In this episode of TD Cowen’s Retail Visionaries Podcast Series, Adam Brotman, CEO of Brightloom speaks with Andrew Charles, Cowen restaurants analyst. They discuss data analytics automation via artificial intelligence (AI) for the restaurant industry, how data proficiency will change restaurant marketing effectiveness through personalization and how Starbucks’ equity stake and international partnership impacts Brightloom. Press play to listen to their conversation.
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Andrew Charles: Thank you all for joining us for our next rendition of what’s cooking with Cowen. Today I’m joined by Brightloom CEO Adam Brotman. Adam, thanks for joining us today.
Adam Brotman: Great to be here. Thanks for having me.
Andrew Charles: Great. Adam, we’ve seen delivery and online ordering democratized for the broader restaurant industry. Brightloom is looking to do the same with data analytics. Can you give us the quick 60-second elevator pitch on what is Brightloom and what is the solution that you’re bringing to the restaurant industry?
Adam Brotman: Yeah. The the really quick elevator pitch is all of these restaurant brands, but actually any consumer brand these days, has a ton of first-party customer data because they’ve got a ton of digitized relationships. It was always growing, but when the pandemic hit especially, the percentage of the customer base that the brands have a relationship with digitally of the customers is material. And they have all this data. And there’s a lot of different platforms out there that help brands create their own segments or marketing segments and personalization capabilities using data. But it’s a lot of work for the brands. When I was at Starbucks and at J.Crew and other places, I just felt like there had to be a better way, an easier way to simply get the data, run the data through sophisticated models, but make it super easy and effective for the brands to run campaigns without having to do a lot of work.
So with all that data out there, I just felt like that’s the next big breakthrough. That’s the next frontier for restaurant brands. It was mobile ordering, mobile engagement, loyalty. Those have become, as you pointed out, fairly… not commoditized, but if you want those things, you can do those things. But if you want to use your data in an effective, always on way to market to your customers, that’s still not easy despite all these other vendors that are out there. And so Brightloom is all about creating a software platform that makes it really easy for brands to simply upload their data, and we provide automated tools for campaign management.
Andrew Charles: That’s great. Adam, I’d like to reflect, look backwards [inaudible] more about how you got into the role and how that really shapes you as the CEO of this company. So a lot of listeners on the call likely remember you from your time at Starbucks, as you were on quarterly earnings calls and attended investor events. Can we talk about how you got your start there and your impressive accomplishments at Starbucks as chief digital officer?
Adam Brotman: I mean, honestly, that’s nice of you to say that, but the journey at Starbucks was fairly organic because the platform, the brand was already in place to… It was almost ripe for digital engagement, digital transformation. The biggest thing, I was given an opportunity to build a team and build a strategy around what would be the best thing for the customer. So it wasn’t really a particular roadmap. It was just what should we do. And my timing was lucky. I came to Starbucks at the end of 2008, beginning 2009. Howard Schultz had just come back. The iPhone was maybe almost less than two years old. And I got lucky, and I fell in love with the power of the app store and the power of mobile and the cloud.
And so I was watching customers at Starbucks. As the head of digital for Starbucks, I was watching customers and how they were engaging with the brand and how they wanted to engage with the brand. And a lot of it centered around mobile and loyalty. Everything at Starbucks is about personalization. So that was a natural. So essentially, we just started building digital products and features that we thought the customer would love, centered on mobile, and we started realizing that we had something, and we started adding and connecting features to one another. We started with the mobile app that was connected to mobile payment. We added loyalty. We added ordering. We added personalized marketing. But these were all just us paying attention to what we thought would be the best thing for the customer, and it turned out that the customer loved it. And the more the customer engaged in it, the more usage we got and the more we were able to get value for the business and the customer out of the platform. So we called it a flywheel effect, and that’s basically what we did.
So it took about that there in 2000… like I mentioned, at the beginning of 2009, and by end of 2013, we had 9 million customers using the app. By 2015, we had over 40% of all of our sales running through the app, essentially. So it just became a huge thing. And then I left the company in 2018 and went to J.Crew. And by that time, I think we were approaching 50% of all the business being through the app. And then of course, during the pandemic, I watched with a lot of pride that that platform was really important to Starbucks, obviously after I left, and still is.
