Interview: Engineering Seamless Experiences For Physical Retail
John Miller, CEO of Cali Group, talks about developing retail tech, like robotics and facial recognition, to reduce friction in the customer experience
For a number of years, brands and retailers have been looking to leverage interactive technologies in stores. Often, they have struggled to find a clear purpose for tech in brick and mortar but that hasn’t stopped innovative companies from exploring how tech can deliver seamless retail and remove friction along the purchase path in physical stores.
PSFK founder and editor-in-chief Piers Fawkes spoke to Cali Group CEO John Miller for a podcast on seamless retail experiences. In this extract from their conversation, John shares describes how Cali Group proves out concepts, like facial recognition for payment and loyalty programs, at its CaliBurger restaurant chain as a way of introducing new tech to the retail space at large.
John: Cali Group actually is a family of companies, CaliBurger just being the restaurant operating division that we use to prove out the new concepts. Then once we prove them out at CaliBurger, we can raise additional capital to these separate companies that we’ve set up to widely commercialize and deploy the technologies across the entire industry.
Our view is that there’s obviously a lot of pain right now in the restaurant industry, and the retail industry at large. That’s driven by changes in the labor market and the growth of delivery, which is having an impact on profits and free cash flow as more and more people want to eat food made by restaurants, but eat it at home.
At the same time, there’s all these new technologies that are coming online that can be used in the physical world. Internet of Things, artificial intelligence, machine vision, machine learning, robotics—tons of infrastructure and capital have gone into deploying those technologies in the transportation industry for autonomous vehicles.
There’s a convergence of these two trends: the pain being felt in the restaurant industry, and the need for new technologies to make retail operate more like digital companies in terms of seeing customers, automating things, and at the same time, the accessibility of those technologies and the ability to actually put them into practice.
Our model is to understand the problems, look at the technology out there for a solution and prove it out at CaliBurger. Then we provide capital and invest in these things, but we also bring in outside capital partners for each of the different deals.
Piers: Did you start in burgers and back out of that, or was there always the intention of creating this technology investment company and using CaliBurger as a real world incubator?
John: We started the restaurant business first so that we could actually understand what it’s like to actually operate, and what the problems are. It’s one thing to talk to people and speculate. It’s another thing to actually try and operate a restaurant. It is so hard, and so different from software and hardware, which is where we came from.
Step one was to actually spend some time building and operating restaurants. Then step two was to launch the whole Cali Group initiative with all these technology projects. Our backgrounds were in technology, so we always came into this thinking that there was probably a big opportunity to innovate in the restaurant industry.
Someone from 50 years ago might walk into a kitchen today in a restaurant and know exactly what to do. Not much has changed. There are few industries like that in the world that haven’t really innovated a whole lot. There are lots of things that can be done.
We’ve always had that vision of applying technology to restaurants, but it started with the restaurants themselves, and operating those for a couple of years before we started investing.
Was it one bad burger experience that made you think about this?
No, it was just the difficulties—consistency in trying to manage multiple restaurants in different places, and managing people. It’s a tough business. You’ve got all these fixed costs, you’ve got tough variable costs and inventory that expires pretty quick.
Today, we look at all these different things going on. We see there are opportunities in delivery. There are opportunities for in-store entertainment. There are opportunities for automation in the kitchen.
There are opportunities for using camera systems to see customers like Amazon sees its customers. You’ve seen the facial recognition for loyalty and payment. We’re using AI algorithms to predict what sales are going to be in the near future so that we can schedule labor and food ordering accordingly.
There are many, many different components of the restaurant business and, actually, retail in general. A lot of the stuff we’ve invested in applies to retailers outside of restaurants. We’re looking at the whole thing, and picking apart each of the different paint points and what we might do to solve them.
You have deployed consumer experience technology, which is the facial recognition that remembers your previous orders. Can you talk about the motivation behind that?
Our bigger investments have been in interactive gaming. On the face piece, the idea is that everybody has a loyalty program, but loyalty programs in general don’t have a whole lot of participation in use.
