Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business
Speaker 1: Week Inside from the reporters and editors who bring you
Speaker 1: America's most trusted business magazine, plus global business, finance and
Speaker 1: tech news. The Bloomberg Business Week Podcast with Carol Messer
Speaker 1: and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Hi, everyone, Welcome to the Bloomberg Business Wee Weekend Podcast. Well,
Speaker 2: we've officially entered the final month of twenty twenty four
Speaker 2: and with that the last jobs report of the year
Speaker 2: that will now weigh on the Fed's rate cut decision
Speaker 2: later on this month. For the latest on that, head
Speaker 2: over to Bloomberg dot com or check it out.
Speaker 3: On the Bloomberg Now.
Speaker 2: Tim and I we got our own read on the
Speaker 2: US economy and really the housing economy here in the
Speaker 2: United States, courtesy of the team over at the asset
Speaker 2: and real estate investment company Walton Global. More in just
Speaker 2: a moment.
Speaker 4: Also this week, more records on Wall Street on that
Speaker 4: we have a consistently top performing fund manager who has
Speaker 4: returned on average twenty five percent annually over the past
Speaker 4: five years, all by investing in thirty stocks.
Speaker 3: You're gonna want to take notes on that one plus.
Speaker 2: As the auto industry tries to retool for the electric
Speaker 2: vehicle era, we see increasingly that road is paved with
Speaker 2: a few bumps along the way. We saw this this
Speaker 2: past week after the surprise departure of the CEO of Stilantis.
Speaker 2: Our take on the ev industry came courtesy of the
Speaker 2: CEO of the EV charging management software company Drives.
Speaker 4: Also from the alt energy space, how to build out
Speaker 4: nuclear energy in the US with the chief nuclear officer
Speaker 4: of the nuclear company.
Speaker 2: All of that to come, we begin with one often
Speaker 2: overlooked investment group, small and mid cap stocks. They just
Speaker 2: don't get any respect sometimes, although they.
Speaker 3: Get talked about it.
Speaker 5: You're Rodney Dangerfield.
Speaker 3: I was going to go there, all right.
Speaker 2: While all the attention has been focused on large cap
Speaker 2: tech stocks for a good reason, they've really fueled market gains,
Speaker 2: such as Nvidia, small caps finally, finally, finally seem to
Speaker 2: be making up for lost ground with the Russell two
Speaker 2: thousand trade your an all time high. WITCH hit a
Speaker 2: record about one week ago for the first time since
Speaker 2: twenty twenty one.
Speaker 4: Ryan Kelly is the chief investment officer and portfolio manager
Speaker 4: at Hennessy Funds and invest in the small and MidCap space.
Speaker 4: It's got a pretty impressive track record to show for it.
Speaker 4: Ryan Co manages the Hennessy Cornerstone MidCap thirty Fund. It's
Speaker 4: return on average about twenty five percent annually for the
Speaker 4: past five years, putting the fund in the ninety eighth percentile,
Speaker 4: so beating pretty much just about everyone in the sector.
Speaker 4: He's stopped by to talk about strategy and picks.
Speaker 6: So much of the large cap stocks are just dominated
Speaker 6: by the Magnificent seven still and in Vidia, you know,
Speaker 6: so far this year, twenty five percent of the S
Speaker 6: and p's returns have been from in Vidia. So one
Speaker 6: stock doing that much good and maybe sometimes that much
Speaker 6: damage right to one particular index is a lot. So
Speaker 6: we like the small and MidCap space because it's not
Speaker 6: as susceptible to a lot of you know, there's not
Speaker 6: megacaps that'll take over the index. It's traded in a
Speaker 6: better valuation. Certainly some changes that are supposedly upcoming with
Speaker 6: less regulation, better corporate tax rate, that's going to benefit
Speaker 6: some of these companies as well.
Speaker 3: Tariff policy.
Speaker 6: Tariff policy could actually eat into some of their earnings.
Speaker 7: For some of these MidCap stocks.
Speaker 4: What's of those things you mentioned, what's actually priced in
Speaker 4: right now in your view? And we'll talk about some
Speaker 4: of these individual names soon. But the administration is in transition, yes, so,
Speaker 4: but we know the makeup of Congress pretty much. What
Speaker 4: do you think they'll be able to get done? So, therefore,
Speaker 4: what is priced down?
Speaker 7: Very tough question.
Speaker 6: I would say that tariffs are not completely priced in
Speaker 6: because I think there's still a disbelief that we can
Speaker 6: get to some of the levels that have been talked about.
Speaker 6: I think that personally it would be a very detrimental
Speaker 6: to the economy overall, and I hope that sort of
Speaker 6: more level heads come up with maybe a better plan.
Speaker 6: But if that is the case, we're getting the kind
Speaker 6: of tariffs we're talking about that really could hurt I
Speaker 6: think some of the longer term earnings of some of
Speaker 6: these company.
Speaker 3: All right, let's get to it, because I want to
Speaker 3: talk names.
Speaker 2: Your fund is up thirty seven percent year today, ninety
Speaker 2: eighth percentile.
Speaker 3: You've had a great five years for the fund as well.
Speaker 2: You pretty much are beating your peers, so kudos, kudos.
Speaker 2: We like to talk to people who perform your strategy.
Speaker 2: It's a one year rebalance. You reminded me when you
Speaker 2: sat down here in our studio, you just finished a rebalance.
Speaker 2: Tell us about that rebalance. It's thirty names and you said,
Speaker 2: only two have stayed in the portfolio from the past year.
Speaker 7: Yeah.
Speaker 6: So what we do is we really want to make
Speaker 6: sure that we're just going to continue to follow the
Speaker 6: same formula year in and year out. So this fund
Speaker 6: is twenty one years old. It has been done the
Speaker 6: exact same way since inception. We use a very disciplined process.
Speaker 6: That's actually on our website. It's the formula is listed
Speaker 6: there on how we do it. But the idea is
Speaker 6: that once a year, we'll look at all the portfolio
Speaker 6: and we'll look at the universe of.
Speaker 7: Stocks out there, and we really a lot to look
Speaker 7: at it.
Speaker 6: It's a lot, and so it's it's a quantitative based
Speaker 6: it's a formula based fund, okay, but it's based on
Speaker 6: fundamentals going back for many, many many decades when this
Speaker 6: was first put together. They look back at three four
Speaker 6: decades worth of data to see what really works.
Speaker 7: On Wall Street. And so what we've what we.
Speaker 6: Do is we look for companies in the one to
Speaker 6: ten billion market cap range. We look for a low
Speaker 6: price to sales, which is an interesting metric because most
Speaker 6: people use PE or to EBITDA or whatever. We look
Speaker 6: for a low price to sales of less than one
Speaker 6: point five times.
Speaker 2: It almost thinks about some valuation that hasn't been recognized right.
Speaker 3: As a result, a lot of times of the top line.
Speaker 6: Get you'll get companies that are are in a bad
Speaker 6: part of the cycle or that are underperforming, that are
Speaker 6: about to turn. And the reason why we're okay doing
Speaker 6: that is that another important part of the metrics is
Speaker 6: we're looking for momentum, so we already want stocks that
Speaker 6: have turned. We don't want to buy an undervalued company
Speaker 6: that has a lot more to go on the downside,
Speaker 6: but rather buy a company that's a good company that's
Speaker 6: out of favor, that's on its way up.
Speaker 2: So you're one of your old holdings that was one
Speaker 2: of your biggest holdings. With sprouts, Farmer's market uptically twenty
Speaker 2: two percent year to date, it's treading your time high.
Speaker 3: You said bye bye.
Speaker 6: Yes, so that in this most recent rebalance, it then
Speaker 6: moved way above our price to sales of one point
Speaker 6: five times.
Speaker 7: Only about a third.
Speaker 6: Of companies out there that are publicly traded trade below
Speaker 6: one point five times, so it's a pretty restrictive number,
Speaker 6: and that one way above it.
Speaker 7: It performed very well for us, but now it's gone.
Speaker 4: Okay, let's talk about some of the names that you're adding.
Speaker 4: One name that I think a lot of people would
Speaker 4: be surprised to hear would be Peloton. Yes, this is
Speaker 4: a company that has faced incredible pressure since the pandemic.
Speaker 5: Why are you optimistic? Why are you bullish?
Speaker 6: It comes down to the formula first and foremost.
Speaker 7: It fits.
Speaker 6: It trades at zero point seven times price to sales.
Speaker 6: We bought it around we're buying it around the five
Speaker 6: to six dollars mark. It's now approaching eight. So it
Speaker 6: has had to bounce back. You know, they're starting to
Speaker 6: improve on their cost side. You know, a new CEO
Speaker 6: is always an important and potentially beneficial it's certainly challenging,
Speaker 6: but we've seen that type of turnaround before, believe it
Speaker 6: or not. Crock we owned Crocs when nobody wanted Crocs,
Speaker 6: and now all my children wear them. You know, we
Speaker 6: owned h We owned restorators hardware when people were not
Speaker 6: going nobody's going to go to a store. Yeah, yeah,
Speaker 6: and then they became. You know, it was an incredible
Speaker 6: turnaround story. So there's a lot of it may not
Speaker 6: come down to this particular name working the best, but
Speaker 6: it's just a representative.
Speaker 7: Holding of what we'll own.
Speaker 6: And the idea is you'll get something that's completely out
Speaker 6: of favor, that's beat down, that maybe has a second life.
Speaker 3: Tell us about HERK.
Speaker 6: So HERK holdings is this is so when we did
Speaker 6: the rebalance this year, we did find that there was
Speaker 6: a whole lot of consumer discretionary and a whole lot
Speaker 6: of industrials. And HERK is an equipment rental company essentially.
Speaker 3: So as hri I and it's up about forty this year.
Speaker 6: Mm hm. So that you know, this is typically what
Speaker 6: we do. We catch something as it's already gone up.
Speaker 6: We don't want to try to buy it on its
Speaker 6: way down.
Speaker 3: Yeah, and with the idea you're okay that you've lost
Speaker 3: some of the momentum.
Speaker 6: We're okay, we'd rather not try to time the bottom
Speaker 6: but participate once it.
Speaker 5: Are you using AI at all now in your analysis?
Speaker 8: No?
Speaker 3: AI, this is wait or not.
Speaker 6: I have to say this is so simple that it's
Speaker 6: almost almost too so, you know, and I come from
Speaker 6: a I come from an analyst background, where you don't know.
Speaker 3: For the last year and a half, that's all we
Speaker 3: talk about is AI. But go ahead.
Speaker 7: I came from the background where I covered banks.
Speaker 6: I didn't know how old the CEO was, where he
Speaker 6: went to you know, where they went to play golf,
Speaker 6: all these kind of intricate pieces of data.
Speaker 7: But this is really it's it's fundamental quant is.
Speaker 6: What it's called in the idea is you really just
Speaker 6: want to boil it down to very simple metrics and
Speaker 6: just stay with it year in and year out.
Speaker 7: And it's it's worked. Tim.
Speaker 2: If you don't know loves to eat a lot, he
Speaker 2: just finished a sandwich, it will come up. Brinker International
Speaker 2: is another name that you like. Eat is a tick er.
Speaker 2: Love that it's up one hundred and eighty three percent,
Speaker 2: but you've got it in the portfolio for the coming year,
Speaker 2: so there's more momentum to the app side.
Speaker 6: Yeah, so Eat Chili is the name brand. Also Cake
Speaker 6: Cheesecake Factory. Both of those are two restaurants that are
Speaker 6: now in the portfolio. Again, it's it's the same sort
Speaker 6: of situation we've looked for all these companies.
Speaker 3: Cake is up thirty three percent.
Speaker 7: This yeah, and you know, you look at these.
Speaker 6: Names that we add in and an example that worked
Speaker 6: really well is super micro Computers. We owned and we
Speaker 6: owned it as it went completely up until it didn't,
Speaker 6: and we actually got rid of it because it was
Speaker 6: too expensive.
Speaker 3: So who needs AI.