Andrew Charles: Yeah. Adam, no, certainly an impressive legacy that you left with the company. You had a stint at J.Crew, but then you came back to the restaurant industry in April 2019 when Brightloom [inaudible] at the time. Can you talk about what the platform was when you took the CEO job?
Adam Brotman: Yeah. When I took the CEO job at Eatsa at the time, I was actually encouraged to look at the opportunity by both the [inaudible] investors of Eatsa as well as Starbucks. And I’ll explain. The platform of Eatsa had become… Eatsa was a really revolutionary pioneer in fast casual in its own right as a restaurant company. But by the time I came to the company a little over a year ago, the company was no longer a restaurant company. It had made the decision that it wanted to be a technology company. It wanted to be a software company. And it had built its own software for its own restaurants, but was looking to find ways to help restaurants in particular with their technology needs. And that’s where Starbucks came into the picture because Kevin Johnson, the CEO of Starbucks and Jon Shulkin, the chairman of Eatsa, they were connected already and had started a relationship because Starbucks and Valor, which is Jon Shulkin’s firm, created a really cool venture fund called Valor Siren Ventures.
And as they started talking, they realized they both shared a common vision. And it was in common with my vision too, which was… And I was still at J.Crew or thinking about coming back to Seattle, but the idea was, “Hey, is there a way to take the kinds of things that Starbucks was doing for itself on the digital flywheel and productize some of them and offer them to other retail and restaurant brands?” Kevin Johnson had that vision and Starbucks had that vision for a long time. Eatsa was just a great platform because it was ready for a pivot and it had some interesting technology. Starbucks, of course, had their interesting technology. And I was going to come in off of a combination of roles at Starbucks and J.Crew where I just loved the idea of how can we make it… I loved the idea of disrupting and digital transformation. And so it was a great fit for me.
And when I came in, though, it was kind of a blank slate, meaning we knew what the Starbucks technology was. We knew what the Starbucks methodology was. Eatsa had done some really cool things around ordering. But we were able to sit down and say, “Okay, if we could take any part of the Starbucks flywheel, because that was our opportunity and productized it, what should we do?” And we talked about all the parts of the Starbucks flywheel at first, but we zeroed in on personalization and using customer data to drive personalized messages and offers to help brands pull off the kinds of things that up until we’ve come along are almost impossible to do unless you have teams of data scientists or pay big consulting firms. And our idea was let’s create a simple software as a service solution that lets anybody do the personalization engine that a Starbucks has.
Andrew Charles: Yeah. Adam, I want to talk about why, because obviously you mentioned you had a holistic opportunity with digital and data analytics and you really streamlined the business really down to data analytics. Was that just your skillset, where you came from, what you had to offer, or did you think that was the [inaudible] in the marketplace that you really thought Brightloom could really help dominate?
Adam Brotman: Yeah. I wish it was my skillset. Trust me, I’m lucky that I’ve got great product people and great data scientists and data engineers at both Brightloom, but also at the companies we work for. But to answer your question in all seriousness, it was actually more a matter of timing. So like I mentioned, I got lucky with the timing of when I came to Starbucks once in a lifetime to be the chief digital officer at a brand like Starbucks right as the iPhone and smartphone apps were blooming. And so I was able to just get to the right place at the right time. In this case, the issue is, again, timing, and the idea is that if you want to… I’ll call it replicate a lot of what Starbucks does [inaudible] of features.
I mean, Starbucks does an amazing job of creating a really amazing customer experience on their digital platform. That’s really hard to still do. But if you just go through the basic feature list of mobile ordering, internet ordering, loyalty, even a spend and points-based loyalty program, even mobile payment, we were super advanced and we were pioneers in those areas. And I think up until recently, Starbucks had, for example, more mobile payment transactions than Apple Pay for… I want to say for five, six years. I mean, I couldn’t believe it. Meaning Starbucks has got a really big lead on that. But now, not only is it no wonder that Apple has surpassed that, but if you want to go pay with your phone at any retailer today, you pretty much can.
I mean, some of them still don’t have their NFC turned on for some reason, but for the most part, if you forget your wallet at home and you want to go pay, you can with Apple Pay or Android Pay or whatever. And so basically, when the pandemic hit, it became even more the case that if you’re a restaurant or a retailer and you don’t already have internet ordering, and you don’t have order ahead, frankly, nowadays, you don’t have curbside and loyalty. I mean, these are things that pretty much every retailer has today if they want it. It went from five, six years ago being a pioneering thing to today being somewhat a necessity, frankly, and therefore everybody’s got it. But today, I’m amazed when you look at… And you know this because actually, I learned from you.
