July 30, 2024 • 22 mins
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The restaurant industry is facing significant challenges in 2024, with indicators pointing to a potential downturn. Wall Street's recent struggles, including a tech selloff, may impact high-net-worth individuals' spending on dining out. Several fast-casual chains are experiencing difficulties, exemplified by One Table Restaurant Brands' bankruptcy filing and MOD Pizza's acquisition to avoid bankruptcy. While Chipotle reported growth, consumer sentiment data suggests potential future declines. Darden Restaurants is consolidating its position through strategic acquisitions. Alcohol sales are declining globally, potentially affecting restaurant profitability. Interestingly, convenience stores are outperforming quick-service restaurants in customer loyalty retention. These trends suggest a shifting landscape in the food service industry, with restaurants needing to adapt their strategies to maintain profitability and customer loyalty in an increasingly competitive and economically challenging market.
RestaurantApocalypse #DiningDilemma2024 #FastCasualFallout #LoyaltyWars #ConvenienceStoreRevolution
📈 Learn More ~ Restaurant Power Index featuring the top 50 brands' performance in consumer sentiment based on 12 performance markers in food, service, and overall brand consumer sentiment. The RPI features historical and current sentiment analysis for key brands based on the overall market sentiment data. Subscribe for weekly reports on the top brands in the restaurant industry. https://www.savor.fm/restaurant-power-index
The restaurant industry is facing significant challenges in 2024, with indicators pointing to a potential downturn. Wall Street's recent struggles, including a tech selloff, may impact high-net-worth individuals' spending on dining out. Several fast-casual chains are experiencing difficulties, exemplified by One Table Restaurant Brands' bankruptcy filing and MOD Pizza's acquisition to avoid bankruptcy. While Chipotle reported growth, consumer sentiment data suggests potential future declines. Darden Restaurants is consolidating its position through strategic acquisitions. Alcohol sales are declining globally, potentially affecting restaurant profitability. Interestingly, convenience stores are outperforming quick-service restaurants in customer loyalty retention. These trends suggest a shifting landscape in the food service industry, with restaurants needing to adapt their strategies to maintain profitability and customer loyalty in an increasingly competitive and economically challenging market.
RestaurantApocalypse #DiningDilemma2024 #FastCasualFallout #LoyaltyWars #ConvenienceStoreRevolution
📈 Learn More ~ Restaurant Power Index featuring the top 50 brands' performance in consumer sentiment based on 12 performance markers in food, service, and overall brand consumer sentiment. The RPI features historical and current sentiment analysis for key brands based on the overall market sentiment data. Subscribe for weekly reports on the top brands in the restaurant industry. https://www.savor.fm/restaurant-power-index
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome back to another episode of the Restaurant Report. My
name is Paul Baron. I'll be your host today. We're
going to really break into some of the industry news
today that I think you guys are going to be
interested in when it comes to trends and how consumers
are going to be facing possibly a downturn in the
restaurant industry, and there's a lot happening. I'll do a
(00:20):
whole slew of screen shares for you guys today. So
if you are listening to the audio version of this
podcast over on Spotify or on Apple Podcast, make sure
and jump over to the YouTube channel, and of course
just search saver Fm. You'll find us there, and of
course you'll get a chance to see.
Speaker 2 (00:37):
The full visuals.
Speaker 1 (00:39):
So let's get right into it today. All right, let's
break into a couple of points I want to add in,
and one of the things I want to jump into
is this right here, stocks tumbling Wall Street of course
gets a little bit of an AI way up call.
(01:01):
This is the longest streak of a less than two
percent decline since two thousand and seven, so a pretty
significant time in terms of the you know, the markets
in general for US to get almost twenty years without
a greater than two percent decline, So this is a
(01:22):
pretty big deal. I've been talking with a lot of
people in the industry, and I'll zoom in on this
right here. Sell off in most of this has been
in big tech, and when you look at big tech
as being the kind of the focus of where the
industry has been faced with. When I say industry meaning
the just where investing is going, obviously AI has been
(01:43):
one of the biggest areas of that. So sell off
in big tech sent the S and P five hundred
down to its worst day since December twenty twenty two,
ending the best stretch without a two percent drop since
the start of the global financial crisis. So losses were
also pronounced in then, as Tek one hundred tumbled over
three point five percent, alphabet Google slid five. We also
(02:06):
saw Tesla miss numbers which was pretty big, including the
Robotaxi delay by Elon, which spurred a twelve percent stock plunge.
I think that's kind of be expected with what Elon
does out there in the market, for sure. The other
thing that plays into this, I think when you look
at just where the industry, meaning the restaurant industry is going.
(02:27):
The key here is is that if the stock market
starts to see a full regression, typically that is going
to be in the high net worth individuals that usually
drives into consumables, and restaurant industry typically is on the
front edge of consumables. One of the things that I'm
watching all the time is what other things are happening
(02:50):
out there right now? One table restaurant brand filed for
Chapter eleven bankruptcy protection. And I think when you look
at remember this is the company a pair of company
of Tens and Takaya. This is a problem right here, guys,
because remember tender Greens at one times, at one time
was probably the number one fast casual sector restaurant out there.
