Latest / Choppin’ It Up by Bloomberg Intelligence / A Plan for Cracker Barrel’s Path to Recovery

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A Plan for Cracker Barrel’s Path to Recovery · Choppin’ It Up by Bloomberg Intelligence

0:13
Speaker 1: Welcome to Chopping It Up.
0:15
Speaker 2: I'm your host, Mike Hanlon, the senior restaurant and food
0:17
Speaker 2: service analysts at Bloomberg Intelligence. Our research and that a
0:21
Speaker 2: bi's five hundred analysts around the globe can be found
0:24
Speaker 2: exclusively on the Bloomberg terminal. If you enjoy the pod,
0:27
Speaker 2: I'd love it if you could leave us a review
0:29
Speaker 2: on Apple or Spotify. Today we're joined by my friend
0:33
Speaker 2: Fred Lafranc. Fred is a chaos strategist, managing partner and
0:37
Speaker 2: co founder of Results Through Strategy, as well as hosts
0:41
Speaker 2: of a new podcast, The Executive and The Mystic. Welcome
0:44
Speaker 2: back to the pod.
0:45
Speaker 1: Fred.
0:46
Speaker 3: All right, Mike, I'm glad to be here.
0:48
Speaker 2: All right, man, So we're gonna do things a little
0:51
Speaker 2: bit different today. Fred's gonna interview me largely about Cracker Barrel.
0:55
Speaker 2: I'm gonna probably interview him back a bit. But before
1:01
Speaker 2: we get into Cracker Barrol, why don't you talk to
1:03
Speaker 2: me about your new podcast.
1:05
Speaker 3: Well, the new podcast, as you mentioned, thanks for mentioning it.
1:08
Speaker 3: Mike is The Executive and The Mystic, and essentially it's
1:10
Speaker 3: going to focus on personal professional development and a lot
1:14
Speaker 3: of the work that I've done over the last, you know,
1:15
Speaker 3: twenty eight years of consulting with companies, you know, it's
1:19
Speaker 3: become more and more evident that culture is the secret
1:22
Speaker 3: sauce for a brand. We saw that for companies coming
1:25
Speaker 3: out of COVID, if they had a healthy culture that
1:27
Speaker 3: came out strong. If they were toxic, they did not
1:29
Speaker 3: for obvious reasons. And as I have worked with executives,
1:32
Speaker 3: I've seen that the imprint of the executive's personality ends
1:36
Speaker 3: up in the culture with all the commensurate strengths and weaknesses.
1:39
Speaker 3: And so if you want the businesses to succeed, you
1:41
Speaker 3: have to address those things. So when I coach CEOs,
1:43
Speaker 3: which I do about half a dozen on a regular basis,
1:46
Speaker 3: we get into it pretty deeply in terms of some
1:48
Speaker 3: of the personal development work they need to do to
1:50
Speaker 3: address their weaknesses and to recognize that it shows up
1:54
Speaker 3: in the company, sometimes through hiring decisions, policies, whatever the
1:57
Speaker 3: case may be. And along the way, I've been working
2:00
Speaker 3: with a woman named Christina Christina Wilseee who I have
2:04
Speaker 3: worked with personally, and she helped me through some of
2:07
Speaker 3: the recent health challenges that I've had, and in doing so,
2:10
Speaker 3: I was able to really uncover patterns that I was
2:13
Speaker 3: unaware of. She gave me a different perspective back. Her
2:15
Speaker 3: title is a perspective alchemist. She changes the perspective and
2:19
Speaker 3: at one point in a conversation she and I were
2:21
Speaker 3: having about some of the clients I work with without
2:23
Speaker 3: sharing private information. Her insights were really powerful, and I said,
2:27
Speaker 3: you know what, we need to talk about this because
2:30
Speaker 3: you can help provide someone a view of themselves that
2:33
Speaker 3: I can't do necessarily as an individual, because I always
2:37
Speaker 3: tell I was joke around, so you can't read the
2:38
Speaker 3: label from inside the jar, and having an outside perspective
2:42
Speaker 3: is helpful. So we decided to have this podcast where
2:45
Speaker 3: she can address some of the personal development stuff. She's
2:47
Speaker 3: an experienced executive, she can lean into the business. I
2:50
Speaker 3: work with a lot of cultures, organizational teams and things
2:52
Speaker 3: like that, and I have that one, so we're sort
2:54
Speaker 3: of matching it up. But in a way, she's sort
2:56
Speaker 3: of an executive mystic and I'm a mystical executive.
3:00
Speaker 2: And the first episode was great. I haven't had a
3:02
Speaker 2: chance to get past the first episode.
3:05
Speaker 3: Yet because I haven't released it. You got a.
3:06
Speaker 2: Preview, yeah, was able to. I was able to dig
3:11
Speaker 2: and find find an episode. Yeah, and thank you for
3:14
Speaker 2: introducing me to Christina. She's been instrumental in my growth
3:18
Speaker 2: over the last couple of years. So well, that's great
3:20
Speaker 2: to hear. That's great, good endorsement.
3:22
Speaker 1: Yeah, for sure, man.
3:23
Speaker 2: So all right, let's let's do it. Man, let's chop
3:26
Speaker 2: it up about Cracker Barrel.
3:27
Speaker 3: Well, I mean, obviously, everyone at this point in the
3:30
Speaker 3: restaurantcy knows about the controversy about the new logo and
3:33
Speaker 3: potentially the remodels, and we you and I just commented
3:36
Speaker 3: they announced they're going to stop all the remodels, and
3:38
Speaker 3: so when you and I were talking about it, I said, well, Mike,
3:40
Speaker 3: let's get down to the numbers, right, Uh, you know,
3:43
Speaker 3: how is Cracker Barrel doing? And since you follow them,
3:46
Speaker 3: you have an intimate knowledge of it. So let's just
3:48
Speaker 3: start out with what do the numbers tell you about
3:50
Speaker 3: the performance of the company in recent quarters. In recent quarters,
3:53
Speaker 3: sales have been inflecting higher.
3:55
Speaker 2: You know, a lot of the data that that you know,
4:00
Speaker 2: management is looking at to project future sales is getting better.
4:04
Speaker 2: So speed of service is improving, order accuracies, improving guest sentiments, improving.
4:09
Speaker 2: Turnover was down fourteen percentage points in the last quarter. Huge, huge,
4:16
Speaker 2: and we were seeing that in the same sore sales
4:19
Speaker 2: results restaurant, same source sales. You know, coming into the year,
4:22
Speaker 2: the street was looking at about two percent growth. Now
4:25
Speaker 2: they've raised their estimates up to three percent for the year.
4:30
Speaker 2: So things before before the controversy we're looking up.
4:36
Speaker 3: So that's interesting from a timing standpoint. So this whole
4:39
Speaker 3: the whole thing blew up when the logo was revealed
4:41
Speaker 3: in mid August. Prior to that, you're telling me that
4:44
Speaker 3: performance has been strong by all metrics that you just
4:46
Speaker 3: talked about, which is a good thing. You know, you
4:48
Speaker 3: watch yourself carefully. And even the remodels, they've only done
4:51
Speaker 3: a few remodels. Am I correct in that.
4:53
Speaker 2: Yeah, they tested it, they talked, and we'll get deep
4:56
Speaker 2: into the remodels, I think, because I want to hear
4:59
Speaker 2: your view point as well. But they mentioned how it
5:01
Speaker 2: was tested in four and now it's been expanded to
5:04
Speaker 2: about twenty I think in total. They haven't given us
5:08
Speaker 2: any information about any sales lifts they've seen.
5:11
Speaker 3: So that's okay. So let's as soon because the system's
5:13
Speaker 3: a large system. How many restaurants does Krackle borrough have
5:16
Speaker 3: right now, oh.
5:17
Speaker 2: Close to you know, six sixty ish, you know getting
5:20
Speaker 2: click seven hundred.
5:21
Speaker 3: Okay, so that's a lot. So the small percentage of
5:24
Speaker 3: restaurants have been remodeled. So without the remodels, without the
5:28
Speaker 3: logo change, the business has been doing better and they've
5:30
Speaker 3: improved on scores about things that matter in the guests experience, right,
5:34
Speaker 3: So they focus on the food quality, they focus on
5:37
Speaker 3: speed of service, they focus on all the things that
5:40
Speaker 3: add up to a better guest experience. And we've seen
5:42
Speaker 3: the advent of something like Chili's is up thirty percent,
5:44
Speaker 3: a couple of quarters in a row, who not that
5:47
Speaker 3: they've done the exact same thing, but they're obviously working
5:49
Speaker 3: on an improvement thing. So all that's good, and then
5:51
Speaker 3: banned the logo comes out and slams them. So what
5:54
Speaker 3: happened to the stock when the logo came out?
