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Qdoba’s Big Opportunity in Fast-Casual Mexican · Choppin’ It Up by Bloomberg Intelligence

0:22
Speaker 1: Welcome to Chopping it Up. I'm your host, Mike Hammon,
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Speaker 1: the senior restaurant and food service analyst at Bloomberg Intelligence.
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Speaker 1: Today we're joined by John Siwinsky, CEO of Modern Restaurant Concepts.
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Speaker 1: Thanks for doing this, John.
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Speaker 2: Hey, appreciate Mike looking forward to it for sure.
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Speaker 1: Can you start out about your career background and what
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Speaker 1: attracted you to MRC.
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Speaker 2: Yeah. Sure. For the prior I joined Modern Restaurant Concepts,
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Speaker 2: which owns Qdoba in Modern Market eatery two brands about
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Speaker 2: a year ago. For the six years prior to that,
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Speaker 2: I was president for Apple's Grown Bar, my second stint
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Speaker 2: with Applebee's. Before that, I was president of KFC with
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Speaker 2: Young Brands, and prior stints with McDonald's, Burger King, the
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Speaker 2: Walt Disney Company, And I was a franchise e for
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Speaker 2: a short period of time in Chicago for Duncan Brands
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Speaker 2: and Sonic, owning and operating ten restaurants, which was my
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Speaker 2: little entrepreneurial gig for a period of time, and I
1:27
Speaker 2: decided to jump back into the corporate world.
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Speaker 1: Good stuff. So let's start with Modern Market. How many
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Speaker 1: stores does the chain have? Where is it strong geographically?
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Speaker 1: And what service model does it employ.
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Speaker 2: Yeah, Modern market Eatery is a small, better for you
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Speaker 2: fast casual brand. Started in Denver. We have thirty one units.
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Speaker 2: The majority of those are in the Denver kind of
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Speaker 2: broader Colorado area. We've branched out into Dallas. We have
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Speaker 2: five units in Dallas, we have three Phoenix, we have
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Speaker 2: three in Austin, We have one at the University of
2:05
Speaker 2: Notre Dame, and we have a couple of units in
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Speaker 2: Denver International Airport. And so our plan there is to
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Speaker 2: expand pretty rapidly. We brought in our first franchise e.
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Speaker 2: Most of those units are company owned, but our first
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Speaker 2: franchise e this past year. He's the second largest Applebee's
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Speaker 2: franchise e, a fellow named John Rolf and a good
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Speaker 2: friend of mine, and he acquired the Austin market and
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Speaker 2: we'll be bringing in other franchisees here soon as well.
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Speaker 1: All right, great stuff. In terms of those growth plans,
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Speaker 1: are you going to continue to build company owned stores
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Speaker 1: or are you just focused on selling markets to franchisees
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Speaker 1: at this point?
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Speaker 2: Yeah, primarily franchise ee development. We just opened our first
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Speaker 2: drive through unit in Colorado Springs and that's a company
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Speaker 2: owned unit. But the in John Rolf just opened his
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Speaker 2: first unit in Kansas City. So I think the vast
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Speaker 2: majority of any new unit development will come through our
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Speaker 2: franchise partners.
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Speaker 1: Okay, great, Any any other markets that that are really
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Speaker 1: attractive to you right now?
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Speaker 2: Yeah? If you think about the profile of the brand,
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Speaker 2: is a female, skew, family oriented, perhaps you know, suburban,
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Speaker 2: slightly upscale. You think about markets like Denver, Austin, Dallas, Phoenix,
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Speaker 2: where we currently have a footprint. Other markets that come
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Speaker 2: to mind would be Salt Lake City, Nashville, Kansas City, Charlotte,
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Speaker 2: North Carolina. And so we've We've got I think much
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Speaker 2: of that Mike's going to be driven by the franchise
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Speaker 2: partners that step into the brand and where they have
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Speaker 2: a base of operations. But you know, the brand plays
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Speaker 2: very well where it where it exists today, AUVs are
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Speaker 2: about two million dollars, very very healthy unit economics, and
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Speaker 2: we're now looking to scale it pretty rapidly.
