Latest / Choppin’ It Up by Bloomberg Intelligence / Fast Food Lost Its Value, Convenience Advantages

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Fast Food Lost Its Value, Convenience Advantages · Choppin’ It Up by Bloomberg Intelligence

0:22
Speaker 1: Welcome to Chopping It Up.
0:23
Speaker 2: I'm your host, Mike Hamlon, the senior restaurant and food
0:26
Speaker 2: Service analyst at Bloomberg Intelligence. Our Research and that a
0:29
Speaker 2: bi's five hundred analysts around the globe can be found
0:32
Speaker 2: exclusively on the Bloomberg terminal. Today, we're joined by Tom Wagner,
0:36
Speaker 2: founder and partner at Restaurant Insight Monitor. The company is
0:41
Speaker 2: a research restaurant research platform that tracks attitudinal and visitation
0:46
Speaker 2: trends for over forty national brands across segments.
0:50
Speaker 1: Thanks for doing this, Tom, Well, thanks for having me. Mike.
0:53
Speaker 1: You're famous man. I just read about you in Greg
0:56
Speaker 1: Creed's book Red Marketing.
0:59
Speaker 3: Yeah. Greg and I I worked together for many, many years.
1:01
Speaker 3: He was my direct boss when he was chief marketing
1:04
Speaker 3: officer of Taco Bell and we had a blast together
1:08
Speaker 3: and we made a lot of money. The company really
1:12
Speaker 3: did well under Greg's leadership.
1:14
Speaker 1: Yeah, he's a cool guy. What roles did you fill.
1:17
Speaker 3: Over my Well, I was there twenty four years, So
1:20
Speaker 3: it started in finance, financial planning, capital planning. I worked
1:24
Speaker 3: in development for a while, then I got into marketing research,
1:28
Speaker 3: then ultimately built the entire sales analysis function within the
1:33
Speaker 3: company and that led into ultimately taking over consumer insights,
1:38
Speaker 3: and that I took over that position, I want to say,
1:41
Speaker 3: in two thousand and one, and I was VP of
1:44
Speaker 3: Insights there for and brand planning for thirteen years. It
1:51
Speaker 3: was quite a ride. Taco Bell is a super fun company.
1:55
Speaker 3: You know, the culture there was very empowering and we
1:59
Speaker 3: broke a lot of rules in the restaurant space and
2:02
Speaker 3: had a blast doing it.
2:03
Speaker 1: Yeah, it sounds like fun.
2:05
Speaker 3: Man.
2:05
Speaker 1: What are you most proud of during your ten tenure?
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Speaker 3: I think a lot of the strap planning work that
2:11
Speaker 3: I did and really as we became very consumer focused
2:17
Speaker 3: as an organization, And probably the thing I'm most proud
2:21
Speaker 3: of there was really the team I built and really
2:24
Speaker 3: being able to move the company towards a needs based
2:29
Speaker 3: marketing approach. So we really stratified the whole industry into
2:34
Speaker 3: specific need states, you know, things like price value or
2:37
Speaker 3: abundant value or you know, a big taste something like
2:41
Speaker 3: a Dorito's Locos tacos and things like that. And by
2:44
Speaker 3: stratifying the consumer need states, it really enabled us to
2:48
Speaker 3: do a lot of deep ideation within each need state,
2:52
Speaker 3: which led to, you know, some pretty big innovations that
2:55
Speaker 3: really delivered against specific consumer needs, and it really we
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Speaker 3: effectively drove actions ten years in a row, with the
3:02
Speaker 3: exception of a e Coali event and a a class
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Speaker 3: action lawsuit which ended up being completely dismissed.
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Speaker 2: Yeah, Taco Bells still rolling, Man, tell me a bit
3:14
Speaker 2: about what you're doing at Restaurant Insight Monitor.
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Speaker 3: So we started this. We started planning about a year
3:20
Speaker 3: and a half ago, and we really we noticed that
3:24
Speaker 3: even though there was a lot of marketing research firms
3:28
Speaker 3: out there, based on our expertise, we didn't think there
3:31
Speaker 3: was much integration between really what are the consumers needs
3:36
Speaker 3: really around economic duress. You know, we were we were
3:39
Speaker 3: coming out of COVID and we started seeing inflation, and
3:42
Speaker 3: we thought, you know, there's a there's a big opportunity
3:45
Speaker 3: here to take almost like the University of Michigan consumer sentiment,
3:50
Speaker 3: you know, that level of understanding and then bridge that
3:54
Speaker 3: with consumer attitude and visitation. Because I've been around a
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Speaker 3: long time and we've been through peereriods of inflation and recession,
4:02
Speaker 3: and I've seen exactly what happens in the restaurant industry
4:05
Speaker 3: and by brand, we've seen it. So we thought it
4:07
Speaker 3: was a good opportunity to put this platform together. I
4:10
Speaker 3: have two partners, Lynda Ashbrook and maher Minawala. We all
4:14
Speaker 3: worked together at Taco Bell and then between the three
4:17
Speaker 3: of us, we have over one hundred years of restaurant
4:20
Speaker 3: analytic and research experience just amongst the three of us.
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Speaker 3: So we got together and built this platform and it's
4:27
Speaker 3: going really well so far. We've really uncovered a lot
4:29
Speaker 3: of interesting insight for a lot of brands.
4:33
Speaker 1: Great.
4:33
Speaker 2: So, the restaurant industry sure feels like it's in a
4:35
Speaker 2: recession this year.
4:36
Speaker 3: Your thoughts, Uh, Yeah, Like we talk about recession as
4:41
Speaker 3: a country, like the most anticipated recession that hasn't happened,
4:45
Speaker 3: But in reality, we've had a rolling recession, right Like
4:48
Speaker 3: you know, whether it's energy or transportation or package goods
4:52
Speaker 3: or you know, a lot of things have moved around.
4:54
Speaker 3: During COVID. Of course, we consumers were buying products like crazy.
4:58
Speaker 3: You know, the manufacturing side of our economy was booming
5:02
Speaker 3: and the service side was dead. And then once we
5:04
Speaker 3: opened up, the service side took off and the manufacturing
5:07
Speaker 3: side decline. But if you look at the restaurant industry
5:10
Speaker 3: in general, we are in a recession. Transactions are down
5:15
Speaker 3: about twenty percent over the last four years. So that
5:19
Speaker 3: sure sounds like a recession to me, right, So you know,
5:22
Speaker 3: try to disconnect it from the broader you know, recession
5:25
Speaker 3: for the country. We are in a restaurant recession, there's
5:28
Speaker 3: no doubt. And even within fast casual and QSR and
5:32
Speaker 3: casual dining, you know, traffic is down, you know, two
5:36
Speaker 3: to four percent every year and just getting smaller. So
5:40
Speaker 3: that's that's a trend you cannot ignore, right, we are
5:44
Speaker 3: trying to ignore it. And everybody's taken a lot of
5:47
Speaker 3: price and we can talk about why they've been able
5:49
Speaker 3: to do that and why it's going to be much
5:50
Speaker 3: more difficult, but really we are shrinking as a industry
5:57
Speaker 3: in terms of number of visits.