5:56
Speaker 2: The stock has gotten crushed. I mean the stock had
6:00
Speaker 2: rallied fred over one hundred percent from the April lows
6:04
Speaker 2: in the market after the tariff, you know, freak out
6:09
Speaker 2: into heading into earning season, and this has been an
6:12
Speaker 2: earning season where you know, restaurant stocks have been up,
6:17
Speaker 2: most of them not nearly as much as cracker barrels
6:19
Speaker 2: hundred percent bounced, but they've been a lot, been up
6:22
Speaker 2: a lot, and so heading into earnings and after the
6:25
Speaker 2: earnings reports, even when some of these chains have reported
6:28
Speaker 2: good earnings, the stocks have been selling off, right, and
6:31
Speaker 2: so this this started to sell off. Now, it starts
6:34
Speaker 2: to sell off before the controversy because earn it with
6:37
Speaker 2: earning season, with its competitors going.
6:40
Speaker 1: Down, you know, and then it's been exacerbated.
6:42
Speaker 2: So the stock is not pretty significantly twenty five percent
6:45
Speaker 2: I'd say maybe a little more from the highs.
6:48
Speaker 3: That's a lot. That's a lot. But their performance over
6:51
Speaker 3: the last few quarters has been good. You mentioned comp
6:53
Speaker 3: Star sales of an up. If I got my stats right,
6:56
Speaker 3: Q two is up four to seven, but Q three
6:58
Speaker 3: slowed down to one percent, so losing some momentum there possibly,
7:03
Speaker 3: And as we commented on it earlier, they are coming
7:06
Speaker 3: off of a fairly poor year the year before, so
7:10
Speaker 3: they're growing against weakness, which is fine. It all happens
7:13
Speaker 3: to everybody, but it looks at that had occurred, and
7:16
Speaker 3: how is their ebitdad doing overall? There? Actual you know,
7:18
Speaker 3: that's what people care about in the public market. How's
7:21
Speaker 3: cash looking.
7:22
Speaker 2: Yeah, so you know, earnings are exceeding estimates, so the
7:27
Speaker 2: street EPs estimates are fifteen percent higher than they were
7:32
Speaker 2: heading into the year.
7:33
Speaker 1: Adjusted EBITDAD growth has been good so far. It's up
7:36
Speaker 1: nine percent year to date despite all the investments they've
7:40
Speaker 1: been making.
7:41
Speaker 3: Okay, let's spend a couple of minutes talking about Julian
7:44
Speaker 3: Messino as the CEO. You spoke to her in January
7:46
Speaker 3: and your podcast. She's a veteran and a lot of
7:49
Speaker 3: background experience. I think she was with Young for many years.
7:53
Speaker 3: You and I both attended the Prosper Forum in August
7:55
Speaker 3: on and Amlia Island, and in a CEO panel, Greg Creed,
7:59
Speaker 3: who was the former CEO of Young, mentioned the or
8:03
Speaker 3: Tacob excuse me mentioned you know, look at you can
8:05
Speaker 3: criticize Julie's ideas, but do not attack her. And I
8:08
Speaker 3: agree with that wholeheartedly. You know, you might not agree
8:12
Speaker 3: with some decision, but there's no reason to do a
8:14
Speaker 3: character assassination social media. Just la ambassador. But give me
8:17
Speaker 3: the four one one on Julie from your perspective.
8:20
Speaker 2: Yeah, I mean a big part of what I do
8:22
Speaker 2: is is trying to analyze these leaders, and you know,
8:25
Speaker 2: similar to what you were talking about the work you
8:27
Speaker 2: do with these executives, trying to figure out authentically good
8:31
Speaker 2: person right that cares about their employees, cares about the guests,
8:36
Speaker 2: wants to do good for the company and in the world, right,
8:40
Speaker 2: you know, And our impressions, you know, I've gotten to
8:43
Speaker 2: spend some time with Julie and our my impressions were that,
8:46
Speaker 2: you know, she is honestly really loves Cracker Barrel. She
8:52
Speaker 2: she loves the brand. That's why she took the job.
8:56
Speaker 2: To me, she seems like an authentic leader, somebody that
8:59
Speaker 2: will try to lead with trust and transparency, right, so
9:05
Speaker 2: you know, and then I analyzed their strategies, right, and
9:10
Speaker 2: prior to the logo and the remodel decisions, I've had
9:14
Speaker 2: felt that her strategies were on point, right, trying to
9:17
Speaker 2: nail the operations, and you mentioned the turnaround at Brinker
9:21
Speaker 2: and Kevin Hawkman another young brands alum.
9:23
Speaker 1: You know, it was similar.
9:24
Speaker 2: It was like, you know, let's nail these operations first, right,
9:28
Speaker 2: She got the turnover down, got all these consumer scores higher,
9:33
Speaker 2: and then from there started doing more marketing, started working
9:36
Speaker 2: to improve the food she did it, I think a
9:39
Speaker 2: good job of you know, pairing the menu where it
9:43
Speaker 2: needed to be paired, adding some new items that were
9:46
Speaker 2: really I think fit really well with Cracker Barrel's history
9:50
Speaker 2: and its current menu. They did some Barbell strategies where
9:53
Speaker 2: they pushed value but also upgraded stakes, right, and so
9:58
Speaker 2: I thought the strategies were going really well until the controversy.
10:05
Speaker 3: Well, the other thing too, is I mean Cracker Bell's
10:07
Speaker 3: check average is very moderate compared to some competitors. I mean,
10:12
Speaker 3: that's that's the thing that they don't have to reposition
10:14
Speaker 3: themselves as value. They already have value sort of built
10:17
Speaker 3: into the brand. You know, Chili's has given the public
10:21
Speaker 3: price certainty with their three for me. At a lower
10:24
Speaker 3: starting point, you can go up in a couple different tiers.
10:27
Speaker 3: But Crackerbill didn't have to worry too much about it.
10:29
Speaker 3: They might do a Barbelle strategy to get more of
10:31
Speaker 3: a lower end consumer. And given the fact that Chili's
10:34
Speaker 3: is not cheaper in the McDonald's, I have to assume
10:35
Speaker 3: the bit Crackerbill is cheap in the McDonald's. You know,
10:39
Speaker 3: for a broad appeal audience out there, is that what
10:41
Speaker 3: you're doing.
10:42
Speaker 2: Yeah, management's been highlighting that they're, you know, forty percent
10:46
Speaker 2: lower than casual dining peers in terms of their guest
10:49
Speaker 2: check average.
10:49
Speaker 3: Right.
10:49
Speaker 1: They've been highlighting that they do breakfast all day, which
10:52
Speaker 1: is cheaper.
10:53
Speaker 3: Right.
10:53
Speaker 2: They have a seven ninety nine Sunrise special that they've
10:57
Speaker 2: been pushing, right, and I think that puts them in
11:01
Speaker 2: a very good position. It'll also they've been behind. They
11:04
Speaker 2: were very slow to adopt strategic pricing. So under Julie
11:08
Speaker 2: they finally kind of caught up to some peers and
11:11
Speaker 2: started implementing strategic pricing. And you know, this will enable
11:15
Speaker 2: them to drive some check growth and seem source of
11:18
Speaker 2: sales growth this year and in the future as well.
11:21
Speaker 2: So yeah, we think those price points though, are definitely
11:25
Speaker 2: an advantage and when when And it seems as though
11:29
Speaker 2: marketing those price points has boosted results in this fiscal
11:33
Speaker 2: twenty twenty five year.
11:35
Speaker 3: The other thing in your podcast with Julie in January,
11:38
Speaker 3: she talked about her new loyalty program. What are the
11:40
Speaker 3: stats in the loyalty program? What's happening with that for them?
11:44
Speaker 1: Yeah, they they're still working on loyalty.
11:47
Speaker 2: They need still it's not it wasn't where it was
11:51
Speaker 2: where it needed to be.
11:52
Speaker 1: It seemed like it was kind of.
