WEBVTT - Restaurants Aim to Steal Share Amid Traffic Drop 0:00:21.680 --> 0:00:24.280 Welcome to Chopping it Up. I'm your host, Mike Hallen, 0:00:24.320 --> 0:00:27.560 the senior restaurant and food Service analyst at Bloomberg Intelligence. 0:00:28.200 --> 0:00:31.400 Today we're joined by Mark Cooperman. He's the chief operating 0:00:31.440 --> 0:00:35.360 officer of Revenue Management Solutions. Thanks for doing us, Mark, Oh, 0:00:35.479 --> 0:00:37.519 my pleasure and so it's good to see you man. 0:00:37.560 --> 0:00:38.240 It's been a while. 0:00:38.720 --> 0:00:39.360 Absolutely. 0:00:40.560 --> 0:00:42.640 Why don't we start out by, you know, telling the 0:00:42.640 --> 0:00:45.839 audience a bit about RMS and the service that you 0:00:45.840 --> 0:00:46.640 guys provide. 0:00:46.960 --> 0:00:52.240 Sure, So, RMS or Revenue Management Solutions, we're a tech 0:00:52.360 --> 0:00:58.920 enabled company helping brands optimize their pricing to drive full 0:00:58.960 --> 0:01:01.400 flow through the profit of ability, while at the same 0:01:01.440 --> 0:01:05.520 time managing transactions. So we've been in business about thirty years. 0:01:06.200 --> 0:01:11.080 We work with over one hundred thousand restaurants worldwide. We 0:01:11.160 --> 0:01:14.560 collect competitive prices for over one hundred and seventy thousand 0:01:14.640 --> 0:01:20.200 restaurants worldwide. Our business is really driven around understanding the 0:01:20.319 --> 0:01:25.040 dynamics around customer purchase behavior and whether or not future 0:01:25.160 --> 0:01:28.679 changes or what changes can be made to minimize the 0:01:28.720 --> 0:01:33.760 impact of guests, maximize flow through to the brands that 0:01:33.800 --> 0:01:36.480 we work with, and then manage those transactions over the 0:01:36.520 --> 0:01:39.440 long term. Right. We've seen over the last couple of 0:01:39.520 --> 0:01:42.560 years when you take a big price increase the impact 0:01:42.560 --> 0:01:44.840 it can have on guests. And our focus is really 0:01:44.880 --> 0:01:48.480 on long term profitability, not necessarily meeting a quarterly goal. 0:01:49.720 --> 0:01:54.080 Obviously a super hot topic right now. So you and 0:01:54.160 --> 0:01:57.240 the team recently did a report on quick service restaurants sales, 0:01:57.720 --> 0:02:01.000 so i'd kind of like to start out there. You know, 0:02:01.040 --> 0:02:03.280 we all know same sort of sales of jumped for 0:02:03.400 --> 0:02:07.960 most chains pretty significantly since twenty nineteen. But you know, 0:02:08.200 --> 0:02:12.079 you did some great work indexing back to twenty nineteen, 0:02:12.160 --> 0:02:17.720 which not enough analysts are doing these days, so that 0:02:17.880 --> 0:02:19.520 was very nice to see. Can you talk a bit 0:02:19.560 --> 0:02:24.400 about the divergence between pricing and traffic over that time 0:02:24.480 --> 0:02:27.560 span and what that could mean for the QSR industry 0:02:28.760 --> 0:02:29.880 sales going forward? 0:02:30.360 --> 0:02:35.760 Sure, So, as we look across the industry, what we've 0:02:35.840 --> 0:02:40.560 seen is that since twenty nineteen, QSR is down about 0:02:40.600 --> 0:02:44.079 twenty percent in traffic, right, and but we're still talking 0:02:44.120 --> 0:02:47.959 about positive sales, and that's really driven by a pretty 0:02:48.000 --> 0:02:51.680 significant increases an average check to the magnitude of about 0:02:51.680 --> 0:02:58.560 forty percent. Now, that's not necessarily driven across all all 0:02:58.720 --> 0:03:02.200 segments of the menu or all day parts. But on average, 0:03:02.240 --> 0:03:04.440 that's the impact that we're seeing across the industry, and 0:03:04.800 --> 0:03:07.960 that's pretty significant. As we're going into twenty twenty four, 0:03:08.639 --> 0:03:11.520 there's a lot of weight and see and looking at 0:03:11.520 --> 0:03:15.280 competitors and really trying to understand who's that first mover, 0:03:15.480 --> 0:03:17.000 what are they going to do, and how are we 0:03:17.040 --> 0:03:20.119 going to