May 1, 2025 • 37 mins
Where we were with trade talks six weeks ago and where we are now are very different and that trajectory will continue over the next six weeks to six months, Align Public Strategies’ Founding Partner Joe Kefauver tells Bloomberg Intelligence. In this episode of the Choppin’ It Up podcast, Kefauver sits down with BI’s senior restaurant and foodservice analyst Michael Halen to discuss why he thinks the worst of the tariff showdown is behind us. He also comments on tax cuts, the MAHA movement’s progress and a recent study on the impact of the FAST Act.
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Speaker 1 (00:13):
Welcome to Chopping It Up. I'm your host, Mike Hanlon,
the senior Restaurant 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. Enjoy
the pod. I'd love it if you could leave us
a review on Apple or Spotify. Today I'm joined by
Joe Keith Appert. Joe is a founding partner of a
(00:33):
Line Public Strategies, a full service public affairs and creative firm.
He's the host of the Working Lunch podcast and my
go to source for all things public policy. Thanks for
returning to the podcast, Joe.
Speaker 2 (00:46):
Mike, it is great to be here on Chopping It Up.
I always love being on it, always love listening to it.
Speaker 3 (00:51):
So you do a great job.
Speaker 1 (00:53):
Thanks man, I appreciate it, and check out Joe's pod.
He does a great job man, of really getting in
the weeds is some of the regulatory issues that our
industry is facing. Man, it's really good stuff.
Speaker 2 (01:05):
I recently received an award as the most boring podcast. Uh,
I'm very proud of that.
Speaker 1 (01:11):
I disagree, man, you know, because we hear about stuff
on the on the on the federal level level. Right,
but unless it's things are happening in our state, and
you know, we tend not to hear about it. So
it's good to hear from from you and your co
host about, uh, you know, what's what's coming down the pip,
what we're seeing in some of the other states. So
(01:32):
is the worst of the tariff show down behind us?
Speaker 2 (01:36):
You know, anyone that has ever been in the business
of trying to predict what this president is going to
do is broke.
Speaker 3 (01:43):
So you don't know.
Speaker 4 (01:45):
But you know, Michael, the the the the collision between
politics and policy is often brutal, and especially populist politics,
and so.
Speaker 2 (01:58):
It takes a while well for the reality to catch
you up to the rhetoric. And I think tariffs is
a perfect example of that. Obviously, the president campaign in large,
you know, in large part on this kind of strategy,
and he is, you know, fulfilated this narrative that somehow
(02:21):
we're on the short end of all these trade deals
and and so forth, and we need to right the
right the ship. And then conversely, you know, people argue that, well,
he just uses this kind of as a chess piece.
Speaker 3 (02:31):
It's part of a broader game.
Speaker 2 (02:32):
He's trying to get concessions on the form policy or
whatever that may be. Right, So regardless of where you
fall down on that, there are some real world implications
for folks. Obviously in the restaurant industry is having a
conversation earlier. You know, we're the we're the caboosts on
a big, long train, and the egg industry is the
front of that train, and the restaurant industry is the
(02:53):
caboost of that train. And if in front of that
train is suffering or derails, man, we're we're sure to follow.
And so I worry about the tariffs on the ag community,
especially with regard to interestingly enough, not stuff we import
with stuff we export. So much of American agriculture exported Michael. Today,
(03:13):
as a matter of fact, we're taping this today.
Speaker 3 (03:15):
The New York.
Speaker 2 (03:16):
Times has a their daily podcast and they're interviewing a
soybean and corn farmer from Iowa, and she said about
fifty five percent of her total product and her peer
group all goes to China. And so you talk about
the marketplace and what happens, and you know, agribusiness now
it's floating, especially the family farms floating on loans, and
(03:38):
it's a future's business, and there's.
Speaker 3 (03:40):
All tons of uncertainties in agg anyway.
Speaker 2 (03:44):
And then you add all of this and the ramifications,
there's no good there's no good thing that comes out
of it. I do think, you know, this week we
saw the CEOs of the big retail, big boxes, Walmart,
targets and mothers go into the White House and they
basically said, look at present, we get, we get what
you're trying to do here, but understand the ramifications are,
in about two weeks, you're gonna start to see a
(04:04):
lot of empty store shelves as a supply chain uh
dries up.
Speaker 3 (04:10):
And that's going to be relayed on your lap politically, right.
Speaker 2 (04:13):
And and you saw later that day he comes out
and pumps the brakes on a bunch of tariff stuff, right,
And it's it's it's it's when that reality sets in
and when his political base, which is a large part
of corporate America, the AD community, start to go, hey,
all fun and games until it's not. And we're getting
to the point where it's it's kind of really not.
(04:35):
And you know, everybody, our whole, our whole political system
our economic system, foreign policy, whatever it is, is based
on stability.
Speaker 3 (04:41):
Right.
Speaker 2 (04:41):
It's an under it's a foundational billing block, and everything
to do is stability. We want to be predictive, We
want to understand what's going to happen the next quarter,
the next year, the next year, whatever that may be.
And instability is not good for anybody. So I don't
say that it's behind us totally to get to get
to the root of your question, but I do think
kind of the worst of that is kind of played
out of its system. He's gotten the political energy out
(05:03):
of it for the constituents he wanted to get the
energy out of it with Right, and now it's time
to kind of go okay, and so he can't completely
back off of it to save face. But you see
every he continues to delay or pump the brakes and
then politically claim victory right, and his constituency says, well,
we won that conversation with China or Canada or Mexico.
Speaker 3 (05:26):
So there's really almost no.
Speaker 2 (05:29):
Political price to be paid for it until there's an
economic price for the country, and then he will he
will wear that.
Speaker 1 (05:35):
Well, that's good to hear man. Do you think reciprocal
tariffs can lead to fewer global tariffs over time. I
now we've seen some of our partners say they pull
back on their tariffs. You know, obviously Trump that wasn't
enough for the Trump administration. They will also want to
see maybe less subsidies and different tax treatment. What are
your thoughts on that?
Speaker 3 (05:56):
Yeah, listen, you never know how a country is going
to react.
Speaker 2 (06:02):
I was actually kind of surprised, not so much with
the Chinese, but certainly Europe, the EU and Canada. They
didn't just fold over, right, And I think when you're
playing this game, you don't know how they're going to.
Speaker 3 (06:16):
Respond to They just acquiesced.
Speaker 2 (06:18):
And we saw a couple of Latin American countries kind
of acquiesce, but we didn't see that in other the
bigger trading partners across the world. And so I think
the short term thing is again separating politics and policy
to actpt policy outcomes.
Speaker 3 (06:34):
It's a zero sum game. The only the only person.
Speaker 2 (06:37):
That really loses in the whole thing as American consumer, right,
And so you know that's cool until it's not cool anymore.
So I think you're going to see a a flare
ups and spaces flare ups at times, but an overall
pumping of the breaks slowly over time, so you can
still kind of politically have appear to have the high
(06:58):
ground on it. It'll flare up again in probably June
of twenty twenty twenty six, about six months before the
midterm elections because as political juice, and we'll start having
this conversation again. So I don't I don't mean it
sounds so cynical, but I think that the headlines and
the stories kind of back up what I'm saying is
(07:20):
where where we were six weeks ago and where we
are now is a very different time. And I think
that's trajectory will continue over the next six to six
weeks to six months.
Speaker 1 (07:28):
Yeah, it's fascinating to watch. I mean, there's there's no
way you're gonna shift from a system that has always
prioritized capital over labor, you know, to kind of flip
that on its head and not expect some bumps in
the road. So definitely keeping meat busy man that it is.
Speaker 2 (07:45):
And you know, if I'm the CEO of a major
company that you're that you're that you're covering, you know,
I I know we have long term agreements in place
with certain certainly a suppliers, but I'm you know, the market,
not to get too much into your sandbox, but certainly
the market rewards growth, and growth is in part predicated
(08:07):
on a access to capital instability or in that market,
and be equipment, access to equipment. A lot of our
restaurant equipments friars or dishwashers or whatever comes out of Asia. Right,
And so I've made certain commitments to the street about
what my growth plant looked like over the next you know,
two years, five years, and now all that's kind of
hanging in the ether, and I suspect that some stock
(08:29):
prices over the next year or so, we'll take take
a pounding.
Speaker 1 (08:32):
Yeah, we'll see. They sure sure did over the last
couple of weeks. All right. I'm looking forward to the
day that the narrative shifts from tariffs to tax cuts.
Does anything stand in the way of eliminating taxes on
tips and overtime?
