Speaker 1: Welcome to Chopping It Up.
Speaker 2: I'm your host, Mike Hallon, the senior restaurant and food
Speaker 2: service analyst at Bloomberg Intelligence. Today we're joined by my
Speaker 2: colleague Daniella. Sir Tory Courtina, Bloomberg's restaurant's reporter. Thanks for
Speaker 2: doing us.
Speaker 3: Yeah, I know, anytime. Happy to be here.
Speaker 1: Yeah.
Speaker 2: So, you know, we've talked a few times about productivity
Speaker 2: and efficiency. They become pretty popular topics with all the
Speaker 2: inflation we've seen over the past couple of years, and
Speaker 2: you've done some good work around the topic.
Speaker 1: Can you talk about Popeyes first?
Speaker 4: Yeah?
Speaker 3: No, thanks Mike.
Speaker 4: I think you know, if we get into this, not
Speaker 4: to make a Taylor Swift reference, but it does seem
Speaker 4: like restaurants and are sort of in their productivity era.
Speaker 4: I guess you can't say they were at eras without
Speaker 4: talking about Taylor Slift. But AnyWho, you know, you you
Speaker 4: tracked so well, you know the trajectory of restaurants during
Speaker 4: the pandemic and just how they were struggling to basically
Speaker 4: survive the labor issues and inflation and everything that we saw,
Speaker 4: and it really seems that a lot of them that
Speaker 4: you know, I had a difficult time during the pandemic,
Speaker 4: are turning their attention to that idea of productivity and
Speaker 4: efficiency and how do we just keep people coming back?
Speaker 4: And so I had the chance to you know, visit
Speaker 4: Popeye's other Miami headquarters and my.
Speaker 2: Favorite, my favorite restaurant, QSR restaurant by the way for
Speaker 2: eating not oh really in terms of stock recommendations, it
Speaker 2: was my It was my favorite stock back in the day,
Speaker 2: like twenty thirteen through like twenty sixteen or so, and
Speaker 2: it did pretty well.
Speaker 1: But yeah, I'm a big fan of Popeye's.
Speaker 3: Checking out, big fan of Popeyees.
Speaker 1: Yeah, I was there last weekend when my sonets fans no.
Speaker 4: Way, I do remember dragging my husband to try the
Speaker 4: you know, fried chicken sandwich and that came out. But
Speaker 4: you know, that's a perfect place to start, because really,
Speaker 4: I mean for most of us, you know, unless you
Speaker 4: lived in certain parts of the US, Popeyes entered into
Speaker 4: our consciousness with the fried chicken sandwich. And of course
Speaker 4: it was a big success for them. I mean they
Speaker 4: brought up, brought in a lot of customers that previously
Speaker 4: did not go to Popeyes, right, A lot of people
Speaker 4: tried it. It was viral on the internet. But they
Speaker 4: realized at some point that a lot.
Speaker 3: Of those people just were not coming back.
Speaker 4: So you know, they started sort of scratching their heads
Speaker 4: and trying to figure out what was going on. And
Speaker 4: so earlier this year they came out with a plan
Speaker 4: to just try to crack that, and so I was
Speaker 4: very happy to get sort of like an insight look
Speaker 4: into the plan. I went down to the Miami headquarters
Speaker 4: and really one of the main things that they're doing
Speaker 4: is just ripping up the kitchens, and so.
Speaker 3: I talked to you Sammy C.
Speaker 4: Dicky, who is the president of Popeye's North America, and
Speaker 4: one of the things that he said is like, look,
Speaker 4: we realized that our service just wasn't We needed to
Speaker 4: be right. You know, people were saying that the orders
Speaker 4: weren't coming out perfect, that we were taking a little
Speaker 4: bit longer. And also a lot of people just had
Speaker 4: never seen a Popeyes.
Speaker 3: That was another big part.
Speaker 4: And so, you know, if you do want people to
Speaker 4: think of you as an option, as a daily option,
Speaker 4: like it seems like you do MIC with your son,
Speaker 4: people need to see locations. You know, you can't have
Speaker 4: people driving out of their way ten to twelve minutes
Speaker 4: to try a QSR restaurant. And so one of the
Speaker 4: cool things that they're trying to do is figure out how.
Speaker 3: To make the kitchens more efficient.
Speaker 4: And so if you want, I can get more into that,
Speaker 4: but I don't know how deep you want to hear
Speaker 4: about that.
Speaker 2: Yeah, No, I want to hear about it because it's
Speaker 2: important and it's good. It's interesting because you know, there's
Speaker 2: a lot of attention being paid at Burger King US
Speaker 2: for restaurant brands, right, but right now the biggest growth
Speaker 2: engine in terms of net units is Popeyes, right, And
Speaker 2: so they finally talked a bit about it on this
Speaker 2: last call about improving the operations have Popeyes, but they
Speaker 2: haven't delved too deeply into it. So this is a
Speaker 2: big reason when I got here. I love talking about Popeyes,
Speaker 2: and you have the inside scoop.