11:56
Speaker 2: This wasn't under Julie's watch, but I think it was
11:58
Speaker 2: pretty It seemed like it was released kind of haphazardly,
12:04
Speaker 2: so there needs to be a lot more work done.
12:07
Speaker 2: We don't think loyalty is going to be a significant
12:09
Speaker 2: driver for this company because, to be honest, it hasn't
12:14
Speaker 2: been very successful for a lot of our chains.
12:18
Speaker 3: But she talks about having over eight million members. That's
12:20
Speaker 3: a sizeable amount of people. I mean, it's over six
12:24
Speaker 3: hundred and sixty restaurants, so that's a big She's got
12:26
Speaker 3: a big base to work off of. But I know
12:29
Speaker 3: that's something to support, and everyone's focusing on loyalty in
12:31
Speaker 3: some way. I mean, the reality is that ultimately the
12:35
Speaker 3: guest experience in all restaurants has so much to do
12:39
Speaker 3: with what happens at that table, you know. And the
12:42
Speaker 3: challenge that I've always seen in the work that we
12:44
Speaker 3: do is that executive some of them, I'm not saying Julie,
12:47
Speaker 3: have a tendency to gloss over that experience because they're
12:49
Speaker 3: dealing with macro numbers, but it gets right down to
12:51
Speaker 3: the interaction at that table with the server and whatever's
12:54
Speaker 3: going on there. And this is the big conundrum people
12:57
Speaker 3: to have, you know, especially today with the labor shortage.
13:00
Speaker 3: Possibly the turnover you mentioned earlier is another thing that
13:03
Speaker 3: never helps because you're constantly training people to hopefully meet
13:06
Speaker 3: standards that you want. And she's been making, you know,
13:09
Speaker 3: some some progress there, and yet the backlash seemed to
13:13
Speaker 3: attack the very essence of what she was trying to
13:16
Speaker 3: do and turn it around like somehow she sold out
13:18
Speaker 3: the soul to the devil. Right, And you know, you
13:22
Speaker 3: mentioned in your recent LinkedIn post that you're ruth Bardian
13:26
Speaker 3: at heart, and so I looked at that, and I
13:28
Speaker 3: be honestly, they had no idea what the hell you
13:30
Speaker 3: were talking about. So I looked it up. But I
13:33
Speaker 3: want you to tell me what your view of that
13:35
Speaker 3: is so that everyone here understands that on the podcast.
13:38
Speaker 2: Yeah, well, I just wanted to be clear that I'm
13:41
Speaker 2: not on team Red or team Blue right.
13:44
Speaker 1: I'm an an oorco capitalist.
13:46
Speaker 2: I think Murray Rothbard is the greatest political philosopher and
13:54
Speaker 2: historian of that I've ever read, that may have ever lived. Listen,
13:59
Speaker 2: it's about radical freedom, right, It's about free markets. Uh,
14:07
Speaker 2: you know, Roth bar you know, Murray Rothbard right now
14:09
Speaker 2: would be you know, very anti war. He would be
14:14
Speaker 2: very you know, he would be against probably the federal government.
14:19
Speaker 2: He'd be you know, and you know, I just wanted
14:24
Speaker 2: to make a clear that I'm not on either team.
14:26
Speaker 2: I think, you know, I have leanings obviously towards certain politicians,
14:33
Speaker 2: and it's usually based on, you know, if do I
14:36
Speaker 2: feel they have integrity, do they have a track record
14:39
Speaker 2: of voting the same way over and over over time,
14:44
Speaker 2: And unfortunately in the United States, for me, it's it's
14:48
Speaker 2: Ron Paul and it's Thomas Massey, and you know, Rand
14:52
Speaker 2: Paul is getting better as time goes on.
14:54
Speaker 1: And that's about it.
14:55
Speaker 2: So, yeah, I don't have any allegiances to Team Read
14:59
Speaker 2: or team and I wanted to make that clear that
15:03
Speaker 2: I think it gives me an advantage in this politically
15:05
Speaker 2: charged environment. What we're seeing right now in the stock
15:10
Speaker 2: market is a lot of negative articles about the stock
15:14
Speaker 2: market and why things are going to get worse, and
15:16
Speaker 2: yet the market keeps continuing higher. And to be honest,
15:20
Speaker 2: I think a lot of these outlets don't like Trump
15:22
Speaker 2: and they want to see the market go down because
15:24
Speaker 2: they don't want to see him out there talking about
15:28
Speaker 2: how you know, everything's amazing, you know, and I think
15:33
Speaker 2: I think it can impact you if you are are
15:37
Speaker 2: judging somebody based on you know, how they vote.
15:40
Speaker 3: No, I would I would agree, I mean, I would agree.
15:43
Speaker 3: It's you know, at the end of the day, we're
15:45
Speaker 3: all Americans, and America is built on capitalism. And you know,
15:50
Speaker 3: I'm a member of conscious capitalism. You know, we want
15:53
Speaker 3: to do it intentionally, without political affiliation, and we think
15:57
Speaker 3: that capitalism as a governmental philosophy has done more to
16:01
Speaker 3: lift people out of poverty than any other system that
16:03
Speaker 3: has ever existed, from you know, communism, socialism and fascism,
16:07
Speaker 3: all that kind of stuff. Capitalism is the one system
16:09
Speaker 3: of government, imperfect though it may be, that has lifted
16:13
Speaker 3: so many people into a better cost of living. Hell,
16:15
Speaker 3: why is everyone trying to get into these countries? Because
16:17
Speaker 3: you can actually show up here and create a future
16:20
Speaker 3: that you could not get in your home country. And
16:22
Speaker 3: that's not a political statement, that's just sort of a
16:24
Speaker 3: reality of it. And yes, sadly, right now, everything gets politicized,
16:30
Speaker 3: bud like can get politicized, and obviously cracker Bell has
16:33
Speaker 3: been politicized. But now moving on to the benefits of
16:36
Speaker 3: getting this kind of exposure, which you know, you know,
16:38
Speaker 3: what's the old line, you know, any kind of publicity
16:41
Speaker 3: is good publicity as long as your name's in the press.
16:44
Speaker 3: So and I know, earnings this next week. Do you
16:46
Speaker 3: have any sense at all whether or not traffics come back.
16:49
Speaker 3: Are people going back to show support for Cracker Barrel?
16:52
Speaker 3: Because I've worked with some old brands, you know, and
16:54
Speaker 3: I'd go to them and say, yeah, I'm working with
16:56
Speaker 3: XYZ company and they go, oh, I love that bran
16:58
Speaker 3: I go, when was the last time we were there?
17:00
Speaker 3: About ten years, you know, and that doesn't that doesn't
17:03
Speaker 3: help anyone's economics in the restaurant industry. You want to
17:06
Speaker 3: come in last week, not ten years ago. So what's
17:09
Speaker 3: your view of that? Is this going to be good
17:10
Speaker 3: for them? Ultimately?
17:12
Speaker 1: I think it will.
17:13
Speaker 2: And something I've learned from our partners at Cognoviy, Benny
17:18
Speaker 2: Gradwall runs that place. They do some great work for us.
17:22
Speaker 2: But is that apathy and indifference are an issue?
17:28
Speaker 1: Right?
17:28
Speaker 2: But there it really is a very thin line between
17:31
Speaker 2: love and hate. And you could see by the passion
17:35
Speaker 2: online about this brand that people love it, right, whether
17:40
Speaker 2: they've been there in years or not. You know, there's
17:45
Speaker 2: definitely a strong emotional attachment to this brand, and I
17:50
Speaker 2: think that bodes well for the future.
17:52
Speaker 3: Okay, So if I summarize what I'm hearing to say,
17:55
Speaker 3: is regardless of the fact that it was someone negative
17:57
Speaker 3: and a lot of reaction to it. I mean, some
17:59
Speaker 3: people kind of like big deals to logo. Other people
18:02
Speaker 3: are like, oh my god, you know, I forgot what's
18:03
Speaker 3: the character's name, the old Marshall Uncle Herschel, Uncle Herschel. Okay,
18:06
Speaker 3: so Uncle Herschel has sort of wiped out, he's back.
18:09
Speaker 3: You feel that ultimately the loyalty has been sort of
18:13
Speaker 3: awoken without being woke, and now people may return to
18:19
Speaker 3: go short to check it out. Let's just go see
18:21
Speaker 3: if Uncle Hirsch is alive as well. So that's the
18:22
Speaker 3: view I think so, but we'll see how long that takes.