Speaker 2 (08:47):
You know, again, rhetoric meeting reality. It's kind of a
theme here. I think, you know, when when when the
president announced that policy idea, I guess at a rally
and h during the campaign, and everybody kind of jumped
on board. It was one of those things that that
that got ahead of itself. You saw a race among
(09:10):
Republican senators to get a gold star from the President
and introduced legislation, ran down, Ted Cruz ran down the
Senate floor, and next thing, you know, we have legislation
blah blah blah. And of course the industry has to
go whoa, whoa, whoa, whoa, whoa, let's pump the brakes here.
This is a very complicated area of the law, forty
five B tax credit. You know, our whole our own
(09:31):
models predicated on this forty five B tax credit, you know,
in terms of the about casual dining obviously, and you know,
sit down, full servi, full service restaurants. And they had
to you know, the NRA and others had to race
up the Capitol hill in the who who who Let
me explain how this whole ecosystem works here and here
it is April twenty fourth. We haven't heard much about
(09:52):
that issue federally. I know that in December after the election,
John Thune, the majority leader uh the Senate, was like,
this a very high priority and members, we're talking about it.
People were talking about it in town hall meetings and
here we are in April, and no one's talking too
much about Now. Other headlines have sucked a little bit
(10:12):
of the oxygen out of the room, right, Obviously, the
tariff stuff and what's going on, you know, all that
kind of stuff. But it is not an easy thing.
And when you've got the NRA and the restaurant's going, well,
what's super careful here, kind of takes some of the
gat the gleam off of it.
Speaker 1 (10:27):
Right.
Speaker 2 (10:27):
There are a couple of states that are pursuing that
as well, but we didn't see states jump in. We
saw a bunch of states with legislation that really was
just for the cameras and really didn't go anywhere. And
of course you'd want to let something like that be
reconciled federally before you start monking with that at the
state level. But it was it was fraught with potholes
(10:50):
and pitfalls. And I'm not saying the issue is going
away because it's political merit in it, but it's super complicated,
as you well know. And I don't think yeah, I
mean the president candidate Trump at the time, former President
Trump at the time, heard this from a server on
a stage and went out two minutes later, there was
(11:11):
no policy and there was no white paper at a
heritage foundation on this thing.
Speaker 3 (11:14):
All of a sudden, it is.
Speaker 2 (11:15):
The fifty yard line of a conversation, and it's it's
been hard over the last four or five months to.
Speaker 3 (11:23):
Pump the brakes level set understand.
Speaker 2 (11:25):
What's going on here, and so I think the enthusiasm
on that space has dropped a little bit. I think
that if they could figure out a way to do it,
they would pursue it because it has a lot of
political juice in it, especially with their overarching theory of
trying to have more outreach to the working class and
working class voters and so forth. So it fits nicely
(11:47):
into their overall strategy. This one's just super complicated. And
you start opening up the tax code and exempting this
person from income tax, so this part of their income
from then what's next, you know, and just dominoes start
to all doubt And so I think cooler heads have
forvailed on that issue. It remains to be seen what's
gonna happen.
Speaker 1 (12:04):
Seems like the MAHA movements made some progress in some
state legislatures.
Speaker 2 (12:09):
Yeah, we saw you know, West Virginia, and you know,
no one's ever said, you know, let's follow West Virginia's
lead on state legislation, but they were out there first
and banned a number of dies and preservatives and so forth.
And we saw Sarah Huckaby Sanders just last week sign
they've Senate Bill nine into law with a little broader list,
(12:33):
and we have a big bill kind of the last
what I would think is kind of the last big
bill of the year, just because you know, a lot
of the state legislature is already out, especially some of
the red states where this is going are already out.
Louisiana has a massive bill as like fifty one I
think ingredients in it, you know, so it hasn't gone
(12:54):
to so many states, but the conversation certainly has. But
again that's another one that's that's that's complicate, right, and
you know, from an industry perspective, and whether it's a
manufacturing side or the retailers O the restaurants, so much
of what's in the I think all of the Louisiana bill,
all those fifty one entities or ingredients are banned in
(13:17):
the UK, EU, Canada already right in parts of the world,
So you know, it's hard to have a leg to
stand on to say, well, we can't do this, We
can't do that.
Speaker 3 (13:27):
You know, obviously we probably can.
Speaker 2 (13:29):
It's just whether we can how much time they give
you to kind of reformulate, and you know, and so forth.
But it's got a lot of political energy. But I
think it's another issue. I feel like I'm kind of
a cynical black cloud on it. I don't mean to be,
but I'm just trying to be, you know, predictive of
where the conversation goes.
Speaker 3 (13:45):
You know.
Speaker 2 (13:46):
I think it's another one where it's kind of cool
until it's not right, and once you start going down
the road and and and really trying to.
Speaker 3 (13:58):
Dig into space.
Speaker 2 (13:59):
At some point when John Q voter in Iowa their
kid can't get fruity pebbles anymore, there's what the hell's
going on around here?
Speaker 3 (14:09):
You know?
Speaker 2 (14:09):
And and I think the same thing is happening with soda.
We're starting to see some of the things in the
Louisiana Bill, the Arizona Arkansas Bill have to deal with
soda colorings and formulations. And you start messing with John
Q viewed voters PEPSI man, and all of a sudden
you're now you're hitting a.
Speaker 3 (14:26):
Little too close to home, right, and so we'll see
where that goes.
Speaker 2 (14:28):
You know, I don't I think if I'm a restaurant operator,
whether large or small, I think it's like what is
the next set of dominoes? If you if you start
off and this dies and food coloring that has really
very little attachment to any real science, you know, around
the causations of different You know what happens when you
(14:50):
have some real science behind it, i e.
Speaker 3 (14:53):
Obesity, salt, sugar.
Speaker 2 (14:55):
And so if I'm a rest in the restaurant world,
whether you know, trade association or company, I'm watching this
and that was okay, and I know my manu, my
supply chain would largely take care of it and we'll
figure it out. But if you started getting into sugars
and salts and fats and all that kind of stuff.
Now now it's getting a little close to home, We'll
see where that goes.
Speaker 3 (15:14):
You know. I laugh about this particular space.
Speaker 2 (15:16):
If you're really you know, you're the Health and Human
Services secretary, you have the MAHA movement. The biggest things
to make America unhealthy are boos and smokes.
Speaker 3 (15:28):
They've said nothing about boos and smokes. So it's like, how.
Speaker 2 (15:31):
Much energy is in this, you know, short term? Yeah,
it's good politics. It's an interesting political coalition between kind
of lefty granola moms and anti science moms over here.
And it's it's a very very interesting political grassroots coalition.
It's and it has potential. I mean, if if you
(15:52):
get going on other other issues. It reminds me of
it could be the the Mad, if you will, of
this generation where you know, parts of the country or
blue or red or whatever, we're all united around this
issue set right, And I think MAHA is a lot
of the building blocks of the of the Mad movement
of you know, twenty twenty five years ago. So I
watch I'm fascinated by not so much the policy directives
(16:16):
and outcomes, but by the grassroots coalition that they're building
around that and what that does to overall kind of
I don't know, activism patterns, voting patterns, grassroots pattern that
I find MAHA fascinating.
Speaker 1 (16:27):
It's really interesting too, or something to see more chains
adopt each tallow versus some of these oils, right, yeah.
Speaker 2 (16:33):
You know, and I saw some chains kind of get
out front, and I'm thinking more of political the steak
and shake stuff. We've seen a couple of other chains.
It's gonna be hard for some change to make that
make that transitions. Then that one's you know, I don't know.
I probably should, but I don't know what McDonald's going
(16:55):
to pick on McDonald's.
Speaker 3 (16:56):
Just because they're the biggest.
Speaker 2 (16:57):
But when I go into that McDonald I know, whether
I'm in Spokane, Washington or Tampa, Florida, what those French
routes are going to taste like. And when I drive
in in two years and they taste different, I'm gonna
be upset. It's not like my I like it the
way it is right, And so we'll we'll we'll see
all that plays out. But the the the Louisiana bill
(17:20):
that I referenced earlier is the kind of the first
one that really starts to play in the oils space
as well. So it's it's a super interesting bill for
your audience to kind of go look at and understand.
Speaker 1 (17:27):
All right, great, one fair wage is moving onto my
home state. Are they going to have any success eliminating
the tech tip credit in New Jersey?
Speaker 3 (17:35):
You know, Oh my good, this is a great question.
Speaker 2 (17:38):
I I ultimately I don't think so if I were
going to Vegas and bedding, I would not. You know,
we've we've likened this, you know.
