November 20, 2023 • 31 mins
Restaurant CEOs seem pretty confident that sales will hold up just fine as the use of GLP-1 drugs increases, Daniela Sirtori-Cortina, Bloomberg News restaurant reporter, tells BI. In this episode of the Choppin’ It Up podcast, Sirtori-Cortina sits down with BI’s senior restaurant and foodservice analyst Michael Halen to discuss how drugs like Ozempic are forcing chains to consider salads, chicken and smaller portions. She also comments on the popularity of small indulgences amid a consumer slowdown and productivity improvements at Starbucks and Popeyes.
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Speaker 1 (00:21):
Welcome to Chopping It Up.
Speaker 2 (00:22):
I'm your host, Mike Hallon, the senior restaurant and food
service analyst at Bloomberg Intelligence. Today we're joined by my
colleague Daniella. Sir Tory Courtina, Bloomberg's restaurant's reporter. Thanks for
doing us.
Speaker 3 (00:35):
Yeah, I know, anytime. Happy to be here.
Speaker 1 (00:38):
Yeah.
Speaker 2 (00:38):
So, you know, we've talked a few times about productivity
and efficiency. They become pretty popular topics with all the
inflation we've seen over the past couple of years, and
you've done some good work around the topic.
Speaker 1 (00:51):
Can you talk about Popeyes first?
Speaker 4 (00:54):
Yeah?
Speaker 3 (00:54):
No, thanks Mike.
Speaker 4 (00:55):
I think you know, if we get into this, not
to make a Taylor Swift reference, but it does seem
like restaurants and are sort of in their productivity era.
I guess you can't say they were at eras without
talking about Taylor Slift. But AnyWho, you know, you you
tracked so well, you know the trajectory of restaurants during
the pandemic and just how they were struggling to basically
survive the labor issues and inflation and everything that we saw,
(01:17):
and it really seems that a lot of them that
you know, I had a difficult time during the pandemic,
are turning their attention to that idea of productivity and
efficiency and how do we just keep people coming back?
And so I had the chance to you know, visit
Popeye's other Miami headquarters and my.
Speaker 2 (01:35):
Favorite, my favorite restaurant, QSR restaurant by the way for
eating not oh really in terms of stock recommendations, it
was my It was my favorite stock back in the day,
like twenty thirteen through like twenty sixteen or so, and
it did pretty well.
Speaker 1 (01:50):
But yeah, I'm a big fan of Popeye's.
Speaker 3 (01:52):
Checking out, big fan of Popeyees.
Speaker 1 (01:54):
Yeah, I was there last weekend when my sonets fans no.
Speaker 4 (01:56):
Way, I do remember dragging my husband to try the
you know, fried chicken sandwich and that came out. But
you know, that's a perfect place to start, because really,
I mean for most of us, you know, unless you
lived in certain parts of the US, Popeyes entered into
our consciousness with the fried chicken sandwich. And of course
it was a big success for them. I mean they
brought up, brought in a lot of customers that previously
(02:18):
did not go to Popeyes, right, A lot of people
tried it. It was viral on the internet. But they
realized at some point that a lot.
Speaker 3 (02:25):
Of those people just were not coming back.
Speaker 4 (02:28):
So you know, they started sort of scratching their heads
and trying to figure out what was going on. And
so earlier this year they came out with a plan
to just try to crack that, and so I was
very happy to get sort of like an insight look
into the plan. I went down to the Miami headquarters
and really one of the main things that they're doing
is just ripping up the kitchens, and so.
Speaker 3 (02:49):
I talked to you Sammy C.
Speaker 4 (02:50):
Dicky, who is the president of Popeye's North America, and
one of the things that he said is like, look,
we realized that our service just wasn't We needed to
be right. You know, people were saying that the orders
weren't coming out perfect, that we were taking a little
bit longer. And also a lot of people just had
never seen a Popeyes.
Speaker 3 (03:07):
That was another big part.
Speaker 4 (03:09):
And so, you know, if you do want people to
think of you as an option, as a daily option,
like it seems like you do MIC with your son,
people need to see locations. You know, you can't have
people driving out of their way ten to twelve minutes
to try a QSR restaurant. And so one of the
cool things that they're trying to do is figure out how.
Speaker 3 (03:28):
To make the kitchens more efficient.
Speaker 4 (03:29):
And so if you want, I can get more into that,
but I don't know how deep you want to hear
about that.
Speaker 2 (03:33):
Yeah, No, I want to hear about it because it's
important and it's good. It's interesting because you know, there's
a lot of attention being paid at Burger King US
for restaurant brands, right, but right now the biggest growth
engine in terms of net units is Popeyes, right, And
so they finally talked a bit about it on this
last call about improving the operations have Popeyes, but they
(03:56):
haven't delved too deeply into it. So this is a
big reason when I got here. I love talking about Popeyes,
and you have the inside scoop.
Speaker 4 (04:04):
I have the inside information this time around. Yeah. So
basically one other things that they realize is that, for example,
their kitchens just were not arranged in a way that
they really flowed to the drive through and just sort
of to the handoff points. So you know, when they started,
you know, with a chicken sandwich, they just kind of
put the station wherever it fit. And really that's no
way to really handle making one of your best selling products, right,
(04:28):
And so it starts there. It starts with just making
kitchens such as flow better so that when team members
are assembling the orders, it's just much easier to put
them together, and then they just sort of flow to
the drive through, flow to your hands, you know when
you're in your car or at the counter, and they're
really looking at a lot of little details. Right. So
when I went there, there was this kind of kitchen
(04:49):
set up with these five modules that are all sequentially
arranged that basically every station has a kind of stuff
that you would actually need to put together one of
the orders, and they're implementing things is like you know
sticker printers. You know, if you go to McDonald's, if
you go to Starbucks, those are pretty common. I mean
on your carpet at Starbucks, you have the sticker that
has your name, it has your order, and so that
(05:10):
way the baristas can easily see it. Popeye's was not
doing that, and so you know, the folks in the
kitchen had to like manually check against a paper receipt
whether your order was correct. All that stuff just slows
it down and yeah, and so they're also making sure
that like once that order is correct, you know, you
get to a landing zone where they actually check stuff,
(05:31):
and then they actually do the whole bumping process. You know,
they hit that button that says order ready and you're
alerted to it. And again, this is stuff that's pretty
common at places like McDonald's and even Burger King. But
you know, I think it's underscores how we started this
conversation with this idea of Okay, this is the productivity
and sort of like efficiency era for a lot of
places that perhaps in the past it was like okay,
(05:53):
but we're fine, you know, you know, the sandwiches are
selling and the kitchens are fine, so why should we
them up? And now restaurants like Popeyes are really looking
at it and like, okay, we really need to be
efficient in how we do this.
Speaker 2 (06:07):
Yeah, and it's probably more important for them than anybody
to get that kind of like basic blocking and tackling right,
because it's chicken's tough. You know, there's typically a lot
more waste at a chicken chain. You know, it takes
fifteen minutes to fry a new batch. When you run
run out right, and so a lot of times are
making too much and there's food waste, and it just
(06:30):
makes it a trickier operation than heating up burger. So
I think getting that blocking and tackling is going to
be really important for them.
Speaker 3 (06:38):
But that's one of the things.
Speaker 4 (06:39):
And so for example, one of the processes that they
are also trying to improve is how they is the batter.
You know, you know, the way that Tammy explained it
to me is like, okay, you have to make this batter.
You have to chill water in ice, and then someone
will have to take the temperature by hand until it
got to the perfect and then they would have to
(07:01):
mix it and they would have to constantly steer it
so it would clumb, so it wouldn't clump, and then
you know, they would actually be able to batter the chicken.
And so they just came up with a machine that
doesn't right. And so there's just like all these things
that if you realize if you have a labor model,
a business model that's more labor heavy, labor reliant in
(07:22):
a time of you know, still tight labor market, it's
just tougher and so just kind of automating some of
that stuff, and it's streamlining how you do it? I
think you said it, Mike. Actually for my story, like
operations is not sexy, but it matters a lot.