Speaker 4: I have the inside information this time around. Yeah. So
Speaker 4: basically one other things that they realize is that, for example,
Speaker 4: their kitchens just were not arranged in a way that
Speaker 4: they really flowed to the drive through and just sort
Speaker 4: of to the handoff points. So you know, when they started,
Speaker 4: you know, with a chicken sandwich, they just kind of
Speaker 4: put the station wherever it fit. And really that's no
Speaker 4: way to really handle making one of your best selling products, right,
Speaker 4: And so it starts there. It starts with just making
Speaker 4: kitchens such as flow better so that when team members
Speaker 4: are assembling the orders, it's just much easier to put
Speaker 4: them together, and then they just sort of flow to
Speaker 4: the drive through, flow to your hands, you know when
Speaker 4: you're in your car or at the counter, and they're
Speaker 4: really looking at a lot of little details. Right. So
Speaker 4: when I went there, there was this kind of kitchen
Speaker 4: set up with these five modules that are all sequentially
Speaker 4: arranged that basically every station has a kind of stuff
Speaker 4: that you would actually need to put together one of
Speaker 4: the orders, and they're implementing things is like you know
Speaker 4: sticker printers. You know, if you go to McDonald's, if
Speaker 4: you go to Starbucks, those are pretty common. I mean
Speaker 4: on your carpet at Starbucks, you have the sticker that
Speaker 4: has your name, it has your order, and so that
Speaker 4: way the baristas can easily see it. Popeye's was not
Speaker 4: doing that, and so you know, the folks in the
Speaker 4: kitchen had to like manually check against a paper receipt
Speaker 4: whether your order was correct. All that stuff just slows
Speaker 4: it down and yeah, and so they're also making sure
Speaker 4: that like once that order is correct, you know, you
Speaker 4: get to a landing zone where they actually check stuff,
Speaker 4: and then they actually do the whole bumping process. You know,
Speaker 4: they hit that button that says order ready and you're
Speaker 4: alerted to it. And again, this is stuff that's pretty
Speaker 4: common at places like McDonald's and even Burger King. But
Speaker 4: you know, I think it's underscores how we started this
Speaker 4: conversation with this idea of Okay, this is the productivity
Speaker 4: and sort of like efficiency era for a lot of
Speaker 4: places that perhaps in the past it was like okay,
Speaker 4: but we're fine, you know, you know, the sandwiches are
Speaker 4: selling and the kitchens are fine, so why should we
Speaker 4: them up? And now restaurants like Popeyes are really looking
Speaker 4: at it and like, okay, we really need to be
Speaker 4: efficient in how we do this.
Speaker 2: Yeah, and it's probably more important for them than anybody
Speaker 2: to get that kind of like basic blocking and tackling right,
Speaker 2: because it's chicken's tough. You know, there's typically a lot
Speaker 2: more waste at a chicken chain. You know, it takes
Speaker 2: fifteen minutes to fry a new batch. When you run
Speaker 2: run out right, and so a lot of times are
Speaker 2: making too much and there's food waste, and it just
Speaker 2: makes it a trickier operation than heating up burger. So
Speaker 2: I think getting that blocking and tackling is going to
Speaker 2: be really important for them.
Speaker 3: But that's one of the things.
Speaker 4: And so for example, one of the processes that they
Speaker 4: are also trying to improve is how they is the batter.
Speaker 4: You know, you know, the way that Tammy explained it
Speaker 4: to me is like, okay, you have to make this batter.
Speaker 4: You have to chill water in ice, and then someone
Speaker 4: will have to take the temperature by hand until it
Speaker 4: got to the perfect and then they would have to
Speaker 4: mix it and they would have to constantly steer it
Speaker 4: so it would clumb, so it wouldn't clump, and then
Speaker 4: you know, they would actually be able to batter the chicken.
Speaker 4: And so they just came up with a machine that
Speaker 4: doesn't right. And so there's just like all these things
Speaker 4: that if you realize if you have a labor model,
Speaker 4: a business model that's more labor heavy, labor reliant in
Speaker 4: a time of you know, still tight labor market, it's
Speaker 4: just tougher and so just kind of automating some of
Speaker 4: that stuff, and it's streamlining how you do it? I
Speaker 4: think you said it, Mike. Actually for my story, like
Speaker 4: operations is not sexy, but it matters a lot.
Speaker 1: Yeah, for sure, no doubt.
Speaker 2: And so you know, talking about streamlining operations, you know,
Speaker 2: we were talking about Starbucks. They've been investing heavily to
Speaker 2: improve their throughput, speed of service, and just basically make
Speaker 2: the baristas and the other employees jobs easier. So I
Speaker 2: was swamped with the earnings last week, but you made
Speaker 2: it to their investor day in New York.