Speaker 3 (17:46):
Is this the the.
Speaker 2 (17:48):
Resurgence of a movement or is this kind of that
death rattle before the patient goes under, that last kind
of spasmive activity before it's over. I am completely shocked
that they continue you as an entity to receive funding.
Their their legislative political track record over the last couple
of years has been abysmal. I mean, they've they've won
(18:09):
in the City of Chicago, they've lost bout initiatives, and
you know, Massachusetts and legislation Baltimore and you know, state
of Mayor, all these places. They're just losing left and right.
I don't think that they're going to be able to
be successful in New Jersey. You never know, but unlikely.
I mean, you gotta look down ninety five of what's
(18:31):
happened in the restaurant industry in DC.
Speaker 3 (18:33):
It's a little more complicated.
Speaker 2 (18:35):
Obviously, COVID kept much of the customer base of the
restaurant industry out of the city. Remote work kept it
from backfilling up. And in the middle of this, the
voter's passed this tip cradit elimination, which is just I mean,
you know, kind of nailing the coffin for a lot
of restaurant owners. But I think the issue can be
(18:57):
framed in a way that the destructive impact that the
tip cred elimination had, and it's just right down the street.
Speaker 3 (19:03):
I don't find a lot of fervor in New Jersey
for what's going on.
Speaker 2 (19:09):
Similarly, they have this legislation in India in Illinois to
replicate what Chicago did, and everybody's like, no, we're not
doing that again, you know.
Speaker 3 (19:17):
So you know, I think it's kind of the death rattle.
Speaker 2 (19:22):
I just don't know where they're gonna get their funding,
where they gonna get their funding note to continue. So
I don't see it. I don't see it happening in Baltimore.
I don't see it happening in New Jersey. I don't
see it happening in Illinois. So we'll see where that
movement goes. But there they're still active, you know, rattling
their pots and pans. They were up in Albany this
week rallying at the capitol about the bill up there.
(19:44):
They were in Springfield this week riding on the pots
and pans about the bill there, but I think it's
just kind of for the short term cameras, and I
don't think it has really any impact, gotcha.
Speaker 1 (19:55):
Yeah, And it's bummer to hear what's going on there,
you know, in the with the restaurant industry in d C.
Man our old stomping grounds.
Speaker 2 (20:03):
Yeah, it's it's it's a bad it's it's just a
it's not even a one to two punch, but it's
been a one, two, three punch for them, and it's
been and now you know, half I guess a four
punch is that their customer base was kept out of
the city, their customer base was incentive not to come
into the city, and now they're.
Speaker 3 (20:24):
All being fired. So it's like, what is going on?
Speaker 2 (20:28):
I mean, the housing market in d C is going
to take a die. I mean, it's just a bad,
bad time. If you were you know, Mike's Barn and
Grill on Fifteenth Street, Man, it's got to be a
really tough tough time to be a restaurant operator in DC.
Speaker 1 (20:43):
Yeah, for sure, man, I you know, I like to
get there at least once a year. Hopefully my Jose
Andres restaurants are still alive from Well, next time I
get down there.
Speaker 2 (20:52):
Man, Yeah, that I love his email, his Mexican place
on seventh that is, I could just bring him backpack,
sleeping bag, his move into that joint. I love that place.
It's fantastic, fantastic. So yeah, so what do you what
do you when you when you were talking to you know,
corporate leaders, what are they saying to Michael about this space.
Speaker 3 (21:11):
Are they nervous or they think it's all.
Speaker 2 (21:12):
Gonna kind of pan out and it'll die down, or
what's when you talk to your folks, you know, what
do they think.
Speaker 1 (21:20):
In regards to which topic?
Speaker 3 (21:22):
Just ability to turmoil?
Speaker 2 (21:24):
You know, the outlook, economic outlook, No, no, no particular
policy and I'm asking about but just to kind of
the overall, you know, all this stuff settle down, they
get back to running the restaurants or is it just
going to be a wild ride here for the next
couple of years.
Speaker 1 (21:40):
It's interesting, right because we came out of last year,
which was such a rough year for restaurants, right, Like
the slow down and consumer spendings typically typically hits restaurants first.
And you've had that, and but after the election, people
start spending more money and you know, I was expecting
(22:00):
some strength here in the first half of the year
as we were lapping some weak numbers, and the industry
got it with the oldest January and fourteen years we
had snow, we had the worst flu season in a
very long time, and then now we have uncertainty about tariff.
So we just got started on the earning season. Chipotle
(22:21):
reported yesterday and that was interesting. They're talking about a
week second quarter and I don't think that's really surprised anyone.
But what is a little bit surprising is that their
numbers are actually weaker than what we're seeing in April
through black Box Intelligence data. So the data in April
(22:45):
it seems to be getting better, you know, post you know,
tariff for drama. So really there's just a lot of uncertainty,
you know, in the markets, by the consumer were and
about what's going to happen. I mean, I think Chipotle
sounded pretty positive that the second half was going to
(23:08):
be a lot better than the first half, but that's
typically what a company does when they miss first quarter earning.
So how much is it is there sincere belief versus
you know, what they want to tell the street right now?
Speaker 2 (23:23):
Us surprise to see Chipotle's numbered down a little bit.
I just get you know, you know, I don't have
my little microcosm of the world as a reference point,
but I live with in you know, ten or fifteen
minutes to two Chipotle's, and every time I go by
and there's there's plenty of people there. I mean, they're busy,
they're busy properties, you know, So that kind of surprised
me when I saw that.
Speaker 1 (23:42):
Yeah, I was surprised that everybody their their trend. So
there's you know, we look, we go back, do we
look at two year trends, six year trends. You know,
their six year trend was down ten percentage points from
the fourth quarter to the first. Their two year trend
was down over seven hundred faces points from the fourth
quarter of the first a material slowdown, right that that
(24:02):
seven hundred basis points is an old weather and flew
in the shift of easter, right, so there's something going on.
We're trying to figure it out. Management pointed to, uh,
you know, efforts to clean their stores better and uh,
you know, provide their customers with friendlier service. So I
wish I had some more for you. By the end
of next week. I'll have a lot more data on that.
Speaker 3 (24:25):
On that ask you another question. You're interviewing me, and
now I'm interviewing you.
Speaker 1 (24:30):
But but you're a great host, So let's let's do about.
Speaker 2 (24:34):
So so on the you know, I remember a million
years ago when I had you know, headful of Hair
and heartful of Hope and Darden, we would talk about
weather and you know, quarterly earnings reports and we were
all very caught. Isn't the weather obviously, But you know,
fast forward all these years and delivery is such a big.
Speaker 3 (24:52):
Part of the business.
Speaker 2 (24:54):
Now, you know, is how how much of delivery and
not having to go out to get food has softened
the edges of some of that weather stuff or is it?
Speaker 3 (25:04):
Are they just haven't been connected? Are they connected?
Speaker 1 (25:06):
You would think it will. But last year we saw
consumers do a lot more pick up versus the third
party delivery just because the the you know, price difference
is massive. But I think there is something to that.
You know, what we wrote in our earnings preview for
Dominoes was that we expect Dominoes to perform most quick
(25:28):
service restaurants because when the weather's really cold and snowy,
you know, you're more likely to order a pizza than
than to leave the house. So and pizzas, you know,
the most cost effective way to feed a family. It's
got it's got a great price point.
Speaker 3 (25:42):
It's getting up there though.
Speaker 2 (25:43):
We my my, my, my little humble Costa is no
stranger to pizza delivery.
Speaker 3 (25:48):
It's like normal on tiers.
Speaker 2 (25:49):
Hey Joe, Hey doing but you can it didn't take
long to uh get a pretty expensive pizza water, so
that the prices are going up on that pretty significantly.
Speaker 1 (25:58):
Yeah, man, we're seeing it. We're seeing it. So and
it's it's going to be interesting to see what's what
opens with the tariffs, right, Like, most of our companies
don't have that exposure, which is great. And when it
comes to the food side, most of the increases that
the companies are going to suffer and be passed along
with modest price increases or just swallowed by the company
(26:21):
without much of an issue. You know, Chole was talking
about about fifty bases point increase in perpetuity to their
cost to the tariffs. You know, what's more interesting, I
think is you know the point you made earlier about
equipment and a lot of the component components of the
equipment especially are manufactured in China, and so that's a
(26:45):
little bit more of a concern. But that's you know,
it's going to eat into returns on investment a little bit,
but I don't think it's enough to be completely prohibitive, right,
But we're going to continue to watch cash on cash
returns and yeah, and it's going to be more of
the same. The companies that will provide the best returns
on investment are going to be the ones that grow
(27:05):
the fastest. Right, money flows to where it's treated best.
