WEBVTT - US Consumer Response to Menu Pricing Madness 0:00:00.320 --> 0:00:04.160 Welcome to Chopping It Up Episode four. I'm your host, 0:00:04.240 --> 0:00:07.440 Michael Halen, the senior Restaurant and food Service analyst at 0:00:07.440 --> 0:00:11.200 Bloomberg Intelligence. So it's my pleasure to introduce today's guest, 0:00:11.280 --> 0:00:15.520 Mike Lucianoff. Mike is a data scientist, entrepreneur, and now 0:00:15.640 --> 0:00:19.239 CEO of Extra P three sixty, a decision intelligence company. 0:00:19.920 --> 0:00:22.200 Thanks for joining me, Mike, Michael, thanks for having me. 0:00:22.239 --> 0:00:24.200 It's good to be here. For those of you that 0:00:24.560 --> 0:00:28.400 don't know Mike, Uh, you know, he's he's uh, one 0:00:28.440 --> 0:00:30.400 of the smartest people I know in the restaurant industry, 0:00:30.400 --> 0:00:33.640 and it's somebody I lean on, uh in terms of 0:00:33.680 --> 0:00:35.600 trying to figure out what's going on in the market. 0:00:35.680 --> 0:00:38.680 So I'm excited to have him here. So, you know, 0:00:38.760 --> 0:00:40.479 before we get into it, why don't you talk a 0:00:40.520 --> 0:00:43.440 little bit about your new venture, Extra P three sixty, 0:00:43.680 --> 0:00:45.720 uh and kind of explain to us how it's different 0:00:45.720 --> 0:00:50.640 than what you've done in the past. Sure, yeah, no, thanks. Um. 0:00:51.000 --> 0:00:53.840 You know, as you know, I've been in in the 0:00:53.880 --> 0:01:00.160 business of turning data into insights and decisions for the 0:01:00.240 --> 0:01:04.560 decades now, um, and you know, there's a lot there's 0:01:04.560 --> 0:01:06.640 a lot of new analytics companies that are coming out 0:01:06.680 --> 0:01:09.800 and so forth UM and b I companies. And I 0:01:09.840 --> 0:01:13.040 think is this as this huge tidal wave of new 0:01:13.160 --> 0:01:16.440 data started to surge into the end of the industry, 0:01:16.560 --> 0:01:19.240 there's more and more people who don't know what to 0:01:19.280 --> 0:01:22.280 do with it UM, and it could be a tremendous 0:01:22.319 --> 0:01:26.480 asset UM. But really the a lot of the traditional 0:01:26.680 --> 0:01:28.600 players are just saying, oh, you'll put it in a 0:01:28.720 --> 0:01:31.679 data lake and you know, view it this way. And 0:01:31.800 --> 0:01:35.440 more often than not, the enormous sound of data, even 0:01:35.440 --> 0:01:38.680 when they get access to it, is just creating more, 0:01:39.360 --> 0:01:42.920 you know, confusion. So there's just too much information and 0:01:43.040 --> 0:01:47.360 not knowing what's what's the information is actually UH worth 0:01:47.400 --> 0:01:52.240 paying attention to UM, And throughout my career, I've always 0:01:52.280 --> 0:01:55.000 been trying to come up with what's that final what's 0:01:55.000 --> 0:01:59.800 that solution, what's the answer? UH? And through actually three 0:02:00.000 --> 0:02:03.280 ext really our our mission is to focus on that, 0:02:03.440 --> 0:02:06.920 on that final on that final decision. How do we 0:02:07.000 --> 0:02:11.880 take the data and the methodologies and help business leaders 0:02:12.560 --> 0:02:17.200 UH to distill it down into probabilistic outcomes. UM. You know, 0:02:17.240 --> 0:02:19.480 the kind of work that I've done with pricing and 0:02:19.520 --> 0:02:22.399 with promotional work and so forth. It wasn't just hey, 0:02:22.440 --> 0:02:25.520 this is what you should do, but it's hey, if 0:02:25.560 --> 0:02:28.600 you do this, then the probability of this happening to 0:02:28.720 --> 0:02:33.800 your sales and traffic and profit is this. And most 0:02:33.800 --> 0:02:37.000 of those tools were inward looking for the analysts that 0:02:37.000 --> 0:02:39.880 were supporting the businesses that I that I had been 0:02:40.840 --> 0:02:45.200 founded or partnered in UM and and now we're doing it. 0:02:45.520 --> 0:02:47.960 We still have the services, but we're trying to make 0:02:48.000 --> 0:02:52.400 it more tools that are directly in support of those customers. 