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Musk Offers Loft Promises After $1 Trillion Tesla Payday · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am
• 0:14
  Speaker 1: Eastern on Applecarclay and Android Auto with the Bloomberg Business App.
• 0:18
  Speaker 1: Listen on demand wherever you get your podcasts, or watch
• 0:21
  Speaker 1: us live on YouTube.
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  Speaker 2: Tesla shareholders approved Elon Musk one trillion dollar pay package,
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  Speaker 2: and we had some comments from Tesla General counsel Brandon Earhart.
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  Speaker 1: Let's take a listen.
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  Speaker 3: Six.
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  Speaker 4: Then finally on the twenty twenty five CEO Performance Award
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  Speaker 4: to our founder and CEO Elon Musk, with over seventy
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  Speaker 4: five percent voting in favor.
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  Speaker 5: Approved.
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  Speaker 2: All right, that's a good date for Elon Musk. That
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  Speaker 2: was Tesla General counsel Brandon Earhart to see what this
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  Speaker 2: means for the company, for the stock. That's checking with
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  Speaker 2: Stephen Man. He's Global Autos and Industrials research channels for
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  Speaker 2: Bloomberg Intelligence. So Steve, a good day for Elon Musk.
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  Speaker 2: What does it mean for the company here to get
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  Speaker 2: this pay package through?
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  Speaker 5: Yeah, he did seem pretty upbeat last night at the
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  Speaker 5: shareholder meeting, you know he was, I mean, he was
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  Speaker 5: talking a lot about what the future looks like it
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  Speaker 5: almost feel like I'm watching like a Star Trek episode
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  Speaker 5: when he talked about robots. I think it's it's a
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  Speaker 5: it's a big relief for the company as well as
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  Speaker 5: the shareholders. Looks like a lot of shareholders. Given that
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  Speaker 5: about seventy five percent voted for the pay package. I
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  Speaker 5: think now the company and he can actually start focusing
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  Speaker 5: on delivering those metrics, which is, you know, eight and
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  Speaker 5: a half trillion dollar market cap in ten years, you know,
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  Speaker 5: four hundred billion ebitda during that time. So there's a
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  Speaker 5: lot of things he needs to do.
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  Speaker 6: So those are the very specific financial metrics that he
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  Speaker 6: needs to achieve if he wants to get paid what
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  Speaker 6: shareholders have approved. But in terms of actually getting there,
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  Speaker 6: Musk made some big promises. Human annoid robots will be
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  Speaker 6: doing a lot of beyond human precision surgery, for instance,
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  Speaker 6: and robots will play big role in setting up basis
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  Speaker 6: on the Moon and in Mars, and what of the
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  Speaker 6: which of the predictions that he make sound reasonable at
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  Speaker 6: this point.
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  Speaker 5: I mean, robotics is an evolution. I think there is
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  Speaker 5: still a lot of technical challenges to make the humanoid
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  Speaker 5: work just as well as a human so we're you know,
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  Speaker 5: at BI we think humanoid robots are actually a little
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  Speaker 5: bit ways off. But what was really interesting and kind
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  Speaker 5: of you know, caught my attention was that he wanted
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  Speaker 5: to build well, he's currently designing his own chips for autonomy,
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  Speaker 5: but he also wants to build his own fab for autonomy.
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  Speaker 5: And that's really a direct competition to companies like in
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  Speaker 5: Nvidia and and some of the fab companies like TSMC. Now,
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  Speaker 5: his his chips are a little bit different. It's a
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  Speaker 5: special purpose chip where villas in videos. AI chips are
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  Speaker 5: made to accommodate many AI applications, is specifically for autonomy
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  Speaker 5: like robots and cars.
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  Speaker 2: All Right, the math I do is, you know, in
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  Speaker 2: order for mister Muff to achieve his full trillion dollars
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  Speaker 2: in comp the market cap I have to get to
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  Speaker 2: like eight and a half trillion. It's one and a
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  Speaker 2: half trillion now, so that's incremental seven trillion dollars in
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  Speaker 2: market cap he thinks he can create and if he
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  Speaker 2: wants to take a billion of it, that's fine with me.
