Latest / Choppin’ It Up by Bloomberg Intelligence / McWin Capital Partners on Investing in Europe

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McWin Capital Partners on Investing in Europe · Choppin’ It Up by Bloomberg Intelligence

• 0:13
  Speaker 1: Welcome to Chopping It Up, where we mostly chat with
• 0:16
  Speaker 1: people shaping the future of the restaurant and food service industries.
• 0:19
  Speaker 1: I'm your host, Mike Hanlon, the senior restaurant and food
• 0:22
  Speaker 1: service analyst at Bloomberg Intelligence. If you're enjoying these conversations,
• 0:27
  Speaker 1: please subscribe wherever you get your podcasts and leave us
• 0:30
  Speaker 1: a five star review on Spotify or Apple. Today's guest
• 0:35
  Speaker 1: is Vibob Junasia, also known as VJA, principal at mcwinn
• 0:40
  Speaker 1: Capital Partners. Mcwinn has built a reputation by combining experienced
• 0:44
  Speaker 1: operators with investment professionals to help restaurants grow, primarily across Europe.
• 0:50
  Speaker 1: The portfolio spans everything from pizza and coffee to quick
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  Speaker 1: service restaurants, and they're actively investing in new concepts so
• 0:57
  Speaker 1: while scaling their existing brands. Welcome to the the pod. VJA.
• 1:01
  Speaker 2: Thank you so much, Fright for having me. It's great
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  Speaker 2: to be here. Yeah.
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  Speaker 1: Man, you know, it's been a while since we last chatted,
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  Speaker 1: but I've been itching to get you back on to
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  Speaker 1: give us some good color on Europe, which our companies
• 1:12
  Speaker 1: don't always like to give us. You know, all that
• 1:15
  Speaker 1: much information on international markets so I'm excited to have
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  Speaker 1: you here. So for your listeners who may not know mcwinn,
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  Speaker 1: please give us a rundown of its largest portfolio companies,
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  Speaker 1: the countries they operate in, and what makes the investment
• 1:29
  Speaker 1: model different than some of your competitors.
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  Speaker 2: Sure. So, McQuinn is basically a specialist investment platform mainly
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  Speaker 2: focusing food. I sit in the private equity side of
• 1:39
  Speaker 2: the business, so I lead the investment team there. The
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  Speaker 2: film was found by Henry mccourn and Steve Vinegert. That's
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  Speaker 2: where the McQuinn comes from. Just a quick fact. Both
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  Speaker 2: of them spend decades building restaurant platforms at scale. So
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  Speaker 2: it's a pretty interesting combination of people who've actually run
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  Speaker 2: restaurant businesses alongside people like myself who truck recording investments
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  Speaker 2: for US. I would say the structural opportunity is fairly simple.
• 2:04
  Speaker 2: We actually believe that, you know, Europe has shortages of
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  Speaker 2: branded restaurant concepts at a very high level. If you
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  Speaker 2: think about it, the branded concepts account for roughly thirty
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  Speaker 2: percent of the European food service. Compare that with the US,
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  Speaker 2: it's more than double that. We look for brands where
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  Speaker 2: the consumer proposition and the four world United economics are
• 2:24
  Speaker 2: already proven, but where the company around the brand still
• 2:28
  Speaker 2: has to be built. I would say we because we
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  Speaker 2: are operation operations lead investors, we underwrite from the restaurants
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  Speaker 2: as a starting point, so things like you know, what's
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  Speaker 2: the organic brand love, what's the repeat customer, whether the
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  Speaker 2: foreward need economics can be repeated, and where the organization
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  Speaker 2: can absorb the growth. Then we obviously work with the
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  Speaker 2: management teams pretty closely on the development engine people supply
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  Speaker 2: chain data. I'd like to say we I think at
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  Speaker 2: the institution capability without diluting the founder magic or the
• 3:04
  Speaker 2: consumer process. Across our fourteen portfolio investments, we roughly have
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  Speaker 2: over twenty two hundred restaurants. We are a billion five
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  Speaker 2: in AUM. We do both the small cap investments as
• 3:17
  Speaker 2: well as the mid to the large cap. We'll close
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  Speaker 2: this year close it to over four billion of system
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  Speaker 2: sales across all of our portfolio investments. In terms of
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  Speaker 2: portfolio construction, Germany is our largest market, followed by UK,
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  Speaker 2: but we have a pan European mandate. So yeah, that's
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  Speaker 2: my quinn fear.
