How delivery and food industry are adapting to changing customer demands

Vlad Rikhter, Zenput CEO , joins Yahoo Finance to discuss the changing delivery and Food Space.

Video Transcript

ADAM SHAPIRO: I have shares of Papa John's international. They closed up today about 1.5%, that's after they had earnings, which came in a lot better than some were expecting. Total revenue $472 million, that was up year over year, something like 23.8%.

So let's talk about pizza, because as Homer Simpson would say, mm, pizza. We're going to do that with the CEO from Zenput, Vlad Rikhter. Their company, by the way, which deals with all kinds of fast food restaurants, thousands of them, helping them meet the brand's standards as well as the cleanliness standards. So glad, it's good to have you here.

What's your take real quick on what Papa John's is telling us they've been able to do, increasing sales during the pandemic?

VLAD RIKHTER: Yeah, I think that story's phenomenal. It sort of speaks to two factors, right? One is the agility of the brand and the safety elements they've been kind of pushing forward. I think when we went into a shutdown mode, when all of us started cooking at home, and before you know it, and you start to get sick of your own cooking, you want to bring some other food in.

And places like Papa John's are absolutely set up for this, right? They're ready to deliver, you know, within 20, 25 minutes to your house, make sure you've got a hot pie that's sitting in front of you. And they've been doing phenomenal. I mean, the same store sales are up almost 24% year over year. And you've had this now going back for the last, I think, one or two quarters on their side.

This is a brand that had, you know, in a couple of years ago, it struggled a bit. And it's just doing phenomenally with the pandemic. And I think it's a reflection of their ability and their drive internally to make sure that they can meet the consumer, what they're looking for today, which is, you know, pizza at lunch during the week, pizza for dinner in the evenings, and pizza for weekends as well.

SEANA SMITH: But all restaurants have had to adjust their businesses at least a little bit during this pandemic. Even if you're someone like Papa John's, you had to adjust going into this pandemic. What is Papa John's doing right? I mean, what are some of the-- what are some of the things that other restaurants can learn just in terms of what's been successful for this company?

VLAD RIKHTER: Yes, so we've been lucky to be working with the brand for many years now. And I think there's really kind of three things that are probably hit on. One is the safety element, right? Right now, if you're getting delivery at home, you want to make sure no one's tampered with it. Like, so there are tamper-proof stickers, a lot of these places making sure you know that the food hasn't been opened, that it hasn't been touched.

Two is you're looking at a lot of productivity gains, right? These individuals, the employees in these places are really working hard. I mean, the sales volume just through the roof. So they've managed to make sure that the employees are safe, that they're covered with PPE, they're making sure that they're pushing a lot of work down on them. But they're getting it done on time.

And I think the third piece of this is, in general, on the agility side, right? You're taking a business that was used to kind of growing at a regular, kind of, pace, and you're throwing it up there by 25%, 30% same store growth year over year. And they're able to turn around and adjust the labor needs, the supply chain needs on the food side of it.

I mean, it's been pretty phenomenal on their front of what they've been able to do.

ADAM SHAPIRO: And you work with lots of these companies, Papa John's, Chipotle, Taco Bell, Five Guys, Sweetgreen. I'm getting hungry just naming the companies you work with. We saw on the labor report the big increases, leisure, hospitality. What do you think, though, these companies face?

Because there's going to be demand for workers in these companies, which the workers might have the ability to drive up wages. But then you got places like Florida, which are raising the minimum wage. What do you see coming down the pike?

VLAD RIKHTER: Yeah, sure, so I think there's two fronts, right? We've seen Domino's come out and say that they're going to be hiring 20,000 folks out there, 7-Eleven somewhere along those lines as well, right? So they're full steam ahead. When I speak with the operators of these brands, the main thing they talk about now is, hey, where do we find more workers? How do we get them in here as quickly and safely as possible?

I think the-- I think the pressure on the minimum wage side is definitely going to make an impact on the business. It will probably be seen in the sales as well, right? Inevitably, you know, a $5 pizza might now turn into a $5.50 pizza or $6 pizza along the way. But the reality is that, as long as you can get it there safely to your consumer, as long as you can get it there relatively quickly, we're going to keep buying them. Because it's at least a bit of a change of habit from sitting inside and cooking on a regular basis.

SEANA SMITH: Vlad, on the flipside, though, not all chains are doing well in this environment. I know you've got the data, you just ticked off the number of restaurants that you work with. Have any of them seen a drop in demand in terms of where cases are surging right now? Because we just had another day where we had record number of new daily cases when it comes to coronavirus.

VLAD RIKHTER: Yeah, I think-- I think there's a little bit of change between now and what happened back in the first shutdown during March and April, right? I think your casual dining segment took a massive hit back then, right? The types of restaurants that weren't used to delivering, right, the ones that you would come in with your family, you'd sit down, it'd be brunch, it'd be dinner, whatever else it is, you get some drinks while you're there, and you'd enjoyed your time in that place.

Those individual-- those types of establishments took a big hit at that time. As you move forward a little bit, they've adjusted. I mean, they're doing delivery on their own now, right? I think if you've seen a Chili's, part of Brinker, came out and-- came out with its own sort of delivery focused on the brand called Just Wings. And within a couple months, they're doing $3 million in sales a year. It's $150 million annualized.

So those individuals, those types of locations are definitely struggling. There's going to be a lot of shutdowns, right? I think we've, you know, we've come out and we've seen numbers upwards of maybe 100,000 restaurant locations that'll shut down, if not before the end of this year, than before Q1 or Q2 of next year. And I think that's going to be-- that's going to be really tough.

If you don't have a game plan on how to turn around and make sure that you can do delivery, make sure that you can do takeout relatively quickly, make sure you can do the e-commerce side, and more importantly, tell the consumer that the food is safe, the environment safe, you're going to struggle coming out the other side. So we're seeing a lot of adoption technology in these brands, and I think it's-- I think it's, in a lot of ways, for the better because it's moving up the, sort of, transformation of our industry by a couple years.

ADAM SHAPIRO: So if I were opening a franchise or if I was one of these companies, should I be doing the big investment on digital? Or should I, as one guest was just telling us a few minutes ago, it's going to go back to normal. You know, the business cycle, after this pandemic. Should I be counting on the walk in, takeout business?

VLAD RIKHTER: I think there will always be a portion of the business that's going to be walk in and takeout. But I think you need to approach things digital first, right? I mean, you look at it today, and there are brands that are now doing, you know, 50%, 60%, 70%, 80% of their orders via their mobile applications. I think you've got to start with a digital first mindset, whether it's front of the house of the consumer or back a house to the employees, where they're spending time and making sure that they're being productive in the technology that they're using.

And, of course, don't forget that, you know, obviously, people are going to come in. But we will go back to folks coming in there. But I think, at the end of the day, you're going to order ahead, and then you're going to go there and pick up. And that first touchpoint with the application, with the technology that the brain is using is going be super crucial for us as consumers.

ADAM SHAPIRO: The company is Zenput, the CEO is Vlad Rikhter. We look forward to you coming back because you can never get enough fast food restaurant talk. And we appreciate your being here.