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  Speaker 2: I'll take the rest. And that's I think that's kind
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  Speaker 2: of what shareholders we're saying with seventy percent of them,
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  Speaker 2: seventy five percent of them are propec Yeah for a trillion.
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  Speaker 2: So I mean, you know, if he's going to mix
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  Speaker 2: incremental you know, seven trillion dollars for shareholders, he can
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  Speaker 2: have a trillion as far as he says.
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  Speaker 5: But look good like Remember he's not taking the cap
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  Speaker 5: A lot of it's stopped. Right at the end of
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  Speaker 5: the day. He just wanted greater control over the company,
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  Speaker 5: twenty five percent control of the company. But he has
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  Speaker 5: to deliver, Yeah.
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  Speaker 2: Ask to deliver. So how do we think about this?
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  Speaker 2: Even the car business now, Steve, it's almost an afterthought
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  Speaker 2: for this entire story. How do you how are investors
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  Speaker 2: thinking about kind of what is the core business today?
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  Speaker 5: Look, I think, yeah, you're right, a lot of people
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  Speaker 5: think their thought, but I actually have a different view.
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  Speaker 5: What he's really trying to achieve is physical AI. No
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  Speaker 5: quite different than what you know, what Google is doing
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  Speaker 5: on chat EPT is doing. He's actually you know, creating
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  Speaker 5: AI through cars, mobile devices, cars and robots. So you know,
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  Speaker 5: for him to proliferate proliferate autonomy physical AI, he still
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  Speaker 5: needs to produce cars, right. I don't think he's going
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  Speaker 5: to license the full cell driving to any other automakers.
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  Speaker 5: So for him to proliferate autonomy, he does have to
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  Speaker 5: produce cars. Look, and then that's why he's also very
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  Speaker 5: focused on, you know, improving the design of the OPTIMUSM
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  Speaker 5: robot so he can actually you know, build more and
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  Speaker 5: sell more to the market. Yeah, cars is important still,
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  Speaker 5: that's the understandable.
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  Speaker 2: So important, like spin out the car business and just
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  Speaker 2: have that happens and just have the rest of it
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  Speaker 2: is kind of this is the this is Elon Inc.
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  Speaker 2: If you want to buy into all the stuff about
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  Speaker 2: Elon and then here's your way.
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  Speaker 5: I'm so glad you bring that up.
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  Speaker 6: Because there was also a proposal seven that was voted
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  Speaker 6: on at the shareholders meeting Steve, where it was a
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  Speaker 6: non binding request for the board to authorize an investment
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  Speaker 6: in x Ai, which is essentially Elon Musk's side gig Right,
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  Speaker 6: the company that holds x as well as the rock chatbot.
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  Speaker 6: That gives the board the option to invent us Tesla's
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  Speaker 6: money into x Ai. What does that tell us about
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  Speaker 6: where Tesla's headed as a company.
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  Speaker 5: That it's an interesting proposal, and look, they they are
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  Speaker 5: gonna still probably take some time to think about that.
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  Speaker 5: But it's all interrelated, right, A lot of the stuff
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  Speaker 5: that he talked about last night about autonomy, optimist optimist
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  Speaker 5: robots from Tesla and how those robots can be used
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  Speaker 5: in Mars. Uh, they're all connected. All AI is connected,
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  Speaker 5: so you know what you know, does it make sense
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  Speaker 5: for it to for Tesla to invest in x Ai. Yeah.
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  Speaker 5: I think there's a lot of technology that can actually
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  Speaker 5: be shared between the different AI platforms. And you know,
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  Speaker 5: right currently, if you know, Tesla vehicles do come with Grock,
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  Speaker 5: which is part of x AI. So you know, if
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  Speaker 5: if vehicles are autonomous, uh, you know, Rock with and
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  Speaker 5: and and an other assistant would be very very useful
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  Speaker 5: in a vehicle for the passenger.
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  Speaker 6: We have a listener a question coming in Ryan from
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  Speaker 6: New York City asks what's the likelihood Tessa can compete
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  Speaker 6: on the global level versus Chinese robot companies?
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  Speaker 7: Is it?
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  Speaker 6: Maybe it's the leader in the US, but where does
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  Speaker 6: it stand versus those in Asia?
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  Speaker 5: Uh? Uh, you know, we we actually publish a report
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  Speaker 5: on human our robots, but specifically going on in manufacturing.
