Tapping into Profit with Nick Spohn, FLOTEQ USA, Episode 314.

Speaker A: Look, I got. I'd have to say, I don't know why I keep interviewing people from Phoenix.

Speaker B: That's what's happening.

Speaker A: I mean, we even opened an office out there, Nick. We did. We literally have opened an office out there. I think we've got some, some clients that have kind of taken us out there. I'm thinking, you know, I should have come out there to you personally to do, to do the interview about Flotech, because we could have literally sat down in a beautiful bar and watched this incredible system take place. And, oh, by the way, I could have been in 70 degree weather. But you've had a couple, a whole whopping 50 degrees, which no one cares about. Nick, I promise you, it was rough. Yeah, I know. Look at you. You're sitting there, you're tanned. I'm like white and pasty. You know, for those of you who are audio only, you should jump over to watch us on YouTube. You can see Nick's incredible tan living out here in Phoenix as he builds the next, the next great, uh, software technology, uh, startup in, uh, the draft beverage world, which is kind of cool. Um, you know, I did a lot of food and beverage podcasting for years, and I kind of wish I had met you during that. But when I did discover you, I thought, you know what I mean, going to have you down because what you're working on right now is, is really, really where it's at for, um, entrepreneurs who, uh, who are in hospitality, who are trying to make a living in this space. Why did you choose, of all the industries to go into food and beverage, and particularly this kind of niche of, uh, draft.

Speaker B: Well, what they say is, uh, was it necessity is the mother of invention. Right. And, um, I had happened to do some consulting for a buddy of mine in Denver. This was, you know, eight, nine years ago, and he was building a bar and he'd been in the industry a very long time, and he was like, man, just got to figure out something to make this bar more efficient. You know, all this money goes through the bar. It should be our profit center. And it is. It's just not what it should be. And so, um, I talked to one of my other, uh, buddies in a past life that had done some data science, uh, for medical records with hipaa. And I was like, you know, how do we do this data? And how do we, how do we fix draft? How do we fix a bar? Um, and so we did some research and we found out that it is indeed a problem, uh, 30% of all draft beverages are wasted due to theft. Bad environmentals, meaning high pressure, low pressure, temperature, um, lines aren't cleaned. Um, there's just a lot of these variables that have been assumed, uh, just part of the game. Right? So a proprietor, operator, like well we're going to lose drafts so we're going to charge this much money. It's the most efficient thing still. Uh, that's why they keep it as opposed to package. But it just wasn't right. And so with my past experience um, in data, wireless, uh, startups, hardware, uh, service, all that experience kind of came together and then the light bulb went on. I was like, hey, we can do this. Um, and looking at what the ROI would be for an operator, we're looking at 10, 15, 25x for some of our customers. Right. So I don't want to sound like we stumbled upon something that was super novel. It was just very low hanging fruit that just hadn't gotten solved yet. And so um, you know we're, we're solvers over at Flotech and you know, four years ago we went to set out made proprietary devices to get ground zero data in real time, uh, which hadn't existed before. Um, we have a patent pending on that technology and we deliver that system and that certainty of draft, um, you know, down to the second. Um, and we do it at a very low cost and you know, our customers are very happy. But why we got into it was just because if you understand the beer or draft process, it's a four step process that starts at the brewer, then it goes to distributor, then it goes to a bar and then that bar has to sell it. And so you have these four steps and the brewer doesn't know what's actually going through the tap. So the supply chain is kind of broken there. And what the distributor orders isn't necessarily what they sell and what they sell isn't necessarily what gets poured. Right. So Flotech brings that proof of pour and we thought that was necessary to bring to the market. And so with those, I guess tenants and um, kind of mission missions that we had, we put it all in one product and we delivered it. And that's what we're doing today.

Speaker A: And it's for beer.

Speaker B: I mean, did we mention it's for all draft beverages?

Speaker A: Uh, knew you're gonna say that. I know, but like beer is kind of like the, you know, the tail that wags the dog, it, that's kind of where it starts. And of course anything that's tapped, you know, you can kind of get into that. And when you and I are talking kind of offline, what kind of impressed me was that you had this, uh, poor score. And I thought that was kind of interesting because as a, uh, as an entrepreneur, as a business owner, look, there's so much data that comes at us. There's just right, there's actually too much. And I just think that's kind of a really clever way that you looked at all the different, um, variety, um, aspects from you know, temperature, volume and so on. You've got 96 of these and you've kind of boil it all down to a score so they can literally just open, you know, open the app and just kind of see this is, you know, where we're at. And I think it's really clever. Can you explain a kind of typical before and after kind of reaction? Uh, I, because you were kind of telling me some of these stories of these customers and they were just blown away because they were truly just expecting, hey, we're losing 25, 30% off the top. We know it. And you're like, why are you accepting this? You know, you.