Speaker 2: We just need Ryan Kelly Brian good to see you
Speaker 2: with you have a great holiday season. He is the
Speaker 2: chief investment officer at Hennessy Funds.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
Speaker 1: Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App,
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Speaker 2: From a model portfolio to modeling what is going on
Speaker 2: in the US housing market? US Census Bureau and Department
Speaker 2: of Housing and Urban Development data show that sales of
Speaker 2: new home in the US slumped in October to the
Speaker 2: lowest in almost two years, as two hurricanes hit the
Speaker 2: South and affordability challenges continued to weigh on buyers.
Speaker 4: On top of that, new single family home sales decreased
Speaker 4: seventeen percent last month to a six hundred and ten
Speaker 4: thousand annualized rate. The media estimate of economists surveyed by
Speaker 4: Bloomberg called for seven hundred and twenty five thousand. Meantime,
Speaker 4: home price gains in the US slowed in September as
Speaker 4: buyers gained more negotiating power in the housing market.
Speaker 2: Katie Hubbard has a front seat to the housing market.
Speaker 2: She is the executive VP of Capital Markets of the
Speaker 2: privately owned acid and real estate investment company Walton Global,
Speaker 2: which has nearly four point four billion dollars of land
Speaker 2: under management and over ninety thousand acres under management in
Speaker 2: the United States. The company operates in the retail, industrial,
Speaker 2: and commercial sectors.
Speaker 8: Our clients are typically the largest public homebuilders in The
Speaker 8: rate environment obviously is affecting all of the homebolders, but
Speaker 8: the large ones that have the scale and the ability
Speaker 8: to buy down rates have been doing just that and
Speaker 8: been gaining market share in a rising rate environment. It's
Speaker 8: been good for the large home builders who are are
Speaker 8: more competitive.
Speaker 4: So it's it's okay, that's that's what's That's what's hard
Speaker 4: to understand, because you know, the idea is when rates
Speaker 4: go down, people can afford to buy more homes.
Speaker 5: Hopefully that's the idea.
Speaker 4: We haven't really seen that play out necessarily just because
Speaker 4: of the demand element here. But but how does it
Speaker 4: affect the way that home builders then come to you
Speaker 4: to purchase land?
Speaker 8: Yeah, I mean it definitely, just because we're typically feeding
Speaker 8: the land to the largest public homebuilders and they're less
Speaker 8: rate sensitive. The smaller builders that that don't have the
Speaker 8: ability to bite down the rates are are more effective
Speaker 8: and can't really compete in the land space as well
Speaker 8: as the large builders. We're also purchasing land ahead of
Speaker 8: needing it right now, so they're keeping an off balance
Speaker 8: sheet where smaller builders who are also affected by the mortgages,
Speaker 8: they don't have the ability to land bank like the
Speaker 8: larger competitors do. But obviously when rates go down, you
Speaker 8: know in that sweet spot when it goes below six percent,
Speaker 8: I mean there's a lot of people on the sidelines
Speaker 8: right now that are waiting for that, and we think
Speaker 8: that that's going to be coming up into the next
Speaker 8: next probably won't be hitting below six percent this year,
Speaker 8: but next year could get a lot of consumers off
Speaker 8: the sidelines.
Speaker 2: Katie, one thing I'm curious about and I want to
Speaker 2: get your take on this, and we want to get
Speaker 2: into kind of what people want in homes going forward.
Speaker 2: I mean, I don't know if the mega mansion or
Speaker 2: the MC mansions are gone. But before we do that,
Speaker 2: we talk about the housing shortages in the United States.
Speaker 2: It's not just a one or two or three year thing.
Speaker 2: It's at least ten years, if not more, and that
Speaker 2: you don't have affordable housing in great cities, be it
Speaker 2: New York or elsewhere for those people who work in
Speaker 2: the city but can't afford to live there. So it's
Speaker 2: not just about building housing, but building housing, affordable housing.
Speaker 3: Where it needs to be. So when you guys are
Speaker 3: acquiring land, is.
Speaker 2: It in major cities, is it suburbs? Like, is it
Speaker 2: really feeding the demand that needs to be met?
Speaker 8: Yeah, good question. So it's really it's regionally based. But
Speaker 8: we are typically on the outskirts of the cities where
Speaker 8: home bolders can build larger scale communities versus those infilocas
Speaker 8: because we're dealing on a larger scale land land supply.
Speaker 8: But yeah, absolutely, the homebuilders have adjusted the type of
Speaker 8: product mixes that they're building to just for that affordability factor.
Speaker 8: They're building more efficient floor plans. Everything is getting smaller,
Speaker 8: smaller kitchen, smaller garages, smaller storage to build a smaller
Speaker 8: home just to make them more affordable.
Speaker 3: What's considered doing higher.
Speaker 8: Density to your point, Carol, less big bangs, and more
Speaker 8: amenities geared towards the people that are able to purchase
Speaker 8: the homes. So you're seeing more pickleball courts out there.
Speaker 2: It's kind of funny what's considered affordable, Like, what do
Speaker 2: you guys consider affordable housing?
Speaker 8: So the average new home is just hitting around in
Speaker 8: the four hundred and sixty seven thousand dollars range, and
Speaker 8: people are moving to the Northeast now for affordability. I
Speaker 8: mean you can Youngstown, Ohio, you can get a house
Speaker 8: for one hundred and seventy one thousand dollars. It's one
Speaker 8: of the most affordable markets. And then they're going to
Speaker 8: where their jobs are located. So for example, Syracuse, New
Speaker 8: York has a huge influx of people because Micron's building
Speaker 8: on hundred billion dollar chip manufacturing plant. So if the
Speaker 8: jobs are there, then you know it's relative to that market.
Speaker 8: But Southern California, I mean it's still one of the
Speaker 8: most expensive markets and one of the most difficult places
Speaker 8: to build because land is so expensive, So it is
Speaker 8: very relative.
Speaker 4: Like you said, well, that said, you do have quite
Speaker 4: a few assets in the state of California, quite a
Speaker 4: few in the San Diego area, a few in the
Speaker 4: Bay Area as well. What is attractive to you about
Speaker 4: that area given how expensive it is and how difficult
Speaker 4: it is for some home builders to actually build in California.
Speaker 3: Doesn't scream affordable to.
Speaker 8: Me, right, It's just it's the overall fundamentals of people
Speaker 8: wanting to be in southern California. So the demand is there,
Speaker 8: and you have a scarcity of land that's available for development.
Speaker 8: You used to have this mentality of you know, people
Speaker 8: didn't want things built in their backyards and nimbi mentality, Well,
Speaker 8: in California goes a step further. It's now called the
Speaker 8: Banana mentality, which is build absolutely nothing anywhere near anything.
Speaker 4: So it makes it before I've never heard that that's
Speaker 4: the banana build absolutely nothing anywhere near.
Speaker 8: Anything, exactly, and that is the California. It can be
Speaker 8: the California mentality. And so if you have the expertise
Speaker 8: and the boots on the ground to buy the land
Speaker 8: for the builders, the demand for people wanting to live
Speaker 8: there is there.
Speaker 2: Nuts looking at the map of your website in terms
Speaker 2: of where you, guys, I guess have land and land assets,
Speaker 2: specifically Atlanta. Is it still on fire for you guys,
Speaker 2: or is that property land just sitting kind of empty
Speaker 2: and demand is cooled?
Speaker 8: There definitely is demand there, but you are seeing less
Speaker 8: demand in the South. Like I mentioned the October numbers
Speaker 8: for the Southeast, we're down, but I mean it's still
Speaker 8: a good place for migration for the affordability.
Speaker 3: Factor Texas too. Are people still fly to Texas?
Speaker 8: Texas? Texas continues to be a stronghold. Almost all of
Speaker 8: the top public builders have a very large presence in Texas.
Speaker 8: But we're moving to places in the Northeast, like Delaware,
Speaker 8: where the public builders have told us they will take
Speaker 8: all of the land that we can bring them in
Speaker 8: a place like Delaware because you've got low property taxes,
Speaker 8: is no social Security income tax, strong employment, great schools,
Speaker 8: and the surrounding cities are just much more expensive.
Speaker 4: You basically, in thirty seconds, just tell us you basically
Speaker 4: have no assets in the sort of northwest quadrant of
Speaker 4: the United States. I mean all the way from Iowa
Speaker 4: to Washington and Oregon.
Speaker 8: Why is that we're going to be expanding our acquisition strategy,
Speaker 8: So we're going to be entering the Idaho market. We
Speaker 8: do land bank for d R. Horton in the Northwest,
Speaker 8: so we do have some assets holding land off balance
Speaker 8: sheet for them. So those are markets that worksploring.
Speaker 3: Where's the most expensive place to buy land right now?
Speaker 3: Just ten seconds?
Speaker 8: Southern California, I mean California markets are the most expensive
Speaker 8: and the most difficult.
Speaker 4: That sun is perfect weather is going to cost you,
Speaker 4: Carol Master, of.
Speaker 3: Course it does.
Speaker 8: Katy is expensive.
Speaker 2: Yeah, Katie Hebard, thank you so much, executivevice president Capital
Speaker 2: Markets at the privately owned asset and real estate investment
Speaker 2: company Walton Globble.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 3: This past week, news.
Speaker 2: That General Motors is selling at stake in an electric
Speaker 2: vehicle battery plant in Lansing, Michigan, to South Korean partner
Speaker 2: LG Energy Solution, recouping about a billion dollars in investment
Speaker 2: from a facility that will still supply energy sales to
Speaker 2: the automaker's evs.
Speaker 4: The move reflects a realization by the carmaker that it's
Speaker 4: battery cell plants in Ohio and Tennessee, along with some
Speaker 4: supplies from the new plan in Lansing, will be enough
Speaker 4: to meet near term demand for evs without additional capital investment.
Speaker 4: GM continues to grow EV sales, but a slowdown in
Speaker 4: demand and political uncertainty over the future of federal ed
Speaker 4: tax credits have made the future prospects for all electric
Speaker 4: vehicles less certain, and the push.
Speaker 2: To accelerate EV adoption in the US is experiencing a
Speaker 2: massive roadblock, and that is the lack of charging infrastructure.
Speaker 2: In twenty twenty one, the Biden administration announced it would
Speaker 2: invest seven point five billion dollars toward charging infrastructure, with
Speaker 2: the aim of building five hundred thousand electric vehicle chargers
Speaker 2: by twenty thirty.
Speaker 4: That move could experience an even bigger roadblock if President
Speaker 4: Electroump follows through on his campaign promise to scrap incentives
Speaker 4: for EV adoption, like the Biden Administration's National Electric Vehicle
Speaker 4: Infrastructure Program in the seventy five hundred dollars federal EV
Speaker 4: tax credit. California Governor Gavin Newsom is already preparing for
Speaker 4: a showdown with Donald Trump over the subsidy.
Speaker 2: One company that was recently recognized as a leader in
Speaker 2: worldwide electric vehicle charging management solutions is Drives Drives as
Speaker 2: part of the five point eight billion dollar market cap
Speaker 2: publicly held company Vntier Corporation. Drive CEO is Andy Bennett.
Speaker 9: In general, we think about batteries in two ways. Right,
Speaker 9: of course, host the batteries are in the car, right,
Speaker 9: so you have a battery management system that optimize is
Speaker 9: the use of that energy. But batteries are becoming more
Speaker 9: and more important for EV charging. In places like the
Speaker 9: United States. You have lots and lots of areas that
Speaker 9: you know effectively are constrained from an energy perspective, and
Speaker 9: so you can put large batteries in those areas. You
Speaker 9: can control the flow of energy, so you can increase
Speaker 9: the number of cars you can charge. So batteries, when
Speaker 9: you're thinking about EV charging, there's really two parts of
Speaker 9: the equation, and the first is that battery in the car,
Speaker 9: how it's behaving, how it's being utilized. And then those
Speaker 9: batteries that are going to be at gas stations all
Speaker 9: around the country that are going to give us extra
Speaker 9: capacity to really keep that charging experience as quick as possible.
Speaker 2: So okay, so I'm just curious about you know, it's
Speaker 2: interesting I'm listening to you talking. I'm thinking about when
Speaker 2: we talk about the ev world, Andy, A lot of
Speaker 2: what comes up is about range anxiety or people being
Speaker 2: able to find a place to recharge. You know, if
Speaker 2: I pop on a highway out to Connecticut, I see
Speaker 2: the rest stops, they all have them, but in New
Speaker 2: York City it's still really challenging. So I understand what
Speaker 2: you guys are doing, but I feel like, is this
Speaker 2: the cart before the worse in terms of having enough
Speaker 2: places just where people can charge before we kind of
Speaker 2: take it to the optimization level, which sounds like what
Speaker 2: you guys are doing.
