September 15, 2025 • 47 mins
The great brands open up the throttle at their busiest times, Fred LeFranc, Results Thru Strategy founder, managing partner and chaos strategist, tells Bloomberg Intelligence. In this episode of the Choppin’ It Up podcast, LeFranc sits down with BI senior restaurant and foodservice analyst Michael Halen to discuss the logo controversy surrounding Cracker Barrel and how the company can return to same-store sales and profit growth. The two discuss remodels, nostalgia, branding and the company’s upcoming earnings report.
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Speaker 1 (00:13):
Welcome to Chopping It Up.
Speaker 2 (00:15):
I'm your host, Mike Hanlon, the senior restaurant and food
service analysts at Bloomberg Intelligence. Our research and that a
bi's five hundred analysts around the globe can be found
exclusively on the Bloomberg terminal. If you enjoy the pod,
I'd love it if you could leave us a review
on Apple or Spotify. Today we're joined by my friend
Fred Lafranc. Fred is a chaos strategist, managing partner and
(00:37):
co founder of Results Through Strategy, as well as hosts
of a new podcast, The Executive and The Mystic. Welcome
back to the pod.
Speaker 1 (00:45):
Fred.
Speaker 3 (00:46):
All right, Mike, I'm glad to be here.
Speaker 2 (00:48):
All right, man, So we're gonna do things a little
bit different today. Fred's gonna interview me largely about Cracker Barrel.
I'm gonna probably interview him back a bit. But before
we get into Cracker Barrol, why don't you talk to
me about your new podcast.
Speaker 3 (01:05):
Well, the new podcast, as you mentioned, thanks for mentioning it.
Mike is The Executive and The Mystic, and essentially it's
going to focus on personal professional development and a lot
of the work that I've done over the last, you know,
twenty eight years of consulting with companies, you know, it's
become more and more evident that culture is the secret
sauce for a brand. We saw that for companies coming
out of COVID, if they had a healthy culture that
(01:27):
came out strong. If they were toxic, they did not
for obvious reasons. And as I have worked with executives,
I've seen that the imprint of the executive's personality ends
up in the culture with all the commensurate strengths and weaknesses.
And so if you want the businesses to succeed, you
have to address those things. So when I coach CEOs,
which I do about half a dozen on a regular basis,
we get into it pretty deeply in terms of some
(01:48):
of the personal development work they need to do to
address their weaknesses and to recognize that it shows up
in the company, sometimes through hiring decisions, policies, whatever the
case may be. And along the way, I've been working
with a woman named Christina Christina Wilseee who I have
worked with personally, and she helped me through some of
the recent health challenges that I've had, and in doing so,
(02:10):
I was able to really uncover patterns that I was
unaware of. She gave me a different perspective back. Her
title is a perspective alchemist. She changes the perspective and
at one point in a conversation she and I were
having about some of the clients I work with without
sharing private information. Her insights were really powerful, and I said,
you know what, we need to talk about this because
you can help provide someone a view of themselves that
(02:33):
I can't do necessarily as an individual, because I always
tell I was joke around, so you can't read the
label from inside the jar, and having an outside perspective
is helpful. So we decided to have this podcast where
she can address some of the personal development stuff. She's
an experienced executive, she can lean into the business. I
work with a lot of cultures, organizational teams and things
like that, and I have that one, so we're sort
(02:54):
of matching it up. But in a way, she's sort
of an executive mystic and I'm a mystical executive.
Speaker 2 (03:00):
And the first episode was great. I haven't had a
chance to get past the first episode.
Speaker 3 (03:05):
Yet because I haven't released it. You got a.
Speaker 2 (03:06):
Preview, yeah, was able to. I was able to dig
and find find an episode. Yeah, and thank you for
introducing me to Christina. She's been instrumental in my growth
over the last couple of years. So well, that's great
to hear. That's great, good endorsement.
Speaker 1 (03:22):
Yeah, for sure, man.
Speaker 2 (03:23):
So all right, let's let's do it. Man, let's chop
it up about Cracker Barrel.
Speaker 3 (03:27):
Well, I mean, obviously, everyone at this point in the
restaurantcy knows about the controversy about the new logo and
potentially the remodels, and we you and I just commented
they announced they're going to stop all the remodels, and
so when you and I were talking about it, I said, well, Mike,
let's get down to the numbers, right, Uh, you know,
how is Cracker Barrel doing? And since you follow them,
you have an intimate knowledge of it. So let's just
(03:48):
start out with what do the numbers tell you about
the performance of the company in recent quarters. In recent quarters,
sales have been inflecting higher.
Speaker 2 (03:55):
You know, a lot of the data that that you know,
management is looking at to project future sales is getting better.
So speed of service is improving, order accuracies, improving guest sentiments, improving.
Turnover was down fourteen percentage points in the last quarter. Huge, huge,
(04:16):
and we were seeing that in the same sore sales
results restaurant, same source sales. You know, coming into the year,
the street was looking at about two percent growth. Now
they've raised their estimates up to three percent for the year.
So things before before the controversy we're looking up.
Speaker 3 (04:36):
So that's interesting from a timing standpoint. So this whole
the whole thing blew up when the logo was revealed
in mid August. Prior to that, you're telling me that
performance has been strong by all metrics that you just
talked about, which is a good thing. You know, you
watch yourself carefully. And even the remodels, they've only done
a few remodels. Am I correct in that.
Speaker 2 (04:53):
Yeah, they tested it, they talked, and we'll get deep
into the remodels, I think, because I want to hear
your view point as well. But they mentioned how it
was tested in four and now it's been expanded to
about twenty I think in total. They haven't given us
any information about any sales lifts they've seen.
Speaker 3 (05:11):
So that's okay. So let's as soon because the system's
a large system. How many restaurants does Krackle borrough have
right now, oh.
Speaker 2 (05:17):
Close to you know, six sixty ish, you know getting
click seven hundred.
Speaker 3 (05:21):
Okay, so that's a lot. So the small percentage of
restaurants have been remodeled. So without the remodels, without the
logo change, the business has been doing better and they've
improved on scores about things that matter in the guests experience, right,
So they focus on the food quality, they focus on
speed of service, they focus on all the things that
add up to a better guest experience. And we've seen
(05:42):
the advent of something like Chili's is up thirty percent,
a couple of quarters in a row, who not that
they've done the exact same thing, but they're obviously working
on an improvement thing. So all that's good, and then
banned the logo comes out and slams them. So what
happened to the stock when the logo came out?
Speaker 2 (05:56):
The stock has gotten crushed. I mean the stock had
rallied fred over one hundred percent from the April lows
in the market after the tariff, you know, freak out
into heading into earning season, and this has been an
earning season where you know, restaurant stocks have been up,
(06:17):
most of them not nearly as much as cracker barrels
hundred percent bounced, but they've been a lot, been up
a lot, and so heading into earnings and after the
earnings reports, even when some of these chains have reported
good earnings, the stocks have been selling off, right, and
so this this started to sell off. Now, it starts
to sell off before the controversy because earn it with
(06:37):
earning season, with its competitors going.
Speaker 1 (06:40):
Down, you know, and then it's been exacerbated.
Speaker 2 (06:42):
So the stock is not pretty significantly twenty five percent
I'd say maybe a little more from the highs.
Speaker 3 (06:48):
That's a lot. That's a lot. But their performance over
the last few quarters has been good. You mentioned comp
Star sales of an up. If I got my stats right,
Q two is up four to seven, but Q three
slowed down to one percent, so losing some momentum there possibly,
And as we commented on it earlier, they are coming
off of a fairly poor year the year before, so
(07:10):
they're growing against weakness, which is fine. It all happens
to everybody, but it looks at that had occurred, and
how is their ebitdad doing overall? There? Actual you know,
that's what people care about in the public market. How's
cash looking.
Speaker 2 (07:22):
Yeah, so you know, earnings are exceeding estimates, so the
street EPs estimates are fifteen percent higher than they were
heading into the year.
Speaker 1 (07:33):
Adjusted EBITDAD growth has been good so far. It's up
nine percent year to date despite all the investments they've
been making.
Speaker 3 (07:41):
Okay, let's spend a couple of minutes talking about Julian
Messino as the CEO. You spoke to her in January
and your podcast. She's a veteran and a lot of
background experience. I think she was with Young for many years.
You and I both attended the Prosper Forum in August
on and Amlia Island, and in a CEO panel, Greg Creed,
who was the former CEO of Young, mentioned the or
(08:03):
Tacob excuse me mentioned you know, look at you can
criticize Julie's ideas, but do not attack her. And I
agree with that wholeheartedly. You know, you might not agree
with some decision, but there's no reason to do a
character assassination social media. Just la ambassador. But give me
the four one one on Julie from your perspective.
Speaker 2 (08:20):
Yeah, I mean a big part of what I do
is is trying to analyze these leaders, and you know,
similar to what you were talking about the work you
do with these executives, trying to figure out authentically good
person right that cares about their employees, cares about the guests,
wants to do good for the company and in the world, right,
you know, And our impressions, you know, I've gotten to
(08:43):
spend some time with Julie and our my impressions were that,
you know, she is honestly really loves Cracker Barrel. She
she loves the brand. That's why she took the job.
To me, she seems like an authentic leader, somebody that
will try to lead with trust and transparency, right, so
(09:05):
you know, and then I analyzed their strategies, right, and
prior to the logo and the remodel decisions, I've had
felt that her strategies were on point, right, trying to
nail the operations, and you mentioned the turnaround at Brinker
and Kevin Hawkman another young brands alum.
Speaker 1 (09:23):
You know, it was similar.
Speaker 2 (09:24):
It was like, you know, let's nail these operations first, right,
She got the turnover down, got all these consumer scores higher,
and then from there started doing more marketing, started working
to improve the food she did it, I think a
good job of you know, pairing the menu where it
needed to be paired, adding some new items that were
(09:46):
really I think fit really well with Cracker Barrel's history
and its current menu. They did some Barbell strategies where
they pushed value but also upgraded stakes, right, and so
I thought the strategies were going really well until the controversy.
Speaker 3 (10:05):
Well, the other thing too, is I mean Cracker Bell's
check average is very moderate compared to some competitors. I mean,
that's that's the thing that they don't have to reposition
themselves as value. They already have value sort of built
into the brand. You know, Chili's has given the public
price certainty with their three for me. At a lower
starting point, you can go up in a couple different tiers.
(10:27):
But Crackerbill didn't have to worry too much about it.
They might do a Barbelle strategy to get more of
a lower end consumer. And given the fact that Chili's
is not cheaper in the McDonald's, I have to assume
the bit Crackerbill is cheap in the McDonald's. You know,
for a broad appeal audience out there, is that what
you're doing.
Speaker 2 (10:42):
Yeah, management's been highlighting that they're, you know, forty percent
lower than casual dining peers in terms of their guest
check average.
Speaker 3 (10:49):
Right.
Speaker 1 (10:49):
They've been highlighting that they do breakfast all day, which
is cheaper.
Speaker 3 (10:53):
Right.
Speaker 2 (10:53):
They have a seven ninety nine Sunrise special that they've
been pushing, right, and I think that puts them in
a very good position. It'll also they've been behind. They
were very slow to adopt strategic pricing. So under Julie
they finally kind of caught up to some peers and
started implementing strategic pricing. And you know, this will enable
(11:15):
them to drive some check growth and seem source of
sales growth this year and in the future as well.