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  Speaker 1: Cool and you kind of touched on it. But if
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  Speaker 1: you can kind of reiterate the most important things you're
• 3:40
  Speaker 1: looking for when making a restaurant investment and how that
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  Speaker 1: framework maybe has evolved over the last few years.
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  Speaker 2: Sure, So I think when we look at the underwriting,
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  Speaker 2: we look at through four different lenses. So it's the restaurant,
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  Speaker 2: the new store roll out, the company, and the deal.
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  Speaker 2: So if I start with the restaurant, I think the
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  Speaker 2: first question we ask ourselves is is there a clear
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  Speaker 2: consumer reason for this brand to exist? I mean, do
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  Speaker 2: guest return organically? Does the four volunt economics is attractive
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  Speaker 2: on cash returns with sensible paybacks? Second one is the
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  Speaker 2: new site rollout, which is really really important, so do
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  Speaker 2: the economics repeat across different cohorts and different catchments? Is
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  Speaker 2: the white space reel? Are things like construction, site selection, opening,
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  Speaker 2: post opening review institutionalized? And third one is the company
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  Speaker 2: And this one is really important, so things like does
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  Speaker 2: it really have the leadership, the systems, the supply chain,
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  Speaker 2: the data to absorb growth as you know, a great
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  Speaker 2: restaurant does not translate to a great restaurant company. And
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  Speaker 2: finally it's the deal, right, so what is already reflected
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  Speaker 2: in the entry price? Which are the two or three
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  Speaker 2: key assumptions that actually move the needle and underpin then
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  Speaker 2: investment and writing case. How is growth funded, what does
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  Speaker 2: downside look like if traffic is flat or whether the
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  Speaker 2: openings ramp up slowly. I would say the one nuance
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  Speaker 2: that McQuinn has is we don't build the base case
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  Speaker 2: around a friendly M and a market or a hire
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  Speaker 2: exit multiple. We look for early cash generation. We like
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  Speaker 2: businesses that can self fund the new site rollout and
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  Speaker 2: actually have balance sheet optionality. You know, the unwriting is
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  Speaker 2: designed to basically be supported by strong operating ownings and
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  Speaker 2: new side rollouts.
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  Speaker 1: Great, you know, to your point, mquen has a unique
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  Speaker 1: advantage point because you're operating across several European markets. You know,
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  Speaker 1: the worst parked even greater inflation across the pond that
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  Speaker 1: it did here in the US. Generally, how our consumers
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  Speaker 1: holding up on the continent.
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  Speaker 2: It's it's it's a question that we actually spend a
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  Speaker 2: lot of time on and as you know, sort of
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  Speaker 2: europage a collection of different markets that have different consumer
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  Speaker 2: occasions for all economics, I would say at a forty
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  Speaker 2: thousand feet level, and we see this team play across
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  Speaker 2: all of our portfolio companies sick covers or volumes are down.
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  Speaker 2: You know, the spend is mainly being carried by price.
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  Speaker 2: The basket is flat because the items per basket are shrinking,
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  Speaker 2: So that's just the temperature of the hospital. If I
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  Speaker 2: go through country by country, I would say Germany because
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  Speaker 2: that's our biggest market. From a portfolio construction perspective, it's
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  Speaker 2: an interesting one. You probably are aware it has had
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  Speaker 2: a brutal few years, specifically in the food service subsector.
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  Speaker 2: I would say the big structural tailwind that happened in
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  Speaker 2: the early part of this year was the VAT come
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  Speaker 2: down from nineteen percent to seven percent. That obviously favors
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  Speaker 2: the scaled operators like ourselves. Helps with the P and L,
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  Speaker 2: but with Germany's slightly nuanced because the GDP is still
• 6:45
  Speaker 2: modestly positive, but the hospitality is on the softer side
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  Speaker 2: of the house. And I would say there is industrial
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  Speaker 2: weakness in Germany, which obviously still weighs on the consumer
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  Speaker 2: confidence in different touchments. So our read is that Germany
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  Speaker 2: is a transition market. There's a selective opportunities, but there's
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  Speaker 2: no broad based demand recovery assumption in Germany. If I'm
• 7:06
  Speaker 2: more monthly ukn You know, there's a lot of sort
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  Speaker 2: of negative news on the UK, but I think we
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  Speaker 2: like to believe it's lucky, more nuanced. You know. Interestingly,
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  Speaker 2: the real household spending is up this year, but the
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  Speaker 2: high street is quiet, the footfall is down. I would
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  Speaker 2: say that eating out participation is low. The covers are
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  Speaker 2: also softer. Mainly it's been led by price, but I
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  Speaker 2: would say that the share of wallet has not really disappeared.