Speaker 1: How are they progressing?
Speaker 4: I did? I did, so, you know, just to kind
Speaker 4: of put it a little bit in context, it's a
Speaker 4: similar story to poplize in the sense that you know,
Speaker 4: Starbucks had that big slump when the pandemic started, but
Speaker 4: then you know they've really recovered pretty quickly, Like their
Speaker 4: demand is pretty strong, but because of everything in the pandemic,
Speaker 4: they just didn't adapt quickly enough, especially to that like
Speaker 4: just massive shift to online orders. I mean, Starbucks has
Speaker 4: always had a bunch of online orders, they were pioneers
Speaker 4: in that space, but it just like really searched in
Speaker 4: a way that made everything more complicated for baristas and
Speaker 4: so about a year ago they announced sort of the
Speaker 4: first iteration of the plan that they implemented to just
Speaker 4: basically help stores run better. You know, they are rolling
Speaker 4: out stuff like new cold foam blenders.
Speaker 3: Cold foam is a super super popular topic.
Speaker 4: If you've ever been to Starbucks lately, you see people
Speaker 4: with their you know, walking out with their beverages and
Speaker 4: there's like the cold foam on top.
Speaker 3: But previously that you have to make it.
Speaker 4: I got full size blender and that competes with preppuccinos, right,
Speaker 4: so it just made it harder. And so that's some
Speaker 4: of the stuff they're doing. They're also rolling out something
Speaker 4: that's basically a thirty second verse French press machine. Basically
Speaker 4: it makes coffee in thirty seconds instead of having to
Speaker 4: make a bunch of you know, batches in the like
Speaker 4: large rewers type stuff, and that generated a lot of waste.
Speaker 4: And another big thing that they unveiled is basically a
Speaker 4: new setup to bring together all the elements to make
Speaker 4: cold drinks. Cold drinks account for like seventy five percent
Speaker 4: of Starbucks orders, unbelievably, and so that also was meant to.
Speaker 3: Help with that.
Speaker 4: So the first two parts, right, the blender and the
Speaker 4: vertica are the the coff Flover Vertica, which is the
Speaker 4: thirty second coffee machine, are the ones that are the
Speaker 4: most advanced. They're also relatively speaking, easier to implement. I mean,
Speaker 4: it's a machine at a store versus you know, the
Speaker 4: side iron system, which is what they call the new setup.
Speaker 4: Is that it's a new setup, so you have to
Speaker 4: you know, retrofit stores and everything. What what I found interesting
Speaker 4: about the latest update that they gave, you know, during
Speaker 4: their what they called Reinvention of Data was on November second,
Speaker 4: was that it seemed like investors were focusing a lot
Speaker 4: on the siren system. It was like, that's the big thing,
Speaker 4: that's what we should be focusing on. But they really
Speaker 4: sort of broadened it out a little bit more and
Speaker 4: they talked about just other things that they have been
Speaker 4: doing to make the stores easier to run, like, for example,
Speaker 4: capping the number of delivery orders.
Speaker 2: Well, we don't like to hear that. We don't like
Speaker 2: to hear anybody capping orders.
Speaker 3: So why is that? Okay?
Speaker 4: Yeah, I now I had get to interview with you,
Speaker 4: Like what right.
Speaker 2: You got to you got to hit those same store
Speaker 2: sales targets right, like you shouldn't you should you know,
Speaker 2: I'd rather see you improve your operations more quickly than
Speaker 2: turned down then you know, orders, especially it those online
Speaker 2: orders so usually pretty pretty good in size, you know.
Speaker 2: But I think I just quickly make a point. You know,
Speaker 2: both of these companies have seen big jumps in average
Speaker 2: unit volume SAAM source sales over the last four or
Speaker 2: five years. And this is part of the reason why
Speaker 2: they need to do these overhauls, is because the boxes
Speaker 2: weren't built to support these levels of sales.
Speaker 1: But please keep.
Speaker 4: Going, no, no, no, exactly, But I mean you make
Speaker 4: a really good point about those miss sales, right because
Speaker 4: at the end of the day, that's the point of
Speaker 4: all of this, you know, it's not just like, oh,
Speaker 4: we're going to be the best run Starbucks are pod
Speaker 4: byas is just if we can serve people faster, then
Speaker 4: people won't see along line and walk away. And so
Speaker 4: it's just that idea of capturing you know, those those
Speaker 4: additional sales. And so in this latest update, one of
Speaker 4: the one of the things that sort of cut my eyes,
Speaker 4: it's just them trying to almost like redirect investors to
Speaker 4: this idea of all the other stuff they're doing, like
Speaker 4: it's not just about the Seren system, which is hard
Speaker 4: to implement because it's probably only going into news stores.