0:02:53.160 --> 0:02:56.600 Because we're taking this approach, we're also able to not 0:02:56.680 --> 0:03:00.760 just incorporate things like the point of sale and all 0:03:00.800 --> 0:03:04.160 the inside data, but we've taken a lot of a 0:03:04.200 --> 0:03:06.560 lot of time and effort to really start getting into 0:03:07.680 --> 0:03:12.720 new types of data sets UM mobile UH mobile tracking data, 0:03:13.600 --> 0:03:18.080 UM macro economic data sets, all localized so that you 0:03:18.120 --> 0:03:22.799 can start to have UM forward looking leading indicators at 0:03:22.800 --> 0:03:26.280 a very local level to understand what's coming down the pipe, 0:03:26.320 --> 0:03:29.640 what's in the what's in the UH you know, what's 0:03:29.639 --> 0:03:31.040 in the front window of you know, not in the 0:03:31.040 --> 0:03:34.400 rear view mirror. So that's that's what we're in. What's 0:03:34.440 --> 0:03:36.560 that's what we're building, and that's what we just recently 0:03:36.640 --> 0:03:42.120 launched very cool. Um So, let's you know, dive in 0:03:42.160 --> 0:03:45.160 here a little bit in terms of of of pricing 0:03:45.240 --> 0:03:47.880 because you know, from where I sit, I think it's 0:03:47.920 --> 0:03:50.960 it's going to be very important to second half performance. 0:03:51.000 --> 0:03:53.680 And some of the companies that we cover, you know, 0:03:53.760 --> 0:03:57.080 have been the ones that have been you know, um, 0:03:57.120 --> 0:04:00.720 you know, more conservative on pricing, uh in an attempt 0:04:00.720 --> 0:04:03.120 to gain share, seemed to have outperformed some of their 0:04:03.200 --> 0:04:05.760 peers in the second half, in the second quarter, and 0:04:06.840 --> 0:04:09.840 um so I think it's critical, but you know, to 0:04:10.200 --> 0:04:12.880 get some insight into what is going to happen the 0:04:12.920 --> 0:04:15.720 second half and next year. So, um, let's kind of 0:04:15.720 --> 0:04:21.200 start with the third party delivery uh uh aggregators, Right, So, 0:04:21.279 --> 0:04:25.920 consumers seem to generally accept higher menu prices for their 0:04:25.960 --> 0:04:27.960 door to ash or their Uber Eats orders. You know, 0:04:28.080 --> 0:04:30.880 is it because there's a little there's very little overlap 0:04:30.960 --> 0:04:34.520 between the third party delivery customer and the dining room 0:04:34.560 --> 0:04:38.760 patron or do delivery customers accept that convenience is costly 0:04:39.400 --> 0:04:41.480 or is there something else to it? And is this 0:04:41.560 --> 0:04:45.640 the right strategy for the industry? Yeah, I think I 0:04:45.640 --> 0:04:47.719 think it's a little a little bit of both. Yeah, 0:04:47.760 --> 0:04:49.880 I think that there was a time when restaurant floors 0:04:49.880 --> 0:04:52.159 would say, you know, if you're not in my dining 0:04:52.240 --> 0:04:55.960 room and you're not connecting directly with my uh you know, 0:04:56.000 --> 0:04:59.040 with my service staff, then it can't possibly be worth 0:04:59.080 --> 0:05:00.680 as much as it is, you know when you come 0:05:00.680 --> 0:05:03.680 into the restaurant. So you know, they never thought that 0:05:03.720 --> 0:05:05.840 they could charge more for it to show up at 0:05:05.839 --> 0:05:09.600 somebody's doorstep, you know, and in their living room. UM. 0:05:09.880 --> 0:05:11.599 And I think that what we've been seeing, not just 0:05:11.720 --> 0:05:15.119 through some some survey work and some research and also 0:05:15.200 --> 0:05:21.200 the price elasticities have really been showing that um, for 0:05:21.279 --> 0:05:24.080 the most part, you know, consumers are much more accepting 0:05:24.120 --> 0:05:27.080 of the higher prices. UM. I think part of it 0:05:27.160 --> 0:05:30.880 is because of that convenience. The people who don't want 0:05:30.920 --> 0:05:33.680 to pay for that convenience. It might be the same customer, 0:05:33.720 --> 0:05:36.479 but it might be a very different occasion. Uh. You know, 0:05:36.520 --> 0:05:38.919 if they just want to sit back and have the 0:05:38.960 --> 0:05:42.600 food come