18:26
Speaker 3: So right now, we have data that shows you know,
18:28
Speaker 3: traffic post quarter.
18:30
Speaker 1: You know, we're very strong on this quarter.
18:32
Speaker 2: We think they can put up a six the streets
18:34
Speaker 2: at three point four, right, so we think there's going
18:38
Speaker 2: to be massive outperformance in this quarter and the July
18:43
Speaker 2: second measured data that Bloomberg owns alternative data. It's credit
18:47
Speaker 2: card and debit card data is corroborating, you know, our estimate.
18:54
Speaker 2: So we're pretty we think they're going to report a
18:57
Speaker 2: very strong quarter. The concern is about moving forward to
19:00
Speaker 2: your point. So the data we have, that second measured data,
19:04
Speaker 2: is now showing that sales.
19:07
Speaker 1: Started the quarter really really strong.
19:10
Speaker 2: At the beginning of August, the first two and a
19:12
Speaker 2: half weeks, they were up mid single digits, so very
19:17
Speaker 2: strong versus a consensus revenue growth estimate of one point
19:20
Speaker 2: two percent in the quarter.
19:22
Speaker 1: So the quarter started off really really hot.
19:25
Speaker 2: Ever since this happened, sales trends have decelerated and now
19:31
Speaker 2: have gone negative. So you know, right now it's not
19:35
Speaker 2: helping August, right. I think if you tally all of
19:38
Speaker 2: the August numbers, revenue growth is probably based on this data,
19:42
Speaker 2: is probably going to be better than consensus. But right
19:47
Speaker 2: now it's it's in a downtrend.
19:49
Speaker 3: Okay, So you have stats that tell you that forget
19:51
Speaker 3: the stock price, right, we know that went down, but
19:53
Speaker 3: you're saying that traffic has gone down because of this controversy.
19:56
Speaker 1: Is that based on this data? Yeah?
19:58
Speaker 3: Interesting? Well, I mean, you know in your podcast with Julie.
20:01
Speaker 3: She spent a quite a bit of time talking about
20:04
Speaker 3: the importance the need to really understand who your guest is.
20:07
Speaker 3: You know, and look it. I work with CEOs all
20:09
Speaker 3: the time. Everyone's doing the best they can with the
20:11
Speaker 3: information available in an every changing world. I would say,
20:14
Speaker 3: we're in a whitewater world where you know, you're in
20:16
Speaker 3: a class five wave all the time, right, and we're
20:19
Speaker 3: always a tweet away from disasters, so there's always something
20:21
Speaker 3: going on. And in the midst of this insanity, you're
20:24
Speaker 3: trying to make a call in terms of predicting the
20:25
Speaker 3: future to move business in a certain way. And she's
20:27
Speaker 3: done a masterful job of that, and she talks so
20:30
Speaker 3: much about understanding of your customers. She gave you a
20:32
Speaker 3: little grief because you're not on tiktoking off and she's
20:34
Speaker 3: on TikTok with Brocker Barrel. And when she's a younger
20:38
Speaker 3: platforms for a different audience. I mean, I've worked with
20:40
Speaker 3: enough old brands. You're trying to get that next generation
20:42
Speaker 3: audience in there. Because if you look at someone like
20:44
Speaker 3: TGI Fridays, Because when I was growing up in the
20:46
Speaker 3: restaurant and to see TJRI Fridays was the bomb. I
20:48
Speaker 3: mean that's where you went. I mean that was the
20:50
Speaker 3: place to go. And now they're gone. I mean essentially
20:54
Speaker 3: they're just shuttered because they age with their audience. They
20:56
Speaker 3: didn't stay relevant to the new audience. And it's a
20:59
Speaker 3: tough trick to do that. Some brands have figured out,
21:01
Speaker 3: many brands have not. And she was trying to go
21:04
Speaker 3: in there and make sure that she knew she had
21:05
Speaker 3: an older demographic and she wanted to appeal to a
21:09
Speaker 3: younger demographic, so that being classic is cool, right versus oh,
21:13
Speaker 3: these are old fuddy that is I don't want to
21:15
Speaker 3: go there. And yet with all the understanding, well she's
21:19
Speaker 3: done intellectually and her team she mentioned Sarah, I think
21:21
Speaker 3: is your CMO and the work she's done, that logo change.
21:25
Speaker 3: I don't know about the remodels because you don't have
21:26
Speaker 3: information up, but the logo, James, seems to be a whiff.
21:29
Speaker 3: You know, it was a fastball down the middle and
21:32
Speaker 3: it was a big, big miss. No one would have
21:34
Speaker 3: anticipated that kind of reaction. So somehow there must not
21:38
Speaker 3: have been a focus group or something as classic in
21:41
Speaker 3: marketing to say, hey, here's the old logo, here's the
21:44
Speaker 3: new logo. It's kind of like old Coke U Cooke. Right,
21:46
Speaker 3: did you ever tell them this was going to replace
21:48
Speaker 3: the old one or you just want to get a
21:49
Speaker 3: feel for it, right, what's your sense of that?
21:51
Speaker 2: Yeah, I mean I think it is. I think to
21:54
Speaker 2: your point, it is clearly a whiff. I didn't I
21:57
Speaker 2: don't love the I didn't love the new log go,
22:01
Speaker 2: but I don't love the old one either. I mean,
22:03
Speaker 2: you you're you know, this brand to your point, skews
22:07
Speaker 2: very very much older.
22:09
Speaker 1: And and they've really not done.
22:11
Speaker 2: A good job prior to Julie of bringing in the
22:14
Speaker 2: very coveted you know, gen Y and gen Z consumers.
22:18
Speaker 2: They've not been able to do it. So to me,
22:22
Speaker 2: you know, the logo change and a remodel to me
22:25
Speaker 2: make sense. And the remodels weren't drastic, right, They were
22:28
Speaker 2: changing from wood chairs to black chairs. They were painting
22:31
Speaker 2: it white to make it a little brighter in there.
22:35
Speaker 2: I didn't see, you know. I know there was some
22:37
Speaker 2: negative articles over the last several months, and they'd interview
22:40
Speaker 2: people that were complaining about it, right, And I understand
22:45
Speaker 2: you don't want to, you know, piss off your core customers, right, right,
22:49
Speaker 2: But they need to bring younger consumers in, right, they're
22:53
Speaker 2: competing in the south now, First Watches is growing pretty
22:56
Speaker 2: pretty fast in the south, right, and that's Cracker Barrel territory.
23:02
Speaker 2: So they're going to have to up their game.
23:04
Speaker 1: Man.
23:04
Speaker 2: So you know, yeah, the logo seems like a whiff.
23:08
Speaker 2: You know, the remodel. I actually when I heard they
23:11
Speaker 2: were pulling back on the remodel, I was kind of disappointed.
23:15
Speaker 2: I felt like, it needs to be refreshed, it needs
23:20
Speaker 2: to be remodeled. I'm not looking for a drastic remodel,
23:23
Speaker 2: but you know, the competition's increased in the South and
23:26
Speaker 2: they're going to need to do something to win back
23:30
Speaker 2: younger customers.
23:31
Speaker 3: Well, they're committing a lot of money, millions of dollars
23:34
Speaker 3: to these remodels. You know, as I read, I mean,
23:37
Speaker 3: there's a lot of money down the table here. Now,
23:39
Speaker 3: I don't know. I bit. I was in Cracker Barrel
23:41
Speaker 3: six weeks ago. I was driving from Charlotte to Atlanta
23:45
Speaker 3: with a colleague and we pulled over the Cracker Barrell
23:47
Speaker 3: because they're all over the highways in the south right,
23:49
Speaker 3: And so we went in and had a decent meal,
23:52
Speaker 3: and and I was you know, so between Charlotte and Atlanta,
23:56
Speaker 3: you're kind of in the country. Not totally because people
23:59
Speaker 3: in Greenville, Southcot and I'll get mad at me, But nevertheless,
24:02
Speaker 3: you're out there and you know, plaid shirts, jeans, boots,
24:05
Speaker 3: the whole nine yards, right, I mean, this is the
24:07
Speaker 3: heartland of America to large extent. Was representative there and
24:12
Speaker 3: I enjoy nostalgic places. I mean, there's nothing wrong in
24:15
Speaker 3: my mind. I'm not the new target audience and can
24:17
Speaker 3: probably reflect the older audience. But nevertheless, and I'm not
24:19
Speaker 3: a cracker barrel junkie. I don't go there all the
24:21
Speaker 3: time because they're really not by my home. But it
24:24
Speaker 3: was not a bad experience. And I'll tell you a
24:26
Speaker 3: fresh coat of paint goes a long way. I don't
24:30
Speaker 3: know if the remodel is just paint or if it's
24:32
Speaker 3: other things changing the color of the chairs. And I
24:34
Speaker 3: would bet a million dollars easily that most people could
24:37
Speaker 3: not tell you the color of the chair today and
24:39
Speaker 3: it change tomorrow. You know, it's just people don't notice it. Humans,
24:43
Speaker 3: you know, work we do. We pick up subtle cues,
24:46
Speaker 3: you know, we don't unless somebody's really in your face.