react to that. There's no question what we're 0:03:20.120 --> 0:03:23.320 seeing is a lot of R and D around what 0:03:23.360 --> 0:03:27.120 should we do when someone makes let's say a significant 0:03:27.240 --> 0:03:30.320 value play, right, but to be the first mover on 0:03:30.480 --> 0:03:33.280 value right now? And we can talk about value and 0:03:33.320 --> 0:03:35.440 what that means. That's where we see a lot of 0:03:35.520 --> 0:03:37.000 uncertainty going into next year. 0:03:37.680 --> 0:03:42.640 Okay, what's the spread that you found between average check 0:03:42.680 --> 0:03:46.680 gains at takeout versus in restaurants? Right, So we'd assume 0:03:46.720 --> 0:03:52.119 that that change we're taking more on the delivery side, right, 0:03:53.640 --> 0:03:55.400 But if you could talk about that spread, I think 0:03:55.400 --> 0:03:56.200 that would be interesting. 0:03:56.880 --> 0:03:59.840 You know, the spread that I was thinking about, you know, 0:04:00.000 --> 0:04:02.920 going into this was really about the timing of the 0:04:03.000 --> 0:04:05.640 changes that we saw across the menu. Right. 0:04:06.200 --> 0:04:09.440 So for example, the first day part. 0:04:09.280 --> 0:04:14.200 That was really hit was lunch okay, followed by dinner, 0:04:14.280 --> 0:04:16.280 and then what we saw in twenty twenty three was 0:04:16.800 --> 0:04:21.640 finally breakfast being touched and that had a really significant 0:04:21.680 --> 0:04:25.680 impact on traffic for breakfast. So breakfast was working, was 0:04:25.720 --> 0:04:30.599 actually doing really well. In twenty one twenty two, really 0:04:30.640 --> 0:04:33.440 no price had been put into most systems, and then 0:04:33.480 --> 0:04:35.800 in twenty twenty three we saw a lot of price 0:04:36.160 --> 0:04:39.960 to the tune of fifty one percent relative to twenty nineteen, 0:04:40.520 --> 0:04:44.240 and so that really accelerated some of the changes that 0:04:44.360 --> 0:04:47.760 you know are impacting restaurants at breakfast. I think the 0:04:47.839 --> 0:04:51.000 channel that really stands out to me that's changed so 0:04:51.120 --> 0:04:56.320 much as dining right that we've seen the customers. You know, 0:04:56.360 --> 0:05:00.560 what COVID did was it trained customers to use the 0:05:00.680 --> 0:05:03.200 drive through and the convenience of drive through. And while 0:05:03.200 --> 0:05:06.200 we've seen a lot of changes since COVID, that purchase 0:05:06.279 --> 0:05:09.400 behavior right of shifting back to dine in has not 0:05:09.480 --> 0:05:12.920 really happened, right, And therefore we do see the QSR 0:05:13.040 --> 0:05:17.440 picked up, and we also see that that takeout and 0:05:17.480 --> 0:05:18.840 delivery benefited from that. 0:05:19.360 --> 0:05:22.520 Yeah, so what does this mean for store footprints? 0:05:22.760 --> 0:05:25.440 You know, it's an interesting question in the context of 0:05:25.960 --> 0:05:30.680 existing restaurants versus future restaurants, right. You know, for existing restaurants, 0:05:31.080 --> 0:05:33.960 the opportunity right now is really taking a look at 0:05:34.200 --> 0:05:37.480 late night and drive through, right, and we'll talk a 0:05:37.520 --> 0:05:40.200 little bit about the labor model and how that relates 0:05:40.240 --> 0:05:43.680 to that day part. I think that brands are going 0:05:43.720 --> 0:05:46.479 to have to really look at what experience they want 0:05:46.480 --> 0:05:49.520 to provide and dine in versus drive through. I think 0:05:50.600 --> 0:05:53.400 we're reaching a point here where I think in this 0:05:53.560 --> 0:05:57.440 industry we have to really go back to understanding value. 0:05:57.720 --> 0:06:01.680 Value being the relationship between the guests experience, whether it's food, 0:06:02.800 --> 0:06:05.080 speed of service, and price. And I think in dining 0:06:05.200 --> 0:06:07.719 we've lost a little of that, right, What is that 0:06:07.880 --> 0:06:10.880 extra value associated with dining in the restaurant? I think 0:06:10.920 --> 0:06:12.640 brands are going to have to solve for that if 0:06:12.640 --> 0:06:15.160 they want to fill in guests again during that day point. 