Speaker 1 (07:38):
Yeah, for sure, no doubt.
Speaker 2 (07:40):
And so you know, talking about streamlining operations, you know,
we were talking about Starbucks. They've been investing heavily to
improve their throughput, speed of service, and just basically make
the baristas and the other employees jobs easier. So I
was swamped with the earnings last week, but you made
it to their investor day in New York.
Speaker 1 (07:59):
How are they progressing?
Speaker 4 (08:01):
I did? I did, so, you know, just to kind
of put it a little bit in context, it's a
similar story to poplize in the sense that you know,
Starbucks had that big slump when the pandemic started, but
then you know they've really recovered pretty quickly, Like their
demand is pretty strong, but because of everything in the pandemic,
they just didn't adapt quickly enough, especially to that like
just massive shift to online orders. I mean, Starbucks has
(08:24):
always had a bunch of online orders, they were pioneers
in that space, but it just like really searched in
a way that made everything more complicated for baristas and
so about a year ago they announced sort of the
first iteration of the plan that they implemented to just
basically help stores run better. You know, they are rolling
out stuff like new cold foam blenders.
Speaker 3 (08:48):
Cold foam is a super super popular topic.
Speaker 4 (08:50):
If you've ever been to Starbucks lately, you see people
with their you know, walking out with their beverages and
there's like the cold foam on top.
Speaker 3 (08:57):
But previously that you have to make it.
Speaker 4 (09:00):
I got full size blender and that competes with preppuccinos, right,
so it just made it harder. And so that's some
of the stuff they're doing. They're also rolling out something
that's basically a thirty second verse French press machine. Basically
it makes coffee in thirty seconds instead of having to
make a bunch of you know, batches in the like
(09:22):
large rewers type stuff, and that generated a lot of waste.
And another big thing that they unveiled is basically a
new setup to bring together all the elements to make
cold drinks. Cold drinks account for like seventy five percent
of Starbucks orders, unbelievably, and so that also was meant to.
Speaker 3 (09:41):
Help with that.
Speaker 4 (09:42):
So the first two parts, right, the blender and the
vertica are the the coff Flover Vertica, which is the
thirty second coffee machine, are the ones that are the
most advanced. They're also relatively speaking, easier to implement. I mean,
it's a machine at a store versus you know, the
side iron system, which is what they call the new setup.
Is that it's a new setup, so you have to
(10:04):
you know, retrofit stores and everything. What what I found interesting
about the latest update that they gave, you know, during
their what they called Reinvention of Data was on November second,
was that it seemed like investors were focusing a lot
on the siren system. It was like, that's the big thing,
that's what we should be focusing on. But they really
(10:25):
sort of broadened it out a little bit more and
they talked about just other things that they have been
doing to make the stores easier to run, like, for example,
capping the number of delivery orders.
Speaker 2 (10:38):
Well, we don't like to hear that. We don't like
to hear anybody capping orders.
Speaker 3 (10:42):
So why is that? Okay?
Speaker 4 (10:44):
Yeah, I now I had get to interview with you,
Like what right.
Speaker 2 (10:46):
You got to you got to hit those same store
sales targets right, like you shouldn't you should you know,
I'd rather see you improve your operations more quickly than
turned down then you know, orders, especially it those online
orders so usually pretty pretty good in size, you know.
But I think I just quickly make a point. You know,
both of these companies have seen big jumps in average
unit volume SAAM source sales over the last four or
(11:08):
five years. And this is part of the reason why
they need to do these overhauls, is because the boxes
weren't built to support these levels of sales.
Speaker 1 (11:15):
But please keep.
Speaker 4 (11:16):
Going, no, no, no, exactly, But I mean you make
a really good point about those miss sales, right because
at the end of the day, that's the point of
all of this, you know, it's not just like, oh,
we're going to be the best run Starbucks are pod
byas is just if we can serve people faster, then
people won't see along line and walk away. And so
it's just that idea of capturing you know, those those
(11:38):
additional sales. And so in this latest update, one of
the one of the things that sort of cut my eyes,
it's just them trying to almost like redirect investors to
this idea of all the other stuff they're doing, like
it's not just about the Seren system, which is hard
to implement because it's probably only going into news stores.
And I think it's about forty percent of the system
(12:00):
is going to have it by like twenty twenty six. Right,
That's that's lower than a lot of people thought. But
so they announced these other ideas of Okay, we're gonna
just run our stores better. We're gonna open stores that
are more specific to the purpose that we want them
to have.
Speaker 1 (12:15):
Yeah. Yeah, all that's good stuff, and I like that that.
Speaker 2 (12:19):
I liked some of those things that you picked up
on because it wasn't necessarily my biggest focus. I think
my biggest focus was that they lowered their long term
targets without admitting they lowered their long term targets, and
like no one, everyone gave them a pass on it.
Everybody loved Starbucks, apparently because they made a lot of
money I guess over the years investing in it.
Speaker 1 (12:40):
But yeah, that was curious. I mean, that was interesting
during their Yeah, I mean.
Speaker 2 (12:45):
During the investor day back in late twenty twenty one,
I guess about two years ago. Now, I found it
really curious that I'm sorry, not two years ago. It
was last year.
Speaker 4 (12:56):
I know what time now, I know it flies.
Speaker 1 (13:00):
So they taught they raised.
Speaker 2 (13:02):
Their long term targets, you know, and just EPA, it
was like five to ten. They increased revenue guidance to
five to ten, or central sales from five to ten,
operating come ten to fifteen percent growth a year, and
then fifteen to twenty percent EPs growth, which we wrote
at the time was like, why are you doing this
to the CEO as he's coming in. Usually CEOs like
(13:23):
to come in and cut all the targets to keep
Wall Street off his back for like.
Speaker 1 (13:27):
A year, you know.
Speaker 2 (13:29):
Yeah, and then now a year later they cut it
to like they didn't cut it totally, but they cut
the top end off, right, So it's like now it's
like five percent SAMSAR sales and ten percent.
Speaker 3 (13:41):
Yeah revenue growth.
Speaker 1 (13:42):
Plus yes growth. Yeah. So that was where most of
my focus was.
Speaker 4 (13:46):
Yeah, that's a very good point and sort of the
what I heard, right, you know, when I was talking
to investors and analysts ahead of this, is that just
echoing what you were saying. A lot of people thought
that the targets were just too to begin with, right,
the way I was talking to an analyst and the
way that she explained it was the consumer environment has
(14:07):
definitely become more worried, to put it that way, since
last September when they first set those goals. But it's
hard to say that it's not a sort of specific
thing when they were the ones that promised those lofty goals, right,
and so it was sort of that thing of Starbucks
doesn't have a problem with its brand. People are still
buying it, but at the same time, in an environment
like this, you might need to be a little more
(14:29):
careful about the type of targets you have. And it
was a little bit, you know, when they announced earnings
and then they caught that same store soals guidance from
seven to nine percent, so five to seven the stock
was going up, right, and that doesn't really happen that often.
And sort of the explanation that I got is that
(14:49):
they didn't cut the profitability targets, and it seemed to
be reassuring for investors that even with slower same store
sales growth, they could still reach that EPs growth target
through other things like, for example, that three billion dollar
just cost saving program. I think he would have been
a lot worse and not as reassuring if they had
(15:11):
also caught the profit guidance the guidance, So is that
is that kind of how you were also seeing it?
Speaker 2 (15:18):
Yeah, I guess, you know, as long as they kept
the bottom line, the bottom end of that that guidance,
that seemed to play kid investors off of a very
strong quarter, right, So you know, the calendar second quarter
result was pretty weak. We saw a pretty significant slowdown
in the four year same source of sales trend, and
so management didn't really address that. And but but like sequentially,
(15:40):
this was a reacceleration of the same.