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  Speaker 2: But the visit to a restaurant or an eating out
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  Speaker 2: occasion is highly contested. So you basically need a very
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  Speaker 2: clear proposition and more importantly a right location. And the
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  Speaker 2: other thing that we're seeing in the UK is that
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  Speaker 2: the undifferentiated middle, which is neither on the premium boutique
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  Speaker 2: independent side or the QSR site, that is the one
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  Speaker 2: which is squeezed the most. Because if you don't have
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  Speaker 2: a clear value for money proposition, by the way, value
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  Speaker 2: does not only quite the price right, then I think
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  Speaker 2: it's tough. France, again, I would say, is a caution market.
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  Speaker 2: It's interesting because their household savings rate are a one
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  Speaker 2: of the highest, but household confidence is definitely lower, so
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  Speaker 2: that basically tells you that the issue is not just
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  Speaker 2: about affordability, It is about the willingness to spend, and
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  Speaker 2: specifically in the full service side of the house, you
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  Speaker 2: need a very clear reason for the occasion, and the
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  Speaker 2: price value promise has to be very, very sub attractive.
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  Speaker 1: Great, are you seeing meaningful differences in how consumers respond
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  Speaker 1: to price hikes across countries? You know, which are there
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  Speaker 1: markets out there that can absorb further increases this year
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  Speaker 1: and next, and maybe which have to work harder on value.
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  Speaker 2: I think the value proposition that's consistent across all of
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  Speaker 2: the markets from some of the markets where the demand
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  Speaker 2: based growth is more strong, I would say is Spain
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  Speaker 2: and Poland and see so if you look at Spain,
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  Speaker 2: it's definitely had a story of strong demand consumption. The
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  Speaker 2: employment is supportive, and actually the tourism is additive, so
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  Speaker 2: that helps. That doesn't really mean that every concept works,
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  Speaker 2: but I would say the current momentum and that market
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  Speaker 2: is good and the macro is definitely favorable. Poland, again,
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  Speaker 2: like Central Europe, as a strong sort of broad based
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  Speaker 2: consumption backdraw, the retail sales are growing, the GDP is positive,
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  Speaker 2: and I would say the branded food service penetration is low,
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  Speaker 2: so that basically means they're much more white space in
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  Speaker 2: those countries.
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  Speaker 1: Great, are there any markets in Europe that you're aggressively
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  Speaker 1: looking to get into right now?
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  Speaker 2: So we don't have a stand alone investment in Spain
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  Speaker 2: and actually sort of Steve and Henry spent a lot
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  Speaker 2: of time in their past life in Spain, so that's
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  Speaker 2: something that we're looking at. We quite like that market.
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  Speaker 2: We think there are genuine structured tail winds there. So
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  Speaker 2: that's one market that is on our radar. The other one,
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  Speaker 2: I would say is definitely Poland and Cee because we
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  Speaker 2: know that market really really well from that lumbers days.
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  Speaker 2: So those two markets are quite interesting. We're also opportunistically
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  Speaker 2: looking at taking our portfolio companies to the US, so
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  Speaker 2: and that's something which is part of our you know,
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  Speaker 2: international playbook, and also to selected you know countries in
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  Speaker 2: g c C. I know GCC is not the flavor
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  Speaker 2: of the month, but you know, we think that at
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  Speaker 2: some point of time that region will be back.
• 10:26
  Speaker 1: Yeah.
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  Speaker 2: Yeah, so we're keeping our eyes in the years open there.
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  Speaker 1: That's great. Can you talk a little bit about what
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  Speaker 1: you're doing in the US.
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  Speaker 2: Yeah, So in US, the one of our portfolio companies,
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  Speaker 2: which is an experiential Italian concept called Big Mama Group.
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  Speaker 2: We have taken We've required a brand a business there
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  Speaker 2: in US called car Mines, which is in Florida and
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  Speaker 2: it's a really interesting concept. It's uh it's a mix
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  Speaker 2: of a deli and a restaurant. UH. And then we've
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  Speaker 2: also signed with Jamie Partner in the US and hopefully
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  Speaker 2: we'll be you know, opening more a Big Mama sites
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  Speaker 2: in the US and that's quite interesting for us because
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  Speaker 2: we think there's a genuine demand for that proposition in
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  Speaker 2: the market. We're also actively exploring US from other portfolio companies.
