Speaker 1: Welcome to Chopping It Up. I'm your host, Mike Hanlon,
Speaker 1: the senior Restaurant food Service Analysts at Bloomberg Intelligence. Our
Speaker 1: research and that a bi's five hundred analysts around the
Speaker 1: globe can be found exclusively on the Bloomberg terminal. Enjoy
Speaker 1: the pod. I'd love it if you could leave us
Speaker 1: a review on Apple or Spotify. Today I'm joined by
Speaker 1: Joe Keith Appert. Joe is a founding partner of a
Speaker 1: Line Public Strategies, a full service public affairs and creative firm.
Speaker 1: He's the host of the Working Lunch podcast and my
Speaker 1: go to source for all things public policy. Thanks for
Speaker 1: returning to the podcast, Joe.
Speaker 2: Mike, it is great to be here on Chopping It Up.
Speaker 2: I always love being on it, always love listening to it.
Speaker 3: So you do a great job.
Speaker 1: Thanks man, I appreciate it, and check out Joe's pod.
Speaker 1: He does a great job man, of really getting in
Speaker 1: the weeds is some of the regulatory issues that our
Speaker 1: industry is facing. Man, it's really good stuff.
Speaker 2: I recently received an award as the most boring podcast. Uh,
Speaker 2: I'm very proud of that.
Speaker 1: I disagree, man, you know, because we hear about stuff
Speaker 1: on the on the on the federal level level. Right,
Speaker 1: but unless it's things are happening in our state, and
Speaker 1: you know, we tend not to hear about it. So
Speaker 1: it's good to hear from from you and your co
Speaker 1: host about, uh, you know, what's what's coming down the pip,
Speaker 1: what we're seeing in some of the other states. So
Speaker 1: is the worst of the tariff show down behind us?
Speaker 2: You know, anyone that has ever been in the business
Speaker 2: of trying to predict what this president is going to
Speaker 2: do is broke.
Speaker 3: So you don't know.
Speaker 4: But you know, Michael, the the the the collision between
Speaker 4: politics and policy is often brutal, and especially populist politics,
Speaker 4: and so.
Speaker 2: It takes a while well for the reality to catch
Speaker 2: you up to the rhetoric. And I think tariffs is
Speaker 2: a perfect example of that. Obviously, the president campaign in large,
Speaker 2: you know, in large part on this kind of strategy,
Speaker 2: and he is, you know, fulfilated this narrative that somehow
Speaker 2: we're on the short end of all these trade deals
Speaker 2: and and so forth, and we need to right the
Speaker 2: right the ship. And then conversely, you know, people argue that, well,
Speaker 2: he just uses this kind of as a chess piece.
Speaker 3: It's part of a broader game.
Speaker 2: He's trying to get concessions on the form policy or
Speaker 2: whatever that may be. Right, So regardless of where you
Speaker 2: fall down on that, there are some real world implications
Speaker 2: for folks. Obviously in the restaurant industry is having a
Speaker 2: conversation earlier. You know, we're the we're the caboosts on
Speaker 2: a big, long train, and the egg industry is the
Speaker 2: front of that train, and the restaurant industry is the
Speaker 2: caboost of that train. And if in front of that
Speaker 2: train is suffering or derails, man, we're we're sure to follow.
Speaker 2: And so I worry about the tariffs on the ag community,
Speaker 2: especially with regard to interestingly enough, not stuff we import
Speaker 2: with stuff we export. So much of American agriculture exported Michael. Today,
Speaker 2: as a matter of fact, we're taping this today.
Speaker 3: The New York.
Speaker 2: Times has a their daily podcast and they're interviewing a
Speaker 2: soybean and corn farmer from Iowa, and she said about
Speaker 2: fifty five percent of her total product and her peer
Speaker 2: group all goes to China. And so you talk about
Speaker 2: the marketplace and what happens, and you know, agribusiness now
Speaker 2: it's floating, especially the family farms floating on loans, and
Speaker 2: it's a future's business, and there's.
Speaker 3: All tons of uncertainties in agg anyway.
Speaker 2: And then you add all of this and the ramifications,
Speaker 2: there's no good there's no good thing that comes out
Speaker 2: of it. I do think, you know, this week we
Speaker 2: saw the CEOs of the big retail, big boxes, Walmart,
Speaker 2: targets and mothers go into the White House and they
Speaker 2: basically said, look at present, we get, we get what
Speaker 2: you're trying to do here, but understand the ramifications are,
Speaker 2: in about two weeks, you're gonna start to see a
Speaker 2: lot of empty store shelves as a supply chain uh
Speaker 2: dries up.
Speaker 3: And that's going to be relayed on your lap politically, right.
Speaker 2: And and you saw later that day he comes out
Speaker 2: and pumps the brakes on a bunch of tariff stuff, right,
Speaker 2: And it's it's it's it's when that reality sets in
Speaker 2: and when his political base, which is a large part
Speaker 2: of corporate America, the AD community, start to go, hey,
Speaker 2: all fun and games until it's not. And we're getting
Speaker 2: to the point where it's it's kind of really not.
Speaker 2: And you know, everybody, our whole, our whole political system
Speaker 2: our economic system, foreign policy, whatever it is, is based
Speaker 2: on stability.
