Issue #69: The Franchise Food Chain

A big congratulations to everyone who ran the NYC marathon today. What an achievement! (Also, one of the best days in NYC each year!) Plus, retail is PACKED today.

Issue #69: The Franchise Food Chain

Each week, I create a new Notion doc from my template and populate it with ideas, articles, and trends I see each week. Oftentimes, the notes are in the form of a question I want to answer. This week was no different, as the question that came to me was “how do franchises get their food? Is there overlap with other competitors?”. Turns out, I was not the only one wondering these questions, as this week, a couple of tweets went viral on the subject of franchise supply chain. It seems that consumers are not happy about the overlap in the supply chain between restaurants. Here is one example:

Turns out, most of these products have been coming from Sysco. So what is Sysco? Sysco is a food distributor company that dominates the restaurant industry as a supplier to many restaurants since its start in 1969. In 2025, it did $81B in revenue. That comes from restaurants, but a big portion is healthcare, sports, schools, bars, and more. A common misnomer is that they only serve QSRs and Fast Food, when in fact a lot of fine dining restaurants are buying from Sysco, too. Like many super-efficient supply chain companies, they have gotten as many customers as possible. Sysco sells the chain restaurant frozen mozzarella sticks they reheat, and the three Michelin star restaurant the raw ingredients to make a single $100 mozzerella stick. Additionally, Sysco’s core value proposition is that it is a company that moves products that are super hard to move around (perishable and frozen). So, for some of these larger establishments, they may be supplying proprietary items, but just through their distribution network. It is hard to know exactly who their clients are (both sides keep it secret-ish), but walking around, you will see plenty of their trucks parked outside a variety of food establishments. Some other common restaurant distributors are US Foods (national) and Baldor Foods (northeast/NYC), although for the higher-end restaurants, they tend to get their dry grocery from Sysco and more perishable items (produce, meat, etc.) from more local suppliers.

As a retail nerd, one thing that fascinates me here most is the ability to service such a wide variety of products and clients. You have to deliver fresh, frozen, and ambient products all to the same location. Then on the delivery side, you have such a variety of locations you deliver to. Some may be small restaurants with a couple of hand trucks a day, all the way up to stadiums receiving pallets at their loading docks. What a fun logistics puzzle! Trust me, not one you want to solve either.

Taking a step back, I believe there are key insights that can be extrapolated from this discourse from a macro POV, since I think this pushback illustrates how current consumer sentiment has shifted. Most restaurants have been operating this way since the 80s and 90s. There is definitely a lot Sysco could do to assuage these concerns, but what changed now? What changed is the consumer behavior. People are faced with reduced spending power, want to get value for their spending, and all this is happening while restaurant food prices are going up to consumers. Consumers do not like paying more for essentially a product they could have re-heated from the frozen section of the grocery store. For retailers, this sentiment is tough because margins are already super compressed in the industry, and the last thing most places want to do is raise prices. However, my recommended solution would be to focus on the service and experience, making this the best experience ever. Part of retail will always be the product, but the other part will be the service. Don’t neglect the service!

Estee Lauder Launches Shopify Partnership

Estee Lauder is the second-largest cosmetic company in the world. Like most cosmetic companies, they do not have traditional retail stores. Instead, they have stores within stores in department stores, airports, malls, and more. The biggest benefit of this setup is the lower costs and reduced need to market, since the bigger store is driving the marketing. On the other hand, it is much harder to have a relationship (aka get customer data) with the customer, since the sales mostly flow through the bigger store. With the rise in eCommerce, a shortcut has emerged to build that relationship with the customer. Especially in beauty, which has many of the factors for a successful eCommerce product: high frequency use, high margin, and small items. Estee Lauder already has an eCommerce presence, with a very hard-to-find Store Locator for retail, but they want to get “real-time data, insights and AI-driven capabilities - enabling us to be more agile, meet our consumers where they are, and deliver breakthrough personalization”, according to their CTO. Currently, it seems that they use a custom solution, which is probably more expensive than Shopify as well. I am always hesitant about these types of announcements that come up around quarterly earnings, as they might just be a way to generate positive PR. However, a launch date of Q1 2026 was shared, so it will be exciting to see the changes (if any).