(03:13):
And I think when you look at what's happening right
now with one table, this represents a shift in upscale
dining reduction. And I think that's the key here is
we see more and more pressure from not only high
interest rates you know, the FED higher for longer, and
also the CPI. And when you look at where inflation
(03:36):
is right now, even though it has started to regress
down to around three percent, the biggest problem is the
lagging effect on the economy. And I think this is
the thing that a lot of people do not really
look at when it comes to the restaurant industry. This
is one of the nice to haves, the entertainment layer
of expenditures for most consumers. Credit card debt, now it's
(03:59):
high credit card failures or excuse me, lack of being
able to make payments, one of its highest mortgage demand
lowest ever. We're seeing all the indicators that are really
pushing the market into a bad position. And here's the
thing when you look at what could be happening here
on the restaurant industry. This is a good example, and
(04:20):
I'll kind of showcase what restaurant Dive focused on right here.
And I thought this was kind of interesting. Both brands
never saw their sales volume recover, never came back. Tender
Greens average in a volume falling from three point four
million in twenty nineteen to two point nine million twenty
twenty three, so a big drop in terms of overall sales.
AUV slid from three four to two one in twenty
(04:43):
twenty three. So now that's even more cause for ARM
and of course falling sales four wall profits. This is
inside the restaurant now from sixteen percent of Tender Greens
and thirteen percent to Coyo, both before the pandemic now
present a level of nine to four and one point respectively.
These are horrendous numbers. And this is the concern I
(05:06):
have right now is I believe that we have been
in a recession for quite some time. This is just
the validation point that we continue to see. And I'm
going to show you some data on sentiment, consumer sentiment
around some of our brands that get into this a
little bit further. The other thing I want to hit
on is this right here is Chipotle had an eight
(05:27):
percent boost in traffic, their ltos increase, their labor deployment,
boosted Chipotle's transactions and throughput in Q two, driving increase
in safe store sales of eleven point one percent. I
don't think that's the whole story here. I think right
now Chipotle has been able to ride on the cotails
of digital and what it's been able to do over
the last several years. This has started to change and
(05:50):
I want to showcase something for you guys that is
pretty significant. One is this right here, and this is
a problem because Chapottle has been really tagged hard by
the consumer and the guests that basically say, hey, everybody
notices the portion sizes have started to reduce. They are
(06:13):
trying to focus on portion sizes as some of their
outlier restaurants to address this. And remember these are huge
Internet complaints and this is something that I think a
lot of people don't necessarily understand, is the impact of
sentiment on these brands. In fact, if you follow the
sentiment trail on our RPI, which is our Restaurant Power Index,
(06:36):
you start to see a lot of the problems paint
out before the market actually sees it. Let me give
you an example of this. We're going to go over
here to the RPI, and of course, if you guys
are not checking out the Restaurant Power indecks, just go
over to savor dot fm and you can learn a
little bit more about it. But it is something that
(06:58):
we've built and it continues to be I think one
of the most powerful tools out there and being able
to track down what's happening with the industry. Chipotle will
jump to them real quickly. And this is coming in
from the June numbers twenty twenty four. We'll have the
(07:18):
July numbers finished up here in a moment, so we'll
have another record. What I can tell you is Chipotle
has continued their slide, but this is a huge slide
from seventy eight. Let me zoom in on that for
you guys. This is probably one of the most I
think concerning areas that I continue to see is just
the amount of consumer sentiment that is falling off. Now remember, yes,
(07:43):
Chipotle has been one that has gone. This is the
overall market sentiment for fast casual from a seventy eight
down to seventy two. Here's Chipotle started the year to
sixty seven, came back up, and then right here back
up to sixty seven, and then have just continued for
a double dip in the last two months. And July
shows a number again that is not consistent with growth,
(08:08):
meaning we're going to see continued downtrend here, I think
for for Chipotle, and if you look at some of
the other you know, fast casuals, we'll go into a handful.
Here's Cava, which has been face somewhat pacing with the
overall sentiment of the market, but now starting to dip
slightly under and then kind of right where market is
(08:28):
trending right now, and they are of course one of
the top you know, fast casuals out there. This is
some of the categories that we track right now. If
you guys want to learn a lot more about this,
you can, of course again just go over and check
savor dot fm and you'll learn how you can get
into this. I want to go on to one other thing,
(08:49):
and this is one of the concerns I continue to see,
and that is this kind of stuff right here, the
pizza category is absolutely getting murdered. Mod announces a new owner.
They're trying to stave off bankruptcy. This of course came
in from CNN. But the point being is Mod has
been a brand that we have been looking at for
(09:10):
the last several years. I don't know what happened here.