So yeah, we think those price points though, are definitely
an advantage and when when And it seems as though
marketing those price points has boosted results in this fiscal
twenty twenty five year.
Speaker 3 (11:35):
The other thing in your podcast with Julie in January,
she talked about her new loyalty program. What are the
stats in the loyalty program? What's happening with that for them?
Speaker 1 (11:44):
Yeah, they they're still working on loyalty.
Speaker 2 (11:47):
They need still it's not it wasn't where it was
where it needed to be.
Speaker 1 (11:52):
It seemed like it was kind of.
Speaker 2 (11:56):
This wasn't under Julie's watch, but I think it was
pretty It seemed like it was released kind of haphazardly,
so there needs to be a lot more work done.
We don't think loyalty is going to be a significant
driver for this company because, to be honest, it hasn't
been very successful for a lot of our chains.
Speaker 3 (12:18):
But she talks about having over eight million members. That's
a sizeable amount of people. I mean, it's over six
hundred and sixty restaurants, so that's a big She's got
a big base to work off of. But I know
that's something to support, and everyone's focusing on loyalty in
some way. I mean, the reality is that ultimately the
guest experience in all restaurants has so much to do
(12:39):
with what happens at that table, you know. And the
challenge that I've always seen in the work that we
do is that executive some of them, I'm not saying Julie,
have a tendency to gloss over that experience because they're
dealing with macro numbers, but it gets right down to
the interaction at that table with the server and whatever's
going on there. And this is the big conundrum people
to have, you know, especially today with the labor shortage.
(13:00):
Possibly the turnover you mentioned earlier is another thing that
never helps because you're constantly training people to hopefully meet
standards that you want. And she's been making, you know,
some some progress there, and yet the backlash seemed to
attack the very essence of what she was trying to
do and turn it around like somehow she sold out
the soul to the devil. Right, And you know, you
(13:22):
mentioned in your recent LinkedIn post that you're ruth Bardian
at heart, and so I looked at that, and I
be honestly, they had no idea what the hell you
were talking about. So I looked it up. But I
want you to tell me what your view of that
is so that everyone here understands that on the podcast.
Speaker 2 (13:38):
Yeah, well, I just wanted to be clear that I'm
not on team Red or team Blue right.
Speaker 1 (13:44):
I'm an an oorco capitalist.
Speaker 2 (13:46):
I think Murray Rothbard is the greatest political philosopher and
historian of that I've ever read, that may have ever lived. Listen,
it's about radical freedom, right, It's about free markets. Uh,
(14:07):
you know, Roth bar you know, Murray Rothbard right now
would be you know, very anti war. He would be
very you know, he would be against probably the federal government.
He'd be you know, and you know, I just wanted
to make a clear that I'm not on either team.
I think, you know, I have leanings obviously towards certain politicians,
(14:33):
and it's usually based on, you know, if do I
feel they have integrity, do they have a track record
of voting the same way over and over over time,
And unfortunately in the United States, for me, it's it's
Ron Paul and it's Thomas Massey, and you know, Rand
Paul is getting better as time goes on.
Speaker 1 (14:54):
And that's about it.
Speaker 2 (14:55):
So, yeah, I don't have any allegiances to Team Read
or team and I wanted to make that clear that
I think it gives me an advantage in this politically
charged environment. What we're seeing right now in the stock
market is a lot of negative articles about the stock
market and why things are going to get worse, and
(15:16):
yet the market keeps continuing higher. And to be honest,
I think a lot of these outlets don't like Trump
and they want to see the market go down because
they don't want to see him out there talking about
how you know, everything's amazing, you know, and I think
I think it can impact you if you are are
(15:37):
judging somebody based on you know, how they vote.
Speaker 3 (15:40):
No, I would I would agree, I mean, I would agree.
It's you know, at the end of the day, we're
all Americans, and America is built on capitalism. And you know,
I'm a member of conscious capitalism. You know, we want
to do it intentionally, without political affiliation, and we think
that capitalism as a governmental philosophy has done more to
(16:01):
lift people out of poverty than any other system that
has ever existed, from you know, communism, socialism and fascism,
all that kind of stuff. Capitalism is the one system
of government, imperfect though it may be, that has lifted
so many people into a better cost of living. Hell,
why is everyone trying to get into these countries? Because
you can actually show up here and create a future
that you could not get in your home country. And
(16:22):
that's not a political statement, that's just sort of a
reality of it. And yes, sadly, right now, everything gets politicized,
bud like can get politicized, and obviously cracker Bell has
been politicized. But now moving on to the benefits of
getting this kind of exposure, which you know, you know,
what's the old line, you know, any kind of publicity
is good publicity as long as your name's in the press.
(16:44):
So and I know, earnings this next week. Do you
have any sense at all whether or not traffics come back.
Are people going back to show support for Cracker Barrel?
Because I've worked with some old brands, you know, and
I'd go to them and say, yeah, I'm working with
XYZ company and they go, oh, I love that bran
I go, when was the last time we were there?
About ten years, you know, and that doesn't that doesn't
help anyone's economics in the restaurant industry. You want to
(17:06):
come in last week, not ten years ago. So what's
your view of that? Is this going to be good
for them? Ultimately?
Speaker 1 (17:12):
I think it will.
Speaker 2 (17:13):
And something I've learned from our partners at Cognoviy, Benny
Gradwall runs that place. They do some great work for us.
But is that apathy and indifference are an issue?
Speaker 1 (17:28):
Right?
Speaker 2 (17:28):
But there it really is a very thin line between
love and hate. And you could see by the passion
online about this brand that people love it, right, whether
they've been there in years or not. You know, there's
definitely a strong emotional attachment to this brand, and I
(17:50):
think that bodes well for the future.
Speaker 3 (17:52):
Okay, So if I summarize what I'm hearing to say,
is regardless of the fact that it was someone negative
and a lot of reaction to it. I mean, some
people kind of like big deals to logo. Other people
are like, oh my god, you know, I forgot what's
the character's name, the old Marshall Uncle Herschel, Uncle Herschel. Okay,
so Uncle Herschel has sort of wiped out, he's back.
You feel that ultimately the loyalty has been sort of
(18:13):
awoken without being woke, and now people may return to
go short to check it out. Let's just go see
if Uncle Hirsch is alive as well. So that's the
view I think so, but we'll see how long that takes.
So right now, we have data that shows you know,
traffic post quarter.
Speaker 1 (18:30):
You know, we're very strong on this quarter.
Speaker 2 (18:32):
We think they can put up a six the streets
at three point four, right, so we think there's going
to be massive outperformance in this quarter and the July
second measured data that Bloomberg owns alternative data. It's credit
card and debit card data is corroborating, you know, our estimate.
(18:54):
So we're pretty we think they're going to report a
very strong quarter. The concern is about moving forward to
your point. So the data we have, that second measured data,
is now showing that sales.
Speaker 1 (19:07):
Started the quarter really really strong.
Speaker 2 (19:10):
At the beginning of August, the first two and a
half weeks, they were up mid single digits, so very
strong versus a consensus revenue growth estimate of one point
two percent in the quarter.
Speaker 1 (19:22):
So the quarter started off really really hot.
Speaker 2 (19:25):
Ever since this happened, sales trends have decelerated and now
have gone negative. So you know, right now it's not
helping August, right. I think if you tally all of
the August numbers, revenue growth is probably based on this data,
is probably going to be better than consensus. But right
(19:47):
now it's it's in a downtrend.
Speaker 3 (19:49):
Okay, So you have stats that tell you that forget
the stock price, right, we know that went down, but
you're saying that traffic has gone down because of this controversy.
Speaker 1 (19:56):
Is that based on this data? Yeah?
Speaker 3 (19:58):
Interesting? Well, I mean, you know in your podcast with Julie.
She spent a quite a bit of time talking about
the importance the need to really understand who your guest is.
You know, and look it. I work with CEOs all
the time. Everyone's doing the best they can with the
information available in an every changing world. I would say,
we're in a whitewater world where you know, you're in
a class five wave all the time, right, and we're
(20:19):
always a tweet away from disasters, so there's always something
going on. And in the midst of this insanity, you're
trying to make a call in terms of predicting the
future to move business in a certain way. And she's
done a masterful job of that, and she talks so
much about understanding of your customers. She gave you a
little grief because you're not on tiktoking off and she's
on TikTok with Brocker Barrel. And when she's a younger
platforms for a different audience. I mean, I've worked with
(20:40):
enough old brands. You're trying to get that next generation
audience in there. Because if you look at someone like
TGI Fridays, Because when I was growing up in the
restaurant and to see TJRI Fridays was the bomb. I
mean that's where you went. I mean that was the
place to go. And now they're gone. I mean essentially
they're just shuttered because they age with their audience. They
didn't stay relevant to the new audience. And it's a
tough trick to do that. Some brands have figured out,
(21:01):
many brands have not. And she was trying to go
in there and make sure that she knew she had
an older demographic and she wanted to appeal to a
younger demographic, so that being classic is cool, right versus oh,
these are old fuddy that is I don't want to
go there. And yet with all the understanding, well she's
done intellectually and her team she mentioned Sarah, I think
(21:21):
is your CMO and the work she's done, that logo change.
I don't know about the remodels because you don't have
information up, but the logo, James, seems to be a whiff.
You know, it was a fastball down the middle and
it was a big, big miss. No one would have
anticipated that kind of reaction. So somehow there must not
have been a focus group or something as classic in
marketing to say, hey, here's the old logo, here's the
(21:44):
new logo. It's kind of like old Coke U Cooke. Right,
did you ever tell them this was going to replace
the old one or you just want to get a
feel for it, right, what's your sense of that?
Speaker 2 (21:51):
Yeah, I mean I think it is. I think to
your point, it is clearly a whiff. I didn't I
don't love the I didn't love the new log go,
but I don't love the old one either. I mean,
you you're you know, this brand to your point, skews
very very much older.
Speaker 1 (22:09):
And and they've really not done.
Speaker 2 (22:11):
A good job prior to Julie of bringing in the
very coveted you know, gen Y and gen Z consumers.
They've not been able to do it. So to me,
you know, the logo change and a remodel to me
make sense. And the remodels weren't drastic, right, They were
changing from wood chairs to black chairs. They were painting
(22:31):
it white to make it a little brighter in there.
I didn't see, you know. I know there was some
negative articles over the last several months, and they'd interview
people that were complaining about it, right, And I understand
you don't want to, you know, piss off your core customers, right, right,
But they need to bring younger consumers in, right, they're
(22:53):
competing in the south now, First Watches is growing pretty
pretty fast in the south, right, and that's Cracker Barrel territory.
So they're going to have to up their game.
Speaker 1 (23:04):
Man.
Speaker 2 (23:04):
So you know, yeah, the logo seems like a whiff.
You know, the remodel. I actually when I heard they
were pulling back on the remodel, I was kind of disappointed.
I felt like, it needs to be refreshed, it needs
to be remodeled. I'm not looking for a drastic remodel,
but you know, the competition's increased in the South and
(23:26):
they're going to need to do something to win back
younger customers.