Speaker 1 (15:42):
Source of sales.
Speaker 2 (15:42):
So I felt that the quarter was so strong and
that they kept the low end of the long term guidance.
I think that seemed to play CAID investors, and they
kind of gave them a pass because for those reasons
that you said, they're long term targets, which I'm gonna
pat myself on the back because we wrote this coming
out of the Investor a year ago. It's like, these
targets don't include any slow down the consumer, so they
(16:03):
don't make any sense to me. So you know, even
a broken clock is right twice twice a day.
Speaker 3 (16:08):
There we go.
Speaker 4 (16:09):
Yeah, that's got we got excellent point.
Speaker 2 (16:11):
We had that one, right, So so we'll see, so,
you know, we'll see going forward. Obviously, this is a
super popular name that everybody likes to talk about very
very very Yeah, everybody loves their talk, loves their coffee,
and so you know, you also mentioned to me that
they hyped up their position as a provider of small
(16:31):
indulgences amid a slowing economy, So would they have.
Speaker 4 (16:35):
To say, yeah, So I think this just like it's
a really good example of these theme that we've seen
more broadly, people are caughting back on just big expenses,
like for example, appliances, right, I mean, part of it
is just a bunch of us, but appliance is during COVID,
how many more washers do you need? And then also
just that idea of you know, wallets are pressured, but
(16:57):
at the same time, people are still willing to splurge
on what we have called small intelligences. Right. So you
know a lot of the beverage companies are doing great,
right that that doesn't really cost you that much. People
are also traveling, right, so they have this idea of like, well,
I mean, I might as well spend on something that
(17:17):
I really enjoy and especially with international travel, like we've seen,
you know, a fair bid of strength there, and then
we have something like Starbucks. So Mike, something that has
really caught my attention, and then I'll bring it back
to sort of like the financial is. You know, I'm
a millennial, and for for a long time, the type
of narrative that I heard, particular un millennials was well,
(17:38):
if you, you know, stop cheating avocado toast and buying Starbucks,
you would be able to save up for a down
payment on a house. Right. That was ridiculous. That was
a big narrative, Like, that's ridiculous.
Speaker 1 (17:49):
It's like those people that tell you know, you could say, well, yeah,
I forget, but don't get me started.
Speaker 4 (17:54):
There we go. But that was a big narrative around
sort of like the way that millennials went around the economy.
Most more recently, I have seen you know, posts on
social media that are like, well, even if you spend
seven dollars a day on your coffee X many days
a year, that still only amounts to I don't know,
one thousand dollars, that's still not enough for a down
payment on a house.
Speaker 3 (18:14):
So just buy the coffee, you know.
Speaker 4 (18:16):
So this idea of indulging, you know, those small indulgences,
and so just to bring it back to like specific
Starbucks results, one of the reasons why they're same store
sales were fairly strong this quarter was more people buying
more stuff, you know, and so that sort of like
underscores that idea. And actually their chief marketing officer, Brady Brewer,
(18:37):
which excellent name for the job, by the way, said
this during the investor day. He was like, people are
just not calling back. I mean, they're adding more stuff,
and you know, you're at this wonky term in the
restaurant industry, the idea of food attached, right, basically just
people adding food to their orders. Also a record reporter,
you know, people are going to Starbucks for their drinks
and they're also adding sandwiches, crosshounds, whatever it is, holding
(19:00):
some of the like seasonal items that they have. So
it's just like a really good example of this kind
of trend that we seem to be seeing in the
consumer space of yes, let's cut back on those like
big outlay expenses, but then also I'm going to get
my cold phone and my cold crew.
Speaker 3 (19:16):
You know.
Speaker 1 (19:17):
Yeah.
Speaker 2 (19:18):
They credited their pretty solid performance throughout the Great Financial
Crisis to you know, the same sort of of a trend.
I think it also helps them that they sell an
addictive product, right, and their addictive product has more caffeine
in it than anybody else's. And so if you really
got to get a lot of work done, you're still
(19:39):
going to get your Starbucks coffee in the morning.
Speaker 4 (19:41):
And it's such a routine product, right. I think that's
just something that's so interesting about the coffee business is
you know, you if you have a habit of I'm
going to leave my house, I'm gonna stop by Starbucks
and then go to the office or whatever it is,
it's just so hard to cut out. It's just something
that you do every single day. I mean, it's not
like other pockets of the restaurant industry where we have
(20:03):
seen some weakness that are just more kind of like,
oh maybe I'll go out to celebrate something or you know,
I don't know if I have time for that, you know,
sit down meal. But it does raise an interesting point
that actually, like you know, another Wall Street person brought
up to me, which is what happens to these sort
of routine based businesses. If, for example, we have a
(20:26):
dip in employment, right, Like, you know, employment has been
so strong, is really the only way that we can
go here is down?
Speaker 3 (20:32):
Perhaps, I don't know.
Speaker 4 (20:34):
So it's kind of interesting to think also about sort
of those second order effects of where the consumer's going
and what that means, not not necessarily because people have
less money, but because their routines aren't disrupted. So we'll see,
we'll see. I mean, I think that'll be interesting to
keep an eye on for the AAR ahead.
Speaker 1 (20:51):
Yeah, for sure.
Speaker 2 (20:52):
You know, we've seen a lot of other QSRs kind
of slow. People aren't giving up the coffee yet, but
some of the other you know, quick service restaurants recovers,
you've seen some some slowing and the sales and there's
been a lot of concern about future sales for those QSR.
Speaker 1 (21:08):
Names due to the g LP ones. And a nice article.
Speaker 2 (21:14):
Yeah, you set me up nicely for that one, you said,
you know, you wrote a good article today about you know,
what companies with CEOs are saying about ozempic and how
it's going to impact eating habits moving forward. So what
are these CEOs saying about this quote unquote miracle drug.
Speaker 3 (21:33):
Yeah, there we go.
Speaker 4 (21:33):
So, first of all, quick plug for the Bloomberg Health
team if you really want to, you know, be up
to date to just what's happening there from the scientific perspective.
Speaker 3 (21:41):
They're doing a great job with their.
Speaker 4 (21:43):
Reporting, including a approval recently for yet another one of
these drugs.
Speaker 3 (21:50):
But basically, you know, during earning season and.
Speaker 4 (21:53):
As I've had access to restaurant executives, I was just
trying to ask them like how they're thinking about it
and how they're thinking about the impact on their businesses,
and they seem pretty confident that it's going to be okay.
You know that they are going to hold up just
fine for a couple of different reasons. And so if
you talk to the likes of Cava and Chipotle that
tend to have what you would call like healthier meals,
(22:15):
you know, stuff that they sort of talk about more
as real food, right, like you can see the rice
and the beans and the you know salad.
Speaker 1 (22:24):
Yeah, you can eat healthy at those places if you
want to, for sure.
Speaker 4 (22:28):
Exactly, It's like you can make those choices of more
like more wholesome food. The idea that they have brought
up is, well, we think that the people who are
on this golp ones are already more conscious about their health, right,
Like they're actively trying to lose weight, and they are
probably also actively thinking more about what kind of food
they're eating. And so Cava and Chipole both said that
(22:50):
they think that those people, because they're being more just
sort of discriminating about what about their health, they're probably
going to go for their types of meals kind of
no matter how littly.
Speaker 3 (23:00):
I did ask, you know.
Speaker 4 (23:01):
The Chipota CFO but I was like, well, but like,
you know, if these drugs do suppress appetite, like what
are you going to do about your portion sizes?
Speaker 3 (23:08):
And his answer was like, you know, our consumers are already.
Speaker 4 (23:11):
Pretty savvy about that type of stuff, Like some people
buy the balls with the intention of eating them into seedtings,
not one. So you know that that's the type of
stuff that they're saying. And then you have other restaurants
that do serve more indulgent food like so, for example,
I talked to Freddy's Frozen Custard and Steak Burgers. I
talked to their CEO.