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  Speaker 5: What we've learned is that Chinese are very very far ahead. Uh.
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  Speaker 5: They have a number of startups working on humanoid robotics,
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  Speaker 5: you know, trying to improve dexterity, trying to improve the
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  Speaker 5: technology stack. Uh, it will be. It will be interesting
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  Speaker 5: to see. And uh, I think some people have written
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  Speaker 5: out the Chinese, but the fact that they have a
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  Speaker 5: lot of investment and a lot of startups looking at this, Uh,
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  Speaker 5: there'll be there will be a formidable uh competitor.
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  Speaker 7: Stay with us.
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  Speaker 2: More from Bloomberg Intelligence come.
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  Speaker 8: Up after this.
• 8:04
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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• 8:19
  Speaker 2: Are you a gamer child?
• 8:21
  Speaker 6: No, but my children are, and that irritates me to no.
• 8:24
  Speaker 7: End, does it?
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  Speaker 2: So?
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  Speaker 5: Are they like are they on their phone?
• 8:28
  Speaker 6: On their phone?
• 8:28
  Speaker 2: Usually?
• 8:29
  Speaker 5: Okay?
• 8:29
  Speaker 2: So this grand theft Auto thing for people, I guess
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  Speaker 2: it's a piece of news.
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  Speaker 6: Right, Yeah, No, it's a big deal because this is
• 8:35
  Speaker 6: something they've been working on for a long time. And
• 8:38
  Speaker 6: this is the sixth part of the franchise, the sixth
• 8:41
  Speaker 6: iteration of it, and it's supposed to take place in Miami.
• 8:43
  Speaker 6: But a fictional version of Miami, and it's supposed to
• 8:46
  Speaker 6: be like the Hot Game when it eventually comes out.
• 8:49
  Speaker 5: That's the issue.
• 8:50
  Speaker 6: We don't know whether they're going to meet their deadline,
• 8:54
  Speaker 6: and they've delayed it twice.
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  Speaker 2: All right, let's talk to somebody who knows the stuff
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  Speaker 2: for a living. I guess that's the best we can
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  Speaker 2: do here, Nathan Natu Technology Research Channels for Bloomberg Intelligency
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  Speaker 2: Joints is here. Grand Theft Auto postponed again.
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  Speaker 5: Take two.
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  Speaker 2: The stock is down almost nine percent on this news here, Nathan,
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  Speaker 2: what do you make of it?
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  Speaker 3: Yeah, so that's a good point on the GTA or
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  Speaker 3: Grand Theft Auto six iteration being a big factor actually
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  Speaker 3: in today's sell off. And I think you know, GTA six,
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  Speaker 3: let's call it in toort has been the prospects of
• 9:30
  Speaker 3: it rather has been priced into Take two shares. And
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  Speaker 3: last I check, you know, Take two is trading at
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  Speaker 3: about sixty percent premium to the only other big US publishers,
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  Speaker 3: Electronic Arts. And that's sixty percent premium and even higher
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  Speaker 3: compared to an average of about ten peers. And so
• 9:49
  Speaker 3: you know, valuations and expectations were high up until that point.
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  Speaker 3: So Obviously, valuations were going to be a bit sensitive
• 9:56
  Speaker 3: to any sort of downside risk, and as we have
• 9:59
  Speaker 3: seen today is the delay of GTA six. But I
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  Speaker 3: don't think this second delay officially is necessarily going to
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  Speaker 3: do any more impact than the first delay, because the
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  Speaker 3: first delay actually skipped the holiday season. This time round,
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  Speaker 3: it pulls the launch timing closer to the holiday season
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  Speaker 3: and actually a season that usually see a lot more
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  Speaker 3: activity on the player's side.
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  Speaker 6: Okay, Yeah, to your point, the original release state was
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  Speaker 6: back in Fall twenty twenty five, then it was delayed
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  Speaker 6: until May twenty twenty six, and now it's been delayed
• 10:28
  Speaker 6: by another six months to November twenty twenty six. Nathan,
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  Speaker 6: I'm going to ask the dumb question. If they delayed
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  Speaker 6: it twice, they might delay it again. Why are they
• 10:36
  Speaker 6: delaying this game? What's what's proving to be difficult or
• 10:40
  Speaker 6: problematic about this?