0:06:15.320 --> 0:06:17.599 Okay, col let's get back to breakfast a little bit 0:06:17.640 --> 0:06:20.400 because that, in my opinion, that was probably the biggest 0:06:20.400 --> 0:06:23.919 surprise in the report, the fact that there was you know, 0:06:24.040 --> 0:06:28.960 massive outperformance of the breakfast day part for QSR since 0:06:29.000 --> 0:06:32.000 twenty nineteen. You know, that day part was a huge 0:06:32.120 --> 0:06:36.240 underperformer in the early days of the pandemic due to 0:06:36.400 --> 0:06:42.040 increased telecommuting and family jains. Chains continue to underperform when 0:06:42.040 --> 0:06:45.640 we index them back to twenty nineteen, So what's kind 0:06:45.640 --> 0:06:49.080 of what's the dynamic there and kind of what's changed 0:06:49.760 --> 0:06:51.240 since the early days of the pandemic. 0:06:52.520 --> 0:06:55.159 So you know, when we go back, obviously it makes 0:06:55.200 --> 0:06:57.839 total sense the breakfast would be hit, right, the need 0:06:57.920 --> 0:07:03.240 state for the consumer was different, right, And you know, 0:07:03.320 --> 0:07:06.760 I think that initial drop intuitively makes total sense. What 0:07:06.960 --> 0:07:09.440 makes made less sense to me when I look at 0:07:09.440 --> 0:07:12.080 the data is that we really started to see breakfast 0:07:12.160 --> 0:07:14.920 trending up in twenty twenty one, and maybe that's driven 0:07:14.960 --> 0:07:17.880 by the fact that brands were holding price on breakfast 0:07:18.200 --> 0:07:20.720 based on the fact that they were worried about guest counts. 0:07:21.880 --> 0:07:24.320 Then when we got into twenty twenty two, we saw 0:07:24.360 --> 0:07:28.800 that traffic was basically on parody where brands were back 0:07:28.800 --> 0:07:32.840 in twenty nineteen. Okay, it's twenty twenty three, right that 0:07:32.880 --> 0:07:36.560 we're seeing the traffic is down twenty percent relative, and 0:07:37.560 --> 0:07:39.560 I really think that's driven by a lot of the 0:07:39.600 --> 0:07:43.160 price changes. It makes sense to me that brands had 0:07:43.160 --> 0:07:45.960 to touch price. You can only move so far and 0:07:46.040 --> 0:07:49.200 get the necessary impact from breakfast. And I'm sorry, from 0:07:49.280 --> 0:07:52.880 lunch and dinner, So it was inevitable that breakfast would happen. 0:07:52.960 --> 0:07:55.440 And you know, in retrospect, one can make the argument 0:07:55.480 --> 0:07:59.600 maybe distributing price increases across more of the segments over 0:07:59.640 --> 0:08:03.280 time to ease that up, But I think it also 0:08:03.360 --> 0:08:06.920 makes sense that you wouldn't touch a segment when traffic 0:08:07.000 --> 0:08:08.040 is hurting. Yeah. 0:08:08.920 --> 0:08:11.800 Yeah, so you answered my next question, but that that's 0:08:12.440 --> 0:08:17.200 very interesting. So you're starting to see some pushback on price, right, 0:08:17.240 --> 0:08:19.600 and it's something that we've been writing about that that 0:08:20.440 --> 0:08:23.120 you know, it was inevitable that that customers wouldn't be 0:08:23.120 --> 0:08:27.120 able to continue to pay the prices that they were seeing. 0:08:27.600 --> 0:08:30.920 You know, do you have any data on on kind 0:08:30.920 --> 0:08:34.240 of what's the dynamic here in same source of sales 0:08:34.320 --> 0:08:37.400 like and in terms of that price pushback? You know, 0:08:37.440 --> 0:08:41.160 our customers, do you think they're going to continue to 0:08:41.280 --> 0:08:45.600 visit less you know, menu prices rolling off? 0:08:45.760 --> 0:08:46.040 What? 0:08:46.040 --> 0:08:48.880 What what does that mean for sales going forward? Are 0:08:48.880 --> 0:08:53.520 you seeing more check management? You know, any insight into 0:08:53.559 --> 0:08:56.640 those mew moving parts of same source sales? 