Speaker 9: Yeah, No, we do a little bit of both. So
Speaker 9: we build the software behind the world's largest charge point operators,
Speaker 9: so we call them CPOs. So think about evygo as
Speaker 9: a great example or shell, and that software is looking
Speaker 9: after the health of all those chargers out there. Is
Speaker 9: the network working, is it running? Energy is just one
Speaker 9: part of that total equation. Are you able to build?
Speaker 9: Are you able to show up to a charger? And
Speaker 9: actually you use your credit card to go make that work?
Speaker 9: So without that, without that fundamental software, there is no charging, right.
Speaker 9: It's the infrastructure software that makes it work. But you're
Speaker 9: absolutely right. When you think about the frustration that folks
Speaker 9: have today, it kind of comes into sort of flavors.
Speaker 9: The first is, when I get to a charger, is
Speaker 9: it available? Right? And then if it's available, is everything working?
Speaker 9: And as we've seen in over the last couple of years,
Speaker 9: reliability is going up and up and up and up,
Speaker 9: which is great. But then you nailed it. The second
Speaker 9: part is we just don't have enough charging today in place,
Speaker 9: enough public charging. So if you think about the United States,
Speaker 9: you know today we have roughly, let's say, about two
Speaker 9: hundred thousand available chargers to people. Most of those are
Speaker 9: what we call AC chargers, so they're lots slower than
Speaker 9: the DC fast chargers that you might.
Speaker 7: See on the highway.
Speaker 9: And if we were to keep up with really just
Speaker 9: the current sales that we have in evs right now
Speaker 9: by the end of next year, we would still need
Speaker 9: to build four times more charging infrastructure in the United
Speaker 9: States to meet that demand. Some of those projections say,
Speaker 9: by twenty twenty seven, twenty twenty eight, we would need
Speaker 9: to build eight times more than what we currently have
Speaker 9: just to satisfy that what you just mentioned, of course,
Speaker 9: which is range anxiety.
Speaker 2: So a Trump administration, are we going to then ramp
Speaker 2: up the building of these because it does sound like
Speaker 2: we need them. Like, what are your expectations around policies
Speaker 2: in the EV world and what it means for the
Speaker 2: industry and your business?
Speaker 9: Yeah, I mean, look, clearly there's some headwinds with some
Speaker 9: of the administrative changes. Some of the things that could
Speaker 9: be changed is you know, we could get a drop
Speaker 9: in passenger EV adoption, right, so if we don't have
Speaker 9: you know, the incentives, then some folks just aren't going
Speaker 9: to go buy those cars. Now, having said that, for
Speaker 9: a company like ourselves that is building the software for
Speaker 9: the charge point operators, there's still such a huge gap
Speaker 9: between having enough of those chargers out there to deal
Speaker 9: with the current requirements, you know, versus what's actually there
Speaker 9: that we kind of some of us in the industry
Speaker 9: are happy to kind and get a little bit of
Speaker 9: a catch up time there, So no doubt I think
Speaker 9: if you think about, you know, right now, where are
Speaker 9: we in terms of charging infrastructure growth for the year.
Speaker 9: Most of the projections at the beginning of the year said, look,
Speaker 9: we'll probably end up at around thirty percent year of
Speaker 9: a year growth in public charging. We actually know it's
Speaker 9: it's probably closer to thirty six or thirty eight percent growth.
Speaker 9: It's just an incredible cater I think about that, that's
Speaker 9: a massive amount of infrastructure. The big CPOs are building
Speaker 9: as quickly as they can, and I think often we
Speaker 9: spend a little bit too much time maybe associating that
Speaker 9: build out with the Navy funding, the federal funding that
Speaker 9: came out. Most of that infrastructure spending happened way before
Speaker 9: the federal government ever started to step in and incentivize.
Speaker 9: So look, we still have a ton of demand. The
Speaker 9: big CPOs are still building at just breakneck speed.
Speaker 5: That's going to happen.
Speaker 9: It may it may get a little bit and press
Speaker 9: of course, but it's still going to happen at a
Speaker 9: very very fast rate, independent of the whole Navy funding pathway.
Speaker 4: I'm wondering about just some basic question, Andy, if we
Speaker 4: think about where all the gas stations are in this country,
Speaker 4: why is it cost prohibitive for these gas station owners
Speaker 4: to just add one or two EV charging systems to
Speaker 4: their existing gas stations, Like why doesn't why why is
Speaker 4: this so difficult to do?
Speaker 9: Yeah, I got you know, Tim, that's that's a really
Speaker 9: great question, you know, for me, I kind of to
Speaker 9: look for that answer.
Speaker 7: One of the best.
Speaker 9: Places to go look is in the Nordics, right where
Speaker 9: we know today over ninety percent of all new cars
Speaker 9: are evs. Look at the UK, Look at Europe, which is,
Speaker 9: by the way, one of the places my company has
Speaker 9: been for years helping charge point operators. You know, what
Speaker 9: you see as some gas stations are really well suited
Speaker 9: for electrification and some some aren't. Maybe a couple quick
Speaker 9: comments about that, because you know, no matter what, we
Speaker 9: believe that the winners in this marketplace are going to
Speaker 9: be the fueling stations that also have other things, other amenities,
Speaker 9: other conveniences. So when you're in Oslo or outside of Oslo,
Speaker 9: whether you're in the urban area or you're you know,
Speaker 9: on the highways, what you see is EV charging stations
Speaker 9: that you know, have outdoor gyms, they have incredible food,
Speaker 9: clean bathrooms, really nice amenities. The second you show up
Speaker 9: at one of these stations, you connect to their Wi
Speaker 9: Fi and you start to get coupons to go inside
Speaker 9: and save ten percent on a cup of coffee. It's
Speaker 9: a really really integrated experience, and we certainly see some
Speaker 9: of the larger retailers here in the United States starting
Speaker 9: down that pathway Apple Green. You've ever driven on Route
Speaker 9: ninety five is a perfect example as you go through
Speaker 9: New Jersey, extremely innovative around what that experience will look like.
Speaker 9: But having said that, some of those places just aren't
Speaker 9: great spots, right. They may not have the ability to
Speaker 9: they might not have just the real state to bring
Speaker 9: that in, they may not have the conveniences. And remember
Speaker 9: the average weight time is probably about twenty two minute
Speaker 9: minutes today as you're charging on a DC fast charger,
Speaker 9: so you generally want to get out of the car.
Speaker 9: You're going to expect other amenities. But when you go
Speaker 9: back to the European example, what we do see, especially
Speaker 9: in their urban environments is a slower, more methodical transfer,
Speaker 9: so over time they don't just go one hundred percent electric.
Speaker 9: At those stations. They may have ten fueling pumps and
Speaker 9: two DC chargers to start with, and then they slowly
Speaker 9: pull out those pumping stations. Circle K is a great
Speaker 9: example in Europe where they have done this really fluid
Speaker 9: transition as the economics makes sense that DC fast charge
Speaker 9: is expensive. So just the way to think about it
Speaker 9: is break even on that investment probably close to about
Speaker 9: eleven percent utilization. It has to be being used eleven percent.
Speaker 7: Of the time that it's there.
Speaker 4: I will say, Carol, my trip to Norway a few
Speaker 4: years ago, the infrastructure just makes you cry when you
Speaker 4: compare it to US infrastructure.
Speaker 5: The tunnels, the tunnels are incredible.
Speaker 4: Just drill right through these mountains, miles long, totally well lit,
Speaker 4: not crowded at all.
Speaker 5: Unbelievable.
Speaker 3: Maybe Elon's onto something with the boring company.
Speaker 2: I'm just saying, Hey, just got thirty seconds. Andy in
Speaker 2: a nutshell or word or two, how do you describe
Speaker 2: the EV market today?
Speaker 9: You know, look, we make software behind these these charging companies.
Speaker 9: We we can barely keep up with the demand. And
Speaker 9: the growth that's taking place has been incredible. We're a
Speaker 9: company that's doubling year over year and just you know,
Speaker 9: building the things these folks need to be successful.
Speaker 8: For us.
Speaker 9: Your huge portion of the market still remains in Europe,
Speaker 9: the United States is is just starting to grow. I
Speaker 9: think we're going to see a little bit of a
Speaker 9: dent taken out of passenger EV charging. Nothing is going
Speaker 9: to stop the electrification of large scale fleets, though, that
Speaker 9: is picking up at a pace that is really fantastic.
Speaker 9: And why that's relevant is as that continues to be successful,
Speaker 9: we're going to see whether it's a passenger or a
Speaker 9: truck co charging at these different places so the infrastructures
Speaker 9: can continue to roll out. At the end of the day,
Speaker 9: if you build a car, right, there's two things for
Speaker 9: you to go. Get people to buy an EV car,
Speaker 9: cut the costs of the battery, and get more EV
Speaker 9: infrastructure out there.
Speaker 3: Totally makes sense.
Speaker 2: Andy Bennett really enjoyed the CEO of drives joinining us
Speaker 2: right here on Bloomberg Business.
Speaker 5: That's at drivz.
Speaker 7: Very cool.
Speaker 1: I love that you're listening to the Bloomberg Business Week podcast.
Speaker 1: Catch us live weekday afternoons from three to six Eastern
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Speaker 2: Last month of Bloomberg News, colleague Jennifer de Louis reported
Speaker 2: that the Biden administration is setting out plans for the
Speaker 2: United States to triple nuclear power capacity by twenty fifty,
Speaker 2: with demand climbing for the technology as a round the
Speaker 2: clock source of carbon free power.
Speaker 4: Under a roadmap being unveiled a few weeks ago, the
Speaker 4: US would deploy an additional two hundred gigawatts of nuclear
Speaker 4: energy capacity by mid century through the construction of new reactors,
Speaker 4: plant restarts, and upgrades to existing facilities. In the short term,
Speaker 4: the White House aims to have thirty five gigawatts of
Speaker 4: new capacity operating in just over a decade. For a
Speaker 4: little bit of context, nuclear accounted for about one hundred
Speaker 4: gigawatts of installed electricity generation capacity in the US. That
Speaker 4: was in twenty twenty three, so this would be a
Speaker 4: big jump.
Speaker 2: Joe Clutches hoping to help the US get there. He's
Speaker 2: chief nuclear officer of the Nuclear Company, which is looking
Speaker 2: to build a series of nuclear power plants across the
Speaker 2: United States.
Speaker 10: We aim to really develop and deploy new nuclear at
Speaker 10: large scale. We're aiming to help deliver in a way
Speaker 10: that we've never seen before, which is bringing clean, firm,
Speaker 10: sustainable power to the grid that will help solve some
Speaker 10: of these the issues we're going to see with the
Speaker 10: growth of AI, the growth of electrification related to vehicles
Speaker 10: and manufacturing. And we believe that doing new nuclear construction
Speaker 10: in a way that is design, once, rense, and repeat
Speaker 10: many times at scale will get us into a position
Speaker 10: where we can really drive down the costs and create
Speaker 10: a product that is much needed for national security.
Speaker 7: Frans, how do you do this?
Speaker 4: And you can answer this question in a way that
Speaker 4: other people can't because you worked at Southern Company as
Speaker 4: operations director for the vocal units one and two, and
Speaker 4: then you also transitioned oversee vocal units three and four.
Speaker 4: So these are very expensive. They took years, decades, they
Speaker 4: were billions of dollars over budget.
Speaker 5: How do you not repeat that at the nuclear company? Like,
Speaker 5: how are you going to do that differently?
