Miso Robotics and the Rise of the Machines

Speaker 1:
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Andrew Charles:
Thanks so much for joining me today. I'm Andrew Charles, Cowen's restaurant analyst. I'm joined today by Jake Brewer, Chief Strategy officer of Miso Robotics Company, whose mission is to help restaurant companies with robotics to help improve their operations as well as their service models. Jake, thanks so much for joining us today.
Jake Brewer:
Hey, thanks for having me. I really appreciate it.
Andrew Charles:
Great. Well, Jake, I was wondering if we could just set the stage here. Miso obviously had a lot of excitement in the business over the last 18 months, and thematically, the broader adoption of kitchen robotics seems like a matter of when, not if. If we use an analog, seven years ago, the only restaurants that did mobile order were the pizza concepts, the sandwich delivery concepts and Starbucks. And today that's table stakes. So really the question for you, is that when do you think the tipping point will come that kitchen robotics will become mainstream instead of niche, and what do you think?
Jake Brewer:
Yeah, it's a really in depth question, honestly. So at the surface level, I think the tipping point has occurred. And what I mean by that is the macro factors that make the economics work out are there, and there's several buckets of that. Robotic and automation pricing, technology prices have come down, they always will. They continue to come down. So the cost to build the system has come down. On top of that education and the ability of talent for people to come in, it's no longer as niche as it used to be to program and do things around robotics, within robotics and automation. So young people are coming out of university and even trade schools, with in-depth coding knowledge. That just wasn't around seven, 10 years ago or as prevalent.
But then on the restaurant side, there's the obvious things. You don't need to click on the news and you'll see inflation again, will be talked about. So food pricing continues to go up. So we need to be able to combat that with smarter systems that waste less and have a better cost of goods. But the most obvious one is wage. There's been a ton of press over the last several years around wage rates. $15, now long distant memory of, oh my gosh, the world's going to end when we get to $15 an hour. We just saw California FAST acts last week or the week before, one of the two, gets signed in to say, go to $22 an hour. That all of a sudden has caused the economics, not only to make sense, but to become a no-brainer because we can sell systems that immediately pay for themselves, in many different areas of the kitchen and the industry and just robotics in general, at the highest level.
And then I will say the little kicker for this, when we talk about has the tipping point occurred? I don't believe personally, I think it'll get better, but we won't go back to some nirvana state from the 1930s or '40s or '50s, is when really the last time that we felt like the kitchen was completely staffed all the time and it was a job that everyone was holding. People have talked about the inability to staff in the last 12 to 24 months, very heavily. My experience being in restaurants my whole life, running restaurants, working in restaurants, the fry cook that tends to not show up multiple times a week in restaurants across the world. So this isn't a new problem. It's certainly been exaggerated.
So when you combine all these things, the affordable price of the system, the absolute kind of crazy increase in wage rates, as well as inflation of food, and then that nice little kicker of, oh, and people aren't wanting to work these jobs in large part, especially the kind of what we call dangerous, dirty, highly repetitive tasks. So I think the tipping point has occurred as to why it makes sense for robotics automation. You said it from the beginning. The reason I left the brand side to come to Miso was it had become a very obvious, for those in the industry, very obvious that it was no longer a question of if robotics and automation is coming for the kitchen, the question is who's going to win? Who's going to win the race, and what does the solution look like? So it's kind of part of my personal journey too, and I couldn't agree with your statement more.
Andrew Charles:
It's very insightful. Thank you. And then can you talk about the number of restaurants that currently feature Miso technology at the store level and how many you project over the next three to five years, or however you guys internally think about the long term?
Jake Brewer:
Yeah, absolutely. Well, I can't give specific numbers. Two years ago when I joined, some of the, just to kind of level set baselines, we had one signed agreement with White Castle two years ago. We have somewhere north of 25 signed pilot agreements across the industry at this point. We've installed into now, seven different brands. White Castle for us, famously probably for the broader audience, maybe are unaware, but they signed an actual rollout agreement and that was publicized. So they're going to roll out Miso technology to a third of their system.
But right now a Miso system is running in somewhere north of two dozen restaurants. And we have various products. Some of those are robotics, some of those are the AI vision systems, like what Panera's using for coffee monitoring, but we're in two dozen or so restaurants.
Andrew Charles:
And Jake, it sounds like, without getting, putting numbers, but it definitely sounds like it's going to be exponential in terms of the growth here instead of linear in terms of what you guys are looking at.
