Latest / Choppin’ It Up by Bloomberg Intelligence / Align’s Kefauver on Tariffs, Tax Cuts and MAHA

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Align’s Kefauver on Tariffs, Tax Cuts and MAHA · Choppin’ It Up by Bloomberg Intelligence

0:13
Speaker 1: Welcome to Chopping It Up. I'm your host, Mike Hanlon,
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Speaker 1: the senior Restaurant food Service Analysts at Bloomberg Intelligence. Our
0:19
Speaker 1: research and that a bi's five hundred analysts around the
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Speaker 1: globe can be found exclusively on the Bloomberg terminal. Enjoy
0:26
Speaker 1: the pod. I'd love it if you could leave us
0:27
Speaker 1: a review on Apple or Spotify. Today I'm joined by
0:30
Speaker 1: Joe Keith Appert. Joe is a founding partner of a
0:33
Speaker 1: Line Public Strategies, a full service public affairs and creative firm.
0:37
Speaker 1: He's the host of the Working Lunch podcast and my
0:40
Speaker 1: go to source for all things public policy. Thanks for
0:44
Speaker 1: returning to the podcast, Joe.
0:46
Speaker 2: Mike, it is great to be here on Chopping It Up.
0:49
Speaker 2: I always love being on it, always love listening to it.
0:51
Speaker 3: So you do a great job.
0:53
Speaker 1: Thanks man, I appreciate it, and check out Joe's pod.
0:57
Speaker 1: He does a great job man, of really getting in
0:59
Speaker 1: the weeds is some of the regulatory issues that our
1:03
Speaker 1: industry is facing. Man, it's really good stuff.
1:05
Speaker 2: I recently received an award as the most boring podcast. Uh,
1:10
Speaker 2: I'm very proud of that.
1:11
Speaker 1: I disagree, man, you know, because we hear about stuff
1:15
Speaker 1: on the on the on the federal level level. Right,
1:18
Speaker 1: but unless it's things are happening in our state, and
1:20
Speaker 1: you know, we tend not to hear about it. So
1:24
Speaker 1: it's good to hear from from you and your co
1:26
Speaker 1: host about, uh, you know, what's what's coming down the pip,
1:30
Speaker 1: what we're seeing in some of the other states. So
1:32
Speaker 1: is the worst of the tariff show down behind us?
1:36
Speaker 2: You know, anyone that has ever been in the business
1:39
Speaker 2: of trying to predict what this president is going to
1:41
Speaker 2: do is broke.
1:43
Speaker 3: So you don't know.
1:45
Speaker 4: But you know, Michael, the the the the collision between
1:50
Speaker 4: politics and policy is often brutal, and especially populist politics,
1:56
Speaker 4: and so.
1:58
Speaker 2: It takes a while well for the reality to catch
2:03
Speaker 2: you up to the rhetoric. And I think tariffs is
2:06
Speaker 2: a perfect example of that. Obviously, the president campaign in large,
2:11
Speaker 2: you know, in large part on this kind of strategy,
2:16
Speaker 2: and he is, you know, fulfilated this narrative that somehow
2:21
Speaker 2: we're on the short end of all these trade deals
2:23
Speaker 2: and and so forth, and we need to right the
2:25
Speaker 2: right the ship. And then conversely, you know, people argue that, well,
2:29
Speaker 2: he just uses this kind of as a chess piece.
2:31
Speaker 3: It's part of a broader game.
2:32
Speaker 2: He's trying to get concessions on the form policy or
2:34
Speaker 2: whatever that may be. Right, So regardless of where you
2:37
Speaker 2: fall down on that, there are some real world implications
2:40
Speaker 2: for folks. Obviously in the restaurant industry is having a
2:43
Speaker 2: conversation earlier. You know, we're the we're the caboosts on
2:47
Speaker 2: a big, long train, and the egg industry is the
2:50
Speaker 2: front of that train, and the restaurant industry is the
2:53
Speaker 2: caboost of that train. And if in front of that
2:55
Speaker 2: train is suffering or derails, man, we're we're sure to follow.