0:08:57.840 --> 0:09:01.640 Sure? So a couple of things. If we stay on 0:09:01.760 --> 0:09:05.000 breakfast and we look at some of the survey work 0:09:05.040 --> 0:09:11.080 that's been done to understand intended visitation. Right, what we 0:09:11.160 --> 0:09:14.840 see is that the intended visitation for coffee and pastry 0:09:14.880 --> 0:09:17.480 going into twenty twenty four is at its highest relative 0:09:17.520 --> 0:09:19.959 to all the other segments. So even though we see 0:09:20.000 --> 0:09:23.280 breakfast sort of hurting right now, when we look at 0:09:23.320 --> 0:09:26.880 what customers want to do, right, that is the segment 0:09:26.920 --> 0:09:29.760 where they actually want to be. So I think it's 0:09:29.760 --> 0:09:31.840 an interesting data point. Right. On the one hand, we 0:09:31.880 --> 0:09:33.760 see the numbers, On the other hand, we look at 0:09:33.760 --> 0:09:37.520 how customers are potentially feeling. It doesn't exactly line up, right, 0:09:37.600 --> 0:09:41.160 So I don't feel like breakfast like hope is all 0:09:41.320 --> 0:09:43.839 is lost with breakfast? Right. I think some of the 0:09:43.960 --> 0:09:48.320 changes that we're seeing, unemployment holding low, right, all those 0:09:48.320 --> 0:09:50.959 factors are going to I think play into breakfast and 0:09:51.000 --> 0:09:52.160 hopefully a recovery there. 0:09:52.559 --> 0:09:56.080 Yeah, and telecommuting isn't that quite at the levels it 0:09:56.200 --> 0:09:58.959 was a few years ago. It's still exact, so that 0:09:59.280 --> 0:10:02.559 should help too. And your note you also talked about 0:10:02.640 --> 0:10:04.760 labor a little bit. Can you talk about how that's 0:10:05.160 --> 0:10:06.760 affecting QSR traffic? 0:10:07.679 --> 0:10:09.800 You know a couple things with labor, right, We're seeing 0:10:09.880 --> 0:10:14.680 that you know, obviously, unemployments at its lowest. Right, we're 0:10:14.679 --> 0:10:20.400 seeing that labor participation rates are almost at pre COVID levels, right. 0:10:20.920 --> 0:10:23.200 We know that, you know, when we look at who 0:10:23.280 --> 0:10:27.200 left the industry, you know, at least on the labor side, 0:10:27.200 --> 0:10:30.480 it's fifty five plus. The recovery is coming from twenty 0:10:30.520 --> 0:10:31.480 five to thirty four. 0:10:32.000 --> 0:10:32.120 Right. 0:10:32.240 --> 0:10:35.319 So profile of you know, the staffing, I think it 0:10:35.480 --> 0:10:39.440 has changed significantly since twenty nineteen. How does that going 0:10:39.520 --> 0:10:42.120 to play in? Well, you know, we've seen brands make 0:10:42.280 --> 0:10:47.960 significant investments in you know, technology, drive through speed of service. 0:10:48.920 --> 0:10:53.120 I think with this younger labor force, the focus. 0:10:52.720 --> 0:10:55.640 On operations is going to be really critical, right because 0:10:55.720 --> 0:10:57.440 at the end of the day, as prices are going up, 0:10:57.480 --> 0:10:59.520 and I was saying this before, how are we going 0:10:59.600 --> 0:11:02.319 to make this a better experience for the customer? Right? 0:11:02.360 --> 0:11:06.160 And that change in labor and that profile means that, you. 0:11:06.080 --> 0:11:09.079 Know, we've got a different a different set of experiences 0:11:09.120 --> 0:11:11.400 for the staff that are coming in that I think 0:11:11.440 --> 0:11:13.240 have to be addressed. Does that make sense? 0:11:13.360 --> 0:11:15.560 Yeah, of course, We're seeing a lot of companies move 0:11:15.600 --> 0:11:19.040 on that side. You know, Starbucks is probably the biggest one, 0:11:19.120 --> 0:11:22.920 but you know Chipotle as well, Like you know, happy 0:11:23.000 --> 0:11:27.360 employees in turn, you know, create happy guests, right, and 0:11:27.440 --> 0:11:31.600 so making their jobs easier is definitely a huge point 0:11:31.600 --> 0:11:33.760 of emphasis for the companies that we cover. 