Jake Brewer:
It's the whole focus, candidly, for the next couple quarters is just scaling the manufacturing growth and implementation growth. The demand, the top of the funnel could, in fact, not to say we're not taking any more customers, because of course we always want to be lining them up. But we're very honest with them about, yeah, and we'll probably start the processing Q3, Q4 next year. So yeah, the top of the funnel, we're just trying to figure out how to get them into the field as quickly and efficiently as possible.
Andrew Charles:
A 100%. And then, you've publicly announced pilots with Chipotle and Jack in the Box and curious about what is about these concepts that make them ideal partners for you guys team up with?
Jake Brewer:
Yeah, so we're very fortunate. I definitely don't say this. I say this with a lot of thankfulness, hopefully it comes through is, we don't have a sales team. I don't say that again, with hubris. It's all inbound interest, we're right now, in the fortunate position of getting to choose our partners. Jack in the Box, Chipotle, White Castle. I can't get off any news thing without mentioning them. They've been a huge, huge, huge asset to us and a great partner. The reason why these brands are successful is a couple things in partnership with us, is they have a realistic understanding of where robotics is today and how quickly the maturation journey happens. What I mean by that is, it's still all very new. And so, even if I've were to put in a perfect system into a restaurant, it's still disrupting how they've been working in that restaurant for decades, in some instances, with shift managers and RGMs that have been in some restaurants for 30 years.
And so these brands are accepting and understanding of, there's going to be a change management process. That's number one. Number two, they all have a heart of innovation. They genuinely mean it. I've seen it multiple times. I was on the brand side for many years across Yum and Kroger and CKE restaurants. And when you look at some of these top tier brands, they don't get hung up on the reasons why something won't work. They aim towards the reasons why something will work, should work and has to work. And for all the reasons we spoke about at the beginning. The Chipotle, again, I'll highlight them, they have such a mindset of innovation, they're taking control of their own destiny. They launched a venture fund very publicly. They just invested into Hyphen, another robotics company. And they're the best in the industry when it comes to, they own all their assets, they bet big on technology. And I think their quarterly statements are showing how it's going for them.
Andrew Charles:
Jake, would also love your thoughts on Sweetgreen's acquisition of Spyce to help automate their kitchen preparation with robotics?
Jake Brewer:
In short, I love it. There's a rising tide for the whole industry. Miso is the largest player in the space right now, but it's not a zero sum game at the moment. I would say there's commodities that have been well established for decades now, like fryers, as an example. And there's little technology advances here and there. And not to diminish what the fryer companies are doing, but the brands that need fryers are growing slowly year over year. The pond that will become a lake that will become an ocean of robotics and automation, is growing quarterly, massively. You're seeing things kind of come out in the news and Spyce as a great example of this. I think Sweetgreens is again, among the top tier of innovative companies out there. In fact, their VP of innovation is Miso's previous COO. So it's, there's a lot of shared thoughts, not between the two companies, but just in the industry around, as restaurants are seeing the need for automation, they're going to start acquiring more brands.
We're going to see that, that trend will not stop. It won't work for all brands because it's not ripe for all brands. But I don't imagine we see less investment from brands in multiple avenues, including acquisition, into robotics companies. The other side of the coin there is, and it's a similar vein, go on LinkedIn, there's more people in the restaurant industry than ever before with titles of director, senior director, VP, chief, automation, robotics officers and leaders in the industry, for Inspire, as a great example, we work with Inspires through Buffalo Wild Wings publicly. And their VP of robotics and automation, I think is his official title, peter Cryan, he's kind of an industry legend. He's been around for some time doing innovation work across many of the Inspire brands. But that role was just created not too long ago. Because Paul Brown and the Inspire team see where this is going. And so they're investing internally as well. Not only just buying brands but in their talent and their teams.
Andrew Charles:
And Jake, it's a great segue to my next question that you now have several of the largest wing concepts as customers. And is there anything about wing concepts that make them particularly ripe for kitchen robotics?
Jake Brewer:
Yeah, I mean the number of fried items, that's a really kind of core item because, not just for us. So we make, fryer automation is one of our product lines, so they're right for us, but they have a super high volume of a very repetitive task. I think just in general, that's what is a leading indicator for automation and robotics in any industry, including restaurants. It just hadn't been applied to restaurants as it had been in automation, or sorry, automotive. I think in the '70s someone finally goes, Wait a second, that guy or girl's just screwing on a bolt a 1000 times a day to the same spot with the same, same tool. And that's the same thing for a fryer. It's a guy or gal using the same basket and the same fryer, with the same food 100 of times a day.
