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In a groundbreaking week for the hospitality technology sector, Branded, a pioneering company focused on technology and innovation in the hospitality industry, has announced significant growth and strategic transactions.

Beginning with Branded's investment philosophy, the firm prioritizes emerging companies that work closely with operators to optimize margins and tackle important pain points and opportunities. These companies, referred to as 'operator-centric', are expected to lead the way in the ongoing digital transformation of the sector.

Branded stresses the importance of taking care of staff at technology and innovation companies, enabling them to support operators effectively, just as hospitality businesses prioritize their staff for the sake of their guests.

The company's convictions about the hospitality industry and its focus on being tech-enabled and tech-supported, while prioritizing the immediate needs of guests, have been reaffirmed this week. The firm maintains that perfection should not stand in the way of good enough when it comes to their technology stacks, as they are not in the technology business.

Branded's assertion that 'best-in-suite' will triumph over 'best-in-class' is challenged by their commitment to investing in point-solutions or 'features'. This approach stems from their belief that acquiring 'best-in-class' technology may not yield the desired results for a 'best-in-suite' platform, as companies will need to either build or buy to achieve this status.

With a positive market consensus and forecast for the mergers and acquisitions (M&A) market in 2024, Branded fully supports this outlook. The increased M&A activity seen in Q1 2024 confirms these predictions, as the industry's consolidation is deemed beneficial by operators. A significant backlog of assets needing to trade, stemming from operators holding onto assets during the 2023 valuation collapse, also contributes to the M&A market's momentum.

Research reports from major financial institutions point towards an increase in deal volumes of 10% to 12% in 2024, following a decline of 8% to 10% in 2023. However, the industry remains below the 2021 high watermark, with volumes still down between 25% to 35%.

While larger financial institutions primarily focus on transactions above $100mm and are industry-agnostic, Branded, a specialist in the hospitality industry, highlights the need for more unified and simplified digital solutions. This is particularly important in the light of growing guest optionality, fierce competition, and the focus on meeting guests' needs in a digitally transformed industry.

Payments are a crucial but often undervalued part of the business, serving as a precursor to analytics, data, personalization, loyalty, and margin optimization – key factors in a winning strategy in the hospitality industry.

A study by SmartBrief reveals that 76% of foodservice operators believe that technology is a key driver in business competition and relevance, a statistic Branded credits to CEO Gregg Majewski and his team at Craveworthy Brands. An additional 75% of restaurant operators plan to adopt new technology in 2024 to address labor and cost challenges, according to PYMNTS in collaboration with Ingo Money.

As the digital transformation gathers pace, hospitality operators are increasingly demanding bundled and integrated solutions. This trend signifies a shift from the fragmented industry of the past, with numerous tech-stacks piecesmealed together. Today's operators require a more straightforward and unified tech-stack, as the industry moves towards a high-stakes game of 'musical chairs' where technology companies must come together to create the unified tech-stacks the industry is craving.

Branded cites several transactions and partnerships as evidence of this consolidation trend. Highlights include the acquisition of employee training specialist ExpandShare by back-office powerhouse Restaurant365, and the strategic partnership between Curbit.ai and Olo. These developments underscore the consolidation and integration happening in the emerging and early-stage segment of the hospitality industry's technology ecosystem.

In a nod to the array of exciting developments, Branded CEO Jimmy Frischling expressed his enthusiasm for the week's action and announcements by several portfolio companies, which inspired the theme for this week's 'Top of the Fold'. He concluded by emphasizing that, regardless of the challenges, technology companies driving value for operators, demonstrating strong sales growth, and offering competitive pricing, will continue to garner investor interest and funding.

1. Branded prioritizes operator-centric companies, aiming to optimize margins and address critical pain points in the hospitality industry.
2. The company believes that technology and innovation in the hospitality sector are essential for improving guest experience, and their investment philosophy aligns with this belief.
3. Taking care of staff at technology and innovation companies is crucial for Branded, as they enable operators to be effective in serving guests.
4. The company strives to create technology stacks that are good enough rather than perfect, as they are not primarily focused on the technology business.
5. Branded supports the increasing M&A market, which is predicted to grow by 10% to 12% in 2024 following a decline in 2023.
6. Despite an increase in deal volumes, the hospitality industry's M&A activity is still below the 2021 high watermark.
7. Large financial institutions tend to focus on transactions above $100mm and are industry-agnostic, while Branded emphasizes unified and simplified digital solutions within the hospitality sector.
8. As the digital transformation continues, foodservice operators are increasingly adopting new technology to address labor and cost challenges, with 75% planning to do so in 2024.
9. Operators are demanding bundled and integrated solutions, signifying a shift from the fragmented tech-stacks of the past, with Branded citing acquisitions and partnerships as evidence of this consolidation trend in the hospitality industry's technology ecosystem.

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