WEBVTT - Papa John's Just Hired Over 12,000 People: CEO Lynch 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penl podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.720 Along with my co host Lisa Brahma Waits. Each day 0:00:07.760 --> 0:00:10.280 we bring you the most noteworthy and useful interviews for 0:00:10.320 --> 0:00:12.560 you and your money, whether at the grocery store or 0:00:12.600 --> 0:00:15.520 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.560 --> 0:00:18.000 podcast or wherever you listen to podcasts, as well as 0:00:18.000 --> 0:00:21.799 that Bloomberg dot com. Well, this pandemic has created a 0:00:21.840 --> 0:00:24.840 whole new set of consumer behaviors as it relates to 0:00:25.000 --> 0:00:28.040 eating meals. A lot of more people are cooking in, 0:00:28.080 --> 0:00:30.920 but a lot more people are ordering out. To get 0:00:30.960 --> 0:00:33.520 a sense of what that means for the pizza business, 0:00:33.560 --> 0:00:37.279 we welcome Rob Lynch Robs the presidency of Papa John's Pizza. Rob, 0:00:37.280 --> 0:00:39.519 thanks so much for joining us here. Give us a 0:00:39.560 --> 0:00:43.280 sense of how your business has evolved over the past 0:00:43.320 --> 0:00:46.120 couple of months as the pandemic has really gripped the 0:00:46.120 --> 0:00:50.400 country and people have become more and more quarantined. Hi, Paul, 0:00:50.479 --> 0:00:54.200 thanks for having me. You know our business is built 0:00:54.480 --> 0:00:57.920 to help in these uncertain times. We are an off 0:00:57.960 --> 0:01:02.320 premise delivery focused business US. We do not have very 0:01:02.360 --> 0:01:05.720 many dining rooms to speak of, UM, so this is 0:01:05.800 --> 0:01:09.680 kind of what we do. And we saw the challenges 0:01:09.880 --> 0:01:15.920 that we're coming into North America. UM through our global 0:01:15.959 --> 0:01:19.839 business we have we operating over fifty countries, including China 0:01:20.240 --> 0:01:23.039 and South Korea some of the the countries that were 0:01:23.040 --> 0:01:26.040 impacted first and we started, you know, we were able 0:01:26.080 --> 0:01:28.959 to learn what it would look like and and you 0:01:29.000 --> 0:01:31.200 know what we realized is that if we were allowed 0:01:31.200 --> 0:01:34.640 to continue to operate, that we would have a big 0:01:34.680 --> 0:01:39.120 responsibility and a big demand for our services. And you know, 0:01:39.160 --> 0:01:42.039 in China we weren't able to operate as the government 0:01:42.319 --> 0:01:45.080 shut down, but in South Korea we were. And and 0:01:45.120 --> 0:01:48.360 so we took that model and we applied it to UH, 0:01:48.400 --> 0:01:52.000 you know, North America, and we we focused on making 0:01:52.040 --> 0:01:55.520 sure that we had were prepared for business continuity efforts 0:01:55.680 --> 0:01:58.680 in our supply chain, making sure that we could UH 0:01:58.680 --> 0:02:01.960 staff up to eat the incremental demand, and make sure 0:02:02.000 --> 0:02:06.720 that we had the appropriate stantitization and and and procedures 0:02:06.720 --> 0:02:09.240 in place to keep our employees safe so that we 0:02:09.240 --> 0:02:12.760 can continue to operate. And we did that and and 0:02:12.840 --> 0:02:14.280 that was a lot of the work that went on 0:02:14.360 --> 0:02:17.680 in March as we started to see UM things change 0:02:17.720 --> 0:02:21.680 and and then shortly thereafter, we implemented a new platform 0:02:22.040 --> 0:02:25.480 UH and no contact delivery, and it has made a 0:02:25.480 --> 0:02:29.960 world of difference. Has allowed our customers to feel confident 0:02:30.000 --> 0:02:32.680 that when they order food from us, that we're delivering 0:02:32.760 --> 0:02:35.840 it in a safe way, that that you know, they 0:02:35.840 --> 0:02:39.040 can get food and everyone's doing their part. People are 0:02:39.080 --> 0:02:41.440 staying home to try to fight this pandemic, and the 0:02:41.480 --> 0:02:44.280 only way people can stay home is if they have food. 0:02:44.520 --> 0:02:47.280 And you know, the frontline workers out there and the 0:02:47.320 --> 0:02:51.320 grocery stores and our delivery drivers and inside team members 0:02:51.360 --> 0:02:53.919 are doing a doing a great job making sure that 0:02:53.919 --> 0:02:56.400 that we can get through this thing and fight this 0:02:56.560 --> 0:03:01.200 terrible pandemic. So what did you to seek pre and 0:03:01.320 --> 0:03:03.480 post the quarantine. There was a sense of kind of 0:03:03.480 --> 0:03:06.840 how your sales changed once people really were in the 0:03:06.880 --> 0:03:09.560 lockdown mode. That's great question. You know, we got off 0:03:09.600 --> 0:03:13.200 to a really strong start UH in two thousand and twenty. 