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  Speaker 2: There's a you know, Artisonal bakery business that we have
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  Speaker 2: in the UK, wee thing that can travel really well
• 11:17
  Speaker 2: to the US, and amongst other businesses that we have
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  Speaker 2: in the portfolio. US is a very interesting market and
• 11:24
  Speaker 2: this will surprise you because a lot of the European
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  Speaker 2: food service founders are very keen to enter the US market.
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  Speaker 2: But I think one needs to be very humble and
• 11:33
  Speaker 2: be very thorough with their work when you enter the
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  Speaker 2: US market, not just because of the competitive intensity, but
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  Speaker 2: I would say there's the scale of the marketing you
• 11:42
  Speaker 2: really have to do your homework to get into the US,
• 11:45
  Speaker 2: so that so it's a key. It's a really interesting
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  Speaker 2: and important market for US. Cool.
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  Speaker 1: Are there any areas of the US that you're looking
• 11:53
  Speaker 1: more aggressively.
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  Speaker 2: We quite like the fast casual segment. We really like
• 11:57
  Speaker 2: the better for you category. We think that, you know,
• 12:01
  Speaker 2: that's a structured tailwind which has been you know, growing
• 12:04
  Speaker 2: at high single digit cagres for a very long time.
• 12:08
  Speaker 2: We really like the craft coffee and bakery concepts in
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  Speaker 2: the US. So these are the few sort of sub
• 12:14
  Speaker 2: segments within food service that we're looking at.
• 12:16
  Speaker 1: Yeah, you can't have enough good you know, European coffee
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  Speaker 1: and pastries, in my opinion, never enough very cool. What
• 12:26
  Speaker 1: trends are you watching that perhaps aren't getting enough attention
• 12:29
  Speaker 1: from investors? Looking at Europe, I think the one.
• 12:36
  Speaker 2: Thing that people underestimate about Europe is the sheer complexity.
• 12:41
  Speaker 2: And that's something that sort of v take comfort in
• 12:44
  Speaker 2: because one is sort of you know, able to grasp
• 12:47
  Speaker 2: the different cultural once is across the different geographies. But
• 12:51
  Speaker 2: the second one is how do you actually operate through that?
• 12:55
  Speaker 2: And in the past we have seen other generalists private
• 12:58
  Speaker 2: equity funds who have look at food service concepts in
• 13:02
  Speaker 2: Europe and I've tried to take the brand either outside
• 13:04
  Speaker 2: of the core market or you know, grow within the
• 13:07
  Speaker 2: core market by rolling out more stores. It's something that
• 13:10
  Speaker 2: we spend a lot of time on because, you know,
• 13:13
  Speaker 2: given our pattern recognition across sort of twenty two hundred restaurants,
• 13:16
  Speaker 2: we know exactly when a restaurant concept starts to break
• 13:20
  Speaker 2: and what questions need to be answered before we comit
• 13:22
  Speaker 2: more capital well. And so just to give you a
• 13:26
  Speaker 2: high level example, one of the portfolio companies which we own,
• 13:30
  Speaker 2: we have unlocked three different store sites. You have unlocked
• 13:34
  Speaker 2: travel retail within train stations, within airports, within out of London,
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  Speaker 2: and that's something that has taken us roughly three and
• 13:42
  Speaker 2: a half years, and even when we were underwriting that investment,
• 13:45
  Speaker 2: we had started work there. So I would say Europe
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  Speaker 2: is a pretty complex market and the way we think
• 13:53
  Speaker 2: about is in different line items within the P and L.
• 13:57
  Speaker 2: We spend a lot of time thinking through the cost
• 13:59
  Speaker 2: of goods, the menu optimization, the product pricing, architecture, the
• 14:02
  Speaker 2: labor of the rent bottle. So the cookie cutter approach
• 14:06
  Speaker 2: unfortunately doesn't really work in Europe.