Speaker 4: And I think it's about forty percent of the system
Speaker 4: is going to have it by like twenty twenty six. Right,
Speaker 4: That's that's lower than a lot of people thought. But
Speaker 4: so they announced these other ideas of Okay, we're gonna
Speaker 4: just run our stores better. We're gonna open stores that
Speaker 4: are more specific to the purpose that we want them
Speaker 4: to have.
Speaker 1: Yeah. Yeah, all that's good stuff, and I like that that.
Speaker 2: I liked some of those things that you picked up
Speaker 2: on because it wasn't necessarily my biggest focus. I think
Speaker 2: my biggest focus was that they lowered their long term
Speaker 2: targets without admitting they lowered their long term targets, and
Speaker 2: like no one, everyone gave them a pass on it.
Speaker 2: Everybody loved Starbucks, apparently because they made a lot of
Speaker 2: money I guess over the years investing in it.
Speaker 1: But yeah, that was curious. I mean, that was interesting
Speaker 1: during their Yeah, I mean.
Speaker 2: During the investor day back in late twenty twenty one,
Speaker 2: I guess about two years ago. Now, I found it
Speaker 2: really curious that I'm sorry, not two years ago. It
Speaker 2: was last year.
Speaker 4: I know what time now, I know it flies.
Speaker 1: So they taught they raised.
Speaker 2: Their long term targets, you know, and just EPA, it
Speaker 2: was like five to ten. They increased revenue guidance to
Speaker 2: five to ten, or central sales from five to ten,
Speaker 2: operating come ten to fifteen percent growth a year, and
Speaker 2: then fifteen to twenty percent EPs growth, which we wrote
Speaker 2: at the time was like, why are you doing this
Speaker 2: to the CEO as he's coming in. Usually CEOs like
Speaker 2: to come in and cut all the targets to keep
Speaker 2: Wall Street off his back for like.
Speaker 1: A year, you know.
Speaker 2: Yeah, and then now a year later they cut it
Speaker 2: to like they didn't cut it totally, but they cut
Speaker 2: the top end off, right, So it's like now it's
Speaker 2: like five percent SAMSAR sales and ten percent.
Speaker 3: Yeah revenue growth.
Speaker 1: Plus yes growth. Yeah. So that was where most of
Speaker 1: my focus was.
Speaker 4: Yeah, that's a very good point and sort of the
Speaker 4: what I heard, right, you know, when I was talking
Speaker 4: to investors and analysts ahead of this, is that just
Speaker 4: echoing what you were saying. A lot of people thought
Speaker 4: that the targets were just too to begin with, right,
Speaker 4: the way I was talking to an analyst and the
Speaker 4: way that she explained it was the consumer environment has
Speaker 4: definitely become more worried, to put it that way, since
Speaker 4: last September when they first set those goals. But it's
Speaker 4: hard to say that it's not a sort of specific
Speaker 4: thing when they were the ones that promised those lofty goals, right,
Speaker 4: and so it was sort of that thing of Starbucks
Speaker 4: doesn't have a problem with its brand. People are still
Speaker 4: buying it, but at the same time, in an environment
Speaker 4: like this, you might need to be a little more
Speaker 4: careful about the type of targets you have. And it
Speaker 4: was a little bit, you know, when they announced earnings
Speaker 4: and then they caught that same store soals guidance from
Speaker 4: seven to nine percent, so five to seven the stock
Speaker 4: was going up, right, and that doesn't really happen that often.
Speaker 4: And sort of the explanation that I got is that
Speaker 4: they didn't cut the profitability targets, and it seemed to
Speaker 4: be reassuring for investors that even with slower same store
Speaker 4: sales growth, they could still reach that EPs growth target
Speaker 4: through other things like, for example, that three billion dollar
Speaker 4: just cost saving program. I think he would have been
Speaker 4: a lot worse and not as reassuring if they had
Speaker 4: also caught the profit guidance the guidance, So is that
Speaker 4: is that kind of how you were also seeing it?
Speaker 2: Yeah, I guess, you know, as long as they kept
Speaker 2: the bottom line, the bottom end of that that guidance,
Speaker 2: that seemed to play kid investors off of a very
Speaker 2: strong quarter, right, So you know, the calendar second quarter
Speaker 2: result was pretty weak. We saw a pretty significant slowdown
Speaker 2: in the four year same source of sales trend, and
Speaker 2: so management didn't really address that. And but but like sequentially,
Speaker 2: this was a reacceleration of the same.
Speaker 1: Source of sales.
Speaker 2: So I felt that the quarter was so strong and
Speaker 2: that they kept the low end of the long term guidance.