And so I think that's why wings, with their high percentage of fried volume at their core. So burger concept, which we're in burger concepts as well as you know, still this makes sense, but for wing concepts, you're not frying the burger, but the very nature of the core product of a wing concept is fried. So the volumes are exceptionally high.
Andrew Charles:
Jake, that's great. And then not to detract from the conversation so far, but on the last earnings call McDonald's CEO said about kitchen robotics, and I'm going to quote here, "It's not practical in the vast majority of restaurants. The economics don't pencil out. You don't necessarily have the footprint and there's a lot of infrastructure investments that you need to do around utility and HVAC systems. You're not going to see this as a broad-based solution anytime soon." What would you say in response to that?
Jake Brewer:
I get this question a lot recently, of course, because McDonald's being who they are and very importantly, their history around automation. They've been, they at one point, when I was running KFCs in London for Yum some years back and near to one of my restaurants was the European innovation store for McDonald's. So I would constantly cross shop that store. They had automation, automated fryers, they had conveyor lines for the burgers to move around. So the employees had... McDonald's is one of the most well-invested brands into automation, including their drink machine. They've had an automated drink machine for two decades now. And so, one, I think some of it's a little bit of a misnomer and a redirection, which is fair, I understand why they would do that. But they're already in the automation game, deeply entrenched in it. The other piece I would respond to that is, if this is one of the inherent problems going back to kind of that Spyce, Sweetgreen issue, when you then own the robotics and it's not done by a third party like Miso, there are some inherent challenges that you maybe take on inadvertently.
So when Chris said that publicly, I got a lot of questions around, wait a second, you have to move the hoods or the HVACs off? And I said, No, no, no, that's not for our products. That's not true. We work with all types of hoods, all fryers. We don't in fact, ask you to remodel anything. Our system fits in and around. However, if and when McDonald's did that in the past, they took a whole building approach. So it was a multimillion dollar build, from ground up. And of course they made everything perfectly fit because they could. And so that kind of I think, framed their mindset of, well, to do robotics and automation, you have to change everything. That's different than them choosing to change everything.
Miso has been forced to build the market penetration that we need to become the company we want to. We have to think bigger than that. So I can't ask every brand to move their hoods because that's super expensive. It'll limit my penetration to the market. So the product we have simply put, does not require HVAC changes, does not require hood changes, does not require fryer changes, utility changes, it plugs into the outlets you have. The most often change order that's put in is a $200 outlet change to make sure the right outlet is near to the system so we can plug our robot in. And that's it.
So it's not to be in complete contrast to what he's saying, because I think from his point of view, that's probably his reality, but it's from a McDonald's only point of view versus when you look at the industry, that's not how our products work. And that's not how it will work in the future.
Andrew Charles:
Very insightful and hope you got a Royale with cheese when you're in the European test lab for McDonald's.
Jake Brewer:
Yeah, absolutely.
Andrew Charles:
Just changing gears here, given that labor is the key focus for the restaurant industry, executives and investors in a tight labor environment, is Flippy advertised as a supplement or replacement of labor? And maybe as a follow up, what have you guys observed in the amount of labor hours saved or productivity that's been increased as restaurants implement your technology?
Jake Brewer:
As of eight or nine months ago, this is my favorite topic because we had enough data to actually start talking about it publicly versus anecdotally. Let's start with what we're seeing in restaurant because I think that's the most fun. We're seeing somewhere between one and one and a half full-time employees displaced from the fryer station. And that depends on the volume of frying and the volume of the restaurant. So it's not a swath across all 250,000 US restaurants, but a good 50% of restaurants operate in that manner.
So we see that and it takes that job, it takes, well, we have our director of what we call solutions engineering, is an x Chick-fil-A industrial engineer. Very famous Chick-fil-A is known for their ability to scientifically map down everything in the restaurant to get to the volumes they're operating at today. And so this individuals, his name's Sam, he has been able to use that knowledge and then remap for all of these brands, what restaurant operations looks like with the robot versus their current day, in conjunction with the brand. So before we even install the robot into any place, we know how the labor will be redistributed within that restaurant. And then that just means that the pilot or multiple pilots become a proof point to prove the theory we've already put on paper. It's not a test to see, let's cross our fingers and hope it works.