3:00
Speaker 2: And so I worry about the tariffs on the ag community,
3:04
Speaker 2: especially with regard to interestingly enough, not stuff we import
3:07
Speaker 2: with stuff we export. So much of American agriculture exported Michael. Today,
3:13
Speaker 2: as a matter of fact, we're taping this today.
3:15
Speaker 3: The New York.
3:16
Speaker 2: Times has a their daily podcast and they're interviewing a
3:21
Speaker 2: soybean and corn farmer from Iowa, and she said about
3:24
Speaker 2: fifty five percent of her total product and her peer
3:27
Speaker 2: group all goes to China. And so you talk about
3:32
Speaker 2: the marketplace and what happens, and you know, agribusiness now
3:35
Speaker 2: it's floating, especially the family farms floating on loans, and
3:38
Speaker 2: it's a future's business, and there's.
3:40
Speaker 3: All tons of uncertainties in agg anyway.
3:44
Speaker 2: And then you add all of this and the ramifications,
3:46
Speaker 2: there's no good there's no good thing that comes out
3:49
Speaker 2: of it. I do think, you know, this week we
3:52
Speaker 2: saw the CEOs of the big retail, big boxes, Walmart,
3:56
Speaker 2: targets and mothers go into the White House and they
3:58
Speaker 2: basically said, look at present, we get, we get what
4:00
Speaker 2: you're trying to do here, but understand the ramifications are,
4:03
Speaker 2: in about two weeks, you're gonna start to see a
4:04
Speaker 2: lot of empty store shelves as a supply chain uh
4:08
Speaker 2: dries up.
4:10
Speaker 3: And that's going to be relayed on your lap politically, right.
4:13
Speaker 2: And and you saw later that day he comes out
4:16
Speaker 2: and pumps the brakes on a bunch of tariff stuff, right,
4:20
Speaker 2: And it's it's it's it's when that reality sets in
4:23
Speaker 2: and when his political base, which is a large part
4:26
Speaker 2: of corporate America, the AD community, start to go, hey,
4:29
Speaker 2: all fun and games until it's not. And we're getting
4:32
Speaker 2: to the point where it's it's kind of really not.
4:35
Speaker 2: And you know, everybody, our whole, our whole political system
4:37
Speaker 2: our economic system, foreign policy, whatever it is, is based
4:40
Speaker 2: on stability.
4:41
Speaker 3: Right.
4:41
Speaker 2: It's an under it's a foundational billing block, and everything
4:44
Speaker 2: to do is stability. We want to be predictive, We
4:45
Speaker 2: want to understand what's going to happen the next quarter,
4:48
Speaker 2: the next year, the next year, whatever that may be.
4:51
Speaker 2: And instability is not good for anybody. So I don't
4:54
Speaker 2: say that it's behind us totally to get to get
4:57
Speaker 2: to the root of your question, but I do think
4:59
Speaker 2: kind of the worst of that is kind of played
5:01
Speaker 2: out of its system. He's gotten the political energy out
5:03
Speaker 2: of it for the constituents he wanted to get the
5:06
Speaker 2: energy out of it with Right, and now it's time
5:10
Speaker 2: to kind of go okay, and so he can't completely
5:12
Speaker 2: back off of it to save face. But you see
5:14
Speaker 2: every he continues to delay or pump the brakes and
5:18
Speaker 2: then politically claim victory right, and his constituency says, well,
5:23
Speaker 2: we won that conversation with China or Canada or Mexico.
5:26
Speaker 3: So there's really almost no.
5:29
Speaker 2: Political price to be paid for it until there's an
5:32
Speaker 2: economic price for the country, and then he will he
5:34
Speaker 2: will wear that.
5:35
Speaker 1: Well, that's good to hear man. Do you think reciprocal
5:38
Speaker 1: tariffs can lead to fewer global tariffs over time. I
5:41
Speaker 1: now we've seen some of our partners say they pull
5:45
Speaker 1: back on their tariffs. You know, obviously Trump that wasn't
5:48
Speaker 1: enough for the Trump administration. They will also want to
5:49
Speaker 1: see maybe less subsidies and different tax treatment. What are
5:55
Speaker 1: your thoughts on that?