0:11:34.200 --> 0:11:37.040 And we've seen you know, we're seeing right now that 0:11:38.400 --> 0:11:42.560 you know, the the wage growth is basically in many 0:11:42.640 --> 0:11:47.000 cases outpacing the inflation that we're seeing right so net net, 0:11:47.280 --> 0:11:52.080 the sort of real disposable income for that, you know 0:11:52.160 --> 0:11:56.120 that labor force is actually positive right now, and that's 0:11:56.320 --> 0:11:59.320 that's I think really important as we're considering, you know, 0:11:59.360 --> 0:12:01.360 how we go into staffing in twenty twenty four. 0:12:02.520 --> 0:12:04.719 Yeah, and I didn't see anything in your note, so 0:12:04.800 --> 0:12:06.360 you may not have an answer to this question, but 0:12:06.400 --> 0:12:09.320 do you have any insight into staffing at late night? 0:12:09.559 --> 0:12:12.160 You know, we've pointed that out as an opportunity in 0:12:12.160 --> 0:12:14.560 twenty twenty three for some of our companies, Jack in 0:12:14.600 --> 0:12:16.920 the Box being the primary one, but also you know, 0:12:17.040 --> 0:12:19.880 Wendy's and McDonald's, these companies that were having real difficulties 0:12:19.920 --> 0:12:23.960 staffing at that day part last year, we saw maybe 0:12:23.960 --> 0:12:25.920 some room for improvement. And do you have any insight 0:12:25.960 --> 0:12:26.959 into that part of the day? 0:12:26.920 --> 0:12:29.800 Yeah, absolutely so. A lot of the research that we 0:12:29.840 --> 0:12:33.800 do when we're working with brands like you're mentioning is 0:12:33.920 --> 0:12:37.520 understanding what the right hours of operation are. Okay, the 0:12:37.600 --> 0:12:39.920 benefit of being a big brand is you can look 0:12:40.280 --> 0:12:44.120 and benchmark across you know, potentially thousands of stores to 0:12:44.200 --> 0:12:47.320 answer a really important question, which is should I be 0:12:47.440 --> 0:12:50.680 open an hour more, do I have the right amount 0:12:50.679 --> 0:12:53.160 of hours? Or should I be open less? Right? And 0:12:53.240 --> 0:12:56.440 so I think answering that question is really critical. And 0:12:56.480 --> 0:12:58.840 what we see in the industry is that typically across 0:12:58.840 --> 0:13:01.120 a brand, it's not uniform. Now, Jack maybe a little 0:13:01.120 --> 0:13:03.559 bit different with twenty four hours, but other brands, right 0:13:03.600 --> 0:13:06.320 and QSR, some are open to eleven, some are open 0:13:06.360 --> 0:13:09.000 to twelve, some are open to one. We're seeing a 0:13:09.120 --> 0:13:12.880 huge amount of opportunity dialing that in right, because that's 0:13:12.920 --> 0:13:15.440 going to be that game between labor, labor and sales. 0:13:16.240 --> 0:13:19.040 So these large brands should really be leveraging all of 0:13:19.080 --> 0:13:24.040 this experimental data that exists, right, restaurants being opened different 0:13:24.120 --> 0:13:28.520 times that can be used to really dial in, you know, 0:13:28.600 --> 0:13:31.240 the revenue against the labor that it takes. 0:13:32.160 --> 0:13:35.800 Great. Let's shift gears a little bit. Talk to me 0:13:35.840 --> 0:13:39.240 about strategic pricing. You know, how important is it right 0:13:39.240 --> 0:13:42.880 now to manage prices, price, product and promotions locally. 0:13:44.800 --> 0:13:51.400 Yeah, we've definitely seen a trend away from national price 0:13:51.480 --> 0:13:55.520 point promotions, and for very good reason. You know, when 0:13:55.559 --> 0:13:58.120 a brand runs something for five dollars, let's say some 0:13:58.240 --> 0:14:02.480 type of value associated with five dollars that hits Alabama 0:14:02.800 --> 0:14:09.040 completely differently than California, right. And I understand why brands 0:14:09.200 --> 0:14:12.880 want franchisees to be on those price points, right. I mean, 0:14:12.880 --> 0:14:13.240 that's a. 0:14:13.280 --> 0:14:15.679 Very powerful part of the marketing initiative. 