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Speaker 1: Okay, cool. How big are the units? How much do
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Speaker 1: they cost to build?
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Speaker 2: Yeah? About a million dollar costs to build twenty five
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Speaker 2: to twenty eight hundred square feet. All of them are
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Speaker 2: for the most part end cap units, and as I mentioned,
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Speaker 2: we just opened our first drive through end cap so
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Speaker 2: that'll be interesting to see how we execute the brand,
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Speaker 2: which does have a heavy off premise mix and portability
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Speaker 2: is outstanding for the brand. So yeah, good, very solid
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Speaker 2: sales to investment ratio. Unit economics are attractive. We need
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Speaker 2: to determine the next five markets and heavily penetrate those,
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Speaker 2: and so we have significant franchise interest. We will probably
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Speaker 2: Mike refranchise Dallas, and we have significant interest in the
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Speaker 2: state of Colorado, where we've got you know, we're kind
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Speaker 2: of ubiquitous in Denver. People know the brand quite well.
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Speaker 2: You get outside of Denver and people don't know the
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Speaker 2: brand yet. So that's our challenge or our opportunity.
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Speaker 1: Cool. Yeah, two to one sales to investment ratio is
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Speaker 1: very attractive in terms of building the brand awareness. Is
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Speaker 1: social media a big part of that?
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Speaker 2: Yeah, I think the you know, we we have a
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Speaker 2: pretty savvy digital marketing team and it you know, it
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Speaker 2: becomes a little more challenging in a market like Dallas
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Speaker 2: when you nearly have five units that are kind of
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Speaker 2: geographically dispersed. But you know, we invest a pretty meaningful
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Speaker 2: amount on an ongoing basis to drive awareness and trial.
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Speaker 2: Once we get him into the restaurant, the rest of
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Speaker 2: it kind of takes care of itself. It's a terrific menu,
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Speaker 2: you know, it's very I would categorize it as perhaps
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Speaker 2: a little more contemporary version of a of a era
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Speaker 2: and you know very much, you know, freshly prepared, culinary
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Speaker 2: driven concept. Cool.
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Speaker 1: Yeah, I haven't had a chance to visit, but next
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Speaker 1: time I'm in Denver, I'll definitely check it out. Or Dallas.
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Speaker 2: Yeah, we have nothing in your backyard, but we will
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Speaker 2: at some point. Yeah.
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Speaker 1: Cool, just online. You know, when I was doing my research,
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Speaker 1: the restaurants looked really nice, for sure.
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Speaker 2: Yeah, they're beautiful. They you know, they are very attractive
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Speaker 2: suburban units you would find them to. Most of them
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Speaker 2: have been built within the past ten years. So it's
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Speaker 2: a new concept and a in one that we scale.
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Speaker 2: We plan to scale pretty quickly. Nice.
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Speaker 1: All right, So let's talk about Kenoba a little bit.
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Speaker 1: I covered Jack in the Box. So this is a
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Speaker 1: story I'm familiar with. Let's let's start with the big issues.
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Speaker 1: As when I was a customer, QESO was always like
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Speaker 1: a big highlight for me, and when I was covering it.
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Speaker 1: I always wondered why it didn't play prominent role in
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Speaker 1: the marketing. Has that been a point of emphasis since
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Speaker 1: it went private?
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Speaker 2: Well, yeah, I think then interesting history. And I've been
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Speaker 2: with the brand now for a year. The brand is
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Speaker 2: owned by Butterfly Equity based in La Terrific, absolutely terrific partners,
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Speaker 2: you know, a big part of the reason I joined
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Speaker 2: and left Applebee's to do so. We have seven hundred
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Speaker 2: and fifty restaurants. We're in forty five of the fifty states.
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Speaker 2: Our largest markets would be where we started in Colorado.
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Speaker 2: We've got I think eighty five units in Colorado. We've
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Speaker 2: got sixty units in Wisconsin, We've got sixty in Michigan.
