A Conversation with Marc Lore at Strictly VC NYC 2024
Wonder's Business Model and Operations
- Marc Lore's company, Wonder, has a unique business model that involves a 2,800 sq. ft. kitchen where 30 different restaurants can be operated, offering 600 unique meals across various cuisines, from fine dining to fast casual (1m28s).
- The model is vertically integrated, with the company owning all the restaurants and the delivery process, allowing for a great customer experience, fast delivery, and the ability to order from multiple restaurants in a single checkout (1m48s).
- The company has several dozen stores in the Northeast US and plans to have around 100 by the end of next year, with a focus on less densely populated areas where the model works well (1m2s).
- The stores are designed to look like high-end fast casual restaurants, with seating, pickup kiosks, and a kitchen in the back that uses only two pieces of electric cooking equipment, with no hoods, gas, stoves, or flames (2m20s).
- The company has systematized the cooking of 600 different meals across various cuisines using the same equipment platform, allowing for flexibility in adding or removing restaurants from a location without expense (2m42s).
- The cooking process starts elsewhere and is finished off at the store locations, eliminating the need for exhaust fans and allowing for the use of electric equipment only (3m18s).
- The company can cook a wide variety of dishes, including steak, pizza, and seafood, to perfect temperature and quality in a short amount of time (3m26s).
- The business model is data-driven, leveraging Marc Lore's background in data analysis to inform decision-making and optimize operations (3m41s).
- Wonder, a company that has incorporated around 300 people, with a total of over 1,000 people including those working at the restaurants, has figured out the process of providing high-quality food quickly and efficiently after six years and a billion dollars of investment (4m11s).
- The company has systematized the process, allowing for meals to be cooked quickly, such as pizza in 88 seconds, pasta without water, and rock-fried Chinese food without a wok (4m34s).
Wonder's Market Presence and Competition
- Wonder has 31 locations in the New York Metro area, covering most addresses in Manhattan, Westchester, and Northern New Jersey, with plans for further expansion (5m10s).
- The locations are doing three times the volume of an average fast-casual restaurant, with 50% of customers picking up their orders and 50% opting for delivery, and only a few percent dining in (5m50s).
- Wonder competes against various companies, including Cava, Chipotle, ghost kitchens, and Cloud kitchens, but primarily targets customers seeking high-quality food experiences with dependable, fast, and good value options (6m11s).
- The company's vertically integrated model allows it to maintain full margins on food and pass the savings on to customers, resulting in lower prices compared to traditional restaurants and delivery platforms (6m31s).
- Wonder's prices are sustainable, with the company offering high-quality food at lower prices than traditional restaurants, such as a $35 steak filet that would cost $55 in a restaurant or on a delivery platform (6m39s).
- The company's vertically integrated model also enables 95% on-time delivery within a 5-minute window, ensuring hot and fast food delivery (7m4s).
- The business model allows for high margins, with food costs only in the 20s as a percentage of revenue, enabling the company to offer good value and deliver it to customers at a better price (7m37s).
- The tight delivery radius and higher average order value help reduce the cost of delivery and improve the overall value proposition (7m55s).
Wonder's Focus on Food Quality
- The company focuses on quality, with a system in place to ensure consistency across locations, and chefs working to improve dishes with taste scores below 8.8 out of 10 (9m1s).
- The company is maniacal about quality, with chefs reviewing taste scores and comments daily to make improvements and increase quality over time (9m3s).
- The food quality is comparable to or better than what can be found in top restaurants, with dishes like barbecue and fried chicken made to match the quality of well-known regional specialties (9m31s).
- The best-selling items vary by market, but top sellers include Tas brisket, Bobby Fil-A steak, burgers, pizza, and fried chicken (9m52s).
- The company has 31 locations, with each location serving a few hundred meals per day, totaling around 10,000 meals per day (10m22s).
Wonder's Expansion Plans and B2B Business
- The company aims to be like the Amazon of food and beverage, with a range of services including Wonder, a delivery network, and licensing deals to license its tech to sports arenas and other businesses (10m46s).
- The company has a B2B business, including licensing deals with sports arenas and a partnership with Walmart to open smaller Wonder locations inside Walmart stores (11m4s).
- The company also sells its ovens and food to stadiums and arenas, including Yankee Stadium (11m23s).