Speaker B: Right.

Speaker A: So it was really eye opening for them. So I'm really. So give us the kind of that before and after that these guys are having.

Speaker B: Yeah, so it's, it's, you know, the hardest part of my job is, is being believable. Um, because like I said, the status quo is, is these operators just assume over the decades and decades, sometimes generational, uh, you know, operations and bars, that they're going to lose that, that 25, 30%. So when somebody like myself shows up and says, hey, we can fix that, and they know how much that means, they can do math. That's what they do for a living is math. And they're like, I don't know. And then when we tell them that we do it for free install, it's just $500 a month after the first month, which they recoup probably 10x that in the first month. Um, their reactions are crazy. Ah, you know, one of our most recent, um, customers, they have, they sell the most Bud Light here in Phoenix. I mean, just go through kegs and kegs and kegs weekly. And so we set up the system. Two weeks later, I come back, I sit down with the owner, sit down with his area manager and I was like, oh, how many Bud Light kegs did you buy this week and how much money did you make? And so versus the other previous weeks? And so they went back like, well, we ordered only one less Bud Light keg. So we ordered 10 instead of, you know, or 10 of 11, but we made 450 more dollars on less buy just by getting that waste out. And if you extrapolate that the owner's like, wait a minute, four times 450s, that's $1,800 on one brand that we just solved in the first two weeks. And they weren't even at 90, 95%. They were still sitting at 85, 87, up from the 65% that they came from. So when they see the hard data and the evidence grade data from our sensors, then obviously their POS is exactly what they're collecting in the drawer. And we marry that, that digital world to that physical world, that real time, ground zero data that's coming off the taps. It's just amazing to see and no one can escape. Right. So it's uh, the after hours, it's just like, what do you do? I mean the bartenders run and hide. Um, but it's more than Big Brother. I mean first the owners are like, I'm going to catch these bartenders, you know, and of course they do. But a lot of it's environmental. I mean, I'd say 90% of the customers that we walk into, their beer coolers are at 50 degrees. They have to be below 42. That's the max. Or they don't even know what the pressure of their system is. Long draw, short draw. They don't know what restriction lines mean. These guys are businessmen. They aren't draft technicians, they're not physicists. You know, they don't know these things. So our system boils that down to a poor score. A, uh, very readable, actionable data points that the owner can say, hey, our gas is down. I'll call the gas guy. He doesn't have to know anything about gas. He says, no, it's just out of range. And then they can get that fixed and you know, you're up and running again. So it's just kind of like the, the, the light dawns on Marble Head when they see it because it's like no idea this is possible. Now that it is possible, I see my business completely differently now because the bar is the profit center and now they have 20% more revenue to almost a play with. But to fund their business, not go out of business, invest in their business, lower price, be competitive. All of those things are on the table. Once they engage with the float that data.

Speaker A: Yeah. And you know what I think is really clever about this too is that they inherently know they could be Making more money. So instead of just automatically accusing someone, now they can go in. Because, you know, look, people don't want to be accused of being dishonest. So instead of going out there right now, you have the data, and now it's like, oh, you know what? We had a tech issue, right? It wasn't you, it wasn't your. So suddenly you. You've just helped actually build stronger culture, a stronger brand internally, right? And now they can feel like, see this all along I've been telling you we were having a problem, and it wasn't. We weren't just overpouring. Right. I think that's fantastic. The other thing you mentioned, um, you just touched on it. Maybe you could explain this. You mentioned how you have this real time. What your POS says is truly what's happening at the bar, because you've integrated with the POS system. For people who don't understand, explain what that means. This is. You're talking about your point of sale. Can you explain how this integration is actually in some ways, kind of revolutionary? Like what you see is what you get.