This brand was flying and was doing so well, and
then all of a sudden last year we started seeing signals,
at least on consumer sentiment that just absolutely destroyed what
we had been expecting from the industry. And I think
this is one of those things that you and I know,
(09:33):
Scott and Ali, I've met them, we've done interviews with
them before. I think this is I don't know if
they took their eye off the ball, tried to grow
too fast, funding got to be a problem, couldn't penetrate
markets in terms of competition with other fast casuals. Maybe
it was just a too fast, too soon kind of scenario,
and obviously COVID kind of delayed.
Speaker 2 (09:53):
A lot of that.
Speaker 1 (09:54):
But man, the team over at MOD have absolutely just
been getting destroyed, and of course Beth Scott she departed
from MOD all of that began. We saw the entire
executive team pretty much gutted by this acquisition by Elite
Restaurant Group, which was earlier this month. So I think
this is a problem. It's going to be a big
(10:14):
comeback story if MOD can recover from this. It does
put a huge black eye back in the pizza fast
casual category, which I believe is still one of the
most struggling categories in fast casual even though the entire
fast casual sector right now is in trouble, and this
is a problem I think that may not get alleviated
(10:38):
for any time to come. And there's many reasons why.
I think it is all lagging indicators from an economic
position that we study constantly over on our finance channel,
which if you guys have never checked that out. Go
over to Paul Baron Network on YouTube. You'll find us there.
We just hit four hundred and fifty thousand subscribers. It
(10:58):
is blowing up with there. We cover a lot of
crypto topics, but we also get into a lot of
macroeconomics and a lot of study of that. The other
thing that is kind of interesting is a consolidation. Consolidation
continues to be one of the things that I'm looking at. Darden,
of course buying Chewies for more than six hundred million.
This is a big deal because I think with Darden,
(11:19):
you know, one of the things you have to look
at is the potential for casual dining to possibly reposition
in the market. QSR is struggling. Fast casual is struggling.
Casual dining has been struggling. Fine dining, I think is
about to get hit for the first time with high
income and high net worth individuals maybe pulling back. Luxury
(11:42):
goods have already started to decline. A handful of things
that are are already pushing into this area. If you
look at the dive brief from Restaurant Dive on this deal.
Let me share my screen to you guys. The interesting
point right here is it's one hundred and one unit.
You know, it's full service text max Change. But they
(12:04):
bought this at about thirty seven to fifty a share.
This was a pretty good deal, all cash transaction worth
the enterprise value of about six hundred and five million.
I mean you think about that basically at six million
dollars a store and not bad, you know when you
look at the opportunity here of what this category could be.
Remember this is a second transaction. Darden is pulled off
(12:27):
the other one. They bought Ruth Chris Ruth Chris Hospitality
Group seven or fifteen million, and you guys know, I
mean this is Long Corner Olive Garden Steakhouse and then
Yardhouse in Bahama, Brieze.
Speaker 2 (12:41):
Listen.
Speaker 1 (12:42):
The bigger picture here is this consolidation. Consolidation continues to
be I think one of the key factors here. But
here is another factor that I think a lot of
people are not following when it comes to just where
these these brands are going. And I'm going to share
a trading view chart and we do this all the
(13:04):
time on our shows. I'm on the weekly right now,
and what I'm looking at right now is Diagio. This
is Diagio, one of the biggest brands out there in
the alcoholic section. But you can kind of see alcohol brands.
You can kind of see this massive fall off on
the weekly really since what we saw back in December
of twenty twenty one, which was its high, and now
(13:25):
we started to see a complete adjustment with negative downtrends
continuing on a sentiment side. But I want to go
over and look at Chipotle. This is Chipotle, which has
been on a tear for gosh almost five six years,
absolutely just killing it in terms of stock price. Look
at this growth right here. Let me give you a
kind of just an insight. This was in March of
(13:48):
twenty twenty. Remember that that's the called the Chipotle or
excuse me, the COVID dip. And up here to the high.
That is a five hundred and forty eight percent gain,
five and forty eight percent gain from March twenty through
June twenty twenty four. Here's the difference. Just in the
last month, we have seen a correction here from the
(14:10):
high down to here of almost thirty percent. Does this
mean that Chapote starts its decline going back into possibly
you know the twenty five to thirty dollars stock range.
This is huge for where Chipotle will be. McDonald's also
kind of going sideways a little bit, but still on
(14:31):
the uptrend. I think they have an opportunity here to
continue to perform Wendy's sideways. Not seeing a lot of
attraction here sentiment wise, also kind of the same thing.
Not a lot of traction in terms of consumers. And
if you look at Darden, it's been pretty much uptrend
from here, even though they've had a little bit of
a downtrend here recently. This may be a play here.
(14:53):
I'm watching this one very closely for sure. Here's Starbucks.
