WEBVTT - Bloomberg Businessweek Weekend - February 9th, 2024 0:00:02.400 --> 0:00:07.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.640 --> 0:00:13.000 This is Bloomberg business Week inside from the reporters and 0:00:13.200 --> 0:00:16.760 editors who bring you America's most trusted business magazine, plus 0:00:16.840 --> 0:00:20.959 global business, finance and tech news. The Bloomberg Business Week 0:00:21.000 --> 0:00:25.920 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:27.400 --> 0:00:30.720 Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. Yes, 0:00:31.000 --> 0:00:34.680 it's a big weekend Super Bowl fifty eight usher in 0:00:34.760 --> 0:00:37.080 the halftime show and betting on whether or not Taylor 0:00:37.120 --> 0:00:40.640 will be mentioned in the MVP speech, Assuming Tim of 0:00:40.680 --> 0:00:42.680 course it goes to her boyfriend Travis Kelsey of the 0:00:42.760 --> 0:00:45.239 Kansas City Chiefs, who we all know are playing the 0:00:45.280 --> 0:00:47.879 San Francisco forty nine ers in the Big Game. I mean, 0:00:47.880 --> 0:00:49.320 there's a lot of betting going on it. 0:00:49.479 --> 0:00:52.320 I'm making a lot of assumptions here, Carol, like, you 0:00:52.360 --> 0:00:53.800 know who wins. Who's there? 0:00:54.040 --> 0:00:55.600 MVP said? If? 0:00:55.920 --> 0:00:59.120 Okay? Said if okay, okay, okay. So we'll talk all 0:00:59.160 --> 0:01:01.279 about that beat on the Big Game. Of course, we're 0:01:01.280 --> 0:01:02.760 going to do that in the next hour with bet 0:01:02.840 --> 0:01:06.440 mgm CEO Adam Greenblatt. Also, because we're not done with 0:01:06.520 --> 0:01:09.039 earning season yet, we had quite a bit this week. 0:01:09.080 --> 0:01:11.920 We heard from Uber Win, got upside surprises from Disney Ford, 0:01:12.120 --> 0:01:15.160 a blockbuster surprise from arm Holdings. Check out all the 0:01:15.160 --> 0:01:17.440 details at Bloomberg dot com and of course on the 0:01:17.440 --> 0:01:18.679 Bloomberg terminal, and got to. 0:01:18.640 --> 0:01:20.280 Say they were coming fast and furious. We thought we 0:01:20.280 --> 0:01:22.920 were at the end of earning season, but not quite yet. 0:01:23.000 --> 0:01:25.160 And we also heard from a space that we all 0:01:25.280 --> 0:01:27.240 like to talk about food because you like to eat 0:01:27.240 --> 0:01:27.440 a lot. 0:01:27.480 --> 0:01:29.440 Tim, Yeah, all that talk of food makes me hungry. 0:01:29.760 --> 0:01:32.040 Surprise surprise, well, Tim, Like I said, we did get 0:01:32.080 --> 0:01:34.560 results from players in the fast casual and fast food 0:01:34.560 --> 0:01:37.800 space this week. McDonald's Young Brands and Chipotle Mexican Grill, 0:01:38.280 --> 0:01:41.240 also from a big healthcare name and from the maker 0:01:41.280 --> 0:01:43.520 of Barbie and hot wheels. And so we're going to 0:01:43.600 --> 0:01:47.240 kick off this hour with Chipotle Mexican Grill. The stocks 0:01:47.240 --> 0:01:50.200 storing to a record high, a lot of analysts upgrading 0:01:50.200 --> 0:01:53.200 their price targets following their quarterly update. It was a 0:01:53.200 --> 0:01:53.760 big report. 0:01:54.000 --> 0:01:55.520 It was a big report. I also had a hard 0:01:55.560 --> 0:01:57.600 time focusing because all I was thinking about was eating 0:01:57.680 --> 0:01:58.520 like a burrito bowl. 0:01:58.600 --> 0:02:02.000 Wait, wait up, the press is Tim is hungry again? 0:02:02.080 --> 0:02:02.400 All right? 0:02:02.440 --> 0:02:05.800 Fourth quarter sales and profit beat expectations as both transactions 0:02:05.840 --> 0:02:09.640 and check sizes rose, defying fears of waning consumer sentiment. 0:02:09.919 --> 0:02:12.520 Same store sales growth it's a gauge that tracks restaurants 0:02:12.560 --> 0:02:14.560 open for more than a year. That came into eight 0:02:14.600 --> 0:02:18.200 point four percent, whereas analysts expected seven point one percent, 0:02:18.280 --> 0:02:21.160 So a beat there as well. Revenue came in above 0:02:21.200 --> 0:02:23.760 expectations at two point five to two billion dollars. 