Speaker 3 (23:31):
Well, they're committing a lot of money, millions of dollars
to these remodels. You know, as I read, I mean,
there's a lot of money down the table here. Now,
I don't know. I bit. I was in Cracker Barrel
six weeks ago. I was driving from Charlotte to Atlanta
with a colleague and we pulled over the Cracker Barrell
because they're all over the highways in the south right,
And so we went in and had a decent meal,
(23:52):
and and I was you know, so between Charlotte and Atlanta,
you're kind of in the country. Not totally because people
in Greenville, Southcot and I'll get mad at me, But nevertheless,
you're out there and you know, plaid shirts, jeans, boots,
the whole nine yards, right, I mean, this is the
heartland of America to large extent. Was representative there and
I enjoy nostalgic places. I mean, there's nothing wrong in
(24:15):
my mind. I'm not the new target audience and can
probably reflect the older audience. But nevertheless, and I'm not
a cracker barrel junkie. I don't go there all the
time because they're really not by my home. But it
was not a bad experience. And I'll tell you a
fresh coat of paint goes a long way. I don't
know if the remodel is just paint or if it's
other things changing the color of the chairs. And I
would bet a million dollars easily that most people could
(24:37):
not tell you the color of the chair today and
it change tomorrow. You know, it's just people don't notice it. Humans,
you know, work we do. We pick up subtle cues,
you know, we don't unless somebody's really in your face.
Where you notice the change that's different. Like if you're
working on the food that play the foods in front
of your face, you're going to see that. And I
know some of the people that have helped them on
the food development program and the foods, they're trying to
(24:59):
make their the appearance more attractive. And this is part
of the you know, the cens of ground of expanding
the five senses and making sure that the subtle cues
as well as the obvious cues all reinforce a combinatorial
experience that make it better. And that's what it seems
they were doing. Have you seen the new remodels.
Speaker 2 (25:16):
I haven't seen them in person, unfortunately, I've just seen
you know, I've seen pictures. Yeah, So you know, what
was your thought on the remodel? Do you think these
stores need to be remodeled? Do you do you think
it was a mistake? How do you how do you
feel about that?
Speaker 3 (25:32):
A lot of companies, and I'm going to say, I'm
going to answer this in a broad way before I
get to the specific of Cracker Brough. It's not an
expert on Cracker Burrow. Many many restaurants have deferred maintenance. Okay,
a lot do not all, but a lot do. And
I go into brands and I look at the deferred maintenance,
and I know, I've been a CEO of half a
dozen restaurant companies. It's expensive to maintain. I've always gone
(25:54):
by Disney's philosophy that it should look as good every
day as the day had opened. And that's why in
Disney this Land, they go into the park every single
night and they repaint areas that need to get touched up.
They don't. They always wanted to look as good as
the day was open. They powerwash those sidewalks, et cetera,
et cetera. I live in Charlotte, so we're remodeling airport.
(26:15):
We're spending billions of dollars remodel in the airport. And
I walk out and look at the sidewalk and it's
just full of gum and cigarette butts and it's disgusting
and go. You know, for the cost of a powerwash,
it would make the place look good. And that's the
same way in restaurants. I went to a restaurant through
the day and it's you know, it's getting to be
fallish and winds blowing, so there's leaves around, and they
hadn't bothered to sweep the entrance. You know, those are
the things that I noticed because I'm a restaurant tour
(26:37):
but I know that when I've worked with other brands
that cannot afford it. It's very expensive to do remodels.
You know, you really can't. I call them, I say,
let's do a lipstick remodel, okay, And that's sort of
an ode to you know, a woman who just touches
up her lipstick, doesn't do her whole face, doesn't change
her clothes just to be looking fresh, because that's really
front and center. And paint is one of them. It's
(27:00):
the cheapest thing you can do to refresh your restaurant.
It's paint. And so I don't think that's necessarily a
bad thing. When you have a situation where we have
torn Naugahyde booths, right, you have broken chair legs, You've
got tables that the finish has completely come off of them,
that to me is a bigger issue. That's a problem.
You need to do that, and quite honestly, in my experience,
(27:23):
it's less expensive to have an ongoing and I call
it a beautification program, an ongoing beautification program that you
do a bite sized pieces, little by little by little,
then waiting to get so bad that you have to
do a full on remodel. In years past, when I
was running a company, we'd go into a restaurant that
was a little worn. We look at and say, hey,
the furnage looks pretty good. Let's just change the carpet.
(27:44):
So we change the carpet. Then you come back and oh,
my god, the furniture looks shabby because you got this
brand new carpet looks fantastic, and then the furniture looks horrible.
And so I learned a long time ago you got
to be really careful what elements do adjust and to
make sure you do it in a proper way this affordable.
And the other thing too is let's talk about why
are you doing a remodel. Okay, so ubsensively people say, oh,
(28:05):
it's because the guests will have a better experience. That's true.
You know who matters the most in the remodel the employee.
The employees that really matters because that's the work environment
they have. And whenever we did remodels, one of the
things I always did is go back to the employee
break areas. Okay, at the old days, restaurants are big
enough to have a break area. Nowadays they're kind of small,
but there's still an area that you have your schedule
(28:26):
up there and things like that. It's kind of like
where the employees hang out. And I would always make
an emphasis say let's get this done. Let's do something
here to show the employees that we care. So when
you go out in front to service the guests, if
it's a full service restaurant, they feel that they're part
of that exposure experience because then you just had this
juxtaposition of the front looks fantastic in the back of
the house which is old and dingy, and you really
(28:48):
don't want to do that. You want to make sure
you polish it for the benefit of the guests. And
the other thing that's really inexpensive is changing uniforms. If
they're T shirts, you know, do a refresh, because if
you put a new piece of clothing whatever that may be,
on an employee, they feel different. And so managing a
restaurant is all about managing the employee experience that it
is much about managing the guests experience.
Speaker 2 (29:09):
Yeah, that's really interesting, right, I would think, you know,
certain areas should still probably be worked on, you know.
I think they're doing floors too in stores that need it.
I would think like bathrooms is something ye that that
they should probably think about.
Speaker 3 (29:31):
A clean bathsroom is can't be controversial one hundred.
Speaker 1 (29:35):
You know.
Speaker 2 (29:36):
It's really interesting though, because you know, Sarder brought this
up last year when he was pushing for some more
board seats. Larry Hyatt was the CFO a long time ago.
He did he he did a great job, and he
did a great job.
Speaker 1 (29:50):
Communicating with the street. And one of the things he
always mentioned was like.
Speaker 2 (29:53):
Are cappacks compared cappacks of sales compared to everyone else
is so much lower because it's an old country store
and we don't need to renovate it, right, And I
think that was true in twenty fourteen when he mentioned
that to me. I don't know if that's still true today.
Speaker 3 (30:12):
I would disagree with his statement today. Back then he
might have been sued. I mean, by the way, when
you say old, which I'm going to use old in
the context in nostalgic is very different than old as
worn out, you know, And I think that's the critical
difference that I see because I've worked with some old brands.
I worked with Sardar's company Steak and Shake when he
(30:32):
first took it over. I've worked with friendlies, you know,
these are these both brands in those days were over
eighties another over ninety years old, and they were worn old,
not nostalgia gold. And ironically, in both those brands, when
we helped them do some lipstick remodels, we leaned into
the nostalgia. You know. With Sardar, the restaurants were white
(30:56):
at the time. They had pictures of Sundays. They had
a kind of a bit of a dessert thing trying
to push on and I was about the excenter of
the core, and we painted the walls red and we
put in black and white pictures of old photos that
were in the archives of the early days of Steak
and Shake, which were just great pictures. I mean, they
really evoked a lot of wonderful things. And the remodels
were probably less than ten thousand dollars of store, and
(31:17):
of course, with better food and all that kind of stuff,
sales popped up dramatically. You remember, the stock just took off.
That's when we did four under four during the recession,
which was again price certainty before people walked in, and
it worked beautifully. Same thing at Friendlies and Friendlies. One
of the things we did was we found these old
black and white pictures of the restaurants back in the day.
(31:39):
But also we got black and white pictures of famous
people eating ice cream, and then we put those in
the wall and we colorized the ice cream. So because
Friendlys is big under Fountain and so now you had
this like Franklin Dell and Roosevelt the licking an ice
cream cone, but the cone was white and he was
black and white. And Shirley Temple and other people like
that didn't even CASHU click Muhammad Ali. Those kind of things.
(32:00):
People get off on that. I mean, nostalgia is not
necessarily bad. Even with this new generation the salt digital
and so far and so on, there are the good
old days and they recalled that not because they really were,
but because they just evoke some memory of simpler times.
Speaker 1 (32:13):
Yeah, Nostalgia's been been big.
Speaker 2 (32:16):
Chili's has hit on it right, They've been bringing back
a lot of nineties Nostalgia's actually has been hot over
the last couple of years. So they brought back Brian
mcnight and Boys to men to do some of their
TV ads that that did it from wonderfully right.
Speaker 3 (32:33):
No, and kids are rediscovering, you know, old bands that
for certain generations were like what when we were kids,
and I'll oh, they rediscovered it. You know. It's like
I always going to kick out of a fourteen year
old tells me about the Beatles for the first time.
Speaker 2 (32:49):
Yeah, I'm a house music of ficionado, and a lot
of the songs I loved in the mid to late
nineties and early two thousands now are coming back being
remixed by some of these young guys and girls.
Speaker 1 (33:00):
It's it's pretty funny to see. It's it's awesome. I
love it.
Speaker 3 (33:04):
Yeah, So nostalag is so I think my conclusion is
nostage is not bad. And and it just seems that,
you know, let's put the logo aside for a second,
with Uncle Herschel being you know, kind of air brushed
out and he's back. Okay, great, Now what do you
do on the inside. And as long as I think
that Julie and her team are mindful of maintenance and
beautification versus elimination, I think that's that's really, really, really important.
(33:30):
And to build on the fact that she's made so
much investment into a better guests experience through the food
and the service and now cleaning up the environment. It's
not going to really hurt you in the long run,
and ultimately we'll see whether this controversy will reflect on
better sales right now. I mean, as far as you
can tell, you think the stocks a goodbye. Is that correct?
Speaker 2 (33:52):
Yeah, I'm not as confident as I was because we
don't know how long this downturn is going to last.
Speaker 1 (33:58):
But yeah, we've been positive on the name.
Speaker 2 (34:02):
You know, like I said, I think we'd be a
little less confident right now, but I think the big
you know, there's been you know, if you go on
poly market, there's like a twenty five percent chance that
Julie Messina Messino loses her job before a year end.
I think that's probably one of the biggest risks to
stock personally. I think a big part of our thesis.
Speaker 1 (34:23):
Around this name was an improvement in the management team
and that.
Speaker 2 (34:28):
The leadership body by Julie and some of the people
she brought in, and that would be a shame.
Speaker 3 (34:32):
I mean, this is a kind of you know, public
humiliation and conviction over it. Let's say it was a misstep.
Let's assume let's just say, fine, it was a misstep.
We made a mistake, and they admitted it. She said,
I made a mistake. We're going to go back to
the old logo, and that's done. Let's keep on improving it.
And I would hope that if everyone's such a Rabbit fan,
that the best thing you could do is show up right,
(34:53):
go in there, eat, spend some money, show people your care,
Let the employees know that you're behind and supporting them,
so that the people who are the ones that are
pillaring her are the ones that show up at least
and become a guest again. Uh, if they weren't already,
and that would be an important thing. I'm not sure
you mentioned this, the odds of her being eliminated. What
is the source for that. I'm not familiar with that.
Speaker 2 (35:15):
Poly Market So yeah, poly Market's an online odds making website.