6:01
Speaker 1: So QSR traffics down a lot the last three years.
6:04
Speaker 2: And you know, based on the commentary from the companies
6:06
Speaker 2: we cover, you know linked low income consumers are the
6:09
Speaker 2: biggest issue, right And so is it just the cumulative
6:13
Speaker 2: effective inflation that you mentioned on that cohort.
6:17
Speaker 1: Or are there some deeper issues in QSR?
6:21
Speaker 3: Well, think about you know where you're eating options are, right,
6:26
Speaker 3: So there's kind of a hierarchy in terms of cost.
6:29
Speaker 3: The cheapest way to eat is to eat at home,
6:31
Speaker 3: So that's grocery, all right. The next level is quick
6:35
Speaker 3: service restaurants or fast food, and then above that is
6:38
Speaker 3: fast casual, and then you get into casual dining and
6:42
Speaker 3: then really fine dining things like that. But fast food
6:48
Speaker 3: accounts for about fifty percent of all restaurant revenues. Of
6:53
Speaker 3: all restaurants, about half of all revenue is generated by
6:57
Speaker 3: fast food, and almost three orders of all visits to
7:01
Speaker 3: restaurants are to fast food restaurants. So fast food is
7:05
Speaker 3: this huge segment, and they became that big for two
7:09
Speaker 3: primary reasons, for value and convenience. Those are the primary
7:15
Speaker 3: need states that fast food fulfills. You either don't have
7:20
Speaker 3: the money or you don't have the time. So as
7:23
Speaker 3: the industry grew and ballooned in all these different chains,
7:26
Speaker 3: you know, starting way back when with an W and McDonald's,
7:29
Speaker 3: and you know even Taco Bell back in starting in
7:30
Speaker 3: nineteen sixty two, then burg King and all of these chains,
7:34
Speaker 3: they were fulfilling either a value or a convenience need.
7:39
Speaker 3: So if you look what's going on now is because
7:41
Speaker 3: of all the inflation that has taken place over the
7:44
Speaker 3: last several years, restaurants. Fast food restaurants, they have a
7:49
Speaker 3: lot of labor and they had a lot of ingredient
7:51
Speaker 3: inputs that were inflating at a very high rate. Right,
7:55
Speaker 3: we come out of COVID and there wasn't enough labor,
7:58
Speaker 3: so labor at restaurants and hotels, so hospitality labor got
8:03
Speaker 3: very expensive. And the what did the companies do, Well,
8:07
Speaker 3: they just raised price. Right, their input costs or their
8:10
Speaker 3: food costs or way up as well, so they raised
8:13
Speaker 3: raised price even more. So here you have this fast
8:16
Speaker 3: food industry, raised tons of price and yes, transactions were
8:20
Speaker 3: down some, but they were making more money. You know,
8:24
Speaker 3: they were able to basically take those price increases with impunity.
8:28
Speaker 3: Why because consumers were not price sensitive. We come out
8:32
Speaker 3: of COVID, nobody cared. People had lots of money, right,
8:36
Speaker 3: you know, five trillion dollars of stimulus money pays down
8:40
Speaker 3: credit cards, people put it in the bank. They couldn't
8:44
Speaker 3: spend it on you know, things to do, so they
8:47
Speaker 3: bought everything on Amazon, or they bought houses. But they
8:50
Speaker 3: had a lot of excess savings and resources, so they
8:53
Speaker 3: didn't care when people came out of COVID. They just
8:55
Speaker 3: wanted to do what they wanted to do, and if
8:57
Speaker 3: restaurants were a lot more expensive. Sobit I have the
9:01
Speaker 3: money either on my credit card, you know the capacity
9:03
Speaker 3: of my credit card, or have the money in the bank.
9:05
Speaker 3: Well that's no longer the case. If you look at
9:07
Speaker 3: what's happened the COVID money has been depleted for the
9:10
Speaker 3: most part, and credit card debt is at an all
9:13
Speaker 3: time high. It's like almost one point two trillion dollars
9:18
Speaker 3: of credit card debt in this country. And so they've
9:23
Speaker 3: had to cut back and it really hit us January
9:26
Speaker 3: of this year, all of a sudden, you started seeing,
9:29
Speaker 3: you know, businesses were, you know, people are starting to
9:31
Speaker 3: put up negative same store sales growth, which means their
9:34
Speaker 3: transaction growth was significantly lower because everybody still were taking price.
9:39
Speaker 3: So it was a in reality, people just ran out
9:43
Speaker 3: of money and so they were forced to, you know,
9:46
Speaker 3: make cutbacks. And by the way, restaurants are the number
9:50
Speaker 3: one way consumers cut back. If they're cutting back, it's
9:54
Speaker 3: restaurants spending the number one way.
9:57
Speaker 1: Yeah. Yeah, you shared that survey data that you did.
10:00
Speaker 2: With me, and so some of our clients will be
10:03
Speaker 2: familiar with the with the fact that you know, seventy
10:06
Speaker 2: four percent of financially concerned customers cut back at restaurants, right,
10:10
Speaker 2: So that's why we've called it the canary and the
10:13
Speaker 2: coal mine for for quite some some time. Man, Yes, yes,
10:18
Speaker 2: And you know you're talking about value a bit here
10:20
Speaker 2: with QSR. You know, would you say that that, you know,
10:24
Speaker 2: Fast Casual now is kind of got a bigger lead
10:27
Speaker 2: now in terms of value for the money on QSRs.
10:31
Speaker 3: Well, it's interesting if both value and affordability. So the
10:36
Speaker 3: way we ask the question, we start with affordability, right,
10:39
Speaker 3: and we use a you know, we use a scale
10:41
Speaker 3: like a traditional research scale. But affordability has been declining
10:45
Speaker 3: across Fast Casual and QSR since January, so it's been
10:51
Speaker 3: going down and it's even affordabilities lower in Q three
10:54
Speaker 3: than it was in Q two across almost every brand,
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Speaker 3: I mean even big brands that are doing fairly well,
11:00
Speaker 3: their affordability and value for the money scores are continuing
11:03
Speaker 3: to deteriorate. But as it released to Fast Casual versus QSR,
11:08
Speaker 3: you have to think about why people were going to QSR.