0:14:15.880 --> 0:14:18.800 But I also understand franchisees that are saying, listen, these 0:14:18.840 --> 0:14:23.840 promotions really don't support our unit economics, and so I 0:14:23.880 --> 0:14:27.000 think this moved to a more promotional strategy that's driven 0:14:27.080 --> 0:14:29.760 let's say, at a market level. I think it's a really, 0:14:29.800 --> 0:14:34.400 really big opportunity for brands. I think the challenge is, 0:14:34.440 --> 0:14:36.640 how are you communicating to your guests? Right, if you're 0:14:36.680 --> 0:14:39.280 leveraging a loyalty program or you're leveraging a way to 0:14:39.320 --> 0:14:42.440 communicate directly with your guests. That to me is the 0:14:42.480 --> 0:14:46.440 huge opportunity in twenty twenty four. There's so much technology 0:14:46.480 --> 0:14:51.320 out there now that allows allows brands to say, mark 0:14:51.640 --> 0:14:54.760 this is the right promotion for you, right to come 0:14:54.760 --> 0:14:58.160 into the restaurant and from there, right, moving the needle 0:14:58.200 --> 0:15:00.640 to drive frequency for me or potentially the add ons 0:15:00.680 --> 0:15:03.800 and things like that. Yeah, that's where I think that 0:15:03.880 --> 0:15:06.000 the game is going to be, you know, going forward. 0:15:07.240 --> 0:15:10.560 Yeah, so how has that impacted your pricing models over 0:15:10.560 --> 0:15:11.720 the last few years? 0:15:12.320 --> 0:15:17.000 So as we think about our how our models have evolved, 0:15:17.120 --> 0:15:18.560 you know, over the last couple of years, one of 0:15:18.600 --> 0:15:20.800 the things that we've had to do is add a 0:15:20.800 --> 0:15:24.280 lot more variables into the model or our models in 0:15:24.400 --> 0:15:29.720 order to isolate what is actually price versus what is 0:15:29.920 --> 0:15:32.680 all the other stuff that's taking place. Right, So that's 0:15:32.800 --> 0:15:35.640 that's been a big change for us, and it's actually 0:15:35.680 --> 0:15:38.520 really forcing us to evolve our models much more quickly 0:15:38.560 --> 0:15:42.040 than we did let's say ten years ago, right, you know, 0:15:42.040 --> 0:15:44.280 I'd say the second thing is, as we're looking at 0:15:44.320 --> 0:15:47.880 pricing models, we really have to account for competition now, right, 0:15:48.440 --> 0:15:52.040 And it's very easy for brands to say, oh, I'm 0:15:52.040 --> 0:15:54.720 going to compare this item to that item. Right. What 0:15:54.840 --> 0:15:57.440 I'm most interested in when I'm looking at competition is 0:15:57.480 --> 0:16:04.080 really total basket associated with with what the customer is spending. So, 0:16:04.480 --> 0:16:07.640 you know, what we worry about is that we touch 0:16:08.200 --> 0:16:12.440 too many products that one customer buys and none of 0:16:12.480 --> 0:16:16.240 the products that other customers are buying, right, And finding 0:16:16.280 --> 0:16:19.600 that distribution is really critical, and that's why you have 0:16:19.640 --> 0:16:21.560 to go down to the basket level to understand it. 0:16:21.600 --> 0:16:25.160 But it can also be why we see price changes 0:16:25.200 --> 0:16:28.160 in lunch and then not price changes at dinner. Right. 0:16:28.200 --> 0:16:31.520 There's there's a lot of different interplay we can be 0:16:31.600 --> 0:16:35.040 looking at. Do customers who shop at shop for lunch 0:16:35.280 --> 0:16:37.480 go to dinner or not. In some brands, we see 0:16:37.520 --> 0:16:41.200 it's their their their lunch customers and dinner customers, and 0:16:41.240 --> 0:16:43.760 that allows us to take two very different pricing strategies. 0:16:44.000 --> 0:16:47.200 In many cases they really overlap, and that makes it 0:16:47.240 --> 0:16:51.000 more challenging to account for making sure that you don't 0:16:51.080 --> 0:16:53.280 have some customers that are being hit really hard. The 0:16:53.320 --> 0:16:55.520 simple example, right, is if you touch a burger and 0:16:55.560 --> 0:16:57.440 a fry, and a and a and a beverage at 0:16:57.480 --> 0:17:02.200 the same time, right, versus touching a burger, a chicken sandwich, 0:17:02.400 --> 0:17:05.680 and you know, some kind of vegetarian item. Right. It's 0:17:05.680 --> 0:17:08.280 a simplistic example, but it adds up. Right, when you 0:17:08.280 --> 0:17:10.320 put five percent into the system, it could be that 0:17:10.400 --> 0:17:14.600 some customers are expiring twenty percent. Right, So understanding the 0:17:14.640 --> 0:17:18.640 makeup of the checks has really become important. I'd say. 0:17:18.640 --> 0:17:22.480 The last thing is that pricing has to support the 0:17:22.600 --> 0:17:26.119 initiatives of the brand. Okay, that's going to be marketing initiatives. 