Speaker 1 (23:29):
I'm sorry, Christal, Yeah, I had him on the podcast.
Speaker 4 (23:32):
Yes, yeah, you know, he's he was. He was really interesting.
I did ask him if most people think his name
is Freddy, and he said yes.
Speaker 3 (23:40):
But AnyWho.
Speaker 4 (23:41):
Uh So, what Chris was saying was that, you know,
they have an opportunity in chicken. He's like, you know,
one of the things that we can look at as
part of just like our general menu review, is just
improving our chicken offerings. You know, chicken is perceived to
be healthier than beef. And also it's just as we
talked about with Popeyes, it's just very popular. I mean,
(24:03):
Americans are eating more and more chicken. And he mentioned like, well,
I mean, you know, you might look up and some
they actually see a salad on our menu for example.
The other part of what he was saying, which was
also sort of echoed by Darden a couple of months
ago when they reported earnings, was this idea that people
are not going to want to miss out on dining
(24:23):
out with friends and family, Like they're not going to
want to cut out the experience part of dining out,
the part that isn't just need to get sustenance now.
Speaker 3 (24:33):
And so that's also an important sort.
Speaker 4 (24:35):
Of like hypothesis that they have, and Darden also you know,
emphasized that they've done a lot of work across their properties,
you know, Alive Garden and all of those two just
have more options for people, you know, so people can
pick something healthier if they want. That means that, like,
what what do you think about that? Because it seems
like these are very different reasons. And I mean it
(24:58):
seems like the scientific community think that these drugs are
a real breakthrough and that they do suppress appetite for
all sorts of foods. So really big questions still up
in the air.
Speaker 2 (25:10):
Yeah, I have my I have my doubts that it's
going to make a major impact to the restaurant industry.
You know, some of the reports are out out there
or they're saying, you know, there could be a seven
or a ten percent, maybe at twelve percent decline in
calorie consumption by twenty thirty five. I mean, like, are
you telling me McDonald's can't figure out how to decrease
(25:30):
the size of their burgers ten percent by twenty thirty five,
I think.
Speaker 3 (25:34):
Not smaller.
Speaker 1 (25:35):
Come on, I'm sorry.
Speaker 2 (25:38):
Sorry to break it to you, but with all the inflation,
I think we're in the early stages of.
Speaker 1 (25:42):
A commodity bull market.
Speaker 2 (25:43):
So I think inflation is not going anywhere for anywhere
for a long time, so burgers are probably gonna shrink.
Speaker 1 (25:48):
As it is.
Speaker 4 (25:49):
That's that's a really good point. A lot of structural
reasons behind that.
Speaker 2 (25:52):
Yeah, And I don't I don't, you know. I think
what should be more of a concern would be the
quick service names, because I have read that people that
are on these medications do not want to eat greasy
and fatty food. So I would say it would probably
be a little bit more of a concern for places
like that. But I'd also make the argument that most
people don't really care, like does everybody care about their weight?
Speaker 1 (26:17):
Like does everybody?
Speaker 2 (26:19):
Is everybody willing to take a drug to cut their weight,
like to stay skinny? Like you know, I get it
for health reasons, you know. And one thing we've been
saying is like right now, this is this is and
then near term this does nothing to McDonald's because there
their customers can't afford to go on these medications if
it's off prescription.
Speaker 4 (26:39):
I think you're bringing up like a great point about
all your knowns about this, you know what I mean,
And like those are the big questions that have to
be solved to even try to determine what the impact
is going to be, you know, and to your point,
you know, I have also, you know, read this idea
about you know, cutting out sort of like junk foods
and stuff like that. But even then, another point that
(27:00):
has come up is that that might hurt more sort
of the individual dining occasion, like just going to drive
through for lunch or something like that, unless sort of
the group. You know.
Speaker 2 (27:11):
Oh, I agree wholeheartedly, wholeheartedly. I mean, we saw that
coming out of the pandemic. There's that's where people go
to meet friends and family and is restaurants, right, That's
where you're going to go when you want to like
do business, when you want to see friends, whatever it
might be, celebrate an anniversary or a birthday.
Speaker 1 (27:30):
Where do you go?
Speaker 2 (27:30):
You go to the restaurant. So those dining occasions are
not going anywhere. And uh yeah, for me, I think
there's just too many question marks about GLP ones right now,
and I think this is a long term thing. And
so I think investors, you know, should not be making
their investment decisions in restaurants based on you know, pie
and the sky estimates of ozempic and other GLP ones.
Speaker 4 (27:52):
So I'll just I'll just keep it at that there
something else like last sort of points on this was,
you know, chrispy Kreme did take a big hit. I
think it was not too long ago because of a
downgrade that wasn't about the impact, it was about the uncertainty,
you know. So the argument that was made with that
downgrade to the price target was the idea that it
(28:16):
would be better if we knew already, so that way
we can factor it into estimates and growth targets.
Speaker 3 (28:22):
So it's just another way to see it.
Speaker 4 (28:24):
You know. My job here is not to say who's
right on who's wrong. It's just it's another one of
the things that has come up, you know, because you're
talking about the potential impact based on estimates, and then
there's people who are looking at it. It's like, well,
but the uncertainties matter, So what do you think.
Speaker 2 (28:38):
I think there is a bias by most of analysts
and investors, and it's this New York, you know, pretty
wealthy bubble that these people live in, and I don't
think they know or or really analyze how people and
(29:00):
the rest of the country live.
Speaker 1 (29:04):
Yeah, it's it's very different. Listen. We're blessed.
Speaker 2 (29:06):
We work for a great company and we make the money,
and you know, and we live in this bubble, but
the large majority of this country, you know, lives a
very different way.
Speaker 1 (29:18):
So I have a have a story.
Speaker 2 (29:20):
So years ago, when I was covering restaurants at Sadodi
prior to coming here, every time Domino's did a limited
time offer, they'd send us a pizza and they sent
me this like chicken bacon Carbonora pizza and like, I
called up the IR director to thank her, and I
(29:40):
was like, now, this is really good.
Speaker 1 (29:42):
Thank you, I appreciate it.
Speaker 2 (29:43):
And she's like, believe it or not, it's healthier than
most of the the pizzas, than the average pizza we sell.
I was like, oh really, She's like yeah, but don't
tell anybody that.
Speaker 1 (29:53):
I'm like, why because because people won't buy it.
Speaker 3 (29:57):
That's fascinating.
Speaker 2 (29:58):
People live very and very differently than we do here
in the you know, and in other on the coasts
and in major metropolitan areas.
Speaker 1 (30:07):
And I think I think I see it. It's not
I think I do.
Speaker 2 (30:12):
See it all the time with the investor bases of
a lot of these companies that they're not they don't
put themselves in the shoes of everyday Americans.
Speaker 3 (30:20):
In Middle America the overall consumer.
Speaker 4 (30:22):
And you know that's again like another one of those
big things that we have to figure out, like why
are they use such patterns for this? Who has access
to this? How long can they stay on it? Based
on their insurance? And so maybe the executives that I've
been talking to who are saying that they think they'll
be okay, all right, maybe they'll be right right, and
so we'll we'll see. But I think you make a
(30:44):
very good point about just the perspective that we have
and you know, we got to get out to more
drive throughs. That's that's what America, how America consumes. That's
my take away from this conversation.
Speaker 2 (30:57):
Yeah, I don't think they're going away anytime soon, that's
for sure. Well thanks again, this was awesome. Where can
the audience find you on social media?
Speaker 4 (31:06):
So I am on Twitter at Danny Underscore LSC and
then add me on LinkedIn. I'm on LinkedIn all the time,
and I'm always looking to hear from people in the
restaurant space.
Speaker 3 (31:18):
Tell me your thoughts, tell.
Speaker 4 (31:19):
Me our secrets. That's mostly what I want to hear.
But if you want to don't want to say that
still reach out and I do want to hear about
just what you think is going on in the restaurant space.