This one right here worries me because I think star
Bucks continues to be challenged by what's happening with the industry,
and they are also falling into the same problem in
terms of how the consumer interfaces with the restaurant industry,
and that is high noworth individuals and people who have
(15:16):
expendable income. And the biggest problem right here is jen
Z and also jen A. They have yet to be
able to connect to that kind of consumer, and I
think this is a problem going forward. I'm going to
play a clip for you right now. That is the
Starbucks CEO talking about this very thing, Jim.
Speaker 3 (15:36):
When we look at the biggest loser today, it's going
to be Starbucks. It's among the worst performers in the
S and P. Five hundred. It's one of the bigger
guidance because I've seen in a long time. I checked
with all the major both public and private companies that
are in a similar business to you, and no one
saw a three percent decline in comm stores because of weather,
and none of them saw a negative number except for you.
Speaker 4 (16:00):
We have not been able to communicate to them the
value that we provide. What we're doing for that is
we are making it attractive for them to come back into.
Speaker 2 (16:08):
The Stopbucks app and join it. On the app.
Speaker 4 (16:11):
What you will see is you will see value that
they haven't seen.
Speaker 2 (16:15):
There are drops that are going to happen every Monday.
Speaker 4 (16:17):
There are bundles that we're putting in place that are
attractive for.
Speaker 2 (16:20):
Them, for example, a beverage and a drink at a
certain price.
Speaker 4 (16:24):
What you're seeing there is the effort we're making in
order to ensure that our occasional customers get to see.
Speaker 2 (16:30):
The value that we provide.
Speaker 3 (16:32):
A loyal customer ly program go from thirty four point
three to thirty two point thirty two point eight in
link quarter. I mean those people are not occasional. Those
people are hardcore. Not the occasional, but the hardcore drop off.
Speaker 4 (16:47):
It's at the tail of the laynty program, particularly those
that are you know, in the ninety day active as
we call it, the folks that didn't come back. They
again are very similar to the occasional customers. We have
an action plan in place right now to communicate directly
with them.
Speaker 2 (17:01):
If you look at some of the metrics that.
Speaker 3 (17:03):
We have done, and Tim Wharton said you were not
holding share, sir, I regard them as being seminal companies
that are just as good when it comes to McDonald
says you are losing share.
Speaker 4 (17:13):
The thing we didn't do enough off is really attack
the occasional customer with delivering and communicating value to them
in a more aggressive manner. That's what the plan we
have does.
Speaker 3 (17:26):
Is it not time to pause, sir, and figure out
what's really going wrong and spend a deep dive and
making it so that this decline in comp store numbers
does not continue because it is perilous to the actual
existential existence of Starbucks.
Speaker 1 (17:41):
All right, So as you can see, I mean, they
don't really have a plan in place, and I think
this is the problem. The loyalty system continues to fall,
and we've continued to see potentially a issue I think
with maybe the ability for them to truly connect to
the next generation consumer. I think that is the bigger
(18:01):
problem that lies in Starbucks' situation right now. So a
lot really pushing forward here, and I was talking about
Diagio just a minute ago. Obviously we've seen the downturn here.
One of the things that concerns me here if you
look at the brands that are available here. Let me
share this screen with you guys, and the brands that
(18:22):
are available here, Tanger Ray Againnis, Johnny Walker, Smeirnoff, Bailey's, Buchanans, Sirock,
Don Julio, Kettle, I, Crown Royal, Captain Morgan. You can
see this is the core of what I call the
everyday man's liquor cabinet. And for this to see continue
(18:45):
downturn and for us to see a huge downturn in
where the industry is going around just overall beverage sales,
especially in the situation with whiskey, American whiskey. This is
a concerning problem because America Whiskey, I think, is the
bell weather of how all of this plays forward. And
(19:07):
if you look at just some of the things here
in terms of the data, this iswsr's recently published analysis,
and this is the global industry alcohol sales decline in
twenty twenty three for the first time in nearly three decades,
and they're continuing to face a soft market in twenty
twenty four. And recent data coming in on this right
now is that twenty twenty four could be a bigger
(19:30):
decline this year than even what we've seen in twenty
twenty three. All of that being said, this aligns with
one of the most profitable centers in a restaurant and
that of course is the bar business. So I want
you guys to think about that and really understand what
this means. The other thing that you have to consider
(19:51):
is where is the customer going If they're not going
to restaurants anymore, what is the angle that could be
playing in here. Well, one that you have to consider
is what's happening in the sea store category. Look at
this crazy stuff. Seastorees now seeing higher loyalty retention than
QSRs quick serve restaurants fast food. They sign up new
(20:13):
members much more slowly than QSR, but they are getting
higher loyalty retention. So it's just a matter of time,
people before we start to see the C store kind
of move in. Look at here, I'm going to show
you some of the data hear from restaurant dive. Great
side by the way they do a good job. Seastore's
upper half of loyalty Transactions Share see at least eighty
(20:36):
percent of their members returning eighty that's right, I said,
eight zero percent of their members returning.
Speaker 2 (20:42):
Every mind.