24:49
Speaker 3: Where you notice the change that's different. Like if you're
24:51
Speaker 3: working on the food that play the foods in front
24:53
Speaker 3: of your face, you're going to see that. And I
24:55
Speaker 3: know some of the people that have helped them on
24:57
Speaker 3: the food development program and the foods, they're trying to
24:59
Speaker 3: make their the appearance more attractive. And this is part
25:01
Speaker 3: of the you know, the cens of ground of expanding
25:04
Speaker 3: the five senses and making sure that the subtle cues
25:06
Speaker 3: as well as the obvious cues all reinforce a combinatorial
25:10
Speaker 3: experience that make it better. And that's what it seems
25:13
Speaker 3: they were doing. Have you seen the new remodels.
25:16
Speaker 2: I haven't seen them in person, unfortunately, I've just seen
25:19
Speaker 2: you know, I've seen pictures. Yeah, So you know, what
25:23
Speaker 2: was your thought on the remodel? Do you think these
25:26
Speaker 2: stores need to be remodeled? Do you do you think
25:28
Speaker 2: it was a mistake? How do you how do you
25:31
Speaker 2: feel about that?
25:32
Speaker 3: A lot of companies, and I'm going to say, I'm
25:33
Speaker 3: going to answer this in a broad way before I
25:35
Speaker 3: get to the specific of Cracker Brough. It's not an
25:37
Speaker 3: expert on Cracker Burrow. Many many restaurants have deferred maintenance. Okay,
25:42
Speaker 3: a lot do not all, but a lot do. And
25:45
Speaker 3: I go into brands and I look at the deferred maintenance,
25:47
Speaker 3: and I know, I've been a CEO of half a
25:49
Speaker 3: dozen restaurant companies. It's expensive to maintain. I've always gone
25:54
Speaker 3: by Disney's philosophy that it should look as good every
25:57
Speaker 3: day as the day had opened. And that's why in
25:59
Speaker 3: Disney this Land, they go into the park every single
26:02
Speaker 3: night and they repaint areas that need to get touched up.
26:06
Speaker 3: They don't. They always wanted to look as good as
26:08
Speaker 3: the day was open. They powerwash those sidewalks, et cetera,
26:12
Speaker 3: et cetera. I live in Charlotte, so we're remodeling airport.
26:15
Speaker 3: We're spending billions of dollars remodel in the airport. And
26:17
Speaker 3: I walk out and look at the sidewalk and it's
26:19
Speaker 3: just full of gum and cigarette butts and it's disgusting
26:22
Speaker 3: and go. You know, for the cost of a powerwash,
26:24
Speaker 3: it would make the place look good. And that's the
26:25
Speaker 3: same way in restaurants. I went to a restaurant through
26:27
Speaker 3: the day and it's you know, it's getting to be
26:30
Speaker 3: fallish and winds blowing, so there's leaves around, and they
26:32
Speaker 3: hadn't bothered to sweep the entrance. You know, those are
26:34
Speaker 3: the things that I noticed because I'm a restaurant tour
26:37
Speaker 3: but I know that when I've worked with other brands
26:40
Speaker 3: that cannot afford it. It's very expensive to do remodels.
26:44
Speaker 3: You know, you really can't. I call them, I say,
26:46
Speaker 3: let's do a lipstick remodel, okay, And that's sort of
26:49
Speaker 3: an ode to you know, a woman who just touches
26:52
Speaker 3: up her lipstick, doesn't do her whole face, doesn't change
26:54
Speaker 3: her clothes just to be looking fresh, because that's really
26:57
Speaker 3: front and center. And paint is one of them. It's
27:00
Speaker 3: the cheapest thing you can do to refresh your restaurant.
27:02
Speaker 3: It's paint. And so I don't think that's necessarily a
27:05
Speaker 3: bad thing. When you have a situation where we have
27:08
Speaker 3: torn Naugahyde booths, right, you have broken chair legs, You've
27:13
Speaker 3: got tables that the finish has completely come off of them,
27:17
Speaker 3: that to me is a bigger issue. That's a problem.
27:19
Speaker 3: You need to do that, and quite honestly, in my experience,
27:23
Speaker 3: it's less expensive to have an ongoing and I call
27:26
Speaker 3: it a beautification program, an ongoing beautification program that you
27:30
Speaker 3: do a bite sized pieces, little by little by little,
27:32
Speaker 3: then waiting to get so bad that you have to
27:34
Speaker 3: do a full on remodel. In years past, when I
27:38
Speaker 3: was running a company, we'd go into a restaurant that
27:40
Speaker 3: was a little worn. We look at and say, hey,
27:42
Speaker 3: the furnage looks pretty good. Let's just change the carpet.
27:44
Speaker 3: So we change the carpet. Then you come back and oh,
27:46
Speaker 3: my god, the furniture looks shabby because you got this
27:49
Speaker 3: brand new carpet looks fantastic, and then the furniture looks horrible.
27:53
Speaker 3: And so I learned a long time ago you got
27:55
Speaker 3: to be really careful what elements do adjust and to
27:58
Speaker 3: make sure you do it in a proper way this affordable.
28:00
Speaker 3: And the other thing too is let's talk about why
28:02
Speaker 3: are you doing a remodel. Okay, so ubsensively people say, oh,
28:05
Speaker 3: it's because the guests will have a better experience. That's true.
28:07
Speaker 3: You know who matters the most in the remodel the employee.
28:11
Speaker 3: The employees that really matters because that's the work environment
28:13
Speaker 3: they have. And whenever we did remodels, one of the
28:16
Speaker 3: things I always did is go back to the employee
28:18
Speaker 3: break areas. Okay, at the old days, restaurants are big
28:21
Speaker 3: enough to have a break area. Nowadays they're kind of small,
28:24
Speaker 3: but there's still an area that you have your schedule
28:26
Speaker 3: up there and things like that. It's kind of like
28:28
Speaker 3: where the employees hang out. And I would always make
28:31
Speaker 3: an emphasis say let's get this done. Let's do something
28:34
Speaker 3: here to show the employees that we care. So when
28:36
Speaker 3: you go out in front to service the guests, if
28:38
Speaker 3: it's a full service restaurant, they feel that they're part
28:40
Speaker 3: of that exposure experience because then you just had this
28:43
Speaker 3: juxtaposition of the front looks fantastic in the back of
28:45
Speaker 3: the house which is old and dingy, and you really
28:48
Speaker 3: don't want to do that. You want to make sure
28:49
Speaker 3: you polish it for the benefit of the guests. And
28:51
Speaker 3: the other thing that's really inexpensive is changing uniforms. If
28:55
Speaker 3: they're T shirts, you know, do a refresh, because if
28:58
Speaker 3: you put a new piece of clothing whatever that may be,
29:01
Speaker 3: on an employee, they feel different. And so managing a
29:04
Speaker 3: restaurant is all about managing the employee experience that it
29:07
Speaker 3: is much about managing the guests experience.
29:09
Speaker 2: Yeah, that's really interesting, right, I would think, you know,
29:15
Speaker 2: certain areas should still probably be worked on, you know.
29:20
Speaker 2: I think they're doing floors too in stores that need it.
29:23
Speaker 2: I would think like bathrooms is something ye that that
29:27
Speaker 2: they should probably think about.
29:31
Speaker 3: A clean bathsroom is can't be controversial one hundred.
29:35
Speaker 1: You know.
29:36
Speaker 2: It's really interesting though, because you know, Sarder brought this
29:39
Speaker 2: up last year when he was pushing for some more
29:43
Speaker 2: board seats. Larry Hyatt was the CFO a long time ago.