0:02:23.800 --> 0:02:27.080 Yeah, investors like those numbers. Brian Nickel, chairman and CEO 0:02:27.080 --> 0:02:30.200 of Chipotle, dropped in again, joining from the company's headquarters 0:02:30.200 --> 0:02:31.679 in Newport Beach, California. 0:02:32.000 --> 0:02:35.240 Look, I think what we believe is happening is our 0:02:35.280 --> 0:02:38.680 operation is executing better than we ever have and frankly, 0:02:39.000 --> 0:02:41.840 we've just been on a journey to get back to 0:02:41.960 --> 0:02:45.120 executing this business to Chipotle standard. So you know, we 0:02:45.160 --> 0:02:48.320 feel great about our staffing, we feel great about our culinary, 0:02:48.400 --> 0:02:50.880 we feel great about our speed, and I think that's 0:02:50.880 --> 0:02:55.080 why we're being rewarded with customers coming in. And you 0:02:55.160 --> 0:02:57.440 saw the comp that we delivered that was driven by 0:02:57.480 --> 0:03:00.600 transaction growth, right, that eight percent plus com was driven 0:03:00.639 --> 0:03:03.880 by seven point four percent transaction growth, And I think 0:03:03.880 --> 0:03:05.680 that's a testament to what our teams are doing in 0:03:05.680 --> 0:03:08.760 our restaurants on all those areas that I just mentioned. 0:03:08.480 --> 0:03:10.239 Brian, great to be talking with you again. Dig a 0:03:10.280 --> 0:03:11.919 little bit deeper for us. First of all, that same 0:03:11.960 --> 0:03:15.040 story of sales growth really blown away analyst expectations. Is 0:03:15.080 --> 0:03:18.240 that sustainable you think in the current quarter and maybe 0:03:18.240 --> 0:03:20.120 throughout the year to see that kind of growth. 0:03:20.240 --> 0:03:23.200 You know, what we've guided is mid single digits for 0:03:23.320 --> 0:03:26.320 the year in twenty twenty four. And you know, the 0:03:26.360 --> 0:03:29.080 way we take this approach is we want to make 0:03:29.080 --> 0:03:32.640 sure we've got a strong value proposition, which based on 0:03:32.680 --> 0:03:34.800 all our data, we continue get feedback that the value 0:03:34.800 --> 0:03:37.000 proposition is really strong. And then we want to make 0:03:37.000 --> 0:03:39.640 sure that when customers come in, they get the experience 0:03:39.680 --> 0:03:42.960 that they want. And so what we've seen over the 0:03:43.000 --> 0:03:45.480 fourth quarter and as we walked into the first quarter 0:03:45.560 --> 0:03:47.400 is people are telling us they like what they see. 0:03:47.440 --> 0:03:50.320 You know, our teams are in position, our. 0:03:50.200 --> 0:03:52.720 Food is ready to go, the culinary is dialed in, 0:03:53.160 --> 0:03:55.880 it tastes delicious, and we're working really hard on the 0:03:55.960 --> 0:03:58.520 speed aspect so that people don't have to stand in 0:03:58.520 --> 0:04:00.560 line too long, so they get down the line, get 0:04:00.600 --> 0:04:02.760 to the business of enjoying their breed over bowl. I 0:04:02.760 --> 0:04:04.800 think we stay focused on that will continue to deliver 0:04:04.880 --> 0:04:05.680 really good results. 0:04:05.880 --> 0:04:07.880 You know, I'm curious. You know, others in the space, 0:04:07.920 --> 0:04:11.080 something like a McDonald's, they've talked about low income consumers 0:04:11.120 --> 0:04:14.400 pulling back on their spending. You guys, your consumer base, 0:04:14.960 --> 0:04:17.360 what do you expect in terms of us consumer behavior 0:04:17.400 --> 0:04:19.640 this year? What can you tell us about how the 0:04:19.640 --> 0:04:21.599 consumer is doing and how they are spending? Because you 0:04:21.640 --> 0:04:25.120 do talk about transactions up check size is rising, but 0:04:25.200 --> 0:04:27.040 what more can you give us in terms of how 0:04:27.080 --> 0:04:28.120 the consumer. 