to them in their living room, they're willing 0:05:42.640 --> 0:05:45.640 to pay more for that convenience. So, you know, so 0:05:45.680 --> 0:05:47.960 I think it is it is a combination now that 0:05:47.960 --> 0:05:51.200 can be very different from one from one trade area 0:05:51.240 --> 0:05:53.840 to the next. All these restaurants are not built in 0:05:53.880 --> 0:05:57.440 the same in the same area. So when you talk 0:05:57.480 --> 0:06:02.040 about some restaurants, some restaurant change not increasing the prices 0:06:02.080 --> 0:06:06.479 as much and others increasing by a lot. UH, well, 0:06:07.200 --> 0:06:09.839 it may very well be about how they did it. 0:06:10.279 --> 0:06:13.800 Maybe some of them are more regionally focused, maybe some 0:06:14.520 --> 0:06:19.000 were more strategic in understanding what their trade areas UM 0:06:19.360 --> 0:06:24.880 trade area dynamics were UM. But really inflation is is 0:06:24.920 --> 0:06:28.880 both of is both as a ceiling UH and a 0:06:28.920 --> 0:06:33.520 floor in pricing right now, because if you don't if 0:06:33.520 --> 0:06:35.599 you don't maintain a certain level of pricing, if you 0:06:35.600 --> 0:06:37.840 just said, hey, I'm gonna stop increasing my prices, well, 0:06:37.880 --> 0:06:40.880 first of all, the economics of your business they're going 0:06:40.920 --> 0:06:44.720 to start to really take a toll, even even by 0:06:44.760 --> 0:06:49.479 getting more gaining more share. UM. You know the way 0:06:49.520 --> 0:06:54.799 that the UH cost of labor and cost of UH 0:06:54.960 --> 0:06:57.200 you know, running a restaurant in general is just is 0:06:57.200 --> 0:07:01.080 going up as as quickly as UM as the inflation. Right, 0:07:02.000 --> 0:07:05.320 So you've got to do something. The question is do 0:07:05.400 --> 0:07:07.640 you keep paced or do you come in a little 0:07:07.640 --> 0:07:12.320 bit lower or do you come in a little bit higher. UM. 0:07:12.360 --> 0:07:17.040 I would say that up until UM probably as you're 0:07:17.080 --> 0:07:20.760 saying around second quarter and the first quarter into second 0:07:20.800 --> 0:07:25.320 quarter this year, it was pretty easy for restaurants to say, 0:07:25.440 --> 0:07:29.440 I'm jumping on the bandwagon. That's what cp I was. Uh, 0:07:29.480 --> 0:07:31.160 that's what flewd away from home is, is what my 0:07:31.200 --> 0:07:34.880 competitors are doing. You know, jack the prices up x 0:07:35.000 --> 0:07:40.960 ray and it's gonna be okay. Um, that's not necessarily 0:07:41.000 --> 0:07:43.280 what we're starting to see, you know, come you know 0:07:43.360 --> 0:07:46.240 second and and and you know what I expect to 0:07:46.280 --> 0:07:49.440 see in the third quarter. And it's not universal. You know, 0:07:49.600 --> 0:07:53.880 it's when you really dissect it by uh, consumer segments, 0:07:53.960 --> 0:07:58.160 when you dissected by types of trade areas and and geography. Uh, 0:07:58.280 --> 0:08:01.200 it's very very different from from one uh, from one 0:08:01.240 --> 0:08:06.680 area the next. That that's uh, that's interesting and so 0:08:07.160 --> 0:08:10.800 um you know, you know, I guess, I guess what 0:08:10.800 --> 0:08:14.120 you're getting at. It's very important to manage price, product 0:08:14.360 --> 0:08:18.960 and promotions locally. Um, you know, I guess what what 0:08:19.040 --> 0:08:23.240 areas of the country they seem more strength, um, you know, 0:08:23.400 --> 0:08:30.520 versus others. But it's it's it's funny because even you know, 0:08:30.560 --> 0:08:35.200 in the past, when we've seen cp I escalating, we've 0:08:35.240 --> 0:08:37.839 seen it going at a similar pace and a and 0:08:37.920 --> 0:08:44.840 a similar um in a similar cadence across the country. UM. 0:08:45.960 --> 0:08:48.679 And really what we've seen over the course of the 0:08:48.720 --> 0:08:54.400 past eighteen months is that it really hit UM the 0:08:54.480 --> 0:08:59.679 coasts UH harder and faster. So you know, if you 0:08:59.760 --> 0:09:03.920 are in San Francisco or Los Angeles, UM, then you 