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  Speaker 5: Yeah.
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  Speaker 3: So, according to the words by the company themselves, they
• 10:47
  Speaker 3: want to give the publisher the developers rather a bit
• 10:50
  Speaker 3: more time to polish the game.
• 10:51
  Speaker 8: Game like GTA, GTA to take a step back.
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  Speaker 3: Grand Theft also is easily the top five selling games
• 10:59
  Speaker 3: franchise of all time globally, so this game has quite
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  Speaker 3: a bit of a cult following.
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  Speaker 8: You know, he has sold.
• 11:05
  Speaker 3: More than four hundred and fifteen million units, right, and
• 11:09
  Speaker 3: so I think it doesn't make a big difference whether
• 11:12
  Speaker 3: it's delayed, you know, in this round of delay, because
• 11:17
  Speaker 3: you know, this game, regardless of when this launch is gonna,
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  Speaker 3: it's going to bring back those core Lawyer fan base.
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  Speaker 3: And we're talking about fifteen to twenty millions of people
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  Speaker 3: playing GTA five, the current version, every month.
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  Speaker 8: So you know that that proves my point.
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  Speaker 3: And also, like you know, you know, launching in November,
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  Speaker 3: which is the high sales season for any sort of
• 11:39
  Speaker 3: video games or any sort of products rather is actually
• 11:42
  Speaker 3: a better timing. And in my work in GTA six
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  Speaker 3: favor In the end, I think, all.
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  Speaker 2: Right, Nathan, in your world of online gaming, can you
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  Speaker 2: size out how big this business is, because I think
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  Speaker 2: a lot of people don't have a good idea just
• 11:57
  Speaker 2: how big the game?
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  Speaker 6: It gets bigger than Hollywood?
• 11:59
  Speaker 5: Yeah, right, so how movie business?
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  Speaker 2: Exactly how big is it? And kind of what's the
• 12:03
  Speaker 2: growth parameters for this industry?
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  Speaker 8: Yeah?
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  Speaker 3: So you know, the overall video game market is inching
• 12:11
  Speaker 3: towards like one hundred and eighty billion US dollars in
• 12:15
  Speaker 3: sales last year, and you know that is actually bigger
• 12:19
  Speaker 3: than films and you know other easily right, other entertainment
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  Speaker 3: forms and GTA.
• 12:27
  Speaker 8: You know, if we assume that.
• 12:30
  Speaker 3: We assume that the GTA six cells about thirty five
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  Speaker 3: to forty five million units, that's about two to three
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  Speaker 3: billion US dollars in upfront revenue to the company.
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  Speaker 8: And that's just one game.
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  Speaker 6: Man eighteen to forty nine. Oh my god, it's just
• 12:46
  Speaker 6: the advertisers stream, is I guess?
• 12:49
  Speaker 7: Yeah?
• 12:49
  Speaker 2: Yeah, I mean I punk this pong count.
• 12:54
  Speaker 6: Sorry, no one's monetizing off pong anymore. Nathan, Do you
• 12:58
  Speaker 6: know what pong is?
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  Speaker 8: Yeah? You mean like age cohort?
• 13:03
  Speaker 6: No, okay, so when we're showing our age.
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  Speaker 2: Now, all right, So Nathan, for Take two, what's the
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  Speaker 2: is it? Is that just really a play on Grand
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  Speaker 2: Theft Auto? Is it that dependent on that game?
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  Speaker 8: Yeah?
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  Speaker 3: So Take two actually has a few other big franchises
• 13:21
  Speaker 3: under it spelt like red that Redemption for example, and
• 13:24
  Speaker 3: Take two is also big in sports game whether that's football,
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  Speaker 3: uh and and so GT is that certainly the biggest game,
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  Speaker 3: but it's not the only pieces of the parcel in
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  Speaker 3: terms of how it is driving take to top top
• 13:38
  Speaker 3: line as well as bottom line. But it is certainly
• 13:40
  Speaker 3: going to be the biggest biggest game launch next year,
• 13:44
  Speaker 3: and that's coming from Take two.
• 13:46
  Speaker 8: And given the.