0:04:27.760 --> 0:04:29.920 Is Yeah, you know, so we look at this very 0:04:29.920 --> 0:04:32.919 closely as well. And first we start with what are 0:04:32.920 --> 0:04:35.920 people's perceptions of our brand? And the perceptions are really 0:04:35.960 --> 0:04:38.320 strong right now. You know, people are getting the idea 0:04:38.400 --> 0:04:40.800 that we're all about fresh food, we're all about food 0:04:40.880 --> 0:04:44.200 with integrity. They're getting the idea that, hey, this is 0:04:44.240 --> 0:04:46.640 a great value when I think about what I pay for, 0:04:46.720 --> 0:04:50.560 what I get, the customization, the speed. Okay, And so 0:04:50.600 --> 0:04:52.920 when we look at this among different income cohorts, so 0:04:53.440 --> 0:04:56.279 less than forty thousand, between forty thousand, one hundred thousand, 0:04:56.279 --> 0:04:59.440 over one hundred thousand, we're seeing we're making progress in 0:04:59.560 --> 0:05:04.919 every and so we've seen sales gains with every income group. 0:05:05.320 --> 0:05:06.360 One thing that I think is. 0:05:06.320 --> 0:05:10.599 Happening is especially the lowering consumer, they are saying, hey, 0:05:10.680 --> 0:05:12.279 we're going to be really choosy with the money that 0:05:12.279 --> 0:05:14.640 we choose to spend. You've got to give us what 0:05:14.680 --> 0:05:16.640 we want on our terms. And one of the things 0:05:16.680 --> 0:05:18.640 that's really great is Chipotle's able to do that. 0:05:18.839 --> 0:05:19.039 Right. 0:05:19.120 --> 0:05:22.119 We can get you the exact food experience that you want, 0:05:22.400 --> 0:05:25.200 hopefully at a speed that delights you, and then when 0:05:25.240 --> 0:05:26.960 you walk away, you feel like you know that was 0:05:27.160 --> 0:05:29.480 money well spent and I'm going to come do it again. 0:05:29.640 --> 0:05:31.920 Well, let me go back to comp sales in terms 0:05:31.960 --> 0:05:34.120 of your outlook that you guys put Brian, why do 0:05:34.160 --> 0:05:37.400 you think you see growth though continuing but at a 0:05:37.440 --> 0:05:41.080 slower slightly slower space I mean pace? Excuse you? 0:05:41.400 --> 0:05:43.240 I think, yeah, yeah, I Look. 0:05:43.279 --> 0:05:46.000 The way we think about this is we want to 0:05:46.000 --> 0:05:48.919 continue to focus on executing the basics. Obviously, January we 0:05:48.960 --> 0:05:51.440 had to deal with some bad weather across the country. 0:05:51.880 --> 0:05:54.440 The good news is the days where we haven't seen 0:05:55.200 --> 0:05:58.719 bad weather, the businesses strengthen right back up, and so 0:05:59.400 --> 0:06:01.839 we're optimist sick about where we can get to You know, 0:06:01.880 --> 0:06:05.200 we've switched back to what our pre pandemic practice was 0:06:05.200 --> 0:06:07.240 was just guiding for the full year. You know, Hopefully 0:06:07.320 --> 0:06:10.080 what happens is we're able to beat those expectations. That's 0:06:10.080 --> 0:06:12.400 always our goal, and we'll see how it all unfolds 0:06:12.400 --> 0:06:14.680 over the course of the year. But we're set up 0:06:14.800 --> 0:06:18.120 very well to open a lot of restaurants deliver I think, 0:06:18.200 --> 0:06:22.760 really strong in store experiences and digital experiences, which hopefully 0:06:22.760 --> 0:06:25.720 we'll build on the momentum that we've achieved thus far. 0:06:25.839 --> 0:06:28.159 Hey, Brian, let's talk more when it comes to labor. 0:06:28.240 --> 0:06:30.520 Fifteen percent of your restaurants are in California. You're joining 0:06:30.600 --> 0:06:34.039 us from Newport Beach right now. We saw California minimum 0:06:34.080 --> 0:06:37.520 wage raised this year to sixteen dollars per hour. It's 0:06:37.560 --> 0:06:39.560 going to continue to rise this year and over the 0:06:39.560 --> 0:06:43.720 next few years. How else, apart from raising prices, is 0:06:43.800 --> 0:06:47.360 Chipotle going to cope with California's new minimum wage law. 0:06:47.600 --> 0:06:47.800 Yeah. 0:06:47.800 --> 0:06:50.040 Look, I mean we're always working hard on what can 0:06:50.080 --> 0:06:52.680 we do to be more efficient so that we don't 0:06:52.760 --> 0:06:54.640 have to pull the pricing lever. 