0:09:03.960 --> 0:09:09.160 saw a big spike in um IN in food away 0:09:09.160 --> 0:09:13.800 from home CPI earlier. UH, if you're in Florida, while 0:09:13.840 --> 0:09:17.240 the rest of the country was experiencing you know, close 0:09:17.280 --> 0:09:21.520 to double digit food away from home inflation for up 0:09:21.600 --> 0:09:27.280 until really December some you know, some areas in in Florida, 0:09:27.320 --> 0:09:31.280 So markets in Florida we're only experiencing about two So 0:09:31.760 --> 0:09:38.560 there was this crazy dichotomy UH that you know, not 0:09:38.679 --> 0:09:41.880 everybody was managing particularly well because they didn't necessarily have 0:09:42.080 --> 0:09:44.840 called you know, that sort of priced tearing structure to 0:09:44.840 --> 0:09:49.200 be able to manage their stores um in in such 0:09:49.240 --> 0:09:54.760 a targeted way. But what was interesting is that come 0:09:55.000 --> 0:09:58.880 the second half of this year, that the second half 0:09:58.920 --> 0:10:01.480 is here become second po order. We started to see 0:10:02.520 --> 0:10:09.640 inflation rates flip flop. So you go into UM, you 0:10:09.720 --> 0:10:16.920 go into uh northern California, San Francisco area, and they 0:10:16.960 --> 0:10:19.199 might just be around I think the last meeting was 0:10:19.240 --> 0:10:25.880 around six, where Tampa Bay was around eleven. So when 0:10:25.920 --> 0:10:30.360 you think about this sort of floor and ceiling and 0:10:30.600 --> 0:10:33.000 there a lot of the areas I think that we're 0:10:33.679 --> 0:10:36.720 called it ahead of the curve the floor are also 0:10:36.720 --> 0:10:39.400 starting to see a little bit more weakness and the 0:10:39.400 --> 0:10:42.520 lowest end of the consumer. But you might not notice 0:10:42.559 --> 0:10:44.320 it as much because some of them also have a 0:10:44.400 --> 0:10:47.560 very yeah, a lot a lot more density of the 0:10:47.760 --> 0:10:49.920 high income consumer. Right, so it might not be as 0:10:49.960 --> 0:10:54.080 noticeably yet, but it's but it's coming. Um yeah. And 0:10:54.120 --> 0:10:58.360 then you know, interestingly, just the very big price increases 0:10:58.400 --> 0:11:02.840 across the across the more so in places like you know, 0:11:02.880 --> 0:11:06.880 the Midwest and and um, you know in Tampa in 0:11:06.880 --> 0:11:10.480 in the last couple of um, in the last couple 0:11:10.520 --> 0:11:13.839 of of CPR reports, it sounds like some of those 0:11:13.880 --> 0:11:16.079 areas are playing a little catch up. I gotta follow 0:11:16.160 --> 0:11:19.880 up on the c p I. UM, you know, the 0:11:20.000 --> 0:11:23.000 food away from home and and versus food at home 0:11:23.080 --> 0:11:25.920 inflation has been very different, right. Package food companies have 0:11:26.000 --> 0:11:29.480 been more aggressive with their price increases, I guess other 0:11:29.640 --> 0:11:32.120 other than the fact that you know they can because 0:11:32.160 --> 0:11:35.400 it's a cheaper overall dining experience. What what do you 0:11:35.480 --> 0:11:38.960 think is behind the more aggressive price increases at the 0:11:38.960 --> 0:11:45.240 grocery store? Uh? Yeah, I mean I think I think 0:11:45.280 --> 0:11:49.000 you're right. It's it's a staple UM. You know, it's 0:11:49.040 --> 0:11:55.000 harder to it, so it's naturally less elastic. Where are 0:11:55.000 --> 0:11:59.280 people going to go? And there they've always been. Grocery 0:11:59.320 --> 0:12:03.240 has always been much more UH cost based, then demand 0:12:03.240 --> 0:12:06.480 based restaurants would be, you know, a little bit more 0:12:06.520 --> 0:12:09.640 focused on what's the consumer willing to pay, whereas grocery 0:12:09.679 --> 0:12:11.760 stores have always been about well, what's it cost when 0:12:11.760 --> 0:12:14.360 it comes in my back door? And if they're not 0:12:14.440 --> 0:12:19.000 making their their multiples, then you know, then the business 0:12:18.800 --> 0:12:24.240 that doesn't work. So, you know, as long as the UM, 0:12:24.280 --> 0:12:27.640 as long