But if you look around the restaurant… I’ll just take the restaurant industry. Look at what are the top initiatives of Shake Shack, Chipotle, Wingstop? I’ll just take those three incredibly successful, incredibly capable companies. I think they all have personalized CRM as their top, if not their top three initiatives digitally. And the fact that they’re not doing it yet… Now, I’m sure they will. And I’m picking on those brands because they’re some of my favorite and they’re very capable. If they’re not doing it, imagine what’s going on in the rest of the industry. It’s clearly a need. It’s clearly not commoditized. And clearly, the tools that are out there today aren’t easy enough or powerful enough for both, because otherwise, everyone would be doing it.
So that’s where we were like, “Hey, I think we might be onto something here.” And our timing might be great again to like, “Let’s find out why these great brands and other great brands are not using their data to power an always-on personalization engine offering personalized messages and offers. There’s got to be a reason they’re not doing it. Let’s get after it. Let’s solve it, make it easy, and see if we…” I hope someday, I’m talking to you on a podcast in a couple of years from now, and we’re talking about how this is commoditized as well, but it’s not right now. So we’re trying to pioneer something again.
Andrew Charles: No. Adam, that’s super well-said. Adam, what restaurant is Brightloom’s target customer? Are these chains? Are these independents? Are these brands with urban skew versus suburban skew? Is there a certain cuisine that seems to fare best with data analytics?
Adam Brotman: We’re still pretty early on. So I don’t know which ones… we’ll see which ones are going to fare best. But in terms of the ideal customer profile for us right now, we have about 25 brands on the platform today, and they are mostly restaurants, although there are some omni-channel retail and direct-to-consumer e-commerce because any brand that’s got accounts with transaction history data and an opt-in marketing relationship, we’re a good fit for. But we’ve found is that restaurant chains are our best fit. And I’m talking about particularly sub $1 billion. I mean, trust me, we’re trying to sell big chains as well. But you get over $1 billion in sales and these restaurant brands typically have got a lot of resources, got a lot of vendors. They either are or should be doing it themselves, although we absolutely have a platform that can help them. And in fact, many of our pilot customers are $1 billion in sales.
But our sweet spot is the restaurant chain that is 10 locations, up to 800 locations. That sounds like a big range. If you think about it, it’s not because anyone who studies restaurant industry knows we’re not going after right now the mom and pop, although we have a great product… I’ll explain this… I think that can help them. I’ll call it the single, one, two, three location chain. Our sweet spot is a brand that’s got 50, 60,000 up to 1 million digitized customers in their database. They’ve got transaction history on them. They’ve got the ability to market to them through email and maybe even push notification on an app. And yet, the labor of going through and trying to create segments and create triggers and create rules for them, it’s too much brain damage. And so we we’re coming after that segment of restaurants right now as our sweet spot.
Andrew Charles: I have a philosophical question for you. How can personalization and loyalty programs avoid being another avenue for discounting? What do you view as the key to driving incremental visits in ticket add-ons? Because I really don’t think a lot of restaurants cracked the code on this.
Adam Brotman: Yeah, that’s a great question. You can imagine when I was at J.Crew, you’re asking the restaurant and the restaurant context, but in the retail context, it’s even more important where discounting has become a primary way of promoting the… But let’s just go to restaurants for a second because it’s a great question. There are a couple of ways that you can avoid just straight discounts. So you could imagine at Starbucks, that’s something we just generally never did. Almost never did. Maybe frappuccino happy hour or something, but we almost never did straight discounts. And it’s not great for the brand a lot of times, and it can become a race to the bottom. So when you’ve got a personalization engine like Brightloom can provide, what you can do is you can use the power of relevance and you can use the power of… I’ll call it rightsizing the discount.
So for example, you don’t have to do offers on a personalization engine. In fact, one of the things that differentiates Brightloom is that we have a product recommendation model, a data science-driven model, very unique in our space. And again, normally you’d have to hire data scientists, data engineers. But because of our platform, we look at your transaction history, we can predict what your customers are most likely to want to buy or find relevant in terms of your menu, and then you can just have a personalization engine that doesn’t even have offers if you want. And we’ve actually seen some early good results of just recommending products and seeing better email engagement and good results. But when you combine it with an offer… It doesn’t have to be a discount. It could be a, “Get a free salad with your pizza. Get a free soda with your hamburger.” You can do certain things and you can right-size the offers as well to make sure that you’re not just giving everybody a big promotion or discount that doesn’t need it and making sure that you’re saving those for your lapsed or at-risk customers.
