How Wonder CEO Marc Lore Is Reinventing Food Delivery | WSJ

Oh, great to be here.

Yeah, I mean I just watching habits of consumers changing. People were cooking less. At home dining has exploded in the last 10 years and just felt like there was, you know, a way to make the experience better by owning, you know, both the restaurants and the delivery and being able to cook the food and stitch it together and get your food hotter, faster, at better quality. That was sort of the original thinking. But I think with the last couple years with AI and robotics, we're thinking much bigger to just completely reimagine what it even means to be a restaurant.

Yeah. So it's basically a brick and mortar with a fast casual looking front of house, maybe 10 to 20 seats. In the back we have what we call programmable cooking platform. It has now 25 different restaurants. Cook to order. Some people think you're reheating it or things like that. We're actually cooking to order. 25 different restaurants across every cuisine type. Everything from a high-end Bobby Flay steak to Jose Andres to burgers, barbecue, Chinese, Thai, Middle Eastern, Mexican pizza, fried chicken, all in the same kitchen with no open flames or gas. It's all electric-based platform. And it's becoming increasingly more robotic. So, we've got conveyors. We've got a robotic arm at Expo. We just bought Spice Robotics, which is an automatic bowl making machine.

So, at peak, we get up to about 12 people. At nighttime, late night, we could operate all 25 restaurants with three people.

I don't think so. I think, you know, we can keep 12 people and go from we have about 7 million throughput capacity with 12 people. We see a path to getting to 20 million throughput out of 2,500 square feet with just 12 people. So, just getting more out of the same people. The goal also is in the next I guess by 2035 to have 1,000 unique restaurants operating out of the 2,500 square feet.

Think about what the cloud did to software, right? We're decoupling the hardware from the software inside of a restaurant. So, we're decoupling the kitchen from the restaurant. And so, the kitchen, this programmable cooking platform has all the equipment. It has a 700 ingredient library. Think 150 proteins, all the produce, grains, it's got everything that's fixed. Anytime we create a restaurant, a restaurant is only recipes and a brand. So, restaurants are like software. And because it's recipes in a brand, you could build a restaurant and plug it into all the programmable cooking platforms instantaneously. So today we have 120. Next year we'll have 400 of these programmable cooking platforms. So you can imagine you create a restaurant next year and it's in 400 locations instantaneously. Then we thought since we're building restaurants and building them out, what about giving others the ability to build their own restaurants using the platform? And so at the end of the year, we're launching Wonder Create. Think about like a Shopify front end with an AI prompt. You type what kind of restaurant you want to build. It builds the restaurant AI does in under a minute. It does the name, branding, description, pictures, pricing, health information, and all the recipes for your restaurant. And then you can decide to say yes, I like it. Or you could ask AI to make changes. You like the restaurant, your restaurant is now live to 20 million people and all you have to do is pay us 10 bucks a month to get started.

I mean because anyone who builds a restaurant is driving demand to Wonder. Anybody that has the ability to drive demand. It could be a mega influencer, a micro influencer, anyone that wants to monetize their following or it could be a private trainer that wants to make specific bowls. It could be a not for profit. It could be Disney for their new movie. Anybody can make a restaurant, but I think the big one is college students and high school students.

Well, she learned the hard way. She started with a brownie store and she realized she had to cook the brownies. That was out. And then she said, 'You know, Dad, I learned a really good lesson.' So she said, 'How about stickers? They're really easy. They go in an envelope.' It was great, right? So she's not going to learn that lesson with Wonder, but she would be able to spin up a restaurant from her for her grandmother who eats Sweetgreen every day for lunch and can literally spin up a Sierra Salads with a perfectly made bowl with great premium ingredients at a lower price point with a great delivery experience and tell her grandma, order Sierra Salads. And then grandma switches, Sierra makes 10% on every bowl and then maybe she gets her mom and dad and sister. So, don't think of it only as like these mega influencers. I think just people will build restaurants for their own families.

