, and then we generally would add integration activities to that and try to prioritize, but all the complexity layered upon itself and it really came to a head in 2022. We realized we just had to think fundamentally differently around how we are prioritizing the business. And you put on top of that that we're a highly matrixed organization — every part of the organization is depending upon another part of the organization to do something to allow them to do what they need to do, so the interdependencies are key. We decided to fully adopt the OKR process for the entire company, from me all the way down. It's not just one part of the organization — a lot of times technology companies do this a lot, but not a lot of non-tech companies use this way of managing the entire business end to end. We rolled this out in 2023, and we've been successful in that everyone in the company above the restaurant can at any point in time see every single OKR in the organization, from me on down, and see what they're doing and how what they're doing is relating to everyone else. It's really forced this great prioritization. I just spent three days already this week doing the retrospective on Q1, and it really brings a real organizing factor. I'm a disciple. I was skeptical to be honest at the beginning, but I have become an absolute disciple of how OKRs can really transform a complex, multi-business-unit, highly matrixed global organization like ours. And I think the biggest beneficiaries are really our technology teams, because they were the ones that were getting thrashed if the business is not prioritizing very well. That's really gone a long way to us being clear on what's important, how it's prioritized, and then ultimately what we turn in.

Yeah, it is today, right now, for a lot of reasons, a more difficult environment to get deals done — as evidenced by the fact there's not a lot getting done. And it's not just equity valuations, but obviously the debt markets are much more expensive and harder to access as well. So there is a moment in time to whether it is the right environment for a deal to get done, and for a lot of reasons, this is a bit of a tougher environment at this moment in time. Things can change, but at this moment in time, equity valuation being one of those factors.

I mean, you know, our strategy is to bring brands in and tightly integrate them. So you're not going to see us — particularly the brands that we've done that with — see this as an opportunistic hold and then sell, spin one out at the right time. We believe that we put these brands together for a reason, and we integrated them in such a way that they're not really designed to be spun out. That's why while we're backed by private equity, I wouldn't call us a private equity portfolio play. That is more what a private equity firm would do with individual companies.

Well, the answers to the two questions are actually kind of tied together. Loyalty programs are still relatively new to the restaurant industry. I mean, obviously they've been out there for a while, but if you compare it to other industries, particularly hotels and airlines, we're still in early days. But they are incredibly important, particularly for high-frequency brands — coffee is a really good example of that. The loyalty program plays a really critical role. And given the fact that our customer base is so broad — across our portfolio, 75% of every man, woman, and child in this country eats in one of our restaurants every year — that's a very, very broad cross-section. So the ability to actually be as targeted as possible, not only the offers but how you talk to them and how you engage with them, the loyalty program plays an absolutely critical role in that. You can see that our brands that have higher penetration of loyalty generally perform better than those that don't. But it's not a one-size-fits-all, and I think it's harder to think about designing loyalty programs in this industry than it is for example in hotels, because you have fewer levers to work with when it comes to tailoring the experience. Generally you have thinner economics to work with, and it's also harder to do on a portfolio play. On the first-party side, a lot of that comes with what is the advantage of working directly, coming directly through us. Some of that's a pricing advantage — in all cases, the landed price of going to the direct channel in the restaurant industry, not just for us but our competitors, is lower than it is if you go through a third party. That's a dynamic that's different in the restaurant industry than it is in a lot of other industries. So there's that advantage, but we also have to make sure that the functionality is on par as well. That's where the third-party delivery companies still kind of have a bit of an advantage — a bit more seamless experience, both on the digital platform itself as well as the delivery side. So we continue to focus on that.

I do think it's really important to be out and about. Quite honestly, that gets a little harder the bigger and more complex the organization gets. I'll be honest, I spend more time not in my office but basically in the office than I certainly did when I was CEO of Arby's. That's something I think you have to watch out for. But there's nothing that substitutes for actually getting out, walking around the floors, having those hallway conversations, those elevator conversations. It's amazing how much can get done in a three-minute elevator conversation versus setting up an organized Zoom call. That impromptu interaction is really important. But again, I also have to respect the fact that I have a lot of leaders, and you don't want to be jumping around them and getting in the way of them being a leader of their organization. So it is kind of this balancing act, and one that I'm still, quite honestly, learning and getting used to as I become more the CEO of a portfolio of brands than the CEO of one brand.