• 14:08
  Speaker 1: Yeah, and the first stop internationally, you know, outside of
• 14:11
  Speaker 1: maybe Canada for a lot of the companies that we
• 14:14
  Speaker 1: cover is typically the UK. And a couple of years
• 14:18
  Speaker 1: ago I had a guest on the on the podcast
• 14:20
  Speaker 1: saying that, well, that's typically the first move because it's
• 14:23
  Speaker 1: an English speaking country. But that is, you know, to
• 14:27
  Speaker 1: the point you made earlier, it's very competitive. So maybe
• 14:31
  Speaker 1: if you could talk a little bit about uh US
• 14:34
  Speaker 1: brands expanding into the UK and Europe more generally.
• 14:38
  Speaker 2: Oh, sure, And I think it's it's it's quite topical
• 14:42
  Speaker 2: because as you probably are where a number of chicken
• 14:46
  Speaker 2: concepts from the US will be opening shop in London shortly,
• 14:51
  Speaker 2: and you're seeing this play out in different ways. You've
• 14:53
  Speaker 2: got a being stop in the UK that has been
• 14:55
  Speaker 2: doing very well. You've got the light likes of is
• 15:00
  Speaker 2: in Keness planning to sort of enter the UK market
• 15:03
  Speaker 2: along with Chip fil A. So so there are different
• 15:06
  Speaker 2: brands of tried and entry UK. I would say it's
• 15:10
  Speaker 2: easy to have a flagship site work, but the way
• 15:14
  Speaker 2: we think about it is can you prove a cluster?
• 15:17
  Speaker 2: Because for US, it's not about you know, putting different
• 15:20
  Speaker 2: flags on a map. It's about proving that a cluster
• 15:22
  Speaker 2: works or a critical minimum mass of restaurants work to
• 15:26
  Speaker 2: then scale the domestic roll out. And I think the
• 15:29
  Speaker 2: UK is it's to say the obvious London is not UK.
• 15:34
  Speaker 2: A concept can work in London, but for it to
• 15:37
  Speaker 2: have legs, it generinely has to work outside of London.
• 15:40
  Speaker 2: And that's a big part of our playbook as well.
• 15:43
  Speaker 2: Many concepts you know from from the US have actually
• 15:46
  Speaker 2: worked in London, but unfortunately they haven't been able to
• 15:49
  Speaker 2: prove that model outside of London. So yeah, UK is
• 15:52
  Speaker 2: pretty competitive. Is a lot of hard.
• 15:54
  Speaker 1: Work, gotcha, you know, and by the time this airs,
• 15:57
  Speaker 1: Jersey Mics will have been uh well be public. But
• 16:01
  Speaker 1: it's something I'm working on pretty diligently right now. Can
• 16:06
  Speaker 1: you give us maybe some color on subway and how
• 16:08
  Speaker 1: subway is faring in Europe and whether or not it's
• 16:11
  Speaker 1: doing better in Europe than it is here in the States.
• 16:13
  Speaker 2: That's a really good question. I would say. Someway is
• 16:18
  Speaker 2: is something that we had mcquinnever running joke. We call
• 16:20
  Speaker 2: it the Sleeping Giant in Europe. It's obviously a brand
• 16:23
  Speaker 2: which is very well known in the US, but we
• 16:28
  Speaker 2: believe that it's underpenetrated in Europe. So we have MFDs
• 16:33
  Speaker 2: for Subway in Luxembourg, brance and Belgium. And it's quite
• 16:37
  Speaker 2: interesting because if you look at the French market, it's
• 16:40
  Speaker 2: always been, you know, very receptive to us QSR brands,
• 16:46
  Speaker 2: and there's a lot of white space, we believe for
• 16:50
  Speaker 2: Subway in the European markets, particularly in France. It's it's
• 16:56
  Speaker 2: a it's a it's a brand that that travels quite well.
• 16:58
  Speaker 2: It's a concept that travels quite well. And it's interesting
• 17:02
  Speaker 2: because if you think about the strong buguette culture in France,
• 17:05
  Speaker 2: people may sort of have this impression that sort of
• 17:08
  Speaker 2: Subway directly competes with that. We we we believe that actually,
• 17:13
  Speaker 2: you know, competition for sub is not other us QSR brands.
• 17:16
  Speaker 2: It's actually the local independent blongeries and cafes, right, And
• 17:20
  Speaker 2: it's a different occasion, It's serves a different customer, it
• 17:23
  Speaker 2: serves a different day part. It's a product that you know,
• 17:27
  Speaker 2: we feel can travel really really well in Europe.