So but instead of you know, gambling on sports, you
gamble on you can gamble on the number of rate
cuts the FED is going to.
Speaker 1 (35:29):
Engage in this year. You can, Oh, okay, yeah you can.
You can. You can gamble on like all sorts of stuff.
Speaker 3 (35:37):
Okay, including economics or public job Yeah, well, let me
that's down there.
Speaker 1 (35:42):
I've been tracking it.
Speaker 3 (35:43):
Yeah, okay, well I'll have to check that out. But
let me ask you this. I mean, we just got
the jobs report out. I know you you follow all
this because it affects the industry. It was not great.
And they just also downgraded the jobs that supposedly have
been earned in the last quarter by almost a million.
So the economy has been soft for a while. We
just you know, we're just finding that out now and
hopefully the Bureau of Labor Statistics remains a source of
(36:07):
good effective data. You know, we don't want to manipulate
it anyway. But what's your outlook for the overall industry
at this point, for you know, including cracker barrel.
Speaker 2 (36:16):
Yeah, we're bullish, you know, and we're still bullish, I'd say,
at least through the first quarter of next year. We
remained bullish.
Speaker 1 (36:24):
You know.
Speaker 2 (36:24):
We came into this year expecting better same source sales
than last year. We've seen that we expected, you know,
I think same sore sales were up in eighty ish
basis points in the first half, maybe ninety base points,
and we expect that to accelerate through year end. We've
seen that in July and August data. We think that
that continues. Restaurants had their recession last year, so we
(36:48):
think things are getting better, you know, to your point,
the jobs number, you know, cp I was.
Speaker 1 (36:56):
A little benign and so not PPI not p PI.
Speaker 2 (37:01):
But but you know what we see is, you know,
so right now, it's kind of a stagflationary numbers here
this month.
Speaker 1 (37:11):
But you know, we from what we see in.
Speaker 2 (37:14):
The economic data that we watch, low income consumers still strapped,
getting better, though less stressed because delinquencies are down, you know,
are going down from where they were last year. In
terms of auto credit card credit card bounces are still rising,
but at a much slower pace. You know, the data
that we see and is most important to us continues
(37:38):
to slowly get better, right and then we're seeing in
this stock market a broadening rally. So that's usually a
good sign that people are starting to think that this
economy is going to get.
Speaker 1 (37:48):
Better for the next couple of quarters.
Speaker 2 (37:50):
And so even though we have some stagflationary numbers here
right now, we think mostly economic indicators and restaurants spending
continue to get get better through the first quarter of
next year, I'd say, if if I was worried about something,
it would be more along the lines of inflation. Inflation
isn't going away. In my opinion, We're not getting three
(38:11):
rate cuts because you know, you see it every time
there's even talk of rate cuts, Commodity prices rip higher, right,
and that's the data that goes into the CPI. So
it makes it very very hard for the Fed to
cut rates. We've seen it for two years right coming
into twenty twenty four, there were supposed to be eight
nine rate cuts.
Speaker 1 (38:31):
What do we get?
Speaker 3 (38:33):
Right?
Speaker 2 (38:33):
So yeah, we're still continuably you know, I would say,
like conservatively bullish. We don't think low income consumers are
going to come back in full force anytime soon because
of the inflation and its cumulative nature. But middle income
and higher income consumers are doing pretty good.
Speaker 3 (38:52):
Well. I noticed sectors no longer matter as much as
always individual companies in my experience, right, but QSR seems
to be hitting a wall, and casual dining fine dining
has actually gone up a bit. Is that what you're mutas? Okay?
Speaker 2 (39:06):
So yeah, coming into this year, I didn't necessarily expect it,
I mean, but you know, we did know that casual
dining was lapping really really weak results last year and
this year. That's helped them. But they've all and they've
also been helped by Chili's.
Speaker 1 (39:20):
Chili's.
Speaker 2 (39:20):
You know, you put that thirty percent comp into the
into your numbers and it makes everything look pretty good.
But you know, Darden's doing better this year, Cracker barrels
doing better this year, cheesecake factories putting up you know,
solid comps. In the first quarter, they were outperforming QSR
to your point. So I think part of that is
the supply and demand is in better shape in casual
(39:42):
dining because they haven't you know, there have been some
small emerging chains building, but there hasn't in the companies
we cover. There hasn't been much store development over the
last five years, whereas QSR has built a ton and
I think supply and demand has gotten a little bit
out of back. Our friend Mike Lukianov at since I'm
(40:03):
Sorry Signal Flare AI has has talked about the fact
that supplying demand is out of whack in QSR and
that's hurting the comps, and so, yeah, you know, I
think there could continue to be out performance in the
second half of this year, we think that conform ourt
performance is going to narrow and that's what we saw
last the last like two months because McDonald's is starting
(40:26):
to pick up a little bit steam, QSR is starting
to lap week second half results from last year, and
Chile's comps are going to go down because of you know,
just the law of large numbers.
Speaker 3 (40:38):
Yeah, yeah, well I think they're really they cut there
from thirty, they went down to like fifteen, but they're
lapping in a huge quarter, so God bless them. And
they've also increased their AUVs up and profitability, so they're
still they're gonna up been a lot better place overall.
But yeah, oh yeah.
Speaker 2 (40:52):
We look at multi year geometric comps, so we're looking
at you know, the one year, but also the two year,
the sixth year, will be looking at the seven year
coming up. So so we look at these trends at
a you know, on a very long term timeline. And
you know, even though we know their comps are going
to slow, they could still continue to grow on a
(41:12):
two and a six year geometric stack. And if they
do that, man, it continues to be impressive.
Speaker 3 (41:19):
Well that's good to hear that. You're bullish on the
industry of role I am, always have been, and continue
to do so. I got the pleasure of working with
some great young, emerging brands, and you know, they're the future.
I mean, we're going I call this a period of
creative destruction where a lot of the stuff that's really
outdated and has no relevance is going to go away sadly,
DJA Fridays and other brands. I mean, we had another
(41:40):
two companies go declared bankruptcy in the last fourteen days,
so that bankruptcy for restaurant now is new old news
now just happens repeatedly. But these new brands are coming
up and they're they're exciting, they're they're appealing to a
new consumer, and they're even attracting some of the older
generations as well because there is some energy in them
that wasn't present before.
Speaker 2 (42:02):
Well, I've never seen such a wide gap between the
winners and losers.
Speaker 1 (42:07):
I love it. I pick stocks for.
Speaker 2 (42:08):
A living, so it makes it a lot more fun
for me. And you mentioned the emerging brands. You've recently
done some work for Hawkers. Can you talk a little
bit about that.
Speaker 3 (42:21):
Yeah, I was, you know, placed on the board of
Hawkers and worked with them in the earlier part of
the year, and it's an exciting I love the brand.
It's an exciting brand. There were some decisions made by leadership,
which we talked about, that have sometimes amiss that put
the company in a precarious position. But the fundamental brand
was really good because I look at the guest experience.
That's to me as the barometer. You can tell me
(42:43):
everything you want about the brand, but if I walk
into a restaurant, the experience as lousey that it's just
a canary in the coal mine. You know where the
rest is going to go. But here was a brand
that had high energy, multisensory, you know, so the flavors
are the lisious, the high energy in the vibe, the
whole nine yards. But they were down as most brands
were down. They suffered because they're most you know, there's
(43:04):
the base out of Orlando, seven states. But they also
got hit by the weather in the first court like
everybody else did. And we were able to do something
because when I worked with companies, one other thing I
learned a long time ago is that the easiest way
to increase sales and there is an easy way to
do it is to focus on your busiest times when
you have the highest demand. And the great brands like
(43:24):
Chick fil A. Chick fil A did not increase their
AUVs to over eight million dollars because they had a
better ad campaign. What they did is they opened up
the throttle and said, we're going to get more business,
more orders per hour when we're the busiest, and they
put people out there with iPads and dual lanes and
so far on so on. See if you study, they go, Okay,
that's just genius. You know, because I talked to the
most company, go when what are you trying to increase? Well,
(43:45):
Monday through Thursday is really slow. We're trying to build it.
I said, oh, don't waste your money there. I mean,
you're going to get something, but an incremental dollar on
a Friday, Saturday nights. We had a lot more of
an incremental dollar on a Monday night. And so we
did a study. We uncovered over six million dollars and
sales were lost because of over slow table turns, longer
dwell times. And it was over four million dollars in
(44:08):
profit that we could generate and in something like eight weeks,
over half the company went from being negative in traffic
count to positive in traffic count. And we did nothing
to do with advertising. It was all operations execution because
I'm an old opsky. That's where I grew up in
this restaurant business and repeatedly with other companies when I
worked with a Burger King one hundred and tenuon of
Burger outfit years ago. Because of what I learned at
(44:31):
Steak and Shake is we focus on drive through, and
we cut the drive through turn by over a minute,
and sales, you know, were incredible. And say, we did
the same thing at Steak and Shape. We focused on
drive through, got rid of items that were slow cook.
It was mostly grilled cheese. It just takes a long
time to melt cheese. And we were able to really,
you know, improve sales primarily by focusing on the busiest
(44:54):
shifts QSR Fast casual is going to be during the
week you know, the regular casual dining, fine dining is
going to be on the weekend. And it works. And
at the end, so Caleb and his fellow founders are
great guys, took it to heart, put in to send
up plan and got it all rallied. We had a
Hospitality summer with the gms's like focus on the guest experience.
These are just metrics that you have to look at
(45:15):
the side, but make sure that guests experience is better.
And no more quotes over at an hour and a half.
No one's going to do that anymore. I mean, I
remember back in the day of casual dining, they used
to track You might have done this, so you tracked
the quote time on Friday and Saturdays. There was a
service that would tell you how long Cheesecake Factory TGI Fridays.
All those people had on quotes. They don't do that anymore,
(45:36):
but that was a big measure in ge Sak factory
two hour quote and everyone was all excited about it.
I would have wait two hours for the dinner if
I was hungry. My life depended. But I want to
I'll just go somewhere else and eat. And so that's
understanding that that you don't want to have a quote
wait over thirty minutes in a busy Friday night. You
want to get in there and experience it as best
as you can. Thirty minutes is acceptable. An hour and
a half is stupid. And thanks to Caleb and the team,
(45:59):
they were able to do, and they're keeping the program
going because it's just easy money. It's there, then you
can worry about the other sales. But I always ask
this question, what's the busiest hour in every restaurant in
your system. I don't care if the restaurants viewed as
a slow restaurant, low volume or high one. Every restaurant
has a busess hour. What is it and what's the
gap between the lowest and the highst across the system?
(46:20):
And by the way, sometimes the slowest restaurant has the
highest sales hour of the week because they care, they're busy,
they're trying to get it in there. And the guys
that are all kind of cocky with the high sales
are just losing money. So it's like to me, I
call it moneyball. You're looking at this industry statistically in
a different way to give you advantage.
Speaker 1 (46:37):
That's good advice for Cracker Barrel.
Speaker 2 (46:39):
I think you know, as a family dining chain, they
do a huge percentage of their business from Friday night
through Sunday afternoon, So maybe something.
Speaker 1 (46:47):
Cracker Bow can look at. Thanks for doing this, Fred,
You're the best and.
Speaker 3 (46:50):
I appreciate it's a lot of fun, Mike.
Speaker 2 (46:52):
Always is man. I want to thank the audience for
tuning in. If you'd like to learn more about Results
through Strategy, go to Results through Strategy dot com.