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Speaker 2: We're very strong in the Midwest, and then we've got
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Speaker 2: white space in many of those other geographies. Average unit
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Speaker 2: volume is one point six million dollars. Union economics are strong,
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Speaker 2: i'd say restaurant level E, but the MIC probably in
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Speaker 2: the eighteen to twenty percent range, you know, contingent upon
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Speaker 2: your volume. Our plan here is to double the size
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Speaker 2: of this brand pretty aggressively. So to move from seven
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Speaker 2: hundred and fifty to fifteen hundred units, to move from
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Speaker 2: one point six million AAV to two million AAV and
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Speaker 2: to approach a three billion dollar system. And you mentioned marketing,
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Speaker 2: and the brand has never really been a national marketer,
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Speaker 2: even though we've got pretty meaningful scale, not Chipotle like scale,
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Speaker 2: they've got three thousand plus restaurants, but we peacefully coexist
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Speaker 2: in this Mexican, very attractive Mexican fast casual space. And
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Speaker 2: next year, probably late next year, you'll see the brand
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Speaker 2: become a pretty meaningful national marketer for the first time.
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Speaker 2: So for the first time, we'll have an opportunity to
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Speaker 2: tell our story, to find who we are, what we
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Speaker 2: stand for, how we are differentiated, and we're looking forward
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Speaker 2: to that. Our franchise partners are very enthusiastic about exposing
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Speaker 2: the brand to America. Even though it's pretty well known.
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Speaker 2: I'm not sure everyone knows where their closest Qdoba is,
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Speaker 2: and so we've been a culinary marketing or culinary ops
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Speaker 2: driven concept to date, and our plan is to introduce
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Speaker 2: marketing here in short order. As a matter of fact,
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Speaker 2: we just retained Leeoverurnett Advertising out of Chicago as our
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Speaker 2: agency of record and they'll be our partners. We developed
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Speaker 2: content moving forward.
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Speaker 1: Okay, nice Yeah, I was. I frequented the brand a
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Speaker 1: good bit in my twenties and when I was living
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Speaker 1: in Hobok and there was one Hoboken one up the street.
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Speaker 2: Right. Well, yeah, that's a that's a franchise market for us.
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Speaker 2: We're eighty percent franchised at the moment. We did a
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Speaker 2: good amount of refranchising last year and early this past year.
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Speaker 2: Our fiscal year ends in September, and so we're into
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Speaker 2: our fiscal twenty four as we speak, and we're eighty
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Speaker 2: percent franchise. We'll get to ninety plus percent. Believe in
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Speaker 2: the asset light model, and we have eighty five you know,
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Speaker 2: absolutely terrific partners.
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Speaker 1: Okay, cool, And i'd imagine, you know, I'd imagine why
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Speaker 1: the franchises would be excited about the national marketing. I mean,
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Speaker 1: we've seen some chains actually, you know, absolutely explode once
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Speaker 1: once they turned on that national marketing. Sonic is one
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Speaker 1: that that really comes to mind.
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Speaker 2: Yeah, I think, you know, I've experienced it firsthand, and
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Speaker 2: I've witnessed it with other brands, and our franchisees understand it.
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Speaker 2: At some point when you're when you're in forty five
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Speaker 2: states and you have seven hundred and fifty plus restaurants
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Speaker 2: that you've got the scale. There's kind of an inflection
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Speaker 2: point right where you need to move from a local
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Speaker 2: marketer to a national marketer. We're there, and we've got
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Speaker 2: a very compelling story, and we've got tremendous momentum. I mean,
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Speaker 2: one of the things, honestly, that I found very tracted.