Speaker 2 (31:28):
So thank you all right, good stuff, and thanks to
the audience for tuning in. If you liked the episode,
please share with your friends and colleagues. Check back next week.
I'll be interviewing Red Robin CEO GJ.
Speaker 1 (31:38):
Hart
Welcome to Chopping It Up.
Speaker 2 (00:22):
I'm your host, Mike Hallon, the senior restaurant and food
service analyst at Bloomberg Intelligence. Today we're joined by my
colleague Daniella. Sir Tory Courtina, Bloomberg's restaurant's reporter. Thanks for
doing us.
Speaker 3 (00:35):
Yeah, I know, anytime. Happy to be here.
Speaker 1 (00:38):
Yeah.
Speaker 2 (00:38):
So, you know, we've talked a few times about productivity
and efficiency. They become pretty popular topics with all the
inflation we've seen over the past couple of years, and
you've done some good work around the topic.
Speaker 1 (00:51):
Can you talk about Popeyes first?
Speaker 4 (00:54):
Yeah?
Speaker 3 (00:54):
No, thanks Mike.
Speaker 4 (00:55):
I think you know, if we get into this, not
to make a Taylor Swift reference, but it does seem
like restaurants and are sort of in their productivity era.
I guess you can't say they were at eras without
talking about Taylor Slift. But AnyWho, you know, you you
tracked so well, you know the trajectory of restaurants during
the pandemic and just how they were struggling to basically
survive the labor issues and inflation and everything that we saw,
(01:17):
and it really seems that a lot of them that
you know, I had a difficult time during the pandemic,
are turning their attention to that idea of productivity and
efficiency and how do we just keep people coming back?
And so I had the chance to you know, visit
Popeye's other Miami headquarters and my.
Speaker 2 (01:35):
Favorite, my favorite restaurant, QSR restaurant by the way for
eating not oh really in terms of stock recommendations, it
was my It was my favorite stock back in the day,
like twenty thirteen through like twenty sixteen or so, and
it did pretty well.
Speaker 1 (01:50):
But yeah, I'm a big fan of Popeye's.
Speaker 3 (01:52):
Checking out, big fan of Popeyees.
Speaker 1 (01:54):
Yeah, I was there last weekend when my sonets fans no.
Speaker 4 (01:56):
Way, I do remember dragging my husband to try the
you know, fried chicken sandwich and that came out. But
you know, that's a perfect place to start, because really,
I mean for most of us, you know, unless you
lived in certain parts of the US, Popeyes entered into
our consciousness with the fried chicken sandwich. And of course
it was a big success for them. I mean they
brought up, brought in a lot of customers that previously
(02:18):
did not go to Popeyes, right, A lot of people
tried it. It was viral on the internet. But they
realized at some point that a lot.
Speaker 3 (02:25):
Of those people just were not coming back.
Speaker 4 (02:28):
So you know, they started sort of scratching their heads
and trying to figure out what was going on. And
so earlier this year they came out with a plan
to just try to crack that, and so I was
very happy to get sort of like an insight look
into the plan. I went down to the Miami headquarters
and really one of the main things that they're doing
is just ripping up the kitchens, and so.
Speaker 3 (02:49):
I talked to you Sammy C.
Speaker 4 (02:50):
Dicky, who is the president of Popeye's North America, and
one of the things that he said is like, look,
we realized that our service just wasn't We needed to
be right. You know, people were saying that the orders
weren't coming out perfect, that we were taking a little
bit longer. And also a lot of people just had
never seen a Popeyes.
Speaker 3 (03:07):
That was another big part.
Speaker 4 (03:09):
And so, you know, if you do want people to
think of you as an option, as a daily option,
like it seems like you do MIC with your son,
people need to see locations. You know, you can't have
people driving out of their way ten to twelve minutes
to try a QSR restaurant. And so one of the
cool things that they're trying to do is figure out how.
Speaker 3 (03:28):
To make the kitchens more efficient.
Speaker 4 (03:29):
And so if you want, I can get more into that,
but I don't know how deep you want to hear
about that.
Speaker 2 (03:33):
Yeah, No, I want to hear about it because it's
important and it's good. It's interesting because you know, there's
a lot of attention being paid at Burger King US
for restaurant brands, right, but right now the biggest growth
engine in terms of net units is Popeyes, right, And
so they finally talked a bit about it on this
last call about improving the operations have Popeyes, but they
(03:56):
haven't delved too deeply into it. So this is a
big reason when I got here. I love talking about Popeyes,
and you have the inside scoop.
Speaker 4 (04:04):
I have the inside information this time around. Yeah. So
basically one other things that they realize is that, for example,
their kitchens just were not arranged in a way that
they really flowed to the drive through and just sort
of to the handoff points. So you know, when they started,
you know, with a chicken sandwich, they just kind of
put the station wherever it fit. And really that's no
way to really handle making one of your best selling products, right,
(04:28):
And so it starts there. It starts with just making
kitchens such as flow better so that when team members
are assembling the orders, it's just much easier to put
them together, and then they just sort of flow to
the drive through, flow to your hands, you know when
you're in your car or at the counter, and they're
really looking at a lot of little details. Right. So
when I went there, there was this kind of kitchen
(04:49):
set up with these five modules that are all sequentially
arranged that basically every station has a kind of stuff
that you would actually need to put together one of
the orders, and they're implementing things is like you know
sticker printers. You know, if you go to McDonald's, if
you go to Starbucks, those are pretty common. I mean
on your carpet at Starbucks, you have the sticker that
has your name, it has your order, and so that
(05:10):
way the baristas can easily see it. Popeye's was not
doing that, and so you know, the folks in the
kitchen had to like manually check against a paper receipt
whether your order was correct. All that stuff just slows
it down and yeah, and so they're also making sure
that like once that order is correct, you know, you
get to a landing zone where they actually check stuff,
(05:31):
and then they actually do the whole bumping process. You know,
they hit that button that says order ready and you're
alerted to it. And again, this is stuff that's pretty
common at places like McDonald's and even Burger King. But
you know, I think it's underscores how we started this
conversation with this idea of Okay, this is the productivity
and sort of like efficiency era for a lot of
places that perhaps in the past it was like okay,
(05:53):
but we're fine, you know, you know, the sandwiches are
selling and the kitchens are fine, so why should we
them up? And now restaurants like Popeyes are really looking
at it and like, okay, we really need to be
efficient in how we do this.
Speaker 2 (06:07):
Yeah, and it's probably more important for them than anybody
to get that kind of like basic blocking and tackling right,
because it's chicken's tough. You know, there's typically a lot
more waste at a chicken chain. You know, it takes
fifteen minutes to fry a new batch. When you run
run out right, and so a lot of times are
making too much and there's food waste, and it just
(06:30):
makes it a trickier operation than heating up burger. So
I think getting that blocking and tackling is going to
be really important for them.
Speaker 3 (06:38):
But that's one of the things.
Speaker 4 (06:39):
And so for example, one of the processes that they
are also trying to improve is how they is the batter.
You know, you know, the way that Tammy explained it
to me is like, okay, you have to make this batter.
You have to chill water in ice, and then someone
will have to take the temperature by hand until it
got to the perfect and then they would have to
(07:01):
mix it and they would have to constantly steer it
so it would clumb, so it wouldn't clump, and then
you know, they would actually be able to batter the chicken.
And so they just came up with a machine that
doesn't right. And so there's just like all these things
that if you realize if you have a labor model,
a business model that's more labor heavy, labor reliant in
(07:22):
a time of you know, still tight labor market, it's
just tougher and so just kind of automating some of
that stuff, and it's streamlining how you do it? I
think you said it, Mike. Actually for my story, like
operations is not sexy, but it matters a lot.
Speaker 1 (07:38):
Yeah, for sure, no doubt.