Speaker 10: Yeah, it's I think it's a great question. I get
Speaker 10: asked this question a lot. And Yes, my career started
Speaker 10: in the US Navy as a sub mariner working on
Speaker 10: nuclear submarines, and I've progressed through any utilities operating and
Speaker 10: maintaining nuclear facilities, and as you mentioned, had the great
Speaker 10: opportunity to help with the Vogel project, which was a
Speaker 10: monumental effort by Southern Company, many lessons learned. The simplest
Speaker 10: way to help people understand this is this was a
Speaker 10: first of a kind build in our country with a
Speaker 10: first of a kind technology. We need to continue to
Speaker 10: use the lessons learned from projects like Vogel and many
Speaker 10: others that have occurred around the world to move us
Speaker 10: from a first of a kind project into what we
Speaker 10: call enth of a kind. So we got to get
Speaker 10: through the early stages of capturing lessons learned on what
Speaker 10: is a really, really great design, and there's many others
Speaker 10: out there. You continue to use this same design, develop
Speaker 10: use those lessons learned. We think we can get forty
Speaker 10: percent efficiencies through lessons learned. We also believe there's twenty
Speaker 10: to thirty percent savings in the use of digital technologies,
Speaker 10: whether those be digital twins, three D scans, drones, technologies
Speaker 10: that are available today that weren't necessarily available when these
Speaker 10: nuclear projects were occurring in the past. That is our
Speaker 10: path to really getting the costs of nuclear down and
Speaker 10: getting it in a position where it can provide what
Speaker 10: a lot of other forms of energy cannot provide, and
Speaker 10: that's the security to the grid. To provide that firm
Speaker 10: ninety three percent plus capacity factor of clean energy.
Speaker 2: The plants that were started by Southern Company, I just
Speaker 2: want to go back to right considered a milestone in
Speaker 2: US nuclear power construction, but they were seven years later
Speaker 2: that originally plan and a budget of more than double
Speaker 2: the preliminary projected cost of over thirty billion dollars. I
Speaker 2: would assume making nuclear power plants is difficult forgive by starcasm,
Speaker 2: but we know that this is not it. And you know,
Speaker 2: Tim and I were talking before we got going. I
Speaker 2: had a dad who's an engineer who worked in the
Speaker 2: early space program and putting men on the Moon, and
Speaker 2: guidance systems and the system of government contracts of like
Speaker 2: low cost provider often being at the top of the
Speaker 2: list as a priority makes me a little hinky when
Speaker 2: we're talking about nuclear power. How do we get it right?
Speaker 2: How do we do it safely? How do we do
Speaker 2: it without the cost overruns?
Speaker 6: Yeah?
Speaker 10: So I think those are all great points, and there
Speaker 10: are obviously something There are problems that we are trying
Speaker 10: to solve at the Nuclear Company, and I believe we
Speaker 10: will we will solve again. The number one thing is,
Speaker 10: let's design a technology that works extremely well, and let's
Speaker 10: continue to rebuild the rebuild that technology many times so
Speaker 10: we can really capture the lessons learned and then get
Speaker 10: the cost benefits out of capturing those lessons.
Speaker 2: So what is the different technology from maybe what was
Speaker 2: done by the Southern Company versus what you guys are
Speaker 2: looking to do.
Speaker 3: Break it down for us.
Speaker 10: Yeah, so we are not a technology provider. We are
Speaker 10: a developer and we are a deployer. So we're going
Speaker 10: to we're going to develop these projects, whether you know
Speaker 10: related to where they're going to be cited, which partners
Speaker 10: we're going to work with, and then we have the
Speaker 10: team going to come in and perform the project management
Speaker 10: and deployment to get these from the numbers that you
Speaker 10: estimated down to half of what those have historically been
Speaker 10: through what I said before, the use of technologies, get
Speaker 10: in the right systems in place, locking that design down.
Speaker 10: Remember when you're doing a first of a kind project,
Speaker 10: there are a lot of lessons that come out of that,
Speaker 10: and if you don't capture those lessons and continue to
Speaker 10: do it, then you've just thrown away all the value
Speaker 10: you get out of doing a technology. It'd be like
Speaker 10: if Henry Ford developed a model T built one and
Speaker 10: said that was way too hard to do. I'm not
Speaker 10: going to build anymore. You've got to keep iterating on
Speaker 10: that process to get it to a point that you
Speaker 10: get to the end of a kind cost on these technologies.
Speaker 4: It's a very capital intensive process to say the least
Speaker 4: building a nuclear power plant. In terms of where your
Speaker 4: role is and just where the money is coming from.
Speaker 4: Give everyone an update and you guys are a startup,
Speaker 4: but give everyone an update on how much you've raised
Speaker 4: and how you think you'll be able to get there.
Speaker 7: Yeah.
Speaker 10: So we have investors on the company side, specific to
Speaker 10: the nuclear company that are investing to really fund our company.
Speaker 10: We'll continue through the process of a startup company to
Speaker 10: do our rounds of funding as needed. Specific to projects.
Speaker 10: We leverage public private partnerships, and then we'll be pulling
Speaker 10: in different investors associated with the public private investor partnerships
Speaker 10: to drive the funding of the projects themselves. So we
Speaker 10: plan to roll up more information in the first quarter
Speaker 10: of next year related to where that funding is coming
Speaker 10: from and who those potential partners are, But for now,
Speaker 10: we don't want to share any more detailed information.
Speaker 5: Can you tell us where some of the projects you're
Speaker 5: looking at would go.
Speaker 7: Yeah.
Speaker 10: At a high level, our theory is we're going to
Speaker 10: focus on projects that we can build quickly. We believe
Speaker 10: we need to bring we need to be building now.
Speaker 10: We don't need to be waiting on technologies. There's technologies
Speaker 10: available that can be built now. So with that said,
Speaker 10: we are looking at sites, and we have an algorithm
Speaker 10: that helps with our site selection process that focuses on
Speaker 10: sites that already have some form of licensing and environmental
Speaker 10: work already completed, so we could start these projects sooner
Speaker 10: rather than later.
Speaker 2: So Joe, help me understand something. So, as you said,
Speaker 2: you're a project management company, you're not a technology company,
Speaker 2: so you're not actually building them.
Speaker 3: It's like you're a middleman. It sounds like right in
Speaker 3: terms of getting these done. Why do we need a middleman?
Speaker 2: Want to just ultimately come through the government or utilities
Speaker 2: or states or power companies.
Speaker 3: Figuring it out? Why do we need a middleman?
Speaker 2: Is this more of an investor play, which is certainly
Speaker 2: of interest to the Bloomberg audience who are always looking
Speaker 2: for a different ways of investing, But is that what
Speaker 2: this is mostly about?
Speaker 10: Yeah, I would say we're more of an orchestrator than
Speaker 10: a middleman. We certainly want to work the front end
Speaker 10: from an investment perspective and a financial perspective to make
Speaker 10: sure there's models where large utilities don't have to take
Speaker 10: this apple to risk all on their balance sheet. So
Speaker 10: that's part of the problem we're solving. But we've also
Speaker 10: pulled together a team of experts that have built these
Speaker 10: projects recently in the United States and elsewhere that we're
Speaker 10: building the best project management team around to be able
Speaker 10: to go and really help the utilities and partner through
Speaker 10: our consortium to drive down these costs quicker. What we've
Speaker 10: seen in the past in the seventies and eighties, when
Speaker 10: these facilities were being built, every utility would go about
Speaker 10: this on their own and they'd all want to do
Speaker 10: it a different way, so you never truly got to
Speaker 10: that end of a kind cost. We believe by using
Speaker 10: our consortium of utilities OEMs hyper scalers, we can bring
Speaker 10: more power to this and we can really use the
Speaker 10: rinse and repeat method to drive these costs down quickly.
Speaker 2: No, I kind of understand the model, but let me
Speaker 2: just ask you then, who takes the capital risk and
Speaker 2: who actually takes the responsibility of making.
Speaker 3: Sure that it's a safe plant. Ultimately.
Speaker 10: Yeah, so again public private partnership. So we'll be working
Speaker 10: with the government on part of the capital risk. Will
Speaker 10: also be focusing with our investors to take on that
Speaker 10: capital risk, so it's not put directly onto utilities or
Speaker 10: rate base, with more of a build transfer.
Speaker 7: Model, if you will.
Speaker 10: As far as who controls the safety.
Speaker 2: The excent So does that also mean that taxpayer risk?
Speaker 2: If the government's involved, it's also taxpayer risk, right, potentially
Speaker 2: it could be.
Speaker 10: Now again, we'll release more information on the actual programs
Speaker 10: we're looking to use in the first quarter of next year,
Speaker 10: but I'll just leave it at public private partnerships for
Speaker 10: now and then yeah, go ahead, Yeah, the safety aspects.
Speaker 10: So part of our consortium is going to be large
Speaker 10: utilities that have historically operated these facilities for years. They
Speaker 10: would be the licensee and the ultimate owner of these
Speaker 10: projects once the build is complete.
Speaker 2: Is this a model just twenty five seconds that really
Speaker 2: is for the US or I mean we're Europe and
Speaker 2: elsewhere outside the US already kind of all in on
Speaker 2: nuclear Is that part of it? And forgive me, I
Speaker 2: only got about twenty seconds here.
Speaker 7: Yeah, yeah, I'll be quick.
Speaker 10: So we initially, you know, we're building this company to
Speaker 10: help support the US market, but we are receiving a
Speaker 10: lot of interest overseas with all of the new nuclear
Speaker 10: projects going on there, and there was a lot of
Speaker 10: help needed in those areas.
Speaker 2: Interesting stuff. Stay in touch as you can share more
Speaker 2: with us. Joe Kletcha, chief nuclear officer of the Nuclear Company.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Easter here on
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Speaker 1: York station, Just say Alexa play Bloomberg eleven thirty.
Speaker 3: Plenty ahead in.
Speaker 2: Our second hour of the weekend edition of Bloomberg Business Week,
Speaker 2: including America's favorite food group a patty in two buns
Speaker 2: with some stuff thrown on top from Humble backyard barbecues
Speaker 2: to Michelin starred menus, why the Hamburger continues to thrive
Speaker 2: with American consumers really global consumers.
Speaker 4: Plus the twelve Days of Christmas may need a thirteenth
Speaker 4: verse about my true love going broke because of Christmas gifts, Carol,
Speaker 4: They're actually getting pretty expensive. And it's not because of
Speaker 4: you know, gold rings.
Speaker 5: Yeah, this is so confused.
Speaker 1: It's fine, it's fine.
Speaker 5: I'm not bitter about it.
Speaker 3: He is a little bit.
Speaker 2: We'll explain later on First Up this hour. As many
Speaker 2: of us gathered with family around a table filled with
Speaker 2: trays of food for Thanksgiving, millions of Americans worry about
Speaker 2: where their next meal will come from. In twenty twenty three,
Speaker 2: about thirteen point five percent of households in the US,
Speaker 2: that's about eighteen million people were food insecure. This is
Speaker 2: according to the USDA, which defines food insecurity as quote.
Speaker 2: At times during the year, these households were uncertain of
Speaker 2: having or unable to acquire enough food to meet the
Speaker 2: needs of all their members because they had insufficient money
Speaker 2: or other resources for food.
Speaker 4: The picture is actually worse for households with children. We're
Speaker 4: nearly eighteen percent were effect by food and security and
Speaker 4: it's something that Claire Babinot Fontano is all too familiar with.
Speaker 4: She's the CEO of Feeding America. It's the US based
Speaker 4: nonprofit that has a network of more than two hundred
Speaker 4: food banks. Last year, Feeding America distributed more than five
Speaker 4: billion meals. So are things actually getting better?
Speaker 11: Unfortunately, things are worse. I know that might be difficult
Speaker 11: or for any of us to wrap our heads around,
Speaker 11: but it's true. Food and security rates were lower during
Speaker 11: the peak of the pandemic than they are today are
Speaker 11: at their highest rates since the two thousand and eight
Speaker 11: two thousand and nine economic downtow.
Speaker 1: Why is that.
Speaker 11: Well in part because food and security captured the attention
Speaker 11: of the American publican policy makers dudent the pandemic, people
Speaker 11: saw those very long lines of cars on the road,
Speaker 11: or saw parking lots build with ten thousand cars, each
Speaker 11: car representing four to five families, and it got our attention.
Speaker 3: When we are.
Speaker 11: Intent on something, we tend to do something about it.