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Speaker 2: It was the first question I asked the Butterfly team
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Speaker 2: when I was talking with him, is tell me about
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Speaker 2: your past. You know, ten or twenty years. The brand's
11:08
Speaker 2: been around for twenty years of comp sales, and they
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Speaker 2: pulled out a chart and showed me, and I'm looking
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Speaker 2: at it here, seventeen in the past twenty years positive
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Speaker 2: comp sales and post COVID MIC, you know, the brand
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Speaker 2: performed exceptionally well, up eleven percent and twenty one, twelve
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Speaker 2: percent and twenty two last year. And our fiscal year
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Speaker 2: again ends September thirty. We're up six percent in this
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Speaker 2: fiscal year through three months. That momentum continues, so there's
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Speaker 2: organic growth here. I attribute that to the we're in
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Speaker 2: the sweet spot of the fast casual category Mexican. For me,
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Speaker 2: Mexican fast casual is the absolute sweet spot the most
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Speaker 2: attractive category out there, and it it's also a unique
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Speaker 2: one for me when I again to study it, and
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Speaker 2: like you, I know this industry. Well, you've got you know,
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Speaker 2: almost four hundred thousand QSR restaurants out there. You've got
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Speaker 2: two hundred and twenty two hundred and thirty thousand casual
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Speaker 2: dining restaurants out there. They're only thirty about thirty five
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Speaker 2: thousand fast casual restaurants in Mexican. Fast casual is the
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Speaker 2: only category that I know of that doesn't have a
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Speaker 2: list of twenty mature competitors, you know, slugging it out
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Speaker 2: for market share battle. You've got Chipotle at number one,
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Speaker 2: You've got Kudoba as a clear number two, and then
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Speaker 2: you've got a few others. So it's probably you know
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Speaker 2: where QS are and casual dining where twenty years ago,
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Speaker 2: That's where Mexican fast casual is at the moment. There's
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Speaker 2: a tailwind, there's a lot of organic growth. Chipotle's got
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Speaker 2: three thousand ish units, we've got seven hundred and fifty.
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Speaker 2: You'll probably see you know, ten to fifteen thousand units
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Speaker 2: in Mexican fast casual over the next decade.
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Speaker 1: Yeah, it is definitely a hot category. I love Mexican food.
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Speaker 1: I like to joke around that I was Mexican in
13:03
Speaker 1: a past life. I make a mean me and margarita
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Speaker 1: MI guacamole's pretty love it pretty damn good man.
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Speaker 2: Yeah, but not as good as not as good as
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Speaker 2: the case.
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Speaker 1: So you can get that case Oman, Yeah, I know
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Speaker 1: I can't. I wouldn't even try. I wouldn't even try
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Speaker 1: to say.
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Speaker 2: It's yeah, it's fascinating to me. The other thing I
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Speaker 2: did is, I, you know, I hopped on a YouTube
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Speaker 2: and started looking at all these college kids, you know
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Speaker 2: where we've got a strong presence, and you know what
13:27
Speaker 2: they like to do on Friday and Saturday night. Since
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Speaker 2: they'll go out and have a couple of drinks and no, no,
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Speaker 2: they'll get on camera and do a little taste stats.
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Speaker 2: Who's got the better burrito? You know, Chipotle or Qdo,
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Speaker 2: But who's got the better caso and guac and chips?
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Speaker 2: Pretty entertaining stuff.
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Speaker 1: Cool. I'll have to check it out. So same Star
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Speaker 1: sales have been good over the last few years.
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Speaker 2: That's great.
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Speaker 1: Do you have any plans that you're willing to share
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Speaker 1: about driving seam Star sales and AUV games? Over the
13:53
Speaker 1: next couple of years.
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Speaker 2: Yeah, the portfolio of seven point fifty is in in
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Speaker 2: really good shape. So you know, under prior ownership, pretty
14:05
Speaker 2: meaningful remodeling has taken place. There are we own one
14:11
Speaker 2: hundred and sixty five of the seven hundred and fifty restaurants, Mike,
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Speaker 2: and we are remodeling half of that portfolio as we speak.
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Speaker 2: That's kind of the last component of the portfolio that
14:22
Speaker 2: needs to be remodeled. Scope of that is about two
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Speaker 2: hundred and twenty thousand dollars per unit we're investing in
14:30
Speaker 2: and we're placing digital menu boards in every one of
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Speaker 2: our company owned units and expect that to expand into
14:36
Speaker 2: our franchise system. But we'll prove it out the business
14:39
Speaker 2: case for our franchise partners. First, we're looking at some
14:43
Speaker 2: innovative new kitchen equipment that enables pretty meaningful innovation moving forward.