5:56
Speaker 3: Yeah, listen, you never know how a country is going
6:01
Speaker 3: to react.
6:02
Speaker 2: I was actually kind of surprised, not so much with
6:05
Speaker 2: the Chinese, but certainly Europe, the EU and Canada. They
6:11
Speaker 2: didn't just fold over, right, And I think when you're
6:13
Speaker 2: playing this game, you don't know how they're going to.
6:16
Speaker 3: Respond to They just acquiesced.
6:18
Speaker 2: And we saw a couple of Latin American countries kind
6:20
Speaker 2: of acquiesce, but we didn't see that in other the
6:23
Speaker 2: bigger trading partners across the world. And so I think
6:26
Speaker 2: the short term thing is again separating politics and policy
6:31
Speaker 2: to actpt policy outcomes.
6:34
Speaker 3: It's a zero sum game. The only the only person.
6:37
Speaker 2: That really loses in the whole thing as American consumer, right,
6:41
Speaker 2: And so you know that's cool until it's not cool anymore.
6:45
Speaker 2: So I think you're going to see a a flare
6:49
Speaker 2: ups and spaces flare ups at times, but an overall
6:52
Speaker 2: pumping of the breaks slowly over time, so you can
6:55
Speaker 2: still kind of politically have appear to have the high
6:58
Speaker 2: ground on it. It'll flare up again in probably June
7:03
Speaker 2: of twenty twenty twenty six, about six months before the
7:10
Speaker 2: midterm elections because as political juice, and we'll start having
7:14
Speaker 2: this conversation again. So I don't I don't mean it
7:16
Speaker 2: sounds so cynical, but I think that the headlines and
7:18
Speaker 2: the stories kind of back up what I'm saying is
7:20
Speaker 2: where where we were six weeks ago and where we
7:23
Speaker 2: are now is a very different time. And I think
7:25
Speaker 2: that's trajectory will continue over the next six to six
7:27
Speaker 2: weeks to six months.
7:28
Speaker 1: Yeah, it's fascinating to watch. I mean, there's there's no
7:31
Speaker 1: way you're gonna shift from a system that has always
7:34
Speaker 1: prioritized capital over labor, you know, to kind of flip
7:38
Speaker 1: that on its head and not expect some bumps in
7:42
Speaker 1: the road. So definitely keeping meat busy man that it is.
7:45
Speaker 2: And you know, if I'm the CEO of a major
7:47
Speaker 2: company that you're that you're that you're covering, you know,
7:51
Speaker 2: I I know we have long term agreements in place
7:55
Speaker 2: with certain certainly a suppliers, but I'm you know, the market,
8:00
Speaker 2: not to get too much into your sandbox, but certainly
8:02
Speaker 2: the market rewards growth, and growth is in part predicated
8:07
Speaker 2: on a access to capital instability or in that market,
8:09
Speaker 2: and be equipment, access to equipment. A lot of our
8:12
Speaker 2: restaurant equipments friars or dishwashers or whatever comes out of Asia. Right,
8:16
Speaker 2: And so I've made certain commitments to the street about
8:19
Speaker 2: what my growth plant looked like over the next you know,
8:21
Speaker 2: two years, five years, and now all that's kind of
8:25
Speaker 2: hanging in the ether, and I suspect that some stock
8:29
Speaker 2: prices over the next year or so, we'll take take
8:31
Speaker 2: a pounding.
8:32
Speaker 1: Yeah, we'll see. They sure sure did over the last
8:35
Speaker 1: couple of weeks. All right. I'm looking forward to the
8:38
Speaker 1: day that the narrative shifts from tariffs to tax cuts.
8:42
Speaker 1: Does anything stand in the way of eliminating taxes on
8:44
Speaker 1: tips and overtime?