29:46
Speaker 2: He did he he did a great job, and he
29:49
Speaker 2: did a great job.
29:50
Speaker 1: Communicating with the street. And one of the things he
29:52
Speaker 1: always mentioned was like.
29:53
Speaker 2: Are cappacks compared cappacks of sales compared to everyone else
29:57
Speaker 2: is so much lower because it's an old country store
30:00
Speaker 2: and we don't need to renovate it, right, And I
30:03
Speaker 2: think that was true in twenty fourteen when he mentioned
30:06
Speaker 2: that to me. I don't know if that's still true today.
30:12
Speaker 3: I would disagree with his statement today. Back then he
30:16
Speaker 3: might have been sued. I mean, by the way, when
30:19
Speaker 3: you say old, which I'm going to use old in
30:21
Speaker 3: the context in nostalgic is very different than old as
30:24
Speaker 3: worn out, you know, And I think that's the critical
30:27
Speaker 3: difference that I see because I've worked with some old brands.
30:30
Speaker 3: I worked with Sardar's company Steak and Shake when he
30:32
Speaker 3: first took it over. I've worked with friendlies, you know,
30:35
Speaker 3: these are these both brands in those days were over
30:38
Speaker 3: eighties another over ninety years old, and they were worn old,
30:42
Speaker 3: not nostalgia gold. And ironically, in both those brands, when
30:47
Speaker 3: we helped them do some lipstick remodels, we leaned into
30:51
Speaker 3: the nostalgia. You know. With Sardar, the restaurants were white
30:56
Speaker 3: at the time. They had pictures of Sundays. They had
30:58
Speaker 3: a kind of a bit of a dessert thing trying
31:00
Speaker 3: to push on and I was about the excenter of
31:02
Speaker 3: the core, and we painted the walls red and we
31:05
Speaker 3: put in black and white pictures of old photos that
31:07
Speaker 3: were in the archives of the early days of Steak
31:09
Speaker 3: and Shake, which were just great pictures. I mean, they
31:11
Speaker 3: really evoked a lot of wonderful things. And the remodels
31:14
Speaker 3: were probably less than ten thousand dollars of store, and
31:17
Speaker 3: of course, with better food and all that kind of stuff,
31:20
Speaker 3: sales popped up dramatically. You remember, the stock just took off.
31:24
Speaker 3: That's when we did four under four during the recession,
31:26
Speaker 3: which was again price certainty before people walked in, and
31:30
Speaker 3: it worked beautifully. Same thing at Friendlies and Friendlies. One
31:33
Speaker 3: of the things we did was we found these old
31:35
Speaker 3: black and white pictures of the restaurants back in the day.
31:39
Speaker 3: But also we got black and white pictures of famous
31:41
Speaker 3: people eating ice cream, and then we put those in
31:44
Speaker 3: the wall and we colorized the ice cream. So because
31:46
Speaker 3: Friendlys is big under Fountain and so now you had
31:49
Speaker 3: this like Franklin Dell and Roosevelt the licking an ice
31:51
Speaker 3: cream cone, but the cone was white and he was
31:53
Speaker 3: black and white. And Shirley Temple and other people like
31:55
Speaker 3: that didn't even CASHU click Muhammad Ali. Those kind of things.
32:00
Speaker 3: People get off on that. I mean, nostalgia is not
32:02
Speaker 3: necessarily bad. Even with this new generation the salt digital
32:05
Speaker 3: and so far and so on, there are the good
32:06
Speaker 3: old days and they recalled that not because they really were,
32:09
Speaker 3: but because they just evoke some memory of simpler times.
32:13
Speaker 1: Yeah, Nostalgia's been been big.
32:16
Speaker 2: Chili's has hit on it right, They've been bringing back
32:19
Speaker 2: a lot of nineties Nostalgia's actually has been hot over
32:24
Speaker 2: the last couple of years. So they brought back Brian
32:26
Speaker 2: mcnight and Boys to men to do some of their
32:29
Speaker 2: TV ads that that did it from wonderfully right.
32:33
Speaker 3: No, and kids are rediscovering, you know, old bands that
32:38
Speaker 3: for certain generations were like what when we were kids,
32:41
Speaker 3: and I'll oh, they rediscovered it. You know. It's like
32:43
Speaker 3: I always going to kick out of a fourteen year
32:45
Speaker 3: old tells me about the Beatles for the first time.
32:49
Speaker 2: Yeah, I'm a house music of ficionado, and a lot
32:52
Speaker 2: of the songs I loved in the mid to late
32:55
Speaker 2: nineties and early two thousands now are coming back being
32:57
Speaker 2: remixed by some of these young guys and girls.
33:00
Speaker 1: It's it's pretty funny to see. It's it's awesome. I
33:03
Speaker 1: love it.
33:04
Speaker 3: Yeah, So nostalag is so I think my conclusion is
33:07
Speaker 3: nostage is not bad. And and it just seems that,
33:11
Speaker 3: you know, let's put the logo aside for a second,
33:13
Speaker 3: with Uncle Herschel being you know, kind of air brushed
33:15
Speaker 3: out and he's back. Okay, great, Now what do you
33:18
Speaker 3: do on the inside. And as long as I think
33:20
Speaker 3: that Julie and her team are mindful of maintenance and
33:24
Speaker 3: beautification versus elimination, I think that's that's really, really, really important.
33:30
Speaker 3: And to build on the fact that she's made so
33:32
Speaker 3: much investment into a better guests experience through the food
33:35
Speaker 3: and the service and now cleaning up the environment. It's
33:39
Speaker 3: not going to really hurt you in the long run,
33:42
Speaker 3: and ultimately we'll see whether this controversy will reflect on
33:46
Speaker 3: better sales right now. I mean, as far as you
33:48
Speaker 3: can tell, you think the stocks a goodbye. Is that correct?
33:52
Speaker 2: Yeah, I'm not as confident as I was because we
33:55
Speaker 2: don't know how long this downturn is going to last.
33:58
Speaker 1: But yeah, we've been positive on the name.
34:02
Speaker 2: You know, like I said, I think we'd be a
34:04
Speaker 2: little less confident right now, but I think the big
34:07
Speaker 2: you know, there's been you know, if you go on
34:08
Speaker 2: poly market, there's like a twenty five percent chance that
34:11
Speaker 2: Julie Messina Messino loses her job before a year end.
34:16
Speaker 2: I think that's probably one of the biggest risks to
34:19
Speaker 2: stock personally. I think a big part of our thesis.
34:23
Speaker 1: Around this name was an improvement in the management team
34:27
Speaker 1: and that.
34:28
Speaker 2: The leadership body by Julie and some of the people
34:30
Speaker 2: she brought in, and that would be a shame.
34:32
Speaker 3: I mean, this is a kind of you know, public
34:36
Speaker 3: humiliation and conviction over it. Let's say it was a misstep.
34:40
Speaker 3: Let's assume let's just say, fine, it was a misstep.
34:41
Speaker 3: We made a mistake, and they admitted it. She said,
34:43
Speaker 3: I made a mistake. We're going to go back to
34:46
Speaker 3: the old logo, and that's done. Let's keep on improving it.
34:48
Speaker 3: And I would hope that if everyone's such a Rabbit fan,
34:51
Speaker 3: that the best thing you could do is show up right,
34:53
Speaker 3: go in there, eat, spend some money, show people your care,
34:56
Speaker 3: Let the employees know that you're behind and supporting them,
34:59
Speaker 3: so that the people who are the ones that are
35:01
Speaker 3: pillaring her are the ones that show up at least
35:03
Speaker 3: and become a guest again. Uh, if they weren't already,
35:06
Speaker 3: and that would be an important thing. I'm not sure
35:10
Speaker 3: you mentioned this, the odds of her being eliminated. What
35:13
Speaker 3: is the source for that. I'm not familiar with that.
35:15
Speaker 2: Poly Market So yeah, poly Market's an online odds making website.
35:21
Speaker 2: So but instead of you know, gambling on sports, you
35:24
Speaker 2: gamble on you can gamble on the number of rate
35:28
Speaker 2: cuts the FED is going to.
35:29
Speaker 1: Engage in this year. You can, Oh, okay, yeah you can.
35:33
Speaker 1: You can. You can gamble on like all sorts of stuff.
35:37
Speaker 3: Okay, including economics or public job Yeah, well, let me
35:42
Speaker 3: that's down there.