0:03:13.560 --> 0:03:16.640 We were up about seven percent in in the first 0:03:16.720 --> 0:03:20.919 quarter until mid March when we started seeing the initial 0:03:21.000 --> 0:03:24.920 impact of COVID nineteen and people started the pantry load 0:03:24.960 --> 0:03:28.720 a little bit, and um, you know, people really the 0:03:28.800 --> 0:03:32.920 uncertainty created a dynamic where people didn't order out and 0:03:32.960 --> 0:03:37.040 so we but we got through that and and UM 0:03:37.320 --> 0:03:40.920 and then April hit. And once we got into April, 0:03:40.920 --> 0:03:44.160 and we were about two weeks into the shelter and 0:03:44.240 --> 0:03:48.080 place orders in most states and across the country, UM, 0:03:48.240 --> 0:03:50.680 our business just took off. And you know, as we 0:03:50.720 --> 0:03:55.520 reported yesterday, we saw cops store growth. That's that's the 0:03:55.560 --> 0:03:59.120 best month in the company's history. UM. So you know, 0:03:59.160 --> 0:04:02.040 we weren't we weren't expecting that level of growth, but 0:04:02.160 --> 0:04:06.440 we've been able to UM manage it. And you know, 0:04:06.920 --> 0:04:09.960 it's amazing what happens in business when you get really busy, 0:04:10.000 --> 0:04:13.120 people get more productive, people step up to the challenge. 0:04:13.160 --> 0:04:16.240 And our team has just risen to that challenge and 0:04:16.640 --> 0:04:19.920 through their efforts out in the steel, out in our restaurants. 0:04:20.320 --> 0:04:22.800 You know, our customer service scores for a thousand bases 0:04:22.839 --> 0:04:26.760 point over the last six weeks. UM. People really appreciate 0:04:26.800 --> 0:04:29.520 the fact and the extra care that we're taking and 0:04:29.520 --> 0:04:33.279 the extra efforts were making to bring them you know, pizza, 0:04:33.760 --> 0:04:38.120 and you know pizza. It's not just sustenance. It's actually 0:04:38.120 --> 0:04:40.599 a little bit of a return to normalcy. You know, 0:04:40.720 --> 0:04:43.599 it's a little bit of of of that joy that 0:04:43.960 --> 0:04:46.960 they you know that they're looking for as they um 0:04:47.080 --> 0:04:49.920 stay home for for weeks on end. So it's been 0:04:49.960 --> 0:04:54.240 a really rewarding thing. Our company morale, especially the folks 0:04:54.240 --> 0:04:57.080 out in the restaurants, has never been higher. And UM, 0:04:57.120 --> 0:04:59.200 it's really been a privilege and an honor to help 0:04:59.240 --> 0:05:01.640 outdoor and these show engine time. All right, So talk 0:05:01.680 --> 0:05:04.640 about to us about your employees, your your team members 0:05:04.680 --> 0:05:07.200 here as I'm guessing as you ramped up, you mean 0:05:07.279 --> 0:05:12.040 I talked about same store sales growth and uh in April, 0:05:12.279 --> 0:05:15.840 you need some more folks on the ground delivering the pizzas, 0:05:15.880 --> 0:05:17.960 making the pizzas delivering them. Give us a sense of 0:05:18.000 --> 0:05:19.719 how you're kind of ramping up and taking care of 0:05:19.760 --> 0:05:22.800 those folks on the ground. Yeah, you know, it's it's 0:05:22.839 --> 0:05:26.560 it's a really unfortunate outcome of this whole situation as 0:05:26.640 --> 0:05:30.560 these UM high levels of unemployment and and the way 0:05:30.560 --> 0:05:34.960 it's impacting our communities and impacting our country. And you know, 0:05:35.120 --> 0:05:37.719 we've we've tried to do our part. We've actually hired 0:05:37.760 --> 0:05:40.920 over twelve thousand people in the