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Speaker 2: And then you know the marketing lever as I mentioned,
14:54
Speaker 2: you know, we're very good on the culinary front. We've
14:56
Speaker 2: got you know, everything is freshly prepared, cleaning ingredients. You know,
15:01
Speaker 2: we don't have microwaves all of our you know, there's
15:06
Speaker 2: a customization is a very meaningful part of who we are.
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Speaker 2: People love the fact that they can build their own
15:13
Speaker 2: burrito or bowl, or taco or casada. We've got some
15:16
Speaker 2: products on a menu that you wouldn't find it at
15:19
Speaker 2: Chipotle as well. So we've got lots of levers, and
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Speaker 2: certainly national marketing would be one of those. In scale
15:28
Speaker 2: continuing to grow, we are This past year, Mike, we
15:32
Speaker 2: opened up oh I'm doing this for memory, about thirty
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Speaker 2: five new units. I think we closed about fifteen units,
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Speaker 2: so maybe a net twenty new units. This fiscal year,
15:45
Speaker 2: we plan to open about a net fifty and then
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Speaker 2: next year we're going to scale the seventy five plus
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Speaker 2: and our objective is to be putting one hundred net
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Speaker 2: new units in the ground on an annual basis. Have
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Speaker 2: the white space for that. We have just shy of
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Speaker 2: four hundred commitments contractual commitments from our existing franchise partners,
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Speaker 2: and we also have significant demand from external franchise ees.
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Speaker 2: So those who may be in the you know, in
16:16
Speaker 2: the QSR world or the casual dining world, we're looking
16:20
Speaker 2: to diversify their portfolios move into Mexican fast casual. What's
16:24
Speaker 2: interesting is if you want in the Mexican fast casual
16:27
Speaker 2: as a franchise e. You can't get there via Chipotle.
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Speaker 2: There are one hundred percent company owned, as you know,
16:33
Speaker 2: and so it's interesting as I look at my eighty
16:37
Speaker 2: five partners in all the white space that we have,
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Speaker 2: they want to grow, and I've also got these external
16:44
Speaker 2: parties who want in, and so how we kind of
16:47
Speaker 2: navigate existing partners and new partners as we build out
16:52
Speaker 2: all these geographies is a pretty meaningful strategic opportunity for us.
16:58
Speaker 2: When I look at a map, while we've got eighty
17:01
Speaker 2: plus restaurants in the state of Colorado, I've got only
17:05
Speaker 2: twenty in the state of Texas and about the same
17:07
Speaker 2: amount in the state of Florida. So we've you know,
17:10
Speaker 2: those are states that should have you know, eighty plus
17:13
Speaker 2: units quite easily, the same way. You know, I look
17:15
Speaker 2: at the Chicago market, We've got you know, only a
17:18
Speaker 2: handful of restaurants there. So you'll see us pretty aggressively
17:23
Speaker 2: develop those markets that where we have a presence today,
17:27
Speaker 2: but we just don't have meaningful scale yet.
17:30
Speaker 1: How big is your off premise business and what kind
17:33
Speaker 1: of lift do you expect off of the remodels.
17:36
Speaker 2: Delivery is a very important part of our business. I'd say,
17:39
Speaker 2: you know, if I look at our off premise business,
17:42
Speaker 2: third party delivery would be the largest component of that.
17:46
Speaker 2: You know, probably sixteen eighteen percent. Digital orders on our
17:51
Speaker 2: website and app would be an out of twelve percent.
17:54
Speaker 2: Catering is our fastest growing and our most profitable segment
17:59
Speaker 2: at about ten percent, so you know, thirty eight to
18:02
Speaker 2: forty percent off premise. In the initial I mentioned that
18:07
Speaker 2: we're remodeling about eighty five units. We're deploying about twenty
18:13
Speaker 2: about thirty million dollars in capital as we speak this
18:17
Speaker 2: fiscal year. Much of that around the remodels, but the
18:20
Speaker 2: first eight or ten that we remodeled just completed in Boston.
18:26
Speaker 2: In the initial results that we're seeing there right out
18:29
Speaker 2: of the gate are very impressive. But then again, keep
18:31
Speaker 2: in mind, I don't think the Boston restaurants had been
18:34
Speaker 2: touched from an asset perspective for probably fifteen to twenty years.