11:11
Speaker 3: People are going to QSR again for value inconvenience, and
11:15
Speaker 3: QSR is no longer of very good value. I mean,
11:19
Speaker 3: you know, not to pick on McDonald's, but you know
11:22
Speaker 3: a basic you know, big mac combo meal. It's like,
11:26
Speaker 3: you know, between twelve and fourteen dollars. That's a lot.
11:31
Speaker 3: And the real issue is the cost of sales. The
11:36
Speaker 3: average cost of sales across fast food restaurants today is
11:41
Speaker 3: somewhere in the neighborhood of you know, twenty three to
11:44
Speaker 3: twenty seven percent, which means if I'm a consumer and
11:48
Speaker 3: I go and spend a dollar at a fast food restaurant,
11:51
Speaker 3: I'm only getting about twenty five cents worth of food. Right,
11:54
Speaker 3: And I remember I was going to fast food. I
11:57
Speaker 3: built it into my routine because I got a lot
12:00
Speaker 3: of food for the money. Right. It may not as
12:02
Speaker 3: been as good as fast casual or casual dining, but
12:06
Speaker 3: it was a lot cheaper and it was a lot faster. Right. Well,
12:09
Speaker 3: it's not very cheap anymore. So if you think about
12:12
Speaker 3: fast casual, it might be a little bit more expensive
12:15
Speaker 3: in terms of price point, and by the way, that's
12:17
Speaker 3: not always the case, but it might be a little
12:19
Speaker 3: higher in terms of price point. But consumers will say,
12:22
Speaker 3: they do the math. It's what you get for what
12:25
Speaker 3: you pay. So while it might cost just a little
12:27
Speaker 3: bit more, their perception of quality is much higher in
12:31
Speaker 3: fast casual, and the service experience is generally better fast casual.
12:36
Speaker 3: So again, what you get for what you pay. And
12:38
Speaker 3: now all of a sudden, fast food no longer has
12:40
Speaker 3: an advantage over a fast casual, right, So there's that
12:44
Speaker 3: value dynamic. Now let's think about something else. Let's talk
12:48
Speaker 3: about the convenience side of things. The number one asset
12:53
Speaker 3: that fast food restaurants typically have is a drive through.
12:58
Speaker 3: Drive through is the ultimate in America culture, where everybody's
13:02
Speaker 3: in their car driving around, going to work, you know,
13:05
Speaker 3: driving on vacation, doing errands. Having a drive through was
13:09
Speaker 3: a very important asset still is still is an important asset.
13:13
Speaker 3: But now people have mobile apps and mobile apps. You know,
13:18
Speaker 3: you can order from any restaurant and they will bring
13:21
Speaker 3: the food to you. So if you think about like
13:24
Speaker 3: this perfect storm of you know, post COVID, now a
13:28
Speaker 3: lot of people are still working from their homes, they
13:30
Speaker 3: are not driving as many miles, So all of a sudden,
13:33
Speaker 3: you have, you know, the mobile device. That secular trend
13:37
Speaker 3: of mobile is kind of in some ways neutralizing the
13:42
Speaker 3: advantage that traditional fast food restaurants had over fast casual.
13:48
Speaker 3: It makes sense, and you can access value through those
13:52
Speaker 3: mobile apps as well.
13:54
Speaker 1: Yeah, so drive through traffic's been down pretty big, right.
13:58
Speaker 3: Yeah. If you look at a New Management Solutions RMS,
14:01
Speaker 3: they publish a newsletter and they're their data is showing
14:05
Speaker 3: that within QSR that drive through traffic is down double
14:10
Speaker 3: digits this year and double digits last year. So the
14:15
Speaker 3: even though traffic is down, you know, call it two
14:17
Speaker 3: to three percent in fast food right now, they're drive
14:20
Speaker 3: through traffics down ten. So if you're a if you're
14:23
Speaker 3: a fast food concept and you're writing a strat plan
14:26
Speaker 3: for a fast food company, and you show that you
14:30
Speaker 3: are materially losing value and you're losing business in the
14:35
Speaker 3: drive through, which I then interpret as we're losing our
14:39
Speaker 3: convenience advantage, value and convenience. That's not a good trend
14:44
Speaker 3: for that that segment.
14:45
Speaker 1: Yeah.
14:46
Speaker 2: And a couple of things that spoke out both in
14:47
Speaker 2: the survey you sent to me and then also when
14:50
Speaker 2: we spoke is that you know, gen Z is less
14:53
Speaker 2: interested in cars, and car culture used to be such
14:56
Speaker 2: a bigger part of American culture, but you know, not
15:00
Speaker 2: really the case anymore.
15:02
Speaker 3: Yeah, that's right. I mean, I don't know about you,
15:03
Speaker 3: but I got my driver's license the day I turned sixteen.
15:06
Speaker 3: I mean the day I turned sixteen. It was like
15:10
Speaker 3: that was the right of passage, right, that was your
15:13
Speaker 3: you know, your venue to freedom and independence. It was
15:16
Speaker 3: a driver's license. And you know, that's it. You're out
15:18
Speaker 3: the door, and you know, all right, mom and dad,
15:21
Speaker 3: I'll see you when I get home whenever. Right, And
15:23
Speaker 3: so that was a really important you know, link to
15:28
Speaker 3: our social interactions, right cars, and then of course eating
15:33
Speaker 3: as well, it always is. Eating has always been part
15:35
Speaker 3: of you know, how we socialize as humans. But but
15:39
Speaker 3: if you're if you're a Gen Z and even millennials
15:42
Speaker 3: to some extent, many were not in a big hurry
15:46
Speaker 3: to get their driver's license. And look at with with
15:49
Speaker 3: you know, the Internet, which didn't exist when I was
15:51
Speaker 3: a kid, but you know social media platforms that that
15:54
Speaker 3: you get a lot of interaction there, you get a
15:56
Speaker 3: lot of self worth there, things that were not important.
16:00
Speaker 3: One the extras and the Boomers were really young, but
16:03
Speaker 3: the Millennials and the Gen zs, it really is about
16:06
Speaker 3: social media and being an influencer and creating content. You
16:10
Speaker 3: don't really need a car. Right, If you don't need
16:13
Speaker 3: a car, then you're not using to drive through. So
16:15
Speaker 3: generationally it is also not a good trend for the
16:19
Speaker 3: fast food segment overall. It really helps, i said, neutralize
16:24
Speaker 3: the advantage that fast food had over fast casual. And
16:28
Speaker 3: if you look at some of the really popular brands
16:31
Speaker 3: with gen Z right now and millennials, they're the Chipotles,
16:35
Speaker 3: they are the wingstops, raising cane Zaxby's brands like that
16:40
Speaker 3: which are doing very well, and even Starbucks to some extent,
16:45
Speaker 3: and we could talk about that a little bit later,
16:47
Speaker 3: but they also have a relatively younger consumer base, very
16:50
Speaker 3: close to Taco Bells actually, but not as young as
16:53
Speaker 3: Chipotle does. But they have a young consumer base. And
16:57
Speaker 3: again think about the historically how wrong the Starbucks mobile
17:01
Speaker 3: app is and their ability to bring in younger users,
17:04
Speaker 3: especially over the last several years.