8:47
Speaker 2: You know, again, rhetoric meeting reality. It's kind of a
8:51
Speaker 2: theme here. I think, you know, when when when the
8:54
Speaker 2: president announced that policy idea, I guess at a rally
8:59
Speaker 2: and h during the campaign, and everybody kind of jumped
9:04
Speaker 2: on board. It was one of those things that that
9:06
Speaker 2: that got ahead of itself. You saw a race among
9:10
Speaker 2: Republican senators to get a gold star from the President
9:14
Speaker 2: and introduced legislation, ran down, Ted Cruz ran down the
9:17
Speaker 2: Senate floor, and next thing, you know, we have legislation
9:19
Speaker 2: blah blah blah. And of course the industry has to
9:22
Speaker 2: go whoa, whoa, whoa, whoa, whoa, let's pump the brakes here.
9:25
Speaker 2: This is a very complicated area of the law, forty
9:27
Speaker 2: five B tax credit. You know, our whole our own
9:31
Speaker 2: models predicated on this forty five B tax credit, you know,
9:33
Speaker 2: in terms of the about casual dining obviously, and you know,
9:37
Speaker 2: sit down, full servi, full service restaurants. And they had
9:41
Speaker 2: to you know, the NRA and others had to race
9:43
Speaker 2: up the Capitol hill in the who who who Let
9:44
Speaker 2: me explain how this whole ecosystem works here and here
9:49
Speaker 2: it is April twenty fourth. We haven't heard much about
9:52
Speaker 2: that issue federally. I know that in December after the election,
9:56
Speaker 2: John Thune, the majority leader uh the Senate, was like,
9:59
Speaker 2: this a very high priority and members, we're talking about it.
10:02
Speaker 2: People were talking about it in town hall meetings and
10:05
Speaker 2: here we are in April, and no one's talking too
10:08
Speaker 2: much about Now. Other headlines have sucked a little bit
10:12
Speaker 2: of the oxygen out of the room, right, Obviously, the
10:13
Speaker 2: tariff stuff and what's going on, you know, all that
10:16
Speaker 2: kind of stuff. But it is not an easy thing.
10:19
Speaker 2: And when you've got the NRA and the restaurant's going, well,
10:21
Speaker 2: what's super careful here, kind of takes some of the
10:25
Speaker 2: gat the gleam off of it.
10:27
Speaker 1: Right.
10:27
Speaker 2: There are a couple of states that are pursuing that
10:29
Speaker 2: as well, but we didn't see states jump in. We
10:32
Speaker 2: saw a bunch of states with legislation that really was
10:37
Speaker 2: just for the cameras and really didn't go anywhere. And
10:41
Speaker 2: of course you'd want to let something like that be
10:44
Speaker 2: reconciled federally before you start monking with that at the
10:47
Speaker 2: state level. But it was it was fraught with potholes
10:50
Speaker 2: and pitfalls. And I'm not saying the issue is going
10:54
Speaker 2: away because it's political merit in it, but it's super complicated,
10:58
Speaker 2: as you well know. And I don't think yeah, I
11:01
Speaker 2: mean the president candidate Trump at the time, former President
11:05
Speaker 2: Trump at the time, heard this from a server on
11:07
Speaker 2: a stage and went out two minutes later, there was
11:11
Speaker 2: no policy and there was no white paper at a
11:12
Speaker 2: heritage foundation on this thing.
11:14
Speaker 3: All of a sudden, it is.
11:15
Speaker 2: The fifty yard line of a conversation, and it's it's
11:19
Speaker 2: been hard over the last four or five months to.
11:23
Speaker 3: Pump the brakes level set understand.
11:25
Speaker 2: What's going on here, and so I think the enthusiasm
11:28
Speaker 2: on that space has dropped a little bit. I think
11:31
Speaker 2: that if they could figure out a way to do it,
11:35
Speaker 2: they would pursue it because it has a lot of
11:37
Speaker 2: political juice in it, especially with their overarching theory of
11:42
Speaker 2: trying to have more outreach to the working class and
11:45
Speaker 2: working class voters and so forth. So it fits nicely
11:47
Speaker 2: into their overall strategy. This one's just super complicated. And
11:50
Speaker 2: you start opening up the tax code and exempting this
11:54
Speaker 2: person from income tax, so this part of their income
11:56
Speaker 2: from then what's next, you know, and just dominoes start
11:59
Speaker 2: to all doubt And so I think cooler heads have
12:02
Speaker 2: forvailed on that issue. It remains to be seen what's
12:04
Speaker 2: gonna happen.