• 13:46
  Speaker 3: Game is actually in house, meaning it generates a lot
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  Speaker 3: more to bottom line than games that are based on
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  Speaker 3: third party intellectual property where a royalty payment is involved,
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  Speaker 3: So you know, we can expect similar significant boost to
• 14:01
  Speaker 3: take to profits as well next year. And actually the
• 14:03
  Speaker 3: company is expecting to you know, generate positive free cash
• 14:07
  Speaker 3: flow again because they're currently running on negative.
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  Speaker 6: Okay, I have a question here because usually when we
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  Speaker 6: talk about Take two, I look at how the other
• 14:16
  Speaker 6: video game publishers are performing, and right away I thought,
• 14:19
  Speaker 6: oh check EA.
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  Speaker 5: EA is barely moving.
• 14:21
  Speaker 6: But that's also because e A is going to be
• 14:23
  Speaker 6: bought out by private equity. Is take to a candidate
• 14:26
  Speaker 6: for a buyout.
• 14:29
  Speaker 3: So Take two is certainly a good candidate, and it
• 14:32
  Speaker 3: is actually the it would only be it would be
• 14:34
  Speaker 3: the only surviving US game publisher of scale if Take
• 14:39
  Speaker 3: two if the EA deal actually complete and goes through,
• 14:43
  Speaker 3: and EA is expecting that deal to close in the
• 14:45
  Speaker 3: April to June period next year, and EA is a
• 14:48
  Speaker 3: good candidate because he has a robust brought franchises and
• 14:52
  Speaker 3: obviously Grand Theft Auto is a game that has survived
• 14:56
  Speaker 3: more than two decades and it continued to attracts millions
• 14:59
  Speaker 3: of players. Actually, you know about fifteen and up million
• 15:02
  Speaker 3: of players every month, so you know, with attention increasingly
• 15:08
  Speaker 3: being scars, you know, games that continue to perform well
• 15:12
  Speaker 3: actually are games that were published six year or earlier.
• 15:16
  Speaker 3: So there's actually not a lot of room for brand
• 15:18
  Speaker 3: new games to grow in this market. In fact, new
• 15:21
  Speaker 3: Zoo actually mentioned that for brand new titles, only eight
• 15:24
  Speaker 3: percent of the gameplay hours are up for rep so
• 15:28
  Speaker 3: you know that just says like well established franchises with
• 15:32
  Speaker 3: a cup following certainly has its value. And we actually
• 15:35
  Speaker 3: saw ten cents investment in Ubisoft, you know, a French
• 15:39
  Speaker 3: game company in Tenson obviously needs to know. Introduction is
• 15:43
  Speaker 3: a tech giant in China and certainly a giant in gaming. Yeah,
• 15:47
  Speaker 3: they invested about you know, a few billion euros to
• 15:50
  Speaker 3: take a quarter of a subsidiary, subsidiary of Ubisoft that
• 15:55
  Speaker 3: actually owns you know, a quarter of ubisoft three most
• 15:59
  Speaker 3: value franchises. If you like Ninja's assasines. We're talking about
• 16:03
  Speaker 3: assassin crete here, we're talking about Tom Clancy and a
• 16:07
  Speaker 3: few shooter games. So there's definitely a general direction of
• 16:11
  Speaker 3: companies with resources eyeing companies with great ip if those
• 16:16
  Speaker 3: two do not currently exist together. And we certainly see
• 16:19
  Speaker 3: that a EA deals coming through kind of place into
• 16:23
  Speaker 3: the Saudi ambitions for esports and Saudi Prince, which is
• 16:27
  Speaker 3: you know, the chair of the sombern Will Fund there
• 16:31
  Speaker 3: is actually an avid gamer himself, and which I suspect
• 16:34
  Speaker 3: is one of the factors behind why.
• 16:36
  Speaker 8: EA is a good fit for the deal, because EA.
• 16:39
  Speaker 3: Has the most popular soccer game out there. Why I
• 16:42
  Speaker 3: say soccer because I'm in Europe right now, I need
• 16:45
  Speaker 3: to differentiate from football.
• 16:47
  Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
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• 17:09
  Speaker 2: Wendy's I guess the way Bloomberg News is reporting it.