17:06
Speaker 1: Yeah, it's interesting. Interesting, man, It's like the pandemic, give
17:09
Speaker 1: it and then.
17:10
Speaker 2: Take it away for QSR because right, because it's like
17:13
Speaker 2: if you had to drive through, you were still you
17:15
Speaker 2: were you killed it coming out of the pandemic, right,
17:18
Speaker 2: But then at the same time, a lot of these
17:20
Speaker 2: consumers were taught to use the apps and order online
17:25
Speaker 2: and just have the food delivered to them. And so
17:28
Speaker 2: you know, that advantage just gone away pretty quick, man.
17:31
Speaker 2: You got this industry moves fast man, Right.
17:34
Speaker 3: You know there's a there's an old adage or insight.
17:37
Speaker 3: Actually it was from the former chairman of PEPSI used
17:42
Speaker 3: to say this a lot. He'd say, average is awful. Right.
17:46
Speaker 3: Average is awful not only because it doesn't push you
17:49
Speaker 3: to attain high levels, but in the world of consumer insights,
17:53
Speaker 3: average is awful because it hides what's really going on. Right.
17:57
Speaker 3: So if you look at the publicly traded restaurant concepts
18:01
Speaker 3: out there over the last few years, they're killing it, right,
18:04
Speaker 3: they're killing it. Yeah, traffic's been down, but their revenues
18:08
Speaker 3: are hitting all time highs. Their unit level economics are unbelievable.
18:12
Speaker 3: Their franchisees for most of the major chains, we're making
18:16
Speaker 3: more money than they've ever made. Right. They got their
18:19
Speaker 3: financing at historically low rates, so they could lever up
18:22
Speaker 3: like crazy and expand, right, and the average performance out
18:27
Speaker 3: there is hiding what's really going on. And what I
18:30
Speaker 3: mean by that is we're seeing earnings per share those
18:33
Speaker 3: things moving up, margins going up. But that's all being
18:37
Speaker 3: masked because consumers were not price sensitive. They were artificially
18:43
Speaker 3: demand was artificially high given the price level of what's
18:46
Speaker 3: going out there. Now we're starting to see a reality
18:50
Speaker 3: of it, especially starting in January of twenty twenty four,
18:53
Speaker 3: traffic going down. Companies posting very very low digit single
18:59
Speaker 3: same store saying or negative same store sales, which means
19:02
Speaker 3: their traffic is meaningfully lower. The need to start pushing
19:06
Speaker 3: on you know, value, you know, and we're seeing that obviously, right,
19:10
Speaker 3: you know McDonald's doing their five dollars meal deals. We
19:12
Speaker 3: can talk about you know, my outlook on that, because
19:15
Speaker 3: I'm kind of bearish on it actually, But you know,
19:19
Speaker 3: this is really the pivot point twenty twenty four. You know,
19:23
Speaker 3: all the things that were masked in twenty twenty really
19:28
Speaker 3: twenty one, twenty two, and twenty three are really now
19:31
Speaker 3: coming to a pivot point in twenty twenty four. And
19:34
Speaker 3: I believe in twenty twenty five will be a difficult
19:38
Speaker 3: year in the restaurant space for many brands.
19:41
Speaker 2: Okay, so why don't you talk about McDonald's, right, like
19:44
Speaker 2: the five dollars meal deals. It seems like they're trying
19:47
Speaker 2: to re establish their position on value. They've always, you know,
19:51
Speaker 2: been a great provider of value due to their scale.
19:55
Speaker 2: You know, what's your view on the five dollars meal
19:57
Speaker 2: deal and just your view on McDonald's.
20:01
Speaker 3: Sure, well, the five dollars meal deal is, you know,
20:04
Speaker 3: I don't know exactly how they chose the specifics. I
20:07
Speaker 3: know this much, Right, in order to reduce the break
20:10
Speaker 3: even associated with offering a discounted product, right, they had
20:15
Speaker 3: to include items that are not super high mix sales mix.
20:18
Speaker 3: In other words, the big Max not in there. At a
20:20
Speaker 3: quarter pine of with cheese isn't in there. Their most
20:22
Speaker 3: popular chicken sandwiches are not in there. So it's kind
20:26
Speaker 3: of a it's a it's more like a nod to
20:31
Speaker 3: value as opposed to really resolving the value problem that
20:35
Speaker 3: McDonald's has. McDonald's has a significant value for the money problem.
20:39
Speaker 3: Significant Like, they took a lot of pricing and again
20:45
Speaker 3: they made a ton of money. But now what's happening
20:48
Speaker 3: is their visitation is going down. So doing a five
20:52
Speaker 3: dollars meal deal is to me a you know, it's
20:56
Speaker 3: what they want to do and what they need to
20:58
Speaker 3: do are two different things. They want to for value
21:00
Speaker 3: but not have any impact of margins. But that's not
21:04
Speaker 3: what they need to do. What they need to do
21:06
Speaker 3: is give more food for the money their cost of sales.
21:09
Speaker 3: And again I don't know the specifics for that brand. Again,
21:12
Speaker 3: McDonald's a great brand. I'm not in any way taking
21:14
Speaker 3: away the profitability or the you know how big an
21:17
Speaker 3: Americana it is, but their cost of sales is too low.
21:21
Speaker 3: Consumers want more food for the money, right, So the
21:25
Speaker 3: five dollars meal deal is a nod now our insight platform,
21:30
Speaker 3: we saw that in Q two that McDonald's three month reach,
21:37
Speaker 3: so the percent of consumers that have been in McDonald's
21:39
Speaker 3: in the past three months, we saw that go up
21:43
Speaker 3: in Q Q. Yeah, Q two versus Q two year
21:50
Speaker 3: ago just a little bit, but now we're seeing it
21:52
Speaker 3: lower than prior year, right, And we're looking at their
21:55
Speaker 3: affordability and value for the money scores and they have
21:59
Speaker 3: not materially changed that five dollars meal deal did not
22:02
Speaker 3: materially change consumer's net perceptions of affordability or value for McDonald's, right.