Speaker 1 (20:43):
According this is twenty twenty four loyalty report that rose
to eighty five percent for retailers in the ninetieth percentile
and above. By comparison, in the ninetieth percentile and above
ninetieth percentile, Transactions Share saw sixty two percent of their
loyalty memory in the QSR sector, So a big, big problem.
(21:04):
And then you look further into this other convenience store
significantly trail both restaurant types when it came to acquiring
new members, but top performing QSR loyalty programs brought in
an average one hundred and ten new members. This to
me is not good. You bring in a lot of
new people, but you're not able to retain them. The
competition is very strong in the restaurant industry and much
(21:25):
more broad than what we see in the QSR space,
or at least in the C store space, I mean,
and when you look at that and where this may
be leaning, is a lot less occasions going into QSR
and fast casual which could be coming to a problem
near you in the restaurant industry. So anyway, hopefully guys,
(21:47):
this will give you a little bit of more insight
to what is happening on the industry. We'll try to
do more of the restaurant reports to give you rundowns.
I don't know if you like the charting or if
you like some of the stock analysis on this, but
let me know if you're in the comments right now,
this drops some comments down below. We love to get
your feedback there. And of course, if you're over on
the podcast, make sure and subscribe give us five stars,
(22:09):
and make sure if you are not subscribed on the
YouTube channel, get over there and subscribe as well. We
will catch you next week right here on the restaurant
report
Welcome back to another episode of the Restaurant Report. My
name is Paul Baron. I'll be your host today. We're
going to really break into some of the industry news
today that I think you guys are going to be
interested in when it comes to trends and how consumers
are going to be facing possibly a downturn in the
restaurant industry, and there's a lot happening. I'll do a
(00:20):
whole slew of screen shares for you guys today. So
if you are listening to the audio version of this
podcast over on Spotify or on Apple Podcast, make sure
and jump over to the YouTube channel, and of course
just search saver Fm. You'll find us there, and of
course you'll get a chance to see.
Speaker 2 (00:37):
The full visuals.
Speaker 1 (00:39):
So let's get right into it today. All right, let's
break into a couple of points I want to add in,
and one of the things I want to jump into
is this right here, stocks tumbling Wall Street of course
gets a little bit of an AI way up call.
(01:01):
This is the longest streak of a less than two
percent decline since two thousand and seven, so a pretty
significant time in terms of the you know, the markets
in general for US to get almost twenty years without
a greater than two percent decline, So this is a
(01:22):
pretty big deal. I've been talking with a lot of
people in the industry, and I'll zoom in on this
right here. Sell off in most of this has been
in big tech, and when you look at big tech
as being the kind of the focus of where the
industry has been faced with. When I say industry meaning
the just where investing is going, obviously AI has been
(01:43):
one of the biggest areas of that. So sell off
in big tech sent the S and P five hundred
down to its worst day since December twenty twenty two,
ending the best stretch without a two percent drop since
the start of the global financial crisis. So losses were
also pronounced in then, as Tek one hundred tumbled over
three point five percent, alphabet Google slid five. We also
(02:06):
saw Tesla miss numbers which was pretty big, including the
Robotaxi delay by Elon, which spurred a twelve percent stock plunge.
I think that's kind of be expected with what Elon
does out there in the market, for sure. The other
thing that plays into this, I think when you look
at just where the industry, meaning the restaurant industry is going.
(02:27):
The key here is is that if the stock market
starts to see a full regression, typically that is going
to be in the high net worth individuals that usually
drives into consumables, and restaurant industry typically is on the
front edge of consumables. One of the things that I'm
watching all the time is what other things are happening
(02:50):
out there right now? One table restaurant brand filed for
Chapter eleven bankruptcy protection. And I think when you look
at remember this is the company a pair of company
of Tens and Takaya. This is a problem right here, guys,
because remember tender Greens at one times, at one time
was probably the number one fast casual sector restaurant out there.
(03:13):
And I think when you look at what's happening right
now with one table, this represents a shift in upscale
dining reduction. And I think that's the key here is
we see more and more pressure from not only high
interest rates you know, the FED higher for longer, and
also the CPI. And when you look at where inflation
(03:36):
is right now, even though it has started to regress
down to around three percent, the biggest problem is the
lagging effect on the economy. And I think this is
the thing that a lot of people do not really
look at when it comes to the restaurant industry. This
is one of the nice to haves, the entertainment layer
of expenditures for most consumers. Credit card debt, now it's
(03:59):
high credit card failures or excuse me, lack of being
able to make payments, one of its highest mortgage demand
lowest ever. We're seeing all the indicators that are really
pushing the market into a bad position. And here's the
thing when you look at what could be happening here
on the restaurant industry. This is a good example, and
(04:20):
I'll kind of showcase what restaurant Dive focused on right here.
And I thought this was kind of interesting. Both brands
never saw their sales volume recover, never came back. Tender
Greens average in a volume falling from three point four
million in twenty nineteen to two point nine million twenty
twenty three, so a big drop in terms of overall sales.