18:39
Speaker 2: So yeah, very meaningful. You know, I won't quantify it
18:44
Speaker 2: other than to say our expectation would be not a
18:47
Speaker 2: low single digit, but a very high single digit lift
18:51
Speaker 2: from that investment. Good stuff.
18:56
Speaker 1: It sounds like the relationship with your franchisees is pretty
18:58
Speaker 1: strong too. Has it been that way since since you arrived?
19:02
Speaker 2: Well, you know, I believe in franchise partnerships. That's really
19:06
Speaker 2: all that I've done. Most of my work has been
19:08
Speaker 2: with public companies, larger brands, you know, McDonald's and Applebee's
19:12
Speaker 2: and KFC, all of which your asset, you know, ninety
19:16
Speaker 2: plus percent asset light Applebe's, we were one hundred percent franchised.
19:21
Speaker 2: And it's the only way I know how to do
19:23
Speaker 2: business is you have smart strategic partners. It's their livelihood.
19:29
Speaker 2: They've got everything at risk, and some of them have
19:33
Speaker 2: other concepts. So we do have multi brand franchisees. But
19:39
Speaker 2: given the fact that we only had eighty five mic,
19:41
Speaker 2: it's pretty easy to gather everyone in a room, have
19:46
Speaker 2: a strategic discussion, make some decisions and move forwards. So
19:50
Speaker 2: we have a like every brand, we have an advisory board,
19:54
Speaker 2: the q DOVA Franchise Association. Those are eight terrific partners
19:57
Speaker 2: who represent a large percent and of the system. And
20:01
Speaker 2: we have a unique profile. You know, we have the
20:05
Speaker 2: largest franchise has one hundred units, our second largest as
20:09
Speaker 2: sixty and then we at the other end of the spectrum.
20:12
Speaker 2: We've got a good number of franchisees, we have one,
20:15
Speaker 2: two or three, So that's interesting. You know, it's different
20:19
Speaker 2: than what I had at Applebee's, where I only had
20:24
Speaker 2: you know, approximately thirty partners and they were all very
20:26
Speaker 2: large scale franchisees. So I enjoy that partnership. And they're
20:32
Speaker 2: energized by the momentum they have. They understand the opportunity.
20:36
Speaker 2: They all want to grow. We all have. You know,
20:38
Speaker 2: we have an aligned mission here, which is you know,
20:42
Speaker 2: incremental profitable growth. And the track record here is good.
20:46
Speaker 2: I think you know, they had two prior owners. If
20:49
Speaker 2: you go back in time, you had Jack in the
20:52
Speaker 2: Box a long time ago, and you had Apollo most recently.
20:56
Speaker 2: And so Butterfly is they've got about four to five
21:01
Speaker 2: billion under management. That's our private equity firm. They are
21:05
Speaker 2: fully committed to the restaurant space and couldn't be more
21:11
Speaker 2: enthusiastic about what's happening here at Qdoba good stuff.
21:15
Speaker 1: Are you in the franchisees having any issues finding quality
21:18
Speaker 1: real estate right now?
21:20
Speaker 2: Well, you know, I think the issues are maybe related
21:23
Speaker 2: to you know, and everyone has them access to capital.
21:27
Speaker 2: It's pretty you know, it's expensive right now, and so
21:33
Speaker 2: finding real estate is not an issue. I mean we are,
21:36
Speaker 2: we're looking for twenty four hundred square foot end caps.
21:39
Speaker 2: The build out on a qdoba is eight hundred thousand dollars.
21:43
Speaker 2: You know, with a one point six million AUV, it
21:46
Speaker 2: might take you three years to get to a one
21:48
Speaker 2: six AUV, but that two to one sales to investment
21:51
Speaker 2: ratio is very attractive. The cash on cash return is
21:55
Speaker 2: very attractive, and so development quant comes quite naturally here.
22:02
Speaker 2: There was a hiatus, you know, during COVID, so you
22:05
Speaker 2: know this predates me. But if you know, if COVID
22:08
Speaker 2: hit in March of twenty twenty, i'd say twenty twenty,
22:11
Speaker 2: twenty one and twenty two, we're pretty quiet ears on
22:14
Speaker 2: the development front, obviously related to COVID, but we've you know,
22:19
Speaker 2: we've kickstarted new restaurant development in Earnest here and expect
22:24
Speaker 2: that to escalate up to about one hundred net new
22:28
Speaker 2: units a year.