22:08
Speaker 3: So that brings me to the next point, which is
22:11
Speaker 3: how else do brands offer value out there? And that
22:15
Speaker 3: is really through their mobile app. So you can if
22:18
Speaker 3: you download the McDonald's mobile app, you can get some
22:20
Speaker 3: pretty decent deals on it. Right, you buy a six
22:23
Speaker 3: piece McNugget, you get one free. All right, Yeah, it's
22:25
Speaker 3: you know, it's five and a quarter, but you get
22:29
Speaker 3: twelve for five and a quarter, So that's that's not
22:30
Speaker 3: a bad deal. Right. Here's the problem. McDonald's largest age
22:35
Speaker 3: cohort is over forty five, and by the way and growing,
22:41
Speaker 3: the percentage of past month McDonald users that are over
22:44
Speaker 3: forty five is significantly higher than the percentage of their
22:48
Speaker 3: past month users that are under forty five. So let
22:51
Speaker 3: me translate, McDonald's is more about gen X and boomers
22:56
Speaker 3: than they are about Gen Z and millennials. Right, and
23:00
Speaker 3: guess who uses mobile apps? Gen Z and millennials at
23:05
Speaker 3: a significantly higher rate than Gen X and boomers significantly higher.
23:11
Speaker 3: So McDonald's largest cohort is gen X and boomers. Right.
23:17
Speaker 3: They aren't really getting access to value to the mobile
23:21
Speaker 3: app because they don't use it as much. So again,
23:25
Speaker 3: I think what McDonald's is going to need to do
23:28
Speaker 3: is they're going to have to make a material investment
23:33
Speaker 3: in their cost of sales in order to legitimately bring
23:36
Speaker 3: back transparent and accessible value to the masses because they
23:42
Speaker 3: are not there now. I mean an average a medium
23:46
Speaker 3: French fry in the McDonald's near my house there, they're
23:50
Speaker 3: almost five dollars for a medium French fry. It's crazy, right,
23:56
Speaker 3: I mean, people just aren't going to do it. I
23:57
Speaker 3: mean they do it, but so really that's my that's
24:01
Speaker 3: my takeaway at McDonald's I think, I think again, going
24:04
Speaker 3: back to that insight, what what their operators need to
24:07
Speaker 3: do and what they want to do are two different things.
24:10
Speaker 3: They need to give more food for the money to
24:13
Speaker 3: the masses in an accessible way, and they're trying to
24:16
Speaker 3: get around it by reducing the breake. Even their five
24:19
Speaker 3: dollars meal deal is their second tier sandwiches, right MC
24:23
Speaker 3: chicken or a mcdoubell, which is not the ones that
24:26
Speaker 3: people really want. I mean, they'll lead them right, and
24:28
Speaker 3: then they get you know, their small fry and small
24:32
Speaker 3: drink and if you look at their combos, that's not
24:34
Speaker 3: what they sell. So there is a there is a
24:36
Speaker 3: compromise to get to the five dollar price point.
24:40
Speaker 1: Yeah.
24:41
Speaker 2: No, it's interesting, man, and I don't think a lot
24:43
Speaker 2: of people are talking enough about you know, the cost
24:45
Speaker 2: of sales being too low. I think you know everybody
24:48
Speaker 2: for the longest time was just trying to get that
24:50
Speaker 2: number down. And to your point, you know, pricing has
24:53
Speaker 2: got some of these chains have gotten ahead.
24:55
Speaker 3: Of themselves in pricing that, oh for sure.
24:58
Speaker 1: And so you know we're talking that all.
25:00
Speaker 2: So you know in your survey that you shared with me,
25:03
Speaker 2: you also talked about how gen Z was the one
25:07
Speaker 2: cohort that was least financially concerned, right, and so you
25:11
Speaker 2: kind of want that.
25:12
Speaker 1: You want that group coming in your doors, right.
25:15
Speaker 3: Sure, it's the future.
25:16
Speaker 2: Right.
25:16
Speaker 3: If you're not, if you're a brand and you are
25:18
Speaker 3: not in your strap plan, if you are not materially
25:23
Speaker 3: figuring out how to increase your peal with gen Z,
25:26
Speaker 3: I mean long term, you're going to be in trouble.
25:30
Speaker 3: You know. Like I could talk from my own experience
25:32
Speaker 3: at Taco Bell, right, I mean we got behind millennials
25:36
Speaker 3: really early. I mean two thousand, two thousand and one.
25:39
Speaker 3: We were really pushed. We had this initiative called the
25:42
Speaker 3: Millennial Mindset, right, and the whole executive team right had
25:47
Speaker 3: to get around it, really focus it. I'll tell you
25:50
Speaker 3: a quick story. It's I was on the executive team
25:53
Speaker 3: meet at the executive team meeting, and I asked a question.
25:56
Speaker 3: I used to give the state of the business update
25:58
Speaker 3: every Monday morning, and I remember I asked the executive
26:02
Speaker 3: team a question. I said, guess what happened today? And
26:07
Speaker 3: I said, well, today is a very important day because
26:10
Speaker 3: this was back in I want to say two thousand
26:12
Speaker 3: and one or two, or maybe two thousand and three.
26:15
Speaker 3: I said, today is a day the text messaging surpassed
26:19
Speaker 3: phone calls as the most common way of communicating. And
26:24
Speaker 3: I said, how many of you in this room know
26:27
Speaker 3: how to send a text message? And there are I
26:29
Speaker 3: think we had seven people on the you know, the
26:32
Speaker 3: executive team and like to raise their hand. So, without
26:36
Speaker 3: calling out any names, I said, so, you guys are
26:41
Speaker 3: running this company which is basically a millennial skewing brand.
26:48
Speaker 3: Most of our employees are millennials, and you don't know
26:51
Speaker 3: how to communicate and the number one way that millennials communicate,
26:56
Speaker 3: I said, I am changing my objective this year to
26:59
Speaker 3: one thing, and that's to help to drive a millennial
27:02
Speaker 3: mindset through this entire corporate office, which we call the
27:06
Speaker 3: Restaurant Sports Center, as well as you know, the broader organization,
27:10
Speaker 3: and and we did lots of things to make that happen,
27:12
Speaker 3: and the whole, the whole you know, corporate office got
27:16
Speaker 3: behind it, and we really did well. I mean, Taco
27:18
Speaker 3: Bell was very early in the social media, very early.
27:21
Speaker 3: We you know, they saw the power of it, and
27:23
Speaker 3: we had lots of young, hot shot marketing guys that
27:26
Speaker 3: are you know, one or two years out of graduate
27:28
Speaker 3: school MBAs, and those guys really got behind it. And
27:32
Speaker 3: again a lot of those people are leading some big
27:34
Speaker 3: organizations now as marketers.
27:36
Speaker 1: Yeah, and doing well.
27:37
Speaker 3: Man.
27:38
Speaker 1: We've had some of them on the podcast.
27:40
Speaker 2: You know, Yeah, there's there's Taco Bell, and young graduates
27:46
Speaker 2: will call them doing good work all over the US man,
27:50
Speaker 2: and not only in quick service either.