Yeah, one, I'm a big believer in consulting as a career path. I've learned so much from both of those firms, and so therefore I'm also thoughtful around when we bring them in. We do use consultants sometimes quite significantly. I think where they're very valuable is if you have some real heavy lifting that is not really part of the day-to-day — integration of businesses is a great example, probably the classic example. You may have a lot of really great people, but it's not necessarily their skill set, and you don't also have that resource level just sitting around ready to put in that surge capacity to do something as difficult and under the gun as an integration. I also find that they're very helpful when you really want to step way back and just take the lens way out. You can get pretty close to the business when you're in the business, which you should, and there's a lot of good that comes with that. But sometimes myopia can kind of creep in every now and then. When it's time to step back and say, is it time to rethink the positioning of Brand X a little bit, or have we missed something as we started really focusing on the execution of a strategy and the world may have moved a little bit — I think it's really great to have them come in and help you zoom out. And then if it's actually getting into a new area of capabilities, bringing in some specialists and having them sit side by side with your best and brightest in the company is a really good way of bringing them up to speed on something or helping them learn a new way of doing things. Coming in and just being arms and legs, or augmentation staff if you will, is something where companies should be careful about falling into that, because value for money is probably a little less there, and ultimately that's what you probably should be insourcing versus outsourcing.

Yes. The experience that we're working on with the drive-thru, too, is that if you order ahead at a Dunkin', for example, and you're pulling onto the property, we can tell whether you're turning toward the front door or whether you're going into the drive-thru. If you're turning toward the front door, then the order will actually fire in the right place, knowing that you're going to come in and pick up. And if you turn toward the drive-thru, it'll know that you're doing that, and also where you happen to be in the flow, and then ultimately know that you're the one pulling up in front of the menu board at the time, and it will change to a different experience. That is a real use case that we're actually working on scaling up. It has a lot of great efficiencies for the restaurant but also great experiences. Same thing — you can apply that inside a Buffalo Wild Wings, depending upon where people happen to be, if you're actually trying to work to where people can seamlessly transition from interfacing with a physical server to saying now I actually want to start interfacing digitally even within the same experience, and now know where you are. There are a lot of really great use cases for that. I think we're very, very early days in trying to scale that up, but it's definitely a big part of the plan.

Well, that's one of the reasons, when I gave the example of where we're using generative AI, it's really more on an employee team-facing side. You run into less of those issues, and certainly the legal risk — it's not the reason to do it, but the legal space around this is still early days. We've talked to a lot of other companies that are similar to ours, not just in our space but others, and people are settling a bit down on: work first and work on productivity tools for your team members. Do team-member-facing implementations of it. When you start getting into the consumer side, particularly of generative AI — not saying don't — but it becomes a little bit: do you need to rush there versus we still have a lot of opportunities to actually generate a tremendous amount of value for our customers as well as us internally using other methods. It's something we do think about, and I think you're right — be thoughtful around how far out there do we need to be, at least in implementation. It doesn't mean we're not continuing to actually work and think and try things in the right way, but broad implementations of that — we have a lot of upside in a lot of areas before we need to actually go there, particularly consumer-facing.

Yeah, I think that best is the right attitude and cultural fit. People talk about skill-will — you can say different things — and so obviously you have to be at a certain level of skill. But I love people that just really want to be part of something, really want to actually go that extra mile, the 'put me in coach' kind of thing, or constantly saying 'how can I help that other person.' Because again, we're a matrixed organization — I've said that several times — that means nobody can really get anything significant done without other people's help. Which means therefore you need people that actually want to work with other people and know that it's a team-type of environment and really want to pitch in and really want to help. I think that's what we try to hire to. I also like looking for people that have had some failures in their career and actually picked themselves up and figured it out and moved on. Again, I think that's a bit of a will thing, too. You can't overcome not having the appropriate skill, but as long as you can get to a certain level of skill, you can kind of train for capabilities. I think it's really hard to take somebody who doesn't have the right kind of will and get them there. I think it's really something that comes with that individual.