Speaker B: Absolutely. So what we do is we take their POS data and we map it to each brand, right? And so if you run a bar and you're a bar manager, you understand that there's a price for a happy hour pint. There's a regular pint. There might be a Sunday Funday Pinterest, There might be a tall boy for 25 ounces. That needs three buttons as well. So up to six buttons, you know, so you have all these. These selectors for each brand, right? So what we do is we map that over to the actual line that we're taking ground zero data from and say when they push this button, that means 16 ounces. And it means at this price, if they hit this button, it means 25 ounces. It means at this price. Because obviously the economics are different volume plays. And so when they get their poor score and we marry that down to each timestamp of pour, to what button was pushed, to what was collect, we're able to give them a very, very high resolution view of exactly what happened and what didn't happen. Because what happens at the taps is what happened for real. What happens in the POS is what your employee said happened. They have to push a button to engage that system. They don't have to do anything to pull a tap and pour a beer. Right? So the marriage of those two systems are really the accountability, uh, for the staff, and then we take on the accountability for the operator on the in range report, which is watching the temperature and the pressure, making sure that member has the perfect product to serve with the right amount of head, there's not too much foam. So we give accountability to both the bartender and the operator of saying these are the two things you look for use. Give the proper product to serve at the right temperature, right pressure, right environment, environmentals, and then we will hold your bartender accountable to giving you 90 plus percent of that product paid for. So the POS is a very integral part because that's what is said to have happened. And we're marrying that what said to what actually happened. And that's. And that revolution right there is just again, there's just no, we have evidence grade sensors. The POS is what it is. It's also timestamped with the employee number. There's just really nowhere to hide other than profitability or what we call promoting bartenders to customer status, which they're always welcome to sit on the other side of the bar and buy a beer.

Speaker A: I love that you keep saying. I love that you keep saying there's nowhere to hide. I just think. But you know what, to me though, something else that jumps out to me is talk about a fantastic analysis for your sales and marketing programs.

Speaker B: Absolutely.

Speaker A: Because you, you might be thinking, okay, we're going to run these specials and we're going to expect this kind of lift, like, okay, you know, we've got this kind of volume, you know, let's say foot traffic. We know that we get this kind of foot traffic at this time, or maybe we have less foot traffic at this time. We want to start doing these promotions. We're going to lower our price. Let's see if that's increases our, our volume or our sales. So you can instantly give them the feedback. And let me tell you, from a sales and marketing point of view, you know how hard it is to actually say that program worked.

Speaker B: Right.

Speaker A: I, I'll raise my hand right here and tell you it's one of the hardest things. It's one of the hardest things in the world to do. And yet you're actually now giving them. And I don't even think you actually have promoted that. I don't, I don't. But uh, that to me, that's what I see. I see, hey, these programs that you think you're making money on, you're actually not, right?

Speaker B: Well, we kind of given a little padding for that, you know. So next month we're launching a product called Flowboard, which is the, uh, the digital representation of the bar. So not only will it show customers, it's customer facing, show customers what's on tap, the temperature, the most popular, the most popular, uh, draft items on at that time. It also lets them promote those items, promote their high margin stuff. So basically when you use a flow tech system and you're trying, we're trying to drive volume, we're trying to drive volume and make money on that volume. So we want to give our customers one, the data set to do that. To your point, like, hey, let's, let's look at these, see what's moving, what's not moving. If you believe in something or you're a brewery who's trying something new and it is your product that you're trying to push, then they engage with Flowboard and that's free with their poor score subscription as well. And that allows them to market all of their beers, all that stuff, and really drive draft, which is the most, the highest multiple in the bar, um, for the lowest cost of goods. So it's uh, we're trying to wrap that marketing around a little bit further where the owner doesn't have to take the data and then utilize it. To your point, they can just say, hey, I have the data, I'll just update Flowboard and we'll just keep riding this train. Or I have, you know, opportunity I need to uh, exploit on a, a certain product.

Speaker A: Right. Again, as part of that dashboard. They can see.

Speaker B: Absolutely.

Speaker A: Let's just, you know, let's just continue with this program or maybe extend it, you know, extend the hour, add extra days, that kind of thing. You know the other thing too that that's happening right now in the marketplace and I'd be kind of curious to see how you think it's affecting the hospitality industry's adoption rate of say Flotek or these types of technologies. We see one that uh, Gen Z Millennials, it's all in the news, right. They are starting to drink less alcohol. They're going for some of the better for you types of drinks. Doesn't mean they're not drinking because you're looking for high volume places. So maybe where you're located, they're coming there and they're going to celebrate, maybe they're going to drink a little bit more. But overall the trends are the younger generations aren't drinking as much as couple that with rising food costs. Right. So there's even more pressure for them to make money at the bar. How are these market trends, in your opinion, affecting those new customers that you're talking to. Is that helping them get over the hurdle, make the decision, or is it causing some, some, uh, confusion as to whether or not they should try something like this?

