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Restaurants Set the Table for Better 2H Sales · Choppin’ It Up by Bloomberg Intelligence

0:13
Speaker 1: Welcome to Chopping it Up. I'm your host, Mike Hamllon,
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Speaker 1: the senior Restaurant and food Service analyst at Bloomberg Intelligence.
0:19
Speaker 1: Our research and that at BES five hundred analysts around
0:22
Speaker 1: the globe can be found exclusively on the Bloomberg terminal.
0:25
Speaker 1: If you enjoy the pod, I'd love it if you
0:27
Speaker 1: could leave us a review on Apple or Spotify. Today
0:30
Speaker 1: we're doing things a little bit different. Daniellis to Tori,
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Speaker 1: the phenomenal Bloomberg reporter covering restaurants, is going to interview
0:37
Speaker 1: me about our mid year outlook. Welcome back to the pod, Daniella.
0:42
Speaker 2: Thank you so much for having me. Mike. It's always
0:45
Speaker 2: fun to talk to you, and you always help me
0:47
Speaker 2: understand the industry much better. And I'm excited to just
0:51
Speaker 2: pepper you with questions you did today. I hope you're ready.
0:54
Speaker 1: I'm always ready. Let's do it.
0:57
Speaker 2: So I actually wanted to start by asking you a
1:00
Speaker 2: little bit to look back. I mean, the beginning of
1:03
Speaker 2: the year was kind of interesting, right, I mean, we
1:05
Speaker 2: had the bad weather and we had all the you know,
1:09
Speaker 2: news about tariffs and whatever that was going to mean.
1:13
Speaker 2: So can you kind of bring us up to speed
1:16
Speaker 2: about you know, what the what this first part of
1:18
Speaker 2: the year has been like for the restaurant industry.
1:22
Speaker 1: Yeah, you know, we came into the year looking for
1:25
Speaker 1: a better year in terms of restaurant sales, and I'm
1:29
Speaker 1: not so sure about what's going to happen to inflation
1:32
Speaker 1: in the second half in margins, and we're kind of
1:34
Speaker 1: in the you know, our view hasn't changed, you know,
1:38
Speaker 1: there have been headwinds in the first quarter. To your point,
1:42
Speaker 1: the first quarter sales increased for most of our chains.
1:45
Speaker 1: But to your point, weather was bad. It was cold,
1:49
Speaker 1: and then it was snowy, and it was a record
1:51
Speaker 1: flu season, right, and then we had the taraf freakout.
1:55
Speaker 1: And what's interesting is that that twer freakout happened right
1:59
Speaker 1: aroun around when all our companies were reporting their first
2:03
Speaker 1: quarter earnings, and most of the companies we cover used
2:07
Speaker 1: it as an opportunity to cut their guidance just due
2:10
Speaker 1: to quote unquote uncertainty. But then when we got the
2:13
Speaker 1: data for April and May, there really was not much
2:16
Speaker 1: of an impact on restaurants spending. Right, people have to eat,
2:22
Speaker 1: you know, I know people with on the on the
2:24
Speaker 1: East Coast in New York people with personal accounts and
2:28
Speaker 1: pretty big four to one k's were really upset at
2:31
Speaker 1: the time, and maybe they cut back their visits to
2:34
Speaker 1: Ruth Chris or some other high end restaurant. But most
2:37
Speaker 1: Americans don't have stocks investments in stocks and could care
2:40
Speaker 1: less about you know, the historyonics around and around the tariff.
2:47
Speaker 1: So restaurant spending continued kind of unabated, and from the
2:52
Speaker 1: data we get from black Box Intelligence, it was pretty solid,
2:55
Speaker 1: and it seems ourselves were up about ninety bases points
2:57
Speaker 1: in the first half of the year, considering that had
3:00
Speaker 1: ones we've had, we think that that's a pretty good number.
3:03
Speaker 1: In the second half, we continue to lap last year's
3:06
Speaker 1: week results, so especially in the summer. I mean, we're
3:10
Speaker 1: lapping very weak results here in July and August, and
3:14
Speaker 1: you know, and and economic data is looking better. It's not,
3:18
Speaker 1: you know, great, but the stuff that we look at
3:21
Speaker 1: is getting better. So credit card balances, credit card delinquencies,
3:25
Speaker 1: auto loan delinquencies are kind of the increases there are moderating,
3:30
Speaker 1: so we're seeing a rate of change improvement. We're seeing
3:34
Speaker 1: much better small business confidence. We have some issues with
3:38
Speaker 1: the consumer confidence numbers, but those are are starting to
3:43
Speaker 1: poke their heads back up, and so savings rates are
3:46
Speaker 1: increasing again for the first time since you know, stimmy
3:49
Speaker 1: checks were cut to the American public after the pandemic,
3:53
Speaker 1: and so, you know, I think things are are still
3:56
Speaker 1: looking pretty good in the second half. It's not going
3:58
Speaker 1: to go gangbusters because low inc consumers continue to be
4:02
Speaker 1: hampered by all the inflation that we've seen over the
4:04
Speaker 1: last four years. But restaurant business is doing okay.
4:09
Speaker 2: It is definitely an interesting time. And to your point,
4:11
Speaker 2: you know, when it came to the freak out around
4:13
Speaker 2: the tariffs, it seems like the sales started to rebound
4:18
Speaker 2: sort of in April, right as oh, the rhetoric was happening.
4:22
Speaker 2: And I struggled to explain that for a little bit,
4:27
Speaker 2: but it seems like you, you know, you have a
4:29
Speaker 2: good explanation there, So like just for a second, let's
4:31
Speaker 2: dig that a little bit more into that. You know,
4:34
Speaker 2: why do you think that, you know, despite all the rhetoric,
4:37
Speaker 2: you know, things have held up relatively decently.
4:41
Speaker 1: Yeah, well, you know who's done better. It's really been
4:44
Speaker 1: the casual dining chains. And then part of that is
4:47
Speaker 1: better operations and marketing and just the fact that Chile's
4:50
Speaker 1: is putting up thirty percent comps and lifting the entire
4:54
Speaker 1: segment mathematically. But I think there was some pent up demand,
4:59
Speaker 1: right because of those reasons I outlined of of why
5:02
Speaker 1: that first quarter was so bad. I think there was
5:05
Speaker 1: some desire for people to get out and get back
5:07
Speaker 1: into restaurants, and I think that's part of what we've seen.
5:11
Speaker 1: You know, we've also seen quick service underperform, you know,
5:16
Speaker 1: and that is a big part of that really is
5:20
Speaker 1: the exposure to low income consumers. But it's also a
5:24
Speaker 1: couple other things. You know. Number one, pricing, right, Like,
5:27
Speaker 1: people are not happy with the value they're getting at
5:30
Speaker 1: quick service restaurants, and so part of that where they
5:33
Speaker 1: are is because they were able to raise prices all
5:36
Speaker 1: the way back in twenty twenty. Casual dining really wasn't
5:39
Speaker 1: able to do that until like late twenty twenty one, right,
5:41
Speaker 1: So they had a year and a half head start
5:43
Speaker 1: of being able to raise prices for the quick service cheam.