- A business model is being developed where food is cooked quickly using white-label equipment in various locations such as stadiums, arenas, hotels, and hospitals, with the goal of providing consistent, high-quality food at a great price, and it is expected to become a huge business (11m32s).
- The equipment used is compared to Amazon Web Services (AWS), as it is a significant investment in technology that can be sold to other businesses, and it is anticipated to generate substantial revenue (11m37s).
Wonder's AI-Powered Future
- In three to five years, the biggest business for Wonder is expected to be its AI-based meal planning and food delivery service, which will be able to deliver food in various ways, including cooked meals, delivered meals from local restaurants, meal kits, and groceries (12m20s).
- The AI system will be able to track users' food preferences, health goals, and allergies, and provide personalized meal recommendations, with the ultimate goal of becoming the "Super W for Meal Time" (12m42s).
- The AI system will be able to integrate data from wearable devices and blood tests to provide tailored meal recommendations and manage users' health, with the goal of making healthy eating easy and convenient (12m51s).
- The AI system will be able to learn users' preferences and adapt to their changing needs, with the goal of becoming a trusted companion for meal planning and food delivery (13m38s).
- The platform will be able to deliver food in various ways, including cooked meals, delivered meals from local restaurants, meal kits, oven-ready meals, restaurant reservations, and groceries, with the AI system providing personalized recommendations and guidance (13m47s).
- The goal of the platform is to make healthy eating easy and convenient, and to provide users with a sense of freedom and flexibility in their meal planning and food delivery options (14m42s).
- The biggest pain point in daily life is figuring out what to eat for dinner, which led to the idea of creating a platform that can manage what people eat and their health in a way that has never been done before (15m1s).
- The vision for the platform was big from the outset, but the right strategy to achieve it was not clear, so it was built over time by molding and shaping the business like a piece of clay (15m36s).
- The vision was broken down into component pieces, and it was not possible to do everything at once, which is why acquisitions like Blue Apron and GrubHub were made to build a super app platform (16m11s).
- The acquisition of GrubHub provides access to 375,000 restaurants on their platform, which would have taken 10 years and a lot of money to achieve otherwise (18m6s).
- The GrubHub acquisition also brings other assets, such as a great college program, Seamless, and a presence in 10,000 businesses, which can be leveraged to bring a first-party offering to those businesses (18m16s).
- The acquisition of GrubHub also helps to solve the cold start problem on the delivery side by providing order density and allowing Wonder to build off of GrubHub's existing delivery network (18m34s).
Wonder's Acquisition of GrubHub
- The decision to buy GrubHub was not based on it being a standalone business, but rather on the synergies between the two businesses and the potential to create a super app platform (17m31s).
- The purchase price of GrubHub was lower than its previous valuation, but the acquisition is seen as a strategic move to build a comprehensive platform rather than just buying a standalone business (17m27s).
- The Wonder and GrubHub partnership accelerates Wonder's growth while providing GrubHub with a unique assortment of Wonder restaurants and multi-restaurant ordering capabilities (18m40s).
- The partnership offers shared synergies on the back end, including tech platforms and service support areas (18m52s).
- On a standalone basis, buying Wonder would be much harder and less attractive (19m5s).
Wonder's Strategy and Differentiation
- The goal is to become the "Amazon of food and beverage" by employing the Amazon playbook of first-party to win third-party (19m25s).
- This strategy involves building infrastructure, focusing on first-party customer experience, and then offering third-party options (19m30s).
- Wonder is not a traditional ghost kitchen, as it is located in the heart of where people live, has seating, owns its own app, and owns its own delivery (20m40s).
- Wonder owns the customer relationship and the restaurants, and is not just licensing brands (21m4s).
- Wonder is more like a restaurant group that owns a chain of restaurants in every vertical, with 30 restaurants in one location (22m7s).
- The only similarity with ghost kitchens is having multiple restaurants in the same location (22m3s).
Wonder's Financial Vision and Growth Strategy
- The goal is to have a vision for the customer, business, and financial outcome, working backwards from a set target, such as a $30 billion valuation by 2026-2028, which has now increased to $40 billion with the GrubHub deal (22m28s).
- Having a clear financial vision helps determine how much capital is needed to raise and how fast the company needs to grow, as well as ensuring the Total Addressable Market (TAM) and margin profile support the desired multiple (23m33s).
- A "capital plan" is essential, mapping out each round of financing, valuation, and what to do with the capital, making sense to investors, which is part of the VCP framework: Vision, Capital, People (24m1s).