last six weeks, UM 0:05:41.160 --> 0:05:44.120 to try to make sure that we have the staff 0:05:44.160 --> 0:05:48.599 in place to UM take care of our communities and Frankly, 0:05:48.640 --> 0:05:52.240 it's it's been it's been an interesting situation. We have 0:05:52.400 --> 0:05:56.560 people who, um, you know, we're we're in other jobs 0:05:56.600 --> 0:05:59.600 that had nothing to do with food service that are 0:05:59.680 --> 0:06:02.839 now all coming in and working in our restaurants. And 0:06:02.880 --> 0:06:06.240 it's been a great dynamic, uh, them coming in and 0:06:06.279 --> 0:06:09.280 bringing their talents and their passion and and like I said, 0:06:09.360 --> 0:06:12.359 morale has never been higher. These folks are are coming 0:06:12.400 --> 0:06:14.320 in not just because they think, you know, I need 0:06:14.360 --> 0:06:17.120 a paycheck and deliver in pizza. I mean, we try 0:06:17.240 --> 0:06:20.000 really try to reinforce and I think it's really resonated 0:06:20.040 --> 0:06:23.440 that these are essential services. These are and you know, 0:06:23.680 --> 0:06:26.719 this work is important. This work is making a difference, 0:06:26.760 --> 0:06:29.560 is allowing the folks to stay home that need to 0:06:29.600 --> 0:06:32.600 stay home. And so, um, the twelve thousand people we've 0:06:32.680 --> 0:06:34.720 hired over the last six weeks have come in. Our 0:06:34.720 --> 0:06:39.080 retention has been great, and we're we're we're looking for more. 0:06:39.240 --> 0:06:42.240 I mean, we need, we need more people because the 0:06:42.240 --> 0:06:45.520 business continues to thrive and and we want to continue 0:06:45.520 --> 0:06:48.120 to get through these times and help out as much 0:06:48.120 --> 0:06:50.159 as we can. Rob talked to us a little about 0:06:50.200 --> 0:06:52.440 the supply chain. Are you be able to get all 0:06:52.480 --> 0:06:55.520 the ingredients you need to keep your process going. We've 0:06:55.520 --> 0:06:59.120 heard some reports out that you know, maybe dairy there 0:06:59.160 --> 0:07:01.839 might be some sup light chain issues me to pork 0:07:01.839 --> 0:07:05.200 things like that. You know, one of the great things 0:07:05.240 --> 0:07:10.120 about this company is UM it is a vertically integrated company. 0:07:10.240 --> 0:07:13.240 We we own and operate our own supply chain, and 0:07:13.280 --> 0:07:17.720 so we have really great relationships with our raw material 0:07:17.800 --> 0:07:21.400 supplier and our ingredients suppliers. And so once again we 0:07:21.440 --> 0:07:24.560 saw how things were transpiring in Asia and then in Europe, 0:07:24.560 --> 0:07:25.880 and so we got out in front of it. What 0:07:26.000 --> 0:07:28.200 we have great leadership in our supply chain and they 0:07:28.600 --> 0:07:31.640 went out to our suppliers and procured a lot of 0:07:31.720 --> 0:07:36.760 inventory heading into UM the pandemic. So we we significantly 0:07:36.840 --> 0:07:39.160 increased our inventories. We had to go out and get 0:07:39.320 --> 0:07:42.320 incremental storage space to make sure we could get enough 0:07:42.400 --> 0:07:45.360 that that if we did see a disruption to our 0:07:45.360 --> 0:07:49.040 supply chain, UM we were going to be able to 0:07:48.720 --> 0:07:52.520 to persevere through those disruptions. We also went out and 0:07:52.520 --> 0:07:56.160 and worked with new suppliers to try and create redundancies 0:07:56.160 --> 0:07:59.280 in our supply chain and make sure that if something 0:07:59.320 --> 0:08:02.680 happened to our core group of suppliers, we had backups 0:08:02.680 --> 0:08:06.440 and those two initiatives have really paid dividends. We've seen 0:08:06.480 --> 0:08:12.600 no business impact from UM ingredients UM challenges in the 0:08:12.600 --> 0:08:14.720 supply chain right now. A lot of a lot of 0:08:14.720 --> 0:08:19.200 protein suppliers are are challenged. But we have been able to, 0:08:19.840 --> 0:08:22.080 you know, make sure that we have access to all 0:08:22.080 --> 0:08:24.920 the pepperoni and sauces that we need for those are 0:08:24.920 --> 0:08:27.920 the biggest proteins in our business