Watching chefs cook is fun. Hence, restaurants are often designed with an open kitchen as a customer draw. But it's unlikely any restaurant would try to draw customers by featuring the less entertaining process of watching them order their pounds of raw meat, jugs of vinegar or bags of onions and potatoes. Ironically, between dynamics around choice, pricing, and expectation, ordering complications can be just as dramatic as the alchemy demanded to transform raw products into meals.
Nix86 may never make that process sexy for restaurant customers. But it is adding some cheer to "the back of the house." An online software platform for restaurants to optimize efficiency around product orders, it was developed by an experienced team of food professionals as well as a successful technology entrepreneur; the founders of food chains FiRE + iCE, Bertucci’s and Steve’s Ice Cream, along with the chief technology officer of Constant Contact. Nix86's core focus are chefs, bakers, managers and their suppliers, the human supply chain ensuring delivery of the experiences customer ideally describe as "wow!"
The idea for the software platform evolved from, in their words, “the nightmare of managing a dozen suppliers” and the inevitable mistakes that are part of a labor intensive process, one that includes everything from “chasing people down for payments and late-night voice mails” to incomplete information for orders.
Meeting Alex Ross, who is part of the leadership team, at an event for new companies, we were intrigued by his experience (years in senior operations at The Cheesecake Factory and OpenTable) and impressed by his obvious fondness for the adrenaline-crazed demands of running a restaurant. We invited him to talk to about his company at Stir the Pots.
So what led to the idea of Nix86?
Margins are incredibly thin both on the restaurant and supplier side. Anything that can better control costs and increase efficiency is a win for all. Ordering in general – online ordering of menu items – has become common place to consumers. GrubHub, Seamless, etc. This type of tech exists in the business-to-consumer scenario. It doesn’t exist in the back of the house. Yet every server, dishwasher, and manager carries a smart phone. And they’ve all shopped online. They’re begging for this type of tech to exist in the back of the house.
When you say “begging,” can you clarify that?
Restaurants by nature are incredibly reactive. When you book a flight do you go to Kayak or to many different airlines websites? Even more, do you actually call the airline direct? You might have loyalty to one airline, but at a general level, there are efficiencies by going to an aggregator site that allows you to filter and search multiple airlines.
That doesn’t exist in the world of purchasing product at the restaurant level. Every full-service restaurant – in Massachusetts alone – works with an average of 12 to 15 suppliers. None have a common protocol in taking that order. A chef needs to know all the types of ordering processes – phone call, text, even fax. So there are huge inefficiencies in placing an order. By with us playing the aggregator, we eliminate error and allow digitization to make it more efficient. They data behind a chef’s purchasing habits then is turned into actionable information. What to buy – when to buy – how much to buy?
Normally, if a restaurant is working with three different suppliers, then they would have to place three different orders in three different ways. With Nix86 they could place three orders in one way. Extrapolate that out for a restaurant who regularly is placing between 20-25 orders per week to 12-15 suppliers. It’s kind of mind-blowing.
In a sense, it sounds like the ordering process should be pretty simple thing you’re solving for. No?
The reason it seems so simple is that it should be. What we’ve done is create an optimization tool to make that happen. By inserting Nix86 at the fundamental point of placing orders, we make it more efficient. All of the communication is simple in concept but the data behind it changes the process.
Here’s an example. You’re the chef. I am a team member in the kitchen. As you’re leaving at 2 am for the night, you leave a voicemail to place an order. You’re not coming back in at 6 am when I’m going to be opening up. Well, when the product shows up in the morning, I don’t know what you ordered or the quantity or the price of what you ordered – if you even knew it. Because most restaurants don’t even know the price. Well, Nix86 standardizes that so no details are lost. You get a digital record of what was ordered and at what price and the supplier gets exactly what you ordered.
Another example. Say I work at a restaurant and we regularly serve guacamole. I’m opening in the morning when orders come in. Well, as long as avocados show up, I’ll accept them. But what if they are different avocados than the chef ordered? They may be a different quality or price. By the time the chef or book keeper catches those “mistakes” it’s usually too late. Fundamentally, it’s a simple concept. But actually, there’s so much room for mistakes.