So that's at the very basis. We say, in every time we talk to a brand, we're KPI simple. I spent many years getting sole products, not in by the way, great products out there. And these aren't things that I'm saying were done erroneously, but I would end this conversation with, name the supplier and they'd say, based on saving 15 minutes here, better quality by 1%, employee engagement by 2%, that gives you your ROI. And you kind of go, a lot of that's soft and squishy and I can't really calculate it and I can't really save 15 minutes in the middle of a shift. I can't take that person off the shift for 15 minutes. And so it was hard to pencil out versus using kind of that background. When we talked to customers, we say this statement, if it does not save you on your P&L more labor per month than the system costs, we'll walk away. It's that simple.
Now you ask, and then on top of that, we don't even pencil in the fact that we're seeing 10 to 25% faster drive through speed of service times. We see less waste for food. The food that was a very, it was an easy story for those of us who have been in and around restaurants. On peak, you're kind of cooking food continuously and that food's getting sold. Peak starts to die down. Andrew walks in with his family and orders two meals and two kids meals and they're out of fries. Well, the guy or gal, the cashier at the drive-through says, "Hey, I need fries, I just got an order of four." Well, you probably got two kid size fries and maybe two medium fries. The person in the back is stressed, they're overworked and they rip open a bag of fries, dump it into two things, fry both of those, dump them in the hot holding and they bag up your fries and they still have probably another 70% leftover. Fries hold for about five to 10 minutes. Its peak is dying down. That goes straight to the waste bin.
And so you go, a robot doesn't do that. A robot takes the information at hand and cooks what's needed. It doesn't have an emotional reaction based on stress or the things that are real for humans in the restaurant. So we see reduction in food waste. We see an absolute increase or improvement in speed of service through the drive through. And then we see that ability to displace one to one and a half FTE's, capturable PNL labor.
Now, the first question you asked is a very intuitive one. How do we market it? Again, back to that, we don't really have outbound sales team, we have marketing, clearly, we're in press all over, but it's not traditional marketing. So I don't have a statement for you of how we talk about it, but when I'm talking to a brand, I do know that we say what you do with your labor hours is your decision, I have to prove that you could, if you wanted to, take them off this station.
Now, well, what we're seeing is they're going, well, thank goodness I'm short staffed anyway. That person is, I'm a person short. So now I'm fully staffed. We're seeing that a lot. The brands that happen to be fully staffed already, in the instances that we're testing, we're seeing them redeploy that labor to customer service drive through, some other value added tasks. So we have not seen people choose, it's not our choice. They could if they wanted to, but we haven't seen people rip them off the floor. What we see is them redistribute them to make the restaurant more functional.
Andrew Charles:
Super Jake, that's very insightful. Keeping the topic of ROI, I recognize that obviously to your point, on the top side of that, it's a little bit squishy, but obviously there's a lot of unintended benefits that Flippy delivers. If I look at the denominator, it's a bit more concrete, that your website says Flippy 2 starts at $3,000 a month. And I'm curious, what is the pricing scale? So for instance, what does $3,000 include versus what are the add-ons opportunities for the restaurants?
Jake Brewer:
Where we have Flippy at say White Castle, it's our most common system that's in the field, that configuration. But Flippy can go over 3, 4, 5, 6, 7 fryers. It can have a single item dispenser, double item dispenser. It can have what Jack in the Box has for specialty baskets to be able to cook their taco shells. There's different add-ons and features that kind of can opt it in and opt out and those just change the price. But honestly, it's not even, right now they go up to kind of 3750, that price range, 3750. And of course we'll take pricing in the coming years, just like any brand, but nothing egregious or outrageous. And so that 3000 price point, when we start to pencil out the math for brands, we usually start there. And the reason isn't to get them excited about it, sell them in, and then go, oh, but surprise, yours is 3,600 bucks a month.
These are multiple year long life systems. They're not systems that are going to be taken out within three months or six months or a year. These components are seven and 10 year life on these deployed robotic systems. Now we're learning a lot in the first couple that we deployed last year and earlier this year, where we're the failure points? Making sure that a mechanical team is quickly solving those. But the idea here is that we have a multiple five or seven year contract. And why that's important, when we look at the stickiness of this, and I would actually a little bit say that, when I was talking about squishiness, it was kind of in other sales channels, when you're talking about say a fryer's ROI, it becomes multiple variables. Ours is very simple. If you can't pay for the labor, it's one KPI. Labor will pay for more than what the system does.