Speaker 3: Right.
Speaker 2: It's an under it's a foundational billing block, and everything
Speaker 2: to do is stability. We want to be predictive, We
Speaker 2: want to understand what's going to happen the next quarter,
Speaker 2: the next year, the next year, whatever that may be.
Speaker 2: And instability is not good for anybody. So I don't
Speaker 2: say that it's behind us totally to get to get
Speaker 2: to the root of your question, but I do think
Speaker 2: kind of the worst of that is kind of played
Speaker 2: out of its system. He's gotten the political energy out
Speaker 2: of it for the constituents he wanted to get the
Speaker 2: energy out of it with Right, and now it's time
Speaker 2: to kind of go okay, and so he can't completely
Speaker 2: back off of it to save face. But you see
Speaker 2: every he continues to delay or pump the brakes and
Speaker 2: then politically claim victory right, and his constituency says, well,
Speaker 2: we won that conversation with China or Canada or Mexico.
Speaker 3: So there's really almost no.
Speaker 2: Political price to be paid for it until there's an
Speaker 2: economic price for the country, and then he will he
Speaker 2: will wear that.
Speaker 1: Well, that's good to hear man. Do you think reciprocal
Speaker 1: tariffs can lead to fewer global tariffs over time. I
Speaker 1: now we've seen some of our partners say they pull
Speaker 1: back on their tariffs. You know, obviously Trump that wasn't
Speaker 1: enough for the Trump administration. They will also want to
Speaker 1: see maybe less subsidies and different tax treatment. What are
Speaker 1: your thoughts on that?
Speaker 3: Yeah, listen, you never know how a country is going
Speaker 3: to react.
Speaker 2: I was actually kind of surprised, not so much with
Speaker 2: the Chinese, but certainly Europe, the EU and Canada. They
Speaker 2: didn't just fold over, right, And I think when you're
Speaker 2: playing this game, you don't know how they're going to.
Speaker 3: Respond to They just acquiesced.
Speaker 2: And we saw a couple of Latin American countries kind
Speaker 2: of acquiesce, but we didn't see that in other the
Speaker 2: bigger trading partners across the world. And so I think
Speaker 2: the short term thing is again separating politics and policy
Speaker 2: to actpt policy outcomes.
Speaker 3: It's a zero sum game. The only the only person.
Speaker 2: That really loses in the whole thing as American consumer, right,
Speaker 2: And so you know that's cool until it's not cool anymore.
Speaker 2: So I think you're going to see a a flare
Speaker 2: ups and spaces flare ups at times, but an overall
Speaker 2: pumping of the breaks slowly over time, so you can
Speaker 2: still kind of politically have appear to have the high
Speaker 2: ground on it. It'll flare up again in probably June
Speaker 2: of twenty twenty twenty six, about six months before the
Speaker 2: midterm elections because as political juice, and we'll start having
Speaker 2: this conversation again. So I don't I don't mean it
Speaker 2: sounds so cynical, but I think that the headlines and
Speaker 2: the stories kind of back up what I'm saying is
Speaker 2: where where we were six weeks ago and where we
Speaker 2: are now is a very different time. And I think
Speaker 2: that's trajectory will continue over the next six to six
Speaker 2: weeks to six months.
Speaker 1: Yeah, it's fascinating to watch. I mean, there's there's no
Speaker 1: way you're gonna shift from a system that has always
Speaker 1: prioritized capital over labor, you know, to kind of flip
Speaker 1: that on its head and not expect some bumps in
Speaker 1: the road. So definitely keeping meat busy man that it is.
Speaker 2: And you know, if I'm the CEO of a major
Speaker 2: company that you're that you're that you're covering, you know,
Speaker 2: I I know we have long term agreements in place
Speaker 2: with certain certainly a suppliers, but I'm you know, the market,
Speaker 2: not to get too much into your sandbox, but certainly
Speaker 2: the market rewards growth, and growth is in part predicated
Speaker 2: on a access to capital instability or in that market,
Speaker 2: and be equipment, access to equipment. A lot of our
Speaker 2: restaurant equipments friars or dishwashers or whatever comes out of Asia. Right,
Speaker 2: And so I've made certain commitments to the street about
Speaker 2: what my growth plant looked like over the next you know,
Speaker 2: two years, five years, and now all that's kind of
Speaker 2: hanging in the ether, and I suspect that some stock
Speaker 2: prices over the next year or so, we'll take take
Speaker 2: a pounding.
Speaker 1: Yeah, we'll see. They sure sure did over the last
Speaker 1: couple of weeks. All right. I'm looking forward to the
Speaker 1: day that the narrative shifts from tariffs to tax cuts.
Speaker 1: Does anything stand in the way of eliminating taxes on
Speaker 1: tips and overtime?
Speaker 2: You know, again, rhetoric meeting reality. It's kind of a
Speaker 2: theme here. I think, you know, when when when the
Speaker 2: president announced that policy idea, I guess at a rally
Speaker 2: and h during the campaign, and everybody kind of jumped
Speaker 2: on board. It was one of those things that that
Speaker 2: that got ahead of itself. You saw a race among
Speaker 2: Republican senators to get a gold star from the President
Speaker 2: and introduced legislation, ran down, Ted Cruz ran down the
Speaker 2: Senate floor, and next thing, you know, we have legislation
Speaker 2: blah blah blah. And of course the industry has to
Speaker 2: go whoa, whoa, whoa, whoa, whoa, let's pump the brakes here.