0:06:55.560 --> 0:06:57.240 You know, you've heard us talk about things. 0:06:57.000 --> 0:07:01.520 Like Autocato, where we're automating how we cut core scoop avocados. 0:07:01.560 --> 0:07:04.520 We're working on some things automating our digital make line. 0:07:05.200 --> 0:07:06.520 We're also exploring. 0:07:06.120 --> 0:07:10.520 Things on how we could potentially cut our onions peppers 0:07:11.280 --> 0:07:14.200 in the restaurants in a more efficient fashion. So we're 0:07:14.200 --> 0:07:16.760 going to invest in those things. The unfortunate fact is 0:07:17.080 --> 0:07:21.200 the wage increases moving much faster than these efficiencies that 0:07:21.520 --> 0:07:24.240 we're going to be able to find, So price will 0:07:24.240 --> 0:07:26.680 be part of the puzzle in order to handle the 0:07:26.720 --> 0:07:29.640 inflation that's looming. But we're going to do everything we 0:07:29.680 --> 0:07:31.880 can to avoid having to pull that pricing lever. 0:07:32.800 --> 0:07:34.240 And you know, you'll continue to see us. 0:07:34.160 --> 0:07:37.080 Innovate on what we're calling cobotics, so hopefully we can 0:07:37.120 --> 0:07:39.720 make the job more efficient, more effective. 0:07:40.080 --> 0:07:41.960 Team members like it and it gives. 0:07:41.720 --> 0:07:44.800 The great culinary output that our customers have come to expect. 0:07:44.920 --> 0:07:49.000 Totally get it. Other costs, other input costs, coren avocados, 0:07:49.520 --> 0:07:51.800 the cost of ingredients. What are we seeing on that front? 0:07:52.040 --> 0:07:56.240 Are you seeing prices actually going down or increases not 0:07:56.360 --> 0:07:58.520 as significant as they were before? What can you tell 0:07:58.560 --> 0:07:58.840 us there? 0:07:58.880 --> 0:07:59.760 Yeah, yeah, that's right. 0:08:00.120 --> 0:08:02.840 We're not seeing any deflation, but we've definitely seen a 0:08:02.920 --> 0:08:05.520 slowdown in the inflation. You know, it's more in the 0:08:05.560 --> 0:08:08.280 load to mid single digits. There's a couple of pockets 0:08:08.320 --> 0:08:11.160 where we're still watching things like on beef. We're always 0:08:11.160 --> 0:08:13.920 careful with where the avocado market might be moving. But 0:08:14.000 --> 0:08:17.280 for the most part, that's I would say started to normalize, 0:08:17.280 --> 0:08:20.400 with exception of a few pockets of inflation. 0:08:20.120 --> 0:08:20.960 That we're still dealing with. 0:08:21.120 --> 0:08:23.120 Brian, do you see yourself raising prices this year? 0:08:23.480 --> 0:08:26.560 You know, we always try to wait till we get 0:08:26.560 --> 0:08:28.120 to about the end of the year to assess what 0:08:28.160 --> 0:08:30.040 we think we need to do. You know, obviously this 0:08:30.160 --> 0:08:33.520 California minimum wage movement, we'll have to assess how that 0:08:33.520 --> 0:08:36.719 it really impacts the business and we'll take action accordingly. 0:08:36.800 --> 0:08:38.679 But for the bulk of the business, we usually wait 0:08:38.720 --> 0:08:40.679 till around the end of the year, see where all 0:08:40.720 --> 0:08:43.319 the inflation lands, see where our growth lands, see where 0:08:43.320 --> 0:08:46.720 our productivity lands, and then if we need to retake pricing, 0:08:46.800 --> 0:08:48.959 usually in that one two to three percent range. 