Speaker 1 (47:01):
That's t h r u H.
Speaker 2 (47:04):
If you liked our discussion, please share with your friends
and colleagues. Check back soon for an interview with Wade Allen,
president at Costa Vita Fresh Mexican grill
Welcome to Chopping It Up.
Speaker 2 (00:15):
I'm your host, Mike Hanlon, the senior restaurant and food
service analysts at Bloomberg Intelligence. Our research and that a
bi's five hundred analysts around the globe can be found
exclusively on the Bloomberg terminal. If you enjoy the pod,
I'd love it if you could leave us a review
on Apple or Spotify. Today we're joined by my friend
Fred Lafranc. Fred is a chaos strategist, managing partner and
(00:37):
co founder of Results Through Strategy, as well as hosts
of a new podcast, The Executive and The Mystic. Welcome
back to the pod.
Speaker 1 (00:45):
Fred.
Speaker 3 (00:46):
All right, Mike, I'm glad to be here.
Speaker 2 (00:48):
All right, man, So we're gonna do things a little
bit different today. Fred's gonna interview me largely about Cracker Barrel.
I'm gonna probably interview him back a bit. But before
we get into Cracker Barrol, why don't you talk to
me about your new podcast.
Speaker 3 (01:05):
Well, the new podcast, as you mentioned, thanks for mentioning it.
Mike is The Executive and The Mystic, and essentially it's
going to focus on personal professional development and a lot
of the work that I've done over the last, you know,
twenty eight years of consulting with companies, you know, it's
become more and more evident that culture is the secret
sauce for a brand. We saw that for companies coming
out of COVID, if they had a healthy culture that
(01:27):
came out strong. If they were toxic, they did not
for obvious reasons. And as I have worked with executives,
I've seen that the imprint of the executive's personality ends
up in the culture with all the commensurate strengths and weaknesses.
And so if you want the businesses to succeed, you
have to address those things. So when I coach CEOs,
which I do about half a dozen on a regular basis,
we get into it pretty deeply in terms of some
(01:48):
of the personal development work they need to do to
address their weaknesses and to recognize that it shows up
in the company, sometimes through hiring decisions, policies, whatever the
case may be. And along the way, I've been working
with a woman named Christina Christina Wilseee who I have
worked with personally, and she helped me through some of
the recent health challenges that I've had, and in doing so,
(02:10):
I was able to really uncover patterns that I was
unaware of. She gave me a different perspective back. Her
title is a perspective alchemist. She changes the perspective and
at one point in a conversation she and I were
having about some of the clients I work with without
sharing private information. Her insights were really powerful, and I said,
you know what, we need to talk about this because
you can help provide someone a view of themselves that
(02:33):
I can't do necessarily as an individual, because I always
tell I was joke around, so you can't read the
label from inside the jar, and having an outside perspective
is helpful. So we decided to have this podcast where
she can address some of the personal development stuff. She's
an experienced executive, she can lean into the business. I
work with a lot of cultures, organizational teams and things
like that, and I have that one, so we're sort
(02:54):
of matching it up. But in a way, she's sort
of an executive mystic and I'm a mystical executive.
Speaker 2 (03:00):
And the first episode was great. I haven't had a
chance to get past the first episode.
Speaker 3 (03:05):
Yet because I haven't released it. You got a.
Speaker 2 (03:06):
Preview, yeah, was able to. I was able to dig
and find find an episode. Yeah, and thank you for
introducing me to Christina. She's been instrumental in my growth
over the last couple of years. So well, that's great
to hear. That's great, good endorsement.
Speaker 1 (03:22):
Yeah, for sure, man.
Speaker 2 (03:23):
So all right, let's let's do it. Man, let's chop
it up about Cracker Barrel.
Speaker 3 (03:27):
Well, I mean, obviously, everyone at this point in the
restaurantcy knows about the controversy about the new logo and
potentially the remodels, and we you and I just commented
they announced they're going to stop all the remodels, and
so when you and I were talking about it, I said, well, Mike,
let's get down to the numbers, right, Uh, you know,
how is Cracker Barrel doing? And since you follow them,
you have an intimate knowledge of it. So let's just
(03:48):
start out with what do the numbers tell you about
the performance of the company in recent quarters. In recent quarters,
sales have been inflecting higher.
Speaker 2 (03:55):
You know, a lot of the data that that you know,
management is looking at to project future sales is getting better.
So speed of service is improving, order accuracies, improving guest sentiments, improving.
Turnover was down fourteen percentage points in the last quarter. Huge, huge,
(04:16):
and we were seeing that in the same sore sales
results restaurant, same source sales. You know, coming into the year,
the street was looking at about two percent growth. Now
they've raised their estimates up to three percent for the year.
So things before before the controversy we're looking up.
Speaker 3 (04:36):
So that's interesting from a timing standpoint. So this whole
the whole thing blew up when the logo was revealed
in mid August. Prior to that, you're telling me that
performance has been strong by all metrics that you just
talked about, which is a good thing. You know, you
watch yourself carefully. And even the remodels, they've only done
a few remodels. Am I correct in that.
Speaker 2 (04:53):
Yeah, they tested it, they talked, and we'll get deep
into the remodels, I think, because I want to hear
your view point as well. But they mentioned how it
was tested in four and now it's been expanded to
about twenty I think in total. They haven't given us
any information about any sales lifts they've seen.
Speaker 3 (05:11):
So that's okay. So let's as soon because the system's
a large system. How many restaurants does Krackle borrough have
right now, oh.
Speaker 2 (05:17):
Close to you know, six sixty ish, you know getting
click seven hundred.
Speaker 3 (05:21):
Okay, so that's a lot. So the small percentage of
restaurants have been remodeled. So without the remodels, without the
logo change, the business has been doing better and they've
improved on scores about things that matter in the guests experience, right,
So they focus on the food quality, they focus on
speed of service, they focus on all the things that
add up to a better guest experience. And we've seen
(05:42):
the advent of something like Chili's is up thirty percent,
a couple of quarters in a row, who not that
they've done the exact same thing, but they're obviously working
on an improvement thing. So all that's good, and then
banned the logo comes out and slams them. So what
happened to the stock when the logo came out?
Speaker 2 (05:56):
The stock has gotten crushed. I mean the stock had
rallied fred over one hundred percent from the April lows
in the market after the tariff, you know, freak out
into heading into earning season, and this has been an
earning season where you know, restaurant stocks have been up,
(06:17):
most of them not nearly as much as cracker barrels
hundred percent bounced, but they've been a lot, been up
a lot, and so heading into earnings and after the
earnings reports, even when some of these chains have reported
good earnings, the stocks have been selling off, right, and
so this this started to sell off. Now, it starts
to sell off before the controversy because earn it with
(06:37):
earning season, with its competitors going.
Speaker 1 (06:40):
Down, you know, and then it's been exacerbated.
Speaker 2 (06:42):
So the stock is not pretty significantly twenty five percent
I'd say maybe a little more from the highs.
Speaker 3 (06:48):
That's a lot. That's a lot. But their performance over
the last few quarters has been good. You mentioned comp
Star sales of an up. If I got my stats right,
Q two is up four to seven, but Q three
slowed down to one percent, so losing some momentum there possibly,
And as we commented on it earlier, they are coming
off of a fairly poor year the year before, so
(07:10):
they're growing against weakness, which is fine. It all happens
to everybody, but it looks at that had occurred, and
how is their ebitdad doing overall? There? Actual you know,
that's what people care about in the public market. How's
cash looking.
Speaker 2 (07:22):
Yeah, so you know, earnings are exceeding estimates, so the
street EPs estimates are fifteen percent higher than they were
heading into the year.
Speaker 1 (07:33):
Adjusted EBITDAD growth has been good so far. It's up
nine percent year to date despite all the investments they've
been making.
Speaker 3 (07:41):
Okay, let's spend a couple of minutes talking about Julian
Messino as the CEO. You spoke to her in January
and your podcast. She's a veteran and a lot of
background experience. I think she was with Young for many years.
You and I both attended the Prosper Forum in August
on and Amlia Island, and in a CEO panel, Greg Creed,
who was the former CEO of Young, mentioned the or
(08:03):
Tacob excuse me mentioned you know, look at you can
criticize Julie's ideas, but do not attack her. And I
agree with that wholeheartedly. You know, you might not agree
with some decision, but there's no reason to do a
character assassination social media. Just la ambassador. But give me
the four one one on Julie from your perspective.
Speaker 2 (08:20):
Yeah, I mean a big part of what I do
is is trying to analyze these leaders, and you know,
similar to what you were talking about the work you
do with these executives, trying to figure out authentically good
person right that cares about their employees, cares about the guests,
wants to do good for the company and in the world, right,
you know, And our impressions, you know, I've gotten to
(08:43):
spend some time with Julie and our my impressions were that,
you know, she is honestly really loves Cracker Barrel. She
she loves the brand. That's why she took the job.
To me, she seems like an authentic leader, somebody that
will try to lead with trust and transparency, right, so
(09:05):
you know, and then I analyzed their strategies, right, and
prior to the logo and the remodel decisions, I've had
felt that her strategies were on point, right, trying to
nail the operations, and you mentioned the turnaround at Brinker
and Kevin Hawkman another young brands alum.
Speaker 1 (09:23):
You know, it was similar.
Speaker 2 (09:24):
It was like, you know, let's nail these operations first, right,
She got the turnover down, got all these consumer scores higher,
and then from there started doing more marketing, started working
to improve the food she did it, I think a
good job of you know, pairing the menu where it
needed to be paired, adding some new items that were
(09:46):
really I think fit really well with Cracker Barrel's history
and its current menu. They did some Barbell strategies where
they pushed value but also upgraded stakes, right, and so
I thought the strategies were going really well until the controversy.
Speaker 3 (10:05):
Well, the other thing too, is I mean Cracker Bell's
check average is very moderate compared to some competitors. I mean,
that's that's the thing that they don't have to reposition
themselves as value. They already have value sort of built
into the brand. You know, Chili's has given the public
price certainty with their three for me. At a lower
starting point, you can go up in a couple different tiers.
(10:27):
But Crackerbill didn't have to worry too much about it.
They might do a Barbelle strategy to get more of
a lower end consumer. And given the fact that Chili's
is not cheaper in the McDonald's, I have to assume
the bit Crackerbill is cheap in the McDonald's. You know,
for a broad appeal audience out there, is that what
you're doing.
Speaker 2 (10:42):
Yeah, management's been highlighting that they're, you know, forty percent
lower than casual dining peers in terms of their guest
check average.
Speaker 3 (10:49):
Right.
Speaker 1 (10:49):
They've been highlighting that they do breakfast all day, which
is cheaper.
Speaker 3 (10:53):
Right.
Speaker 2 (10:53):
They have a seven ninety nine Sunrise special that they've
been pushing, right, and I think that puts them in
a very good position. It'll also they've been behind. They
were very slow to adopt strategic pricing. So under Julie
they finally kind of caught up to some peers and
started implementing strategic pricing. And you know, this will enable
(11:15):
them to drive some check growth and seem source of
sales growth this year and in the future as well.
So yeah, we think those price points though, are definitely
an advantage and when when And it seems as though
marketing those price points has boosted results in this fiscal
twenty twenty five year.
Speaker 3 (11:35):
The other thing in your podcast with Julie in January,
she talked about her new loyalty program. What are the
stats in the loyalty program? What's happening with that for them?