Speaker 2: This is a very complicated area of the law, forty
Speaker 2: five B tax credit. You know, our whole our own
Speaker 2: models predicated on this forty five B tax credit, you know,
Speaker 2: in terms of the about casual dining obviously, and you know,
Speaker 2: sit down, full servi, full service restaurants. And they had
Speaker 2: to you know, the NRA and others had to race
Speaker 2: up the Capitol hill in the who who who Let
Speaker 2: me explain how this whole ecosystem works here and here
Speaker 2: it is April twenty fourth. We haven't heard much about
Speaker 2: that issue federally. I know that in December after the election,
Speaker 2: John Thune, the majority leader uh the Senate, was like,
Speaker 2: this a very high priority and members, we're talking about it.
Speaker 2: People were talking about it in town hall meetings and
Speaker 2: here we are in April, and no one's talking too
Speaker 2: much about Now. Other headlines have sucked a little bit
Speaker 2: of the oxygen out of the room, right, Obviously, the
Speaker 2: tariff stuff and what's going on, you know, all that
Speaker 2: kind of stuff. But it is not an easy thing.
Speaker 2: And when you've got the NRA and the restaurant's going, well,
Speaker 2: what's super careful here, kind of takes some of the
Speaker 2: gat the gleam off of it.
Speaker 1: Right.
Speaker 2: There are a couple of states that are pursuing that
Speaker 2: as well, but we didn't see states jump in. We
Speaker 2: saw a bunch of states with legislation that really was
Speaker 2: just for the cameras and really didn't go anywhere. And
Speaker 2: of course you'd want to let something like that be
Speaker 2: reconciled federally before you start monking with that at the
Speaker 2: state level. But it was it was fraught with potholes
Speaker 2: and pitfalls. And I'm not saying the issue is going
Speaker 2: away because it's political merit in it, but it's super complicated,
Speaker 2: as you well know. And I don't think yeah, I
Speaker 2: mean the president candidate Trump at the time, former President
Speaker 2: Trump at the time, heard this from a server on
Speaker 2: a stage and went out two minutes later, there was
Speaker 2: no policy and there was no white paper at a
Speaker 2: heritage foundation on this thing.
Speaker 3: All of a sudden, it is.
Speaker 2: The fifty yard line of a conversation, and it's it's
Speaker 2: been hard over the last four or five months to.
Speaker 3: Pump the brakes level set understand.
Speaker 2: What's going on here, and so I think the enthusiasm
Speaker 2: on that space has dropped a little bit. I think
Speaker 2: that if they could figure out a way to do it,
Speaker 2: they would pursue it because it has a lot of
Speaker 2: political juice in it, especially with their overarching theory of
Speaker 2: trying to have more outreach to the working class and
Speaker 2: working class voters and so forth. So it fits nicely
Speaker 2: into their overall strategy. This one's just super complicated. And
Speaker 2: you start opening up the tax code and exempting this
Speaker 2: person from income tax, so this part of their income
Speaker 2: from then what's next, you know, and just dominoes start
Speaker 2: to all doubt And so I think cooler heads have
Speaker 2: forvailed on that issue. It remains to be seen what's
Speaker 2: gonna happen.
Speaker 1: Seems like the MAHA movements made some progress in some
Speaker 1: state legislatures.
Speaker 2: Yeah, we saw you know, West Virginia, and you know,
Speaker 2: no one's ever said, you know, let's follow West Virginia's
Speaker 2: lead on state legislation, but they were out there first
Speaker 2: and banned a number of dies and preservatives and so forth.
Speaker 2: And we saw Sarah Huckaby Sanders just last week sign
Speaker 2: they've Senate Bill nine into law with a little broader list,
Speaker 2: and we have a big bill kind of the last
Speaker 2: what I would think is kind of the last big
Speaker 2: bill of the year, just because you know, a lot
Speaker 2: of the state legislature is already out, especially some of
Speaker 2: the red states where this is going are already out.
Speaker 2: Louisiana has a massive bill as like fifty one I
Speaker 2: think ingredients in it, you know, so it hasn't gone
Speaker 2: to so many states, but the conversation certainly has. But
Speaker 2: again that's another one that's that's that's complicate, right, and
Speaker 2: you know, from an industry perspective, and whether it's a
Speaker 2: manufacturing side or the retailers O the restaurants, so much
Speaker 2: of what's in the I think all of the Louisiana bill,
Speaker 2: all those fifty one entities or ingredients are banned in
Speaker 2: the UK, EU, Canada already right in parts of the world,
Speaker 2: So you know, it's hard to have a leg to
Speaker 2: stand on to say, well, we can't do this, We
Speaker 2: can't do that.
Speaker 3: You know, obviously we probably can.
Speaker 2: It's just whether we can how much time they give
Speaker 2: you to kind of reformulate, and you know, and so forth.
Speaker 2: But it's got a lot of political energy. But I
Speaker 2: think it's another issue. I feel like I'm kind of
Speaker 2: a cynical black cloud on it. I don't mean to be,
Speaker 2: but I'm just trying to be, you know, predictive of
Speaker 2: where the conversation goes.