- The goal is to double the amount of money raised and double the share price with every round, every 18 months, as a guiding principle, which has been close to achieved in previous companies (24m16s).
- The GrubHub deal was part of the calculation in terms of raising revenue, which would help raise the next round or close the next round, serving as a catalyst (24m55s).
- Getting a company public is important for providing liquidity for shareholders, and it's a natural part of the plan when raising capital, with the goal of eventually going public, such as through an IPO (25m41s).
- Going public is a milestone that signifies a company has met the bar to be considered for an IPO, but it's essential to work backward from the IPO and consider factors like financial decisions for shareholders and the company's vision, (25m48s).
- When considering an acquisition offer, it's crucial to assess whether the decision aligns with the company's vision and whether it's the right time to make a move, as seen in the case of Walmart's acquisition of Jet, (25m59s).
- In contrast, selling a company like Amazon can be a harder decision, as it may involve sacrificing the company's vision for financial gain, (26m36s).
Wonder's Approach to Scaling and Execution
- The biggest challenges in building a company include execution, people, culture, and organizational structure, particularly when scaling rapidly, (27m50s).
- Execution relies heavily on people, and it's essential to have the right foundational elements in place, such as a strong culture, organizational structure, and performance management system, to recruit, retain, and motivate top talent, (28m5s).
- A well-designed performance management system, compensation system, and set of behaviors, values, and mission statements are critical in motivating people to give their best, (28m45s).
- Organizational structure is another underrated but essential aspect of building a successful company, and it's crucial to get it right to support rapid growth, (29m31s).
- The company is expanding rapidly, with plans to open 70 new locations in the next 15 months, including 15-20 locations on Long Island by the end of next year, (27m24s).
- To scale a company quickly without falling down on execution, it's essential to have the right people in the right spots with the right level of accountability and ownership, which also contributes to their happiness (29m47s).
- Marc Lore recently hired a new COO, Tony, who previously headed the grocery department at Amazon, and believes he will be an incredible addition to the team (30m1s).
Marc Lore's Vision for AI in Health and Sports
- Marc Lore is part of the ownership group of the Minnesota Timberwolves and is implementing an AI system that advises players on their nutrition, with the goal of improving their health and performance (30m30s).
- The AI system is so advanced that players are not allowed to eat anything unless the AI recommends it, and Marc Lore believes this approach can be applied to other sports franchises (30m42s).
- Marc Lore thinks AI can help change the world by making people healthier and happier, and that food is medicine if people give AI agency to make decisions for them (31m3s).
- AI can monitor a person's system every day and provide personalized recommendations based on their preferences, dietary needs, and health goals (31m43s).
- Marc Lore is actively working towards creating a future where AI helps people make healthier food choices, but acknowledges that it will take time to build and perfect the system (32m42s).
Development and Potential of the AI Health System
- Marc Lore is currently testing the AI system himself, using his aura ring to track his health and receive personalized food recommendations, with the goal of creating a seamless and intuitive user experience (33m22s).
- A system is being developed that uses data from various health monitoring devices, including an Aura ring, blood glucose monitor, and blood pressure monitor, to provide personalized health recommendations (33m24s).
- The system also takes into account data from blood tests, stool tests, saliva, and food sensitivities to identify potential health issues, such as vitamin deficiencies or heavy metal exposure (33m34s).
- The system is designed to be automated, using AI to analyze the data and provide recommendations, with the goal of eventually being able to operate independently (33m56s).
- The AI system is currently being used to provide personalized meal planning, taking into account the individual's food preferences and dietary needs, and is able to learn and adapt over time (34m3s).
- The system is able to provide a wide variety of meal options, and is able to remember the individual's favorite dishes and avoid serving them too frequently (34m31s).
- The system has the potential to greatly improve public health, by identifying and addressing food-related health issues, such as celiac disease, food sensitivities, and allergies (35m25s).
- The system could also be integrated with food delivery services, such as Wonder, to provide convenient and healthy meal options (36m14s).
- However, there are also potential risks to consider, such as cross-contamination of food, particularly for individuals with conditions like celiac disease (36m54s).
- The system's ability to provide personalized meal planning and recommendations has the potential to greatly improve the health and wellbeing of individuals, particularly those with food-related health issues (36m0s).