Speaker 2 (07:40):
And so you know, talking about streamlining operations, you know,
we were talking about Starbucks. They've been investing heavily to
improve their throughput, speed of service, and just basically make
the baristas and the other employees jobs easier. So I
was swamped with the earnings last week, but you made
it to their investor day in New York.
Speaker 1 (07:59):
How are they progressing?
Speaker 4 (08:01):
I did? I did, so, you know, just to kind
of put it a little bit in context, it's a
similar story to poplize in the sense that you know,
Starbucks had that big slump when the pandemic started, but
then you know they've really recovered pretty quickly, Like their
demand is pretty strong, but because of everything in the pandemic,
they just didn't adapt quickly enough, especially to that like
just massive shift to online orders. I mean, Starbucks has
(08:24):
always had a bunch of online orders, they were pioneers
in that space, but it just like really searched in
a way that made everything more complicated for baristas and
so about a year ago they announced sort of the
first iteration of the plan that they implemented to just
basically help stores run better. You know, they are rolling
out stuff like new cold foam blenders.
Speaker 3 (08:48):
Cold foam is a super super popular topic.
Speaker 4 (08:50):
If you've ever been to Starbucks lately, you see people
with their you know, walking out with their beverages and
there's like the cold foam on top.
Speaker 3 (08:57):
But previously that you have to make it.
Speaker 4 (09:00):
I got full size blender and that competes with preppuccinos, right,
so it just made it harder. And so that's some
of the stuff they're doing. They're also rolling out something
that's basically a thirty second verse French press machine. Basically
it makes coffee in thirty seconds instead of having to
make a bunch of you know, batches in the like
(09:22):
large rewers type stuff, and that generated a lot of waste.
And another big thing that they unveiled is basically a
new setup to bring together all the elements to make
cold drinks. Cold drinks account for like seventy five percent
of Starbucks orders, unbelievably, and so that also was meant to.
Speaker 3 (09:41):
Help with that.
Speaker 4 (09:42):
So the first two parts, right, the blender and the
vertica are the the coff Flover Vertica, which is the
thirty second coffee machine, are the ones that are the
most advanced. They're also relatively speaking, easier to implement. I mean,
it's a machine at a store versus you know, the
side iron system, which is what they call the new setup.
Is that it's a new setup, so you have to
(10:04):
you know, retrofit stores and everything. What what I found interesting
about the latest update that they gave, you know, during
their what they called Reinvention of Data was on November second,
was that it seemed like investors were focusing a lot
on the siren system. It was like, that's the big thing,
that's what we should be focusing on. But they really
(10:25):
sort of broadened it out a little bit more and
they talked about just other things that they have been
doing to make the stores easier to run, like, for example,
capping the number of delivery orders.
Speaker 2 (10:38):
Well, we don't like to hear that. We don't like
to hear anybody capping orders.
Speaker 3 (10:42):
So why is that? Okay?
Speaker 4 (10:44):
Yeah, I now I had get to interview with you,
Like what right.
Speaker 2 (10:46):
You got to you got to hit those same store
sales targets right, like you shouldn't you should you know,
I'd rather see you improve your operations more quickly than
turned down then you know, orders, especially it those online
orders so usually pretty pretty good in size, you know.
But I think I just quickly make a point. You know,
both of these companies have seen big jumps in average
unit volume SAAM source sales over the last four or
(11:08):
five years. And this is part of the reason why
they need to do these overhauls, is because the boxes
weren't built to support these levels of sales.
Speaker 1 (11:15):
But please keep.
Speaker 4 (11:16):
Going, no, no, no, exactly, But I mean you make
a really good point about those miss sales, right because
at the end of the day, that's the point of
all of this, you know, it's not just like, oh,
we're going to be the best run Starbucks are pod
byas is just if we can serve people faster, then
people won't see along line and walk away. And so
it's just that idea of capturing you know, those those
(11:38):
additional sales. And so in this latest update, one of
the one of the things that sort of cut my eyes,
it's just them trying to almost like redirect investors to
this idea of all the other stuff they're doing, like
it's not just about the Seren system, which is hard
to implement because it's probably only going into news stores.
And I think it's about forty percent of the system
(12:00):
is going to have it by like twenty twenty six. Right,
That's that's lower than a lot of people thought. But
so they announced these other ideas of Okay, we're gonna
just run our stores better. We're gonna open stores that
are more specific to the purpose that we want them
to have.
Speaker 1 (12:15):
Yeah. Yeah, all that's good stuff, and I like that that.
Speaker 2 (12:19):
I liked some of those things that you picked up
on because it wasn't necessarily my biggest focus. I think
my biggest focus was that they lowered their long term
targets without admitting they lowered their long term targets, and
like no one, everyone gave them a pass on it.
Everybody loved Starbucks, apparently because they made a lot of
money I guess over the years investing in it.
Speaker 1 (12:40):
But yeah, that was curious. I mean, that was interesting
during their Yeah, I mean.
Speaker 2 (12:45):
During the investor day back in late twenty twenty one,
I guess about two years ago. Now, I found it
really curious that I'm sorry, not two years ago. It
was last year.
Speaker 4 (12:56):
I know what time now, I know it flies.
Speaker 1 (13:00):
So they taught they raised.
Speaker 2 (13:02):
Their long term targets, you know, and just EPA, it
was like five to ten. They increased revenue guidance to
five to ten, or central sales from five to ten,
operating come ten to fifteen percent growth a year, and
then fifteen to twenty percent EPs growth, which we wrote
at the time was like, why are you doing this
to the CEO as he's coming in. Usually CEOs like
(13:23):
to come in and cut all the targets to keep
Wall Street off his back for like.
Speaker 1 (13:27):
A year, you know.
Speaker 2 (13:29):
Yeah, and then now a year later they cut it
to like they didn't cut it totally, but they cut
the top end off, right, So it's like now it's
like five percent SAMSAR sales and ten percent.
Speaker 3 (13:41):
Yeah revenue growth.
Speaker 1 (13:42):
Plus yes growth. Yeah. So that was where most of
my focus was.
Speaker 4 (13:46):
Yeah, that's a very good point and sort of the
what I heard, right, you know, when I was talking
to investors and analysts ahead of this, is that just
echoing what you were saying. A lot of people thought
that the targets were just too to begin with, right,
the way I was talking to an analyst and the
way that she explained it was the consumer environment has
(14:07):
definitely become more worried, to put it that way, since
last September when they first set those goals. But it's
hard to say that it's not a sort of specific
thing when they were the ones that promised those lofty goals, right,
and so it was sort of that thing of Starbucks
doesn't have a problem with its brand. People are still
buying it, but at the same time, in an environment
like this, you might need to be a little more
(14:29):
careful about the type of targets you have. And it
was a little bit, you know, when they announced earnings
and then they caught that same store soals guidance from
seven to nine percent, so five to seven the stock
was going up, right, and that doesn't really happen that often.
And sort of the explanation that I got is that
(14:49):
they didn't cut the profitability targets, and it seemed to
be reassuring for investors that even with slower same store
sales growth, they could still reach that EPs growth target
through other things like, for example, that three billion dollar
just cost saving program. I think he would have been
a lot worse and not as reassuring if they had
(15:11):
also caught the profit guidance the guidance, So is that
is that kind of how you were also seeing it?
Speaker 2 (15:18):
Yeah, I guess, you know, as long as they kept
the bottom line, the bottom end of that that guidance,
that seemed to play kid investors off of a very
strong quarter, right, So you know, the calendar second quarter
result was pretty weak. We saw a pretty significant slowdown
in the four year same source of sales trend, and
so management didn't really address that. And but but like sequentially,
(15:40):
this was a reacceleration of the same.
Speaker 1 (15:42):
Source of sales.
Speaker 2 (15:42):
So I felt that the quarter was so strong and
that they kept the low end of the long term guidance.