5:46
Speaker 1: So they're pricing kind of got ahead of itself before
5:49
Speaker 1: anyone else because they were raising prices in twenty twenty
5:53
Speaker 1: because they were the only game in town and they could, right,
5:55
Speaker 1: and so that's part of it. Also, development of quick
6:00
Speaker 1: service restaurants has not slowed since the pandemic, and so
6:04
Speaker 1: there's a lot more quick service restaurants than there were
6:08
Speaker 1: five years ago, and so there's a kind of a
6:10
Speaker 1: supply and demand and balance, whereas casual dinings doing a
6:15
Speaker 1: little better this year because you know, a lot there
6:19
Speaker 1: hasn't been much development at all, and a lot of chains,
6:22
Speaker 1: in fact, I've been closing stores, and so their supply
6:25
Speaker 1: and demand is more in balance and we're seeing better
6:31
Speaker 1: results because of it.
6:33
Speaker 2: How about fine dining, because I think that's one of
6:35
Speaker 2: the interesting things that we've noticed, right. I Mean, when
6:39
Speaker 2: you look at like the black Box data, it seems
6:41
Speaker 2: like casual dining, which is sort of in the middle,
6:43
Speaker 2: seems to be doing pretty well. But both the lower
6:46
Speaker 2: end in terms of quick service and then fine dining
6:48
Speaker 2: and the upper end don't seem to be doing great.
6:51
Speaker 2: So I'm just curious what you make of that, and
6:55
Speaker 2: does that mean anything right about this how Americans are
6:58
Speaker 2: thinking about dining out, or just like what it takes
7:01
Speaker 2: to get them in the door in this type of
7:04
Speaker 2: economic environment.
7:05
Speaker 1: Yeah, find them. I thing is interesting because you know,
7:08
Speaker 1: we thought that they could outperform last year in a
7:11
Speaker 1: bad year because wealthy and consumers are less impacted by inflation.
7:17
Speaker 1: But you also have to remember the big part of
7:19
Speaker 1: their business is B to B right. But it's been
7:23
Speaker 1: a really difficult two years for fine dining. A big
7:27
Speaker 1: part of that is after the pandemic, people had stimmy checks.
7:31
Speaker 1: People weren't spending money, right, So people that didn't lose
7:34
Speaker 1: their jobs and were able to work from home had
7:36
Speaker 1: a lot of money that they were accumulating while they
7:39
Speaker 1: were sitting at home and unable to go out. And
7:41
Speaker 1: so when they did go out in twenty twenty one,
7:45
Speaker 1: in twenty twenty two, they they spent a lot of money.
7:50
Speaker 1: They were you know, a lot of what we were
7:52
Speaker 1: hearing was that they were buying the most expensive bottles
7:55
Speaker 1: of wine on the menu, even though service was struggling.
8:00
Speaker 1: You know, they were going out quite a bit. And
8:02
Speaker 1: so this has been like a two year hangover now
8:06
Speaker 1: from that spending. It's hard for me to really pinpoint
8:11
Speaker 1: exactly what's going on there. You know, I think last
8:13
Speaker 1: year part of it was everyone was trading down a
8:17
Speaker 1: little bit, even hiringcome consumers because prices had gone so
8:22
Speaker 1: up so much. So fast, but they're still continuing to
8:27
Speaker 1: be soft this year, and so it's hard for me
8:30
Speaker 1: to say I have the data from black Box, but
8:32
Speaker 1: you know, my companies outside of Darden really don't have
8:36
Speaker 1: any exposure to that business. So unfortunately, I can't give
8:39
Speaker 1: you too much color there.
8:41
Speaker 2: Yeah, it's a tricky segment. But I wanted to go
8:44
Speaker 2: back a little bit to sort of your expectations for
8:47
Speaker 2: the second half of the year. Right, it seems like
8:49
Speaker 2: generally speaking, you know, you're fairly positive on what's to come.
8:55
Speaker 2: Give me, you know, the summary of what your expectations
9:00
Speaker 2: are for the second half of the year and sort
9:02
Speaker 2: of the top three reasons that are that are anchoring that.
9:07
Speaker 1: Okay, So yeah, we had said throughout the you know,
9:12
Speaker 1: that we expect the result to be better than last year.
9:14
Speaker 1: I think I'm looking at like a one to two
9:16
Speaker 1: percent same star sales increase for the industry. So, like
9:19
Speaker 1: I said, not gangbusters, but better than the zero point
9:24
Speaker 1: two percent increase that we saw last year. And that
9:27
Speaker 1: was all fueled by quick Service, because all the other
9:30
Speaker 1: sub segments did poorly, especially casual dining, which was awful
9:34
Speaker 1: last year. So yeah, we we think the year is
9:37
Speaker 1: going to accelerate. The sasses are going to accelerate through
9:40
Speaker 1: the year. You know, first of all, like I said,
9:42
Speaker 1: is really that lapping that comp that we comp from
9:46
Speaker 1: last year. UH, casual dining will benefit from that the most.
9:51
Speaker 1: I don't think they're gonna exceed the three percent that
9:54
Speaker 1: they did in the first half of this year. I
9:56
Speaker 1: think that's going to moderate. And part of that is
10:01
Speaker 1: same So our sales are going to moderate at Brinker
10:03
Speaker 1: and the comps are going to get tougher as the
10:07
Speaker 1: year goes on. And that segment's also booyed buy you know,
10:11
Speaker 1: pent up demand not only from the first quarter but
10:13
Speaker 1: all of last year. You know, people really cut back
10:16
Speaker 1: on dining out because that's typically what we see in
10:20
Speaker 1: a recession, and we had a restaurant recession last year.
10:23
Speaker 1: Is like people cut back and they trade down to
10:25
Speaker 1: cheaper options, and they traded out of casual dining into
10:29
Speaker 1: quick service. And you know, as we've seen in the
10:33
Speaker 1: employment data, people still have jobs, so they have money.
10:36
Speaker 1: And now that that value gap has shrunk between quick
10:40
Speaker 1: service and casual dining, people are are looking to go
10:44
Speaker 1: out to these full service restaurants and enjoy a meal
10:46
Speaker 1: out and so still good at casual dining. We think
10:50
Speaker 1: they'll continue to outperform again. This is a very unique
10:53
Speaker 1: situation in like a slower economy, but that's what we see.