0:08:49.080 --> 0:08:51.480 Hey, one thing I'm thinking about also, and we saw 0:08:51.520 --> 0:08:53.679 it play out with some others about the impact of 0:08:53.679 --> 0:08:56.640 the Middle East East conflict. You guys last year talked 0:08:56.679 --> 0:09:00.640 about entering Kuwait and the UAE this year. Has the 0:09:00.640 --> 0:09:03.880 conflict in the Middle East Brian impacted that timeline at all. 0:09:04.440 --> 0:09:05.160 Yeah, not yet. 0:09:05.200 --> 0:09:07.559 Our partner over there is the Alshinty Group, and they're 0:09:07.559 --> 0:09:11.360 a terrific operator. They have a lot of brands and 0:09:11.440 --> 0:09:13.959 a lot of experience of operating over there. So as 0:09:13.960 --> 0:09:17.040 of right now, we're still on schedule to open this year. Obviously, 0:09:17.640 --> 0:09:19.280 they will be the first ones to tell us that 0:09:19.320 --> 0:09:21.920 if we need to change that timeline. The good news 0:09:22.040 --> 0:09:24.000 is we think they're a great partner. We think they're 0:09:24.040 --> 0:09:26.760 a great operator, and I think the folks are going 0:09:26.800 --> 0:09:29.160 to love Chipotle when we're able to finally open our 0:09:29.160 --> 0:09:30.400 restaurant in that part of the world. 0:09:30.520 --> 0:09:32.840 Speaking of timelines, I've got two quick questions for you. 0:09:32.840 --> 0:09:35.719 You have been at the company for almost I think 0:09:35.720 --> 0:09:38.880 you're coming up on your six year anniversary. How are 0:09:38.960 --> 0:09:41.560 you thinking about that timeline? I mean, investors are happy 0:09:41.640 --> 0:09:45.200 stock is up almost one thousand percent in that time, 0:09:45.679 --> 0:09:48.600 So how are you thinking about kind of the next 0:09:48.679 --> 0:09:51.200 leg of that timeline for you? Because I've got to 0:09:51.240 --> 0:09:53.640 imagine there are people knocking at your door saying can 0:09:53.679 --> 0:09:56.480 you come do what you did for jibotlet for us? 0:09:56.559 --> 0:09:59.000 And I'm also curious if there's any timeline for stock 0:09:59.080 --> 0:10:00.800 split because it's an expensive stock. 0:10:01.760 --> 0:10:02.520 Yeah, yeah, sure. 0:10:02.559 --> 0:10:04.600 Look, what I hope is the next six years are 0:10:04.760 --> 0:10:07.160 like what these last six years were from a total 0:10:07.200 --> 0:10:09.760 performance standpoint. I could do without some of the macro shots. 0:10:10.640 --> 0:10:14.440 But you know, it's been a tremendous honor leading this brand. 0:10:14.480 --> 0:10:17.920 We've got wonderful people, We've got a terrific purpose and 0:10:18.000 --> 0:10:20.760 product that we provide, and I couldn't be happier to 0:10:20.760 --> 0:10:21.720 be leading this company. 0:10:21.720 --> 0:10:23.560 And I'm really excited about all the growth that's in 0:10:23.559 --> 0:10:23.920 front of us. 0:10:23.960 --> 0:10:25.880 You know, we're going to go from thirty five hundred 0:10:25.920 --> 0:10:28.800 restaurants to seven thousand restaurants. We're going after four million 0:10:28.800 --> 0:10:31.680 average unit volumes, so there's just tremendous growth in front 0:10:31.679 --> 0:10:34.560 of us, which I'm super excited about. Yeah, you know, 0:10:34.920 --> 0:10:36.560 everybody asked us about the stock split. 0:10:37.480 --> 0:10:39.960 We'll have to wait and see what city rated. 0:10:40.080 --> 0:10:42.719 It's now like a street high over three thou to 0:10:42.720 --> 0:10:43.600 get for you to split. 0:10:43.720 --> 0:10:45.000 Yeah, briefly, is there a level? 0:10:46.360 --> 0:10:46.720 You know what? 0:10:46.760 --> 0:10:50.040 We never have a defined level, but it's something we 0:10:50.080 --> 0:10:51.720 talk about and if it makes sense to do. 0:10:51.800 --> 0:10:52.080 We'll do. 0:10:52.440 --> 0:10:54.680 That was Brian nic Old chairman and CEO of Chipotle 0:10:54.760 --> 0:10:58.640 Mexican Grill. Other names and restaurants reporting recently include McDonald's 0:10:58.640 --> 0:11:00.680 and Young Brands. That was this last week, and we 0:11:00.760 --> 0:11:03.000 got Starbucks last week, and you can check it all 0:11:03.000 --> 0:11:05.480 out at Bloomberg dot com or on the Bloomberg terminal. 0:11:05.840 --> 0:11:09.000 Michelle Cosmos, CEO of the National Restaurant Association. It's the 0:11:09.120 --> 0:11:11.840 business group that represents the industry and includes about a 0:11:11.880 --> 0:11:15.000 million restaurant in food service outlets among its members. She's 0:11:15.000 --> 0:11:17.160 stopped by as well with an update on the overall 0:11:17.240 --> 0:11:18.120 restaurant industry. 