But the upgrades and changes, there's a bunch of different configurations. It's something like 128 different ways you can kind of Lego Flippy together to fit in the restaurant correctly. Because it has to be adjustable. If I said, back to that point of what Chris from McDonald's was saying, the CEO of McDonald's, if I said, this is it, there's one configuration and that's the only one, then yeah, we probably would've to make some really substantial changes in the restaurant to fit Flippy in. That's not the case. It's very configurable and it kind of floats between that 3750 number for 2022. And then installation is a nominal cost. It's about, it's $10,000 this year for installation. It's not a profit center for us. It's simply just a, to get the robot on a truck, get the people there, install it, $10,000, it's a flat fee.
Andrew Charles:
Got it. Just my last question, Flippy is of course compatible with fryers and grills and Jake, just giving your extensive restaurant industry experience during your time with CKE Restaurants and Yum. I'm curious, what other kitchen equipment do you believe is ripe for robotic disruption, with the important caveat that it's both technologically and economically feasible?
Jake Brewer:
We have a five year product roadmap that kind of is continually evolving. And the two layers we put over that roadmap is at a basis, understanding across different restaurant segments. So QSR, limited service, full service. While there's a lot of similarities, there are also some important differences in how labor is distributed. Because robotics and automation at its core, is an ROI that's based on labor savings. You have to understand the heat map, and we literally have that heat map of where are hours spent in the kitchen?
So then you layer on top of that, to your point, if there's hours spent there, what is the feasibility of automation of that station? And some are much more complex. I give Hyphen a lot of credit. The make line is a very challenging thing to automate, but there's a lot of labor there. So I see why it's worth the tens and tens and tens of millions of dollars it'll take to get that kind of to a production ready state. It's worth it because a lot of people need that. T.
He other areas I see we have in the cooking and prep category. So we also kind of bifurcate or trifurcate the restaurant into service, cooking and prep and cleaning. Those are the three major buckets of tasks in a restaurant. In the cooking segment, of course, frying, we see that as the knockout kind of big long runway one. Drink dispensing as well, especially at the drive through. So we have a product named Sippy, that will be coming out in Q1 of next year. And that takes POS, puts the cup, drops ice into it, fills it, and then lids it and groups it. That's unique. There isn't a system out by a competitor that's famously been in McDonald's for many years. You still have to touch every cup with a lid and then you have to figure out which cup goes with which order. Ours does that all automatically, intuitively for you. So those two areas we're already working on.
But then what's coming next? There are things that are kind of to the left and the right, and this is, it's if red is the highest kind of color on this chart of labor density on this visual heat map of a restaurant, it doesn't go from red to, call it blue, of no labor. It kind of spans out in a restaurant. So there's a lot of labor at the fryer, but then right next to the fryer, guess what? They're packing orders, expo and packing, right? So you kind of go, oh man, getting away to automate the packing of orders into a bag accurately, but quickly and efficiently. It's another really strong area for automation that I suspect will be coming.
And then you go the other way in the kitchen and in cooking and food prep, there's a lot of time spent in stocking and restocking and moving boxes around the restaurant. The ability to do that in an automated way will again, alleviate this off peak labor that is often hung around at the end of the night, at the beginning of the day, left. You say, "Hey Andrew, can you stick around another 90 minutes to restock the freezer?" "Yeah, sure, I'll do that." But actually, if that was automated, Andrew could just go home and that would actually be capturable labor again. I go back to that capable labor piece. Saving a couple minutes for efficiency sake is good and helpful, but it's hard to justify on ROI.
And then cleaning, cleaning as a whole category, I could go into very deeply and let's just say I'll leave a little bit of meat on the bone, so to speak, for the imagination, but there's a long runway within the cleaning category for automation and robotics that we intend to tackle.
Andrew Charles:
Well, Jake, maybe that gives us just something to kind of continue the discussion for next time, but this has really been helpful and just really all the best to you and Miso Robotics on the very exciting journey ahead. Jake Brewer, thank you so much.
Jake Brewer:
Yeah, thank you. I really appreciate it. Have a great one.
Speaker 1:
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