Speaker B: I think, I think what we see, um, mostly with how the market's adopting technology is when you think about pos, which is a great example. POS has been around for forever. There was a couple major players, Aloha Micros, and I'm missing a few. And basically no one had it. And then overnight everyone had it once the light bulb turned on. Like I said at the beginning, I really think that, you know, we have almost 100% kill rate. I bet a thousand on these sales calls usually takes me about 36 minutes. I'm a data guy. It takes me 36 minutes. That's usually when I have the close. Um, but I mean, we talked operators. Um, yeah, you know, you talk to Caesars Entertainment, Harrah's, and, you know, these airports, and it's like, oh, yeah, you know, totally. I didn't know there was a solve for this. So I think it's. People are hungry, especially with rising food costs. I mean, you got food costs up 40% over the past 18 months. Yeah. You have. Your labor is out of control. Um, you know, you're paying 15 an hour for some tipped employees now. So, I mean, when I was a tipped employee was 2:12 to 18.

Speaker A: We were just talking about this the other day. Whatever. Yeah. Whatever happened to you had to earn your tip now it's like, Right, Yeah. Uh, your base salary or starting hourly rage is like 10x is what we have.

Speaker B: Right, Right. And so you're an owner and you're like, okay, where am I going to get it? These chicken strips can't get me 8x. Uh, of. Of cogs. Right. That's just not how chicken works. It's not how napkins work. I can't. I can't develop a new napkin that somehow gives them a 20x ROI. Like, you know, so. And the owners know this. Right. Like, they've went down. You've seen the menus change. You've seen the menus change since 2020. Those chicken strips that are really good at that one place are kind of not great anymore. Yeah. I mean, they've all made compromises. Right. But what I would say is when you say people are drinking less beer, I don't know that it's necessarily. I think it's a symptom of a bar that doesn't have data. And I'll tell you why is when you look at like beer across the. I guess the landscape is. If I went to a bar today and looked at it, I would assume by what they're serving, that IPA is the best thing that's ever been served. It's great, and it's the most popular thing ever. Now, if it was 15 years ago, that statement would be true. That statement isn't true anymore. But yet the bar I'm walking into today in 2026 has 20 IPAs on a 24 tap system. So are people drinking less beer? Or they just don't want what's on tap because the owner's like, well, I'm just doing what I did last month. Low tech eliminates all of that. Try new things. We do keg cocktails. We have partners that do kegged wine. Try new things, you know, less bottles, you know, better. Um, you know, it's a greener. A greener system, uh, to do draft and, you know, have cases of wine or cases of bottles that you do. You know, it's, you know, it. Operators understand this stuff. It's just there hasn't been anything in their face to make them change. And right now, the 10%, 12% erosion of, of draft, um, beer or beer in general, is getting their attention now. So now they need to make money on those products, just like they need to get the most out of their, you know, their hostess getting paid $15 an hour. Guess who's rolling silverware. Guess who's washing windows, Guys, guess who's mopping the floor. That didn't used to do that. At $5 an hour plus tips, you need more out of your employees. You need more out of your system. FlowTech gives them that more to make those decisions to move the business forward.

Speaker A: Yeah, you're right. It's funny. I've seen some funny memes about how to serve an ipa, and they just. They're like, number one open bottle, and then they show the. Then they show the sink.

Speaker B: Right, exactly. My m. Beer is back 15%. What? Beers on top. That's.

Speaker A: So obviously you're in the. In the process of scaling and, you know, discovering what markets are most, uh, accepting at this point. What do you think are some of the biggest hurdles that you're experiencing just personally, as you're trying to scale, what are you running into?