Speaker 3: You know.
Speaker 2: I think it's another one where it's kind of cool
Speaker 2: until it's not right, and once you start going down
Speaker 2: the road and and and really trying to.
Speaker 3: Dig into space.
Speaker 2: At some point when John Q voter in Iowa their
Speaker 2: kid can't get fruity pebbles anymore, there's what the hell's
Speaker 2: going on around here?
Speaker 3: You know?
Speaker 2: And and I think the same thing is happening with soda.
Speaker 2: We're starting to see some of the things in the
Speaker 2: Louisiana Bill, the Arizona Arkansas Bill have to deal with
Speaker 2: soda colorings and formulations. And you start messing with John
Speaker 2: Q viewed voters PEPSI man, and all of a sudden
Speaker 2: you're now you're hitting a.
Speaker 3: Little too close to home, right, and so we'll see
Speaker 3: where that goes.
Speaker 2: You know, I don't I think if I'm a restaurant operator,
Speaker 2: whether large or small, I think it's like what is
Speaker 2: the next set of dominoes? If you if you start
Speaker 2: off and this dies and food coloring that has really
Speaker 2: very little attachment to any real science, you know, around
Speaker 2: the causations of different You know what happens when you
Speaker 2: have some real science behind it, i e.
Speaker 3: Obesity, salt, sugar.
Speaker 2: And so if I'm a rest in the restaurant world,
Speaker 2: whether you know, trade association or company, I'm watching this
Speaker 2: and that was okay, and I know my manu, my
Speaker 2: supply chain would largely take care of it and we'll
Speaker 2: figure it out. But if you started getting into sugars
Speaker 2: and salts and fats and all that kind of stuff.
Speaker 2: Now now it's getting a little close to home, We'll
Speaker 2: see where that goes.
Speaker 3: You know. I laugh about this particular space.
Speaker 2: If you're really you know, you're the Health and Human
Speaker 2: Services secretary, you have the MAHA movement. The biggest things
Speaker 2: to make America unhealthy are boos and smokes.
Speaker 3: They've said nothing about boos and smokes. So it's like, how.
Speaker 2: Much energy is in this, you know, short term? Yeah,
Speaker 2: it's good politics. It's an interesting political coalition between kind
Speaker 2: of lefty granola moms and anti science moms over here.
Speaker 2: And it's it's a very very interesting political grassroots coalition.
Speaker 2: It's and it has potential. I mean, if if you
Speaker 2: get going on other other issues. It reminds me of
Speaker 2: it could be the the Mad, if you will, of
Speaker 2: this generation where you know, parts of the country or
Speaker 2: blue or red or whatever, we're all united around this
Speaker 2: issue set right, And I think MAHA is a lot
Speaker 2: of the building blocks of the of the Mad movement
Speaker 2: of you know, twenty twenty five years ago. So I
Speaker 2: watch I'm fascinated by not so much the policy directives
Speaker 2: and outcomes, but by the grassroots coalition that they're building
Speaker 2: around that and what that does to overall kind of
Speaker 2: I don't know, activism patterns, voting patterns, grassroots pattern that
Speaker 2: I find MAHA fascinating.
Speaker 1: It's really interesting too, or something to see more chains
Speaker 1: adopt each tallow versus some of these oils, right, yeah.
Speaker 2: You know, and I saw some chains kind of get
Speaker 2: out front, and I'm thinking more of political the steak
Speaker 2: and shake stuff. We've seen a couple of other chains.
Speaker 2: It's gonna be hard for some change to make that
Speaker 2: make that transitions. Then that one's you know, I don't know.
Speaker 2: I probably should, but I don't know what McDonald's going
Speaker 2: to pick on McDonald's.
Speaker 3: Just because they're the biggest.
Speaker 2: But when I go into that McDonald I know, whether
Speaker 2: I'm in Spokane, Washington or Tampa, Florida, what those French
Speaker 2: routes are going to taste like. And when I drive
Speaker 2: in in two years and they taste different, I'm gonna
Speaker 2: be upset. It's not like my I like it the
Speaker 2: way it is right, And so we'll we'll we'll see
Speaker 2: all that plays out. But the the the Louisiana bill
Speaker 2: that I referenced earlier is the kind of the first
Speaker 2: one that really starts to play in the oils space
Speaker 2: as well. So it's it's a super interesting bill for
Speaker 2: your audience to kind of go look at and understand.
Speaker 1: All right, great, one fair wage is moving onto my
Speaker 1: home state. Are they going to have any success eliminating
Speaker 1: the tech tip credit in New Jersey?
Speaker 3: You know, Oh my good, this is a great question.
Speaker 2: I I ultimately I don't think so if I were
Speaker 2: going to Vegas and bedding, I would not. You know,
Speaker 2: we've we've likened this, you know.
Speaker 3: Is this the the.
Speaker 2: Resurgence of a movement or is this kind of that
Speaker 2: death rattle before the patient goes under, that last kind
Speaker 2: of spasmive activity before it's over. I am completely shocked
Speaker 2: that they continue you as an entity to receive funding.