Chipotle Reports Tough Q3 Earnings

This week, Chipotle reported its earnings, which sent its stock tumbling. The topline was solid, with total revenue and same-store sales both up year-over-year. However, the back-of-the-house metrics, like operating margin and labor costs, got worse, and forward-looking plans were revised to be worse than expected. Unfortunately, this revision marks the third time forward-looking guidance has been revised downward, not a trend you want to see. According to Chipotle, it has traditionally overindexed on a younger customer, who are facing large economic headwinds they expect to persist until Q1 2026. Last earnings call, Chipotle leaned on limited-time offers (LTOs) as a potential solution. I believe that is helpful, but at the end of the day, Chipotle’s main problem is value, not assortment. The innovation may help draw people in here or there, but until Chipotle is able to figure out a value strategy or its core demographics have more disposable income, it will continue to struggle.

Chick-fil-A Gets Into The Breakfast Game

One common trend this year that has burst onto the scene is the further rise of breakfast and beverages. From CosMcs to 7Brew to Dutch Bros, everyone is getting into the game. Now Chick-fil-A is getting into the game too. Unlike Dunkin, Taco Bell, Wendy’s, and others that have chosen to focus on adding it to their current concepts, Chick-fil-A is following CosMc’s in launching a spin-off. As illustrated in the menu above, there are many interesting trends featured on the menu, like cold-pressed juices, plant-based milks, protein, and an interesting assortment of well-priced, on-the-go food items. I am surprised that Matcha is a small portion of the menu, but I expect that is something that will grow as the concept evolves. The restaurant officially opened on October 30th in Hiram, Georgia, about 25 miles northwest of Atlanta. Unlike some of the other concepts, this feels like the first one that targets the dominance in the more premium space Starbucks operates in. It certainly will be exciting to follow along and see how it does.

Fox Invests In Chain

Back in Issue #55, I featured the startup Chain, co-founded by actor BJ Novak, which is a restaurant turning basic branded products into elevated concepts. There are often frequent partnerships with brands and restaurants, all centered around the elevated nostalgia theme. This week, it was announced that Fox invested in Chain via Gordon Ramsay’s studio. As part of the investment, Fox gets a first look (aka right of first refusal) at any media Chain’s media arm produces. This part is super interesting because it is the first that has come out about Chain’s media intentions. Additionally, it seems that Chain is planning on expanding to additional locations, leveraging the capital raised, and expanding beyond its sole pop-up location in LA.

• Summary: Cool Sips is bringing Dirty Sodas to NYC, leveraging small footprint stores and a high-quality hospitality experience. Currently, it only features beverages, but I am assuming that eventually, food and non-soda beverage products will be added.

• My Take: Dirty Sodas are super trendy right now, and it seems that they are here to stay. However, despite their popularity, none of the chains has really permeated the northeast yet. I think this product will do well in the northeast, so it is just a question of who is able to capitalize on and own the market.

• Founder(s): Andrew Moger

• Funding: Unknown

• Number of Locations: 4 in NYC

• Social Media Following: 4k on Insta, 2k on TikTok

Additional Links:

1. Roark Capital owner Nothing Bundt Cakes is exploring a sale (read more here)

2. How is omnichannel going to change according to the NielsenIQ team? (read more here)

3. Amazon announces strong third-quarter earnings due to the success of the cloud computing business (read more here)

4. Consumers are noticing that Candy prices are increasing and adjusting Halloween spend accordingly (read more here)

5. You can now get your Crumbl cookies delivered via drone in Texas (read more here)

6. As fall comes, shoppers are starting to stock up on winter gear and football supplies (read more here)

7. Amazon earnings call highlights growth in perishables in addition to key dry grocery items (read more here)

8. Food giants are starting to sue retailers over Private Label items that are a little too close to the originals (read more here)

9. Kroger expands partnership with Uber for 2026 (read more here)

10. Should c-stores have their own food commissaries? (read more here)

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