Speaker 2: I think that seemed to play CAID investors, and they
Speaker 2: kind of gave them a pass because for those reasons
Speaker 2: that you said, they're long term targets, which I'm gonna
Speaker 2: pat myself on the back because we wrote this coming
Speaker 2: out of the Investor a year ago. It's like, these
Speaker 2: targets don't include any slow down the consumer, so they
Speaker 2: don't make any sense to me. So you know, even
Speaker 2: a broken clock is right twice twice a day.
Speaker 3: There we go.
Speaker 4: Yeah, that's got we got excellent point.
Speaker 2: We had that one, right, So so we'll see, so,
Speaker 2: you know, we'll see going forward. Obviously, this is a
Speaker 2: super popular name that everybody likes to talk about very
Speaker 2: very very Yeah, everybody loves their talk, loves their coffee,
Speaker 2: and so you know, you also mentioned to me that
Speaker 2: they hyped up their position as a provider of small
Speaker 2: indulgences amid a slowing economy, So would they have.
Speaker 4: To say, yeah, So I think this just like it's
Speaker 4: a really good example of these theme that we've seen
Speaker 4: more broadly, people are caughting back on just big expenses,
Speaker 4: like for example, appliances, right, I mean, part of it
Speaker 4: is just a bunch of us, but appliance is during COVID,
Speaker 4: how many more washers do you need? And then also
Speaker 4: just that idea of you know, wallets are pressured, but
Speaker 4: at the same time, people are still willing to splurge
Speaker 4: on what we have called small intelligences. Right. So you
Speaker 4: know a lot of the beverage companies are doing great,
Speaker 4: right that that doesn't really cost you that much. People
Speaker 4: are also traveling, right, so they have this idea of like, well,
Speaker 4: I mean, I might as well spend on something that
Speaker 4: I really enjoy and especially with international travel, like we've seen,
Speaker 4: you know, a fair bid of strength there, and then
Speaker 4: we have something like Starbucks. So Mike, something that has
Speaker 4: really caught my attention, and then I'll bring it back
Speaker 4: to sort of like the financial is. You know, I'm
Speaker 4: a millennial, and for for a long time, the type
Speaker 4: of narrative that I heard, particular un millennials was well,
Speaker 4: if you, you know, stop cheating avocado toast and buying Starbucks,
Speaker 4: you would be able to save up for a down
Speaker 4: payment on a house. Right. That was ridiculous. That was
Speaker 4: a big narrative, Like, that's ridiculous.
Speaker 1: It's like those people that tell you know, you could say, well, yeah,
Speaker 1: I forget, but don't get me started.
Speaker 4: There we go. But that was a big narrative around
Speaker 4: sort of like the way that millennials went around the economy.
Speaker 4: Most more recently, I have seen you know, posts on
Speaker 4: social media that are like, well, even if you spend
Speaker 4: seven dollars a day on your coffee X many days
Speaker 4: a year, that still only amounts to I don't know,
Speaker 4: one thousand dollars, that's still not enough for a down
Speaker 4: payment on a house.
Speaker 3: So just buy the coffee, you know.
Speaker 4: So this idea of indulging, you know, those small indulgences,
Speaker 4: and so just to bring it back to like specific
Speaker 4: Starbucks results, one of the reasons why they're same store
Speaker 4: sales were fairly strong this quarter was more people buying
Speaker 4: more stuff, you know, and so that sort of like
Speaker 4: underscores that idea. And actually their chief marketing officer, Brady Brewer,
Speaker 4: which excellent name for the job, by the way, said
Speaker 4: this during the investor day. He was like, people are
Speaker 4: just not calling back. I mean, they're adding more stuff,
Speaker 4: and you know, you're at this wonky term in the
Speaker 4: restaurant industry, the idea of food attached, right, basically just
Speaker 4: people adding food to their orders. Also a record reporter,
Speaker 4: you know, people are going to Starbucks for their drinks
Speaker 4: and they're also adding sandwiches, crosshounds, whatever it is, holding
Speaker 4: some of the like seasonal items that they have. So
Speaker 4: it's just like a really good example of this kind
Speaker 4: of trend that we seem to be seeing in the
Speaker 4: consumer space of yes, let's cut back on those like
Speaker 4: big outlay expenses, but then also I'm going to get
Speaker 4: my cold phone and my cold crew.
Speaker 3: You know.
Speaker 1: Yeah.
Speaker 2: They credited their pretty solid performance throughout the Great Financial
Speaker 2: Crisis to you know, the same sort of of a trend.
Speaker 2: I think it also helps them that they sell an
Speaker 2: addictive product, right, and their addictive product has more caffeine
Speaker 2: in it than anybody else's. And so if you really
Speaker 2: got to get a lot of work done, you're still
Speaker 2: going to get your Starbucks coffee in the morning.