Speaker 2: Their their legislative political track record over the last couple
Speaker 2: of years has been abysmal. I mean, they've they've won
Speaker 2: in the City of Chicago, they've lost bout initiatives, and
Speaker 2: you know, Massachusetts and legislation Baltimore and you know, state
Speaker 2: of Mayor, all these places. They're just losing left and right.
Speaker 2: I don't think that they're going to be able to
Speaker 2: be successful in New Jersey. You never know, but unlikely.
Speaker 2: I mean, you gotta look down ninety five of what's
Speaker 2: happened in the restaurant industry in DC.
Speaker 3: It's a little more complicated.
Speaker 2: Obviously, COVID kept much of the customer base of the
Speaker 2: restaurant industry out of the city. Remote work kept it
Speaker 2: from backfilling up. And in the middle of this, the
Speaker 2: voter's passed this tip cradit elimination, which is just I mean,
Speaker 2: you know, kind of nailing the coffin for a lot
Speaker 2: of restaurant owners. But I think the issue can be
Speaker 2: framed in a way that the destructive impact that the
Speaker 2: tip cred elimination had, and it's just right down the street.
Speaker 3: I don't find a lot of fervor in New Jersey
Speaker 3: for what's going on.
Speaker 2: Similarly, they have this legislation in India in Illinois to
Speaker 2: replicate what Chicago did, and everybody's like, no, we're not
Speaker 2: doing that again, you know.
Speaker 3: So you know, I think it's kind of the death rattle.
Speaker 2: I just don't know where they're gonna get their funding,
Speaker 2: where they gonna get their funding note to continue. So
Speaker 2: I don't see it. I don't see it happening in Baltimore.
Speaker 2: I don't see it happening in New Jersey. I don't
Speaker 2: see it happening in Illinois. So we'll see where that
Speaker 2: movement goes. But there they're still active, you know, rattling
Speaker 2: their pots and pans. They were up in Albany this
Speaker 2: week rallying at the capitol about the bill up there.
Speaker 2: They were in Springfield this week riding on the pots
Speaker 2: and pans about the bill there, but I think it's
Speaker 2: just kind of for the short term cameras, and I
Speaker 2: don't think it has really any impact, gotcha.
Speaker 1: Yeah, And it's bummer to hear what's going on there,
Speaker 1: you know, in the with the restaurant industry in d C.
Speaker 1: Man our old stomping grounds.
Speaker 2: Yeah, it's it's it's a bad it's it's just a
Speaker 2: it's not even a one to two punch, but it's
Speaker 2: been a one, two, three punch for them, and it's
Speaker 2: been and now you know, half I guess a four
Speaker 2: punch is that their customer base was kept out of
Speaker 2: the city, their customer base was incentive not to come
Speaker 2: into the city, and now they're.
Speaker 3: All being fired. So it's like, what is going on?
Speaker 2: I mean, the housing market in d C is going
Speaker 2: to take a die. I mean, it's just a bad,
Speaker 2: bad time. If you were you know, Mike's Barn and
Speaker 2: Grill on Fifteenth Street, Man, it's got to be a
Speaker 2: really tough tough time to be a restaurant operator in DC.
Speaker 1: Yeah, for sure, man, I you know, I like to
Speaker 1: get there at least once a year. Hopefully my Jose
Speaker 1: Andres restaurants are still alive from Well, next time I
Speaker 1: get down there.
Speaker 2: Man, Yeah, that I love his email, his Mexican place
Speaker 2: on seventh that is, I could just bring him backpack,
Speaker 2: sleeping bag, his move into that joint. I love that place.
Speaker 2: It's fantastic, fantastic. So yeah, so what do you what
Speaker 2: do you when you when you were talking to you know,
Speaker 2: corporate leaders, what are they saying to Michael about this space.
Speaker 3: Are they nervous or they think it's all.
Speaker 2: Gonna kind of pan out and it'll die down, or
Speaker 2: what's when you talk to your folks, you know, what
Speaker 2: do they think.
Speaker 1: In regards to which topic?
Speaker 3: Just ability to turmoil?
Speaker 2: You know, the outlook, economic outlook, No, no, no particular
Speaker 2: policy and I'm asking about but just to kind of
Speaker 2: the overall, you know, all this stuff settle down, they
Speaker 2: get back to running the restaurants or is it just
Speaker 2: going to be a wild ride here for the next
Speaker 2: couple of years.
Speaker 1: It's interesting, right because we came out of last year,
Speaker 1: which was such a rough year for restaurants, right, Like
Speaker 1: the slow down and consumer spendings typically typically hits restaurants first.
Speaker 1: And you've had that, and but after the election, people
Speaker 1: start spending more money and you know, I was expecting
Speaker 1: some strength here in the first half of the year
Speaker 1: as we were lapping some weak numbers, and the industry
Speaker 1: got it with the oldest January and fourteen years we
Speaker 1: had snow, we had the worst flu season in a
Speaker 1: very long time, and then now we have uncertainty about tariff.
Speaker 1: So we just got started on the earning season. Chipotle
Speaker 1: reported yesterday and that was interesting. They're talking about a
Speaker 1: week second quarter and I don't think that's really surprised anyone.