as the producer price industries keep going up, 0:12:27.840 --> 0:12:31.440 then the grocery store CP I know, food at home 0:12:32.240 --> 0:12:34.320 UH price index is going to continue to go up. 0:12:35.440 --> 0:12:37.720 I think what's interesting about that is that, you know, 0:12:37.880 --> 0:12:43.360 in the past, we've seen that when UM, when the 0:12:43.400 --> 0:12:47.480 gap between food at home and food away from home 0:12:47.520 --> 0:12:52.680 inflation starts to spread, the lowest income UH consumers would 0:12:52.760 --> 0:12:56.000 drop out of qs R at the low end, lowest 0:12:56.040 --> 0:12:59.319 in qs ARE and into grocery. But now we're seeing 0:12:59.320 --> 0:13:04.880 grocery increasing faster than uh, faster than than QS are 0:13:04.920 --> 0:13:09.800 by by a pretty large margin. Um. So now we're 0:13:09.800 --> 0:13:14.000 still seeing the lowest end consumer dropping out because what's 0:13:14.040 --> 0:13:16.520 happening is that even though the spread isn't there like 0:13:16.880 --> 0:13:20.440 what like it once was, Um, it's just taking a 0:13:20.559 --> 0:13:25.360 complete it's just taking a toll on their total spending capacity. 0:13:25.720 --> 0:13:28.800 It's really floated the consumer for the better part of 0:13:28.840 --> 0:13:33.120 this year. Was this huge savings bubble that happened during COVID, 0:13:33.720 --> 0:13:36.520 And when you look at people's savings rates and how 0:13:36.600 --> 0:13:41.120 that's been just so quickly diminishing from the beginning of 0:13:41.120 --> 0:13:44.679 this year through the middle of this year. Um, it's 0:13:45.040 --> 0:13:48.640 it's drastic. And now we're back down below pre COVID 0:13:48.720 --> 0:13:54.119 levels in terms of uh, you know, individual savings rates, um, 0:13:54.200 --> 0:13:56.280 which I think is why you know, as you were 0:13:56.280 --> 0:14:00.240 mentioning uh in another conversation, people are starting to more 0:14:00.280 --> 0:14:04.840 on credit now too, Right, Yeah, for sure, and we'll 0:14:04.920 --> 0:14:07.240 we'll get into that a little bit later in the pod. 0:14:07.320 --> 0:14:11.240 But um, you know, can you also talk a little 0:14:11.240 --> 0:14:13.719 bit about dynamic pricing systems, right like the days of 0:14:13.800 --> 0:14:18.240 menu pricing based on competitor benchmarking and food costs multipliers 0:14:18.480 --> 0:14:21.960 have passed us by. Um, can you talk a little 0:14:22.000 --> 0:14:24.640 bit about how dynamic pricing systems are going to change 0:14:24.680 --> 0:14:27.240 the game for restaurants and how long will it take 0:14:27.280 --> 0:14:32.200 the industry to to get there? Yeah, you know, it's 0:14:32.040 --> 0:14:37.360 it's funny, you know, even the word dynamic pricing, you know, 0:14:37.400 --> 0:14:43.440 would make restauranturs shutter. And I think, yeah, I get 0:14:43.480 --> 0:14:46.640 it right because they hear and then they envision, you know, 0:14:46.680 --> 0:14:49.800 the prices on their menu changing every minute like a 0:14:49.880 --> 0:14:54.440 stock kicker. Yeah, and and yeah, I think I think 0:14:54.480 --> 0:14:56.960 some of that is probably, you know, because some of 0:14:57.000 --> 0:14:59.760 the technologists were a little bit over ambitious about, you know, 0:14:59.800 --> 0:15:03.080 how how a dynamic system might roll out, like you know, 0:15:03.160 --> 0:15:08.640 an airline airline pricing or something like that. Um. I 0:15:08.680 --> 0:15:11.200 think I think it's if you take it on on 0:15:11.280 --> 0:15:14.960 a spectrum though, you need to think about, well, what's 0:15:15.000 --> 0:15:17.640 the static pricing that the industry has been used to 0:15:17.720 --> 0:15:22.240 where they look at pricing once a year, once over 0:15:22.320 --> 0:15:25.240 eighteen months. Now because of inflation, so many companies have 0:15:25.320 --> 0:15:29.520 been forced to look at it, uh, quarterly. I think 0:15:29.560 --> 0:15:31.280 a lot of a lot of companies are going to 0:15:31.400 --> 0:15:34.280 more of a quarterly look at it. But a lot 0:15:34.320 --> 0:15:37.320 of the systems that they have in place just make 0:15:37.360 --> 0:15:39.840 it really difficult for them to be able to implement 0:15:40.000 --> 0:15:44.200 even a new price change on a new even on 0:15:44.240 --> 0:15:46.360 some of the digital menu boards that are out there. 