Speaker B: Well, anytime you try to take an analog signal or analog information and convert that digitally to. To weaponize against an issue or a problem, you know, the world doesn't like to change. And technology, especially when it's nascent, is, um, it's Powerful, but you have to work through some of those hurdles. Now one of our biggest things is there's a lot of POS technology out of there, a lot of it. So we have to stay very malleable, uh, to take in that data, whether it's CSV file or a PDF, if it's ancient or if there's an API from a non legacy provider, then we can work with that stuff. So a lot of it, there's a lot of customization on our part. We, um, focus on serious operators. Um, not every operator wants to be serious, but actual serious operators with volume or that are vertical with their product or that do high volumes, we have low volume players too, but they're serious operators because they need that razor thin margin or those dollars. Um, so a lot. So we see it all is what I'm getting at is like when you work with, you know, with Caesars, they might have a homegrown pos and we have to integrate and, you know, and that's great. We do that. Set it and forget it. But a lot of people are rotating through these in the home city, right where toast is big now or maybe spot on. And so we see a lot of the hurdles are, is the, the operator is mixing a lot of technologies and kind of rotating them through quickly, trying to find the best fit. So that creates hurdles for us because we have to work with that technology to give our customer a unified look inside of our apps. And going to six different technologies to find out, or spreadsheet or whatever, that's your brand promise.

Speaker A: And so, you know, for you to make good on that, right, you've got to be able to be, as you say, kind of adaptable to the changing whims. And you're right, because some of these smaller, you know, entrepreneurs, they are, they do rotate through these pos. They're trying to. Because from their point of view, if they can shave half a percent by switching, you better believe they're going to do it.

Speaker B: Oh, absolutely. I mean, 3% to a Caesars Entertainment over 50 locations or, you know, a huge airport operator. I mean, it's unreal. I mean, the. Here, here's some fun facts. Most people don't know how it goes is, you know, the, the Dallas Cowboys, uh, go through 500 kegs of beer per game. That seems like a lot. It's four hours, it's 125 kegs an hour. The Tampa Bay Buccaneers go through 1500 kegs during a game. So that's opportunity. Uh, but like in real time, watching that Happen. If you're an operator, you get 3% more revenue on an 18 beer. And you're serving that many beers and you got 3% more of that. I mean, that's. That makes the year. That's the growth. You know, I mean, let's. Let's do. Let's start having the, you know, the quarterly. Quarterly reporting meetings now.

Speaker A: I'm just trying to figure out why Tampa Bay Buccaneer fans drink three times as much as Cowboy fans. I mean, m. Dallas sucks. I'm sorry, Dallas.

Speaker B: Dallas is the only Miller Light Stadium. Dallas is the only Miller Light stadium. I don't know if that has anything to do with it. You know, every other NFL stadium is a Budweiser stadium, so.

Speaker A: Okay.

Speaker B: I don't know. It is what it is, you know, Look, I'm from Missouri, so I know you are.

Speaker A: You're can. You're, uh, you know, you're hoping, uh, for a quick and speedy return for, uh, Patrick Mahomes.

Speaker B: Yes. That'd be great. That'd be awesome.

Speaker A: What I'm curious about though is, uh, you yourself being an entrepreneur, working with so, so many across the space within hospitality. If there was a. An entrepreneur that wanted to get into hospitality, what advice would you give them as they're starting some kind of a food and beverage hospitality business?

Speaker B: Uh, you need to talk to your providers, uh, such as your, uh, food service guys or distributors, um, see what's working for the other people. We have, uh, the other operators in town. We see a lot of that. A lot of people share a lot of information. But get your systems in place first. The systems are what's going to matter when you go to high volume. You're hiring 50 employees, you're going to have 90% turnover. These are all things that are happening besides making money right. With your product.

Speaker A: Right?

Speaker B: So the systems like FlowTech, your POS, your HR, your food delivery, all those people need to be top notch. Your systems need to be top notch before you enter into your, your operation. Because changing a tire at 100 miles an hour never works for anybody. So, you know, get your systems in place first before you venture out.

Speaker A: That's great advice, Nick. I'm really. I'm really glad we got a chance to finally have this conversation on air because we've talked many times offline. I'm like, you know what you need? I really wanted people to hear what you were doing. And, uh, fortunately, you know, our schedules finally aligned and we were able to have you down. So it's great to again to just kind of pick your brain about what's happening in the food and beverage space, because these are some serious numbers. Um, we'll have to. There's a lot happening out there. We'll have to have you back on in four or five months just to see, uh, you know, how the Flotek, uh, revolution is expanding, you know, uh, across the country.

Speaker B: That sounds great. Be happy to do it.

Speaker A: All right, buddy, we'll see you again next time.

Speaker B: Thanks a lot. I appreciate it.