Speaker 1: But what is a little bit surprising is that their
Speaker 1: numbers are actually weaker than what we're seeing in April
Speaker 1: through black Box Intelligence data. So the data in April
Speaker 1: it seems to be getting better, you know, post you know,
Speaker 1: tariff for drama. So really there's just a lot of uncertainty,
Speaker 1: you know, in the markets, by the consumer were and
Speaker 1: about what's going to happen. I mean, I think Chipotle
Speaker 1: sounded pretty positive that the second half was going to
Speaker 1: be a lot better than the first half, but that's
Speaker 1: typically what a company does when they miss first quarter earning.
Speaker 1: So how much is it is there sincere belief versus
Speaker 1: you know, what they want to tell the street right now?
Speaker 2: Us surprise to see Chipotle's numbered down a little bit.
Speaker 2: I just get you know, you know, I don't have
Speaker 2: my little microcosm of the world as a reference point,
Speaker 2: but I live with in you know, ten or fifteen
Speaker 2: minutes to two Chipotle's, and every time I go by
Speaker 2: and there's there's plenty of people there. I mean, they're busy,
Speaker 2: they're busy properties, you know, So that kind of surprised
Speaker 2: me when I saw that.
Speaker 1: Yeah, I was surprised that everybody their their trend. So
Speaker 1: there's you know, we look, we go back, do we
Speaker 1: look at two year trends, six year trends. You know,
Speaker 1: their six year trend was down ten percentage points from
Speaker 1: the fourth quarter to the first. Their two year trend
Speaker 1: was down over seven hundred faces points from the fourth
Speaker 1: quarter of the first a material slowdown, right that that
Speaker 1: seven hundred basis points is an old weather and flew
Speaker 1: in the shift of easter, right, so there's something going on.
Speaker 1: We're trying to figure it out. Management pointed to, uh,
Speaker 1: you know, efforts to clean their stores better and uh,
Speaker 1: you know, provide their customers with friendlier service. So I
Speaker 1: wish I had some more for you. By the end
Speaker 1: of next week. I'll have a lot more data on that.
Speaker 3: On that ask you another question. You're interviewing me, and
Speaker 3: now I'm interviewing you.
Speaker 1: But but you're a great host, So let's let's do about.
Speaker 2: So so on the you know, I remember a million
Speaker 2: years ago when I had you know, headful of Hair
Speaker 2: and heartful of Hope and Darden, we would talk about
Speaker 2: weather and you know, quarterly earnings reports and we were
Speaker 2: all very caught. Isn't the weather obviously, But you know,
Speaker 2: fast forward all these years and delivery is such a big.
Speaker 3: Part of the business.
Speaker 2: Now, you know, is how how much of delivery and
Speaker 2: not having to go out to get food has softened
Speaker 2: the edges of some of that weather stuff or is it?
Speaker 3: Are they just haven't been connected? Are they connected?
Speaker 1: You would think it will. But last year we saw
Speaker 1: consumers do a lot more pick up versus the third
Speaker 1: party delivery just because the the you know, price difference
Speaker 1: is massive. But I think there is something to that.
Speaker 1: You know, what we wrote in our earnings preview for
Speaker 1: Dominoes was that we expect Dominoes to perform most quick
Speaker 1: service restaurants because when the weather's really cold and snowy,
Speaker 1: you know, you're more likely to order a pizza than
Speaker 1: than to leave the house. So and pizzas, you know,
Speaker 1: the most cost effective way to feed a family. It's
Speaker 1: got it's got a great price point.
Speaker 3: It's getting up there though.
Speaker 2: We my my, my, my little humble Costa is no
Speaker 2: stranger to pizza delivery.
Speaker 3: It's like normal on tiers.
Speaker 2: Hey Joe, Hey doing but you can it didn't take
Speaker 2: long to uh get a pretty expensive pizza water, so
Speaker 2: that the prices are going up on that pretty significantly.
Speaker 1: Yeah, man, we're seeing it. We're seeing it. So and
Speaker 1: it's it's going to be interesting to see what's what
Speaker 1: opens with the tariffs, right, Like, most of our companies
Speaker 1: don't have that exposure, which is great. And when it
Speaker 1: comes to the food side, most of the increases that
Speaker 1: the companies are going to suffer and be passed along
Speaker 1: with modest price increases or just swallowed by the company
Speaker 1: without much of an issue. You know, Chole was talking
Speaker 1: about about fifty bases point increase in perpetuity to their
Speaker 1: cost to the tariffs. You know, what's more interesting, I
Speaker 1: think is you know the point you made earlier about
Speaker 1: equipment and a lot of the component components of the
Speaker 1: equipment especially are manufactured in China, and so that's a
Speaker 1: little bit more of a concern. But that's you know,
Speaker 1: it's going to eat into returns on investment a little bit,
Speaker 1: but I don't think it's enough to be completely prohibitive, right,
Speaker 1: But we're going to continue to watch cash on cash
Speaker 1: returns and yeah, and it's going to be more of
Speaker 1: the same. The companies that will provide the best returns
Speaker 1: on investment are going to be the ones that grow
Speaker 1: the fastest. Right, money flows to where it's treated best.
Speaker 1: Has there been progress on paid lead?
Speaker 3: You know, paid leaves?
Speaker 2: Super interesting issue, you know, the one that comes to
Speaker 2: mind obviously, the voters in Missouri in November past Proposition A,
Speaker 2: which established a new paid leave regiment in the state.