10:58
Speaker 1: And then quick service, which has been weak, we think
11:02
Speaker 1: can get better. Part of that is a big part
11:05
Speaker 1: of that is going to be McDonald's. McDonald's has easier
11:09
Speaker 1: comps throughout the year. They're finally passed the e coli
11:14
Speaker 1: issues of late last year. They're put out a lot
11:18
Speaker 1: of food new food items this year, chicken strips and
11:23
Speaker 1: the mcraps and all that good stuff. And so as
11:27
Speaker 1: they start to lap easier comps, you know that'll be helped.
11:31
Speaker 1: We think low income consumers and middle income consumer spending
11:35
Speaker 1: should get a boost in the second half. Right, we
11:37
Speaker 1: just passed the big beautiful bill, and so I think
11:40
Speaker 1: just the narrative switching from all the tariffs, which isn't
11:44
Speaker 1: fully behind us if you work on Wall Street, but
11:47
Speaker 1: it's largely behind us, and now shifting to more talk
11:51
Speaker 1: and thoughts about cutting tax taxes for seniors and overtime
11:58
Speaker 1: and on overtime pay as as well as tipped workers.
12:02
Speaker 1: So all of those are good things for restaurants spending
12:06
Speaker 1: and so we think that will buoy restaurants sentiment and
12:09
Speaker 1: spending into the in the second half and especially next
12:13
Speaker 1: year when people receive their tax refunds.
12:16
Speaker 2: Yeah, that's interesting that you wrote up the Big Beautiful Bill,
12:19
Speaker 2: because I want to talk you something about the narrative
12:22
Speaker 2: around it, right, And a lot of the coverage that
12:25
Speaker 2: even Bloomberg has done has sort of highlighted how a
12:28
Speaker 2: lot of the benefits are more for higher income earners.
12:32
Speaker 2: You know, that they will get more of a boost,
12:34
Speaker 2: and you know, with some cuts to you know, programs
12:36
Speaker 2: like SNAP and Medicaid and everything that would seem to
12:40
Speaker 2: that would hurt lower income consumers more or at least
12:43
Speaker 2: sort of the sentiment around it. So I'm just curious
12:47
Speaker 2: how you're thinking about that narrative, you know, whether it's
12:51
Speaker 2: real or perceived. People are probably hearing in the news
12:55
Speaker 2: that the bill kind of benefits more higher income earners.
13:00
Speaker 2: Does that mean for lower income earners in the sense
13:04
Speaker 2: of their willingness to go out and spend places like restaurants?
13:08
Speaker 1: Yeah, well, well, in terms of that specifically, restaurants aren't
13:13
Speaker 1: you know, take accepting EBT payments and SNAP payments for
13:16
Speaker 1: the most part, and so that's going to have a
13:17
Speaker 1: larger impact at grocery. Right. So the way we're looking
13:20
Speaker 1: at is that, you know, restaurant employees are largely a
13:24
Speaker 1: tipped segment of the population right over time, those are
13:29
Speaker 1: just ones where we're super focused because those are people
13:34
Speaker 1: that need the help. They're the people that have have
13:37
Speaker 1: really struggled from the increases in inflation, and so at
13:41
Speaker 1: the very low end, yes, that that's going to hurt them,
13:44
Speaker 1: you know, pulling back on the snap benefits is definitely
13:46
Speaker 1: going to hurt them. But those aren't people that necessarily
13:49
Speaker 1: spending a lot of money at restaurants, and so, you know,
13:52
Speaker 1: from in our industry, we don't think that's as much
13:57
Speaker 1: of an issue. And you know, I'm not attacks and list,
14:00
Speaker 1: so I can't really dig into the you know, into
14:03
Speaker 1: the weeds there, and I'd rather not get into the
14:06
Speaker 1: politics of it, you know, but you know, think I
14:09
Speaker 1: think overall generally it's it's a good thing for restaurants
14:13
Speaker 1: and consumer.
14:14
Speaker 2: Sentiment got it. So yeah, because I guess that's ultimately
14:18
Speaker 2: the question. It's sometimes it's less about details and more
14:20
Speaker 2: about how people feel about them. And so you think
14:24
Speaker 2: that net net basically the sentiment that's coming out of
14:29
Speaker 2: the Big Beautiful Bill is going to be one of
14:31
Speaker 2: people feeling more comfortable spending in places like restaurants.
14:35
Speaker 1: Yeah. And then one other thing that that you know,
14:38
Speaker 1: we had heard from a couple of our companies that
14:42
Speaker 1: you know that that during the tariff negotiations, there was
14:46
Speaker 1: there also concern about deportations right in the United States
14:51
Speaker 1: around that same time, and so some of our companies
14:53
Speaker 1: did see some pullback with their Hispanic customers. Wingstop was
14:57
Speaker 1: one that specifically mentioned it, but the there's also some
15:00
Speaker 1: package for companies that mentioned it. So we're curious to
15:05
Speaker 1: hear what wink Stuff has to say in the second
15:07
Speaker 1: quarter and what other consumer companies are saying about about
15:13
Speaker 1: that moving forward. You know, I'd imagine it seems like
15:16
Speaker 1: it's less of a headline in the news now, and
15:18
Speaker 1: I'd imagine there's less concerns.
15:20
Speaker 2: You know.
15:20
Speaker 1: I think I saw something where Obama actually deported more
15:23
Speaker 1: people than Trump, So I think the narrative could be
15:27
Speaker 1: shifting there. But that's something that we're curious about too.
15:32
Speaker 2: That is definitely a big just question mark, right, you know,
15:37
Speaker 2: for the industry. Because the other thing is the Big
15:40
Speaker 2: Beautiful bill did give more money for immigration enforcements, so
15:44
Speaker 2: it is going to be interesting what that means in
15:46
Speaker 2: terms of both the workforce and also just customers, like
15:51
Speaker 2: how they feel about going out and getting in line
15:54
Speaker 2: of the drive through if that's the case. But we
15:57
Speaker 2: don't know how that's going out playouts, So I guess, well,
16:00
Speaker 2: have to have another conversation without They said another point.
16:04
Speaker 2: So interesting that you bring up McDonald's in particular. Of
16:07
Speaker 2: course they are such a big name and almost like
16:11
Speaker 2: barometer I guess about, you know, the restaurant industry, but
16:14
Speaker 2: also just the American consumer. And as you mentioned, yes,
16:18
Speaker 2: they've launched you know, they had their Minecraft meal which
16:21
Speaker 2: seems to have helped them, crispy strip strips, the snack
16:24
Speaker 2: wrap that just came back to much fanfare. Do you
16:29
Speaker 2: think that's going to work to solve the issues that
16:32
Speaker 2: they've had over the past you know, a few months,
16:34
Speaker 2: few a few quarters.