Speaker 1 (11:44):
Yeah, they they're still working on loyalty.
Speaker 2 (11:47):
They need still it's not it wasn't where it was
where it needed to be.
Speaker 1 (11:52):
It seemed like it was kind of.
Speaker 2 (11:56):
This wasn't under Julie's watch, but I think it was
pretty It seemed like it was released kind of haphazardly,
so there needs to be a lot more work done.
We don't think loyalty is going to be a significant
driver for this company because, to be honest, it hasn't
been very successful for a lot of our chains.
Speaker 3 (12:18):
But she talks about having over eight million members. That's
a sizeable amount of people. I mean, it's over six
hundred and sixty restaurants, so that's a big She's got
a big base to work off of. But I know
that's something to support, and everyone's focusing on loyalty in
some way. I mean, the reality is that ultimately the
guest experience in all restaurants has so much to do
(12:39):
with what happens at that table, you know. And the
challenge that I've always seen in the work that we
do is that executive some of them, I'm not saying Julie,
have a tendency to gloss over that experience because they're
dealing with macro numbers, but it gets right down to
the interaction at that table with the server and whatever's
going on there. And this is the big conundrum people
to have, you know, especially today with the labor shortage.
(13:00):
Possibly the turnover you mentioned earlier is another thing that
never helps because you're constantly training people to hopefully meet
standards that you want. And she's been making, you know,
some some progress there, and yet the backlash seemed to
attack the very essence of what she was trying to
do and turn it around like somehow she sold out
the soul to the devil. Right, And you know, you
(13:22):
mentioned in your recent LinkedIn post that you're ruth Bardian
at heart, and so I looked at that, and I
be honestly, they had no idea what the hell you
were talking about. So I looked it up. But I
want you to tell me what your view of that
is so that everyone here understands that on the podcast.
Speaker 2 (13:38):
Yeah, well, I just wanted to be clear that I'm
not on team Red or team Blue right.
Speaker 1 (13:44):
I'm an an oorco capitalist.
Speaker 2 (13:46):
I think Murray Rothbard is the greatest political philosopher and
historian of that I've ever read, that may have ever lived. Listen,
it's about radical freedom, right, It's about free markets. Uh,
(14:07):
you know, Roth bar you know, Murray Rothbard right now
would be you know, very anti war. He would be
very you know, he would be against probably the federal government.
He'd be you know, and you know, I just wanted
to make a clear that I'm not on either team.
I think, you know, I have leanings obviously towards certain politicians,
(14:33):
and it's usually based on, you know, if do I
feel they have integrity, do they have a track record
of voting the same way over and over over time,
And unfortunately in the United States, for me, it's it's
Ron Paul and it's Thomas Massey, and you know, Rand
Paul is getting better as time goes on.
Speaker 1 (14:54):
And that's about it.
Speaker 2 (14:55):
So, yeah, I don't have any allegiances to Team Read
or team and I wanted to make that clear that
I think it gives me an advantage in this politically
charged environment. What we're seeing right now in the stock
market is a lot of negative articles about the stock
market and why things are going to get worse, and
(15:16):
yet the market keeps continuing higher. And to be honest,
I think a lot of these outlets don't like Trump
and they want to see the market go down because
they don't want to see him out there talking about
how you know, everything's amazing, you know, and I think
I think it can impact you if you are are
(15:37):
judging somebody based on you know, how they vote.
Speaker 3 (15:40):
No, I would I would agree, I mean, I would agree.
It's you know, at the end of the day, we're
all Americans, and America is built on capitalism. And you know,
I'm a member of conscious capitalism. You know, we want
to do it intentionally, without political affiliation, and we think
that capitalism as a governmental philosophy has done more to
(16:01):
lift people out of poverty than any other system that
has ever existed, from you know, communism, socialism and fascism,
all that kind of stuff. Capitalism is the one system
of government, imperfect though it may be, that has lifted
so many people into a better cost of living. Hell,
why is everyone trying to get into these countries? Because
you can actually show up here and create a future
that you could not get in your home country. And
(16:22):
that's not a political statement, that's just sort of a
reality of it. And yes, sadly, right now, everything gets politicized,
bud like can get politicized, and obviously cracker Bell has
been politicized. But now moving on to the benefits of
getting this kind of exposure, which you know, you know,
what's the old line, you know, any kind of publicity
is good publicity as long as your name's in the press.
(16:44):
So and I know, earnings this next week. Do you
have any sense at all whether or not traffics come back.
Are people going back to show support for Cracker Barrel?
Because I've worked with some old brands, you know, and
I'd go to them and say, yeah, I'm working with
XYZ company and they go, oh, I love that bran
I go, when was the last time we were there?
About ten years, you know, and that doesn't that doesn't
help anyone's economics in the restaurant industry. You want to
(17:06):
come in last week, not ten years ago. So what's
your view of that? Is this going to be good
for them? Ultimately?
Speaker 1 (17:12):
I think it will.
Speaker 2 (17:13):
And something I've learned from our partners at Cognoviy, Benny
Gradwall runs that place. They do some great work for us.
But is that apathy and indifference are an issue?
Speaker 1 (17:28):
Right?
Speaker 2 (17:28):
But there it really is a very thin line between
love and hate. And you could see by the passion
online about this brand that people love it, right, whether
they've been there in years or not. You know, there's
definitely a strong emotional attachment to this brand, and I
(17:50):
think that bodes well for the future.
Speaker 3 (17:52):
Okay, So if I summarize what I'm hearing to say,
is regardless of the fact that it was someone negative
and a lot of reaction to it. I mean, some
people kind of like big deals to logo. Other people
are like, oh my god, you know, I forgot what's
the character's name, the old Marshall Uncle Herschel, Uncle Herschel. Okay,
so Uncle Herschel has sort of wiped out, he's back.
You feel that ultimately the loyalty has been sort of
(18:13):
awoken without being woke, and now people may return to
go short to check it out. Let's just go see
if Uncle Hirsch is alive as well. So that's the
view I think so, but we'll see how long that takes.
So right now, we have data that shows you know,
traffic post quarter.
Speaker 1 (18:30):
You know, we're very strong on this quarter.
Speaker 2 (18:32):
We think they can put up a six the streets
at three point four, right, so we think there's going
to be massive outperformance in this quarter and the July
second measured data that Bloomberg owns alternative data. It's credit
card and debit card data is corroborating, you know, our estimate.
(18:54):
So we're pretty we think they're going to report a
very strong quarter. The concern is about moving forward to
your point. So the data we have, that second measured data,
is now showing that sales.
Speaker 1 (19:07):
Started the quarter really really strong.
Speaker 2 (19:10):
At the beginning of August, the first two and a
half weeks, they were up mid single digits, so very
strong versus a consensus revenue growth estimate of one point
two percent in the quarter.
Speaker 1 (19:22):
So the quarter started off really really hot.
Speaker 2 (19:25):
Ever since this happened, sales trends have decelerated and now
have gone negative. So you know, right now it's not
helping August, right. I think if you tally all of
the August numbers, revenue growth is probably based on this data,
is probably going to be better than consensus. But right
(19:47):
now it's it's in a downtrend.
Speaker 3 (19:49):
Okay, So you have stats that tell you that forget
the stock price, right, we know that went down, but
you're saying that traffic has gone down because of this controversy.
Speaker 1 (19:56):
Is that based on this data? Yeah?
Speaker 3 (19:58):
Interesting? Well, I mean, you know in your podcast with Julie.
She spent a quite a bit of time talking about
the importance the need to really understand who your guest is.
You know, and look it. I work with CEOs all
the time. Everyone's doing the best they can with the
information available in an every changing world. I would say,
we're in a whitewater world where you know, you're in
a class five wave all the time, right, and we're
(20:19):
always a tweet away from disasters, so there's always something
going on. And in the midst of this insanity, you're
trying to make a call in terms of predicting the
future to move business in a certain way. And she's
done a masterful job of that, and she talks so
much about understanding of your customers. She gave you a
little grief because you're not on tiktoking off and she's
on TikTok with Brocker Barrel. And when she's a younger
platforms for a different audience. I mean, I've worked with
(20:40):
enough old brands. You're trying to get that next generation
audience in there. Because if you look at someone like
TGI Fridays, Because when I was growing up in the
restaurant and to see TJRI Fridays was the bomb. I
mean that's where you went. I mean that was the
place to go. And now they're gone. I mean essentially
they're just shuttered because they age with their audience. They
didn't stay relevant to the new audience. And it's a
tough trick to do that. Some brands have figured out,
(21:01):
many brands have not. And she was trying to go
in there and make sure that she knew she had
an older demographic and she wanted to appeal to a
younger demographic, so that being classic is cool, right versus oh,
these are old fuddy that is I don't want to
go there. And yet with all the understanding, well she's
done intellectually and her team she mentioned Sarah, I think
(21:21):
is your CMO and the work she's done, that logo change.
I don't know about the remodels because you don't have
information up, but the logo, James, seems to be a whiff.
You know, it was a fastball down the middle and
it was a big, big miss. No one would have
anticipated that kind of reaction. So somehow there must not
have been a focus group or something as classic in
marketing to say, hey, here's the old logo, here's the
(21:44):
new logo. It's kind of like old Coke U Cooke. Right,
did you ever tell them this was going to replace
the old one or you just want to get a
feel for it, right, what's your sense of that?
Speaker 2 (21:51):
Yeah, I mean I think it is. I think to
your point, it is clearly a whiff. I didn't I
don't love the I didn't love the new log go,
but I don't love the old one either. I mean,
you you're you know, this brand to your point, skews
very very much older.
Speaker 1 (22:09):
And and they've really not done.
Speaker 2 (22:11):
A good job prior to Julie of bringing in the
very coveted you know, gen Y and gen Z consumers.
They've not been able to do it. So to me,
you know, the logo change and a remodel to me
make sense. And the remodels weren't drastic, right, They were
changing from wood chairs to black chairs. They were painting
(22:31):
it white to make it a little brighter in there.
I didn't see, you know. I know there was some
negative articles over the last several months, and they'd interview
people that were complaining about it, right, And I understand
you don't want to, you know, piss off your core customers, right, right,
But they need to bring younger consumers in, right, they're
(22:53):
competing in the south now, First Watches is growing pretty
pretty fast in the south, right, and that's Cracker Barrel territory.
So they're going to have to up their game.
Speaker 1 (23:04):
Man.
Speaker 2 (23:04):
So you know, yeah, the logo seems like a whiff.
You know, the remodel. I actually when I heard they
were pulling back on the remodel, I was kind of disappointed.
I felt like, it needs to be refreshed, it needs
to be remodeled. I'm not looking for a drastic remodel,
but you know, the competition's increased in the South and
(23:26):
they're going to need to do something to win back
younger customers.