- Wonder's AI platform can accommodate individuals with dietary restrictions, such as Celiac disease, by sending meals from gluten-free restaurants or grocery stores, and even providing ingredients to make safe meals at home (37m19s).
- The platform's AI can detect inflammatory reactions to certain foods and make recommendations to avoid them, potentially identifying issues like Celiac disease faster than a doctor (38m22s).
- The AI can also help rebuild and maintain a healthy gut biome by suggesting specific foods and supplements, such as quinoa (38m59s).
Marc Lore's Leadership Style and Company Culture
- Marc Lore's leadership style focuses on the concept of VCP: Vision, Capital, and People, and he spends time with his leadership team reviewing and refining the company's foundational elements, including strategy, structure, and values (40m5s).
- Lore believes that there is no one "right" way to lead, and that different leaders may have different approaches, unlike Brian Chesky's "founder mode" (39m55s).
- Lore's approach involves regular meetings with his leadership team to stay on top of the company's evolving strategy and vision, and to ensure everyone is aligned and understands the nuances of the company's goals (40m47s).
- A well-structured organization with a clear mission, performance management, and compensation system is crucial for success, and having everything laid out and visible to all team members helps to ensure everyone is aligned and working towards the same goals (40m57s).
- When team members are fully aligned and understand the nuances of the strategy and vision, they can be given the autonomy to make decisions and take actions without needing direct involvement from leadership (41m25s).
- It's essential to hire the best people and put them in the right work structure, allowing them to understand the strategy and vision, and then giving them the freedom to execute (41m30s).
Marc Lore's Approach to Hiring and Talent Acquisition
- Hiring "rock stars" is critical, but it's impossible to determine if someone is a rock star in a one-hour interview, and more often than not, people who talk a good game may not work out (42m33s).
- A pattern has been observed in the resumes of superstars, which typically show a demonstrable level of success in every job, including multiple promotions, staying at a company long enough to get promoted, and making significant moves between companies (43m13s).
- Superstars tend to move upward and not laterally, and they don't move from a good company to a bad one, as bad companies often need to pay more to attract people, which can lead to attracting those who are motivated by money rather than excellence (44m1s).
- When evaluating potential hires, it's essential to look for a pattern of success in their resume, and if they have a "superstar resume," it's likely they will be a superstar, but it's still necessary to assess their behavior, culture values, and alignment during the interview process (43m32s).
- A resume that shows a pattern of promotions and big jumps is highly valued, as it indicates a "Superstore" employee who can drive success, and such individuals are willing to be compensated highly for their skills (44m24s).
Wonder's Performance Management System and Employee Growth
- Building a company with a team of "Superstores" requires a performance management system that clearly outlines what employees need to do to get to the next level, which is especially important for Gen Z employees who want to know how to get promoted every six months (45m8s).
- A Taekwondo-based Performance Management System is used, where employees can get promoted every six months for the first six years of their career, and the system uses taekwondo belts to track progress, making it motivating and transparent (45m17s).
- The system is transparent, with everyone in the company knowing what everyone else is making, and promotions are not a "black box" (45m50s).
Marc Lore's Perspective on Risk-Taking in Startups
- People often underestimate the risk of the status quo and overestimate the risk of making a change, especially in startups, where being objective about the risk spectrum is crucial (46m26s).
- Startups have a high risk of failure, and founders need to be aware of this and be willing to take risks to succeed, as the probability of failure is often high, such as 80% (47m40s).
- When making decisions, it's essential to consider the risk spectrum and take calculated risks to reduce the risk of failure, as doing nothing can be the most significant risk of all (47m47s).
- In a startup environment, taking risks is crucial, whereas in a big company like Walmart, the focus is on incremental improvement, and there's no incentive to take risks (48m6s).
- People often don't consider their position on the risk spectrum when making decisions, and even law firms may not fully understand the risk tolerance of their clients (48m26s).
- Lawyers may advise against taking risks due to legal concerns, but the business risk of not taking that risk may be higher, and it's essential to weigh these factors (48m40s).
- When evaluating risks, it's crucial to consider the potential consequences of not taking action, as doing nothing can be the most significant risk of all (48m50s).
- Every day, decisions are made that involve taking calculated risks to reduce the risk of failure, and it's essential to approach these decisions with a mindset that sees opportunities in taking risks (49m6s).
- Marc Lore appreciates the opportunity to discuss risk-taking and is eager to continue taking calculated risks with his company, Wonder (49m42s).