Speaker 4: And it's such a routine product, right. I think that's
Speaker 4: just something that's so interesting about the coffee business is
Speaker 4: you know, you if you have a habit of I'm
Speaker 4: going to leave my house, I'm gonna stop by Starbucks
Speaker 4: and then go to the office or whatever it is,
Speaker 4: it's just so hard to cut out. It's just something
Speaker 4: that you do every single day. I mean, it's not
Speaker 4: like other pockets of the restaurant industry where we have
Speaker 4: seen some weakness that are just more kind of like,
Speaker 4: oh maybe I'll go out to celebrate something or you know,
Speaker 4: I don't know if I have time for that, you know,
Speaker 4: sit down meal. But it does raise an interesting point
Speaker 4: that actually, like you know, another Wall Street person brought
Speaker 4: up to me, which is what happens to these sort
Speaker 4: of routine based businesses. If, for example, we have a
Speaker 4: dip in employment, right, Like, you know, employment has been
Speaker 4: so strong, is really the only way that we can
Speaker 4: go here is down?
Speaker 3: Perhaps, I don't know.
Speaker 4: So it's kind of interesting to think also about sort
Speaker 4: of those second order effects of where the consumer's going
Speaker 4: and what that means, not not necessarily because people have
Speaker 4: less money, but because their routines aren't disrupted. So we'll see,
Speaker 4: we'll see. I mean, I think that'll be interesting to
Speaker 4: keep an eye on for the AAR ahead.
Speaker 1: Yeah, for sure.
Speaker 2: You know, we've seen a lot of other QSRs kind
Speaker 2: of slow. People aren't giving up the coffee yet, but
Speaker 2: some of the other you know, quick service restaurants recovers,
Speaker 2: you've seen some some slowing and the sales and there's
Speaker 2: been a lot of concern about future sales for those QSR.
Speaker 1: Names due to the g LP ones. And a nice article.
Speaker 2: Yeah, you set me up nicely for that one, you said,
Speaker 2: you know, you wrote a good article today about you know,
Speaker 2: what companies with CEOs are saying about ozempic and how
Speaker 2: it's going to impact eating habits moving forward. So what
Speaker 2: are these CEOs saying about this quote unquote miracle drug.
Speaker 3: Yeah, there we go.
Speaker 4: So, first of all, quick plug for the Bloomberg Health
Speaker 4: team if you really want to, you know, be up
Speaker 4: to date to just what's happening there from the scientific perspective.
Speaker 3: They're doing a great job with their.
Speaker 4: Reporting, including a approval recently for yet another one of
Speaker 4: these drugs.
Speaker 3: But basically, you know, during earning season and.
Speaker 4: As I've had access to restaurant executives, I was just
Speaker 4: trying to ask them like how they're thinking about it
Speaker 4: and how they're thinking about the impact on their businesses,
Speaker 4: and they seem pretty confident that it's going to be okay.
Speaker 4: You know that they are going to hold up just
Speaker 4: fine for a couple of different reasons. And so if
Speaker 4: you talk to the likes of Cava and Chipotle that
Speaker 4: tend to have what you would call like healthier meals,
Speaker 4: you know, stuff that they sort of talk about more
Speaker 4: as real food, right, like you can see the rice
Speaker 4: and the beans and the you know salad.
Speaker 1: Yeah, you can eat healthy at those places if you
Speaker 1: want to, for sure.
Speaker 4: Exactly, It's like you can make those choices of more
Speaker 4: like more wholesome food. The idea that they have brought
Speaker 4: up is, well, we think that the people who are
Speaker 4: on this golp ones are already more conscious about their health, right,
Speaker 4: Like they're actively trying to lose weight, and they are
Speaker 4: probably also actively thinking more about what kind of food
Speaker 4: they're eating. And so Cava and Chipole both said that
Speaker 4: they think that those people, because they're being more just
Speaker 4: sort of discriminating about what about their health, they're probably
Speaker 4: going to go for their types of meals kind of
Speaker 4: no matter how littly.
Speaker 3: I did ask, you know.
Speaker 4: The Chipota CFO but I was like, well, but like,
Speaker 4: you know, if these drugs do suppress appetite, like what
Speaker 4: are you going to do about your portion sizes?
Speaker 3: And his answer was like, you know, our consumers are already.
Speaker 4: Pretty savvy about that type of stuff, Like some people
Speaker 4: buy the balls with the intention of eating them into seedtings,
Speaker 4: not one. So you know that that's the type of
Speaker 4: stuff that they're saying. And then you have other restaurants
Speaker 4: that do serve more indulgent food like so, for example,
Speaker 4: I talked to Freddy's Frozen Custard and Steak Burgers. I
Speaker 4: talked to their CEO.
Speaker 1: I'm sorry, Christal, Yeah, I had him on the podcast.
Speaker 4: Yes, yeah, you know, he's he was. He was really interesting.