Speaker 3 (23:31):
Well, they're committing a lot of money, millions of dollars
to these remodels. You know, as I read, I mean,
there's a lot of money down the table here. Now,
I don't know. I bit. I was in Cracker Barrel
six weeks ago. I was driving from Charlotte to Atlanta
with a colleague and we pulled over the Cracker Barrell
because they're all over the highways in the south right,
And so we went in and had a decent meal,
(23:52):
and and I was you know, so between Charlotte and Atlanta,
you're kind of in the country. Not totally because people
in Greenville, Southcot and I'll get mad at me, But nevertheless,
you're out there and you know, plaid shirts, jeans, boots,
the whole nine yards, right, I mean, this is the
heartland of America to large extent. Was representative there and
I enjoy nostalgic places. I mean, there's nothing wrong in
(24:15):
my mind. I'm not the new target audience and can
probably reflect the older audience. But nevertheless, and I'm not
a cracker barrel junkie. I don't go there all the
time because they're really not by my home. But it
was not a bad experience. And I'll tell you a
fresh coat of paint goes a long way. I don't
know if the remodel is just paint or if it's
other things changing the color of the chairs. And I
would bet a million dollars easily that most people could
(24:37):
not tell you the color of the chair today and
it change tomorrow. You know, it's just people don't notice it. Humans,
you know, work we do. We pick up subtle cues,
you know, we don't unless somebody's really in your face.
Where you notice the change that's different. Like if you're
working on the food that play the foods in front
of your face, you're going to see that. And I
know some of the people that have helped them on
the food development program and the foods, they're trying to
(24:59):
make their the appearance more attractive. And this is part
of the you know, the cens of ground of expanding
the five senses and making sure that the subtle cues
as well as the obvious cues all reinforce a combinatorial
experience that make it better. And that's what it seems
they were doing. Have you seen the new remodels.
Speaker 2 (25:16):
I haven't seen them in person, unfortunately, I've just seen
you know, I've seen pictures. Yeah, So you know, what
was your thought on the remodel? Do you think these
stores need to be remodeled? Do you do you think
it was a mistake? How do you how do you
feel about that?
Speaker 3 (25:32):
A lot of companies, and I'm going to say, I'm
going to answer this in a broad way before I
get to the specific of Cracker Brough. It's not an
expert on Cracker Burrow. Many many restaurants have deferred maintenance. Okay,
a lot do not all, but a lot do. And
I go into brands and I look at the deferred maintenance,
and I know, I've been a CEO of half a
dozen restaurant companies. It's expensive to maintain. I've always gone
(25:54):
by Disney's philosophy that it should look as good every
day as the day had opened. And that's why in
Disney this Land, they go into the park every single
night and they repaint areas that need to get touched up.
They don't. They always wanted to look as good as
the day was open. They powerwash those sidewalks, et cetera,
et cetera. I live in Charlotte, so we're remodeling airport.
(26:15):
We're spending billions of dollars remodel in the airport. And
I walk out and look at the sidewalk and it's
just full of gum and cigarette butts and it's disgusting
and go. You know, for the cost of a powerwash,
it would make the place look good. And that's the
same way in restaurants. I went to a restaurant through
the day and it's you know, it's getting to be
fallish and winds blowing, so there's leaves around, and they
hadn't bothered to sweep the entrance. You know, those are
the things that I noticed because I'm a restaurant tour
(26:37):
but I know that when I've worked with other brands
that cannot afford it. It's very expensive to do remodels.
You know, you really can't. I call them, I say,
let's do a lipstick remodel, okay, And that's sort of
an ode to you know, a woman who just touches
up her lipstick, doesn't do her whole face, doesn't change
her clothes just to be looking fresh, because that's really
front and center. And paint is one of them. It's
(27:00):
the cheapest thing you can do to refresh your restaurant.
It's paint. And so I don't think that's necessarily a
bad thing. When you have a situation where we have
torn Naugahyde booths, right, you have broken chair legs, You've
got tables that the finish has completely come off of them,
that to me is a bigger issue. That's a problem.
You need to do that, and quite honestly, in my experience,
(27:23):
it's less expensive to have an ongoing and I call
it a beautification program, an ongoing beautification program that you
do a bite sized pieces, little by little by little,
then waiting to get so bad that you have to
do a full on remodel. In years past, when I
was running a company, we'd go into a restaurant that
was a little worn. We look at and say, hey,
the furnage looks pretty good. Let's just change the carpet.
(27:44):
So we change the carpet. Then you come back and oh,
my god, the furniture looks shabby because you got this
brand new carpet looks fantastic, and then the furniture looks horrible.
And so I learned a long time ago you got
to be really careful what elements do adjust and to
make sure you do it in a proper way this affordable.
And the other thing too is let's talk about why
are you doing a remodel. Okay, so ubsensively people say, oh,
(28:05):
it's because the guests will have a better experience. That's true.
You know who matters the most in the remodel the employee.
The employees that really matters because that's the work environment
they have. And whenever we did remodels, one of the
things I always did is go back to the employee
break areas. Okay, at the old days, restaurants are big
enough to have a break area. Nowadays they're kind of small,
but there's still an area that you have your schedule
(28:26):
up there and things like that. It's kind of like
where the employees hang out. And I would always make
an emphasis say let's get this done. Let's do something
here to show the employees that we care. So when
you go out in front to service the guests, if
it's a full service restaurant, they feel that they're part
of that exposure experience because then you just had this
juxtaposition of the front looks fantastic in the back of
the house which is old and dingy, and you really
(28:48):
don't want to do that. You want to make sure
you polish it for the benefit of the guests. And
the other thing that's really inexpensive is changing uniforms. If
they're T shirts, you know, do a refresh, because if
you put a new piece of clothing whatever that may be,
on an employee, they feel different. And so managing a
restaurant is all about managing the employee experience that it
is much about managing the guests experience.
Speaker 2 (29:09):
Yeah, that's really interesting, right, I would think, you know,
certain areas should still probably be worked on, you know.
I think they're doing floors too in stores that need it.
I would think like bathrooms is something ye that that
they should probably think about.
Speaker 3 (29:31):
A clean bathsroom is can't be controversial one hundred.
Speaker 1 (29:35):
You know.
Speaker 2 (29:36):
It's really interesting though, because you know, Sarder brought this
up last year when he was pushing for some more
board seats. Larry Hyatt was the CFO a long time ago.
He did he he did a great job, and he
did a great job.
Speaker 1 (29:50):
Communicating with the street. And one of the things he
always mentioned was like.
Speaker 2 (29:53):
Are cappacks compared cappacks of sales compared to everyone else
is so much lower because it's an old country store
and we don't need to renovate it, right, And I
think that was true in twenty fourteen when he mentioned
that to me. I don't know if that's still true today.
Speaker 3 (30:12):
I would disagree with his statement today. Back then he
might have been sued. I mean, by the way, when
you say old, which I'm going to use old in
the context in nostalgic is very different than old as
worn out, you know, And I think that's the critical
difference that I see because I've worked with some old brands.
I worked with Sardar's company Steak and Shake when he
(30:32):
first took it over. I've worked with friendlies, you know,
these are these both brands in those days were over
eighties another over ninety years old, and they were worn old,
not nostalgia gold. And ironically, in both those brands, when
we helped them do some lipstick remodels, we leaned into
the nostalgia. You know. With Sardar, the restaurants were white
(30:56):
at the time. They had pictures of Sundays. They had
a kind of a bit of a dessert thing trying
to push on and I was about the excenter of
the core, and we painted the walls red and we
put in black and white pictures of old photos that
were in the archives of the early days of Steak
and Shake, which were just great pictures. I mean, they
really evoked a lot of wonderful things. And the remodels
were probably less than ten thousand dollars of store, and
(31:17):
of course, with better food and all that kind of stuff,
sales popped up dramatically. You remember, the stock just took off.
That's when we did four under four during the recession,
which was again price certainty before people walked in, and
it worked beautifully. Same thing at Friendlies and Friendlies. One
of the things we did was we found these old
black and white pictures of the restaurants back in the day.
(31:39):
But also we got black and white pictures of famous
people eating ice cream, and then we put those in
the wall and we colorized the ice cream. So because
Friendlys is big under Fountain and so now you had
this like Franklin Dell and Roosevelt the licking an ice
cream cone, but the cone was white and he was
black and white. And Shirley Temple and other people like
that didn't even CASHU click Muhammad Ali. Those kind of things.
(32:00):
People get off on that. I mean, nostalgia is not
necessarily bad. Even with this new generation the salt digital
and so far and so on, there are the good
old days and they recalled that not because they really were,
but because they just evoke some memory of simpler times.
Speaker 1 (32:13):
Yeah, Nostalgia's been been big.
Speaker 2 (32:16):
Chili's has hit on it right, They've been bringing back
a lot of nineties Nostalgia's actually has been hot over
the last couple of years. So they brought back Brian
mcnight and Boys to men to do some of their
TV ads that that did it from wonderfully right.
Speaker 3 (32:33):
No, and kids are rediscovering, you know, old bands that
for certain generations were like what when we were kids,
and I'll oh, they rediscovered it. You know. It's like
I always going to kick out of a fourteen year
old tells me about the Beatles for the first time.
Speaker 2 (32:49):
Yeah, I'm a house music of ficionado, and a lot
of the songs I loved in the mid to late
nineties and early two thousands now are coming back being
remixed by some of these young guys and girls.
Speaker 1 (33:00):
It's it's pretty funny to see. It's it's awesome. I
love it.
Speaker 3 (33:04):
Yeah, So nostalag is so I think my conclusion is
nostage is not bad. And and it just seems that,
you know, let's put the logo aside for a second,
with Uncle Herschel being you know, kind of air brushed
out and he's back. Okay, great, Now what do you
do on the inside. And as long as I think
that Julie and her team are mindful of maintenance and
beautification versus elimination, I think that's that's really, really, really important.
(33:30):
And to build on the fact that she's made so
much investment into a better guests experience through the food
and the service and now cleaning up the environment. It's
not going to really hurt you in the long run,
and ultimately we'll see whether this controversy will reflect on
better sales right now. I mean, as far as you
can tell, you think the stocks a goodbye. Is that correct?
Speaker 2 (33:52):
Yeah, I'm not as confident as I was because we
don't know how long this downturn is going to last.
Speaker 1 (33:58):
But yeah, we've been positive on the name.
Speaker 2 (34:02):
You know, like I said, I think we'd be a
little less confident right now, but I think the big
you know, there's been you know, if you go on
poly market, there's like a twenty five percent chance that
Julie Messina Messino loses her job before a year end.
I think that's probably one of the biggest risks to
stock personally. I think a big part of our thesis.
Speaker 1 (34:23):
Around this name was an improvement in the management team
and that.
Speaker 2 (34:28):
The leadership body by Julie and some of the people
she brought in, and that would be a shame.
Speaker 3 (34:32):
I mean, this is a kind of you know, public
humiliation and conviction over it. Let's say it was a misstep.
Let's assume let's just say, fine, it was a misstep.
We made a mistake, and they admitted it. She said,
I made a mistake. We're going to go back to
the old logo, and that's done. Let's keep on improving it.
And I would hope that if everyone's such a Rabbit fan,
that the best thing you could do is show up right,
(34:53):
go in there, eat, spend some money, show people your care,
Let the employees know that you're behind and supporting them,
so that the people who are the ones that are
pillaring her are the ones that show up at least
and become a guest again. Uh, if they weren't already,
and that would be an important thing. I'm not sure
you mentioned this, the odds of her being eliminated. What
is the source for that. I'm not familiar with that.
Speaker 2 (35:15):
Poly Market So yeah, poly Market's an online odds making website.
So but instead of you know, gambling on sports, you
gamble on you can gamble on the number of rate
cuts the FED is going to.
Speaker 1 (35:29):
Engage in this year. You can, Oh, okay, yeah you can.
You can. You can gamble on like all sorts of stuff.
Speaker 3 (35:37):
Okay, including economics or public job Yeah, well, let me
that's down there.