Speaker 11: So a lot of resources were directed toward food and
Speaker 11: security during that time. Since then, the lines have simply
Speaker 11: returned to the insides of buildings, but I think people
Speaker 11: think they've gone away. That makes opportunities like this one
Speaker 11: all the more important for the people that I sign
Speaker 11: up to serve every day.
Speaker 2: Clear Why though, are people hungry in America? We're a
Speaker 2: rich nation, and I guess I wonder why that exists still.
Speaker 11: Yeah, so that's a really complex question with complex answers
Speaker 11: and nuanced answers. But I will tell you one thing
Speaker 11: as an example. The largest are the fastest growing population
Speaker 11: of people who are showing up at food banks are
Speaker 11: people who do not currently qualify for any federal nutrition
Speaker 11: program so SNAP normally known as food stamps. They can't
Speaker 11: get SNAP. We have systems in the country that simply
Speaker 11: don't work well. They don't think about how each could
Speaker 11: relate to each other, and how sometimes they perpetuate people
Speaker 11: staying down. We talk about it a lot. It's sometimes characterized,
Speaker 11: for instance, as benefits cliffs, where it is truly it
Speaker 11: happens all the time throughout the country that a person
Speaker 11: might get a one dollar an hour raise and lose
Speaker 11: all of their childhood care benefits. I get put away
Speaker 11: in extra one hundred dollars in the bank, and now
Speaker 11: they no longer qualify for their housing. So it's a
Speaker 11: combination of things, and I'm hopeful that the Trump administration
Speaker 11: is going to sit down and bring in all of
Speaker 11: the different parts of the government, bring them together, and
Speaker 11: have them work together to come up with some effects.
Speaker 2: You know, we talk about margins a lot here. Certainly
Speaker 2: when it comes to like an earnings are balance sheet
Speaker 2: and a company. But I just think about the slim
Speaker 2: margin or no margin that so many American families are
Speaker 2: trying to exist or you know, and live on, and
Speaker 2: it's just too fragile, Claire, I.
Speaker 4: Was thinking as I was preparing for this segment. I
Speaker 4: mentioned USDA data at the top about thirteen point five
Speaker 4: percent of households in the US eighteen million homes were
Speaker 4: food and secure in twenty twenty three. This data come
Speaker 4: from the USDA's Economic Research Service, and I was thinking
Speaker 4: to myself, is this how valuable this information is because
Speaker 4: it gives us sort of a place to start our
Speaker 4: conversation with you, But also it's important to people like
Speaker 4: you because it gives you a baseline of how to
Speaker 4: understand food and security in this country. We also know
Speaker 4: that the Trump administration, the incoming Trump administration, wants to
Speaker 4: cut two trillion dollars from the federal budget. I'm wondering
Speaker 4: if you think programs such as these important Economic Research
Speaker 4: Service data or other programs at the USDA are at
Speaker 4: risk as a result of the new administration incoming.
Speaker 11: Well, I certainly hope not. I wish I had a
Speaker 11: crystal ball, but I don't. What I can say is
Speaker 11: that Beating America's network has been successful in working with
Speaker 11: every administration since our inception. We worked with the Trump
Speaker 11: administration during trade mitigation, for instance, that incredibly nutritious food
Speaker 11: that was being produced by US farmers, growers and producers,
Speaker 11: so much of it was actually sent into the charitable
Speaker 11: food system, where people received more access to nutrition than
Speaker 11: they ever have. We have worked vigilantly as a network
Speaker 11: to make certain that we maintain a status of being
Speaker 11: non partisan, not bipartisan, which I say we reduce you
Speaker 11: to the lowest common denominator, but non partisan. We stand
Speaker 11: with people experiencing hunger. They tell us what they need,
Speaker 11: and when we get them what they need, communities thrive.
Speaker 11: When communities thrive build, since is thrived, the whole country thrives,
Speaker 11: and it's simply not possible for people. If they can't
Speaker 11: they don't have enough food at home, it has a
Speaker 11: negative impact on everything that we value, and when they
Speaker 11: get what they need, it as a positive impact on
Speaker 11: everything that we value. So we're hopeful that we're going
Speaker 11: to continue to be able to get people to walk
Speaker 11: work across whatever those divides are that we've created between
Speaker 11: us and work with us as we work in communities
Speaker 11: across the country.
Speaker 2: So, Claire, I think it's pretty honorable what you guys
Speaker 2: are doing and have been doing for years. Personally, I'd
Speaker 2: like to put you out of business and I would
Speaker 2: love to see no American go hungry. So tell me
Speaker 2: what is the root cause of why Americans are hungry
Speaker 2: in America today?
Speaker 3: Is it? And you know, and help me fill out
Speaker 3: the picture here? Is it people that you are providing
Speaker 3: assistance for.
Speaker 2: One, two, three, four, five, five years? Are they often
Speaker 2: getting assistants for a long time? Is it because they
Speaker 2: can't get a job that pays? Is it because they're
Speaker 2: a mom with kids and raising young kids?
Speaker 8: Like?
Speaker 12: What is it?
Speaker 3: Why do we go hungry in America today?
Speaker 11: Yeah, it's all of the above. So there are a
Speaker 11: group of people who come to us and it's just episodic.
Speaker 11: They had a big medical expense that they had difficulty addressing,
Speaker 11: and we're there to be helpful in that moment of crisis.
Speaker 11: There are others who have come to us because they're
Speaker 11: in college. I, for instance, was food and secure when
Speaker 11: I was in college. I had to turn to the
Speaker 11: very system that I'm so privileged that I get the
Speaker 11: chance to help lead. And for me, it was during
Speaker 11: a period of transition when I was working really hard
Speaker 11: to create a different kind of path for myself. My
Speaker 11: parents hadn't had the chance to graduate high school, and
Speaker 11: here I was in college and I wanted to make
Speaker 11: good and I just couldn't make ends meet. So there
Speaker 11: was a lot of college hunger in the country. And
Speaker 11: they're also has generational hungry in this country. People who
Speaker 11: turn to us every year and who have many generations
Speaker 11: turned to the charitable food system. We've asked them, so
Speaker 11: what is it that puts you in that line? And
Speaker 11: they've been answering. We follow a report every year in September,
Speaker 11: which is Hunger Action Month. It's called Elevating Voices to
Speaker 11: End Hunger Together, and it's where people experience and hunger
Speaker 11: tell us while they're in the line. So here's what
Speaker 11: they tell us. They say, it's because of things like
Speaker 11: housing that's not affordable. Is because they don't have access
Speaker 11: to great health care and they care about their health.
Speaker 11: It's because of things like the benefits clip, which I
Speaker 11: alluded to in the earlier segment, where when they start
Speaker 11: getting ahead, the system actually pulls them backwards. So it's
Speaker 11: a lot of things. And we as Speeding America, we
Speaker 11: know that to solve hunger, we can't simply food bank
Speaker 11: our way out of it. So, like you, we want
Speaker 11: to put ourselves out of business, and the way to
Speaker 11: do it is to be comprehensive and thoughtful and nonpartisan
Speaker 11: and do what's best for the whole country by lifting
Speaker 11: people up for experience in hunger.
Speaker 4: Claire Carol and I were talking just a few moments
Speaker 4: ago and sort of asking the question of supporting a
Speaker 4: charity such as yours versus working closer to our own communities.
Speaker 4: How do you communicate that to people supporting Feeding America
Speaker 4: versus supporting a food bank in your hometown.
Speaker 11: What's so beautiful is there is no versus. Feeding America
Speaker 11: has a national is a national infrastructure, but it is
Speaker 11: an intensely local organization. Those food banks are in local communities.
Speaker 11: If anyone listening and watching or to go to Feeding
Speaker 11: America dot org, all that you'd have to do is
Speaker 11: type in the soap the zip code for the community
Speaker 11: you care about the most, and there is a member
Speaker 11: of the Feeding America network that's serving that very community.
Speaker 11: Having a national infrastructure allows us to have a lens
Speaker 11: of pulse, if you will, on where the greatest needs are,
Speaker 11: where the hotspots are. We provide funding to food banks
Speaker 11: and pantries. Again, there are over sixty thousand agency partners
Speaker 11: for Feeding America. Some of them are big, some of
Speaker 11: medium sized, and some of them are little bitty church
Speaker 11: pantries throughout the country, especially in rural America, where without
Speaker 11: those church pantries, there's so many people who would be
Speaker 11: devastated because of the implications of hunger. So with Feeding America,
Speaker 11: you don't have to make a choice shows local. That's
Speaker 11: what we want you to do. We want you to
Speaker 11: support your local community, and what we do as a
Speaker 11: national organization is put you in the best position to
Speaker 11: be able.
Speaker 2: To do that, all right, So appreciate getting some time
Speaker 2: with you as we get ready for the holidays, and
Speaker 2: we know it'll be season that is going to be
Speaker 2: tough for a lot of Americans.
Speaker 3: So appreciate checking in with you. Claire.
Speaker 2: Happy holidays and nice to talk with you again. Claire
Speaker 2: Babinot Fontano, CEO Feeding America, joining us there in New Orleans.
Speaker 4: I was just looking for my local zip code to
Speaker 4: food pantries that are not at all affiliates, Like they
Speaker 4: don't look like you know, Feeding America branding at all.
Speaker 4: But are they filling Yes, City Harvest is one of them,
Speaker 4: very prominent one here in New York City.
Speaker 3: Probably makes sense. I was looking at the list of partners.
Speaker 2: It's a who's who of those in the food industry,
Speaker 2: and so they probably work together in filling that out.
Speaker 3: Or you're listening and watching Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch US
Speaker 1: Live weekday afternoons from three to six Eastern Listen.
Speaker 5: On Bloomberg dot com, the iHeartRadio app.
Speaker 1: And the Bloomberg Business app, or watch US Live on YouTube.
Speaker 3: Here's the beat, Americans. We all love fanburgers.
Speaker 2: According to a USDA study from twenty twenty, Americans consume
Speaker 2: an average of.
Speaker 5: Two No, that's not true.
Speaker 3: They're four burgers per day.
Speaker 7: It's not true.
Speaker 3: Oh my god. I can't tell you how much we've
Speaker 3: debated over the statistic this week.
Speaker 4: No, Americans consume the equivalent of meat that would add
Speaker 4: up to two point four burgers per day if they
Speaker 4: were just hamburgers, but that stat includes all meat anyway.
Speaker 3: It's about fifty billion burgers per year. I'm just gonna say,
Speaker 3: we eat a lot of burgers. Can we just think
Speaker 3: we're still make any sense?
Speaker 5: He yeah, I got a lot of beef with this. Okay, funny.
Speaker 4: Here's some more juicy facts that won't make your of
Speaker 4: mouth water when it comes to costs. In the second
Speaker 4: quarter of twenty twenty four, the average price of a
Speaker 4: fast food restaurant burger was eight dollars and forty one cents,
Speaker 4: up sixteen percent from five years ago. Even at McDonald's,
Speaker 4: the average price of a big Mac we're talking no fries,
Speaker 4: no drink, just the sandwich. Back in June it was
Speaker 4: five dollars and twenty nine cents. That's a twenty one
Speaker 4: percent increase from twenty nineteen.
Speaker 2: That's a lot and you got to get the fries
Speaker 2: because that's why you go to McDonald's.
Speaker 3: I'm just gonna put that out there.
Speaker 2: Hey, someone who watches beef prices closely is Pat Conlin.
Speaker 2: He's the president of way Back Burgers, the fast casual
Speaker 2: chain that yes special is in burger's, fry shakes, and.
Speaker 9: A lot more.
Speaker 2: They've got about one hundred and fifty locations in the
Speaker 2: United States. Another twenty in countries including South Africa, Japan, Canada,
Speaker 2: and elsewhere.
Speaker 13: We play in the fast casual segment and shake Schat
Speaker 13: Burger Shake Shaft.
Speaker 8: Guys.
Speaker 3: Okay, we're still waiting in Manhattan.
Speaker 7: I'm just telling you, yep, very soon, you won't have
Speaker 7: to wait much longer.
Speaker 13: We're going to open up our first restaurant, first Way
Speaker 13: Back Restaurant in Manhattan on Seventh Avenue in twenty Seventh
Speaker 13: Street should be in January, right across from f T.
Speaker 13: So then you you'll be able to get one of
Speaker 13: those two point four burgers per day.