16:36
Speaker 1: Yeah, it's going to help, you know, like I said,
16:39
Speaker 1: putting the the e Coli stuff behind them, And they
16:41
Speaker 1: said they exited the first quarter without any impact to
16:45
Speaker 1: their business. You know, that's that's a real positive. And
16:48
Speaker 1: their comps got worse as the year went on last year,
16:50
Speaker 1: and so you know that in and of itself is
16:54
Speaker 1: going to make things easier for them, and then you
16:56
Speaker 1: pile on the impact of some of the these new items.
17:01
Speaker 1: You know, we'll see if they can give them a
17:04
Speaker 1: sustained lift. You know, there's not a doubt in my
17:06
Speaker 1: mind that they gave McDonald's a lift in the second quarter, right.
17:10
Speaker 1: They would really prefer to see an impact continue, right,
17:14
Speaker 1: and to take some share in the in the chicken market,
17:18
Speaker 1: the fast growing chicken market in the United States. So
17:22
Speaker 1: how much of a bump and will it, you know,
17:24
Speaker 1: they get and will it last through year end? I
17:27
Speaker 1: don't really know just yet. You know, I've heard the
17:29
Speaker 1: reviews are kind of mixed on the chicken, you know,
17:34
Speaker 1: not maybe not as good as the selects is what
17:37
Speaker 1: I'm hearing. But you know, it kind of remains to
17:41
Speaker 1: be seen. But we're we're confident in McDonald's and that
17:45
Speaker 1: stock has done really well this year, you know, And
17:47
Speaker 1: a big part of it is because it's seen as
17:49
Speaker 1: a defensive name. It's actually included in some consumer staples
17:53
Speaker 1: ETFs because you know, when times are tough, McDonald's tends
17:57
Speaker 1: to outperform because you know, they can all for price
18:00
Speaker 1: points center just lower than everybody else. And so you know,
18:03
Speaker 1: when McDonald's is on their game, they really make it
18:06
Speaker 1: tough for all of the other quick service burger competitors
18:08
Speaker 1: like Jack in the Box struggling mightily and Wendy's.
18:12
Speaker 2: Yeah, and a big part of the equation right now
18:14
Speaker 2: and has been, especially since the downturn sort of started
18:16
Speaker 2: last year, is a question of value, right, and that
18:19
Speaker 2: is something that McDonald seems to have struggled with or
18:22
Speaker 2: the past few quarters, just that perception of people thinking
18:25
Speaker 2: that he was too expensive. So you know, when you
18:28
Speaker 2: have these new products, something like a snack wrap, which
18:30
Speaker 2: I believe is starting to you know, the starting price
18:33
Speaker 2: is something like two ninety nine or something like, how
18:36
Speaker 2: much does that help that perception of value? Like is
18:39
Speaker 2: McDonald's actually making headway in changing that perception that you
18:44
Speaker 2: know people had that the big mag is like eighteen bucks,
18:47
Speaker 2: even though we only we know that was only like
18:48
Speaker 2: one rest stop in New Jersey or something like that.
18:52
Speaker 1: Yeah, yeah, No, I think it's very important. And McDonald's
18:56
Speaker 1: knows what they're doing right, Like, they're very good. They've
18:59
Speaker 1: had their shoes. But everyone, you know, especially with equal
19:02
Speaker 1: I in pricing last year, everyone got ahead of themselves
19:05
Speaker 1: with pricing. You know, we think that having items on
19:11
Speaker 1: the menu at that very accessible two ninety nine price
19:14
Speaker 1: point is extremely important, especially now since they've made some
19:17
Speaker 1: changes to the to the value menu, right, and so
19:21
Speaker 1: you need you know, it's about a third of their business.
19:24
Speaker 1: Is a third of their transactions, I should say, are
19:28
Speaker 1: by low income consumers. So when you have items on
19:31
Speaker 1: the menu that are accessible to them, that's very important
19:35
Speaker 1: to driving your business. Yeah, so I think it's a
19:39
Speaker 1: great move. I think it's it's a necessary move. I
19:42
Speaker 1: think that should pay dividends for them. You know, everybody's
19:46
Speaker 1: kind of implementing a Barbelle strategy where you're, you know,
19:50
Speaker 1: try to get the low income consumer in with these
19:52
Speaker 1: attractive price points, up sell them if you can. But
19:56
Speaker 1: then also you need some premium items to sell to
19:59
Speaker 1: your upper middle and higher income consumers.
20:03
Speaker 2: So continuing you know, this idea of value. Now talking
20:07
Speaker 2: more a little bit more about casual dining. Of course,
20:10
Speaker 2: we know that part of the reason that they're performing
20:13
Speaker 2: right now, or that segment is up performing right now,
20:15
Speaker 2: is the lap right, just the comparison to to last year.
20:18
Speaker 2: But let's leave that aside and talk a little bit
20:22
Speaker 2: perhaps more about the fundamentals of that business. You know,
20:25
Speaker 2: you did mention things like operations. Of course, Chili's has
20:28
Speaker 2: been the big turnaround story, but do you do you
20:32
Speaker 2: see that casual Dining has actually fundamentally stepped up its game,
20:37
Speaker 2: right that they're not they're not they're not winning just
20:39
Speaker 2: because they're being compared to weak results last year. And
20:43
Speaker 2: if you do give me a couple of examples of
20:45
Speaker 2: how that has played out.
20:47
Speaker 1: Yeah, you know, there's a lot of chains that are
20:50
Speaker 1: trying to follow that brinker in Chili's blueprint, right, and
20:54
Speaker 1: that all started with improved operations, you know, so we're
21:00
Speaker 1: seeing a lot of emphasis on that. This is like
21:03
Speaker 1: the basic nuts and bolts, the basic blocking and tackling
21:07
Speaker 1: of the restaurant industry. But amazingly, uh, sometimes it tends
21:11
Speaker 1: to fall by the wayside, but when you come out
21:13
Speaker 1: of a really difficult year like they had last year,
21:18
Speaker 1: it really forces chains to to sharpen sharpen up a
21:22
Speaker 1: little bit. And so yeah, we've seen it, and you know,
21:25
Speaker 1: some management changes have helped the right. So Brenker, obviously
21:28
Speaker 1: that new management team under Kevin Hawkman have been amazing,
21:32
Speaker 1: but we're also seeing that at Cracker Bow Crocker Brows
21:34
Speaker 1: results are improving pretty significantly, and we think there's still
21:38
Speaker 1: significant upside via improvements of operations and marketing and implementing
21:44
Speaker 1: strategic pricing. And you know, Texas Roadhouse, they've been now
21:50
Speaker 1: performing for god knows how long. It's amazing, but nobody's
21:54
Speaker 1: had better and the public chains that we cover, nobody
21:58
Speaker 1: except for maybe Wingstop has stronger six year same source sales,
22:02
Speaker 1: So absolutely incredible. And how they how do they do it?