• 17:12
  Speaker 2: They reported better than feared three cute results. So there's
• 17:16
  Speaker 2: some concern out there about the consumer, particularly on the
• 17:18
  Speaker 2: lower end of the consumer, and how that's impacting various industries,
• 17:22
  Speaker 2: including the food industry, the restaurant business. And so we
• 17:25
  Speaker 2: want to get the latest on what's happening out there
• 17:27
  Speaker 2: in the world of food and restaurants. We go to
• 17:29
  Speaker 2: Mike Keayln he covers the restaurants for Bloomberg Intelligence. Mike
• 17:34
  Speaker 2: talk to us about Wendy's. What did they say on
• 17:36
  Speaker 2: their call, what did you learn with their results? And
• 17:38
  Speaker 2: by the way, I'm a big fan of the bacon
• 17:40
  Speaker 2: a or.
• 17:43
  Speaker 7: Yeah, baconator is great, Chicken's great.
• 17:46
  Speaker 9: You know, historically Wendy's has been known for great food,
• 17:50
  Speaker 9: but their food has suffered over especially in the last
• 17:54
  Speaker 9: year or two, mainly because the previous management team, who
• 17:59
  Speaker 9: I said in a previous interview, lit this company on
• 18:02
  Speaker 9: fire and then headed for the excess like George Costanza
• 18:06
  Speaker 9: and Seinfeld, knocking over women and children on the way.
• 18:10
  Speaker 9: And you know, what they did was just flood the
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  Speaker 9: system with ltos and it didn't give people system with
• 18:18
  Speaker 9: what limited time offers ultos And every two weeks there
• 18:23
  Speaker 9: was a new offer, a new value meal, a new
• 18:25
  Speaker 9: food item, and it didn't give them ability to market
• 18:29
  Speaker 9: it correctly, and people would come in and thinking they
• 18:32
  Speaker 9: were going to be able to get one item and
• 18:33
  Speaker 9: they'd have to switch to something else, right, and it
• 18:36
  Speaker 9: led to complexity in the store, poor operations, which led
• 18:40
  Speaker 9: to poor food quality, poor customer service.
• 18:43
  Speaker 7: Down the line. You know. So this company had a
• 18:47
  Speaker 7: tough quarter. It's going to have a tough fourth quarter
• 18:51
  Speaker 7: as well, but a lot of it is self inflicted.
• 18:53
  Speaker 9: They did speak about, you know, their expectation for low
• 18:57
  Speaker 9: income consumers to continue to be pressure.
• 19:01
  Speaker 7: In these next two quarters.
• 19:03
  Speaker 2: So I know for McDonald's the vast, vast majority of
• 19:06
  Speaker 2: their stores are franchise is that is that the case
• 19:09
  Speaker 2: for Wendy's as well?
• 19:11
  Speaker 7: Yeah, that's the case for Wendy's.
• 19:13
  Speaker 9: One of the things that they mentioned on the call
• 19:16
  Speaker 9: is that they're going to be closing you know, roughly
• 19:18
  Speaker 9: five percent of their store base in the coming quarters
• 19:21
  Speaker 9: because excuse me, because franchisees have been have not been
• 19:25
  Speaker 9: performing very well. Right, sales have created and when there's
• 19:28
  Speaker 9: a lot of operating leverage in this model when you're
• 19:30
  Speaker 9: a franchise ee, so when your sales decline, your margins
• 19:33
  Speaker 9: decline even faster.
• 19:35
  Speaker 7: So you know they're going to be closing a bunch of.
• 19:38
  Speaker 9: Stores, but we think that could actually accelerate the turnaround, right,
• 19:41
  Speaker 9: so as they close underperforming stores, this should boost sales
• 19:45
  Speaker 9: at the surrounding locations.
• 19:48
  Speaker 7: Uh and management has a pretty good plan.
• 19:50
  Speaker 9: You know, there's not a whole lot of they still
• 19:52
  Speaker 9: don't have a permanent CEO and there's not a lot
• 19:54
  Speaker 9: of restaurant experience at the top. That the interim CEO
• 19:58
  Speaker 9: was the CFO who was who came from outside of
• 20:01
  Speaker 9: the restaurant industry.
• 20:02
  Speaker 7: But we think he's pushing the right buttons.