Has there been progress on paid lead?
Speaker 3 (27:11):
You know, paid leaves?
Speaker 2 (27:12):
Super interesting issue, you know, the one that comes to
mind obviously, the voters in Missouri in November past Proposition A,
which established a new paid leave regiment in the state.
The Republicans went to in the legislature tried to basically
(27:34):
terminated cancel the will of the voters. A Democratic filibuster
in the Missouri Senate has kind of derailed that effort,
and it looks like their law will take effect next
week May one. It's slow but steady. I think they're
only probably still thirteen twelve states that have a mandated
(27:57):
paid leave. I see what's been interesting in that space,
and there are a couple of spaces. Portable benefits is
another one where the politics over the last couple of
years have shifted tremendously and we've been, you know, over
the last ten or fifteen years, the paid leave has
kind of been a pet project of the Blue team,
right and setting up paid leave laws, sickly laws, whatever
(28:21):
it may be. And so you've got the big blue states,
the Californias and the New Jerseys and the New York's
and Illinois's Conneticuts with their paid leave law Maryland. But
what you started to see is in states like Vermont
and New Hampshire, a number of states Kentucky kind of
leader where Republicans have kind of gained the upper hand
(28:42):
on this issue and look at paid leave from a
perspective of not necessarily being a government program per se,
but opening up the private marketplace and leveraging insurance companies
to provide policies that either an employer can pay in
full or in part.
Speaker 3 (29:00):
Like any other benefit. And it's taken a lot of
air out of the paid leave issue.
Speaker 2 (29:06):
And unless it's just in big solid blue states, right,
but there are a number of red states that are
either passed or in the you know, having the CENTERFIC
conversation about a market based paid leave program that is
not necessarily mandated, but employers are certainly incentive to go
(29:28):
down this road through the tax code or whatnot. And
like I say, if you're the labor community, you're Bernie Sanders,
you're pulling your hair out about this because it's really
taken the leadership of the issue. And as it referenced earlier,
it jives in nicely with their overall strategy of trying
to make more inroads with working class voters and so forth.
(29:48):
And I mean, the Democrats have essentially fumbled, in my opinion,
my humble opinion, have fumbled the paid leave ball, and
the Republicans have picked it up and run.
Speaker 3 (29:58):
Their own direction with it. But they're the one with
the ball now.
Speaker 2 (30:01):
And so now the Democrats are reacting to what an
enlarge measure are common sense approaches to paid leave, and
it's driving them kind of crazy, if you will, same
thing on portable benefits that we just saw a portable
benefits legislation signed in the law in Tennessee and Alabama.
And you know, who would have thought the Alabama legislature
would be out front on creating benefits packages for as
(30:23):
many employer employees as possible, right, I mean, it's just
that the Blue team has squandered a bunch of these
issues they've traditionally kind of owned. So it's been super history.
I know, paid leave and portal benefits are very different,
but one sits inside the other. That's super They're related obviously,
so I spect you'll see more of that. We had
some paid leave legislation I think for the fifth year
(30:44):
in a row in New Mexico ran out of gas.
I think the puck has just gone to a different
part of the rink on this issue. And if Democrats
want to do the New York style California style mandated
benefit program, it's it's they're kind of run out of
states that are amenable to that anymore, so they can
(31:06):
have to they have to change the direction on this issue.
Speaker 3 (31:09):
So I find that issue pretty fascinating as well.
Speaker 1 (31:12):
Yeah, that's really interesting trying to leverage the private market
and the tax code to incentivize employers.
Speaker 2 (31:17):
And yeah, and you would think when we're back to
you know, pre COVID numbers of basically four percent unemployment
and employers employees employers are back to competing for workers.
Something like that is very attractive, right that they can
now play and have some leverage over creating a benefit
package that works for their employee at their their workforce,
(31:37):
as opposed to this kind of paying into some fund
that may stay in the paid leave fund. But we
see many states you pay into one fund, it becomes
the highway fund over there when the buddy is tight,
you know what I mean. So it's it's actually a
much more discipline approach and involved.
Speaker 3 (31:54):
In the market.
Speaker 2 (31:54):
And I think Republicans are kind of changing the game
on that on that issue.
Speaker 1 (31:58):
Well, and I learned from your odd Pepperdine did a
study on the fast acts impact in California and what
did it find that they should listen to you?
Speaker 2 (32:09):
Well, I think it's you know, you know, when when
the proponents of these types of policy proposals, whether it's
minim wage increases or workforce standards boards, you know, you
have no idea how it's really going to play out
in the real world, you know, and they come out
with these projections that this may happen and that may happen,
(32:30):
and there's always initial reaction, there's always disruption.
Speaker 3 (32:35):
Maybe maybe employers don't.
Speaker 2 (32:38):
You know, in an industry like fast food where there's you know,
two hundred percent attrition, maybe they just don't replace people
as fast. They're nervous about what's going on. But my
point being, it takes a year or two or maybe
three for enough data to come back where it becomes
statistically meaningful. Right, And what we're starting to see in
the last three or four months California, you know, d C,
(33:01):
these other areas, Chicago, you know, is is real data
about what does this mean for employment? Unemployment benefits. You
measure that, you measure new restaurants, starts, you measure applications
for permits on liquor like whatever it may be, and
you can start to get a picture of the impact
of what it's happening. But again is that there's a
(33:22):
couple of year lag and now we're seeing data, report
after report, every report coming in to saying whoa this is,
This has real rule implications and what Pepperdine And of
course I don't know if you've ever been to Pepperdine,
but it's one of those beautiful campuses overlooking Malibu. I
don't know how anybody could study there, but so but
(33:43):
my point being that you know, while growth while there
was still growth in job categories in California, while there
was still growth in quick service growth sector throughout the country,
there was significant shrinkage in the in the fast food
workforce in California. It went against national norms and national
(34:06):
data points, and so it was really it was really
easy to tie this policy outcome to that that data outcome,
if you will, And I think you're going to see
a lot more of that. We have a new head
of research at the National Restaurant Association just announced this week,
and I think you know, he's coming on board a
lot of great time where there's now meaningful data coming
(34:28):
out of DC and meaningful data coming out of California.
So I think you're going to see a lot more
of that in the industry. Be aggressive, and it's coming
at a good time. Obviously, we went to talking about
New Jersey earlier. It's now really easy to kind of
show New Jersey and the Minneapolis Wage Standards Board idea
they're playing with there, that there are actual implications.
Speaker 3 (34:46):
So just there's just a lag time.
Speaker 2 (34:48):
It's it's a two or three year lag time, so
that data becomes meaningful and that's what we're finding now.
And Pepperdine jumped on to some other end of the
other thing tanks in California.
Speaker 3 (34:57):
That that did more How do I say this without
impugning that that.
Speaker 2 (35:04):
Rightly extrapolated trends to come up with that those those
those those outcomes, but it was a little more speculative.
Like the Pepperdine study is like data right, and it's
the first one in California, and I don't think it
will be the last Biolama shots. So you know, our
our our our task as an industry is how do
we take that energy, that narrative, that data and make
(35:26):
sure that seven thousand state legislators in the country know this,
and five hundred and thirty five members of Congress know this,
and fifty governors and all that kind of stuff.
Speaker 3 (35:35):
That's the that's the that's the NRA's job.
Speaker 1 (35:37):
So yeah, from what I've heard, there was a lot
of kiosks being installed in California.
Speaker 3 (35:43):
Yeah.
Speaker 1 (35:44):
Oh thanks again for doing this man, I'm a big
fan of your work. Where can listeners go to learn
more about aligned public strategies and find the Working Launch podcast?
Speaker 2 (35:52):
Well, the Working Launch Podcast, Thank you for the plug
is produced by Restaurant Business Magazine, so you can find
it on their platform obviously all the Apples and Spotify
platforms as well, and you can go to Align Public
Strategies dot com. That's where we are and happy to
help answer any questions and wax on poetically about the
(36:15):
future of the restaurant.
Speaker 3 (36:16):
Energies VISE are the public policy and politics.
Speaker 2 (36:19):
So I appreciate Michael being on your respected podcast. It's
find to listen to you. I learned more about the
business and the numbers, and I'm not a numbers guy.
I'm I'm the right brain guy, but I your podcast
makes me makes me smart, So I appreciate.
Speaker 3 (36:37):
I appreciate all you do.