And then there’s a whole issue on the supplier side. Let’s talk about cauliflower. Imagine the issues with a restaurant that orders cauliflower that they feel is damaged or incorrect. We were talking to a supplier who told us that in a situation where that happens – misplaced order or damaged – it costs them $60 to go replace that order. And that’s only if it is within the Route 128 area. Outside of Route 128, it costs the supplier $100 to fix a mistake. That supplier is only charging $25 for that case of cauliflower in the first place. So they’re losing money on mistakes. That supplier runs three trucks across the state just to fix mistakes. Those mistakes occur because the chef says one thing over voicemail that’s transcribed incorrectly. But the supplier wants to keep a good relationship with the restaurant chef or manager or owner so they’ll do whatever they need to do. A program like this removes the room for error.
How big is the value to someone who runs or owns a restaurant or a bakery?
Let’s take a restaurant that brings in one million dollars a year in sales. If with Nix86 they can shave off one point from their product costs, that’s $10K of profit. Having in impact like this on a business’ bottom line is incredibly powerful.
The industry average for “cost of goods” is around 26-30 percent. Product costs are the single largest cost center in a restaurant. And it’s the only area that a restaurant, bakery or bar can reasonably control today. Rents are skyrocketing. Labor laws are getting tighter and tighter. The million dollars a restaurant makes in revenue, if 30 percent is going right back into product costs, that’s $300K. Again, if we can help them shave 1 point off, they’ll make $10K more in profit!
Programs like GrubHub and OpenTable are wonderful for generating sales and being leveraged as marketing platforms. Their focus is on driving top-line revenue which comes at a cost. Nix86, however, is an operational tool. Every dollar you make will be more valuable. We are asking businesses to take a look in the mirror and get more out of what they already have.
Sure, consumers get excited by marketing but it’s time for restaurants to get more efficient. Then they can use all the new marketing tools to drive additional sales. In fact, these new sales will be even more valuable.
I’m curious. Would Nix86 have any positive impact on the customer?
Our product is not directly built of the consumer. That said, the potential for what our product can do absolutely can resonate at the consumer level. We met with an amazing fish supplier who has invested tons of technology around traceability. How fresh is it – where it comes from – well, all that information is lost before it gets to the consumer. When the restaurant places it on the menu, a lot of that information is lost. We have the ability to integrate with other systems so that we’ll know when and where a product comes from. Think about that for farm-to-table or sea-to-table. Our product has the ability to make that information more accessible to restaurants and therefore to customers.
How relevant is this service to smaller operations?
In a funny way, the smaller you are, the more you benefit. There’s an age-old phrase in the food business that “sales solve everything.” At The Cheesecake Factory, we were doing close to 18 million dollars a year, so when an order was wrong or a waiter dropped a bottle of wine, sales covered up some of those mistakes. Well, I would argue that the smallest of restaurants, they have to be much more conscious of any mistake. They have to focus even more on how their purchasing habits impact their spend. So it’s really valuable for them.
And at the busier establishments, they see the exact same type of value but it takes them from being a revenue generation machine to a profit-machine. This program is about increasing profit.
Do you want to know if you qualify as a fit to be a Nix86 partner? Ask yourself if you order from more than one supplier. If the answer is yes, then you are a perfect fit.
How does a restaurant, bakery or bar purchase it?
It’s a subscription based model. And we’re a mobile application. We’re cloud based. So it’s accessible anywhere you have access to the internet. Our tablet app provides online/offline capabilities. Think about a chef walking into a freezer to order product. He doesn’t want to stand there a long time and also is unlikely to have internet access in the freezer.
There is a monthly subscription fee, however, we are offering free trials to experience it the immediate benefits of Nix86.
Do you have competitors up and running?