• 20:04
  Speaker 9: I think hiring Greg Creed, who was the previous CEO
• 20:08
  Speaker 9: of Taco Bell and then Young Brands, arguably the QSR
• 20:11
  Speaker 9: goat to do some consulting work, I think is a
• 20:14
  Speaker 9: really good move. I think that's really going to help
• 20:16
  Speaker 9: their marketing. And it's a great brand that has a
• 20:19
  Speaker 9: lot of things that can market from the past, like
• 20:21
  Speaker 9: where's the beef? You know, and they're they're doing a
• 20:25
  Speaker 9: lot less lt O s and they're gonna work on
• 20:27
  Speaker 9: fixing the operations.
• 20:28
  Speaker 7: They're spending money on training.
• 20:30
  Speaker 9: Doing things that we think can really make a difference
• 20:33
  Speaker 9: in twenty twenty six.
• 20:34
  Speaker 2: You know, the Hamburger business has changed a lot since
• 20:37
  Speaker 2: I was a kid, when it was basically you know McDonald's,
• 20:40
  Speaker 2: you know, Burger King. Then Wendy's came along and that
• 20:43
  Speaker 2: was kind of it. Now you've got all these I
• 20:45
  Speaker 2: don't know what you guys call them, specialty burgers like
• 20:47
  Speaker 2: smash Burger five guys, all that kind of stuff. Shakeshack.
• 20:51
  Speaker 2: How's the burger business these days?
• 20:54
  Speaker 7: Man?
• 20:54
  Speaker 9: People love burgers, but you're right there is it is
• 20:57
  Speaker 9: a saturated market with all of those burger better chains.
• 21:03
  Speaker 9: You know, I think it's good for the overall industry
• 21:07
  Speaker 9: that Wendy's is closing some stores. Jack in a Box
• 21:09
  Speaker 9: is going to be closing some stores, right Like to me,
• 21:13
  Speaker 9: this is this is a part of the restaurant business
• 21:16
  Speaker 9: that's oversupplied and it's been growing faster than population growth.
• 21:21
  Speaker 7: And so to see some chain start.
• 21:23
  Speaker 9: To close some stores, you know, we think that's healthy
• 21:27
  Speaker 9: and we think it's going to improve results in the future.
• 21:30
  Speaker 2: How's the burger business been impacted by the cost of beef.
• 21:34
  Speaker 2: I've been reading that. You know, beef costs have been
• 21:36
  Speaker 2: elevated for a while now, So how are they dealing
• 21:38
  Speaker 2: with that?
• 21:40
  Speaker 9: Beef costs are a killer, especially if you're not able
• 21:43
  Speaker 9: to drive you know, traffic into your restaurants. So for
• 21:48
  Speaker 9: Wendy's franchisees, it's been absolutely crushing for them, right, they're
• 21:52
  Speaker 9: more than ninety five percent franchise So the corporation is
• 21:56
  Speaker 9: going to take a hit on the five percent of
• 21:57
  Speaker 9: stores or so that it owns, but most of the
• 22:01
  Speaker 9: inflation and the margin compression is going to come on
• 22:05
  Speaker 9: the franchise z side, and they're the ones that are struggling,
• 22:08
  Speaker 9: and they're the ones that are going to be closing
• 22:10
  Speaker 9: the stores.
• 22:12
  Speaker 2: What'sh where's the best value in your universe of restaurants, Mike?
• 22:18
  Speaker 7: Are you talking about the stocksfuscation? Yeah, well, this one
• 22:22
  Speaker 7: is interesting.
• 22:23
  Speaker 9: Right now, it's trading at ten times twenty twenty six EPs, right,
• 22:28
  Speaker 9: and historically these these names trade at fifteen to thirty
• 22:31
  Speaker 9: times because being a franchise chain, you know, you have
• 22:36
  Speaker 9: very it's very easy to predict your earnings and your
• 22:38
  Speaker 9: cash flow, right, and they're insulated against inflation against inflation,
• 22:43
  Speaker 9: so historically fifteen to twenty. So we think at some point,
• 22:47
  Speaker 9: when you know, ahead of the sales inflection that we
• 22:49
  Speaker 9: think is likely in the first quarter, that investors could
• 22:53
  Speaker 9: could look more closely at this name.
• 22:57
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