AUV slid from three four to two one in twenty
(04:43):
twenty three. So now that's even more cause for ARM
and of course falling sales four wall profits. This is
inside the restaurant now from sixteen percent of Tender Greens
and thirteen percent to Coyo, both before the pandemic now
present a level of nine to four and one point respectively.
These are horrendous numbers. And this is the concern I
(05:06):
have right now is I believe that we have been
in a recession for quite some time. This is just
the validation point that we continue to see. And I'm
going to show you some data on sentiment, consumer sentiment
around some of our brands that get into this a
little bit further. The other thing I want to hit
on is this right here is Chipotle had an eight
(05:27):
percent boost in traffic, their ltos increase, their labor deployment,
boosted Chipotle's transactions and throughput in Q two, driving increase
in safe store sales of eleven point one percent. I
don't think that's the whole story here. I think right
now Chipotle has been able to ride on the cotails
of digital and what it's been able to do over
the last several years. This has started to change and
(05:50):
I want to showcase something for you guys that is
pretty significant. One is this right here, and this is
a problem because Chapottle has been really tagged hard by
the consumer and the guests that basically say, hey, everybody
notices the portion sizes have started to reduce. They are
(06:13):
trying to focus on portion sizes as some of their
outlier restaurants to address this. And remember these are huge
Internet complaints and this is something that I think a
lot of people don't necessarily understand, is the impact of
sentiment on these brands. In fact, if you follow the
sentiment trail on our RPI, which is our Restaurant Power Index,
(06:36):
you start to see a lot of the problems paint
out before the market actually sees it. Let me give
you an example of this. We're going to go over
here to the RPI, and of course, if you guys
are not checking out the Restaurant Power indecks, just go
over to savor dot fm and you can learn a
little bit more about it. But it is something that
(06:58):
we've built and it continues to be I think one
of the most powerful tools out there and being able
to track down what's happening with the industry. Chipotle will
jump to them real quickly. And this is coming in
from the June numbers twenty twenty four. We'll have the
(07:18):
July numbers finished up here in a moment, so we'll
have another record. What I can tell you is Chipotle
has continued their slide, but this is a huge slide
from seventy eight. Let me zoom in on that for
you guys. This is probably one of the most I
think concerning areas that I continue to see is just
the amount of consumer sentiment that is falling off. Now remember, yes,
(07:43):
Chipotle has been one that has gone. This is the
overall market sentiment for fast casual from a seventy eight
down to seventy two. Here's Chipotle started the year to
sixty seven, came back up, and then right here back
up to sixty seven, and then have just continued for
a double dip in the last two months. And July
shows a number again that is not consistent with growth,
(08:08):
meaning we're going to see continued downtrend here, I think
for for Chipotle, and if you look at some of
the other you know, fast casuals, we'll go into a handful.
Here's Cava, which has been face somewhat pacing with the
overall sentiment of the market, but now starting to dip
slightly under and then kind of right where market is
(08:28):
trending right now, and they are of course one of
the top you know, fast casuals out there. This is
some of the categories that we track right now. If
you guys want to learn a lot more about this,
you can, of course again just go over and check
savor dot fm and you'll learn how you can get
into this. I want to go on to one other thing,
(08:49):
and this is one of the concerns I continue to see,
and that is this kind of stuff right here, the
pizza category is absolutely getting murdered. Mod announces a new owner.
They're trying to stave off bankruptcy. This of course came
in from CNN. But the point being is Mod has
been a brand that we have been looking at for
(09:10):
the last several years. I don't know what happened here.
This brand was flying and was doing so well, and
then all of a sudden last year we started seeing signals,
at least on consumer sentiment that just absolutely destroyed what
we had been expecting from the industry. And I think
this is one of those things that you and I know,
(09:33):
Scott and Ali, I've met them, we've done interviews with
them before. I think this is I don't know if
they took their eye off the ball, tried to grow
too fast, funding got to be a problem, couldn't penetrate
markets in terms of competition with other fast casuals. Maybe
it was just a too fast, too soon kind of scenario,
and obviously COVID kind of delayed.
Speaker 2 (09:53):
A lot of that.
Speaker 1 (09:54):
But man, the team over at MOD have absolutely just
been getting destroyed, and of course Beth Scott she departed
from MOD all of that began. We saw the entire
executive team pretty much gutted by this acquisition by Elite
Restaurant Group, which was earlier this month. So I think
this is a problem. It's going to be a big
(10:14):
comeback story if MOD can recover from this. It does
put a huge black eye back in the pizza fast
casual category, which I believe is still one of the
most struggling categories in fast casual even though the entire
fast casual sector right now is in trouble, and this
is a problem I think that may not get alleviated
(10:38):
for any time to come. And there's many reasons why.
I think it is all lagging indicators from an economic
position that we study constantly over on our finance channel,
which if you guys have never checked that out. Go
over to Paul Baron Network on YouTube. You'll find us there.