0:15:46.680 --> 0:15:49.400 It's just not a simple task for them to update 0:15:49.440 --> 0:15:53.560 all of their prices across the multi unit chain. UH. 0:15:53.600 --> 0:15:58.560 In what's now all um multi channel, right, You've got 0:15:58.640 --> 0:16:02.120 multiple channels at the same staurant. UH, And there's there's 0:16:02.120 --> 0:16:05.640 just this there's this complexity to it. So so I 0:16:05.680 --> 0:16:09.280 think that you know, if if you think of dynamic 0:16:09.320 --> 0:16:12.680 pricing on sort of a spectrum and sort of redefined 0:16:12.720 --> 0:16:16.760 as well, what's dynamic, right and what's static? And static 0:16:16.800 --> 0:16:19.800 would be the traditional way of to take a look 0:16:19.840 --> 0:16:24.360 at pricing, you know, infrequently and update it with all 0:16:24.400 --> 0:16:28.040 of your manual way and dynamic could be all the 0:16:28.080 --> 0:16:30.560 way over to the extreme. But I think that that 0:16:30.640 --> 0:16:34.760 works are very very few restaurants in between. There are 0:16:34.880 --> 0:16:37.240 things like, well, how do I how do I get 0:16:37.240 --> 0:16:42.240 more efficient about being able to UM change my merchandising? Right? 0:16:42.280 --> 0:16:45.040 Wheybe it's the center panel of the digital menu. Maybe 0:16:45.080 --> 0:16:50.280 it's a printabal insert h inside of a menu instead 0:16:50.320 --> 0:16:53.320 of the you know, for full service instead of having 0:16:53.320 --> 0:16:58.880 to uh yeah, the manager prince every evening, instead of 0:16:58.920 --> 0:17:01.840 having all the all the prices having to go to 0:17:01.880 --> 0:17:06.760 be professionally printed. Maybe it's um, you know, drink menus 0:17:06.880 --> 0:17:09.119 on you know an iPad or some sort of a 0:17:09.160 --> 0:17:14.280 digital presenter. Um, it's it's a whole different I think 0:17:14.320 --> 0:17:17.240 host of ways of figuring out how to become more 0:17:17.280 --> 0:17:23.200 efficient and being able to get the products, the bundling, 0:17:24.359 --> 0:17:28.000 the merchandizing and the prices out there, uh in a 0:17:28.119 --> 0:17:32.480 much more uh in a much more efficient and faster way. 0:17:32.760 --> 0:17:35.199 Um that moves with the temple with the business, not 0:17:35.359 --> 0:17:38.000 just the tempo of what a lot of restaurantoris wishes 0:17:38.080 --> 0:17:44.440 the business would be. Sure, Um, and you know we've 0:17:44.480 --> 0:17:48.000 seen aggressive price increases in in the QSR industry for 0:17:48.040 --> 0:17:51.200 the last three years, full service for the last two. 0:17:51.960 --> 0:17:59.080 How much do you think US consumers can take? That 0:17:59.280 --> 0:18:05.720 is the question that yael Um. You know, I when 0:18:05.720 --> 0:18:12.359 you look at um, yeah, real income, you know, real 0:18:12.600 --> 0:18:20.200 real wages versus um versus inflation to right, that starts 0:18:20.240 --> 0:18:23.159 to tell you the real story about where the disconnect 0:18:23.200 --> 0:18:25.760 is gonna be. So you take the real wages and 0:18:25.760 --> 0:18:29.960 then you take the savings rates um. And then and 0:18:29.960 --> 0:18:33.440 and again you've got to get really local, right because look, 0:18:33.840 --> 0:18:38.440 there's a lot of people who did really really well 0:18:39.040 --> 0:18:44.000 through COVID, as you know, a trillion dollars hit the 0:18:44.000 --> 0:18:47.840 capital markets, and even with the market correction that's going 0:18:47.880 --> 0:18:55.119 on now, it's still above where it was pre COVID 0:18:55.359 --> 0:18:57.440 something like that. So you know, so there's still a 0:18:57.480 --> 0:19:02.040 wealth effect going on in the highest achalon um. Now 0:19:02.080 --> 0:19:06.399 with mortgage rates uh creeping up, you