22:06
Speaker 1: They do it with great operations and they do it
22:08
Speaker 1: with a great price point, so their value is seen
22:13
Speaker 1: as very strong. So there their food costs are a
22:16
Speaker 1: lot higher than their competitors because they're giving a lot
22:19
Speaker 1: more food on the plate, but a more discerning customer
22:21
Speaker 1: that we've seen for the last couple of years notices that,
22:25
Speaker 1: and so when they do spend their money, they're going
22:27
Speaker 1: to somewhere where they know they're going to get a
22:28
Speaker 1: great experience. And so Texas Roadhouse hasn't missed the beat
22:32
Speaker 1: cheesecake factory. That company has always been very good with
22:37
Speaker 1: operations and their same source sales where uh, you know, didn't.
22:41
Speaker 1: They didn't knock the cover off the ball in the
22:42
Speaker 1: first quarter, but they outperformed all the quick service chains
22:45
Speaker 1: we cover, right, And so you know, with that kind
22:49
Speaker 1: of pent up demand and better operations and prices that
22:53
Speaker 1: have gone up a lot since the pandemic, but not
22:56
Speaker 1: as much as some of their lower price piers, they're
22:59
Speaker 1: looking and more attractive right now.
23:01
Speaker 2: So does that I mean, that suggests to me that
23:03
Speaker 2: Americans are, you know, cautious, but they're not necessarily super
23:09
Speaker 2: strapped when it comes to their budgets. It's just that
23:11
Speaker 2: when they're choosing to go out and spend money, because
23:14
Speaker 2: you know, when you go to a casual dining chain
23:16
Speaker 2: you do have a higher average check than going to
23:18
Speaker 2: fast food. They just want to really make sure it's
23:21
Speaker 2: worth it, you know. Is is that sort of how
23:23
Speaker 2: you're reading the situation.
23:25
Speaker 1: One hundred percent? One hundred percent, They're they're not looking
23:28
Speaker 1: to waste their money, you know, because it does hurt,
23:31
Speaker 1: right if I go out with my son and I
23:33
Speaker 1: spend whatever I spend between to us seventy dollars and
23:36
Speaker 1: it's a bad experience, you know, that hurts. You know,
23:40
Speaker 1: five six years ago, that experience was probably half the cost.
23:44
Speaker 1: So you know, people are and it's up and down
23:47
Speaker 1: the economic spectrum. People are being more discerning and they
23:51
Speaker 1: want to make sure they're having a good experience when
23:53
Speaker 1: they go out. And you know, I like it because
23:56
Speaker 1: we're seeing a wider spread between habs and have not
24:00
Speaker 1: And to me, it really is more of a stock
24:02
Speaker 1: picking market last year and this year. Then it's been
24:05
Speaker 1: in a very long time.
24:07
Speaker 2: So let's talk a little bit about one segment that
24:09
Speaker 2: we haven't really brought up, which is fast casual, right,
24:12
Speaker 2: I mean, they had been out performing for quite a bit.
24:15
Speaker 2: They're still very you know, standout change so far. Like Cava,
24:19
Speaker 2: you know that keep just kind of define gravity. I know,
24:23
Speaker 2: every time I get on with the CEO, I'm like,
24:25
Speaker 2: what what are you? What is it that you're doing?
24:27
Speaker 2: Like why is this working out better for you than
24:30
Speaker 2: for other people? But at the same time, we've had
24:34
Speaker 2: stories that have started to sort of shift a little bit,
24:36
Speaker 2: like Chipotle, right, I mean, their their first quarter wasn't
24:39
Speaker 2: as good as expected after a really you know, long
24:43
Speaker 2: streak of very good results. So let's talk a little
24:46
Speaker 2: bit about fasual fast casual rit large and then yeah,
24:50
Speaker 2: what's up with Chipotle.
24:51
Speaker 1: Yeah. So, first of all, Chipotle, right, had a management change,
24:54
Speaker 1: and it was kind of concerning that. On the first
24:57
Speaker 1: quarter call, they talked about operational issues, considering CEO Scott
25:03
Speaker 1: boat right, who I supported as as a as a
25:06
Speaker 1: hire there. You know, he was a former chief operating
25:09
Speaker 1: officer and he's been on the job now about a year,
25:12
Speaker 1: and for them to be talking about dirty restaurants and
25:16
Speaker 1: poor hospitality is kind of concerning. That being said, I
25:20
Speaker 1: think they kind of uh sambagged this second quarter. They
25:23
Speaker 1: were like they were the first restaurant company to report,
25:26
Speaker 1: and so they really slashed their guidance and they kind
25:28
Speaker 1: of pushed people towards a negative three in the second quarter,
25:31
Speaker 1: which is a pretty easy I think it you know,
25:35
Speaker 1: sets them up to beat that nicely in the second quarter.
25:39
Speaker 1: But right they're seeing some slippage here, and as the
25:43
Speaker 1: largest fast casual in the United States, that definitely provides opportunity.
25:48
Speaker 1: Part of slippage could also be Kava. Right. I don't
25:51
Speaker 1: cover Kava yet, it's something that we're working on, but
25:56
Speaker 1: it sure seems like Kava is taking a bite us
25:59
Speaker 1: then out of out of their business because it's you know,
26:03
Speaker 1: obviously similar business model Mediterranean is viewed as healthy. They're
26:08
Speaker 1: doing a good job of attracting the younger consumers, which
26:14
Speaker 1: you know, tend to spend a lot on mom and
26:16
Speaker 1: dad's credit card and not really worry too much about it,
26:19
Speaker 1: and so uh, Kava seems to be taking some of
26:22
Speaker 1: that share from them. It just seems like there's a
26:26
Speaker 1: lot of shifts in right now in terms of market share.
26:31
Speaker 1: You know, Wingstop had an amazing year last year, but
26:33
Speaker 1: their sam source sales are gonna rise at a much much,
26:38
Speaker 1: much much lower rate here uh this year, so we're
26:42
Speaker 1: gonna see some significant slowing, not on the development side,
26:45
Speaker 1: but on seam source sales. And then you look at
26:48
Speaker 1: like Shakeshack, who you know, we think is setting up
26:51
Speaker 1: to have a great year, you know, coming into the
26:53
Speaker 1: year with Cracker Barrel and shake Shack, we are a
26:55
Speaker 1: two favorite names. So far, so good. They both rallied
26:58
Speaker 1: one hundred percent since they're April lows, you know, and
27:03
Speaker 1: I think they both have good opportunities in improving operations,
27:07
Speaker 1: improving marketing, getting people in the door, providing them with
27:11
Speaker 1: a good experience, and convincing them to come back. So
27:15
Speaker 1: uh yeah, i'd say, overall fast casual kind of seems
27:19
Speaker 1: like this market share battle. And so as as Chipotle
27:23
Speaker 1: they continue to struggle, it'll continue to create opportunities for
27:27
Speaker 1: their competitors.
27:28
Speaker 2: So what do you think are the odds that Chapote
27:30
Speaker 2: they will get it together?