Speaker 3: I don't know what that means. I'll have to double
Speaker 3: check on that.
Speaker 2: But talk fast casual, because you know, we talk about Chipotle,
Speaker 2: who is often credited with really creating it many years ago.
Speaker 3: In terms of fast casual, it wasn't just the fast
Speaker 3: food places that we got in customed to. It was
Speaker 3: a little bit of an experience.
Speaker 13: Right when I grew up, it was really fast food
Speaker 13: and now fast foods called QSR quick service restaurants. Yeah,
Speaker 13: fast asual started really with Chipotle, Panera Bread. Higher quality,
Speaker 13: elevated food, elevated experience in the restaurant, more fresh people,
Speaker 13: wanted a better quality burger, better quality salad to go to,
Speaker 13: and they're willing to pay more for that, for that quality,
Speaker 13: but also for the overall experience in the atmosphere of
Speaker 13: the restaurants.
Speaker 4: How do you replicate that atmosphere of the restaurant in
Speaker 4: New York where rent is super high, spaces are small,
Speaker 4: and crowds are plenty.
Speaker 7: You have to be fast.
Speaker 13: So even though we do the order, we don't pre
Speaker 13: cook any burgers. We make the burger when you order
Speaker 13: it at the at the point of sale system. But
Speaker 13: it's really nowadays the digital ordering process is a big
Speaker 13: portion of our business.
Speaker 7: So people order ordering head on the edge, on the app.
Speaker 13: How much of your business line it's about between the
Speaker 13: app and online ordering and delivery.
Speaker 7: It's about forty percent of our businesses digital orders.
Speaker 5: How much is that up? Just in the last few wait?
Speaker 3: Online app and delivery are forty percent of the business. Okay,
Speaker 3: forgive me go ahead.
Speaker 7: And when you do.
Speaker 5: Delivery, are you doing third party delivery?
Speaker 7: Third party through Uber Eats, grub hub door.
Speaker 3: Do you hate that and paying all those fees? Can
Speaker 3: I just put it out of the fees we pay this?
Speaker 7: I know both of us pay the fees.
Speaker 13: The restaurant tour pays commissions to those services, but we don't.
Speaker 13: I mean, if you had to start a delivery service
Speaker 13: of your own, there's a cost involved in that as
Speaker 13: a restaurant tour delivery guys, insurance cars, things like that.
Speaker 13: So there is a value to having them, and they
Speaker 13: bring certain guests to maybe not to the restaurant, but
Speaker 13: they bring them. They bring those sales into the restaurant
Speaker 13: because there are certain people.
Speaker 7: That are only going to order delivery.
Speaker 13: And when I was a kid, the only thing you
Speaker 13: can get on delivery was Chinese food a pizza. Now
Speaker 13: you can get everything under the sun.
Speaker 3: It is so true.
Speaker 2: Right in terms of diversity, I have to say some
Speaker 2: excuse me as I blow my nose, sorry, getting called
Speaker 2: five guys in and out way back Burger, smash burg
Speaker 2: or Burger Fat Burger, Johnny Rockets, what a Burger?
Speaker 3: Red Robin's Heart, E's Jack in the Box, Wendy's.
Speaker 5: Well, now you're getting into some fast foods.
Speaker 2: Okay, But I'm just gonna say, there are so many
Speaker 2: Burger joints out there. How do you I understand fast
Speaker 2: casual and experience, but how do you stand out, Like,
Speaker 2: what's your fear about coming into a New York market
Speaker 2: when I can also go to PJ. Clark's and get
Speaker 2: a burger with brenets and be a like kind of
Speaker 2: an old speakeasy.
Speaker 3: And have a really cool experience. But tell me how
Speaker 3: you do it.
Speaker 7: Well, it has to be done.
Speaker 13: I mean in the fast casual segment and even in
Speaker 13: the in the qs R a quick service restaurant service.
Speaker 13: Now quality everybody has quality food.
Speaker 3: Okay, So now everybody doesn't have quality food.
Speaker 13: Everybody has some semblance of quality or people expect.
Speaker 7: People expect quality for the level of price they're paying.
Speaker 3: Yeah, okay, fair.
Speaker 13: So you have to have something other than just quality food.
Speaker 13: You have to have the atmosphere. You have to have
Speaker 13: that guest service. We don't call the people that come
Speaker 13: into our restaurant customers. We call them guests because we
Speaker 13: really believe that they're coming into our dining.
Speaker 7: Room at our home. When you order at the POS station,
Speaker 7: we don't give you a number. We take your name.
Speaker 13: So it may sound a little bit goofy, but it's
Speaker 13: a little bit different personalization. So then when we walk
Speaker 13: the food out to your table, we say pat double cheeseburger,
Speaker 13: not number twenty one, number twenty seven.
Speaker 7: So it just makes you feel a little bit better
Speaker 7: as a guest. And then if you walk in and
Speaker 7: that person behind the pos system.
Speaker 13: Remembers your name or maybe they remember that you get
Speaker 13: a bacon double cheeseburger all the time and an Oreo
Speaker 13: milkshake and they say that, and you're in with somebody
Speaker 13: and they catch your name or that, hey, you're getting
Speaker 13: that thing that same order makes you feel like a
Speaker 13: king is the guest.
Speaker 7: So that's how you have to differentiate yourself today in
Speaker 7: the market. We know we have a great burger.
Speaker 13: We know we have great hand dipped milkshakes made the
Speaker 13: old fashioned way in a metal tin spun, not pulled
Speaker 13: out of a machine.
Speaker 7: So we know we have quality of food. It's that
Speaker 7: other atmosphere and that sense of nostalgia that's going to
Speaker 7: set us apart.
Speaker 4: You're a franchise guy, Yes, that's all my life, your
Speaker 4: whole life, Yeah, your whole career. What's the franchise model here.
Speaker 7: In terms of so how does it work?
Speaker 4: I mean, are these all independently owned and operator? Are
Speaker 4: they company stores?
Speaker 8: No?
Speaker 7: There were one hundred percent franchise.
Speaker 4: Okay, one hundred percent franchise, So an asset light model
Speaker 4: for you on the corporate side.
Speaker 5: How do fees work? The franchise fees.
Speaker 13: Initial franchise fee a license, so nump A restaurant is
Speaker 13: thirty five thousand dollars. You're ongoing royalties or five percent,
Speaker 13: and the advertising fee is four percent.
Speaker 5: It's pretty typical to the industry.
Speaker 7: Correct.
Speaker 4: So all you need is thirty five thousand dollars up
Speaker 4: front in order to do it, plus the capex that
Speaker 4: you need to build out your location.
Speaker 13: Yeah, the total investment is between five fifty to six
Speaker 13: fifty including the franchise.
Speaker 4: How do you explain the footprint where restaurants are right
Speaker 4: now in the US? Is that because of who you
Speaker 4: found as franchisees? Is that deliberate? It's it's definitely. There
Speaker 4: are a lot, but they're concentrated in certain areas.
Speaker 13: Yeah, we concentrate except for the one that we're doing
Speaker 13: in Manhattan. We really started we started in nineteen ninety
Speaker 13: one in Newark, Delaware. We've always been very successful in
Speaker 13: small towns. We are opening up the one in Manhattan,
Speaker 13: opening up one in New Orleans, so those are really
Speaker 13: our first forays into downtown areas, and that's we've been successful.
Speaker 13: But now through that downtown, through that was those small markets,
Speaker 13: now we're growing into the cities.
Speaker 4: Who are you seeing as your typical franchisees. Are there
Speaker 4: a handful of people who have like ten of them
Speaker 4: or are they sort of one offs?
Speaker 13: Now we're a little bit different than some other franchise companies.
Speaker 13: We look to award one franchise at a time where
Speaker 13: many other companies want you to.
Speaker 7: Come in and do five or ten or take down
Speaker 7: a whole county. Want to be in.
Speaker 13: Business with you first, See how you do. See if
Speaker 13: you're happy with us. We're happy with you.
Speaker 7: We're all about growth, but we want to make sure
Speaker 7: we're growing with the right people. They do one of
Speaker 7: the time.
Speaker 3: Does that mean you do have some franchise operators who
Speaker 3: have more than one.
Speaker 13: So now over those years since we've been franchising, since
Speaker 13: two thousand and eight, we're about forty five percent of
Speaker 13: our system or multi unit franchisees. So they've reinvested in
Speaker 13: the brand and themselves. They know that it's working and
Speaker 13: they're happy and we're happy with them.
Speaker 2: And you do stuff over internationally too, like woud I Ireland,
Speaker 2: South Africa, Japan, Canada.
Speaker 3: Yeah, you're and you're continuing that, like, how do you like?
Speaker 3: What's that model and.
Speaker 13: That models that model is a little bit different than
Speaker 13: the than the franchisee in the US. It's done by
Speaker 13: a master franchise and that person or that company actually
Speaker 13: becomes really the parent company in that country or that
Speaker 13: territory or that province, so they have to do everything
Speaker 13: that we do in the US.
Speaker 2: Interesting, how quickly does somebody who sets up a restaurant
Speaker 2: a franchise and how quickly do.
Speaker 13: They get their money back really depends upon how they
Speaker 13: set up if they're an owner operator and they're taking
Speaker 13: a salary and there, or if they are multi unit owners,
Speaker 13: it's a it's a different payback and how they set
Speaker 13: it up financially, whether they're paying all cash for it
Speaker 13: using their own money or if they're going to the
Speaker 13: SBA or a lending institution for financing.
Speaker 4: Is the model such that the franchise e is actually
Speaker 4: in the back working getting because or her hands dirty.
Speaker 5: No, that's there's something they need, notorious.
Speaker 7: For that they need to know.
Speaker 13: Yes, they need when we when you become a franchise e,
Speaker 13: you're going to have to learn how to flip burgers
Speaker 13: and drop fries and make milkshakes. The reason being not
Speaker 13: that that's going to be your function as a franchise.
Speaker 13: Your function is to grow your business and to get
Speaker 13: a new guest every day. But you need to know
Speaker 13: because when you walk in, or when you when you
Speaker 13: look on a videotape and you see that the that
Speaker 13: the side of the floor is dirty because they've been
Speaker 13: hitting it with the mop and not cleaning, that you
Speaker 13: need to walk in and be able to catch that.
Speaker 13: So you need to go through the full training process.
Speaker 13: But no, we don't expect our franchisees to be in
Speaker 13: behind the grill every day. That would be a waste
Speaker 13: of their talent and their training.
Speaker 2: We got about thirty four seconds, so they're gonna take
Speaker 2: a break and come back and talk some more. Do
Speaker 2: most franchises work out or are there a small percentage
Speaker 2: where it's just obvious Because you got to worry about
Speaker 2: the brand, the reputation.
Speaker 3: One bad one can bring it down. So I'm just curious.
Speaker 3: Do most of them, like ninety percent of them work out?
Speaker 13: Most of them, Yes, they do work out, and we
Speaker 13: have a great family of franchises across the across the
Speaker 13: US and across across the world. Yeah, there are some
Speaker 13: times where people either decide this isn't for them or
Speaker 13: it is a lot of work. The restaurant business is
Speaker 13: a lot of work. And you also have to have
Speaker 13: a personality to be in the restaurant business. You're not
Speaker 13: behind a desk. You have to be, you know, out
Speaker 13: there frontman. And if that's not for you, then then
Speaker 13: you shouldn't get into the restaurant pisins.
Speaker 2: Pat talked to us about some of the logistics of
Speaker 2: you know, as Tim rightly pointed out, it's franchise ease,
Speaker 2: so asset light. But I am curious about food costs,
Speaker 2: labor costs, you know, building out in as you said,
Speaker 2: you're getting ready to open up and or have one
Speaker 2: location New York City.
Speaker 3: It's expensive here in New York City. Talk to us
Speaker 3: about some of these dynamics.
Speaker 13: Yeah, well, the food cost is again one of the
Speaker 13: reasons you get into a franchise model is we go
Speaker 13: out and we negotiate for one hundred and fifty restaurants
Speaker 13: for beef, for buns, for ice cream.
Speaker 7: For soda, for all the supplies.
Speaker 13: So you're not if you were going out and just
Speaker 13: negotiating for yourself, you wouldn't get that volume discount purchase.