12:04
Speaker 1: Seems like the MAHA movements made some progress in some
12:08
Speaker 1: state legislatures.
12:09
Speaker 2: Yeah, we saw you know, West Virginia, and you know,
12:12
Speaker 2: no one's ever said, you know, let's follow West Virginia's
12:15
Speaker 2: lead on state legislation, but they were out there first
12:18
Speaker 2: and banned a number of dies and preservatives and so forth.
12:23
Speaker 2: And we saw Sarah Huckaby Sanders just last week sign
12:27
Speaker 2: they've Senate Bill nine into law with a little broader list,
12:33
Speaker 2: and we have a big bill kind of the last
12:35
Speaker 2: what I would think is kind of the last big
12:37
Speaker 2: bill of the year, just because you know, a lot
12:39
Speaker 2: of the state legislature is already out, especially some of
12:44
Speaker 2: the red states where this is going are already out.
12:46
Speaker 2: Louisiana has a massive bill as like fifty one I
12:49
Speaker 2: think ingredients in it, you know, so it hasn't gone
12:54
Speaker 2: to so many states, but the conversation certainly has. But
12:57
Speaker 2: again that's another one that's that's that's complicate, right, and
13:02
Speaker 2: you know, from an industry perspective, and whether it's a
13:05
Speaker 2: manufacturing side or the retailers O the restaurants, so much
13:09
Speaker 2: of what's in the I think all of the Louisiana bill,
13:12
Speaker 2: all those fifty one entities or ingredients are banned in
13:17
Speaker 2: the UK, EU, Canada already right in parts of the world,
13:21
Speaker 2: So you know, it's hard to have a leg to
13:24
Speaker 2: stand on to say, well, we can't do this, We
13:26
Speaker 2: can't do that.
13:27
Speaker 3: You know, obviously we probably can.
13:29
Speaker 2: It's just whether we can how much time they give
13:31
Speaker 2: you to kind of reformulate, and you know, and so forth.
13:34
Speaker 2: But it's got a lot of political energy. But I
13:36
Speaker 2: think it's another issue. I feel like I'm kind of
13:38
Speaker 2: a cynical black cloud on it. I don't mean to be,
13:41
Speaker 2: but I'm just trying to be, you know, predictive of
13:44
Speaker 2: where the conversation goes.
13:45
Speaker 3: You know.
13:46
Speaker 2: I think it's another one where it's kind of cool
13:48
Speaker 2: until it's not right, and once you start going down
13:53
Speaker 2: the road and and and really trying to.
13:58
Speaker 3: Dig into space.
13:59
Speaker 2: At some point when John Q voter in Iowa their
14:04
Speaker 2: kid can't get fruity pebbles anymore, there's what the hell's
14:08
Speaker 2: going on around here?
14:09
Speaker 3: You know?
14:09
Speaker 2: And and I think the same thing is happening with soda.
14:12
Speaker 2: We're starting to see some of the things in the
14:14
Speaker 2: Louisiana Bill, the Arizona Arkansas Bill have to deal with
14:18
Speaker 2: soda colorings and formulations. And you start messing with John
14:22
Speaker 2: Q viewed voters PEPSI man, and all of a sudden
14:25
Speaker 2: you're now you're hitting a.
14:26
Speaker 3: Little too close to home, right, and so we'll see
14:27
Speaker 3: where that goes.
14:28
Speaker 2: You know, I don't I think if I'm a restaurant operator,
14:32
Speaker 2: whether large or small, I think it's like what is
14:35
Speaker 2: the next set of dominoes? If you if you start
14:37
Speaker 2: off and this dies and food coloring that has really
14:41
Speaker 2: very little attachment to any real science, you know, around
14:46
Speaker 2: the causations of different You know what happens when you
14:50
Speaker 2: have some real science behind it, i e.