• 17:30
  Speaker 1: Very interesting across your portfolio, where are you seeing AI
• 17:34
  Speaker 1: generate strong value?
• 17:35
  Speaker 2: We think about AI slightly differently. We look at it
• 17:39
  Speaker 2: in two lenses. So one is does it make a
• 17:41
  Speaker 2: shopper as investors. That's one. The second one is, you know,
• 17:45
  Speaker 2: does it sort of improve a repeated decision at a
• 17:47
  Speaker 2: restaurant level. Right, So if I talk about quinn, we
• 17:52
  Speaker 2: apply a clean sheet thinking to diligence in portfolio governments.
• 17:55
  Speaker 2: What that basically means is, just to give an example,
• 17:58
  Speaker 2: we're applying the AI tools to come are portfolio review
• 18:01
  Speaker 2: materials with prior periods and we're seeing, you know, variances
• 18:06
  Speaker 2: surface pretty quickly, and it's it basically is used to
• 18:08
  Speaker 2: shorten the distance between the signal and judgment. Argue is
• 18:14
  Speaker 2: that the tool itself is not the mod but the
• 18:16
  Speaker 2: speed of adoption the data the worldflower. So that's at McQuinn.
• 18:20
  Speaker 2: Within restaurants, I think the shift is from a system
• 18:23
  Speaker 2: of record to a system of action. And what I
• 18:26
  Speaker 2: mean by that is, you know, few use cases of AI.
• 18:30
  Speaker 2: I think the obvious one is sort of labor scheduling,
• 18:32
  Speaker 2: which basically is matching labor to hourly traffic, you know,
• 18:35
  Speaker 2: matching prep to expected demands, so less food is wasted
• 18:38
  Speaker 2: and shaping demanded more. I would say relevant ad digital offers,
• 18:42
  Speaker 2: and those are unglamorous winds, but they added pretty quickly,
• 18:45
  Speaker 2: and they're repeat it every single day across every single restaurant,
• 18:48
  Speaker 2: So that's useful. What we're also seeing across our portfolio
• 18:52
  Speaker 2: is meaningful labor savings from demand based scheduling. So for us,
• 18:59
  Speaker 2: I'm I mean, it's less about the hype, it's more
• 19:01
  Speaker 2: about a practical use case. It will that make sense?
• 19:04
  Speaker 1: Yeah, that's interesting. You know, one of the things that
• 19:06
  Speaker 1: really interests us is the GM assistant, you know, the
• 19:09
  Speaker 1: AI power GM assistant that Taco Bell and Burger King
• 19:13
  Speaker 1: and some of these chains are starting to experiment with that.
• 19:16
  Speaker 1: That does a lot of the stuff that you're talking
• 19:18
  Speaker 1: about right in terms of demand forecasting and labor scheduling
• 19:22
  Speaker 1: it things of that nature. All Right, what's one area
• 19:26
  Speaker 1: where you think AI will change restaurant operations over the
• 19:29
  Speaker 1: next three to five years that maybe investors might be underestimating.
• 19:34
  Speaker 2: I think it can really move the needle on the
• 19:36
  Speaker 2: supply chain side of the house, on the cogs on
• 19:39
  Speaker 2: the procurement better buying both key cogs, essential cogs, and
• 19:44
  Speaker 2: you know, things like tissue paper or other non essential categories.
• 19:49
  Speaker 2: I think it can have a very systematized approach to
• 19:52
  Speaker 2: procurements and that will move the needle on the cost
• 19:55
  Speaker 2: land labor is definitely the next obvious one. You know,
• 19:59
  Speaker 2: it can and help. I would say the analytics pot
• 20:02
  Speaker 2: can can and the machine learning because you know before
• 20:05
  Speaker 2: it was a it was machine learning and we were
• 20:07
  Speaker 2: using the same thing. I think it can also help
• 20:11
  Speaker 2: think through the site selection because, as you know, sort
• 20:15
  Speaker 2: of big part of any creation and a restaurant businesses
• 20:17
  Speaker 2: opening news sites profitably, so I think that that can
• 20:21
  Speaker 2: that can help site selection and probably the property side
• 20:24
  Speaker 2: of the house quite well.
• 20:25
  Speaker 1: Maybe you know we touched on this a bit, but
• 20:28
  Speaker 1: you know, what does it take for a restaurant concept
• 20:30
  Speaker 1: to really be able to travel successfully from one country
• 20:33
  Speaker 1: to another, whether it's across Europe or to the United
• 20:37
  Speaker 1: States or vice versa.