0:11:18.440 --> 0:11:21.559 It's exciting actually in the restaurant industry right now. What 0:11:21.640 --> 0:11:23.840 we're looking at in our State of the Industry report 0:11:23.920 --> 0:11:27.840 for twenty twenty four is that the sales numbers should 0:11:27.880 --> 0:11:31.200 be above one point one trillion dollars, so a huge 0:11:31.240 --> 0:11:34.160 economic driver if you look at sales in the restaurant industry, 0:11:34.160 --> 0:11:37.200 which everybody's very excited about. Of course, the sales numbers 0:11:37.240 --> 0:11:39.400 don't tell the whole story correct much to what you're 0:11:39.440 --> 0:11:40.120 talking about. 0:11:40.280 --> 0:11:42.280 And we see and when you throw it at number 0:11:42.280 --> 0:11:44.600 like one point one trillion, is that above pre pandemic? 0:11:44.679 --> 0:11:46.760 Like give us a number a loan, But give us right. 0:11:46.800 --> 0:11:50.840 We are now above pre pandemic. Last year was the 0:11:50.880 --> 0:11:54.040 beginning of coming back to pre pandemic numbers, and so 0:11:54.320 --> 0:11:55.959 it's great to see that kind of growth in the 0:11:56.000 --> 0:11:58.080 restaurant industry. But again it's sales numbers that. 0:11:58.080 --> 0:11:58.839 We're talking about here. 0:11:58.960 --> 0:12:01.600 Is that because of higher prices, higher prices and of 0:12:01.600 --> 0:12:04.079 course we also see higher expenses. 0:12:04.360 --> 0:12:05.760 Well, I want to talk about that a little bit 0:12:05.760 --> 0:12:09.760 specifically when it comes to wages, because California, for example, 0:12:09.840 --> 0:12:13.920 is sixteen dollars minimum wage right now. A large portion 0:12:14.000 --> 0:12:18.960 of your members are working in restaurants or have restaurants 0:12:18.960 --> 0:12:21.679 where minimum wage is par For the course, what is 0:12:21.720 --> 0:12:24.400 your position when it comes to a national minimum wage 0:12:24.480 --> 0:12:26.000 and the increase that we're seeing in a lot of 0:12:26.000 --> 0:12:27.920 different states where there is a higher standard of living. 0:12:28.640 --> 0:12:30.680 At the National Restaurant Association, we really love to be 0:12:30.720 --> 0:12:33.280 engaged in that wage conversation because it's so important to 0:12:33.320 --> 0:12:36.640 our members because they're trying to find great workers at 0:12:36.640 --> 0:12:38.400 a great workforce. And part of how you do that 0:12:38.600 --> 0:12:42.200 is find that nice balance between trying to ensure profitability 0:12:42.320 --> 0:12:45.760 in an industry that has tremendously low margins three to 0:12:45.800 --> 0:12:49.360 five percent on average and then also trying to attract 0:12:49.360 --> 0:12:51.560 great workforce. And so what we found is that the 0:12:51.600 --> 0:12:54.920 wage question is really one that happens and the conversation 0:12:55.000 --> 0:12:57.200 happens at a local level, more at the state level, 0:12:57.240 --> 0:13:00.360 at the local level than at the federal level, without 0:13:00.360 --> 0:13:02.360 a doubt. And anytime you're in a place where you 0:13:02.400 --> 0:13:04.960 want to talk about what's going on with the minimum 0:13:05.000 --> 0:13:07.040 wage at the federal level or at the state local level, 0:13:07.080 --> 0:13:08.319 we want to be in that conversation. 0:13:09.320 --> 0:13:11.400 Is it problematic? Though? When it gets to twenty dollars 0:13:11.440 --> 0:13:13.280 an hour, I'm looking at that's what eight hundred dollars 0:13:13.280 --> 0:13:15.800 a week, right, that's thirty two hundred dollars a month. 0:13:15.840 --> 0:13:17.560 I mean we're not talking about you know, if you 0:13:17.640 --> 0:13:20.199 bring it out to the annual level, most folks would say, wow, 0:13:20.280 --> 0:13:23.320 that's just somebody maybe getting by barely. And if you 0:13:23.320 --> 0:13:26.400 have kids or something, it's going to be even more problematic. 