27:52
Speaker 3: So.
27:54
Speaker 2: You know, and and you mentioned, you know that the
27:56
Speaker 2: bifurcation between maybe you know, the over forty five and
27:59
Speaker 2: they're forty five year olds, right, the millennials and Gen
28:03
Speaker 2: Z under and the Gen X and the boomers over.
28:07
Speaker 2: And you see a real correlation, don't you, in terms
28:10
Speaker 2: of what percentage of your sales are coming from the
28:14
Speaker 2: younger generations and how you same store sales and traffic
28:18
Speaker 2: are trending.
28:19
Speaker 3: Right, yeah, definitely. I mean if you look at take
28:22
Speaker 3: a wingstop. Okay, Wingstop is the current you know, Darling
28:25
Speaker 3: of same store sales growth. They I think they're two
28:29
Speaker 3: years same store sales growth in Q two if you
28:31
Speaker 3: look at two years where there was something like forty
28:33
Speaker 3: six percent same store sales growth. Not to mention all
28:36
Speaker 3: the new units they've opened, but they skew very young, right,
28:41
Speaker 3: very young they are. I don't have the numbers in
28:44
Speaker 3: front of me, but something like between seventy and eighty
28:49
Speaker 3: percent of their past month users are gen zs or
28:53
Speaker 3: millennials right way up there. Raising Cain is another one.
28:58
Speaker 3: Chipotle has a very very high percentage of their customer
29:02
Speaker 3: base that is under forty five. That's kind of the
29:05
Speaker 3: proxy we use for gen Z and millennials, whereas the
29:09
Speaker 3: more traditional QSRs. McDonald's definitely skews much older. Burger King
29:14
Speaker 3: excus much older. Wendy's is much older, not as old
29:18
Speaker 3: as Burger King and McDonald's, but they do now at
29:21
Speaker 3: Taco Bell again, they're about fifty to fifty, right. Starbucks
29:25
Speaker 3: and Taco Bell are about fifty to fifty, so half
29:28
Speaker 3: of their users are under forty five, and half of
29:31
Speaker 3: the users are over forty five, so it really can.
29:35
Speaker 3: I'm not saying it's it's not the only factor, but
29:39
Speaker 3: it is an important factor. And I didn't quite answer
29:42
Speaker 3: your question before around what's going on with gen Z's
29:45
Speaker 3: but they are significantly more hopeful about the future and
29:51
Speaker 3: significantly less concerned about their financial situation. And when you
29:56
Speaker 3: put that together, they don't cut back as much on
29:59
Speaker 3: spend as especially like the boomers. The boomers cut back
30:03
Speaker 3: the most millennials or the extras, and the boomers cut
30:06
Speaker 3: back the most. Millennials are starting to need to because
30:09
Speaker 3: they are still in you know, important earning years. Yeah,
30:12
Speaker 3: but our platform shows very clearly by brand, which ones,
30:16
Speaker 3: which brands are skewing lower generation, and what's going on
30:20
Speaker 3: with their level of financial concern and it matters.
30:24
Speaker 2: Yeah, and listen, man, gen z they're young. They got
30:26
Speaker 2: their parents' credit cards. Man, they're bringing them.
30:28
Speaker 3: Up, not all of them them up, not the twenty
30:32
Speaker 3: six year olds twenty seven.
30:34
Speaker 1: Yeah.
30:35
Speaker 2: Well, that's what we find interesting too, is how everybody
30:38
Speaker 2: categorizes the different generations.
30:40
Speaker 3: Not true.
30:42
Speaker 2: Neil Strauss's work and you know, he's like, you know,
30:45
Speaker 2: he claims that one to eighteen are.
30:49
Speaker 1: Gen Z.
30:50
Speaker 2: But then also you know, some of the chains we
30:52
Speaker 2: cover will go much higher to the later twenties.
30:55
Speaker 3: Sure on those generations so well, they do have less debt.
30:58
Speaker 3: Gen Z is a lot less that they have more
31:00
Speaker 3: student loans, but you know they can't afford houses right.
31:04
Speaker 1: Now, yeah, or some mortgage that's no.
31:07
Speaker 3: Mortgage, right They don't have as much credit card debt,
31:10
Speaker 3: not yet.
31:10
Speaker 1: Anyway, how's their loyalty?
31:12
Speaker 2: You know, I know it was it was widely publicized
31:14
Speaker 2: that millennials are very disloyal. They want to try a
31:17
Speaker 2: lot of different types of cuisine, and so they might
31:20
Speaker 2: not frequent their favorite restaurants as much as as previous generations.
31:23
Speaker 1: Where does gen Z pan out in terms of loyalty?
31:27
Speaker 3: I can't really comment very objectively on. I just almost
31:30
Speaker 3: hearsay from what I heard. Maybe maybe you know, a
31:36
Speaker 3: lot of adventure right there they get Again, social media
31:39
Speaker 3: really runs through their lives, and there's there's people that
31:42
Speaker 3: can get you to try new brands if you're an influencer.
31:44
Speaker 3: But I don't know, maybe maybe a little bit more
31:48
Speaker 3: they're showing, from what I've read, a little bit more traditional,
31:53
Speaker 3: more loyal than the millennials. Potentially and we'll see as
31:57
Speaker 3: they move through. You know, the restaurants is there's a
32:01
Speaker 3: lot more choices now than they used to be, right,
32:04
Speaker 3: and I'll tell you it's there's a lot of exciting
32:07
Speaker 3: stuff out there. Chicken, right, Chicken is big right now,
32:10
Speaker 3: look at again some of the most top performing brands
32:14
Speaker 3: is you know, Wingstop not raising canes, axe Be's even
32:18
Speaker 3: Chipotle when they when they ran chicken ol pastor that
32:21
Speaker 3: was kind of their their Q two numbers. You know,
32:25
Speaker 3: that broadly appealing, you know, with different sauces and Wingstop
32:28
Speaker 3: you know a lot about the sauces and the dipping.
32:30
Speaker 3: You can take a you know, a protein like chicken
32:33
Speaker 3: and bring a lot of flavor to it. Right. That's
32:35
Speaker 3: you know, that's in addition to you know, the Popeyes
32:37
Speaker 3: of the world, when the chicken sandwiches became these you know,
32:40
Speaker 3: the whole chicken breast fried, I mean blowing outside the bun,
32:43
Speaker 3: you know, so big and will even fit in the bun.