know, that's something 0:19:06.440 --> 0:19:09.919 that you know, we'll start to affect higher reschlant and 0:19:10.119 --> 0:19:16.000 middle income folks um. But monetary policy, these things, those 0:19:16.040 --> 0:19:19.240 are real lagging indicate or you know real is it 0:19:19.280 --> 0:19:22.600 a real lab right, we're experiencing, you know, stuff that 0:19:22.640 --> 0:19:26.720 the Fed did eighteen months ago. You know, the stuff 0:19:26.720 --> 0:19:30.800 that that they did two months ago is really going 0:19:30.880 --> 0:19:35.320 to be felt significantly until next year. This sort of 0:19:36.000 --> 0:19:38.520 peaked to the you know, peake to not so peak 0:19:38.720 --> 0:19:42.119 inflation that we're feeling. It didn't really feel like a 0:19:42.119 --> 0:19:45.200 big tick down, did it. But yeah, there was a 0:19:45.240 --> 0:19:48.000 little bit of celebration over over eight and a half 0:19:48.040 --> 0:19:52.040 percent unbelievable, right right, right, And and so you know, 0:19:52.200 --> 0:19:54.920 and so the crowds applaud. You know, it was a 0:19:54.960 --> 0:20:05.000 little shocking, but um, but you know it's it's um, 0:20:05.480 --> 0:20:08.600 it's gonna you know, it continues. They hit different different 0:20:08.640 --> 0:20:12.840 income levels and different demographics much differently, and those those 0:20:12.920 --> 0:20:18.200 lagging indicators, Um, that is really monetary policy. It's gonna 0:20:18.240 --> 0:20:21.119 take a while, and you know we see it basically 0:20:21.160 --> 0:20:23.080 trying to slow down the economy. But still we see 0:20:23.119 --> 0:20:27.160 five hundred thousand jobs being created last last week. That's 0:20:27.240 --> 0:20:32.119 not slow right, So so when when is the feederm 0:20:32.119 --> 0:20:35.879 gonna be able to get ahold of real inflation and 0:20:35.920 --> 0:20:41.959 inflation expectations. What we're seeing in the tip down from 0:20:42.040 --> 0:20:46.639 uh from June is energy prices, right. That was you know, 0:20:46.760 --> 0:20:51.119 things really shot up in March when uh, you know, 0:20:51.160 --> 0:20:55.280 when things got you know crazy in Ukraine and you 0:20:55.320 --> 0:21:01.800 know other energy uh supply chains snarled, uh, and then 0:21:01.840 --> 0:21:04.879 there was just a huge expectation of recession, right, so 0:21:05.040 --> 0:21:07.880 everything shopped through the roof. So what we're saying now 0:21:08.040 --> 0:21:11.640 is just, uh, it's just energy prices coming down. That's 0:21:11.680 --> 0:21:15.720 bringing things slightly more moderated. But what's going to happen 0:21:15.800 --> 0:21:20.680 in another month, you know, going into the winter, when 0:21:20.880 --> 0:21:22.919 you know Putin decides to shut off all the natural 0:21:22.960 --> 0:21:26.119 gas to Europe? Yeah, is that a risk? Is it 0:21:26.119 --> 0:21:28.800 going to happen? It's a risk for sure. If it 0:21:28.840 --> 0:21:31.920 does happen, what's gonna happen in natural gas? And what's 0:21:31.920 --> 0:21:34.960 happened to do to the consumers in the Northeast and 0:21:35.000 --> 0:21:38.159 the north um, and a lot of it depends on 0:21:38.200 --> 0:21:41.600 what the you know, how how how cold the winter 0:21:41.680 --> 0:21:45.280 is gonna be, right as heating heating a home could 0:21:45.280 --> 0:21:50.000 be very Uh, is going to cost a lot much much, 0:21:50.520 --> 0:21:53.000 much more than it did a year ago, especially up 0:21:53.000 --> 0:21:59.480 there and me especially your main that's for sure. Yeah, yeah, 0:21:59.600 --> 0:22:01.840 I mean the Feds really, you know, we've talked about 0:22:01.880 --> 0:22:03.760 this in the past, but the Feds really put itself 0:22:04.040 --> 0:22:06.359 into a box here right last year, they could have 0:22:06.720 --> 0:22:12.240 gotten away with increasing rates, um, you know, without having 0:22:12.320 --> 0:22:16.800 too much impact on consumer spending. Instead, they decided to 0:22:16.800 --> 0:22:19.680 blow some bubbles. And now, uh, they're kind of putting 0:22:19.760 --> 0:22:22.840 box