Speaker 4: I did ask him if most people think his name
Speaker 4: is Freddy, and he said yes.
Speaker 3: But AnyWho.
Speaker 4: Uh So, what Chris was saying was that, you know,
Speaker 4: they have an opportunity in chicken. He's like, you know,
Speaker 4: one of the things that we can look at as
Speaker 4: part of just like our general menu review, is just
Speaker 4: improving our chicken offerings. You know, chicken is perceived to
Speaker 4: be healthier than beef. And also it's just as we
Speaker 4: talked about with Popeyes, it's just very popular. I mean,
Speaker 4: Americans are eating more and more chicken. And he mentioned like, well,
Speaker 4: I mean, you know, you might look up and some
Speaker 4: they actually see a salad on our menu for example.
Speaker 4: The other part of what he was saying, which was
Speaker 4: also sort of echoed by Darden a couple of months
Speaker 4: ago when they reported earnings, was this idea that people
Speaker 4: are not going to want to miss out on dining
Speaker 4: out with friends and family, Like they're not going to
Speaker 4: want to cut out the experience part of dining out,
Speaker 4: the part that isn't just need to get sustenance now.
Speaker 3: And so that's also an important sort.
Speaker 4: Of like hypothesis that they have, and Darden also you know,
Speaker 4: emphasized that they've done a lot of work across their properties,
Speaker 4: you know, Alive Garden and all of those two just
Speaker 4: have more options for people, you know, so people can
Speaker 4: pick something healthier if they want. That means that, like,
Speaker 4: what what do you think about that? Because it seems
Speaker 4: like these are very different reasons. And I mean it
Speaker 4: seems like the scientific community think that these drugs are
Speaker 4: a real breakthrough and that they do suppress appetite for
Speaker 4: all sorts of foods. So really big questions still up
Speaker 4: in the air.
Speaker 2: Yeah, I have my I have my doubts that it's
Speaker 2: going to make a major impact to the restaurant industry.
Speaker 2: You know, some of the reports are out out there
Speaker 2: or they're saying, you know, there could be a seven
Speaker 2: or a ten percent, maybe at twelve percent decline in
Speaker 2: calorie consumption by twenty thirty five. I mean, like, are
Speaker 2: you telling me McDonald's can't figure out how to decrease
Speaker 2: the size of their burgers ten percent by twenty thirty five,
Speaker 2: I think.
Speaker 3: Not smaller.
Speaker 1: Come on, I'm sorry.
Speaker 2: Sorry to break it to you, but with all the inflation,
Speaker 2: I think we're in the early stages of.
Speaker 1: A commodity bull market.
Speaker 2: So I think inflation is not going anywhere for anywhere
Speaker 2: for a long time, so burgers are probably gonna shrink.
Speaker 1: As it is.
Speaker 4: That's that's a really good point. A lot of structural
Speaker 4: reasons behind that.
Speaker 2: Yeah, And I don't I don't, you know. I think
Speaker 2: what should be more of a concern would be the
Speaker 2: quick service names, because I have read that people that
Speaker 2: are on these medications do not want to eat greasy
Speaker 2: and fatty food. So I would say it would probably
Speaker 2: be a little bit more of a concern for places
Speaker 2: like that. But I'd also make the argument that most
Speaker 2: people don't really care, like does everybody care about their weight?
Speaker 1: Like does everybody?
Speaker 2: Is everybody willing to take a drug to cut their weight,
Speaker 2: like to stay skinny? Like you know, I get it
Speaker 2: for health reasons, you know. And one thing we've been
Speaker 2: saying is like right now, this is this is and
Speaker 2: then near term this does nothing to McDonald's because there
Speaker 2: their customers can't afford to go on these medications if
Speaker 2: it's off prescription.
Speaker 4: I think you're bringing up like a great point about
Speaker 4: all your knowns about this, you know what I mean,
Speaker 4: And like those are the big questions that have to
Speaker 4: be solved to even try to determine what the impact
Speaker 4: is going to be, you know, and to your point,
Speaker 4: you know, I have also, you know, read this idea
Speaker 4: about you know, cutting out sort of like junk foods
Speaker 4: and stuff like that. But even then, another point that
Speaker 4: has come up is that that might hurt more sort
Speaker 4: of the individual dining occasion, like just going to drive
Speaker 4: through for lunch or something like that, unless sort of
Speaker 4: the group. You know.
Speaker 2: Oh, I agree wholeheartedly, wholeheartedly. I mean, we saw that
Speaker 2: coming out of the pandemic. There's that's where people go
Speaker 2: to meet friends and family and is restaurants, right, That's
Speaker 2: where you're going to go when you want to like
Speaker 2: do business, when you want to see friends, whatever it
Speaker 2: might be, celebrate an anniversary or a birthday.