32:46
Speaker 3: And and then you know, younger consumers, you know, you
32:50
Speaker 3: hear that they are a little more down on steak
32:54
Speaker 3: and cows because of you know the environment and you know,
32:57
Speaker 3: carbon dioxide and things like that. Thing I guess, but
33:02
Speaker 3: it makes sense, right if you look at the kind
33:04
Speaker 3: of the secular trends that are going, and the secular
33:09
Speaker 3: trends are you know, you know, the millennials are the
33:12
Speaker 3: biggest generation ever through but there's always a new one
33:15
Speaker 3: coming mobile application, right, That is a secular trend mobile adoption,
33:20
Speaker 3: and then you just kind of overlay that with what's
33:23
Speaker 3: the landscape in the restaurant space. These traditional qs rs
33:27
Speaker 3: have these older, you know, customer bases that are less flexible.
33:32
Speaker 3: They may be more loyal, but you know, they don't
33:35
Speaker 3: want another app on their phone. Some do, but most don't,
33:39
Speaker 3: and it's creating a tech barrier for growth. So you know,
33:46
Speaker 3: I'm having worked on a lot of marketing calendars and
33:48
Speaker 3: a lot of product developments. One of the things that
33:51
Speaker 3: you want to do in the restaurant space is give
33:54
Speaker 3: consumers more reasons to come to your brand more often.
33:59
Speaker 3: And the way you can do that is you can
34:01
Speaker 3: do it through value. That's one way, but also innovation, right,
34:06
Speaker 3: taste innovation, flavor innovation, and those brands that bring a
34:10
Speaker 3: lot of flavor innovation are doing better overall all else equal.
34:15
Speaker 3: That's one of the that's one of the strengths that
34:17
Speaker 3: Taco Bell has is they are they are very strong
34:22
Speaker 3: product innovators, and you know, sometimes it's very similar to
34:25
Speaker 3: the last project product that they launched. But overall, if
34:29
Speaker 3: you can upset that purchase cycle and get someone to
34:32
Speaker 3: come in three days sooner than they normally would and
34:35
Speaker 3: their purchase cadence, it really makes a difference. And Taco
34:38
Speaker 3: Bell did better than almost all major QSRs and Q two.
34:42
Speaker 3: They put up a plus five same store sales, which was,
34:46
Speaker 3: you know, better than all the other major brands. It
34:49
Speaker 3: wasn't Chipotle numbers or Winstock numbers all right, but it
34:52
Speaker 3: was still pretty good. They're a smart group over there there.
34:55
Speaker 3: They know what they're doing, and they have good franchisees.
34:59
Speaker 3: They work together, and that's a you know, that's a
35:00
Speaker 3: challenge for McDonald's because their their franchise relationship from everything
35:04
Speaker 3: I've read, can be a little contentious at times. And
35:09
Speaker 3: you know, the decision for them to extend the five
35:12
Speaker 3: dollars meal deals through I think they said through December
35:14
Speaker 3: at the end of the year, to me is symptomatic
35:17
Speaker 3: that they probably got a response, right, you know, their
35:20
Speaker 3: earnings are coming out. I don't know when they release
35:22
Speaker 3: the first week in November, I'm guessing. I'm sure they
35:25
Speaker 3: got a response. But again, as a as a marketing
35:27
Speaker 3: strategy guy, I'm looking at the consumer data. I don't
35:31
Speaker 3: see any improvement in value for the money, and I
35:34
Speaker 3: just know how consumers respond to value and they're going
35:39
Speaker 3: to have to step up their game if they want
35:41
Speaker 3: to have a material reversal in what's going on with traffic.
35:44
Speaker 3: Long term.
35:44
Speaker 2: Yeah, it's going to be interesting to see what they
35:46
Speaker 2: do with the value menu because it's been largely ignored
35:49
Speaker 2: for quite some time.
35:51
Speaker 3: Rightfully, so you didn't need it, right, people were not
35:53
Speaker 3: price sensitive, but now they are.
35:55
Speaker 1: Yeah, and they've gotten a lot of shade online. Right,
35:57
Speaker 1: you can't buy anything for a buck or less.
35:59
Speaker 2: The best you could do is maybe a drink for
36:01
Speaker 2: a buck at the buck fifty nine or something.
36:04
Speaker 1: But yeah, and the items haven't been renovated. It's been
36:06
Speaker 1: the same items on the menu for quite scan.
36:09
Speaker 3: I think you can, if you know what I know
36:11
Speaker 3: about the restaurant space, you can as a consumer, you
36:14
Speaker 3: can look forward to better values out there as we
36:17
Speaker 3: as we move through the end of the year and
36:19
Speaker 3: into twenty twenty five. Desperation tribe innovation.
36:23
Speaker 4: Yeah for sure, you know, and just you know, going
36:26
Speaker 4: back a little bit to the gen zs and apps
36:28
Speaker 4: app usage, you know, have you done any work around
36:31
Speaker 4: how many apps people will have on their phone, how
36:34
Speaker 4: many restaurant apps people will have on their phone, and
36:37
Speaker 4: how that differs maybe from gen Z up to boomers.
36:41
Speaker 3: I don't have the specifics, although I have read articles
36:44
Speaker 3: and I'm sorry I don't have anything written down I do.
36:47
Speaker 3: But one thing that we do track on our platform
36:50
Speaker 3: is so we look at all past month users of
36:53
Speaker 3: these brands, and we we find out who never uses
36:56
Speaker 3: the app, who always uses the app, and who sometimes
37:01
Speaker 3: uses the app? And just again, anecdotal evidence suggests that
37:07
Speaker 3: younger consumers will download apps in order to access a
37:12
Speaker 3: value offering, and as soon as it's over, you know,
37:15
Speaker 3: they take it off. You know, I don't know about
37:17
Speaker 3: your your mobile device, but I mean I probably have
37:23
Speaker 3: fifteen or twenty more apps on there than I had,
37:26
Speaker 3: you know, eighteen months ago. You know, it's like, you know,
37:28
Speaker 3: how many pages you have to scroll through to find
37:30
Speaker 3: that you know the app you're looking for, and then
37:32
Speaker 3: heaven forbid, somebody changes the color of the app you're
37:35
Speaker 3: used to and now you can't find it at all, right,
37:38
Speaker 3: But yeah, Jeff, definitely, I don't know the number, but
37:41
Speaker 3: younger consumers definitely going to have more apps. But you know,
37:45
Speaker 3: they are probably more fickle as it comes to how
37:48
Speaker 3: many apps they're going to have, So keeping you know,
37:51
Speaker 3: people engaged with that app is important. And I you know,
37:55
Speaker 3: when I talk to the executives at these brands, everybody
37:59
Speaker 3: understands that app users give much higher brand association scores
38:05
Speaker 3: for brands. So for example, again we'll just to give
38:08
Speaker 3: McDonald's some some favorable light here. If you're a McDonald's
38:11
Speaker 3: app user, right, you are going to give McDonald's much
38:15
Speaker 3: better scores on value for the money, right, quality of food,
38:20
Speaker 3: all those things, and you go more frequently. So people
38:24
Speaker 3: that always use the app go by far the most
38:27
Speaker 3: frequent to all these brands. Now, is it that people
38:31
Speaker 3: who go to these brands often the most often download
38:34
Speaker 3: the app, or is it that if you have the app,
38:37
Speaker 3: you go more frequently? It's both, right, is the dog
38:39
Speaker 3: wagon the tail or the tail wagon the dog It's both.