Speaker 13: It also talks to the quality of the product, because
Speaker 13: we're getting the quality these consistency. So you get that
Speaker 13: same burger the McDonald's theory, whether you go to one
Speaker 13: in California or whether you come to one in New
Speaker 13: York or Florida, you get that same taste, same thing
Speaker 13: with way Back. It is the same product across the US,
Speaker 13: So you get the volume discount in the pricing, you
Speaker 13: get the same quality and the consistency which the guest
Speaker 13: is looking for when they walk into a way Back
Speaker 13: or any franchise model.
Speaker 7: And I forgot what the other part of your question was.
Speaker 2: Labor costs, labor quests and even overhead of like building
Speaker 2: out like it's not going to probably cost the same
Speaker 2: to build in New York.
Speaker 3: Versus maybe somewhere else across the unit or does it.
Speaker 13: I don't know, No, I mean New York City is
Speaker 13: a different animal to itself, but it was an existing restaurant.
Speaker 13: So those are some of the spaces that we look
Speaker 13: for around the country, as long as it can't compromise
Speaker 13: on the quality of the location. It has to be
Speaker 13: a number one location, triple A location, and if it
Speaker 13: was a restaurant location, great, You don't want to take
Speaker 13: a second generation restaurant that went out of business because
Speaker 13: it was a bad location, but it's going to save
Speaker 13: you fifty thousand dollars in build out costs.
Speaker 3: So you do research. You're like, okay, who is here beforehand?
Speaker 7: Right? Yeah?
Speaker 13: And why did they go out a business? Is it
Speaker 13: in the back end of the shopping center? Was it
Speaker 13: a bad shopping center? Can you make a left hand turn?
Speaker 13: Is there a light to get in to get out?
Speaker 13: Or you know, taking your life in your hands if
Speaker 13: you have to pull your car out of that shopping center.
Speaker 13: So we do all that research along with our broker networks.
Speaker 13: We have a real estate platform, a modeling platform that
Speaker 13: looks at the locations that that we're choosing with the
Speaker 13: franchisees and we hold their hand all the way through.
Speaker 13: That you asked earlier what type of people are coming
Speaker 13: into the system. It really spans the horizon. There are
Speaker 13: a restaurant people that come in, there are people that
Speaker 13: come out of corporate jobs, and there are people that
Speaker 13: come out of it. It's really all across the board,
Speaker 13: but we have the training programs and the systems to
Speaker 13: be able to make them successful.
Speaker 5: Okay, lots of questions here. You mentioned labor.
Speaker 4: Labor, Yeah, I want to hone on that a little
Speaker 4: bit because we've seen labor costs over the last few
Speaker 4: years go up quite a bit. It's been tough in
Speaker 4: some markets even finding the labor. What's the labor picture
Speaker 4: you're hearing from franchisees right now.
Speaker 13: One of our franchisees told me about six months ago
Speaker 13: that I said to you, and our first franchise opened
Speaker 13: up in Utah about a year ago, and I asked him,
Speaker 13: is there a labor any labor problems, labor issues finding
Speaker 13: labor in your market? And he said, Pat, there's no
Speaker 13: labor issues. That you have to pay what the what
Speaker 13: the going rate is in the area.
Speaker 7: And that's really what it comes down to.
Speaker 13: If a restaurant down the street is paying twenty five
Speaker 13: cents more an hour than what you're offering, you're going
Speaker 13: to have a labor problem. Minimum wage is a is
Speaker 13: a fictitious number. There is no yeah minuse the market
Speaker 13: determines that correct found. But if let's say your franchise
Speaker 13: e in a part of Utah, where the cost of
Speaker 13: living is higher, has to pay a higher wage than
Speaker 13: somebody based in Let's say this a sun belt state
Speaker 13: where you have a store where the cost of living
Speaker 13: is lower. Is that reflected in the actual menu price too?
Speaker 13: Do they have do they have discrepancy or do they
Speaker 13: have the ability to have discrepancies within many pricing? Absolutely,
Speaker 13: we we don't force them to charge X amount for
Speaker 13: a burger or a milkshake. Labor has to be taken
Speaker 13: into account, just like rent has to be taken into account.
Speaker 13: The rent in New York City is going to be
Speaker 13: much different than the rent in North Carolina. That has
Speaker 13: to go into the menu prices. The food costs goes
Speaker 13: into the menu prices. We were talking earlier about the
Speaker 13: price of beef and the price of proteins and how
Speaker 13: that has gone up over the last three four years.
Speaker 13: So that has to be accounted for, and you see
Speaker 13: that in menu prices and inflation and things of that nature.
Speaker 4: I was looking at the menu. The menu looks great
Speaker 4: by the way. It got to a part though, where
Speaker 4: it had.
Speaker 5: The non meat burgers. Carol I used to talk about
Speaker 5: these all the time. Does anyone order these anymore?
Speaker 7: They still do the Impossible, the impossible plant based.
Speaker 13: Yeah, the plant based. We carry the Impossible Burger and
Speaker 13: probably three four. It's just right around the pandemic is
Speaker 13: when we brought it on. That's when it was hot, yes,
Speaker 13: and it probably went up a couple of years after that.
Speaker 7: It's funny.
Speaker 13: We had it on as a limited time offer just
Speaker 13: before the pandemic hit and we weren't sure how it
Speaker 13: was going to go. And it was also going to
Speaker 13: be an expensive menu item, because that product was an
Speaker 13: expensive item to bring into the restaurant, and it turned
Speaker 13: out to sell very well, and we took it off
Speaker 13: because we had a limited amount of supply of it
Speaker 13: and never saw so many feedbacks four or five years ago, when.
Speaker 7: Are you bringing that back?
Speaker 13: The only reason I came into a Burger place was
Speaker 13: I saw that you had that online. Now that that
Speaker 13: has definitely waned and the plant based meat alternatives.
Speaker 4: Have gone down somewhat, and so I don't know about you, Carol,
Speaker 4: but I went from like I loved those things, and
Speaker 4: then I kind of realized what was in.
Speaker 5: On and I was never a fan for me, and
Speaker 5: I'm like, give me the cow. I was never the cow.
Speaker 2: No, because I thought the amount of salt that was
Speaker 2: in it, and I had so many conversations with folks
Speaker 2: that were in the industry, and I'm like, I should
Speaker 2: be your customer, but it isn't a healthier option.
Speaker 7: Yeah, we had.
Speaker 13: It's really for it's really for people who who are
Speaker 13: not they're not vegetarians. They like meat, they like the
Speaker 13: taste of to beat. They were looking to cut down
Speaker 13: their their consumption of meat and going that way so
Speaker 13: worked well for us.
Speaker 2: So I'm looking at a sweet bacon burger that's just
Speaker 2: oozing with bacon and cheese. Looks kind of yammy cheese fries. Yep,
Speaker 2: give me some fries, the bacon on the fries. I'm
Speaker 2: just saying, what happened to people wanting healthy or fair?
Speaker 5: It's I think this has looked at it's healthy now,
Speaker 5: No to be fair like RFK healthy.
Speaker 13: We've only got about thirty seconds like what people people
Speaker 13: looking and they want to eat healthy in January when
Speaker 13: they get their gym membership and when the calendar changes
Speaker 13: come February, everybody's back to eating those two three burgers
Speaker 13: a week.
Speaker 3: Sorry, go ahead, are two point five burgers today.
Speaker 7: They'll take the two point seven.
Speaker 2: I'm just saying Pat Collins still with us preserve way
Speaker 2: Back Burgers. Bloomberger Director Broker Studio. First of all, private
Speaker 2: equity money that keeps getting involved into different worlds, good
Speaker 2: or bad.
Speaker 7: Some of it's good, some of it's probably not good.
Speaker 7: We're very much about we're not private equity. We're owned
Speaker 7: by two partners.
Speaker 13: And no debt on the company which owned what like
Speaker 13: they they're the franchise where the franchise or Jake's Franchising
Speaker 13: they have a concept. Yes, they own the franchise franchising
Speaker 13: companies called Jake's Franchising, And we're the parent company for
Speaker 13: way Back Burgers.
Speaker 5: What do you think of the Jersey Micy purchase? Buying
Speaker 5: eight billion dollars?
Speaker 7: Huge amount of money?
Speaker 13: But we'll see what happens, you know, that's what the
Speaker 13: valuation if you look at it per per location is
Speaker 13: pretty high.
Speaker 5: So did Steve Schwartzman overpay.
Speaker 7: I don't know, we'll I guess we'll see in the
Speaker 7: years to come.
Speaker 2: The business, Like I think about margins, how tight is
Speaker 2: it in a restaurant?
Speaker 3: What are the margins?
Speaker 8: Like?
Speaker 7: It's tight?
Speaker 13: You have to watch your food costs. I mean there
Speaker 13: are burgers. I think you were asking what's changed over.
Speaker 3: The over the year eighteen ninety one. You guys started right.
Speaker 7: So it started originally with in Delaware.
Speaker 13: But when the beef came in, it came in in
Speaker 13: bulk and you had to roll. They called it rolling burgers,
Speaker 13: so you rolled them into little meatballs because it was
Speaker 13: all fresh burgers. So you did that in the back
Speaker 13: of the house and everybody you had to weigh each
Speaker 13: meatball before we pressed it. And the problem with that
Speaker 13: is like my mom did, but she kind of like, right,
Speaker 13: what you did, what you did at home, except your
Speaker 13: mom didn't put a lot of skin.
Speaker 7: She did, and if one was bigger then the other,
Speaker 7: it didn't make a difference. At home.
Speaker 3: My brothers got those. I got the smaller.
Speaker 13: In the restaurant industry, again, you want consistency. But the
Speaker 13: problem is if that burger goes out bigger than it's
Speaker 13: costing you more as a franchise e. If it goes
Speaker 13: out smaller, then the guest is not getting the right side.
Speaker 3: Stop that is burger small, That's right.
Speaker 13: So we went to our burger supplier after years of
Speaker 13: doing it, and it was a labor issue. Rolling beef
Speaker 13: and nobody wanted to do it, and it was the
Speaker 13: employees didn't didn't like doing it. So we went to
Speaker 13: our beef supplier and said, and quite frankly, it was
Speaker 13: a food safety issue having hands on it. And we
Speaker 13: went to the our manufacturer and.
Speaker 7: Said, is there a better way?
Speaker 13: And they said, yeah, you know what, We've just started
Speaker 13: doing this where we can make your proprietary beef in
Speaker 13: a loosely formed puck they call it, and at your weight,
Speaker 13: your your specifications, and it'll come into you cryovacked and
Speaker 13: each patty is already done, so you take it out
Speaker 13: of the back of the house.
Speaker 7: So that's a labor savings, it's a food cost savings
Speaker 7: because now i's a little bit more, don't cost the
Speaker 7: same amount of money.
Speaker 5: Really, they'll just measure it for you.
Speaker 13: They pre measured it saved us a lot of money
Speaker 13: and now there's you know, the team members loved it
Speaker 13: because and the franchise he's loved it because you're getting
Speaker 13: people out of the back of the house so you
Speaker 13: better able to serve guests in the restaurant. Same thing
Speaker 13: with our ice cream. We handscooped the milkshakes and the
Speaker 13: ice cream that we used to use was a French
Speaker 13: a vanilla bean ice cream. It sounds funny, very very hard,
Speaker 13: even though it's frozen at the same amount, and nobody
Speaker 13: wanted to do it. You had to take the tub
Speaker 13: of ice cream out and sit it on the counter
Speaker 13: in the back for a little while that it thaw
Speaker 13: out a little before the team member could scoop it.
Speaker 13: And you were scooping hard ice cream.
Speaker 7: It was tough.
Speaker 3: I think about that with folks who doing ice cream.
Speaker 3: It's a lot of work, it is, I'm getting So
Speaker 3: what were we going to say? Did you automate it?
Speaker 13: So we were eventually looking at that, but we went
Speaker 13: back to the ice cream guy and said, and he said,
Speaker 13: we can make an ice cream with a little more
Speaker 13: sugar content, and believe it or not, it's softer. It's
Speaker 13: still it's still at ten below zero, but it's softer.
