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, 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: leaving a partnership, moving my family from London to Seattle. That led me to get deep in the travel sector, gave me the opportunity for my first real P&L experience, ultimately got promoted to president of Expedia.com. I learned a lot about e-commerce and consumer marketing under Barry Diller. That put me on the track of being a general manager, a P&L manager, which led me to Hilton as president of Brand and Commercial, then to Arby's, and then here. A lot of what we're doing at Inspire, the business model we created, came from the learnings and experiences at Expedia and Hilton.

Well, I left Hilton to become CEO of Arby's. Arby's was a typical private equity play, spun out from Wendy's/Arby's group, acquired by Roark Capital. We turned around the brand. About three or four years in, we were deciding what to do with the business: take it public as a standalone brand? I listened to earnings calls of other standalone restaurant brand CEOs and realized they weren't having fun, struggling to make investments especially in technology. I thought maybe there's a different way. I looked at many companies Arby's size with the same struggles. My private equity team and I said maybe there's an opportunity: a large, fragmented industry being transformed by technology, especially how customers interface with restaurants. We could play a role in organizing and consolidating, bringing together great brands with decades of history that might struggle to be competitive. That was the moment. Then we waited. Activists were poking around, and Buffalo Wild Wings became our first acquisition. We created Inspire, changed the name, and embarked on this journey.

The number one thing I took from the hotel industry is how brands share and are tightly integrated around shared capabilities. They are distinct to customers, but behind the scenes they share virtually everything. We are organized in a tightly matrixed structure, building a platform underpinning consumer brands. That's the biggest learning. The industry has gone from entirely analog: 15 years ago, the relationship with the customer started when they came on property and ended when they left. There was one price from the menu board. Now, much of the interaction is digital, with loyalty programs. That enables personalized discounting through apps, which is impactful in an industry with high operating leverage. Marketing has fundamentally changed. 15 years ago, it was only mass marketing through TV or newspapers, unmeasurable. Now, most spending is in direct and digital channels with precise targeting. It's a transformation in an advertising-sensitive industry.

It wasn't entirely opportunistic. We started out thinking about what types of brands would make sense in a portfolio: from customer experiences to the capabilities they bring. We wanted them distinct, with different day parts and occasions, to give us view across a broad range of experiences. In a franchise business, it's easier to excite existing franchisees when we buy a brand they don't see as a competitor. So we were thoughtful about what we wanted. But having that on paper doesn't mean they're available for acquisition. It's an intersection. In M&A, the worst thing you can do is a bad deal that doesn't fit. We've looked at many more things than we've taken action on. I feel good about the portfolio we've put together in short order.

The biggest trick in M&A is keeping all the good things from the businesses you buy, especially brands that have been around for 50-75 years and franchise businesses where franchisees have been part of the brand for generations. How do you not dilute that yet build value off the platform? We try to be thoughtful about what remains brand specific organizationally and from decision rights. We respect the integrity of those things, and then utilize what we can on the platform side. Culturally, we create a culture at Inspire that is additive to the brand cultures, respectful of their values and purpose. It's a balancing act. That was the first thing we thought about when we acquired Buffalo Wild Wings: the belief and value system of Inspire, and how it relates to the one that came along.

Ben's involvement is quite authentic because he has been a customer and lover of Dunkin' for a long time. For many years, he came to Dunkin' wanting to do things with us. It's tricky because once you attach a brand to a celebrity, you have to be careful for many reasons, especially one already so related to the brand. But the story, and you're likely referring to the Super Bowl ads, is that Ben and Matt Damon created an agency a year ago for production. They came to us wanting Dunkin' to be the first customer. Ben brought great ideas, my team executed well on how he could bring his persona to Dunkin'. JLo helped too; he converted her to a Dunkin' customer. She used to be a big customer of the other brand and has converted many.

QSR is a top-of-mind business. You have to stay on top of consumers' minds, generally by having news to talk about. New products create that opportunity. The trick is not to have disparate sets of products; they must ladder up to the overarching theme and value proposition of the brand. Every new product should reinforce the story you're telling. There's a lot of strategy before the culinary process. It's a long cycle to do it right. We launch hundreds of new products a year across brands, some big launches, some small. Innovation keeps it going. Dunkin' has done well since we acquired them partly due to new products, especially on the beverage side, which created interest in customers who weren't Dunkin' customers three years ago.