22:30
Speaker 1: It's exciting. Are there any margin expansion opportunities at the
22:35
Speaker 1: restaurant level to note?
22:38
Speaker 2: Yeah? Yeah, many. It's say we have a terrific supply
22:42
Speaker 2: chain team led by Paul Senwitz. Store in a constant
22:47
Speaker 2: mode of evaluating P and L opportunities cost reduction without
22:52
Speaker 2: compromising quality. We have pretty good scale, so we leveraged
22:56
Speaker 2: that scale with our our vendor partners. You know, the
23:00
Speaker 2: biggest level we have on a margin expansion is revenue
23:04
Speaker 2: growth and so and there's a bit of an inflection
23:08
Speaker 2: point if I look at our portfolio, Mike, and you know,
23:13
Speaker 2: if I look at units with one point six million
23:15
Speaker 2: av average, I look at those that are in the
23:18
Speaker 2: kind of the one two to one four range, they
23:23
Speaker 2: need to get to one five to one six to
23:25
Speaker 2: have the type of cash flow that we like. And
23:29
Speaker 2: then once you get north of one point six million,
23:33
Speaker 2: your unit level economics become very very attractive. And so
23:37
Speaker 2: revenue growth. And the good news is, you know, we've
23:40
Speaker 2: got it meaningfully that momentum that I mentioned over three
23:44
Speaker 2: years and it continues as we speak. So we're always
23:48
Speaker 2: looking to reduce costs within the P and L as
23:51
Speaker 2: we drive revenue on the top line. And we have
23:54
Speaker 2: a number of initiatives in place to do that.
23:58
Speaker 1: Okay, good stuff, And what do you see it from
24:01
Speaker 1: the consumer right now? You know, from our data, we've
24:03
Speaker 1: seen kind of a slowdown. We got we're lapping some
24:06
Speaker 1: difficult year over year comparisons here for the next couple
24:10
Speaker 1: of months. What do you see it from the consumer?
24:12
Speaker 2: Yeah, you know, I went into the year candidly, you know,
24:15
Speaker 2: coming out of Applebee's and casual dining expecting some sort
24:20
Speaker 2: of recessionary environment. I think we've got it. Inflation and
24:25
Speaker 2: interest rates and student loan debt and price of gas
24:30
Speaker 2: and just price of goods in general has hit the consumer.
24:34
Speaker 2: Our consumer is it's actually very similar to applebee you know,
24:39
Speaker 2: we're a We're not an affluent guest. We're very much
24:42
Speaker 2: Middle America in that respect. I mean, the if I
24:45
Speaker 2: look at demographics, Mike, you'd probably find an equal split,
24:50
Speaker 2: you know, for those with household income under fifty thousand,
24:53
Speaker 2: as you would you know, those in the kind of
24:55
Speaker 2: fifty to one hundred thousand dollars range. But I haven't
24:59
Speaker 2: seen any impact here. It's uh, you know, we did
25:04
Speaker 2: feel it in casual dining, but here in the fast
25:08
Speaker 2: casual category, in particular in Qdoba, I haven't seen any
25:13
Speaker 2: headwinds yet. I expected the consumer to economize, whether that's
25:19
Speaker 2: you know, a lower check or less frequency. But our
25:24
Speaker 2: traffic is strong, our sales are strong. We are pretty
25:28
Speaker 2: you know, pretty good value, So we're value oriented brand.