0:17:26.160 --> 0:17:29.639 So when we're recommending a price change, we have to 0:17:29.680 --> 0:17:32.680 know what's happening in three months, six months, twelve months, right, 0:17:32.760 --> 0:17:35.359 And does the cadence of the price change support the 0:17:35.400 --> 0:17:38.800 initiatives that are going into place? I think that's really 0:17:39.160 --> 0:17:41.640 really critical. Same thing with operations. One of the things 0:17:41.680 --> 0:17:44.160 that we've been hearing as brands are looking at speed 0:17:44.200 --> 0:17:47.399 of service is that there are certain items that we 0:17:47.480 --> 0:17:51.160 actually don't want to promote. Right. There are items sometimes 0:17:51.160 --> 0:17:54.159 where we say, oh, we could lower price on this 0:17:54.320 --> 0:17:57.199 and drive higher margins or something, and the answer is no, 0:17:57.280 --> 0:17:58.240 we can't sell more of that. 0:17:58.280 --> 0:18:01.120 It slows down, the slows down the drive through. 0:18:01.840 --> 0:18:04.840 Right. So all of these factors I think need to 0:18:04.880 --> 0:18:08.040 come into play as you consider a strategy for six months, 0:18:08.080 --> 0:18:09.359 twelve months, eighteen months. 0:18:11.080 --> 0:18:13.320 Okay. Cole and we touched on this a little bit 0:18:13.640 --> 0:18:16.520 about you know, kind of customers pushing back on the 0:18:16.560 --> 0:18:21.520 breakfast price increases this year. But you know, I guess 0:18:21.600 --> 0:18:24.639 my question is on an overall level. Are we starting 0:18:24.680 --> 0:18:28.879 to see more pushback, you know, on the price increases? 0:18:28.960 --> 0:18:32.880 Is that part of why we're seeing you know, results 0:18:32.960 --> 0:18:35.520 kind of slow here in August and September? 0:18:36.720 --> 0:18:40.639 Yeah, I think so. I mean with the numbers that 0:18:40.680 --> 0:18:43.920 are being posted right there, I think we all expect 0:18:44.000 --> 0:18:48.480 some kind of threshold is being hit, right, or is 0:18:48.520 --> 0:18:51.520 going to be hit. The interesting thing is that brands 0:18:51.560 --> 0:18:53.640 are going to have to take more price next year. 0:18:54.160 --> 0:18:56.800 Right when we look at let's say the producer price index, right, 0:18:56.840 --> 0:18:59.040 there's no indication that the cost of goods sold they're 0:18:59.040 --> 0:19:01.960 going to go down, right. We know that wage increases 0:19:01.960 --> 0:19:04.760 are going to be taking place. So how do restaurants 0:19:04.760 --> 0:19:08.800 deal with that? From my perspective, it really comes down 0:19:08.880 --> 0:19:11.560 to running a great restaurant, right. We sort of lose 0:19:11.640 --> 0:19:13.960 that sort of sight as we think of you know, 0:19:14.160 --> 0:19:18.240 QSR sometimes. But the truth is a great run restaurant 0:19:18.280 --> 0:19:21.320 where you increase the value of the experience of the customer, 0:19:21.720 --> 0:19:25.320 will give brands the runway to take price. Now what 0:19:25.359 --> 0:19:27.440 could that be. It could be getting more people through 0:19:27.440 --> 0:19:30.880 the drive through. It could be changing the packaging, right, 0:19:30.960 --> 0:19:33.400 it could be changing the menu board. There's so many 0:19:33.440 --> 0:19:37.600 different ways that brands can buy themselves the opportunity for price. 0:19:37.960 --> 0:19:40.600 Where we've seen brands fail is when they say, you 0:19:40.640 --> 0:19:43.199 know what, I want to change segments, So I'm going 0:19:43.200 --> 0:19:45.520 to raise my prices twenty percent, but I'm not going 0:19:45.520 --> 0:19:46.960 to prove anything for the customer. 0:19:47.520 --> 0:19:49.480 Right those brands, it doesn't stick. 