Speaker 1 (36:39):
Yeah, you got it, man, I appreciate that, and it's
always fun speaking with you. Man. I want to thank
the audience for tuning in. If you liked our discussion,
please share with your friends and colleagues. Check back soon
for an interview with Nick Kenner, the founder and CEO
of Just Salad.
Welcome to Chopping It Up. I'm your host, Mike Hanlon,
the senior Restaurant 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. Enjoy
the pod. I'd love it if you could leave us
a review on Apple or Spotify. Today I'm joined by
Joe Keith Appert. Joe is a founding partner of a
(00:33):
Line Public Strategies, a full service public affairs and creative firm.
He's the host of the Working Lunch podcast and my
go to source for all things public policy. Thanks for
returning to the podcast, Joe.
Speaker 2 (00:46):
Mike, it is great to be here on Chopping It Up.
I always love being on it, always love listening to it.
Speaker 3 (00:51):
So you do a great job.
Speaker 1 (00:53):
Thanks man, I appreciate it, and check out Joe's pod.
He does a great job man, of really getting in
the weeds is some of the regulatory issues that our
industry is facing. Man, it's really good stuff.
Speaker 2 (01:05):
I recently received an award as the most boring podcast. Uh,
I'm very proud of that.
Speaker 1 (01:11):
I disagree, man, you know, because we hear about stuff
on the on the on the federal level level. Right,
but unless it's things are happening in our state, and
you know, we tend not to hear about it. So
it's good to hear from from you and your co
host about, uh, you know, what's what's coming down the pip,
what we're seeing in some of the other states. So
(01:32):
is the worst of the tariff show down behind us?
Speaker 2 (01:36):
You know, anyone that has ever been in the business
of trying to predict what this president is going to
do is broke.
Speaker 3 (01:43):
So you don't know.
Speaker 4 (01:45):
But you know, Michael, the the the the collision between
politics and policy is often brutal, and especially populist politics,
and so.
Speaker 2 (01:58):
It takes a while well for the reality to catch
you up to the rhetoric. And I think tariffs is
a perfect example of that. Obviously, the president campaign in large,
you know, in large part on this kind of strategy,
and he is, you know, fulfilated this narrative that somehow
(02:21):
we're on the short end of all these trade deals
and and so forth, and we need to right the
right the ship. And then conversely, you know, people argue that, well,
he just uses this kind of as a chess piece.
Speaker 3 (02:31):
It's part of a broader game.
Speaker 2 (02:32):
He's trying to get concessions on the form policy or
whatever that may be. Right, So regardless of where you
fall down on that, there are some real world implications
for folks. Obviously in the restaurant industry is having a
conversation earlier. You know, we're the we're the caboosts on
a big, long train, and the egg industry is the
front of that train, and the restaurant industry is the
(02:53):
caboost of that train. And if in front of that
train is suffering or derails, man, we're we're sure to follow.
And so I worry about the tariffs on the ag community,
especially with regard to interestingly enough, not stuff we import
with stuff we export. So much of American agriculture exported Michael. Today,
(03:13):
as a matter of fact, we're taping this today.
Speaker 3 (03:15):
The New York.
Speaker 2 (03:16):
Times has a their daily podcast and they're interviewing a
soybean and corn farmer from Iowa, and she said about
fifty five percent of her total product and her peer
group all goes to China. And so you talk about
the marketplace and what happens, and you know, agribusiness now
it's floating, especially the family farms floating on loans, and
(03:38):
it's a future's business, and there's.
Speaker 3 (03:40):
All tons of uncertainties in agg anyway.
Speaker 2 (03:44):
And then you add all of this and the ramifications,
there's no good there's no good thing that comes out
of it. I do think, you know, this week we
saw the CEOs of the big retail, big boxes, Walmart,
targets and mothers go into the White House and they
basically said, look at present, we get, we get what
you're trying to do here, but understand the ramifications are,
in about two weeks, you're gonna start to see a
(04:04):
lot of empty store shelves as a supply chain uh
dries up.
Speaker 3 (04:10):
And that's going to be relayed on your lap politically, right.
Speaker 2 (04:13):
And and you saw later that day he comes out
and pumps the brakes on a bunch of tariff stuff, right,
And it's it's it's it's when that reality sets in
and when his political base, which is a large part
of corporate America, the AD community, start to go, hey,
all fun and games until it's not. And we're getting
to the point where it's it's kind of really not.
(04:35):
And you know, everybody, our whole, our whole political system
our economic system, foreign policy, whatever it is, is based
on stability.
Speaker 3 (04:41):
Right.
Speaker 2 (04:41):
It's an under it's a foundational billing block, and everything
to do is stability. We want to be predictive, We
want to understand what's going to happen the next quarter,
the next year, the next year, whatever that may be.
And instability is not good for anybody. So I don't
say that it's behind us totally to get to get
to the root of your question, but I do think
kind of the worst of that is kind of played
out of its system. He's gotten the political energy out
(05:03):
of it for the constituents he wanted to get the
energy out of it with Right, and now it's time
to kind of go okay, and so he can't completely
back off of it to save face. But you see
every he continues to delay or pump the brakes and
then politically claim victory right, and his constituency says, well,
we won that conversation with China or Canada or Mexico.
Speaker 3 (05:26):
So there's really almost no.
Speaker 2 (05:29):
Political price to be paid for it until there's an
economic price for the country, and then he will he
will wear that.
Speaker 1 (05:35):
Well, that's good to hear man. Do you think reciprocal
tariffs can lead to fewer global tariffs over time. I
now we've seen some of our partners say they pull
back on their tariffs. You know, obviously Trump that wasn't
enough for the Trump administration. They will also want to
see maybe less subsidies and different tax treatment. What are
your thoughts on that?
Speaker 3 (05:56):
Yeah, listen, you never know how a country is going
to react.
Speaker 2 (06:02):
I was actually kind of surprised, not so much with
the Chinese, but certainly Europe, the EU and Canada. They
didn't just fold over, right, And I think when you're
playing this game, you don't know how they're going to.
Speaker 3 (06:16):
Respond to They just acquiesced.
Speaker 2 (06:18):
And we saw a couple of Latin American countries kind
of acquiesce, but we didn't see that in other the
bigger trading partners across the world. And so I think
the short term thing is again separating politics and policy
to actpt policy outcomes.
Speaker 3 (06:34):
It's a zero sum game. The only the only person.
Speaker 2 (06:37):
That really loses in the whole thing as American consumer, right,
And so you know that's cool until it's not cool anymore.
So I think you're going to see a a flare
ups and spaces flare ups at times, but an overall
pumping of the breaks slowly over time, so you can
still kind of politically have appear to have the high
(06:58):
ground on it. It'll flare up again in probably June
of twenty twenty twenty six, about six months before the
midterm elections because as political juice, and we'll start having
this conversation again. So I don't I don't mean it
sounds so cynical, but I think that the headlines and
the stories kind of back up what I'm saying is
(07:20):
where where we were six weeks ago and where we
are now is a very different time. And I think
that's trajectory will continue over the next six to six
weeks to six months.
Speaker 1 (07:28):
Yeah, it's fascinating to watch. I mean, there's there's no
way you're gonna shift from a system that has always
prioritized capital over labor, you know, to kind of flip
that on its head and not expect some bumps in
the road. So definitely keeping meat busy man that it is.
Speaker 2 (07:45):
And you know, if I'm the CEO of a major
company that you're that you're that you're covering, you know,
I I know we have long term agreements in place
with certain certainly a suppliers, but I'm you know, the market,
not to get too much into your sandbox, but certainly
the market rewards growth, and growth is in part predicated
(08:07):
on a access to capital instability or in that market,
and be equipment, access to equipment. A lot of our
restaurant equipments friars or dishwashers or whatever comes out of Asia. Right,
And so I've made certain commitments to the street about
what my growth plant looked like over the next you know,
two years, five years, and now all that's kind of
hanging in the ether, and I suspect that some stock
(08:29):
prices over the next year or so, we'll take take
a pounding.
Speaker 1 (08:32):
Yeah, we'll see. They sure sure did over the last
couple of weeks. All right. I'm looking forward to the
day that the narrative shifts from tariffs to tax cuts.
Does anything stand in the way of eliminating taxes on
tips and overtime?
Speaker 2 (08:47):
You know, again, rhetoric meeting reality. It's kind of a
theme here. I think, you know, when when when the
president announced that policy idea, I guess at a rally
and h during the campaign, and everybody kind of jumped
on board. It was one of those things that that
that got ahead of itself. You saw a race among
(09:10):
Republican senators to get a gold star from the President
and introduced legislation, ran down, Ted Cruz ran down the
Senate floor, and next thing, you know, we have legislation
blah blah blah. And of course the industry has to
go whoa, whoa, whoa, whoa, whoa, let's pump the brakes here.