It’s just a pain. You got to come in and remember to swipe a card. There’s friction. You have to type something in. The initial idea was, how do we create a frictionless loyalty program, where you just walk up and your loyalty account gets pulled up right there? You don’t even have to think about it.
That was the starting point: to get more people using our loyalty program because it becomes so seamless and convenient. We did that, and then we started looking deeper into face-based payment. We think there are a lot of benefits there for the customer, that in the future, you can walk up, and you don’t need to pull out your wallet.
You don’t need to have your credit card. You can quickly complete a transaction without having to swipe anything. The security surrounding face payment, we believe, is going to be better than plastic swipes. It’s a lot harder to steal a face than it is to steal a piece of plastic and use it.
For everybody, that’s going to reduce credit card processing fees. For merchants, that’s good. For customers, that’s good. In general, we’ve seen the younger customers really appreciate this. They also like the idea of being able to have some tailored experiences.
If we know who’s coming up into our restaurants, and we can see that person, then we can do things specific to that person that makes them feel a little more special. We have a bunch of ideas there.
We launched the pilot on loyalty late last year. We just launched payment a few weeks ago. We’re gathering lots of data now and collecting customer feedback. There are a fair number of customers who don’t like it, particularly people that are older, saying, “Hey, I don’t want my picture taken.”
Younger people generally don’t seem to mind, and they think it’s pretty cool. Of course, Apple’s paving the way for a lot of this with the iPhone. It’s early, and there’s still a long way to go for us to really know how it’s all going to work out.
There are a lot of reasons to believe that face authentication is going to be a big thing. You can imagine lots of other offline face authentication mechanisms—like I go to my gym and, instead of having to swipe my card to get in, I just walk past the camera, and the camera authenticates me with a face gateway in the cloud.
Like I said, so far, we’ve talked to a lot of customers about it. Our target customer for CaliBurger is a 19-year-old male. It’s a nice testing ground, because that’s who eats cheeseburgers.
That’s the customer that’s pretty comfortable with this kind of stuff, who’s not too worried about privacy and their face being in the system to authenticate because they’ve grown up with cameras on their phones and pictures all over the internet. I think we have pretty good evidence that younger people are going to embrace this technology.
The big push in the next few weeks is going to be with our robotics. We’re launching the first robot to automate the grill at our Pasadena location, Flippy. We have a vision of a suite of robots that can do all sorts of things in the restaurant and really change the experience.
Then we could send a lot more people out to the dining room and totally change the customer experience by taking the QSR chain system and making it like casual dining. We’ve got people out refilling drinks and interacting with customers, who are paying really low prices for high quality food.
The robots aren’t going to take away people’s jobs. They’re just going to give them more interesting jobs.
Right now, for us, the pain point is not minimum wage as much as it is turnover. If we can just reduce the amount of turnover by making people enjoy their job more, then that’s a huge thing. The way we do that is to say, “Hey, you don’t have to work on the grill anymore.”
People just don’t like working on the grill. It’s hot, greasy, dirty. It’s hard. I don’t know if you’ve ever scraped a grill. It’s really hard work. It’s just not fun.
If we can say, “Hey, you know what? There’s a robotic system that’s going to take care of everything on the grill. This particular position in our unit model will now be freed up to go play video games with guests using our FunWall gaming system, and interact with guests,” I think that’s going to be good for everybody.
It’s good for the operator. It reduces the opex on training and retraining. The guests have more human interaction. There are also other benefits, like how the consistency of the product is a lot greater with a robotic system, and safety benefits.
I think the less humans touch these fresh protein products, the more comfortable the public’s going to be. In the future, we’ll actually have pathogen detectors integrated in the robotics, so you can sense for things like E. coli.
We’re very aggressive. We just closed another round of financing last week for a company we have, under the umbrella called Miso Robotics, that’s pushing forward very quickly to deploy these things in CaliBurger restaurants.