Speaker 1 (35:42):
I've been tracking it.
Speaker 3 (35:43):
Yeah, okay, well I'll have to check that out. But
let me ask you this. I mean, we just got
the jobs report out. I know you you follow all
this because it affects the industry. It was not great.
And they just also downgraded the jobs that supposedly have
been earned in the last quarter by almost a million.
So the economy has been soft for a while. We
just you know, we're just finding that out now and
hopefully the Bureau of Labor Statistics remains a source of
(36:07):
good effective data. You know, we don't want to manipulate
it anyway. But what's your outlook for the overall industry
at this point, for you know, including cracker barrel.
Speaker 2 (36:16):
Yeah, we're bullish, you know, and we're still bullish, I'd say,
at least through the first quarter of next year. We
remained bullish.
Speaker 1 (36:24):
You know.
Speaker 2 (36:24):
We came into this year expecting better same source sales
than last year. We've seen that we expected, you know,
I think same sore sales were up in eighty ish
basis points in the first half, maybe ninety base points,
and we expect that to accelerate through year end. We've
seen that in July and August data. We think that
that continues. Restaurants had their recession last year, so we
(36:48):
think things are getting better, you know, to your point,
the jobs number, you know, cp I was.
Speaker 1 (36:56):
A little benign and so not PPI not p PI.
Speaker 2 (37:01):
But but you know what we see is, you know,
so right now, it's kind of a stagflationary numbers here
this month.
Speaker 1 (37:11):
But you know, we from what we see in.
Speaker 2 (37:14):
The economic data that we watch, low income consumers still strapped,
getting better, though less stressed because delinquencies are down, you know,
are going down from where they were last year. In
terms of auto credit card credit card bounces are still rising,
but at a much slower pace. You know, the data
that we see and is most important to us continues
(37:38):
to slowly get better, right and then we're seeing in
this stock market a broadening rally. So that's usually a
good sign that people are starting to think that this
economy is going to get.
Speaker 1 (37:48):
Better for the next couple of quarters.
Speaker 2 (37:50):
And so even though we have some stagflationary numbers here
right now, we think mostly economic indicators and restaurants spending
continue to get get better through the first quarter of
next year, I'd say, if if I was worried about something,
it would be more along the lines of inflation. Inflation
isn't going away. In my opinion, We're not getting three
(38:11):
rate cuts because you know, you see it every time
there's even talk of rate cuts, Commodity prices rip higher, right,
and that's the data that goes into the CPI. So
it makes it very very hard for the Fed to
cut rates. We've seen it for two years right coming
into twenty twenty four, there were supposed to be eight
nine rate cuts.
Speaker 1 (38:31):
What do we get?
Speaker 3 (38:33):
Right?
Speaker 2 (38:33):
So yeah, we're still continuably you know, I would say,
like conservatively bullish. We don't think low income consumers are
going to come back in full force anytime soon because
of the inflation and its cumulative nature. But middle income
and higher income consumers are doing pretty good.
Speaker 3 (38:52):
Well. I noticed sectors no longer matter as much as
always individual companies in my experience, right, but QSR seems
to be hitting a wall, and casual dining fine dining
has actually gone up a bit. Is that what you're mutas? Okay?
Speaker 2 (39:06):
So yeah, coming into this year, I didn't necessarily expect it,
I mean, but you know, we did know that casual
dining was lapping really really weak results last year and
this year. That's helped them. But they've all and they've
also been helped by Chili's.
Speaker 1 (39:20):
Chili's.
Speaker 2 (39:20):
You know, you put that thirty percent comp into the
into your numbers and it makes everything look pretty good.
But you know, Darden's doing better this year, Cracker barrels
doing better this year, cheesecake factories putting up you know,
solid comps. In the first quarter, they were outperforming QSR
to your point. So I think part of that is
the supply and demand is in better shape in casual
(39:42):
dining because they haven't you know, there have been some
small emerging chains building, but there hasn't in the companies
we cover. There hasn't been much store development over the
last five years, whereas QSR has built a ton and
I think supply and demand has gotten a little bit
out of back. Our friend Mike Lukianov at since I'm
(40:03):
Sorry Signal Flare AI has has talked about the fact
that supplying demand is out of whack in QSR and
that's hurting the comps, and so, yeah, you know, I
think there could continue to be out performance in the
second half of this year, we think that conform ourt
performance is going to narrow and that's what we saw
last the last like two months because McDonald's is starting
(40:26):
to pick up a little bit steam, QSR is starting
to lap week second half results from last year, and
Chile's comps are going to go down because of you know,
just the law of large numbers.
Speaker 3 (40:38):
Yeah, yeah, well I think they're really they cut there
from thirty, they went down to like fifteen, but they're
lapping in a huge quarter, so God bless them. And
they've also increased their AUVs up and profitability, so they're
still they're gonna up been a lot better place overall.
But yeah, oh yeah.
Speaker 2 (40:52):
We look at multi year geometric comps, so we're looking
at you know, the one year, but also the two year,
the sixth year, will be looking at the seven year
coming up. So so we look at these trends at
a you know, on a very long term timeline. And
you know, even though we know their comps are going
to slow, they could still continue to grow on a
(41:12):
two and a six year geometric stack. And if they
do that, man, it continues to be impressive.
Speaker 3 (41:19):
Well that's good to hear that. You're bullish on the
industry of role I am, always have been, and continue
to do so. I got the pleasure of working with
some great young, emerging brands, and you know, they're the future.
I mean, we're going I call this a period of
creative destruction where a lot of the stuff that's really
outdated and has no relevance is going to go away sadly,
DJA Fridays and other brands. I mean, we had another
(41:40):
two companies go declared bankruptcy in the last fourteen days,
so that bankruptcy for restaurant now is new old news
now just happens repeatedly. But these new brands are coming
up and they're they're exciting, they're they're appealing to a
new consumer, and they're even attracting some of the older
generations as well because there is some energy in them
that wasn't present before.
Speaker 2 (42:02):
Well, I've never seen such a wide gap between the
winners and losers.
Speaker 1 (42:07):
I love it. I pick stocks for.
Speaker 2 (42:08):
A living, so it makes it a lot more fun
for me. And you mentioned the emerging brands. You've recently
done some work for Hawkers. Can you talk a little
bit about that.
Speaker 3 (42:21):
Yeah, I was, you know, placed on the board of
Hawkers and worked with them in the earlier part of
the year, and it's an exciting I love the brand.
It's an exciting brand. There were some decisions made by leadership,
which we talked about, that have sometimes amiss that put
the company in a precarious position. But the fundamental brand
was really good because I look at the guest experience.
That's to me as the barometer. You can tell me
(42:43):
everything you want about the brand, but if I walk
into a restaurant, the experience as lousey that it's just
a canary in the coal mine. You know where the
rest is going to go. But here was a brand
that had high energy, multisensory, you know, so the flavors
are the lisious, the high energy in the vibe, the
whole nine yards. But they were down as most brands
were down. They suffered because they're most you know, there's
(43:04):
the base out of Orlando, seven states. But they also
got hit by the weather in the first court like
everybody else did. And we were able to do something
because when I worked with companies, one other thing I
learned a long time ago is that the easiest way
to increase sales and there is an easy way to
do it is to focus on your busiest times when
you have the highest demand. And the great brands like
(43:24):
Chick fil A. Chick fil A did not increase their
AUVs to over eight million dollars because they had a
better ad campaign. What they did is they opened up
the throttle and said, we're going to get more business,
more orders per hour when we're the busiest, and they
put people out there with iPads and dual lanes and
so far on so on. See if you study, they go, Okay,
that's just genius. You know, because I talked to the
most company, go when what are you trying to increase? Well,
(43:45):
Monday through Thursday is really slow. We're trying to build it.
I said, oh, don't waste your money there. I mean,
you're going to get something, but an incremental dollar on
a Friday, Saturday nights. We had a lot more of
an incremental dollar on a Monday night. And so we
did a study. We uncovered over six million dollars and
sales were lost because of over slow table turns, longer
dwell times. And it was over four million dollars in
(44:08):
profit that we could generate and in something like eight weeks,
over half the company went from being negative in traffic
count to positive in traffic count. And we did nothing
to do with advertising. It was all operations execution because
I'm an old opsky. That's where I grew up in
this restaurant business and repeatedly with other companies when I
worked with a Burger King one hundred and tenuon of
Burger outfit years ago. Because of what I learned at
(44:31):
Steak and Shake is we focus on drive through, and
we cut the drive through turn by over a minute,
and sales, you know, were incredible. And say, we did
the same thing at Steak and Shape. We focused on
drive through, got rid of items that were slow cook.
It was mostly grilled cheese. It just takes a long
time to melt cheese. And we were able to really,
you know, improve sales primarily by focusing on the busiest
(44:54):
shifts QSR Fast casual is going to be during the
week you know, the regular casual dining, fine dining is
going to be on the weekend. And it works. And
at the end, so Caleb and his fellow founders are
great guys, took it to heart, put in to send
up plan and got it all rallied. We had a
Hospitality summer with the gms's like focus on the guest experience.
These are just metrics that you have to look at
(45:15):
the side, but make sure that guests experience is better.
And no more quotes over at an hour and a half.
No one's going to do that anymore. I mean, I
remember back in the day of casual dining, they used
to track You might have done this, so you tracked
the quote time on Friday and Saturdays. There was a
service that would tell you how long Cheesecake Factory TGI Fridays.
All those people had on quotes. They don't do that anymore,
(45:36):
but that was a big measure in ge Sak factory
two hour quote and everyone was all excited about it.
I would have wait two hours for the dinner if
I was hungry. My life depended. But I want to
I'll just go somewhere else and eat. And so that's
understanding that that you don't want to have a quote
wait over thirty minutes in a busy Friday night. You
want to get in there and experience it as best
as you can. Thirty minutes is acceptable. An hour and
a half is stupid. And thanks to Caleb and the team,
(45:59):
they were able to do, and they're keeping the program
going because it's just easy money. It's there, then you
can worry about the other sales. But I always ask
this question, what's the busiest hour in every restaurant in
your system. I don't care if the restaurants viewed as
a slow restaurant, low volume or high one. Every restaurant
has a busess hour. What is it and what's the
gap between the lowest and the highst across the system?
(46:20):
And by the way, sometimes the slowest restaurant has the
highest sales hour of the week because they care, they're busy,
they're trying to get it in there. And the guys
that are all kind of cocky with the high sales
are just losing money. So it's like to me, I
call it moneyball. You're looking at this industry statistically in
a different way to give you advantage.
Speaker 1 (46:37):
That's good advice for Cracker Barrel.
Speaker 2 (46:39):
I think you know, as a family dining chain, they
do a huge percentage of their business from Friday night
through Sunday afternoon, So maybe something.
Speaker 1 (46:47):
Cracker Bow can look at. Thanks for doing this, Fred,
You're the best and.
Speaker 3 (46:50):
I appreciate it's a lot of fun, Mike.
Speaker 2 (46:52):
Always is man. I want to thank the audience for
tuning in. If you'd like to learn more about Results
through Strategy, go to Results through Strategy dot com.
Speaker 1 (47:01):
That's t h r u H.
Speaker 2 (47:04):
If you liked our discussion, please share with your friends
and colleagues. Check back soon for an interview with Wade Allen,
president at Costa Vita Fresh Mexican grill
Host
Michael Halen
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