0:13:26.480 --> 0:13:29.960 So I do wonder, you know, restaurants used to be 0:13:30.080 --> 0:13:32.720 kids in high school and kids you know, who weren't 0:13:32.720 --> 0:13:35.600 supporting families, that kind of thing. It's changed dramatically, So 0:13:36.160 --> 0:13:38.640 is that part of their thinking about the type of 0:13:38.679 --> 0:13:42.520 workers that they are essentially hiring, Like who are they. 0:13:42.760 --> 0:13:45.240 Well, it's interesting. We'd love to have more and more 0:13:45.320 --> 0:13:49.880 of those kids learning how to work in the restaurant industry. 0:13:50.000 --> 0:13:52.319 But the other thing that's true in the restaurant industry 0:13:52.360 --> 0:13:54.800 is people tend not to be in those minimum wage 0:13:54.880 --> 0:13:57.000 jobs very long. What we find is there's a lot 0:13:57.040 --> 0:14:00.200 of mobility. So if people are in the jobs that 0:14:00.320 --> 0:14:04.160 are the types that are at the lower wage levels, 0:14:04.280 --> 0:14:06.040 they usually are in those jobs because they like the 0:14:06.040 --> 0:14:09.840 convenience of the schedule. There's something else about that particular 0:14:09.840 --> 0:14:13.120 position that appeals to them. But those that have any 0:14:13.200 --> 0:14:17.040 kind of longevity in the industry will see those those 0:14:17.040 --> 0:14:20.600 individuals kind of go into other management types of roles 0:14:20.640 --> 0:14:23.480 where they are bringing in more money. And depending on 0:14:23.520 --> 0:14:25.640 the restaurant. If you look at a full service restaurant, 0:14:26.280 --> 0:14:28.640 especially in an environment where there's tipping, you can have 0:14:28.920 --> 0:14:31.400 very well compensated employees across the restaurant. 0:14:31.840 --> 0:14:33.880 What about when it comes to other expenses that we've 0:14:33.880 --> 0:14:37.320 seen rise over the last couple of years, inputs like dairy, 0:14:37.400 --> 0:14:39.880 inputs like meat, other food costs that have gone up. 0:14:40.400 --> 0:14:42.480 What are you hearing from members? Is that stabilized at 0:14:42.480 --> 0:14:43.160 this point? 0:14:43.840 --> 0:14:47.720 It's stabilized what's interesting about the varying food cost increases 0:14:47.880 --> 0:14:52.720 is that it's never consistent. So you see dairy prices 0:14:52.840 --> 0:14:55.200 or egg prices that will go up, meat prices that 0:14:55.240 --> 0:14:57.400 will go up, and they will often come back down. 0:14:57.480 --> 0:15:00.160 They chicken prices of chicken prices yep, have come down. 0:15:00.440 --> 0:15:03.640 So those things will vary over time depending on what 0:15:03.760 --> 0:15:08.240 those larger macro pressures are. But what they've found then, 0:15:08.360 --> 0:15:10.520 for a restaurant is that it's really important for them 0:15:10.600 --> 0:15:13.840 to be tremendously agile in the way that they're managing 0:15:14.200 --> 0:15:16.640 their food costs and the way that they're thinking about 0:15:16.680 --> 0:15:18.840 the menu that they're putting together for their customers. 0:15:18.960 --> 0:15:20.800 So they change the menu, they change the menu to 0:15:20.800 --> 0:15:23.240 it to either cut the costs right, the input costs 0:15:23.320 --> 0:15:26.680 right yep, And so they do that. That's interesting. Well, 0:15:26.680 --> 0:15:29.320 go back to McDonald's though for a moment, because you know, 0:15:29.360 --> 0:15:31.560 they specifically had warned about some of the concerns in 0:15:31.560 --> 0:15:34.320 the Middle East. They've been a target and some would 0:15:34.360 --> 0:15:37.320 say rightfully so, but nonetheless it hasn't had an impact 0:15:37.320 --> 0:15:40.240 on the bottom line, but growth in some of their 0:15:40.240 --> 0:15:42.120 other regions we can as well. We talked a little 0:15:42.120 --> 0:15:46.120 bit about the US market overall. Are people any of 0:15:46.160 --> 0:15:48.280 your members you sound very upbeat, Are any of them 0:15:48.320 --> 0:15:53.040 talking recession or slow down? In consumers? Consumers