We just hit four hundred and fifty thousand subscribers. It
(10:58):
is blowing up with there. We cover a lot of
crypto topics, but we also get into a lot of
macroeconomics and a lot of study of that. The other
thing that is kind of interesting is a consolidation. Consolidation
continues to be one of the things that I'm looking at. Darden,
of course buying Chewies for more than six hundred million.
This is a big deal because I think with Darden,
(11:19):
you know, one of the things you have to look
at is the potential for casual dining to possibly reposition
in the market. QSR is struggling. Fast casual is struggling.
Casual dining has been struggling. Fine dining, I think is
about to get hit for the first time with high
income and high net worth individuals maybe pulling back. Luxury
(11:42):
goods have already started to decline. A handful of things
that are are already pushing into this area. If you
look at the dive brief from Restaurant Dive on this deal.
Let me share my screen to you guys. The interesting
point right here is it's one hundred and one unit.
You know, it's full service text max Change. But they
(12:04):
bought this at about thirty seven to fifty a share.
This was a pretty good deal, all cash transaction worth
the enterprise value of about six hundred and five million.
I mean you think about that basically at six million
dollars a store and not bad, you know when you
look at the opportunity here of what this category could be.
Remember this is a second transaction. Darden is pulled off
(12:27):
the other one. They bought Ruth Chris Ruth Chris Hospitality
Group seven or fifteen million, and you guys know, I
mean this is Long Corner Olive Garden Steakhouse and then
Yardhouse in Bahama, Brieze.
Speaker 2 (12:41):
Listen.
Speaker 1 (12:42):
The bigger picture here is this consolidation. Consolidation continues to
be I think one of the key factors here. But
here is another factor that I think a lot of
people are not following when it comes to just where
these these brands are going. And I'm going to share
a trading view chart and we do this all the
(13:04):
time on our shows. I'm on the weekly right now,
and what I'm looking at right now is Diagio. This
is Diagio, one of the biggest brands out there in
the alcoholic section. But you can kind of see alcohol brands.
You can kind of see this massive fall off on
the weekly really since what we saw back in December
of twenty twenty one, which was its high, and now
(13:25):
we started to see a complete adjustment with negative downtrends
continuing on a sentiment side. But I want to go
over and look at Chipotle. This is Chipotle, which has
been on a tear for gosh almost five six years,
absolutely just killing it in terms of stock price. Look
at this growth right here. Let me give you a
kind of just an insight. This was in March of
(13:48):
twenty twenty. Remember that that's the called the Chipotle or
excuse me, the COVID dip. And up here to the high.
That is a five hundred and forty eight percent gain,
five and forty eight percent gain from March twenty through
June twenty twenty four. Here's the difference. Just in the
last month, we have seen a correction here from the
(14:10):
high down to here of almost thirty percent. Does this
mean that Chapote starts its decline going back into possibly
you know the twenty five to thirty dollars stock range.
This is huge for where Chipotle will be. McDonald's also
kind of going sideways a little bit, but still on
(14:31):
the uptrend. I think they have an opportunity here to
continue to perform Wendy's sideways. Not seeing a lot of
attraction here sentiment wise, also kind of the same thing.
Not a lot of traction in terms of consumers. And
if you look at Darden, it's been pretty much uptrend
from here, even though they've had a little bit of
a downtrend here recently. This may be a play here.
(14:53):
I'm watching this one very closely for sure. Here's Starbucks.
This one right here worries me because I think star
Bucks continues to be challenged by what's happening with the industry,
and they are also falling into the same problem in
terms of how the consumer interfaces with the restaurant industry,
and that is high noworth individuals and people who have
(15:16):
expendable income. And the biggest problem right here is jen
Z and also jen A. They have yet to be
able to connect to that kind of consumer, and I
think this is a problem going forward. I'm going to
play a clip for you right now. That is the
Starbucks CEO talking about this very thing, Jim.
Speaker 3 (15:36):
When we look at the biggest loser today, it's going
to be Starbucks. It's among the worst performers in the
S and P. Five hundred. It's one of the bigger
guidance because I've seen in a long time. I checked
with all the major both public and private companies that
are in a similar business to you, and no one
saw a three percent decline in comm stores because of weather,
and none of them saw a negative number except for you.
Speaker 4 (16:00):
We have not been able to communicate to them the
value that we provide. What we're doing for that is
we are making it attractive for them to come back into.
Speaker 2 (16:08):
The Stopbucks app and join it. On the app.
Speaker 4 (16:11):
What you will see is you will see value that
they haven't seen.
Speaker 2 (16:15):
There are drops that are going to happen every Monday.
Speaker 4 (16:17):
There are bundles that we're putting in place that are
attractive for.
Speaker 2 (16:20):
Them, for example, a beverage and a drink at a
certain price.
Speaker 4 (16:24):
What you're seeing there is the effort we're making in
order to ensure that our occasional customers get to see.
Speaker 2 (16:30):
The value that we provide.