UM and and we've 0:08:28.000 --> 0:08:30.360 We've got plenty of it and we're operating at a 0:08:30.440 --> 0:08:32.600 high level. Rob How do you think this is going 0:08:32.679 --> 0:08:34.400 to play once we get to the other side of 0:08:34.440 --> 0:08:36.760 this it relates to your business. Are you Are you 0:08:36.800 --> 0:08:40.120 guys thinking about how consumer behavior may be changing, either 0:08:40.520 --> 0:08:44.360 positive or negative for your business? You know, this is 0:08:44.720 --> 0:08:49.199 we We've faced UM multiple economic challenges over the last 0:08:49.200 --> 0:08:51.440 twenty years. If you talk about the dot com bubble, 0:08:51.520 --> 0:08:54.240 you talk about the the banking and real estate bubble 0:08:54.280 --> 0:08:56.920 back in two thousand and eight, and you know, I 0:08:56.920 --> 0:09:00.520 think when those happened, people said, you know, the world 0:09:00.559 --> 0:09:02.800 is never going to be the same again, and and 0:09:02.840 --> 0:09:06.800 then the economy were cut or recovered, and I think 0:09:06.840 --> 0:09:09.400 we kind of went back to normal. This is a 0:09:09.520 --> 0:09:11.800 this is a health price. I think this is this 0:09:11.880 --> 0:09:15.040 is going to be different. I think that until we 0:09:15.120 --> 0:09:20.400 have UH and the ability through a vaccine or you know, 0:09:20.720 --> 0:09:25.280 even better a cure um to to give people confidence 0:09:25.600 --> 0:09:29.200 in their personal safety and the safety of their families, 0:09:29.840 --> 0:09:34.080 people are going to, you know, regardless of how latent 0:09:34.480 --> 0:09:39.000 the virus becomes. And you know, we we flattened that curve, 0:09:39.040 --> 0:09:41.560 I think people are still going to have a concern 0:09:41.600 --> 0:09:45.600 about going out into social environments and and being in 0:09:45.640 --> 0:09:49.280 close proximity to people that they don't know, and and 0:09:49.280 --> 0:09:52.040 and people that could potentially present a risk to them, 0:09:52.080 --> 0:09:55.360 and that you know, that's a sad thing. Um. You know. 0:09:55.960 --> 0:09:58.640 I hope that we can get past that, but I 0:09:58.679 --> 0:10:01.120 do think that until there's there's a way to give 0:10:01.160 --> 0:10:04.720 them confidence, we're going to see that. And so I 0:10:04.760 --> 0:10:08.440 think the dynamic that's in place right now, that's happening 0:10:08.559 --> 0:10:13.920 right now where people are ordering almost everything um through 0:10:14.040 --> 0:10:17.720 digital channels and it's showing up at their door and 0:10:17.720 --> 0:10:22.160 and they are consuming either goods or services or food 0:10:22.920 --> 0:10:25.240 at home, I think that's gonna that's gonna permeate for 0:10:25.240 --> 0:10:27.080 a while. I think there's gonna be a tale on this, 0:10:28.200 --> 0:10:30.839 regardless of whether or not states open back up or 0:10:30.880 --> 0:10:34.360 countries open back up and and um, you know, I 0:10:34.400 --> 0:10:38.120 hope that we can get past that because I love 0:10:38.200 --> 0:10:41.360 the fact that we've got a great entrepreneurial dynamic in 0:10:41.400 --> 0:10:43.320 the food service industry and we've got a lot of 0:10:43.320 --> 0:10:47.479 people depending on um customers coming back to their restaurants 0:10:47.480 --> 0:10:49.599 in their dining rooms, and so I hope that we 0:10:49.720 --> 0:10:52.320 get past that as quickly as possible. But you know, 0:10:52.400 --> 0:10:55.680 as long as people are are continuing to rely on 0:10:56.559 --> 0:10:59.520 delivery and show and staying home more often, will be 0:10:59.559 --> 0:11:02.600 there to help about That's my discussion with Papa John 0:11:02.679 --> 0:11:06.079 CEO Rob Lynch, really talking about the business, how it's changed. 