27:32
Speaker 1: Right?
27:32
Speaker 2: Because they have been doing well, you know before sort
27:36
Speaker 2: of this downturn the degree it's yeah, and it seems
27:39
Speaker 2: like they know what the issues are. So do you
27:43
Speaker 2: think that they'll they'll catch up? Do you think that
27:45
Speaker 2: they'll you know, fix those problems quickly enough?
27:50
Speaker 1: I think odds are they will. So this year, odds
27:53
Speaker 1: were that they were gonna sae sor shells were going
27:57
Speaker 1: to rise at a much slower pace. You know, people
28:01
Speaker 1: didn't think they were going to decline, but the street
28:03
Speaker 1: had expected a deceleration in top line and it was
28:07
Speaker 1: because last year they absolutely crushed it, right, and they've
28:10
Speaker 1: crushed it every year basically since twenty twenty. So, you know,
28:15
Speaker 1: if I'm a betting man, which I am, and obviously
28:18
Speaker 1: in my position, right, like, Chipotle has a great management team, right,
28:23
Speaker 1: they were able to keep their executives. They made a
28:25
Speaker 1: smart move after Brian Nickel left and gave their executive
28:29
Speaker 1: team a lot more money and extended their contracts and
28:32
Speaker 1: gave them reason to stay. And you know, these are
28:35
Speaker 1: the people that helped make Chipotle great over the last
28:39
Speaker 1: you know, decade, the post E Coli era under Brian Nickel,
28:44
Speaker 1: and so you know, you'd have to make you'd have
28:48
Speaker 1: to side with, I think, with that management team and
28:51
Speaker 1: their ability to kind of turn it around.
28:54
Speaker 2: Yeah, I know, that's really interesting, and I think it's
28:56
Speaker 2: just a good reminder too that as I don't know,
29:00
Speaker 2: fuzzy or as gray, sometimes the economic backdrop is right.
29:05
Speaker 2: Because there's a lot of good things happening, there's also
29:07
Speaker 2: a lot of uncertainty. It does seem like brands have
29:11
Speaker 2: a lot of things that they can do right now
29:13
Speaker 2: to actually make sure that they get customers in the door,
29:17
Speaker 2: which you know, I mean Kava for example. You mentioned
29:19
Speaker 2: that is one of the companies you're looking to pick
29:22
Speaker 2: up now. I think they put a lot of emphasis
29:23
Speaker 2: on that, or at least that's how the CEO talks
29:25
Speaker 2: about it. You know, they instead of moving toward environment
29:30
Speaker 2: in which there's not a lot of room in the
29:32
Speaker 2: dining not a lot of space in the dining room,
29:34
Speaker 2: for example, they're like investing more and making sure that
29:37
Speaker 2: the people who do want to take the break half
29:39
Speaker 2: that type of space. I you know, I think they're
29:43
Speaker 2: investing in operations. I've talked to them sometimes about my
29:47
Speaker 2: own experiences at the Chicago Cava, which always seems to
29:50
Speaker 2: be busy and takes a while, and they're like, we're
29:53
Speaker 2: working on it. So it is interesting. But at the
29:56
Speaker 2: same time, they're quite small compared to Chipotle, so I
29:59
Speaker 2: do under you know, just like in their ability to
30:02
Speaker 2: take share. There's just not that many stores around the country.
30:06
Speaker 2: But but you know, speaking of a sort of tool.
30:10
Speaker 1: One, i'd like to add one thing there. Yeah, I
30:12
Speaker 1: don't please. Like I said, I don't cover it yet,
30:14
Speaker 1: but I have heard that in terms of you know,
30:17
Speaker 1: outside of their like mid Atlantic and Northeast stronghold, that
30:21
Speaker 1: that operations and speed of service has been an issue.
30:27
Speaker 2: It's one of the things that I you know, as
30:29
Speaker 2: I mentioned, like I talked, when I talked to Bert
30:30
Speaker 2: schelm on the CEO. I think I've asked him a
30:32
Speaker 2: bunch of times, and he knows that he knows the
30:35
Speaker 2: restaurant that I go to because I actually met him
30:38
Speaker 2: there when they opened it. And he's like, we're working
30:41
Speaker 2: on it, and they're they're they're doing all sorts of
30:43
Speaker 2: changes in terms of labor deployment, and they're testing some
30:47
Speaker 2: stuff related to AI to check I think how quickly
30:50
Speaker 2: the ingredients are gutted depleted, so people don't, you know.
30:53
Speaker 2: So they're doing a lot of stuff there. But you know,
30:56
Speaker 2: I'd be curious to definitely talk to them more more
30:59
Speaker 2: about what's going on there.
31:00
Speaker 1: Yeah, well, it's hard when you're growing interesting, right, It's hard,
31:03
Speaker 1: you know. I'd like, I'm interested in hearing about what
31:07
Speaker 1: percentage of new gms at new stores that come have
31:12
Speaker 1: experience and have come from another store, right, because if
31:15
Speaker 1: the higher keep that percentage, the better you can keep
31:18
Speaker 1: the culture, the better the operations and new restaurants will be.
31:22
Speaker 2: Right, And it probably is tricky when you're entering a
31:25
Speaker 2: whole new market, like for example, I think when they
31:27
Speaker 2: entered Chicago. When they came into Chicago last year, it
31:30
Speaker 2: was her first store here, so you have to hire
31:34
Speaker 2: externally pretty much. So it is it is quite interesting.
31:37
Speaker 2: But I guess another company that obviously has a lot
31:41
Speaker 2: to work on and is working on a lot of
31:43
Speaker 2: things is Starbucks. So yeah, just tell me tell me
31:47
Speaker 2: how you're thinking about Starbucks. You know, it's been uh,
31:51
Speaker 2: you know, the CEO, Brian Nickel, of course, moved officially
31:53
Speaker 2: started September ninth of last year, So in a couple
31:57
Speaker 2: of months he's going to be his his one year anniversary.
32:00
Speaker 2: At this stage, how are you thinking about the turnaround
32:03
Speaker 2: in terms of what he's done so far and what's
32:05
Speaker 2: left on.
32:06
Speaker 1: His to do list? You know, I would say he's
32:08
Speaker 1: making the right moves here in the United States. I
32:11
Speaker 1: I also would say that it's probably take it's taking
32:15
Speaker 1: a little bit longer than I thought, and definitely a
32:18
Speaker 1: little bit longer than the street thought. But you know,
32:23
Speaker 1: to me, you know, I think concentrating on the on
32:27
Speaker 1: the price and the value I think is very smart.
32:30
Speaker 1: Definitely price definitely got ahead of itself at Starbucks. Improving
32:35
Speaker 1: the operations, you know, to me, is so crazy how
32:37
Speaker 1: they didn't have a proper queue for the mobile app
32:41
Speaker 1: and in store orders and absolute head scratcher. You know.