Speaker 3 (16:32):
A loyal customer ly program go from thirty four point
three to thirty two point thirty two point eight in
link quarter. I mean those people are not occasional. Those
people are hardcore. Not the occasional, but the hardcore drop off.
Speaker 4 (16:47):
It's at the tail of the laynty program, particularly those
that are you know, in the ninety day active as
we call it, the folks that didn't come back. They
again are very similar to the occasional customers. We have
an action plan in place right now to communicate directly
with them.
Speaker 2 (17:01):
If you look at some of the metrics that.
Speaker 3 (17:03):
We have done, and Tim Wharton said you were not
holding share, sir, I regard them as being seminal companies
that are just as good when it comes to McDonald
says you are losing share.
Speaker 4 (17:13):
The thing we didn't do enough off is really attack
the occasional customer with delivering and communicating value to them
in a more aggressive manner. That's what the plan we
have does.
Speaker 3 (17:26):
Is it not time to pause, sir, and figure out
what's really going wrong and spend a deep dive and
making it so that this decline in comp store numbers
does not continue because it is perilous to the actual
existential existence of Starbucks.
Speaker 1 (17:41):
All right, So as you can see, I mean, they
don't really have a plan in place, and I think
this is the problem. The loyalty system continues to fall,
and we've continued to see potentially a issue I think
with maybe the ability for them to truly connect to
the next generation consumer. I think that is the bigger
(18:01):
problem that lies in Starbucks' situation right now. So a
lot really pushing forward here, and I was talking about
Diagio just a minute ago. Obviously we've seen the downturn here.
One of the things that concerns me here if you
look at the brands that are available here. Let me
share this screen with you guys, and the brands that
(18:22):
are available here, Tanger Ray Againnis, Johnny Walker, Smeirnoff, Bailey's, Buchanans, Sirock,
Don Julio, Kettle, I, Crown Royal, Captain Morgan. You can
see this is the core of what I call the
everyday man's liquor cabinet. And for this to see continue
(18:45):
downturn and for us to see a huge downturn in
where the industry is going around just overall beverage sales,
especially in the situation with whiskey, American whiskey. This is
a concerning problem because America Whiskey, I think, is the
bell weather of how all of this plays forward. And
(19:07):
if you look at just some of the things here
in terms of the data, this iswsr's recently published analysis,
and this is the global industry alcohol sales decline in
twenty twenty three for the first time in nearly three decades,
and they're continuing to face a soft market in twenty
twenty four. And recent data coming in on this right
now is that twenty twenty four could be a bigger
(19:30):
decline this year than even what we've seen in twenty
twenty three. All of that being said, this aligns with
one of the most profitable centers in a restaurant and
that of course is the bar business. So I want
you guys to think about that and really understand what
this means. The other thing that you have to consider
(19:51):
is where is the customer going If they're not going
to restaurants anymore, what is the angle that could be
playing in here. Well, one that you have to consider
is what's happening in the sea store category. Look at
this crazy stuff. Seastorees now seeing higher loyalty retention than
QSRs quick serve restaurants fast food. They sign up new
(20:13):
members much more slowly than QSR, but they are getting
higher loyalty retention. So it's just a matter of time,
people before we start to see the C store kind
of move in. Look at here, I'm going to show
you some of the data hear from restaurant dive. Great
side by the way they do a good job. Seastore's
upper half of loyalty Transactions Share see at least eighty
(20:36):
percent of their members returning eighty that's right, I said,
eight zero percent of their members returning.
Speaker 2 (20:42):
Every mind.
Speaker 1 (20:43):
According this is twenty twenty four loyalty report that rose
to eighty five percent for retailers in the ninetieth percentile
and above. By comparison, in the ninetieth percentile and above
ninetieth percentile, Transactions Share saw sixty two percent of their
loyalty memory in the QSR sector, So a big, big problem.
(21:04):
And then you look further into this other convenience store
significantly trail both restaurant types when it came to acquiring
new members, but top performing QSR loyalty programs brought in
an average one hundred and ten new members. This to
me is not good. You bring in a lot of
new people, but you're not able to retain them. The
competition is very strong in the restaurant industry and much
(21:25):
more broad than what we see in the QSR space,
or at least in the C store space, I mean,
and when you look at that and where this may
be leaning, is a lot less occasions going into QSR
and fast casual which could be coming to a problem
near you in the restaurant industry. So anyway, hopefully guys,
(21:47):
this will give you a little bit of more insight
to what is happening on the industry. We'll try to
do more of the restaurant reports to give you rundowns.
I don't know if you like the charting or if
you like some of the stock analysis on this, but
let me know if you're in the comments right now,
this drops some comments down below. We love to get
your feedback there. And of course, if you're over on
the podcast, make sure and subscribe give us five stars,
(22:09):
and make sure if you are not subscribed on the
YouTube channel, get over there and subscribe as well. We
will catch you next week right here on the restaurant
report
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