25:31
Speaker 2: Maybe that's part of it, but I have not seen
25:36
Speaker 2: anything yet that would suggest a recessionary environment is impacting
25:42
Speaker 2: our our business model. And so I think that speaks
25:46
Speaker 2: to the category. You know, the category and I and I,
25:50
Speaker 2: you know, we do participate with black Box. So when
25:52
Speaker 2: I look at those, when I look at you know
25:55
Speaker 2: twenty you know, fiscal twenty one being up eleven percent,
25:58
Speaker 2: fiscal twenty two being up twelve percent, fiscal twenty three
26:02
Speaker 2: being up six percent, in each of those year years,
26:05
Speaker 2: we outperformed the black Box casual or fast casual average
26:10
Speaker 2: comp sales performance as well. So we're overperforming. And I
26:14
Speaker 2: think the combination of customization and convenience and value with
26:20
Speaker 2: freshly prepared meals plays pretty well.
26:23
Speaker 1: Yeah, that's great, and I'd say some of your competitors
26:25
Speaker 1: are probably are saying similar things, that there's there's kind
26:29
Speaker 1: of a trade down from full service into that fast
26:33
Speaker 1: casual segment.
26:35
Speaker 2: Yeah. I actually, if you had asked me which category
26:38
Speaker 2: I think is likely to be impacted the hardest or
26:42
Speaker 2: the worst, you know, I think that's casual dining. I
26:44
Speaker 2: think guests will naturally trade down into either fast casual
26:49
Speaker 2: or QSR and cut back on those you know, pretty
26:53
Speaker 2: expensive sit down casual dining occasions.
26:56
Speaker 1: Yeah, I'm you know, drinks, appetizers, desserts, tip, yea, all
27:00
Speaker 1: that adds up pretty quick.
27:03
Speaker 2: I agree with you.
27:04
Speaker 1: We've been writing, we've been writing the same and that's
27:07
Speaker 1: what we've seen in the black box data. Really is
27:08
Speaker 1: that you've seen you know, quick service and fast casual
27:12
Speaker 1: actually improve from October to November and you know, looking
27:17
Speaker 1: like they're and you know, at the expense of casual dining,
27:19
Speaker 1: which is continued.
27:20
Speaker 2: To Yeah, it's really it's we're very bullish, you know.
27:23
Speaker 2: It's a it's a strange environment. You and I have
27:26
Speaker 2: lived through the you know, I think the three funkiest
27:29
Speaker 2: years in our professional careers here and then now we've
27:32
Speaker 2: got an election year, so god knows what that brings.
27:35
Speaker 2: But from a business, you know, fundamental perspective, our business
27:39
Speaker 2: fundamentals are rock solid. I see nothing to indicate a
27:44
Speaker 2: slow down in organic growth, which is which is great.
27:48
Speaker 1: All right, We're going to end that there on a
27:50
Speaker 1: high note. I like it, And yeah, this is going
27:53
Speaker 1: to be a crazy year. We'll see what twenty twenty
27:55
Speaker 1: four has in store for us.
27:58
Speaker 2: But this was great.
28:00
Speaker 1: Thanks again for doing it. Where can the audience go
28:04
Speaker 1: to find a nearby MRC restaurant? And which social media
28:08
Speaker 1: platforms are each of the brands big on.
28:11
Speaker 2: Yeah, we're on all of them, so you know again,
28:15
Speaker 2: Kidova is everywhere, right. I think the challenge with the
28:19
Speaker 2: Kidova brand is we need more penetration in many of
28:22
Speaker 2: those states and markets, which is our plan moving forward.
28:27
Speaker 2: And then modern market Eatery is essentially a Colorado based concept,
28:32
Speaker 2: very accessible. You can also access that brand in Austin
28:36
Speaker 2: or Dallas or Phoenix, but it's an emerging brand and
28:39
Speaker 2: so more to come on that front. But I really
28:41
Speaker 2: appreciate you taking the time, Mike. It's good to chat.
28:44
Speaker 2: Happy New Year. Yeah, appreciate your investment every time you
28:50
Speaker 2: go out to Kidoba, so thank you.
28:52
Speaker 1: Enjoy the case so for sure, man, I always do.
28:56
Speaker 1: And a big thanks to the audience for tuning in.
28:58
Speaker 1: If you liked the episode, please subscribe and leave a review.
29:01
Speaker 1: Check back in in a couple of weeks. I'll be
29:04
Speaker 1: speaking with Barry mcgow and the CEO of Fogo of
29:07
Speaker 1: the show.
29:10
Speaker 2: H h H