35:42
Speaker 1: I've been tracking it.
35:43
Speaker 3: Yeah, okay, well I'll have to check that out. But
35:45
Speaker 3: let me ask you this. I mean, we just got
35:46
Speaker 3: the jobs report out. I know you you follow all
35:49
Speaker 3: this because it affects the industry. It was not great.
35:52
Speaker 3: And they just also downgraded the jobs that supposedly have
35:55
Speaker 3: been earned in the last quarter by almost a million.
35:58
Speaker 3: So the economy has been soft for a while. We
36:00
Speaker 3: just you know, we're just finding that out now and
36:03
Speaker 3: hopefully the Bureau of Labor Statistics remains a source of
36:07
Speaker 3: good effective data. You know, we don't want to manipulate
36:09
Speaker 3: it anyway. But what's your outlook for the overall industry
36:13
Speaker 3: at this point, for you know, including cracker barrel.
36:16
Speaker 2: Yeah, we're bullish, you know, and we're still bullish, I'd say,
36:19
Speaker 2: at least through the first quarter of next year. We
36:24
Speaker 2: remained bullish.
36:24
Speaker 1: You know.
36:24
Speaker 2: We came into this year expecting better same source sales
36:28
Speaker 2: than last year. We've seen that we expected, you know,
36:31
Speaker 2: I think same sore sales were up in eighty ish
36:33
Speaker 2: basis points in the first half, maybe ninety base points,
36:37
Speaker 2: and we expect that to accelerate through year end. We've
36:41
Speaker 2: seen that in July and August data. We think that
36:44
Speaker 2: that continues. Restaurants had their recession last year, so we
36:48
Speaker 2: think things are getting better, you know, to your point,
36:51
Speaker 2: the jobs number, you know, cp I was.
36:56
Speaker 1: A little benign and so not PPI not p PI.
37:01
Speaker 2: But but you know what we see is, you know,
37:05
Speaker 2: so right now, it's kind of a stagflationary numbers here
37:10
Speaker 2: this month.
37:11
Speaker 1: But you know, we from what we see in.
37:14
Speaker 2: The economic data that we watch, low income consumers still strapped,
37:20
Speaker 2: getting better, though less stressed because delinquencies are down, you know,
37:25
Speaker 2: are going down from where they were last year. In
37:27
Speaker 2: terms of auto credit card credit card bounces are still rising,
37:31
Speaker 2: but at a much slower pace. You know, the data
37:34
Speaker 2: that we see and is most important to us continues
37:38
Speaker 2: to slowly get better, right and then we're seeing in
37:40
Speaker 2: this stock market a broadening rally. So that's usually a
37:43
Speaker 2: good sign that people are starting to think that this
37:47
Speaker 2: economy is going to get.
37:48
Speaker 1: Better for the next couple of quarters.
37:50
Speaker 2: And so even though we have some stagflationary numbers here
37:53
Speaker 2: right now, we think mostly economic indicators and restaurants spending
37:57
Speaker 2: continue to get get better through the first quarter of
38:00
Speaker 2: next year, I'd say, if if I was worried about something,
38:04
Speaker 2: it would be more along the lines of inflation. Inflation
38:08
Speaker 2: isn't going away. In my opinion, We're not getting three
38:11
Speaker 2: rate cuts because you know, you see it every time
38:15
Speaker 2: there's even talk of rate cuts, Commodity prices rip higher, right,
38:20
Speaker 2: and that's the data that goes into the CPI. So
38:24
Speaker 2: it makes it very very hard for the Fed to
38:26
Speaker 2: cut rates. We've seen it for two years right coming
38:28
Speaker 2: into twenty twenty four, there were supposed to be eight
38:30
Speaker 2: nine rate cuts.
38:31
Speaker 1: What do we get?
38:33
Speaker 3: Right?
38:33
Speaker 2: So yeah, we're still continuably you know, I would say,
38:39
Speaker 2: like conservatively bullish. We don't think low income consumers are
38:42
Speaker 2: going to come back in full force anytime soon because
38:44
Speaker 2: of the inflation and its cumulative nature. But middle income
38:49
Speaker 2: and higher income consumers are doing pretty good.
38:52
Speaker 3: Well. I noticed sectors no longer matter as much as
38:55
Speaker 3: always individual companies in my experience, right, but QSR seems
38:58
Speaker 3: to be hitting a wall, and casual dining fine dining
39:03
Speaker 3: has actually gone up a bit. Is that what you're mutas? Okay?
39:06
Speaker 2: So yeah, coming into this year, I didn't necessarily expect it,
39:09
Speaker 2: I mean, but you know, we did know that casual
39:12
Speaker 2: dining was lapping really really weak results last year and
39:16
Speaker 2: this year. That's helped them. But they've all and they've
39:18
Speaker 2: also been helped by Chili's.
39:20
Speaker 1: Chili's.
39:20
Speaker 2: You know, you put that thirty percent comp into the
39:23
Speaker 2: into your numbers and it makes everything look pretty good.
39:25
Speaker 2: But you know, Darden's doing better this year, Cracker barrels
39:28
Speaker 2: doing better this year, cheesecake factories putting up you know,
39:32
Speaker 2: solid comps. In the first quarter, they were outperforming QSR
39:35
Speaker 2: to your point. So I think part of that is
39:39
Speaker 2: the supply and demand is in better shape in casual
39:42
Speaker 2: dining because they haven't you know, there have been some
39:45
Speaker 2: small emerging chains building, but there hasn't in the companies
39:49
Speaker 2: we cover. There hasn't been much store development over the
39:52
Speaker 2: last five years, whereas QSR has built a ton and
39:57
Speaker 2: I think supply and demand has gotten a little bit
39:59
Speaker 2: out of back. Our friend Mike Lukianov at since I'm
40:03
Speaker 2: Sorry Signal Flare AI has has talked about the fact
40:07
Speaker 2: that supplying demand is out of whack in QSR and
40:10
Speaker 2: that's hurting the comps, and so, yeah, you know, I
40:14
Speaker 2: think there could continue to be out performance in the
40:17
Speaker 2: second half of this year, we think that conform ourt
40:19
Speaker 2: performance is going to narrow and that's what we saw
40:23
Speaker 2: last the last like two months because McDonald's is starting
40:26
Speaker 2: to pick up a little bit steam, QSR is starting
40:29
Speaker 2: to lap week second half results from last year, and
40:32
Speaker 2: Chile's comps are going to go down because of you know,
40:36
Speaker 2: just the law of large numbers.
40:38
Speaker 3: Yeah, yeah, well I think they're really they cut there
40:41
Speaker 3: from thirty, they went down to like fifteen, but they're
40:43
Speaker 3: lapping in a huge quarter, so God bless them. And
40:45
Speaker 3: they've also increased their AUVs up and profitability, so they're
40:48
Speaker 3: still they're gonna up been a lot better place overall.
40:51
Speaker 3: But yeah, oh yeah.
40:52
Speaker 2: We look at multi year geometric comps, so we're looking
40:55
Speaker 2: at you know, the one year, but also the two year,
40:58
Speaker 2: the sixth year, will be looking at the seven year
41:00
Speaker 2: coming up. So so we look at these trends at
41:03
Speaker 2: a you know, on a very long term timeline. And
41:07
Speaker 2: you know, even though we know their comps are going
41:09
Speaker 2: to slow, they could still continue to grow on a
41:12
Speaker 2: two and a six year geometric stack. And if they
41:16
Speaker 2: do that, man, it continues to be impressive.
41:19
Speaker 3: Well that's good to hear that. You're bullish on the
41:21
Speaker 3: industry of role I am, always have been, and continue
41:23
Speaker 3: to do so. I got the pleasure of working with
41:25
Speaker 3: some great young, emerging brands, and you know, they're the future.
41:29
Speaker 3: I mean, we're going I call this a period of
41:31
Speaker 3: creative destruction where a lot of the stuff that's really
41:34
Speaker 3: outdated and has no relevance is going to go away sadly,
41:38
Speaker 3: DJA Fridays and other brands. I mean, we had another
41:40
Speaker 3: two companies go declared bankruptcy in the last fourteen days,
41:44
Speaker 3: so that bankruptcy for restaurant now is new old news
41:47
Speaker 3: now just happens repeatedly. But these new brands are coming
41:51
Speaker 3: up and they're they're exciting, they're they're appealing to a
41:53
Speaker 3: new consumer, and they're even attracting some of the older
41:57
Speaker 3: generations as well because there is some energy in them
42:00
Speaker 3: that wasn't present before.