Speaker 2: The Republicans went to in the legislature tried to basically
Speaker 2: terminated cancel the will of the voters. A Democratic filibuster
Speaker 2: in the Missouri Senate has kind of derailed that effort,
Speaker 2: and it looks like their law will take effect next
Speaker 2: week May one. It's slow but steady. I think they're
Speaker 2: only probably still thirteen twelve states that have a mandated
Speaker 2: paid leave. I see what's been interesting in that space,
Speaker 2: and there are a couple of spaces. Portable benefits is
Speaker 2: another one where the politics over the last couple of
Speaker 2: years have shifted tremendously and we've been, you know, over
Speaker 2: the last ten or fifteen years, the paid leave has
Speaker 2: kind of been a pet project of the Blue team,
Speaker 2: right and setting up paid leave laws, sickly laws, whatever
Speaker 2: it may be. And so you've got the big blue states,
Speaker 2: the Californias and the New Jerseys and the New York's
Speaker 2: and Illinois's Conneticuts with their paid leave law Maryland. But
Speaker 2: what you started to see is in states like Vermont
Speaker 2: and New Hampshire, a number of states Kentucky kind of
Speaker 2: leader where Republicans have kind of gained the upper hand
Speaker 2: on this issue and look at paid leave from a
Speaker 2: perspective of not necessarily being a government program per se,
Speaker 2: but opening up the private marketplace and leveraging insurance companies
Speaker 2: to provide policies that either an employer can pay in
Speaker 2: full or in part.
Speaker 3: Like any other benefit. And it's taken a lot of
Speaker 3: air out of the paid leave issue.
Speaker 2: And unless it's just in big solid blue states, right,
Speaker 2: but there are a number of red states that are
Speaker 2: either passed or in the you know, having the CENTERFIC
Speaker 2: conversation about a market based paid leave program that is
Speaker 2: not necessarily mandated, but employers are certainly incentive to go
Speaker 2: down this road through the tax code or whatnot. And
Speaker 2: like I say, if you're the labor community, you're Bernie Sanders,
Speaker 2: you're pulling your hair out about this because it's really
Speaker 2: taken the leadership of the issue. And as it referenced earlier,
Speaker 2: it jives in nicely with their overall strategy of trying
Speaker 2: to make more inroads with working class voters and so forth.
Speaker 2: And I mean, the Democrats have essentially fumbled, in my opinion,
Speaker 2: my humble opinion, have fumbled the paid leave ball, and
Speaker 2: the Republicans have picked it up and run.
Speaker 3: Their own direction with it. But they're the one with
Speaker 3: the ball now.
Speaker 2: And so now the Democrats are reacting to what an
Speaker 2: enlarge measure are common sense approaches to paid leave, and
Speaker 2: it's driving them kind of crazy, if you will, same
Speaker 2: thing on portable benefits that we just saw a portable
Speaker 2: benefits legislation signed in the law in Tennessee and Alabama.
Speaker 2: And you know, who would have thought the Alabama legislature
Speaker 2: would be out front on creating benefits packages for as
Speaker 2: many employer employees as possible, right, I mean, it's just
Speaker 2: that the Blue team has squandered a bunch of these
Speaker 2: issues they've traditionally kind of owned. So it's been super history.
Speaker 2: I know, paid leave and portal benefits are very different,
Speaker 2: but one sits inside the other. That's super They're related obviously,
Speaker 2: so I spect you'll see more of that. We had
Speaker 2: some paid leave legislation I think for the fifth year
Speaker 2: in a row in New Mexico ran out of gas.
Speaker 2: I think the puck has just gone to a different
Speaker 2: part of the rink on this issue. And if Democrats
Speaker 2: want to do the New York style California style mandated
Speaker 2: benefit program, it's it's they're kind of run out of
Speaker 2: states that are amenable to that anymore, so they can
Speaker 2: have to they have to change the direction on this issue.
Speaker 3: So I find that issue pretty fascinating as well.
Speaker 1: Yeah, that's really interesting trying to leverage the private market
Speaker 1: and the tax code to incentivize employers.
Speaker 2: And yeah, and you would think when we're back to
Speaker 2: you know, pre COVID numbers of basically four percent unemployment
Speaker 2: and employers employees employers are back to competing for workers.
Speaker 2: Something like that is very attractive, right that they can
Speaker 2: now play and have some leverage over creating a benefit
Speaker 2: package that works for their employee at their their workforce,
Speaker 2: as opposed to this kind of paying into some fund
Speaker 2: that may stay in the paid leave fund. But we
Speaker 2: see many states you pay into one fund, it becomes
Speaker 2: the highway fund over there when the buddy is tight,
Speaker 2: you know what I mean. So it's it's actually a
Speaker 2: much more discipline approach and involved.
Speaker 3: In the market.
Speaker 2: And I think Republicans are kind of changing the game
Speaker 2: on that on that issue.
Speaker 1: Well, and I learned from your odd Pepperdine did a
Speaker 1: study on the fast acts impact in California and what
Speaker 1: did it find that they should listen to you?