0:11:06.120 --> 0:11:10.280 They had just a surge in delivery activity in April, 0:11:10.320 --> 0:11:13.079 not surprisingly, but it's up the strongest month in the 0:11:13.600 --> 0:11:16.800 company's history. So they're you know, they're hiring more workers, 0:11:16.800 --> 0:11:18.920 more delivery folks to kind of meet the demand. But 0:11:19.320 --> 0:11:21.840 really interesting to see how the changing dynamics in the 0:11:21.840 --> 0:11:25.480 food services business is benefiting certain companies, particularly the ones 0:11:25.520 --> 0:11:28.520 that really are focused on delivery, like like Papa John. 0:11:28.600 --> 0:11:30.800 So it was a great interview. Yeah, it was really 0:11:30.960 --> 0:11:33.400 to hear him talk about his business and trying to 0:11:33.440 --> 0:11:36.240 balance the growth of the business was trying to protect 0:11:36.840 --> 0:11:42.120 the workers as well. It's hard to put into perspective 0:11:42.679 --> 0:11:45.800 data that really defies historical precedent, and that is the 0:11:45.880 --> 0:11:48.280 position that we are charged with at this point, looking 0:11:48.400 --> 0:11:52.640 at report after report that shows millions of Americans losing 0:11:52.640 --> 0:11:55.199 their jobs in record speed. This morning we got more 0:11:55.240 --> 0:11:59.960 initial jobless claims, another three point one seven million individ 0:12:00.080 --> 0:12:03.280 jules filed for claims. The question is how quickly will 0:12:03.320 --> 0:12:07.120 this recover, how much damage and for how long will 0:12:07.160 --> 0:12:09.560 this make its mark on the economy? Joining us now 0:12:09.640 --> 0:12:12.319 Danielle D. Martino Booth, chief executive officer and director of 0:12:12.400 --> 0:12:16.360 Intelligence at Quill Intelligence, also former advisor at the Dallas Fed, 0:12:16.520 --> 0:12:20.559 a Bloomberg opinion columnist, and the author of the book 0:12:20.679 --> 0:12:23.040 fed Up at Insiders take on why the Federal Reserve 0:12:23.120 --> 0:12:26.200 is bad for America. Danielle, I would love your sense 0:12:26.400 --> 0:12:29.520 right now as we watch a demolition of more than 0:12:29.559 --> 0:12:32.520 a decade of job creation in less than two months, 0:12:33.080 --> 0:12:35.680 do you get a sense of how quickly these jobs 0:12:35.679 --> 0:12:39.880 can be brought back on? Well, you know it's interesting, Um, 0:12:40.679 --> 0:12:43.480 we look, we look on the outside of the country 0:12:43.760 --> 0:12:45.880 in in this episode, I think to figure out what's 0:12:45.880 --> 0:12:48.280 going to happen in the future. And you know what, 0:12:48.400 --> 0:12:51.680 whether we want to dispute the data on the virus 0:12:51.720 --> 0:12:56.040 coming out of China is one thing. But the lowness 0:12:56.080 --> 0:13:00.080 with which the supply chain is coming back online and 0:13:00.280 --> 0:13:03.959 the reticence on the part of consumers, bearing in mind 0:13:04.040 --> 0:13:07.760 China is six consumption, it's kind of I think it's 0:13:07.920 --> 0:13:12.319 a misconception that that China is this um manufacturing state. 0:13:12.440 --> 0:13:16.880 It's not a consumptions versus our two thirds consumption um. 0:13:16.920 --> 0:13:20.120 But the reticence that consumers are showing, I think should 0:13:20.160 --> 0:13:23.840 teach us something about potentially what's going to happen with 0:13:24.000 --> 0:13:26.600 our own consumers here in the United States. That's going 0:13:26.640 --> 0:13:29.800 to determine whether or not we have a second wave, 0:13:30.320 --> 0:13:34.480 a first derivative, if you will, of of of layoffs 0:13:34.480 --> 0:13:38.040 in this country, not directly in leisure and hospitality and 0:13:38.080 --> 0:13:42.720 in restaurants and in things that were impacted singularly by COVID, 0:13:43.080 --> 0:13:46.640 but more so because of demand destruction and companies feeling 0:13:46.679 --> 0:13:49.760 that they have to cut costs um some of those 0:13:49.840 --> 0:13:52.360 high skilled workers that nobody wanted to let go up. 0:13:52.400 --> 0:13:55.640 We used to talk about skill shortages three months ago. UM, 0:13:55.679 --> 0:13:57.520 so I think that's what it's going to come down to, 0:13:57.679 --> 0:13:59.920 is whether or not there's a sense of demand us 0:14:00.000 --> 0:14:04.839 struction that allows for this next wave of layoffs white 0:14:04.840 --> 0:14:08.640 collar workers, higher income to come through. So I'm literally 0:14:08.679 --> 0:14:12.160 combing through warre notices on a state by state basis 0:14:12.200 --> 0:14:15.400 every day. So, Danielle, that kind of goes to kind 0:14:15.400 --> 0:14:19.320 of kind of economic forecasting here we've seen just in 0:14:19.320 --> 0:14:22.200 the last week or so, um Morgan Stanley Goldman sashes 0:14:22.280 --> 0:14:24.360 kind of suggesting of, you know, kind of we're experiencing 0:14:24.360 --> 0:14:27.320 a bottom in the economy, and there even though they're 0:14:27.360 --> 0:14:30.920 both forecasting kind of dire dire GDP numbers in the 0:14:30.960 --> 0:14:34.040 second quarter, they're both looking for a pretty solid rebound 0:14:34.480 --> 0:14:37.080 in the third and fourth quarter. Is that something that 0:14:37.200 --> 0:14:41.840 might be a little prematurity think, you know, I really 0:14:41.920 --> 0:14:44.760 think that it is premature, And I'm not saying that 0:14:44.760 --> 0:14:49.160 they could be right. We could have this you and 0:14:49.200 --> 0:14:50.600 I think at this point you're talking about a you. 0:14:51.080 --> 0:14:53.360 You're just talking about you that you would see in 0:14:53.360 --> 0:14:57.160 the regular alphabet as opposed to a long drawn out you. Um. 0:14:57.440 --> 0:15:00.240 We we could see that it's feasible that we've a 0:15:00.240 --> 0:15:02.800 lot of demand come back online in the third and 0:15:02.840 --> 0:15:04.600 the fourth quarter, but I think a lot of it's 0:15:04.600 --> 0:15:07.440 going to depend on people's attitude. I mean, I'm I'm 0:15:07.440 --> 0:15:10.640 in Dallas, Texas, are our stay at home has been lifted. 0:15:11.000 --> 0:15:13.280 I know that that there are people that are frequenting 0:15:13.640 --> 0:15:17.240 restaurants and going about their business and not wearing masks 0:15:17.400 --> 0:15:19.880 and uh. And then there are people like me who 0:15:19.920 --> 0:15:23.240 are still sheltering in place by choice. So I think 0:15:23.240 --> 0:15:27.800 it's going to depend on how consumers react and whether 0:15:27.880 --> 0:15:31.200 or not their incomes are sustained. I'll be looking really 0:15:31.240 --> 0:15:35.360 closely at hours worked tomorrow as well. Danielle. There's a 0:15:35.440 --> 0:15:39.520 question about whether this time is different than previous episodes 0:15:39.640 --> 0:15:42.680 of mass job losses simply because of how big the 0:15:42.760 --> 0:15:45.680 safety net is. Because the United States has been sending 0:15:45.800 --> 0:15:50.200 checks too American households with previous incomes below a certain amount, 0:15:50.480 --> 0:15:53.400 and given the unemployment benefits that have been boosted, and 0:15:53.440 --> 0:15:57.240 this has led some to predict that demand destruction won't 0:15:57.280 --> 0:16:00.440 be as deep as people are predicting. Basically, people will 0:16:00.440 --> 0:16:03.240 have money in their pockets to go and spend when 0:16:03.480 --> 0:16:06.920 the social distancing restrictions are lifted. How much do you 0:16:06.960 --> 0:16:10.840 buy into that argument, Well, I think that's you know, 0:16:11.160 --> 0:16:15.000 there have been some great stories about UM owners of 0:16:15.040 --> 0:16:18.520 small businesses who have received PPP loans and gotten severe 0:16:18.560 --> 0:16:21.600 backlash from their employees because their employees are like, no, no no, no, 0:16:21.720 --> 0:16:24.240 no no, we want those unemployment we we we we 0:16:24.360 --> 0:16:26.320 we want to be on unemployment insurance. We're going to 0:16:26.360 --> 0:16:30.240 make more money with that extra six dollars a week. UM. 0:16:30.360 --> 0:16:33.080 So there's something to be said about people wanting to 0:16:33.120 --> 0:16:36.440 stay on the sidelines because they're going to be drawing 0:16:36.600 --> 0:16:38.920 a higher income. We saw when the first round of 0:16:38.920 --> 0:16:41.680 stimulus checks went out that there was a spike in 0:16:41.680 --> 0:16:44.800 in TV sales, in in in wide screen TV scale. 