This is a very complicated area of the law, forty
five B tax credit. You know, our whole our own
(09:31):
models predicated on this forty five B tax credit, you know,
in terms of the about casual dining obviously, and you know,
sit down, full servi, full service restaurants. And they had
to you know, the NRA and others had to race
up the Capitol hill in the who who who Let
me explain how this whole ecosystem works here and here
it is April twenty fourth. We haven't heard much about
(09:52):
that issue federally. I know that in December after the election,
John Thune, the majority leader uh the Senate, was like,
this a very high priority and members, we're talking about it.
People were talking about it in town hall meetings and
here we are in April, and no one's talking too
much about Now. Other headlines have sucked a little bit
(10:12):
of the oxygen out of the room, right, Obviously, the
tariff stuff and what's going on, you know, all that
kind of stuff. But it is not an easy thing.
And when you've got the NRA and the restaurant's going, well,
what's super careful here, kind of takes some of the
gat the gleam off of it.
Speaker 1 (10:27):
Right.
Speaker 2 (10:27):
There are a couple of states that are pursuing that
as well, but we didn't see states jump in. We
saw a bunch of states with legislation that really was
just for the cameras and really didn't go anywhere. And
of course you'd want to let something like that be
reconciled federally before you start monking with that at the
state level. But it was it was fraught with potholes
(10:50):
and pitfalls. And I'm not saying the issue is going
away because it's political merit in it, but it's super complicated,
as you well know. And I don't think yeah, I
mean the president candidate Trump at the time, former President
Trump at the time, heard this from a server on
a stage and went out two minutes later, there was
(11:11):
no policy and there was no white paper at a
heritage foundation on this thing.
Speaker 3 (11:14):
All of a sudden, it is.
Speaker 2 (11:15):
The fifty yard line of a conversation, and it's it's
been hard over the last four or five months to.
Speaker 3 (11:23):
Pump the brakes level set understand.
Speaker 2 (11:25):
What's going on here, and so I think the enthusiasm
on that space has dropped a little bit. I think
that if they could figure out a way to do it,
they would pursue it because it has a lot of
political juice in it, especially with their overarching theory of
trying to have more outreach to the working class and
working class voters and so forth. So it fits nicely
(11:47):
into their overall strategy. This one's just super complicated. And
you start opening up the tax code and exempting this
person from income tax, so this part of their income
from then what's next, you know, and just dominoes start
to all doubt And so I think cooler heads have
forvailed on that issue. It remains to be seen what's
gonna happen.
Speaker 1 (12:04):
Seems like the MAHA movements made some progress in some
state legislatures.
Speaker 2 (12:09):
Yeah, we saw you know, West Virginia, and you know,
no one's ever said, you know, let's follow West Virginia's
lead on state legislation, but they were out there first
and banned a number of dies and preservatives and so forth.
And we saw Sarah Huckaby Sanders just last week sign
they've Senate Bill nine into law with a little broader list,
(12:33):
and we have a big bill kind of the last
what I would think is kind of the last big
bill of the year, just because you know, a lot
of the state legislature is already out, especially some of
the red states where this is going are already out.
Louisiana has a massive bill as like fifty one I
think ingredients in it, you know, so it hasn't gone
(12:54):
to so many states, but the conversation certainly has. But
again that's another one that's that's that's complicate, right, and
you know, from an industry perspective, and whether it's a
manufacturing side or the retailers O the restaurants, so much
of what's in the I think all of the Louisiana bill,
all those fifty one entities or ingredients are banned in
(13:17):
the UK, EU, Canada already right in parts of the world,
So you know, it's hard to have a leg to
stand on to say, well, we can't do this, We
can't do that.
Speaker 3 (13:27):
You know, obviously we probably can.
Speaker 2 (13:29):
It's just whether we can how much time they give
you to kind of reformulate, and you know, and so forth.
But it's got a lot of political energy. But I
think it's another issue. I feel like I'm kind of
a cynical black cloud on it. I don't mean to be,
but I'm just trying to be, you know, predictive of
where the conversation goes.
Speaker 3 (13:45):
You know.
Speaker 2 (13:46):
I think it's another one where it's kind of cool
until it's not right, and once you start going down
the road and and and really trying to.
Speaker 3 (13:58):
Dig into space.
Speaker 2 (13:59):
At some point when John Q voter in Iowa their
kid can't get fruity pebbles anymore, there's what the hell's
going on around here?
Speaker 3 (14:09):
You know?
Speaker 2 (14:09):
And and I think the same thing is happening with soda.
We're starting to see some of the things in the
Louisiana Bill, the Arizona Arkansas Bill have to deal with
soda colorings and formulations. And you start messing with John
Q viewed voters PEPSI man, and all of a sudden
you're now you're hitting a.
Speaker 3 (14:26):
Little too close to home, right, and so we'll see
where that goes.
Speaker 2 (14:28):
You know, I don't I think if I'm a restaurant operator,
whether large or small, I think it's like what is
the next set of dominoes? If you if you start
off and this dies and food coloring that has really
very little attachment to any real science, you know, around
the causations of different You know what happens when you
(14:50):
have some real science behind it, i e.
Speaker 3 (14:53):
Obesity, salt, sugar.
Speaker 2 (14:55):
And so if I'm a rest in the restaurant world,
whether you know, trade association or company, I'm watching this
and that was okay, and I know my manu, my
supply chain would largely take care of it and we'll
figure it out. But if you started getting into sugars
and salts and fats and all that kind of stuff.
Now now it's getting a little close to home, We'll
see where that goes.
Speaker 3 (15:14):
You know. I laugh about this particular space.
Speaker 2 (15:16):
If you're really you know, you're the Health and Human
Services secretary, you have the MAHA movement. The biggest things
to make America unhealthy are boos and smokes.
Speaker 3 (15:28):
They've said nothing about boos and smokes. So it's like, how.
Speaker 2 (15:31):
Much energy is in this, you know, short term? Yeah,
it's good politics. It's an interesting political coalition between kind
of lefty granola moms and anti science moms over here.
And it's it's a very very interesting political grassroots coalition.
It's and it has potential. I mean, if if you
(15:52):
get going on other other issues. It reminds me of
it could be the the Mad, if you will, of
this generation where you know, parts of the country or
blue or red or whatever, we're all united around this
issue set right, And I think MAHA is a lot
of the building blocks of the of the Mad movement
of you know, twenty twenty five years ago. So I
watch I'm fascinated by not so much the policy directives
(16:16):
and outcomes, but by the grassroots coalition that they're building
around that and what that does to overall kind of
I don't know, activism patterns, voting patterns, grassroots pattern that
I find MAHA fascinating.
Speaker 1 (16:27):
It's really interesting too, or something to see more chains
adopt each tallow versus some of these oils, right, yeah.
Speaker 2 (16:33):
You know, and I saw some chains kind of get
out front, and I'm thinking more of political the steak
and shake stuff. We've seen a couple of other chains.
It's gonna be hard for some change to make that
make that transitions. Then that one's you know, I don't know.
I probably should, but I don't know what McDonald's going
(16:55):
to pick on McDonald's.
Speaker 3 (16:56):
Just because they're the biggest.
Speaker 2 (16:57):
But when I go into that McDonald I know, whether
I'm in Spokane, Washington or Tampa, Florida, what those French
routes are going to taste like. And when I drive
in in two years and they taste different, I'm gonna
be upset. It's not like my I like it the
way it is right, And so we'll we'll we'll see
all that plays out. But the the the Louisiana bill
(17:20):
that I referenced earlier is the kind of the first
one that really starts to play in the oils space
as well. So it's it's a super interesting bill for
your audience to kind of go look at and understand.
Speaker 1 (17:27):
All right, great, one fair wage is moving onto my
home state. Are they going to have any success eliminating
the tech tip credit in New Jersey?
Speaker 3 (17:35):
You know, Oh my good, this is a great question.
Speaker 2 (17:38):
I I ultimately I don't think so if I were
going to Vegas and bedding, I would not. You know,
we've we've likened this, you know.
Speaker 3 (17:46):
Is this the the.
Speaker 2 (17:48):
Resurgence of a movement or is this kind of that
death rattle before the patient goes under, that last kind
of spasmive activity before it's over. I am completely shocked
that they continue you as an entity to receive funding.