I think that seemed to play CAID investors, and they
kind of gave them a pass because for those reasons
that you said, they're long term targets, which I'm gonna
pat myself on the back because we wrote this coming
out of the Investor a year ago. It's like, these
targets don't include any slow down the consumer, so they
(16:03):
don't make any sense to me. So you know, even
a broken clock is right twice twice a day.
Speaker 3 (16:08):
There we go.
Speaker 4 (16:09):
Yeah, that's got we got excellent point.
Speaker 2 (16:11):
We had that one, right, So so we'll see, so,
you know, we'll see going forward. Obviously, this is a
super popular name that everybody likes to talk about very
very very Yeah, everybody loves their talk, loves their coffee,
and so you know, you also mentioned to me that
they hyped up their position as a provider of small
(16:31):
indulgences amid a slowing economy, So would they have.
Speaker 4 (16:35):
To say, yeah, So I think this just like it's
a really good example of these theme that we've seen
more broadly, people are caughting back on just big expenses,
like for example, appliances, right, I mean, part of it
is just a bunch of us, but appliance is during COVID,
how many more washers do you need? And then also
just that idea of you know, wallets are pressured, but
(16:57):
at the same time, people are still willing to splurge
on what we have called small intelligences. Right. So you
know a lot of the beverage companies are doing great,
right that that doesn't really cost you that much. People
are also traveling, right, so they have this idea of like, well,
I mean, I might as well spend on something that
(17:17):
I really enjoy and especially with international travel, like we've seen,
you know, a fair bid of strength there, and then
we have something like Starbucks. So Mike, something that has
really caught my attention, and then I'll bring it back
to sort of like the financial is. You know, I'm
a millennial, and for for a long time, the type
of narrative that I heard, particular un millennials was well,
(17:38):
if you, you know, stop cheating avocado toast and buying Starbucks,
you would be able to save up for a down
payment on a house. Right. That was ridiculous. That was
a big narrative, Like, that's ridiculous.
Speaker 1 (17:49):
It's like those people that tell you know, you could say, well, yeah,
I forget, but don't get me started.
Speaker 4 (17:54):
There we go. But that was a big narrative around
sort of like the way that millennials went around the economy.
Most more recently, I have seen you know, posts on
social media that are like, well, even if you spend
seven dollars a day on your coffee X many days
a year, that still only amounts to I don't know,
one thousand dollars, that's still not enough for a down
payment on a house.
Speaker 3 (18:14):
So just buy the coffee, you know.
Speaker 4 (18:16):
So this idea of indulging, you know, those small indulgences,
and so just to bring it back to like specific
Starbucks results, one of the reasons why they're same store
sales were fairly strong this quarter was more people buying
more stuff, you know, and so that sort of like
underscores that idea. And actually their chief marketing officer, Brady Brewer,
(18:37):
which excellent name for the job, by the way, said
this during the investor day. He was like, people are
just not calling back. I mean, they're adding more stuff,
and you know, you're at this wonky term in the
restaurant industry, the idea of food attached, right, basically just
people adding food to their orders. Also a record reporter,
you know, people are going to Starbucks for their drinks
and they're also adding sandwiches, crosshounds, whatever it is, holding
(19:00):
some of the like seasonal items that they have. So
it's just like a really good example of this kind
of trend that we seem to be seeing in the
consumer space of yes, let's cut back on those like
big outlay expenses, but then also I'm going to get
my cold phone and my cold crew.
Speaker 3 (19:16):
You know.
Speaker 1 (19:17):
Yeah.
Speaker 2 (19:18):
They credited their pretty solid performance throughout the Great Financial
Crisis to you know, the same sort of of a trend.
I think it also helps them that they sell an
addictive product, right, and their addictive product has more caffeine
in it than anybody else's. And so if you really
got to get a lot of work done, you're still
(19:39):
going to get your Starbucks coffee in the morning.
Speaker 4 (19:41):
And it's such a routine product, right. I think that's
just something that's so interesting about the coffee business is
you know, you if you have a habit of I'm
going to leave my house, I'm gonna stop by Starbucks
and then go to the office or whatever it is,
it's just so hard to cut out. It's just something
that you do every single day. I mean, it's not
like other pockets of the restaurant industry where we have
(20:03):
seen some weakness that are just more kind of like,
oh maybe I'll go out to celebrate something or you know,
I don't know if I have time for that, you know,
sit down meal. But it does raise an interesting point
that actually, like you know, another Wall Street person brought
up to me, which is what happens to these sort
of routine based businesses. If, for example, we have a
(20:26):
dip in employment, right, Like, you know, employment has been
so strong, is really the only way that we can
go here is down?
Speaker 3 (20:32):
Perhaps, I don't know.
Speaker 4 (20:34):
So it's kind of interesting to think also about sort
of those second order effects of where the consumer's going
and what that means, not not necessarily because people have
less money, but because their routines aren't disrupted. So we'll see,
we'll see. I mean, I think that'll be interesting to
keep an eye on for the AAR ahead.
Speaker 1 (20:51):
Yeah, for sure.
Speaker 2 (20:52):
You know, we've seen a lot of other QSRs kind
of slow. People aren't giving up the coffee yet, but
some of the other you know, quick service restaurants recovers,
you've seen some some slowing and the sales and there's
been a lot of concern about future sales for those QSR.
Speaker 1 (21:08):
Names due to the g LP ones. And a nice article.
Speaker 2 (21:14):
Yeah, you set me up nicely for that one, you said,
you know, you wrote a good article today about you know,
what companies with CEOs are saying about ozempic and how
it's going to impact eating habits moving forward. So what
are these CEOs saying about this quote unquote miracle drug.
Speaker 3 (21:33):
Yeah, there we go.
Speaker 4 (21:33):
So, first of all, quick plug for the Bloomberg Health
team if you really want to, you know, be up
to date to just what's happening there from the scientific perspective.
Speaker 3 (21:41):
They're doing a great job with their.
Speaker 4 (21:43):
Reporting, including a approval recently for yet another one of
these drugs.
Speaker 3 (21:50):
But basically, you know, during earning season and.
Speaker 4 (21:53):
As I've had access to restaurant executives, I was just
trying to ask them like how they're thinking about it
and how they're thinking about the impact on their businesses,
and they seem pretty confident that it's going to be okay.
You know that they are going to hold up just
fine for a couple of different reasons. And so if
you talk to the likes of Cava and Chipotle that
tend to have what you would call like healthier meals,
(22:15):
you know, stuff that they sort of talk about more
as real food, right, like you can see the rice
and the beans and the you know salad.
Speaker 1 (22:24):
Yeah, you can eat healthy at those places if you
want to, for sure.
Speaker 4 (22:28):
Exactly, It's like you can make those choices of more
like more wholesome food. The idea that they have brought
up is, well, we think that the people who are
on this golp ones are already more conscious about their health, right,
Like they're actively trying to lose weight, and they are
probably also actively thinking more about what kind of food
they're eating. And so Cava and Chipole both said that
(22:50):
they think that those people, because they're being more just
sort of discriminating about what about their health, they're probably
going to go for their types of meals kind of
no matter how littly.
Speaker 3 (23:00):
I did ask, you know.
Speaker 4 (23:01):
The Chipota CFO but I was like, well, but like,
you know, if these drugs do suppress appetite, like what
are you going to do about your portion sizes?
Speaker 3 (23:08):
And his answer was like, you know, our consumers are already.
Speaker 4 (23:11):
Pretty savvy about that type of stuff, Like some people
buy the balls with the intention of eating them into seedtings,
not one. So you know that that's the type of
stuff that they're saying. And then you have other restaurants
that do serve more indulgent food like so, for example,
I talked to Freddy's Frozen Custard and Steak Burgers. I
talked to their CEO.
Speaker 1 (23:29):
I'm sorry, Christal, Yeah, I had him on the podcast.
Speaker 4 (23:32):
Yes, yeah, you know, he's he was. He was really interesting.
I did ask him if most people think his name
is Freddy, and he said yes.
Speaker 3 (23:40):
But AnyWho.