So when you can right-size the discount and you can decide the discount you want, and you can add on product recommendations, you can really minimize if not eliminate the brand damaging and P&L damaging discounting that a lot of people do.
Andrew Charles: That’s well said. Restaurant operators are known for their entrepreneurial muscle and resourcefulness, but I don’t know if I put tech savvy at the top of the list. So while Brightloom is very intuitive and user-friendly, what support do you provide to assist customers? And I guess what I’m ultimately getting at is how scalable is the technology based on how many account managers or customer service employees you need to keep hiring to work for the platform?
Adam Brotman: Well, that’s the big question because ultimately, that’s the problem we’re trying to solve. How do we automate a lot of the stuff that is normally manual? So to answer your question, we assist on both the data coming onto our platform. And the way that we do that is through integrating with whatever system the data is in. So they don’t have to… It’s really important that one of the mantras of Brightloom is it cannot be a tech project for our customers. That was one of the biggest things we wanted to solve was like, “It’s data. Is difficult. It’s technology.” How do we make this easy? So what we do is we have essentially data onboarding specialists that make sure that we understand what platform their data’s in, and we integrate with the data system or make it really easy for them to get it to us.
So we do provide help there, and we also provide help in analyzing the results of the campaigns in configuring the campaigns so that the models will run just the right types of segments. And then also, we provide help in executing the campaigns. And to your point, we have had to develop a set of both algorithms as well as just software that allows us to be as automated as possible because we need every single account manager, if you will, on our side to be able to handle dozens and dozens and dozens of accounts and maybe even dozens of new ones every month. So we have to automate as much of this as possible.
And that’s the Brightloom secret sauce is not just giving brands tools to create segments, but giving brands actionable intelligence that’s based off of AI and having it be automated so that essentially, it’s almost like you have an army of data engineers, data scientists, and analysts working for you. But the beauty of AI and these models and these platforms is that if you can automate it, then we can scale as a business. And then we can give really quick, effective results to our customers.
Andrew Charles: That’s really interesting. The last question I have for you is that it’s public knowledge and publicly disclosed that Starbucks has an equity stake in your business as well as a board seat. In exchange, Brightloom manages the digital [inaudible] components of Starbucks’ licensed international businesses. And I’m curious how this influences Brightloom’s culture. Should we think of it that the digital and loyalty prowess of Starbucks gives you a testing ground where you can tinker with new initiatives, or perhaps inversely, that Starbucks has a front-row seat to digital advancements in the industry that could potentially work for them? Or maybe it’s even some combination of both.
Adam Brotman: Yeah. It’s definitely a combination of both. We’re really lucky to have Starbucks as a sponsor, if you will, not just because I’m familiar with the company and came from there, but they are a sophisticated customer and they know what they’re doing. So if we’re able to be successful with their international operators in providing them some of the same personalization capabilities that they have in the company-owned business, then that’s a high bar and that is something that helps us know that we have a capability set that’s proven out. And for Starbucks, remember, a big part of what we’re trying to accomplish for other brands besides Starbucks is making it not a tech project, making it easy, make make sure that the speed and ROI is there.
And again, that’s important for Starbucks international markets as well. If you’re Starbucks, when you’ve got a company based in US or China or… I’m sorry, store base, I meant to say, in US or China, or Japan, for example, that’s a lot of company-operated stores to leverage. But when you’re a international operator, you may not have that revenue base to leverage. So in a lot of ways, solving this for Starbucks international operators is the same as solving it for a US, I’ll call it, several hundred-location chain, meaning you got to make sure that you’re worth it. You got to make sure you’re fast. You got to make sure that you’re solving issues because these operators don’t all have the same capability set as the company and markets that Starbucks has. So it’s a great fit for both sides in that way.
Andrew Charles: Yeah. That’s great. Adam, thank you so much for spending time with us today. Really insightful perspectives on the industry, and I wish you continued luck on the journey.
Adam Brotman: Thanks, Andrew. I appreciate it. Thanks for having me.
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