0:16:45.200 --> 0:16:47.720 I mean, it's it's a fact of life that Americans 0:16:47.960 --> 0:16:50.960 like to consume. If they have the means with which 0:16:51.000 --> 0:16:55.360 to do this, Uh, that's great. That what I'm focused 0:16:55.400 --> 0:16:58.640 on more is is whether or not they're going to 0:16:58.680 --> 0:17:01.880 be able to go up the assumption ladder, if they're 0:17:01.880 --> 0:17:05.960 going to sustain their lifestyles, or whether or not we're 0:17:05.960 --> 0:17:10.320 going to be able to bring airbnb S work force 0:17:10.359 --> 0:17:12.120 back online, and we're going to be able to bring 0:17:12.280 --> 0:17:17.600 Uber's force workforce back online again, especially Silicon Valley. To 0:17:17.960 --> 0:17:21.399 see these big employers relent, I think it's unique and 0:17:21.400 --> 0:17:24.840 we should be following that closely. Danielle de Martino Booth, 0:17:24.880 --> 0:17:26.879 thank you so much for being with us. Danielle de 0:17:26.960 --> 0:17:31.000 Martino Booth, the chief executive officer and director of Intelligence 0:17:31.000 --> 0:17:34.280 at Quill Intelligence, former advisor at the Dallas Fed in 0:17:34.359 --> 0:17:39.360 a Bloomberg opinion columnist, really important right now to understand 0:17:39.480 --> 0:17:43.600 the scope of job losses. We had UH deal cash 0:17:43.680 --> 0:17:47.600 Kari speaking this morning and talking about how devastating the 0:17:47.680 --> 0:17:49.359 job losses are going to be, saying, I'll take a 0:17:49.400 --> 0:17:51.760 long time for the economy to recover, saying the number 0:17:51.800 --> 0:17:54.560 tomorrow will probably be around sixteen or seventeen percent with 0:17:54.560 --> 0:17:57.200 respect to the unemployment rate, but he said, I think 0:17:57.240 --> 0:18:01.560 the real numbers probably around twenty three or twenty four percent. 0:18:02.040 --> 0:18:05.040 It's devastating, and really the question is how quickly can 0:18:05.040 --> 0:18:10.760 you get those people back into the labor force. You know, 0:18:10.840 --> 0:18:14.959 we talk about the economic impacts, uh, you know, resonating 0:18:15.040 --> 0:18:17.040 from the global pandemic. We talked about some of the 0:18:17.040 --> 0:18:20.280 big public companies that have been certainly reporting over this 0:18:20.320 --> 0:18:22.640 past earning season, but you think about it, it's really 0:18:22.680 --> 0:18:26.000 the small and mid sized businesses that are really being impacted, 0:18:26.320 --> 0:18:29.720 UH directly, and they have less of a cushion to 0:18:29.800 --> 0:18:32.280 get a sense of how the small and midsized market, 0:18:32.280 --> 0:18:36.160 the middle market, if you will, is performing. We really 0:18:36.200 --> 0:18:39.480 fortunately speak with Randy Swimmer. He's a founder and head 0:18:39.480 --> 0:18:43.040 of origination in capital markets at Churchill Asset Management, which 0:18:43.080 --> 0:18:45.840 is UH an affiliate of Novin. He's also the publisher 0:18:45.880 --> 0:18:49.240 of the Lead Left UM. So we're really happy to 0:18:49.240 --> 0:18:51.280 have Randy with us. So, Randy, give us a sense here. 0:18:51.320 --> 0:18:54.200 I know you guys spend a lot of time working 0:18:54.240 --> 0:18:57.560 with kind of middle market types of companies, and i'd 0:18:57.600 --> 0:18:59.760 love to get a sense of kind of we're you know, 0:18:59.760 --> 0:19:03.360 we're six seven, eight weeks into this pandemic, the economic impact, 0:19:03.400 --> 0:19:06.520 the job lost, the loss of demand. What are you 0:19:06.560 --> 0:19:10.240 seeing in your portfolio of companies? Yeah, I'm Paula and Lisa. 0:19:10.280 --> 0:19:14.200 Thanks for having me back. It's been a wild sixty days. Uh. 0:19:14.880 --> 0:19:18.200 You're absolutely right, and we'd love to roll the clock back, 0:19:18.280 --> 0:19:20.760 but look, all we can do is move forward. UM. 0:19:20.760 --> 0:19:24.240 What we're seeing generally is that I think that the 0:19:24.280 --> 0:19:27.560 portfolio companies and there's no better way actually of judging 0:19:27.560 --> 0:19:30.400 the impact on these companies. Been looking at not only 0:19:30.400 --> 0:19:34.800 our portfolio companies, but those across the middle market and 0:19:35.160 --> 0:19:39.080 direct lenders who who serviced those