32:46
Speaker 1: So a lot of these moves are taking time, probably
32:49
Speaker 1: taking more time than we thought. But this is a very,
32:53
Speaker 1: very large company, and as I like to say, he
32:56
Speaker 1: can't turn around an aircraft carrier on a dime. But
33:00
Speaker 1: I say, I'd say, what's interesting now is I think
33:02
Speaker 1: the street is becoming more negative on Starbucks. To me,
33:07
Speaker 1: I don't think that's the I don't think that's the
33:11
Speaker 1: right way to look at it, you know. I think
33:14
Speaker 1: if anyone can turn it around, it's Brian Nickel. They
33:18
Speaker 1: still have a massive footprint, and yeah, there's some competition
33:21
Speaker 1: from places like Dutch bro Dutch Bros. And Seven Brew,
33:25
Speaker 1: but that's like such a fraction they you know, they
33:28
Speaker 1: they have a fraction of the stores of Starbucks. And
33:31
Speaker 1: so Starbucks is an amazing brand. I don't I don't
33:34
Speaker 1: think it's dead here in America.
33:36
Speaker 2: You know.
33:36
Speaker 1: My bigger concerns are, you know, a what's gonna happen
33:40
Speaker 1: internationally that's going to be a tougher lift in general.
33:45
Speaker 1: I know they're you know, Middle East in some countries
33:48
Speaker 1: with large Muslim populations, including Malaysia, are doing better this
33:54
Speaker 1: year because last year we're so they were the sales
33:56
Speaker 1: were so abysmal, right, but they're coming back this year,
33:58
Speaker 1: but they're still not where they were a couple of
34:00
Speaker 1: years ago. So they have that issue. They have all
34:03
Speaker 1: of the low price competition in China, that's an issue.
34:06
Speaker 1: Obviously they're looking to sell part of that business. We'll
34:10
Speaker 1: see how much they decide to sell. You know, so
34:14
Speaker 1: international is more complicated. It's gonna be more difficult, and
34:18
Speaker 1: it's not Brian Nickel doesn't have a ton of experience
34:21
Speaker 1: on the international side. That being said, you know, his
34:24
Speaker 1: job as CEO is to hire really good people and
34:27
Speaker 1: motivate them to do a good job. And you know,
34:30
Speaker 1: so I think he's made some of the right moves
34:33
Speaker 1: in terms of the people running their international business, right
34:38
Speaker 1: and we'll see how long that takes. But that's gonna
34:40
Speaker 1: be a tougher lift. And then the other concern is tariffs, right,
34:43
Speaker 1: like what happens if Brazil, you know, with the Brazil
34:47
Speaker 1: tariffs and what kind of impact is that going to
34:50
Speaker 1: have on Starbucks? As well as the fact that you know,
34:54
Speaker 1: I keep saying we're in a commodity bull market and
34:57
Speaker 1: so coffee prices have gone up quite significantly over the
35:00
Speaker 1: last year and you know they can continue for quite
35:03
Speaker 1: some time. So there's some headwinds for.
35:08
Speaker 2: Sure, there fun times for Brian and his team. I
35:13
Speaker 2: guess last question about Starbucks how long does he get
35:15
Speaker 2: because as you mentioned, it seems like the street has
35:18
Speaker 2: been turning a little bit more negative. But at the
35:21
Speaker 2: same time as you were saying, this is going to
35:23
Speaker 2: be a long, probably long road, So you know, how
35:28
Speaker 2: long a leash does he get?
35:30
Speaker 1: Listen, I would give him, you know, obviously it would
35:34
Speaker 1: depend on I don't know what's going on behind closed
35:36
Speaker 1: doors and things of that nature. But in terms of
35:39
Speaker 1: who they hired to turn that thing around, I couldn't
35:41
Speaker 1: think of someone better. So to me, he deserves an
35:44
Speaker 1: extremely long leash. There's nobody I would I would have
35:49
Speaker 1: picked ahead of him.
35:51
Speaker 2: Makes sense. I mean, I hear that a lot. That's
35:55
Speaker 2: kind of like what I what I hear when I
35:56
Speaker 2: talk to people as well. A couple more questions, perhaps
36:00
Speaker 2: a little bit broader about the industry. So, oh, Maha
36:03
Speaker 2: thing right, make America healthy again. There's been a lot
36:06
Speaker 2: of conversation more around packaged food companies, I guess because
36:10
Speaker 2: so much of the conversation so far has been oh,
36:13
Speaker 2: one hand, fragmented, you know, very based on like state
36:16
Speaker 2: legislation of movements, and then you know, very focused on
36:18
Speaker 2: things like dies and stuff like that. But how are
36:21
Speaker 2: you thinking about Maha and what he means for the
36:25
Speaker 2: restaurant industry.
36:27
Speaker 1: Yeah, I'm not. I don't think it's going to be
36:29
Speaker 1: that much of an issue because a lot of the
36:32
Speaker 1: things that MAHA are doing or just kind of catching
36:35
Speaker 1: up to standards that we have that they have in
36:37
Speaker 1: Europe and Canada, right, and so my international companies figure
36:41
Speaker 1: out how to how to do it in these other countries. Right.
36:44
Speaker 1: So I think it's going to be a bigger lift
36:46
Speaker 1: for the food service companies that are making the sauces
36:51
Speaker 1: and you know, things of that nature. So I'm not
36:55
Speaker 1: too worried about MAHA. I would say GLP ones are
36:59
Speaker 1: probably still more of a concern in the restaurant space,
37:03
Speaker 1: you know. I you know, as they become cheaper, eventually
37:08
Speaker 1: they'll come out with a pill form and they'll be
37:11
Speaker 1: you know, more common, and so obviously that causes some
37:15
Speaker 1: concern for companies that sell unhealthy food, you know, think
37:21
Speaker 1: the Burger QSRs and stuff like that. But still, I mean,
37:28
Speaker 1: I even the estimates on the really high side don't
37:33
Speaker 1: make me too worried. I mean, I think it's going
37:35
Speaker 1: to cut into alcohol sales. You know, alcohol has been
37:39
Speaker 1: declining now for some time as well, though, because young,
37:42
Speaker 1: younger generations are not really as interested in it, you know.
37:46
Speaker 1: And then we've also seen, you know, the legalization of
37:48
Speaker 1: cannabis kind of hurt alcohol sales a bit too as well.
37:53
Speaker 1: So yeah, I would say fatty foods and alcohol sales
37:58
Speaker 1: are two things that they're looking at. But you know,
38:02
Speaker 1: over time, portion sizes with inflation just continue to shrink,
38:06
Speaker 1: and so you know, we're gonna see more of that.
38:10
Speaker 1: Unfortunately for people like me that have a big appetite that.