We're building the infinite sauce machine now, which I'm really excited about, which goes live in the beginning of next year, which could make from 30 raw ingredients, could make about 80% of all sauce recipes on the internet.

You want that because we could have a near infinite number of dressings and sauces. So, if you're a creator and you're building your salad concept, you could have your very specific dressing recipe. It's all made on demand. The sauce machine can make 500 sauces an hour in three and six ounce cups and route them to the right place. So, it's everything from pesto to harissa to mole to curry. Any sauce is sort of made on demand with high-speed blending and perfect dispensing.

There's a lot of stuff we can't do, but we're not focused on that. So, you know, we're not like shaving the shawarma off the thing of meat there. We're not able to do things like that. Stretching the dough for pizza is tough. Japanese is obviously super tough. But the vast majority of stuff like burger places, fried chicken, wings, any bowl concept. Those are all, you know, straight down the middle of the fairway.

I mean, I think on the strategic asset front, like Grubhub was very strategic because it brought with it 250 million deliveries a year and so it was like overnight having a delivery network with 250,000 couriers. They have relationships with 400,000 restaurants to add as a marketplace on Wonder. So that was strategic. Blue Apron to get into the meal kit business, which is food for now, food for later. It complements it really well. But the acquisitions going forward are going to focus on buying brands. So Blue Ribbon Fried Chicken is the first. But we're able to buy we bought Blue Ribbon Fried Chicken. It's three million in revenue. We paid six and a half million bucks for it. Next year that brand will do 100 million in 400 Wonder locations. So just being able to arbitrage. Buy a brand that's a great brand and then blow it up. And the brands will get bigger and bigger over time. In three years we'll have a thousand locations. And so when you buy a brand and you can buy a brand that has 10 locations or even 50 locations and then overnight put it in a thousand, there's just an incredible arbitrage there.

It's really about marketing because it has to work with the ingredient library and the platform we have. So we look at it and a lot of restaurants work. We can plug them in today. And then we say, okay, we know it works on the platform. How much do we have to pay for the brand and what's the brand equity value? Because that's all we're really buying is the brand equity value. It's like if it was a salad concept, you know, of a name brand and compare that to Sierra Salads, how much better would it do in the locations? That's the incremental revenue. What's the incremental profit? What's it worth to us? And then can we get it for a price much cheaper than that? So there's a nice arb there. That's how we think about it.

It's doing great. We started open our first location three years ago. We have 120 of these programmable cooking platforms. We'll have close to 400 at the end of next year. So, we're adding about two a week. We grew 160% year-over-year. Same store sales grew 23% in Q1. I mean, everything's moving up and to the right. The food quality continues to get better as we scale, which is really important. And yeah, now it's really about adding automation, more automation to the back of house to get better consistency, higher throughput, better quality food, and then to open up the aperture so that Wonder creators at the end of this year can start building their own restaurants on the Wonder platform.

I mean, we're going to be ready to go public in March. So, in 10 months from now and then, you know, we'll see how the markets are, but yeah, we'll be ready to go in 10 months.

This may be counterintuitive because not a typical restaurant, but Wonder works best in less densely populated areas. So, the less people, the less fast casual restaurants there are. And then when we come into the town and we're offering a fast casual burger and fast casual Mexican and salad and we can deliver a steak and we can deliver Indian and we can deliver all these things that maybe aren't available, we do really really well. And same thing with late night. So in many locations now in the suburbs, we're open till 2 a.m. and 5:00 a.m. in the city. And so at 4:59 in the city, you can order a steak, branzino, a salad. I mean, you can order from 25 different restaurants. That assortment is not available at that time of day. That's why we like it.

People listen this is not going to believe this. The bestselling item in the suburbs just before 2 a.m. is a steak.

And it turns out I know I was like I got...