Their their legislative political track record over the last couple
of years has been abysmal. I mean, they've they've won
(18:09):
in the City of Chicago, they've lost bout initiatives, and
you know, Massachusetts and legislation Baltimore and you know, state
of Mayor, all these places. They're just losing left and right.
I don't think that they're going to be able to
be successful in New Jersey. You never know, but unlikely.
I mean, you gotta look down ninety five of what's
(18:31):
happened in the restaurant industry in DC.
Speaker 3 (18:33):
It's a little more complicated.
Speaker 2 (18:35):
Obviously, COVID kept much of the customer base of the
restaurant industry out of the city. Remote work kept it
from backfilling up. And in the middle of this, the
voter's passed this tip cradit elimination, which is just I mean,
you know, kind of nailing the coffin for a lot
of restaurant owners. But I think the issue can be
(18:57):
framed in a way that the destructive impact that the
tip cred elimination had, and it's just right down the street.
Speaker 3 (19:03):
I don't find a lot of fervor in New Jersey
for what's going on.
Speaker 2 (19:09):
Similarly, they have this legislation in India in Illinois to
replicate what Chicago did, and everybody's like, no, we're not
doing that again, you know.
Speaker 3 (19:17):
So you know, I think it's kind of the death rattle.
Speaker 2 (19:22):
I just don't know where they're gonna get their funding,
where they gonna get their funding note to continue. So
I don't see it. I don't see it happening in Baltimore.
I don't see it happening in New Jersey. I don't
see it happening in Illinois. So we'll see where that
movement goes. But there they're still active, you know, rattling
their pots and pans. They were up in Albany this
week rallying at the capitol about the bill up there.
(19:44):
They were in Springfield this week riding on the pots
and pans about the bill there, but I think it's
just kind of for the short term cameras, and I
don't think it has really any impact, gotcha.
Speaker 1 (19:55):
Yeah, And it's bummer to hear what's going on there,
you know, in the with the restaurant industry in d C.
Man our old stomping grounds.
Speaker 2 (20:03):
Yeah, it's it's it's a bad it's it's just a
it's not even a one to two punch, but it's
been a one, two, three punch for them, and it's
been and now you know, half I guess a four
punch is that their customer base was kept out of
the city, their customer base was incentive not to come
into the city, and now they're.
Speaker 3 (20:24):
All being fired. So it's like, what is going on?
Speaker 2 (20:28):
I mean, the housing market in d C is going
to take a die. I mean, it's just a bad,
bad time. If you were you know, Mike's Barn and
Grill on Fifteenth Street, Man, it's got to be a
really tough tough time to be a restaurant operator in DC.
Speaker 1 (20:43):
Yeah, for sure, man, I you know, I like to
get there at least once a year. Hopefully my Jose
Andres restaurants are still alive from Well, next time I
get down there.
Speaker 2 (20:52):
Man, Yeah, that I love his email, his Mexican place
on seventh that is, I could just bring him backpack,
sleeping bag, his move into that joint. I love that place.
It's fantastic, fantastic. So yeah, so what do you what
do you when you when you were talking to you know,
corporate leaders, what are they saying to Michael about this space.
Speaker 3 (21:11):
Are they nervous or they think it's all.
Speaker 2 (21:12):
Gonna kind of pan out and it'll die down, or
what's when you talk to your folks, you know, what
do they think.
Speaker 1 (21:20):
In regards to which topic?
Speaker 3 (21:22):
Just ability to turmoil?
Speaker 2 (21:24):
You know, the outlook, economic outlook, No, no, no particular
policy and I'm asking about but just to kind of
the overall, you know, all this stuff settle down, they
get back to running the restaurants or is it just
going to be a wild ride here for the next
couple of years.
Speaker 1 (21:40):
It's interesting, right because we came out of last year,
which was such a rough year for restaurants, right, Like
the slow down and consumer spendings typically typically hits restaurants first.
And you've had that, and but after the election, people
start spending more money and you know, I was expecting
(22:00):
some strength here in the first half of the year
as we were lapping some weak numbers, and the industry
got it with the oldest January and fourteen years we
had snow, we had the worst flu season in a
very long time, and then now we have uncertainty about tariff.
So we just got started on the earning season. Chipotle
(22:21):
reported yesterday and that was interesting. They're talking about a
week second quarter and I don't think that's really surprised anyone.
But what is a little bit surprising is that their
numbers are actually weaker than what we're seeing in April
through black Box Intelligence data. So the data in April
(22:45):
it seems to be getting better, you know, post you know,
tariff for drama. So really there's just a lot of uncertainty,
you know, in the markets, by the consumer were and
about what's going to happen. I mean, I think Chipotle
sounded pretty positive that the second half was going to
(23:08):
be a lot better than the first half, but that's
typically what a company does when they miss first quarter earning.
So how much is it is there sincere belief versus
you know, what they want to tell the street right now?
Speaker 2 (23:23):
Us surprise to see Chipotle's numbered down a little bit.
I just get you know, you know, I don't have
my little microcosm of the world as a reference point,
but I live with in you know, ten or fifteen
minutes to two Chipotle's, and every time I go by
and there's there's plenty of people there. I mean, they're busy,
they're busy properties, you know, So that kind of surprised
me when I saw that.
Speaker 1 (23:42):
Yeah, I was surprised that everybody their their trend. So
there's you know, we look, we go back, do we
look at two year trends, six year trends. You know,
their six year trend was down ten percentage points from
the fourth quarter to the first. Their two year trend
was down over seven hundred faces points from the fourth
quarter of the first a material slowdown, right that that
(24:02):
seven hundred basis points is an old weather and flew
in the shift of easter, right, so there's something going on.
We're trying to figure it out. Management pointed to, uh,
you know, efforts to clean their stores better and uh,
you know, provide their customers with friendlier service. So I
wish I had some more for you. By the end
of next week. I'll have a lot more data on that.
Speaker 3 (24:25):
On that ask you another question. You're interviewing me, and
now I'm interviewing you.
Speaker 1 (24:30):
But but you're a great host, So let's let's do about.
Speaker 2 (24:34):
So so on the you know, I remember a million
years ago when I had you know, headful of Hair
and heartful of Hope and Darden, we would talk about
weather and you know, quarterly earnings reports and we were
all very caught. Isn't the weather obviously, But you know,
fast forward all these years and delivery is such a big.
Speaker 3 (24:52):
Part of the business.
Speaker 2 (24:54):
Now, you know, is how how much of delivery and
not having to go out to get food has softened
the edges of some of that weather stuff or is it?
Speaker 3 (25:04):
Are they just haven't been connected? Are they connected?
Speaker 1 (25:06):
You would think it will. But last year we saw
consumers do a lot more pick up versus the third
party delivery just because the the you know, price difference
is massive. But I think there is something to that.
You know, what we wrote in our earnings preview for
Dominoes was that we expect Dominoes to perform most quick
(25:28):
service restaurants because when the weather's really cold and snowy,
you know, you're more likely to order a pizza than
than to leave the house. So and pizzas, you know,
the most cost effective way to feed a family. It's
got it's got a great price point.
Speaker 3 (25:42):
It's getting up there though.
Speaker 2 (25:43):
We my my, my, my little humble Costa is no
stranger to pizza delivery.
Speaker 3 (25:48):
It's like normal on tiers.
Speaker 2 (25:49):
Hey Joe, Hey doing but you can it didn't take
long to uh get a pretty expensive pizza water, so
that the prices are going up on that pretty significantly.
Speaker 1 (25:58):
Yeah, man, we're seeing it. We're seeing it. So and
it's it's going to be interesting to see what's what
opens with the tariffs, right, Like, most of our companies
don't have that exposure, which is great. And when it
comes to the food side, most of the increases that
the companies are going to suffer and be passed along
with modest price increases or just swallowed by the company
(26:21):
without much of an issue. You know, Chole was talking
about about fifty bases point increase in perpetuity to their
cost to the tariffs. You know, what's more interesting, I
think is you know the point you made earlier about
equipment and a lot of the component components of the
equipment especially are manufactured in China, and so that's a
(26:45):
little bit more of a concern. But that's you know,
it's going to eat into returns on investment a little bit,
but I don't think it's enough to be completely prohibitive, right,
But we're going to continue to watch cash on cash
returns and yeah, and it's going to be more of
the same. The companies that will provide the best returns
on investment are going to be the ones that grow
(27:05):
the fastest. Right, money flows to where it's treated best.
Has there been progress on paid lead?
Speaker 3 (27:11):
You know, paid leaves?