The landscape is very green right now. This type of technology and thinking in new to the industry. There are a few other companies out there that touch upon some similar areas of our business. Many are complementary tools, and further proof points to the time being now for this type of technology infusion.
Honestly, for now the biggest competitor is pen and paper, the phone. This is new to the industry. The back of the house is always the last to get the infusion of technology. The restaurant industry has been a long-term holdout. But now restaurants have Wi-Fi. Restaurants are spending more money today on this technology than they spent last year.
How is information technology changing the food business?
Traditionally when people think of it, they jump first to front of the house. POS systems. Reservation systems. Online ordering for customers. We’re starting to see kiosk ordering. The technology is there but it’s been slower to hit the back of the house.
Why is that?
Change is scary. When you have been running a restaurant forever, when you have family recipes that you’re proud of – bringing in technology and change that wasn’t available when you first started – that can be intimidating. People feel they know their business well enough to “survive”. Of course, you want to be passionate about what you do, but what good is that passion if your doors aren’t open? This isn’t meant to be a scare tactic, but the reality is this is a cut throat industry and every penny matters. You need to make money to stay in business.
Making great food and being loved by our customers is something you strive for. But what tech does – or should do – is remove inefficiencies from manual tasks and allow restaurants to focus on what matters; great service, the best possible kitchen, flawless execution of the operation. This is to support that. Think about it, a restaurant that has moved to a digital POS would never give it up.
Could today’s technology change what is offered to customers? And if so, how?
Yes! There are so many examples of this, and Nix86 is, of course, one technology helping with this shift – think of access to new products.
Recently went to a supplier who invested half a million dollars in a precision laser cutting machine. It is so precise that it can cut within an eighth of an inch in perfect accuracy. That type of information for a chef is huge. Think about it. By nature, food changes in the cooking process. If you order an 8-ounce filet, by the time it is cooked, it’s 6.75 ounces. If you were a chef working with this particular supplier – he could ask you when the fillet he delivers hits your table, how many ounces do you want it to be? If you want it to be 8 ounces, then that supplier can use his precision cutter to deliver you slices that are 9.25 ounces to take account of what you’ll lose in cooking. That really impacts recipes and preparation.
Describe the actual process a restaurant manager/chef goes through to adopt Nix86?
Getting up and running is designed for simplicity. First, we are an app. That means we built it to be user-friendly, simple and very intuitive. And each partner of ours has a dedicated account manager assigned to them. All the backend work to buildout and setup an account is handled by us, and we simply need to collect some key information from our partners so we can get them started.A potential customer can go from expressing interest to placing their first order in 24 hours or less.
What is the most interesting learning you've had from those who have adopted?
The resounding response we got from the supplier side. Initially, we thought that restaurants be the ones to pull their suppliers into this system. In fact, the suppliers are pushing just as hard to get all of their restaurants into it, as well. Each day we have seen faster and faster confirmation replies, enhanced communication between suppliers and their customers, and strengthened relationships. That’s a true network effect. The buzz is happening, traction is growing, and both sides want to participate. Next is getting it into the hands of all participants even faster.
Final questions, what most excites you about the food business today?
I’ve been in this industry my entire life. It’s a really easy industry to experience as an outsider but when you work in the industry there’s a fraternity of sorts. I love to cook. The feeling I get when I serve something I’m proud of, there’s something very spiritual and holistic with being surrounded by people and food. I’m deeply passionate about this industry. There’s something about the ever changing inconsistent unpredictable element of running a restaurant. Operationally there’s nothing like it. But the average new restaurants last 18 months or less. The reason restaurants close so often has as much to do with what goes on in the back of house as in the front. It's great to be part of a team that's actually helping the back of the house prosper, too.
Here's a link to the video that details the Nix86 platform.
(NOTE: Also note, Alex has the following offers for our audience: "any food industry professional who reads Stir the Pots and tries Nix86, besides getting their first 3 suppliers in the system for free, should they decide to upgrade to the full system within 3 months, we will give them 50% off our monthly subscription. Just mention Stir the Pots when you get in touch with us."