It's $36 for a 10 oz filet. It's a great great value. It really is tremendous value. But I found out I mean I didn't know this but there are a lot more people than I thought that are working late shifts like in the hospital whatever where they're eating dinner at 1:00 in the morning and yeah that's what we're catering to. Our mission at Wonder is to make great food more accessible. So bringing it to geographic areas where they don't have access, bringing it to late night where the only thing open is fast food and then bringing the price point down. We launched two restaurants, Pop Salad and LDAZ, a salad and a fast Mexican that's 20 to 30% cheaper than what you have in market for the same quality and portion size. You know, based on basically taking the labor savings from the automation and putting it back into price. So all of that is to say we're really focused on accessibility and trying to have great food more accessible to more people at lower price points.

I mean, we're not seeing it. It's hard because we're just growing. So, I don't know if we should have grown, you know, same store sales 27% and we only grew 23. It's hard to know. But feeling good, you know, about the momentum now.

Some people are just sick. Not me. Me, some people, other people. I find it fun. I think it's so fun to like I always wanted to be a farmer when I was little because they grow stuff from nothing. And there's something fun about just building something from nothing. And when you have a mission, you really believe in like making great food more accessible. And that plus the big vision of like what it could mean, you know, and how we can elevate access to great food and nutrition in America like things like that are really fun to do and to maybe make a little impact, positive impact on the world. Otherwise I don't know what I'd be doing, you know, if I wasn't doing this.

Yeah, I mean there's values that are the same and then there's like a framework on the values side. Trust, transparency, and fairness have been the three core values of the previous companies. And I find values. Some people conflate values from behaviors you want in the people you hire. That's separate. But values are like what are the values that the company is living in a way that no other company does. And I do think we're the most trusting, most transparent, most fair company anywhere. And we lean into those values. We make our compensation transparent to everyone. We have a fairness committee. Like we do a lot of things as a company because I do believe if a company if employees come into the company and they feel trusted, they feel like the company's giving them all the information and being really transparent and the company's fair, they feel good about, you know, bringing their best self to work, that's really empowering and I find that that culture works really well. So that's been consistent. And then on the business framework side, we have a framework called VCP, vision, capital, people. And every week we as a leadership team we meet in this room on the whiteboards you have all the components of VCP. Vision under the V, vision, strategy, org structure, all the metrics that drive the structure and then on the P you have mission, values, behaviors, compensation system, performance management system and we're constantly sitting every day and sort of working through the nuances of it because I do believe when everyone in the company leadership down understands the nuances of the vision and the strategy and most companies say yeah people know it but they don't really know it. Every word matters. If you say very something what do you mean by very? Everyone has their different definition of very or most. So you go through and we actually break down the nuances of the words because when everyone is aligned on the vision and strategy and you have the right organizational structure that's tied to the strategy where people have the least amount of dependencies to own their part of the strategy which is how we build the org structure and then you have a great culture where you recruit retain and get the best out of the best people and you get them in the right structure and everyone knows the vision and strategy my job is done and I'm on the C part raising capital which is what I do most of the time now.

See I'm still doing that we're doing you know some crossover now and it's always something going on. But yeah.

I'm a big optimist, so no, I don't. I think there'll be definitely in the short term like the immediate sort of the jobs that can be replaced with AI but just as quickly we'll be using AI as a tool to create new jobs and I think the number of new jobs created will outpace the ones that we're losing. So I'm more of an optimist. I think that you know this is we're going to look back in history upon this point in time and there'll be an inflection point in the EQ of humanity. I think it's raising humanity's EQ. The number of people that are asking, you know, ChatGPT or Claude for advice on things and getting smarter. It's democratizing access to information, people maybe that don't speak the language. They live in an apartment with no voice and they're having some issue with the landlord and they sort of just have to take it. Now suddenly it's like, you know, write a letter to the condo board, boom, boom, boom, boom, boom, boom, boom, and like, oh, sorry. And next thing you know, somebody's there to fix the pipes, right? Like that access to intelligence and democratizing is so powerful and uplifting and I think therapy when people start really using it because a lot of people can't afford therapy, right? But to be able to talk say, 'I'm having this issue in my marriage, in my relationship, with my kids. How do I deal with it?' And you sort of view it as being this sort of fair arbiter. That's amazing. In your pocket, you have this fair arbiter on what's right and wrong. Even if you disagree, it's much better than your best friend, you know, or somebody else, right? So, I'm super pumped about the future, an AI future.