Speaker 13: You can take that out at ten below and you
Speaker 13: can scoop it, and you can almost scoop it to order.
Speaker 4: I'm getting Okay, we only have a couple minutes left,
Speaker 4: but I'm getting some questions from folks listening and watching
Speaker 4: right now, as as the person who's the president of
Speaker 4: the franchising firm do you have a view on unionization
Speaker 4: at all. We're seeing it happen at places like Starbucks,
Speaker 4: for example, Apple Store, Yeah.
Speaker 13: Okay, I mean we're in the hospitality business, in the
Speaker 13: restaurant business.
Speaker 7: And we want to make.
Speaker 13: We're also one hundred percent franchised, so it's a little
Speaker 13: bit different than Starbucks, where they're.
Speaker 7: All company owned units.
Speaker 13: So we want to make our team members, we want
Speaker 13: what we want them to be fairly paid. I don't
Speaker 13: know whether we would take a stance one way or
Speaker 13: another on a on unionization.
Speaker 2: All right, So if we're coming, is Tim mcgardenberger, is
Speaker 2: he Carolina?
Speaker 3: Is he a Cajun? I know I'm an a one steakhouse.
Speaker 5: I would do any of the above. I was looking
Speaker 5: at them any earlier.
Speaker 8: Well.
Speaker 13: Also, look at the cheesy, which is very plain. But
Speaker 13: it's four slizes of American cheese on a double patty
Speaker 13: burger with an inverted Butterbut that's magical.
Speaker 7: Yes, no offense.
Speaker 3: I've done that with hot dogs.
Speaker 7: But it's a grilled cheese with a hamburger in the
Speaker 7: middle of it.
Speaker 4: Okay, only thirty seconds. Technology, Kiosks and stores, what's going on?
Speaker 4: Kiosks and stores? We started again that came out of
Speaker 4: the pandemic.
Speaker 13: We have about fifty restaurants across the US today that
Speaker 13: have the kiosks. Every new restaurant that's being built and
Speaker 13: being built with kiosks.
Speaker 7: It again.
Speaker 13: It's it's not so much of a labor savings but
Speaker 13: redeploying the labor in the restaurants so they can better
Speaker 13: serve the guests.
Speaker 3: Five seconds.
Speaker 2: Consumer doing okay, yeah, consumer or consumer consumer, Yeah, shopper's
Speaker 2: restaurant person who comes to a restaurant, you think they're
Speaker 2: doing okay, they're.
Speaker 3: Not pulling back or anything.
Speaker 7: No, no, I mean we see that our sales haven't slipped.
Speaker 7: So staff knockwood.
Speaker 3: All right, Well, when New York opens, come on.
Speaker 7: Back definitely, all right, take you. We'll meet you there
Speaker 7: for Burger deal.
Speaker 3: Peconland President, way back Burgers, Thank you so much. Really
Speaker 3: enjoyed it.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Easter on Bloomberg Radio,
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Speaker 1: Just say Alexa play Bloomberg eleven thirty.
Speaker 3: Before we wrap up.
Speaker 2: Our broadcast, we want to unwrap some data from the
Speaker 2: PNC Christmas Price Index. Now in it's forty first year,
Speaker 2: P and C has been keeping track of just how
Speaker 2: much the twelve days of Christmas cost, and spoiler alert,
Speaker 2: it's a lot.
Speaker 4: Inflation is to blame for the rising costs of decking
Speaker 4: the halls kind of. I mean, yes, it's a little complicated, though.
Speaker 4: We dive into it with Amanda Gotti, chief investment officer
Speaker 4: at PNC Asset Management Group, who broke it all down
Speaker 4: for us.
Speaker 12: The Christmas Price Indux is up really significantly and thankfully
Speaker 12: my favorite gift in the index, the Golden Rings, of course,
Speaker 12: is not the driver, as you said, It's really the
Speaker 12: services side of the equation, which we equate very much
Speaker 12: to the performers. That's really what's driving this year's calculation
Speaker 12: in terms of the Christmas Price Index, and also interesting,
Speaker 12: very much still a lot of services inflationary fire and
Speaker 12: the broader economy too. So the numbers may look eyepopping,
Speaker 12: but the trends are actually quite similar.
Speaker 4: But I don't understand the I don't understand the gold
Speaker 4: element here because gold is up thirty percent from a
Speaker 4: year ago. But in your analysis it's exactly flat from
Speaker 4: a year ago.
Speaker 12: It's not just purely about the cost of the gold itself,
Speaker 12: it's the production and the creation of the ring. And
Speaker 12: so every year we go back to the same jewelry
Speaker 12: store and talk to them about their prices, and they
Speaker 12: have not raised prices on a year over year basis.
Speaker 12: So their margin is certainly coming down because the put
Speaker 12: cost has gone up, as you said, but they haven't
Speaker 12: moved the needle in terms of the price for the
Speaker 12: ring in total itself. That's a nuance, but notable, I think.
Speaker 8: So.
Speaker 3: Wait, the trends remind me.
Speaker 2: Over the years, as we have talked to you about this,
Speaker 2: as we are a service led economy, has it increasingly
Speaker 2: been that the service side of the Twelve Days of
Speaker 2: Christmas is what kind of moves the needle when it
Speaker 2: comes to costs.
Speaker 12: You know, it hasn't always been the case, but as
Speaker 12: the broader economy has shifted from goods to more services,
Speaker 12: we've actually seen a similar trend. The Christmas Price index
Speaker 12: isn't leading it necessarily, but we are seeing that shift
Speaker 12: in the underlying data and the calculation of the index.
Speaker 12: And so when you look at the performers in particular.
Speaker 12: I mean, think about it, the Tailor Swift effect, the
Speaker 12: Beyonce effect. We're going to pay anything to get our
Speaker 12: hands on those tickets. And so the performers in the
Speaker 12: index are really garnering their big fair share of increases
Speaker 12: on a year over year basis.
Speaker 3: Hey, and I was seeing the twelve Ladies dance? Are
Speaker 3: the is it eleven ten lords of.
Speaker 5: Leaping, tenlors leading, ten lords of leader?
Speaker 2: They were they were doing backup work, you know, for
Speaker 2: Taylor Swift, So like could have driven up the.
Speaker 12: Cost that way six lane somewhere or another of the
Speaker 12: cost is way up. And consumers will pay anything for
Speaker 12: services these days.
Speaker 4: What's up with the six GISA laying of eight point
Speaker 4: nine percent from a year ago? I thought poultry prices
Speaker 4: were flattered down, you know, it's.
Speaker 12: It's sort of an interesting it's an interesting dynamic there.
Speaker 12: I have to say, you know, the backyard farming trend.
Speaker 12: Dare I say farm to table? Hopefully the geese aren't
Speaker 12: listening to me me here talking something about that. I
Speaker 12: know it is, isn't it? This is These are the
Speaker 12: cold hard analytical facts for you. But there are definitely
Speaker 12: some consumer oriented trends driving the demand for geese up
Speaker 12: relative to some of the other birds in the index.
Speaker 12: I mean, what are you going to do with turtle doves?
Speaker 12: What are you gonna do with calling birds? You know,
Speaker 12: they're not the greatest of gifts, but geese I could
Speaker 12: get used to that.
Speaker 5: You got to clean up after some of these gifts,
Speaker 5: which is never something that was encouraged in my home.
Speaker 3: And they fly like you you know, it's end of
Speaker 3: the day.
Speaker 12: I'm not I'm not sure what true love is really
Speaker 12: thinking buying all of these birds here. But nevertheless, we're
Speaker 12: not going to deviate from the classic holiday song. So
Speaker 12: this is what you get.
Speaker 5: Well, this is what happened.
Speaker 4: You know, we like to buy experiences these days, but
Speaker 4: they were more interested in things back then.
Speaker 5: Carol.
Speaker 3: Yeah, uh, that's so true.
Speaker 8: You know.
Speaker 2: I have sisters always like giving experiences, which I always
Speaker 2: thought was a kind of a cool thing. But I
Speaker 2: do think about that, right, experiences versus stuff. I wonder, uh,
Speaker 2: the Eight Maids of Milking.
Speaker 3: Is it raw milk.
Speaker 5: To get political political at all?
Speaker 8: Oh? Boy?
Speaker 3: Exactly? The fifth that could be a different cost equation.
Speaker 3: I'm just going to point that out, it.
Speaker 12: Could be very different. Agreed, the underlying data as it
Speaker 12: relates to the maids of milking really ties very much
Speaker 12: to the minimum wage. And because the minimum age hasn't
Speaker 12: changed at all in many, many years, that one has
Speaker 12: been holding pretty steady. We could talk all day long about,
Speaker 12: you know, the philosophical aspects of you know, wages and
Speaker 12: the minimum wage and where we are from an inflationary perspective,
Speaker 12: But until the minimum wage moves from a policy perspective,
Speaker 12: that one, unfortunately is holding.
Speaker 9: Study.
Speaker 2: We said, the cost of all gifts across the two
Speaker 2: hundred thousand dollars threshold for the first time last year
Speaker 2: today settles in three point six percent hire a two
Speaker 2: hundred and nine two hundred and seventy two hundred and
Speaker 2: nine thousand, two hundred and seventy two dollars.
Speaker 3: Help me understand. Does this say to you though, in general,
Speaker 3: that we are living in a little bit of an
Speaker 3: inflationary environment?
Speaker 2: Like, what does it tell you about if we step
Speaker 2: back about what it means in terms of the US
Speaker 2: inflation picture.
Speaker 12: Well, I think we're certainly living in an elevated inflationary environment.
Speaker 12: I mean we're gaining on it relative to the peak
Speaker 12: of you know, nine percent in terms of CPI that
Speaker 12: we saw sort of in the of the pandemic trends
Speaker 12: that we saw there. But we haven't seen prices come down.
Speaker 12: We're not in a deflationary environment. It's really just that
Speaker 12: the rate of change on inflation is slowing, and so
Speaker 12: we are seeing some elements of the Christmas Price Index
Speaker 12: flowing in terms of that rate of change increase. But nevertheless,
Speaker 12: things are on balance more expensive this year than they
Speaker 12: were last year, and it's just a reflection of the
Speaker 12: traditional economy as well.
Speaker 2: Yes, Carol Masser, what's up with the partridge in a
Speaker 2: paar tree? I mean partridge on change? What my understanding
Speaker 2: is a seventeen point one percent jump in the price.
Speaker 9: For a pair.
Speaker 4: That's that's the traditional buying, that's not the Internet buying.
Speaker 5: Okay, that's Mortar Absolutely right?
Speaker 7: Is that there?
Speaker 5: Can I get get back up here, Amanda Gotti.
Speaker 12: Yes, absolutely. Last year we were teasing that we're going
Speaker 12: to make the partridge sit on a cardboard cutout because
Speaker 12: the tree was so darn expensive to try and control
Speaker 12: for prices. We should be saying the same thing this year.
Speaker 12: But the reality with the tree is we use that
Speaker 12: as a proxy for housing costs. And even though mortgage
Speaker 12: rates are moderating in the wake of some of the
Speaker 12: Fed policy actions we've seen these last few months, demand
Speaker 12: for housing continues to be really, really strong. We're net
Speaker 12: short housing supply in this country. So house prices are
Speaker 12: really elevated, certainly, just like they were last year.
Speaker 4: So if you want to buy the entire cost of
Speaker 4: the Christmas Song, if you buy it the traditional way,
Speaker 4: two hundred and nine thousand dollars, up three point six
Speaker 4: percent from last year. If you want to buy it online,
Speaker 4: close to two hundred and fifty thousand dollars. The rate
Speaker 4: of change for inflation was slower, was lower on the internet,
Speaker 4: but more expensive overall. To do this you can buy
Speaker 4: out pay later, yeah.
Speaker 3: Which would be another sign in terms of how the economies.
Speaker 4: Amanda Gotti over at PNC. Always fun when you join us,
Speaker 4: even if it is during the month of November and
Speaker 4: we're already not even a Thanksgiving yet, but talking about
Speaker 4: Christmas a couple days.
Speaker 3: I know, did you see the decorations of around But.
Speaker 5: Did if the trees are out?
Speaker 3: What's happening?
Speaker 7: This is Bloomberg.
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