Speaker 1: Where do you go?
Speaker 2: You go to the restaurant. So those dining occasions are
Speaker 2: not going anywhere. And uh yeah, for me, I think
Speaker 2: there's just too many question marks about GLP ones right now,
Speaker 2: and I think this is a long term thing. And
Speaker 2: so I think investors, you know, should not be making
Speaker 2: their investment decisions in restaurants based on you know, pie
Speaker 2: and the sky estimates of ozempic and other GLP ones.
Speaker 4: So I'll just I'll just keep it at that there
Speaker 4: something else like last sort of points on this was,
Speaker 4: you know, chrispy Kreme did take a big hit. I
Speaker 4: think it was not too long ago because of a
Speaker 4: downgrade that wasn't about the impact, it was about the uncertainty,
Speaker 4: you know. So the argument that was made with that
Speaker 4: downgrade to the price target was the idea that it
Speaker 4: would be better if we knew already, so that way
Speaker 4: we can factor it into estimates and growth targets.
Speaker 3: So it's just another way to see it.
Speaker 4: You know. My job here is not to say who's
Speaker 4: right on who's wrong. It's just it's another one of
Speaker 4: the things that has come up, you know, because you're
Speaker 4: talking about the potential impact based on estimates, and then
Speaker 4: there's people who are looking at it. It's like, well,
Speaker 4: but the uncertainties matter, So what do you think.
Speaker 2: I think there is a bias by most of analysts
Speaker 2: and investors, and it's this New York, you know, pretty
Speaker 2: wealthy bubble that these people live in, and I don't
Speaker 2: think they know or or really analyze how people and
Speaker 2: the rest of the country live.
Speaker 1: Yeah, it's it's very different. Listen. We're blessed.
Speaker 2: We work for a great company and we make the money,
Speaker 2: and you know, and we live in this bubble, but
Speaker 2: the large majority of this country, you know, lives a
Speaker 2: very different way.
Speaker 1: So I have a have a story.
Speaker 2: So years ago, when I was covering restaurants at Sadodi
Speaker 2: prior to coming here, every time Domino's did a limited
Speaker 2: time offer, they'd send us a pizza and they sent
Speaker 2: me this like chicken bacon Carbonora pizza and like, I
Speaker 2: called up the IR director to thank her, and I
Speaker 2: was like, now, this is really good.
Speaker 1: Thank you, I appreciate it.
Speaker 2: And she's like, believe it or not, it's healthier than
Speaker 2: most of the the pizzas, than the average pizza we sell.
Speaker 2: I was like, oh really, She's like yeah, but don't
Speaker 2: tell anybody that.
Speaker 1: I'm like, why because because people won't buy it.
Speaker 3: That's fascinating.
Speaker 2: People live very and very differently than we do here
Speaker 2: in the you know, and in other on the coasts
Speaker 2: and in major metropolitan areas.
Speaker 1: And I think I think I see it. It's not
Speaker 1: I think I do.
Speaker 2: See it all the time with the investor bases of
Speaker 2: a lot of these companies that they're not they don't
Speaker 2: put themselves in the shoes of everyday Americans.
Speaker 3: In Middle America the overall consumer.
Speaker 4: And you know that's again like another one of those
Speaker 4: big things that we have to figure out, like why
Speaker 4: are they use such patterns for this? Who has access
Speaker 4: to this? How long can they stay on it? Based
Speaker 4: on their insurance? And so maybe the executives that I've
Speaker 4: been talking to who are saying that they think they'll
Speaker 4: be okay, all right, maybe they'll be right right, and
Speaker 4: so we'll we'll see. But I think you make a
Speaker 4: very good point about just the perspective that we have
Speaker 4: and you know, we got to get out to more
Speaker 4: drive throughs. That's that's what America, how America consumes. That's
Speaker 4: my take away from this conversation.
Speaker 2: Yeah, I don't think they're going away anytime soon, that's
Speaker 2: for sure. Well thanks again, this was awesome. Where can
Speaker 2: the audience find you on social media?
Speaker 4: So I am on Twitter at Danny Underscore LSC and
Speaker 4: then add me on LinkedIn. I'm on LinkedIn all the time,
Speaker 4: and I'm always looking to hear from people in the
Speaker 4: restaurant space.
Speaker 3: Tell me your thoughts, tell.
Speaker 4: Me our secrets. That's mostly what I want to hear.
Speaker 4: But if you want to don't want to say that
Speaker 4: still reach out and I do want to hear about
Speaker 4: just what you think is going on in the restaurant space.
Speaker 2: So thank you all right, good stuff, and thanks to
Speaker 2: the audience for tuning in. If you liked the episode,
Speaker 2: please share with your friends and colleagues. Check back next week.
Speaker 2: I'll be interviewing Red Robin CEO GJ.
Speaker 1: Hart