Speaker 2 (27:12):
Super interesting issue, you know, the one that comes to
mind obviously, the voters in Missouri in November past Proposition A,
which established a new paid leave regiment in the state.
The Republicans went to in the legislature tried to basically
(27:34):
terminated cancel the will of the voters. A Democratic filibuster
in the Missouri Senate has kind of derailed that effort,
and it looks like their law will take effect next
week May one. It's slow but steady. I think they're
only probably still thirteen twelve states that have a mandated
(27:57):
paid leave. I see what's been interesting in that space,
and there are a couple of spaces. Portable benefits is
another one where the politics over the last couple of
years have shifted tremendously and we've been, you know, over
the last ten or fifteen years, the paid leave has
kind of been a pet project of the Blue team,
right and setting up paid leave laws, sickly laws, whatever
(28:21):
it may be. And so you've got the big blue states,
the Californias and the New Jerseys and the New York's
and Illinois's Conneticuts with their paid leave law Maryland. But
what you started to see is in states like Vermont
and New Hampshire, a number of states Kentucky kind of
leader where Republicans have kind of gained the upper hand
(28:42):
on this issue and look at paid leave from a
perspective of not necessarily being a government program per se,
but opening up the private marketplace and leveraging insurance companies
to provide policies that either an employer can pay in
full or in part.
Speaker 3 (29:00):
Like any other benefit. And it's taken a lot of
air out of the paid leave issue.
Speaker 2 (29:06):
And unless it's just in big solid blue states, right,
but there are a number of red states that are
either passed or in the you know, having the CENTERFIC
conversation about a market based paid leave program that is
not necessarily mandated, but employers are certainly incentive to go
(29:28):
down this road through the tax code or whatnot. And
like I say, if you're the labor community, you're Bernie Sanders,
you're pulling your hair out about this because it's really
taken the leadership of the issue. And as it referenced earlier,
it jives in nicely with their overall strategy of trying
to make more inroads with working class voters and so forth.
(29:48):
And I mean, the Democrats have essentially fumbled, in my opinion,
my humble opinion, have fumbled the paid leave ball, and
the Republicans have picked it up and run.
Speaker 3 (29:58):
Their own direction with it. But they're the one with
the ball now.
Speaker 2 (30:01):
And so now the Democrats are reacting to what an
enlarge measure are common sense approaches to paid leave, and
it's driving them kind of crazy, if you will, same
thing on portable benefits that we just saw a portable
benefits legislation signed in the law in Tennessee and Alabama.
And you know, who would have thought the Alabama legislature
would be out front on creating benefits packages for as
(30:23):
many employer employees as possible, right, I mean, it's just
that the Blue team has squandered a bunch of these
issues they've traditionally kind of owned. So it's been super history.
I know, paid leave and portal benefits are very different,
but one sits inside the other. That's super They're related obviously,
so I spect you'll see more of that. We had
some paid leave legislation I think for the fifth year
(30:44):
in a row in New Mexico ran out of gas.
I think the puck has just gone to a different
part of the rink on this issue. And if Democrats
want to do the New York style California style mandated
benefit program, it's it's they're kind of run out of
states that are amenable to that anymore, so they can
(31:06):
have to they have to change the direction on this issue.
Speaker 3 (31:09):
So I find that issue pretty fascinating as well.
Speaker 1 (31:12):
Yeah, that's really interesting trying to leverage the private market
and the tax code to incentivize employers.
Speaker 2 (31:17):
And yeah, and you would think when we're back to
you know, pre COVID numbers of basically four percent unemployment
and employers employees employers are back to competing for workers.
Something like that is very attractive, right that they can
now play and have some leverage over creating a benefit
package that works for their employee at their their workforce,
(31:37):
as opposed to this kind of paying into some fund
that may stay in the paid leave fund. But we
see many states you pay into one fund, it becomes
the highway fund over there when the buddy is tight,
you know what I mean. So it's it's actually a
much more discipline approach and involved.
Speaker 3 (31:54):
In the market.
Speaker 2 (31:54):
And I think Republicans are kind of changing the game
on that on that issue.
Speaker 1 (31:58):
Well, and I learned from your odd Pepperdine did a
study on the fast acts impact in California and what
did it find that they should listen to you?
Speaker 2 (32:09):
Well, I think it's you know, you know, when when
the proponents of these types of policy proposals, whether it's
minim wage increases or workforce standards boards, you know, you
have no idea how it's really going to play out
in the real world, you know, and they come out
with these projections that this may happen and that may happen,
(32:30):
and there's always initial reaction, there's always disruption.
Speaker 3 (32:35):
Maybe maybe employers don't.
Speaker 2 (32:38):
You know, in an industry like fast food where there's you know,
two hundred percent attrition, maybe they just don't replace people
as fast. They're nervous about what's going on. But my
point being, it takes a year or two or maybe
three for enough data to come back where it becomes
statistically meaningful. Right, And what we're starting to see in
the last three or four months California, you know, d C,
(33:01):
these other areas, Chicago, you know, is is real data
about what does this mean for employment? Unemployment benefits. You
measure that, you measure new restaurants, starts, you measure applications
for permits on liquor like whatever it may be, and
you can start to get a picture of the impact
of what it's happening. But again is that there's a
(33:22):
couple of year lag and now we're seeing data, report
after report, every report coming in to saying whoa this is,
This has real rule implications and what Pepperdine And of
course I don't know if you've ever been to Pepperdine,
but it's one of those beautiful campuses overlooking Malibu. I
don't know how anybody could study there, but so but
(33:43):
my point being that you know, while growth while there
was still growth in job categories in California, while there
was still growth in quick service growth sector throughout the country,
there was significant shrinkage in the in the fast food
workforce in California. It went against national norms and national
(34:06):
data points, and so it was really it was really
easy to tie this policy outcome to that that data outcome,
if you will, And I think you're going to see
a lot more of that. We have a new head
of research at the National Restaurant Association just announced this week,
and I think you know, he's coming on board a
lot of great time where there's now meaningful data coming
(34:28):
out of DC and meaningful data coming out of California.
So I think you're going to see a lot more
of that in the industry. Be aggressive, and it's coming
at a good time. Obviously, we went to talking about
New Jersey earlier. It's now really easy to kind of
show New Jersey and the Minneapolis Wage Standards Board idea
they're playing with there, that there are actual implications.
Speaker 3 (34:46):
So just there's just a lag time.
Speaker 2 (34:48):
It's it's a two or three year lag time, so
that data becomes meaningful and that's what we're finding now.
And Pepperdine jumped on to some other end of the
other thing tanks in California.
Speaker 3 (34:57):
That that did more How do I say this without
impugning that that.
Speaker 2 (35:04):
Rightly extrapolated trends to come up with that those those
those those outcomes, but it was a little more speculative.
Like the Pepperdine study is like data right, and it's
the first one in California, and I don't think it
will be the last Biolama shots. So you know, our
our our our task as an industry is how do
we take that energy, that narrative, that data and make
(35:26):
sure that seven thousand state legislators in the country know this,
and five hundred and thirty five members of Congress know this,
and fifty governors and all that kind of stuff.
Speaker 3 (35:35):
That's the that's the that's the NRA's job.
Speaker 1 (35:37):
So yeah, from what I've heard, there was a lot
of kiosks being installed in California.
Speaker 3 (35:43):
Yeah.
Speaker 1 (35:44):
Oh thanks again for doing this man, I'm a big
fan of your work. Where can listeners go to learn
more about aligned public strategies and find the Working Launch podcast?
Speaker 2 (35:52):
Well, the Working Launch Podcast, Thank you for the plug
is produced by Restaurant Business Magazine, so you can find
it on their platform obviously all the Apples and Spotify
platforms as well, and you can go to Align Public
Strategies dot com. That's where we are and happy to
help answer any questions and wax on poetically about the
(36:15):
future of the restaurant.
Speaker 3 (36:16):
Energies VISE are the public policy and politics.
Speaker 2 (36:19):
So I appreciate Michael being on your respected podcast. It's
find to listen to you. I learned more about the
business and the numbers, and I'm not a numbers guy.
I'm I'm the right brain guy, but I your podcast
makes me makes me smart, So I appreciate.
Speaker 3 (36:37):
I appreciate all you do.
Speaker 1 (36:39):
Yeah, you got it, man, I appreciate that, and it's
always fun speaking with you. Man. I want to thank
the audience for tuning in. If you liked our discussion,
please share with your friends and colleagues. Check back soon
for an interview with Nick Kenner, the founder and CEO
of Just Salad.
Host
Michael Halen
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