• 20:39
  Speaker 2: It's a good question. I mean, I would say international
• 20:42
  Speaker 2: for US is not a copy and paste rollout. It's
• 20:45
  Speaker 2: almost like building a second business. Right the framework that
• 20:50
  Speaker 2: we have at McQuinn. I think the first one is
• 20:53
  Speaker 2: does the consumer proposition travel? And what I mean by
• 20:56
  Speaker 2: that is is there the underlying need, whether that's value, convenience, indulgence,
• 21:02
  Speaker 2: social occasion, which is truly relevant in the new market.
• 21:06
  Speaker 2: I guess the second one is does the local P
• 21:09
  Speaker 2: and L work right? So when you rebuild the whole
• 21:11
  Speaker 2: P and L from you know, local wages, rents, pricing, taxes,
• 21:17
  Speaker 2: does that translate to a sensible for war new economics?
• 21:21
  Speaker 2: I think the third one is what is sacred and
• 21:24
  Speaker 2: what is adaptable? And what I mean by that is
• 21:27
  Speaker 2: in terms of your sacred bucket, what is the hero
• 21:29
  Speaker 2: product the quality promise which are effectively in non negotiables
• 21:34
  Speaker 2: and within the adaptable bucket? How do you think about
• 21:36
  Speaker 2: portion sizes, property format, many width day parts. I guess
• 21:41
  Speaker 2: the fourth one is definitely local execution because you know
• 21:44
  Speaker 2: you could have a strong band, but with the leak
• 21:46
  Speaker 2: local management team, you won't be successful. And finally, which
• 21:50
  Speaker 2: I mentioned earlier, is whether you can prove a cluster? Right?
• 21:53
  Speaker 2: A flagship may work, but it's all about proving a
• 21:57
  Speaker 2: minimum critical mass of restaurants because you know, we underwrite clusters,
• 22:01
  Speaker 2: don't We don't underwrite flags on the map.
• 22:03
  Speaker 1: Yeah. So, what are the biggest mistakes you think brands
• 22:06
  Speaker 1: make when they try to enter new markets?
• 22:08
  Speaker 2: I think what we are seeing in you know, sort
• 22:11
  Speaker 2: of a big part of our pattern recognition is when
• 22:14
  Speaker 2: you when you try and enter a new market. You
• 22:16
  Speaker 2: typically look at your Class A or Grade A or
• 22:20
  Speaker 2: Tier one sites, which are obviously higher rental sites. I
• 22:24
  Speaker 2: think when you look at a catchment, you should be
• 22:27
  Speaker 2: viewing it from two lenses. One is, you know, the
• 22:31
  Speaker 2: insight on the in store lens. The other one is
• 22:33
  Speaker 2: the digital LANs. Right, how does that talk to each other?
• 22:36
  Speaker 2: So opening a new site may or may not be
• 22:39
  Speaker 2: in the in the best part of the city, and
• 22:42
  Speaker 2: that's where I think the analytics can really help you.
• 22:46
  Speaker 2: We are looking to take one of our concepts to
• 22:49
  Speaker 2: Germany and you know when you sort of speak to
• 22:53
  Speaker 2: sort of different management teams, they'll say, oh, of course
• 22:56
  Speaker 2: you must be looking at the likes of the Munich,
• 22:58
  Speaker 2: so the frontforts of the world. Well, interestingly, we think
• 23:01
  Speaker 2: that our concept can work much better in a Stuttgart
• 23:04
  Speaker 2: or a Hamburg because we have done the worker around
• 23:06
  Speaker 2: all of these different cities and based on you know,
• 23:09
  Speaker 2: the market mapping and the catchment analysis, we think it
• 23:12
  Speaker 2: might work much better in a Hamburg versus a Munich
• 23:15
  Speaker 2: due to multiple reasons. So I think that's sort of
• 23:18
  Speaker 2: doing the whole work around the catchment is really important.
• 23:21
  Speaker 2: I would say, sort of hiring the right local management
• 23:24
  Speaker 2: team is really critical. What people do, is they they
• 23:27
  Speaker 2: kind of you know, take selected people from their core
• 23:29
  Speaker 2: market and they sort of move them to a new
• 23:31
  Speaker 2: geography and then they expect them to hit the ground running.