right because that they're they're forced to almost cause 0:22:22.880 --> 0:22:29.359 a recession to to slow down the inflation that we're seeing. Um. Yeah, 0:22:29.400 --> 0:22:32.119 it's it's it's I mean, it's frankly, it's it's worrisome, 0:22:32.480 --> 0:22:36.720 right because you know, looking at the delay from last 0:22:36.800 --> 0:22:40.440 year that was not good judgment, you know, and now 0:22:40.600 --> 0:22:44.679 looking at the increases like, okay, yes you have to 0:22:44.720 --> 0:22:49.600 do something, got it right, understood, We've got to Um. 0:22:49.680 --> 0:22:51.959 But are we gonna look back on it and say, 0:22:52.760 --> 0:22:57.480 you know, all right, yeah, we won't know until it's 0:22:57.520 --> 0:23:04.320 over right. Um. The idea of a soft landing, um, 0:23:04.560 --> 0:23:06.359 I don't. I don't know how that happens, you know, 0:23:06.440 --> 0:23:09.520 with with also getting if you want to get inflation 0:23:09.600 --> 0:23:13.160 under control. Yeah, I don't know how there's a soft 0:23:13.200 --> 0:23:17.919 landing at this point because the time for gradual uh increases, 0:23:18.640 --> 0:23:21.040 it's sort of it's sort of over even the market things. 0:23:21.240 --> 0:23:23.399 You know. I seem to think last week that the 0:23:23.480 --> 0:23:26.840 FED was about to stop increasing, but I think they 0:23:26.840 --> 0:23:28.520 read that wrong. But you're right. I mean, the seventy 0:23:28.520 --> 0:23:31.119 five basis points is an admission that they were behind 0:23:31.119 --> 0:23:34.760 the curve, right, So, um, you know, so I think 0:23:34.760 --> 0:23:36.879 you're right on that. So, you know, I think we 0:23:36.960 --> 0:23:38.760 touched on this a little bit. But you know, a 0:23:38.760 --> 0:23:42.520 big common theme for the second quarter earnings calls was 0:23:42.560 --> 0:23:46.000 the pullback and low income consumer spending. Young brands, McDonald's 0:23:46.040 --> 0:23:48.399 and some of the other companies recover, are starting to 0:23:48.440 --> 0:23:51.680 see some cracks. You know what what is your data 0:23:51.720 --> 0:23:56.840 telling you? Yeah, now we we started seeing it, you know, 0:23:56.880 --> 0:24:02.879 going back to UH mid or at least spring um 0:24:03.000 --> 0:24:09.320 and and and it's getting and it's getting worse UM 0:24:09.400 --> 0:24:12.520 and particularly one of the one of the things that 0:24:12.560 --> 0:24:18.320 we've been analyzing is um UH is looking at trade 0:24:18.359 --> 0:24:23.240 areas where people are more dependent on gas and energy 0:24:23.280 --> 0:24:26.199 prices and so forth. Right, so understanding okay, you know 0:24:26.280 --> 0:24:30.199 by bye, by trade area and even by by brand, 0:24:30.480 --> 0:24:34.840 you know, how far are people commuting to work? UM 0:24:35.160 --> 0:24:41.120 what uh? What are there? UM? What's your disposable income? 0:24:41.560 --> 0:24:44.200 And how much is the energy homage their energy use 0:24:44.480 --> 0:24:49.000 as a portion of the disposable income. And by using 0:24:49.000 --> 0:24:51.640 those kinds of metrics, you can really just see it's 0:24:51.680 --> 0:24:55.640 just like a big signal flare, you know, popping off 0:24:55.680 --> 0:24:59.760 the map UM showing you know where these where these 0:25:00.000 --> 0:25:04.199 pockets are and they're not necessarily limited to you know, 0:25:04.400 --> 0:25:07.880 a particular region in the country. You know, they're they're 0:25:08.040 --> 0:25:12.840 within pockets of you know, lower income UM and longer 0:25:12.880 --> 0:25:18.240 commutes around you know, a lot of different municipalities from 0:25:18.280 --> 0:25:21.040 so forth. I think for people who are who are 0:25:21.040 --> 0:25:24.080 in jobs maybe who can work from home. It might 0:25:24.080 --> 0:25:28.400 be less right now, but there's gonna be a compounding factor, right, 0:25:28.560 --> 0:25:34.520 because there's a there's a like with gas prices, um, 0:25:34.560 --> 0:25:38.359 the real consumer impact happens six to eight weeks after 0:25:38.400 --> 0:25:41.520