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

We've been utilizing AI behind the scenes significantly. A lot of what we do involves personalization of offers and intelligent labor scheduling based on forecasts. That is a big driver of value. As the industry becomes more digital, that becomes more powerful. On generative AI, we're still early. We see opportunities in productivity for our front-line team members. This industry is labor-intensive with high turnover. We and our franchisees hire over a million people a year. Bringing them up to speed with productivity tools and giving them access to information they need is a real opportunity. We're just at the early stages.

It has been transformative for how we run the company. In 2022, we were about a year and a half into the Dunkin' integration, having brought four companies together in short order. Each came with its own activities, and we layered integration on top. Complexity came to a head in 2022. We realized we had to fundamentally rethink how we prioritize. We are highly matrixed, so every part depends on another. We adopted OKRs for the entire company from me down. Not many non-tech companies use this way of managing the whole business. We rolled it out in 2023. Everyone above the restaurant can see every OKR in the organization, see what people are doing and how it relates. It has forced great prioritization. I just spent three days doing a Q1 retrospective with the team. It brings a real organizing factor. I was skeptical at first, but I've become a disciple of how OKRs can transform a complex, multi-business, matrixed global organization. The biggest beneficiaries are our technology teams, because if the business doesn't prioritize well, it thrashes them. This has helped us be clear on what's important and what to deliver.

It is a more difficult environment to get deals done today, as evidenced by few getting done. Not just equity valuations but debt markets are more expensive and harder to access. So it's a tougher environment at this moment. Things can change, but for now it's more challenging.

Loyalty programs are still relatively new to the restaurant industry compared to hotels and airlines. They are incredibly important for high-frequency brands like coffee. Dunkin' is a good example. Our customer base is very broad: 75% of every man, woman, and child in the U.S. eats in one of our restaurants every year. Loyalty programs allow us to be targeted with offers and communication. Brands with higher loyalty penetration generally perform better. But it's harder to design loyalty programs in this industry than hotels because you have fewer levers and thinner economics. On first-party sales, the advantage of coming directly through us is pricing: the landed price of the direct channel is lower than through third parties. We also need to ensure functionality is on par with third parties, which still have an advantage in seamless experience and delivery. We continue to focus on that.

It's really important to be out and about, though it gets harder as the organization grows. I spend more time not in my office than I did when I was CEO of Arby's. There's no substitute for walking around the floors, having hallway and elevator conversations. So much can get done in a three-minute elevator conversation versus an organized Zoom. Impromptu interaction is important. But I also need to respect that I have many leaders; I don't want to jump around them and get in the way of their leadership. It's a balancing act I'm still learning, as CEO of a portfolio rather than a single brand.

I'm a big believer in consulting as a career path. I've learned so much from both firms. We do use consultants, sometimes significantly. They are valuable when there is heavy lifting that's not part of daily operations, like integration of businesses. That's the classic example: your people may not have that skill set, and you need surge capacity. They are also helpful when you need to zoom out and take a broad lens. When you're in the business, myopia can creep in. They can help rethink positioning or see if the world has moved. Also for getting into new areas: bringing specialists alongside your best people helps bring them up to speed. Just using them as arms and legs for filling in, that's something I think companies should be careful about; value for money is less there, and you should insource that.

The experience we're working on with the drive-thru is that if you order ahead at Dunkin', and you're pulling onto the property, we can tell if you're turning toward the front door or the drive-thru. If you go to the front door, the order fires there; if you go to the drive-thru, it knows where you are in the flow, and when you pull up to the menu board, the experience changes. That's a use case we're scaling up. It has great efficiencies for the restaurant and great experience. Same thing inside a Buffalo Wild Wings: you can seamlessly transition from a physical server to digital interface, with the system knowing where you are. We're in early days but it's a big part of the plan.

That's one reason I gave the example of using generative AI on the employee side rather than consumer facing. You run into fewer issues, and the legal space is still early. We've talked to many companies, and people are settling on work-first productivity tools for team members. On the consumer side, do you need to rush? We still have many opportunities to generate value using other methods. I think you should be thoughtful about how far out to go in implementation. That doesn't mean we aren't continuing to work and experiment in the right way, but broad implementations, especially consumer facing, have a lot of upside in other areas before we need to go there.

The best is the right attitude and cultural fit. There's the skill and will. You have to have a certain level of skill, but I love people who really want to be part of something, go the extra mile, have the 'put me in, coach' mentality, constantly asking how they can help others, because we're a matrixed organization. Nobody can get anything significant done without other people's help. So you need people who want to work with others and know it's a team environment. We also like people who have had failures in their career, learned from them, and moved on. That's a will thing. You can train for skills if someone has the right will, but it's hard to get someone who lacks the right will to develop it.