Speaker 4 (23:41):
Uh So, what Chris was saying was that, you know,
they have an opportunity in chicken. He's like, you know,
one of the things that we can look at as
part of just like our general menu review, is just
improving our chicken offerings. You know, chicken is perceived to
be healthier than beef. And also it's just as we
talked about with Popeyes, it's just very popular. I mean,
(24:03):
Americans are eating more and more chicken. And he mentioned like, well,
I mean, you know, you might look up and some
they actually see a salad on our menu for example.
The other part of what he was saying, which was
also sort of echoed by Darden a couple of months
ago when they reported earnings, was this idea that people
are not going to want to miss out on dining
(24:23):
out with friends and family, Like they're not going to
want to cut out the experience part of dining out,
the part that isn't just need to get sustenance now.
Speaker 3 (24:33):
And so that's also an important sort.
Speaker 4 (24:35):
Of like hypothesis that they have, and Darden also you know,
emphasized that they've done a lot of work across their properties,
you know, Alive Garden and all of those two just
have more options for people, you know, so people can
pick something healthier if they want. That means that, like,
what what do you think about that? Because it seems
like these are very different reasons. And I mean it
(24:58):
seems like the scientific community think that these drugs are
a real breakthrough and that they do suppress appetite for
all sorts of foods. So really big questions still up
in the air.
Speaker 2 (25:10):
Yeah, I have my I have my doubts that it's
going to make a major impact to the restaurant industry.
You know, some of the reports are out out there
or they're saying, you know, there could be a seven
or a ten percent, maybe at twelve percent decline in
calorie consumption by twenty thirty five. I mean, like, are
you telling me McDonald's can't figure out how to decrease
(25:30):
the size of their burgers ten percent by twenty thirty five,
I think.
Speaker 3 (25:34):
Not smaller.
Speaker 1 (25:35):
Come on, I'm sorry.
Speaker 2 (25:38):
Sorry to break it to you, but with all the inflation,
I think we're in the early stages of.
Speaker 1 (25:42):
A commodity bull market.
Speaker 2 (25:43):
So I think inflation is not going anywhere for anywhere
for a long time, so burgers are probably gonna shrink.
Speaker 1 (25:48):
As it is.
Speaker 4 (25:49):
That's that's a really good point. A lot of structural
reasons behind that.
Speaker 2 (25:52):
Yeah, And I don't I don't, you know. I think
what should be more of a concern would be the
quick service names, because I have read that people that
are on these medications do not want to eat greasy
and fatty food. So I would say it would probably
be a little bit more of a concern for places
like that. But I'd also make the argument that most
people don't really care, like does everybody care about their weight?
Speaker 1 (26:17):
Like does everybody?
Speaker 2 (26:19):
Is everybody willing to take a drug to cut their weight,
like to stay skinny? Like you know, I get it
for health reasons, you know. And one thing we've been
saying is like right now, this is this is and
then near term this does nothing to McDonald's because there
their customers can't afford to go on these medications if
it's off prescription.
Speaker 4 (26:39):
I think you're bringing up like a great point about
all your knowns about this, you know what I mean,
And like those are the big questions that have to
be solved to even try to determine what the impact
is going to be, you know, and to your point,
you know, I have also, you know, read this idea
about you know, cutting out sort of like junk foods
and stuff like that. But even then, another point that
(27:00):
has come up is that that might hurt more sort
of the individual dining occasion, like just going to drive
through for lunch or something like that, unless sort of
the group. You know.
Speaker 2 (27:11):
Oh, I agree wholeheartedly, wholeheartedly. I mean, we saw that
coming out of the pandemic. There's that's where people go
to meet friends and family and is restaurants, right, That's
where you're going to go when you want to like
do business, when you want to see friends, whatever it
might be, celebrate an anniversary or a birthday.
Speaker 1 (27:30):
Where do you go?
Speaker 2 (27:30):
You go to the restaurant. So those dining occasions are
not going anywhere. And uh yeah, for me, I think
there's just too many question marks about GLP ones right now,
and I think this is a long term thing. And
so I think investors, you know, should not be making
their investment decisions in restaurants based on you know, pie
and the sky estimates of ozempic and other GLP ones.
Speaker 4 (27:52):
So I'll just I'll just keep it at that there
something else like last sort of points on this was,
you know, chrispy Kreme did take a big hit. I
think it was not too long ago because of a
downgrade that wasn't about the impact, it was about the uncertainty,
you know. So the argument that was made with that
downgrade to the price target was the idea that it
(28:16):
would be better if we knew already, so that way
we can factor it into estimates and growth targets.
Speaker 3 (28:22):
So it's just another way to see it.
Speaker 4 (28:24):
You know. My job here is not to say who's
right on who's wrong. It's just it's another one of
the things that has come up, you know, because you're
talking about the potential impact based on estimates, and then
there's people who are looking at it. It's like, well,
but the uncertainties matter, So what do you think.
Speaker 2 (28:38):
I think there is a bias by most of analysts
and investors, and it's this New York, you know, pretty
wealthy bubble that these people live in, and I don't
think they know or or really analyze how people and
(29:00):
the rest of the country live.
Speaker 1 (29:04):
Yeah, it's it's very different. Listen. We're blessed.
Speaker 2 (29:06):
We work for a great company and we make the money,
and you know, and we live in this bubble, but
the large majority of this country, you know, lives a
very different way.
Speaker 1 (29:18):
So I have a have a story.
Speaker 2 (29:20):
So years ago, when I was covering restaurants at Sadodi
prior to coming here, every time Domino's did a limited
time offer, they'd send us a pizza and they sent
me this like chicken bacon Carbonora pizza and like, I
called up the IR director to thank her, and I
(29:40):
was like, now, this is really good.
Speaker 1 (29:42):
Thank you, I appreciate it.
Speaker 2 (29:43):
And she's like, believe it or not, it's healthier than
most of the the pizzas, than the average pizza we sell.
I was like, oh really, She's like yeah, but don't
tell anybody that.
Speaker 1 (29:53):
I'm like, why because because people won't buy it.
Speaker 3 (29:57):
That's fascinating.
Speaker 2 (29:58):
People live very and very differently than we do here
in the you know, and in other on the coasts
and in major metropolitan areas.
Speaker 1 (30:07):
And I think I think I see it. It's not
I think I do.
Speaker 2 (30:12):
See it all the time with the investor bases of
a lot of these companies that they're not they don't
put themselves in the shoes of everyday Americans.
Speaker 3 (30:20):
In Middle America the overall consumer.
Speaker 4 (30:22):
And you know that's again like another one of those
big things that we have to figure out, like why
are they use such patterns for this? Who has access
to this? How long can they stay on it? Based
on their insurance? And so maybe the executives that I've
been talking to who are saying that they think they'll
be okay, all right, maybe they'll be right right, and
so we'll we'll see. But I think you make a
(30:44):
very good point about just the perspective that we have
and you know, we got to get out to more
drive throughs. That's that's what America, how America consumes. That's
my take away from this conversation.
Speaker 2 (30:57):
Yeah, I don't think they're going away anytime soon, that's
for sure. Well thanks again, this was awesome. Where can
the audience find you on social media?
Speaker 4 (31:06):
So I am on Twitter at Danny Underscore LSC and
then add me on LinkedIn. I'm on LinkedIn all the time,
and I'm always looking to hear from people in the
restaurant space.
Speaker 3 (31:18):
Tell me your thoughts, tell.
Speaker 4 (31:19):
Me our secrets. That's mostly what I want to hear.
But if you want to don't want to say that
still reach out and I do want to hear about
just what you think is going on in the restaurant space.
Speaker 2 (31:28):
So thank you all right, good stuff, and thanks to
the audience for tuning in. If you liked the episode,
please share with your friends and colleagues. Check back next week.
I'll be interviewing Red Robin CEO GJ.
Speaker 1 (31:38):
Hart
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