38:42
Speaker 3: It's got to be both. But I'll tell you know,
38:45
Speaker 3: innovation in your app is going to be you know
38:49
Speaker 3: the gen z and millennial battleground. Right, it's there are
38:54
Speaker 3: some really good apps out there. Domino's has a great app, right,
38:57
Speaker 3: Chipotle has a great app, Starbucks has a great app. Like,
39:00
Speaker 3: those are the gold standards, and they have by far
39:03
Speaker 3: the highest level of app adoption. You casual dining is
39:07
Speaker 3: is you know, coming coming from behind, you know, a
39:11
Speaker 3: lot lower adoption, but you don't need it as much generally.
39:14
Speaker 3: But again as a as a strategy, you know, increasing
39:19
Speaker 3: mobile app adoption is something you can't ignore. You just
39:22
Speaker 3: can't ignore it.
39:23
Speaker 1: Yeah, you're good at this.
39:25
Speaker 2: Man.
39:27
Speaker 3: I've been in this industry a long time, and I'll
39:29
Speaker 3: tell you, like I look at the restaurant world and
39:33
Speaker 3: it seems very obvious to me what needs to happen. Right.
39:37
Speaker 3: I mean not to pick on QSR, but QSR your
39:40
Speaker 3: food cost is too low. I mean again like we
39:43
Speaker 3: talked earlier on this podcast, which is you're not giving
39:46
Speaker 3: enough food for the money. I mean just look at
39:49
Speaker 3: if you look at the you know, at the inflation
39:52
Speaker 3: data CPI data, Right, they track food away from home
39:58
Speaker 3: and food at home. Food at home is grocery. Food
40:01
Speaker 3: away from home are restaurants? Right? Since twenty seventeen. Since
40:05
Speaker 3: January first, twenty seventeen, I track all this stuff. Restaurant inflation.
40:10
Speaker 3: Prices in restaurants is up forty percent since January of
40:15
Speaker 3: twenty seventeen. Groceries are up thirty percent. Well, that's a
40:21
Speaker 3: ten point difference. And by the way, that's been going
40:24
Speaker 3: on now for two years. That restaurant inflation continues to
40:30
Speaker 3: outpace really more than too well really really you know
40:33
Speaker 3: seven But there are different periods of time. But if
40:35
Speaker 3: you look at it, and right now every month that
40:38
Speaker 3: goes by, restaurants are getting more expensive relative to grocery prices,
40:44
Speaker 3: right and again, restaurants are you know, they you know,
40:46
Speaker 3: they have to hire people to make it, so they
40:47
Speaker 3: have to buy the food, and then of course they
40:49
Speaker 3: have to pay for you know, the asset they have,
40:52
Speaker 3: you know, utilities they have, all these other things, and
40:55
Speaker 3: labor costs. Labor costs are actually have settled down a
40:58
Speaker 3: lot in restaurants and hospit mentality. Wage inflation in restaurants
41:03
Speaker 3: and hotels is the same as the overall population. So
41:07
Speaker 3: that's good for restaurants and that they're not going to
41:09
Speaker 3: have to take a higher level of pricing to offset
41:13
Speaker 3: their labor compared to everybody else. But every month that
41:18
Speaker 3: goes by, groceries are getting relatively cheaper than eating out.
41:23
Speaker 3: That is not a good trend, right, So the you know,
41:28
Speaker 3: to me, the obvious reality is if you have a
41:32
Speaker 3: basically a consumer base that's in recession, your demand is down.
41:36
Speaker 3: We know there's a value for the money problem. We
41:39
Speaker 3: know there's affordability problem. And you think about all the
41:42
Speaker 3: profits that were made over the last three or four years.
41:46
Speaker 3: Restaurants have made a lot of money by being able
41:49
Speaker 3: to take all this price which has very high flow
41:52
Speaker 3: through right with very little consumer you know pushback, right,
41:58
Speaker 3: In other words, traffic's down a little, but sales are
42:00
Speaker 3: up a lot, Right, You're gonna have to make some
42:03
Speaker 3: investments back and cost of sales, right, even if it
42:07
Speaker 3: means and again for publicly traded companies, yeah, you can innovate, thanks,
42:10
Speaker 3: find a way to automate take labor out of the restaurant,
42:12
Speaker 3: and and all the smart brands are doing that. But
42:17
Speaker 3: this is a reality. And again I was looking at
42:20
Speaker 3: Q three data right before this podcast, our Q three data,
42:24
Speaker 3: and again all the affordability and value for the money
42:27
Speaker 3: scores for all the major fast casual and fast food
42:31
Speaker 3: brands continue to slip. So that's that's a tough trend
42:37
Speaker 3: to acknowledge.
42:40
Speaker 2: No doubt, man, I think that's that's I know how
42:42
Speaker 2: I'm gonna market this episode. That's a perfect place to
42:45
Speaker 2: end because I think that that's really theme of cost
42:49
Speaker 2: of sales being too low has run through this discussion,
42:53
Speaker 2: and I think it's it's really important. I think it's
42:55
Speaker 2: a great insight. So we'll wrap it there. Thanks again
42:59
Speaker 2: for doing this. Where can our listeners go to find
43:01
Speaker 2: out more about Restaurant Insights Monitor?
43:03
Speaker 3: Oh and thanks for asking Mike. It's it's pretty simple.
43:06
Speaker 3: It's www dot Restaurant insightmonitor dot com and we have
43:13
Speaker 3: you know that they can get ahold of us and
43:15
Speaker 3: we do. We have we have subscriptions that we we
43:18
Speaker 3: sell and then we do a lot of sea level
43:20
Speaker 3: consulting as well.
43:22
Speaker 2: Well, yeah, you've done some great work on that, on
43:24
Speaker 2: those surveys that you've shared with me.
43:25
Speaker 1: So I appreciate you for that, and uh yeah.
43:28
Speaker 2: I look forward to continue and discussing restaurants with you,
43:31
Speaker 2: and we'll definitely have to have you back here.
43:33
Speaker 1: On the pod.
43:34
Speaker 2: I want to thank the audience for tuning in. If
43:36
Speaker 2: you liked the episode, please subscribe and leave us a review.
43:39
Speaker 2: Check back soon for an interview with Steve Kislow, the
43:42
Speaker 2: CEO of Firebirds, would fire Grill