businesses, and you can 0:19:39.160 --> 0:19:42.480 kind of divide them into three groups. The first group 0:19:42.560 --> 0:19:45.240 is sort of the front line businesses. Those are the 0:19:45.280 --> 0:19:48.560 travel and retail, leisure, restaurants and so forth that have 0:19:48.680 --> 0:19:53.080 been most directly hit and those, as we've seen UM 0:19:53.560 --> 0:19:56.880 are are pretty much shut for business in many cases. UM. 0:19:57.080 --> 0:19:59.439 You can just walk through your neighborhoods and see that 0:20:00.240 --> 0:20:03.320 the restaurants are uh, you know, deliver only or pick 0:20:03.400 --> 0:20:06.920 up only, and so their businesses way down. The next 0:20:06.920 --> 0:20:11.960 would be services businesses that supplied those frontline businesses and 0:20:12.000 --> 0:20:15.240 their impacted perhaps less so UM. And then we have 0:20:15.280 --> 0:20:18.520 businesses that seem to be you know, uh, fairly intact. 0:20:19.240 --> 0:20:23.680 They tend to be in the service sector areas UM 0:20:23.760 --> 0:20:27.720 that that we focus on more defensive businesses in UM I, 0:20:28.280 --> 0:20:31.360 for example, keeping the back offices going while we're all 0:20:31.359 --> 0:20:35.119 working at home UM and those businesses seem to be 0:20:35.160 --> 0:20:37.760 doing pretty well. And that's pretty much the kinds of 0:20:37.800 --> 0:20:42.040 companies that we've been financing over the last ten years, 0:20:42.040 --> 0:20:45.919 ten twelve years, so UM. But in general, UH, it's 0:20:45.960 --> 0:20:49.000 it's pretty significant, and you've seen that reflected in UH 0:20:49.080 --> 0:20:52.280 the unemployment numbers that's just come out. Randy. We've had 0:20:52.280 --> 0:20:55.880 a lot of conversations about the dry powder that's been raised, 0:20:55.960 --> 0:20:59.040 or some of the UH funds that have been raised 0:20:59.119 --> 0:21:02.280 over the past few years to invest in small and 0:21:02.359 --> 0:21:06.440 midsized companies. We've talked also about some excessive risk taking. 0:21:06.480 --> 0:21:09.760 But I'm wondering at this point what would it take 0:21:10.280 --> 0:21:15.639 for private debt managers to unleash that dry capital into 0:21:15.640 --> 0:21:18.879 a market that's desperate for it, especially as we see 0:21:18.920 --> 0:21:23.480 that about fifty of US small businesses surveyed by the 0:21:23.560 --> 0:21:26.639 Human Resource Management Society think that they're going to be 0:21:26.640 --> 0:21:30.399 out of business in six months if the shutdowns continue. Right, 0:21:30.600 --> 0:21:34.160 So you've identified clearly the need, and now the question 0:21:34.359 --> 0:21:37.200 for those of us who are on the front line 0:21:37.200 --> 0:21:40.959 of financing is what are what can we expect in 0:21:41.080 --> 0:21:44.000 terms of the next three to six months in terms 0:21:44.040 --> 0:21:47.040 of performance of those businesses. Now, there's some of those 0:21:47.800 --> 0:21:51.120 UH for example, that we know, like restaurants and fitness 0:21:51.160 --> 0:21:54.320 centers that have been completely shoved down. It seems like 0:21:54.440 --> 0:21:59.720 we are starting nationwide UH to see signs of those 0:22:00.000 --> 0:22:04.360 ins of businesses state by states opening up with definite 0:22:04.359 --> 0:22:07.239 limitations UH. And so it's not all opening up at 0:22:07.240 --> 0:22:09.760 once and you're not seeing all the customers flooding back. 0:22:10.000 --> 0:22:12.719 There's going to be social distancing. It's going to be 0:22:13.480 --> 0:22:18.040 a slow open rather than a quick one. Um. And 0:22:18.080 --> 0:22:22.480 so what's what finance folks like ourselves are looking at 0:22:22.720 --> 0:22:25.200 is try to get some conviction around where revenues it 0:22:25.280 --> 0:22:27.879 could be, because if you're going to extend credit to 0:22:27.920 --> 0:22:30.040 these businesses, you want to have a fair sense of 0:22:30.640 --> 0:22:33.000 when they are going to be opened up, when they're 0:22:33.040 --> 0:22:36.240 going to start generating revenues, when they're going to generate 0:22:36.280 --> 0:22:39.119