Speaker 2: Well, I think it's you know, you know, when when
Speaker 2: the proponents of these types of policy proposals, whether it's
Speaker 2: minim wage increases or workforce standards boards, you know, you
Speaker 2: have no idea how it's really going to play out
Speaker 2: in the real world, you know, and they come out
Speaker 2: with these projections that this may happen and that may happen,
Speaker 2: and there's always initial reaction, there's always disruption.
Speaker 3: Maybe maybe employers don't.
Speaker 2: You know, in an industry like fast food where there's you know,
Speaker 2: two hundred percent attrition, maybe they just don't replace people
Speaker 2: as fast. They're nervous about what's going on. But my
Speaker 2: point being, it takes a year or two or maybe
Speaker 2: three for enough data to come back where it becomes
Speaker 2: statistically meaningful. Right, And what we're starting to see in
Speaker 2: the last three or four months California, you know, d C,
Speaker 2: these other areas, Chicago, you know, is is real data
Speaker 2: about what does this mean for employment? Unemployment benefits. You
Speaker 2: measure that, you measure new restaurants, starts, you measure applications
Speaker 2: for permits on liquor like whatever it may be, and
Speaker 2: you can start to get a picture of the impact
Speaker 2: of what it's happening. But again is that there's a
Speaker 2: couple of year lag and now we're seeing data, report
Speaker 2: after report, every report coming in to saying whoa this is,
Speaker 2: This has real rule implications and what Pepperdine And of
Speaker 2: course I don't know if you've ever been to Pepperdine,
Speaker 2: but it's one of those beautiful campuses overlooking Malibu. I
Speaker 2: don't know how anybody could study there, but so but
Speaker 2: my point being that you know, while growth while there
Speaker 2: was still growth in job categories in California, while there
Speaker 2: was still growth in quick service growth sector throughout the country,
Speaker 2: there was significant shrinkage in the in the fast food
Speaker 2: workforce in California. It went against national norms and national
Speaker 2: data points, and so it was really it was really
Speaker 2: easy to tie this policy outcome to that that data outcome,
Speaker 2: if you will, And I think you're going to see
Speaker 2: a lot more of that. We have a new head
Speaker 2: of research at the National Restaurant Association just announced this week,
Speaker 2: and I think you know, he's coming on board a
Speaker 2: lot of great time where there's now meaningful data coming
Speaker 2: out of DC and meaningful data coming out of California.
Speaker 2: So I think you're going to see a lot more
Speaker 2: of that in the industry. Be aggressive, and it's coming
Speaker 2: at a good time. Obviously, we went to talking about
Speaker 2: New Jersey earlier. It's now really easy to kind of
Speaker 2: show New Jersey and the Minneapolis Wage Standards Board idea
Speaker 2: they're playing with there, that there are actual implications.
Speaker 3: So just there's just a lag time.
Speaker 2: It's it's a two or three year lag time, so
Speaker 2: that data becomes meaningful and that's what we're finding now.
Speaker 2: And Pepperdine jumped on to some other end of the
Speaker 2: other thing tanks in California.
Speaker 3: That that did more How do I say this without
Speaker 3: impugning that that.
Speaker 2: Rightly extrapolated trends to come up with that those those
Speaker 2: those those outcomes, but it was a little more speculative.
Speaker 2: Like the Pepperdine study is like data right, and it's
Speaker 2: the first one in California, and I don't think it
Speaker 2: will be the last Biolama shots. So you know, our
Speaker 2: our our our task as an industry is how do
Speaker 2: we take that energy, that narrative, that data and make
Speaker 2: sure that seven thousand state legislators in the country know this,
Speaker 2: and five hundred and thirty five members of Congress know this,
Speaker 2: and fifty governors and all that kind of stuff.
Speaker 3: That's the that's the that's the NRA's job.
Speaker 1: So yeah, from what I've heard, there was a lot
Speaker 1: of kiosks being installed in California.
Speaker 3: Yeah.
Speaker 1: Oh thanks again for doing this man, I'm a big
Speaker 1: fan of your work. Where can listeners go to learn
Speaker 1: more about aligned public strategies and find the Working Launch podcast?
Speaker 2: Well, the Working Launch Podcast, Thank you for the plug
Speaker 2: is produced by Restaurant Business Magazine, so you can find
Speaker 2: it on their platform obviously all the Apples and Spotify
Speaker 2: platforms as well, and you can go to Align Public
Speaker 2: Strategies dot com. That's where we are and happy to
Speaker 2: help answer any questions and wax on poetically about the
Speaker 2: future of the restaurant.
Speaker 3: Energies VISE are the public policy and politics.
Speaker 2: So I appreciate Michael being on your respected podcast. It's
Speaker 2: find to listen to you. I learned more about the
Speaker 2: business and the numbers, and I'm not a numbers guy.
Speaker 2: I'm I'm the right brain guy, but I your podcast
Speaker 2: makes me makes me smart, So I appreciate.
Speaker 3: I appreciate all you do.
Speaker 1: Yeah, you got it, man, I appreciate that, and it's
Speaker 1: always fun speaking with you. Man. I want to thank
Speaker 1: the audience for tuning in. If you liked our discussion,
Speaker 1: please share with your friends and colleagues. Check back soon
Speaker 1: for an interview with Nick Kenner, the founder and CEO
Speaker 1: of Just Salad.