0:19:50.000 --> 0:19:52.280 It's the same reason why we would say if a brand, 0:19:53.720 --> 0:19:56.480 if they renovated a restaurant, that is the time to 0:19:56.480 --> 0:19:59.760 take price. Right, You've changed the value for the customer, 0:20:00.080 --> 0:20:05.120 changed the experience, and bought yourself. That opportunity sense. 0:20:05.400 --> 0:20:08.679 Yeah, it does. It's and it's really interesting. But you know, 0:20:08.760 --> 0:20:10.760 our contention is that we could be on the early 0:20:10.800 --> 0:20:14.359 stages of a commodity bull market, and historically those last 0:20:14.359 --> 0:20:17.800 seventeen years. Man, so you might be busy for the 0:20:17.840 --> 0:20:18.720 next decade or so. 0:20:20.000 --> 0:20:20.240 Well. 0:20:20.280 --> 0:20:23.679 You know, it's funny because a lot of the recommendations 0:20:23.680 --> 0:20:27.080 that we make are really around Listen, you've gone far 0:20:27.160 --> 0:20:30.200 enough on this. So either we have to re engineer 0:20:30.240 --> 0:20:33.640 a product, or we have to change the packaging. Something 0:20:33.720 --> 0:20:35.920 has to change because customers are not going to give 0:20:35.920 --> 0:20:39.119 you credit anymore for this level of price for this 0:20:39.200 --> 0:20:42.840 specific product. So yeah, it's going to be a game changer, 0:20:42.880 --> 0:20:43.480 I think. 0:20:43.960 --> 0:20:46.080 Yeah, and it's going to be interesting the next twelve months. Right, 0:20:46.560 --> 0:20:48.399 most of my companies are talking about letting a lot 0:20:48.440 --> 0:20:49.480 of price roll off. 0:20:49.560 --> 0:20:49.680 You know. 0:20:49.760 --> 0:20:51.280 I guess to your point you made at the top 0:20:51.320 --> 0:20:53.879 about kind of taking away and see approach, right, Like 0:20:53.960 --> 0:20:58.199 the gap between inflation in the restaurant versus a grocery store, 0:20:59.359 --> 0:21:02.840 you know, has really wide in this year, and so yeah, 0:21:02.880 --> 0:21:05.760 so uh, you know the price is going to roll 0:21:05.800 --> 0:21:08.440 off this year. But with commodity prices, you know, oil 0:21:08.440 --> 0:21:13.160 at hitting ninety five dollars, commodity prices continuing to go up. Yeah, 0:21:13.200 --> 0:21:14.800 to your point, you know, next year might be a 0:21:14.880 --> 0:21:18.760 year to raise prices. But you know, what I've learned 0:21:18.800 --> 0:21:23.320 in this business is that the top line is where 0:21:23.359 --> 0:21:26.280 you probably gain your most margin expansion, Right, It's really 0:21:26.320 --> 0:21:29.639 about just getting more customers through the door and increasing 0:21:29.680 --> 0:21:32.919 your sales. Right. So if sale, if they can't can't 0:21:33.359 --> 0:21:36.119 figure out a way to at least keep traffic flat 0:21:36.240 --> 0:21:39.800 and boost the same store sales, it's gonna be tough 0:21:39.840 --> 0:21:42.800 to to cover these higher costs. 0:21:43.359 --> 0:21:47.000 Well, you know, I honestly I think we're talking about 0:21:47.119 --> 0:21:50.760 isn't growing traffic as we're talking about stealing share. Okay, 0:21:51.240 --> 0:21:54.520 this is this is a year of stealing share because 0:21:54.880 --> 0:21:57.320 you know, we're not necessarily gonna I don't think that 0:21:57.359 --> 0:22:00.280 the restaurant industry is going to drive higher frequently see 0:22:00.760 --> 0:22:03.280 right as a whole. Sure, some brands can be successful 0:22:03.320 --> 0:22:06.080 to drive frequency and drive spread, but I think at 0:22:06.119 --> 0:22:08.400 you know, at a high level, what brands are going 0:22:08.440 --> 0:22:12.399 to be focused on is stealing share now in terms 0:22:12.400 --> 0:22:15.880 of price for next year. I think, you know, brands 0:22:16.600 --> 0:22:18.640 obviously need to be cautious. They need to be looking 0:22:18.680 --> 0:22:20.560 at what everyone's doing. They need to be looking at 0:22:20.560 --> 0:22:22.879 what the environment is. But what they should not be 0:22:23.040 --> 0:22:27.920 doing is putting the brakes on price. Okay, we've seen, 0:22:28.040 --> 0:22:30.680 you know, for many years one of the biggest mistakes 0:22:30.680 --> 0:22:32.960