• 23:34
  Speaker 2: And like I mentioned earlier, I mean Europe is a
• 23:37
  Speaker 2: pre nuanced market. Languages, cultural occasions, eating out occasions, pricing, architecture,
• 23:42
  Speaker 2: everything is different. So you need to almost backfall from
• 23:45
  Speaker 2: hiring a local management team that can run the show
• 23:47
  Speaker 2: for you. These two other things that come to mind.
• 23:49
  Speaker 1: Yeah, I love it. That's a great answer. How's the
• 23:52
  Speaker 1: M and A market across Europe right now?
• 23:57
  Speaker 2: Not great, especially in what you do. But I think
• 24:02
  Speaker 2: this is one the one thing that we spend a
• 24:05
  Speaker 2: lot of time discussing, you know, within food service, I
• 24:08
  Speaker 2: would say the exit market or the M and A
• 24:12
  Speaker 2: market has not been very active, specifically in the restaurant
• 24:16
  Speaker 2: side of the house, and there are multiple reasons for that.
• 24:19
  Speaker 2: But over the course of the past six seal months,
• 24:21
  Speaker 2: there have been some sort of big transactions in Europe.
• 24:26
  Speaker 2: I think IVY was one in the UK, which is
• 24:28
  Speaker 2: an interesting one, but that deal sort of, you know,
• 24:31
  Speaker 2: has been in negotiation for a long time. I think
• 24:33
  Speaker 2: the show in the UK is another interesting one. But
• 24:38
  Speaker 2: I would say from from a sort of pipeline perspective,
• 24:41
  Speaker 2: there are not many assets in the large cap side
• 24:44
  Speaker 2: of the house that are coming to the market. There's
• 24:47
  Speaker 2: a lot of activity in the small and mid cap
• 24:48
  Speaker 2: side of the house because there are businesses, uh you
• 24:51
  Speaker 2: know that are a lot of funds that have been sitting
• 24:53
  Speaker 2: on for five to seven years and you know now
• 24:56
  Speaker 2: is the right time for them to come to the market.
• 25:00
  Speaker 2: But you know, on the food service it's typically been
• 25:03
  Speaker 2: slower than other sectors within the broad consumer retail ecosystem.
• 25:07
  Speaker 1: Gotcha, all right, what's one restaurant concept you passed on
• 25:11
  Speaker 1: but maybe wish that you hadn't.
• 25:13
  Speaker 3: Unfortunately I won't be able to share close, but I
• 25:17
  Speaker 3: can tell you. I can tell you there's this one
• 25:19
  Speaker 3: concept which had queues out of the door, very popular.
• 25:24
  Speaker 2: You know, the social media loved it. We spent a
• 25:28
  Speaker 2: lot of time looking at that concept and trying to
• 25:31
  Speaker 2: understand how much of the traffic is truly repeat customers organic.
• 25:36
  Speaker 2: We just couldn't couldn't get comfort, you know, when you
• 25:40
  Speaker 2: strip out the hype and the noise and the null
• 25:41
  Speaker 2: de factor of it to the four world your digonomics work.
• 25:45
  Speaker 2: But you know, kudos to them. They've continued to sort of,
• 25:48
  Speaker 2: you know, roll out new sites, profitable sites. They've been
• 25:52
  Speaker 2: very thoughtful and calibrated, methodical and how they think about,
• 25:57
  Speaker 2: you know, scaling the concept. But unfortunately for all the reasons,
• 26:01
  Speaker 2: you know, I can't sure that. Listen, you either you
• 26:04
  Speaker 2: either win or you love right, Yeah, I love that.
• 26:08
  Speaker 1: I use that all the time. And your win or
• 26:10
  Speaker 1: you learn. That's a perfect place to wrap this up, man,
• 26:13
  Speaker 1: Thanks for doing this, Vja. I'm going to lean on
• 26:15
  Speaker 1: you more often.
• 26:16
  Speaker 2: Man I.
• 26:18
  Speaker 1: You know, you just have so much knowledge on the
• 26:20
  Speaker 1: European market. Thanks for doing this.
• 26:22
  Speaker 2: Happy to help, and thanks for taking the time.
• 26:24
  Speaker 1: Great to chat of course, man I also want to
• 26:27
  Speaker 1: thank the audience for listening in. If you enjoyed the episode,
• 26:30
  Speaker 1: be sure to subscribe and leave us a review. Check
• 26:32
  Speaker 1: back soon for another interview on Chopping it Up.