trading down? 0:15:53.840 --> 0:15:56.920 So what we hear about consumers is a desire for value, 0:15:57.360 --> 0:16:00.239 and we see that in trading town. It's not necessarily 0:16:00.240 --> 0:16:03.560 trading down. What they're interested in is a deal in 0:16:03.600 --> 0:16:06.280 many cases. So when we do our consumer surveys, what 0:16:06.320 --> 0:16:09.000 we found is that seven out of ten of consumers 0:16:09.040 --> 0:16:11.440 are looking for some kind of value. And you'll notice 0:16:11.520 --> 0:16:14.560 that a lot of restaurants now will use apps and 0:16:14.640 --> 0:16:17.840 loyalty programs where you get discounts in those apps and 0:16:17.880 --> 0:16:20.880 among those loyalty programs. And that's part of how restaurants 0:16:21.240 --> 0:16:23.440 are trying to appeal to consumers to come back to 0:16:23.480 --> 0:16:26.520 their restaurant time and again. Because we know that even 0:16:26.560 --> 0:16:29.200 though consumers are concerned about the bottom line and concerned 0:16:29.200 --> 0:16:32.600 about what's in their pocketbook, they still want to enjoy restaurants. 0:16:32.680 --> 0:16:34.320 And so the question is how do we want to 0:16:34.320 --> 0:16:36.680 make sure that they're coming into your particular restaurants. 0:16:36.760 --> 0:16:39.520 So how do restaurants do that? I mean, on one end, 0:16:39.560 --> 0:16:42.160 you have employees who are about to get paid twenty 0:16:42.200 --> 0:16:44.920 dollars an hour minimum wage in California in just a 0:16:44.920 --> 0:16:47.120 few months. On the other side, you want customers who 0:16:47.120 --> 0:16:49.680 want value, so they want their dollar to go further. 0:16:50.000 --> 0:16:51.280 Where does that leave your members? 0:16:51.480 --> 0:16:53.600 I think you figured out why the restaurant business is 0:16:53.640 --> 0:16:56.880 a tough business to manage. What our members are really 0:16:56.920 --> 0:17:01.080 doing is trying to balance bringing people in for that 0:17:01.240 --> 0:17:03.800 value and then knowing that there still has to be 0:17:03.840 --> 0:17:06.760 profitability in that menu. And so you're going to see 0:17:07.600 --> 0:17:09.200 You're going to see that change in pricing. But the 0:17:09.240 --> 0:17:10.560 other thing you're going to see is a change in 0:17:10.600 --> 0:17:13.479 technology coming to solve a lot of this problem. What 0:17:13.520 --> 0:17:16.560 we see is more and more restaurant operators using technology 0:17:16.560 --> 0:17:18.639 to solve both their operational efficiency. 0:17:19.000 --> 0:17:20.760 I was just going to say, right to like, we're 0:17:20.840 --> 0:17:21.399 kind of obsessed. 0:17:21.640 --> 0:17:22.800 I think that's part of it. I mean the other 0:17:22.840 --> 0:17:24.879 part that I think is when you walk into a 0:17:24.920 --> 0:17:27.080 fast food a fast food restaurant and you don't see 0:17:27.080 --> 0:17:30.399 people at the cash register, you see a screen that 0:17:30.440 --> 0:17:31.560 you take your order yourself. 0:17:31.640 --> 0:17:34.840 Right, It's a tough balance because everybody wants a smiling face. 0:17:34.960 --> 0:17:36.399 When you walk into a restaurant, you want to be 0:17:36.440 --> 0:17:38.320 greeted by a smiling face and there's no doubt that 0:17:38.320 --> 0:17:41.560 that's what we want. But we also want an affordable meal, 0:17:41.920 --> 0:17:45.520 and so there's a balance between having a technology that 0:17:45.560 --> 0:17:49.880 can provide really consistent, really quick service and having that 0:17:50.080 --> 0:17:52.800 hospitality that greets you. And even in the places where 0:17:52.840 --> 0:17:57.040 you see technology, with the kiosks coming in, you usually 0:17:57.080 --> 0:18:00.479 find that they're delivering your meal to your table, so 0:18:00.520 --> 0:18:03.440 you're getting a little bit more service, even though that 0:18:03.560 --> 0:18:06.879 first experience of the order may have been much more 0:18:06.880 --> 0:18:08.119