38:13
Speaker 2: It's such an interesting dynamic, right because on the one side,
38:17
Speaker 2: portion sizes keep getting smaller, But then we go back
38:20
Speaker 2: to the start, to this example of Texas Roadhouse of
38:24
Speaker 2: them putting more food on the plate or at least
38:27
Speaker 2: a generous portion, and then they're doing well. So it's
38:31
Speaker 2: almost like as a restaurant, you're just kind of looking
38:34
Speaker 2: at what's my bet here? Is it that people are
38:38
Speaker 2: gonna eat it less so I'm gonna go that route?
38:40
Speaker 2: Or is it that Americans buy and large are actually
38:43
Speaker 2: one want bigger portions, because I mean you can kind
38:46
Speaker 2: of have both on one menu, but it does seem
38:49
Speaker 2: like at some point you kind of have to pick
38:51
Speaker 2: a strategy.
38:52
Speaker 1: Yeah, yeah, yeah, well I think it's it's you know,
38:55
Speaker 1: having some flexibility on your menu. You know, She's Cake
39:00
Speaker 1: Factory is known for their for their big, big portions,
39:05
Speaker 1: you know, and they but they dabbled in that skinny
39:06
Speaker 1: delicious menu for a while. You know, who knows, maybe
39:09
Speaker 1: those menus will kind of kind of come back, but
39:12
Speaker 1: it's it kind of it's going to vary by chain,
39:14
Speaker 1: I think, and it's gonna, you know, it's going to
39:16
Speaker 1: be important to maintain you know, your brand feel and
39:23
Speaker 1: what you know, what it means. And if it's Cheesecake
39:26
Speaker 1: Factory providing really big portions, you know, by them shrinking
39:30
Speaker 1: the size is not going to help, you know, in
39:34
Speaker 1: a place like Chili's. Honestly, I'd have to imagine there's
39:38
Speaker 1: not a large percentage of their customer base that GLP ones, right,
39:42
Speaker 1: And so yeah, me staying true to who you are
39:46
Speaker 1: I think is going to be critical. You know, I
39:49
Speaker 1: don't think McDonald's should be, you know, creating this massive
39:54
Speaker 1: like make your own salad menu or anything of that nature,
39:58
Speaker 1: getting rid of apple pies and the ice cream. But
40:04
Speaker 1: you know, well we'll see it's gonna it's gonna be interesting.
40:06
Speaker 1: But I think chains need to need to stay true
40:09
Speaker 1: to what they are.
40:11
Speaker 2: Yeah, I think that's something that for example, Brian Nichol
40:14
Speaker 2: has talked a lot about as he takes over to Starbucks.
40:16
Speaker 2: It's just like, what is it that people really liked
40:18
Speaker 2: about this company and how can we really amp it up?
40:22
Speaker 2: So much going on in the restaurant space keeping both
40:25
Speaker 2: of us quite busy, But I've asked you a bunch
40:28
Speaker 2: of questions. I just wanted to close just by asking
40:31
Speaker 2: you if there's anything else that is top of mind
40:34
Speaker 2: for you, or you know, anything that you found. I
40:36
Speaker 2: don't all surprising unexpected about how things have gone this
40:39
Speaker 2: year so far.
40:40
Speaker 1: Oh well, yeah, I probably the tariff thing was really interesting,
40:49
Speaker 1: I pro you know, looking back, I wish I put
40:51
Speaker 1: more weight on it. But I think the restaurants are
40:55
Speaker 1: in a good place. I think they're in a better
40:57
Speaker 1: place than most because you know, food is sourced locally.
41:02
Speaker 1: Even for these international chains, food is sourced locally. They
41:05
Speaker 1: all have individual supply chains in the countries where they operate,
41:09
Speaker 1: don't have a ton of exposure to tariffs, and so
41:13
Speaker 1: you know, whatever it pans out to be, you know,
41:16
Speaker 1: just weighted average of fifteen to twenty percent, whatever it
41:18
Speaker 1: might be, you know, customers are going to see that
41:21
Speaker 1: in retail, but they're not going to see it at restaurants.
41:24
Speaker 1: And you know, people still have jobs and still have
41:27
Speaker 1: our time, are pressed for time, and still have to
41:29
Speaker 1: eat and often want to eat out because they're pressed
41:32
Speaker 1: for time, and so, you know, I think they were
41:35
Speaker 1: kind of the restaurant's stocks were thrown out. You know,
41:38
Speaker 1: the baby was thrown out with the bath water back
41:42
Speaker 1: in April, and you know, I think that's why we've
41:44
Speaker 1: seen the restaurant chains outperform now outperformed the S and
41:50
Speaker 1: P since. So yeah, I mean that whole situation was
41:54
Speaker 1: probably the most surprising. There was also some interesting things
41:59
Speaker 1: happening in early April where there was like de risking
42:02
Speaker 1: and some of the worst the change with the worst
42:06
Speaker 1: same soour sales and margin compression were up the most
42:09
Speaker 1: on some days because everyone was short them and getting squeezed.
42:12
Speaker 1: And on the same day, you know, the rock stars
42:14
Speaker 1: like Brinker were down big, and so that was like
42:18
Speaker 1: a really interesting, exciting period. I don't know if I
42:22
Speaker 1: could take you know, the stress of it on an
42:26
Speaker 1: annual basis, but that was a really really cool, interesting
42:31
Speaker 1: time to be working in the markets. And then the
42:33
Speaker 1: restaurant base for sure.
42:35
Speaker 2: Definitely, so there's a lot to keep tabs on. So
42:39
Speaker 2: I will keep bugging you with questions and then hopefully we'll.
42:42
Speaker 1: Do this again. Oh hell yeah, you're amazing. Thanks for
42:45
Speaker 1: doing this. We'll definitely do this again. And I just
42:49
Speaker 1: want to thank the audience for tuning in. If you
42:51
Speaker 1: like to learn more about Diana's work, you can visit
42:56
Speaker 1: her on LinkedIn. Right, you have a pretty big test
42:59
Speaker 1: presence any other.
43:00
Speaker 2: Yeah, I always post all my stories on LinkedIn, so
43:03
Speaker 2: feel free to add me and leave comments. I love
43:07
Speaker 2: it when people tell me what they think about what's
43:09
Speaker 2: happening in the restaurant space. It often generates a lot
43:12
Speaker 2: of questions, and then I go ask the companies.
43:14
Speaker 1: So you do a great job. Everyone from the second
43:18
Speaker 1: all of my friends in the restaurant industry met you,
43:21
Speaker 1: they were very impressed. So keep up the good work. Audiences. Ow,
43:26
Speaker 1: you got it an audience. If you liked the discussion,
43:29
Speaker 1: please share it with your friends and colleagues. Check back
43:32
Speaker 1: soon for an interview with Clay Dover, the CEO of
43:35
Speaker 1: Velvet Taco,