42:02
Speaker 2: Well, I've never seen such a wide gap between the
42:05
Speaker 2: winners and losers.
42:07
Speaker 1: I love it. I pick stocks for.
42:08
Speaker 2: A living, so it makes it a lot more fun
42:11
Speaker 2: for me. And you mentioned the emerging brands. You've recently
42:17
Speaker 2: done some work for Hawkers. Can you talk a little
42:20
Speaker 2: bit about that.
42:21
Speaker 3: Yeah, I was, you know, placed on the board of
42:24
Speaker 3: Hawkers and worked with them in the earlier part of
42:27
Speaker 3: the year, and it's an exciting I love the brand.
42:30
Speaker 3: It's an exciting brand. There were some decisions made by leadership,
42:32
Speaker 3: which we talked about, that have sometimes amiss that put
42:36
Speaker 3: the company in a precarious position. But the fundamental brand
42:39
Speaker 3: was really good because I look at the guest experience.
42:41
Speaker 3: That's to me as the barometer. You can tell me
42:43
Speaker 3: everything you want about the brand, but if I walk
42:45
Speaker 3: into a restaurant, the experience as lousey that it's just
42:48
Speaker 3: a canary in the coal mine. You know where the
42:49
Speaker 3: rest is going to go. But here was a brand
42:51
Speaker 3: that had high energy, multisensory, you know, so the flavors
42:56
Speaker 3: are the lisious, the high energy in the vibe, the
42:58
Speaker 3: whole nine yards. But they were down as most brands
43:02
Speaker 3: were down. They suffered because they're most you know, there's
43:04
Speaker 3: the base out of Orlando, seven states. But they also
43:06
Speaker 3: got hit by the weather in the first court like
43:07
Speaker 3: everybody else did. And we were able to do something
43:10
Speaker 3: because when I worked with companies, one other thing I
43:13
Speaker 3: learned a long time ago is that the easiest way
43:16
Speaker 3: to increase sales and there is an easy way to
43:18
Speaker 3: do it is to focus on your busiest times when
43:21
Speaker 3: you have the highest demand. And the great brands like
43:24
Speaker 3: Chick fil A. Chick fil A did not increase their
43:26
Speaker 3: AUVs to over eight million dollars because they had a
43:29
Speaker 3: better ad campaign. What they did is they opened up
43:32
Speaker 3: the throttle and said, we're going to get more business,
43:34
Speaker 3: more orders per hour when we're the busiest, and they
43:37
Speaker 3: put people out there with iPads and dual lanes and
43:39
Speaker 3: so far on so on. See if you study, they go, Okay,
43:41
Speaker 3: that's just genius. You know, because I talked to the
43:43
Speaker 3: most company, go when what are you trying to increase? Well,
43:45
Speaker 3: Monday through Thursday is really slow. We're trying to build it.
43:48
Speaker 3: I said, oh, don't waste your money there. I mean,
43:50
Speaker 3: you're going to get something, but an incremental dollar on
43:52
Speaker 3: a Friday, Saturday nights. We had a lot more of
43:53
Speaker 3: an incremental dollar on a Monday night. And so we
43:56
Speaker 3: did a study. We uncovered over six million dollars and
44:00
Speaker 3: sales were lost because of over slow table turns, longer
44:05
Speaker 3: dwell times. And it was over four million dollars in
44:08
Speaker 3: profit that we could generate and in something like eight weeks,
44:11
Speaker 3: over half the company went from being negative in traffic
44:14
Speaker 3: count to positive in traffic count. And we did nothing
44:17
Speaker 3: to do with advertising. It was all operations execution because
44:19
Speaker 3: I'm an old opsky. That's where I grew up in
44:21
Speaker 3: this restaurant business and repeatedly with other companies when I
44:25
Speaker 3: worked with a Burger King one hundred and tenuon of
44:28
Speaker 3: Burger outfit years ago. Because of what I learned at
44:31
Speaker 3: Steak and Shake is we focus on drive through, and
44:34
Speaker 3: we cut the drive through turn by over a minute,
44:37
Speaker 3: and sales, you know, were incredible. And say, we did
44:39
Speaker 3: the same thing at Steak and Shape. We focused on
44:41
Speaker 3: drive through, got rid of items that were slow cook.
44:45
Speaker 3: It was mostly grilled cheese. It just takes a long
44:47
Speaker 3: time to melt cheese. And we were able to really,
44:51
Speaker 3: you know, improve sales primarily by focusing on the busiest
44:54
Speaker 3: shifts QSR Fast casual is going to be during the
44:56
Speaker 3: week you know, the regular casual dining, fine dining is
45:01
Speaker 3: going to be on the weekend. And it works. And
45:03
Speaker 3: at the end, so Caleb and his fellow founders are
45:06
Speaker 3: great guys, took it to heart, put in to send
45:09
Speaker 3: up plan and got it all rallied. We had a
45:11
Speaker 3: Hospitality summer with the gms's like focus on the guest experience.
45:14
Speaker 3: These are just metrics that you have to look at
45:15
Speaker 3: the side, but make sure that guests experience is better.
45:18
Speaker 3: And no more quotes over at an hour and a half.
45:21
Speaker 3: No one's going to do that anymore. I mean, I
45:23
Speaker 3: remember back in the day of casual dining, they used
45:26
Speaker 3: to track You might have done this, so you tracked
45:28
Speaker 3: the quote time on Friday and Saturdays. There was a
45:30
Speaker 3: service that would tell you how long Cheesecake Factory TGI Fridays.
45:33
Speaker 3: All those people had on quotes. They don't do that anymore,
45:36
Speaker 3: but that was a big measure in ge Sak factory
45:38
Speaker 3: two hour quote and everyone was all excited about it.
45:40
Speaker 3: I would have wait two hours for the dinner if
45:42
Speaker 3: I was hungry. My life depended. But I want to
45:44
Speaker 3: I'll just go somewhere else and eat. And so that's
45:46
Speaker 3: understanding that that you don't want to have a quote
45:48
Speaker 3: wait over thirty minutes in a busy Friday night. You
45:51
Speaker 3: want to get in there and experience it as best
45:53
Speaker 3: as you can. Thirty minutes is acceptable. An hour and
45:56
Speaker 3: a half is stupid. And thanks to Caleb and the team,
45:59
Speaker 3: they were able to do, and they're keeping the program
46:01
Speaker 3: going because it's just easy money. It's there, then you
46:03
Speaker 3: can worry about the other sales. But I always ask
46:06
Speaker 3: this question, what's the busiest hour in every restaurant in
46:10
Speaker 3: your system. I don't care if the restaurants viewed as
46:12
Speaker 3: a slow restaurant, low volume or high one. Every restaurant
46:15
Speaker 3: has a busess hour. What is it and what's the
46:17
Speaker 3: gap between the lowest and the highst across the system?
46:20
Speaker 3: And by the way, sometimes the slowest restaurant has the
46:23
Speaker 3: highest sales hour of the week because they care, they're busy,
46:27
Speaker 3: they're trying to get it in there. And the guys
46:28
Speaker 3: that are all kind of cocky with the high sales
46:30
Speaker 3: are just losing money. So it's like to me, I
46:32
Speaker 3: call it moneyball. You're looking at this industry statistically in
46:35
Speaker 3: a different way to give you advantage.
46:37
Speaker 1: That's good advice for Cracker Barrel.
46:39
Speaker 2: I think you know, as a family dining chain, they
46:41
Speaker 2: do a huge percentage of their business from Friday night
46:44
Speaker 2: through Sunday afternoon, So maybe something.
46:47
Speaker 1: Cracker Bow can look at. Thanks for doing this, Fred,
46:49
Speaker 1: You're the best and.
46:50
Speaker 3: I appreciate it's a lot of fun, Mike.
46:52
Speaker 2: Always is man. I want to thank the audience for
46:55
Speaker 2: tuning in. If you'd like to learn more about Results
46:58
Speaker 2: through Strategy, go to Results through Strategy dot com.
47:01
Speaker 1: That's t h r u H.
47:04
Speaker 2: If you liked our discussion, please share with your friends
47:06
Speaker 2: and colleagues. Check back soon for an interview with Wade Allen,
47:09
Speaker 2: president at Costa Vita Fresh Mexican grill