I mean we are definitely using it to lower prices for sure and just that is part of our flywheel is lower prices means more repeat behavior, more repeat behavior is more sales, you get more leverage on your fixed, the more leverage margins get even better, you can put more in price. It's the strategy. You know Walmart subscribes to the same philosophy if you're able to save money give it back to the customers so they can live better. Costco, you know, the clubs do the same they sort of cap their margins it's a similar kind of philosophy. One of the things I love about food, you asked in the beginning, is the margins are much higher in food when you do it right than in e-commerce because in e-commerce you're selling commodity goods and it's a race to the bottom. Whereas if you own a brand and you cook food and deliver it, you look at the chains that are working, whether it be like a Chipotle or a Cava, they have really good margins relative to e-commerce, right? So, if you're willing to do the work and deliver high quality food, there's nice margin there. And if you're able to automate it and take out, you know, 20 to 25 points of labor and put that back in a price, even better.

Let's go Walmart.

Still no, you know I read a book once I think it was Good to Great where they said you know you don't know how good a leader was until after they leave so...

Who were you referring to here at Walmart?

No I was making a joke that I've left and it's doing well.

But no I mean that was a great experience being there. I learned a ton from Doug and Walmart, they're incredible operators and I just have a very different mentality than I have as an entrepreneur. And I think, you know, I like to think we lent some entrepreneurship thinking into the company, but I took just as much back just on how to be an operator, how to operate at scale. I did 16 quarterly earnings calls. So like now as a public company CEO, I'm prepared. I've done this sort of, you know, give a speech in front of 14,000 people in an arena where the first time I did it, I went out on stage, my legs went numb from the waist down. I didn't know how I was standing. All I kept thinking is how am I standing? I'm standing. I can't feel my legs. I literally couldn't feel anything. I just went paralyzed from the waist. This was a Walmart show. It was the first one. And I get out there and it's an arena, like a stadium, and there's 14,000 people. And I've never like talked to more than like this many people. And it's something about like the thing around the stadium and I just froze, you know, everything went numb and with each meeting I got a little less numb and by the end I was able I was like, 'Oh wow, I can now feel my legs.' But yeah.

Yeah, I mean I think if you play out to 2040, we've got 10,000 locations across the US, reaching 92% of the population. We own, you know, many of the great restaurant brands that we're able to make accessible to people that today don't have access both in geography at time of day. We've brought the price point down, you know, maybe 20% below where prices are today on average. We're able to deliver your food hot on time, under 20 minutes via drone, where you have more than a thousand restaurants available at any one location. So, if you're in some exurban area that's somewhat rural, we have no fast casual today. And everything closes at 7 o'clock except for McDonald's and Taco Bell, you're going to have a thousand restaurants open at 2 a.m. with sub 20-minute drone delivery. You know, plus or minus a few minutes likely on the time we tell you. So, that's where I think we're heading. And that is not as crazy as maybe it sounds. Like, it's a very clear path to get there. Even drone delivery. We have one location that's doing about 70% of deliveries via drone.

It's in Greenbrook, New Jersey. We'll have 10 locations in New Jersey likely at the end of the year doing drone. And next year we'll have 130 locations in Texas with drone delivery. So if you haven't done drone delivery yet, it's coming. This is not some futuristic thing. And you know it flies at 300 ft. It's silent. The wire comes down, drops it right within a square meter, anywhere you want on your front lawn, and then just goes up and it's like 95% within like 5 seconds of the delivery time. So, you literally get a countdown on your phone. It's like 451, 450, you know, just counts down and then you just wait, go outside, there it is on your lawn, and go in. Food's hotter, it's accurate, and you don't have to tip. So, yeah.