14:53
Speaker 3: Obesity, salt, sugar.
14:55
Speaker 2: And so if I'm a rest in the restaurant world,
14:57
Speaker 2: whether you know, trade association or company, I'm watching this
15:01
Speaker 2: and that was okay, and I know my manu, my
15:03
Speaker 2: supply chain would largely take care of it and we'll
15:05
Speaker 2: figure it out. But if you started getting into sugars
15:08
Speaker 2: and salts and fats and all that kind of stuff.
15:10
Speaker 2: Now now it's getting a little close to home, We'll
15:13
Speaker 2: see where that goes.
15:14
Speaker 3: You know. I laugh about this particular space.
15:16
Speaker 2: If you're really you know, you're the Health and Human
15:20
Speaker 2: Services secretary, you have the MAHA movement. The biggest things
15:25
Speaker 2: to make America unhealthy are boos and smokes.
15:28
Speaker 3: They've said nothing about boos and smokes. So it's like, how.
15:31
Speaker 2: Much energy is in this, you know, short term? Yeah,
15:34
Speaker 2: it's good politics. It's an interesting political coalition between kind
15:38
Speaker 2: of lefty granola moms and anti science moms over here.
15:42
Speaker 2: And it's it's a very very interesting political grassroots coalition.
15:49
Speaker 2: It's and it has potential. I mean, if if you
15:52
Speaker 2: get going on other other issues. It reminds me of
15:54
Speaker 2: it could be the the Mad, if you will, of
15:57
Speaker 2: this generation where you know, parts of the country or
16:00
Speaker 2: blue or red or whatever, we're all united around this
16:03
Speaker 2: issue set right, And I think MAHA is a lot
16:05
Speaker 2: of the building blocks of the of the Mad movement
16:08
Speaker 2: of you know, twenty twenty five years ago. So I
16:11
Speaker 2: watch I'm fascinated by not so much the policy directives
16:16
Speaker 2: and outcomes, but by the grassroots coalition that they're building
16:19
Speaker 2: around that and what that does to overall kind of
16:22
Speaker 2: I don't know, activism patterns, voting patterns, grassroots pattern that
16:25
Speaker 2: I find MAHA fascinating.
16:27
Speaker 1: It's really interesting too, or something to see more chains
16:29
Speaker 1: adopt each tallow versus some of these oils, right, yeah.
16:33
Speaker 2: You know, and I saw some chains kind of get
16:36
Speaker 2: out front, and I'm thinking more of political the steak
16:40
Speaker 2: and shake stuff. We've seen a couple of other chains.
16:43
Speaker 2: It's gonna be hard for some change to make that
16:46
Speaker 2: make that transitions. Then that one's you know, I don't know.
16:53
Speaker 2: I probably should, but I don't know what McDonald's going
16:55
Speaker 2: to pick on McDonald's.
16:56
Speaker 3: Just because they're the biggest.
16:57
Speaker 2: But when I go into that McDonald I know, whether
17:01
Speaker 2: I'm in Spokane, Washington or Tampa, Florida, what those French
17:05
Speaker 2: routes are going to taste like. And when I drive
17:07
Speaker 2: in in two years and they taste different, I'm gonna
17:10
Speaker 2: be upset. It's not like my I like it the
17:13
Speaker 2: way it is right, And so we'll we'll we'll see
17:16
Speaker 2: all that plays out. But the the the Louisiana bill
17:20
Speaker 2: that I referenced earlier is the kind of the first
17:22
Speaker 2: one that really starts to play in the oils space
17:23
Speaker 2: as well. So it's it's a super interesting bill for
17:25
Speaker 2: your audience to kind of go look at and understand.
17:27
Speaker 1: All right, great, one fair wage is moving onto my
17:30
Speaker 1: home state. Are they going to have any success eliminating
17:33
Speaker 1: the tech tip credit in New Jersey?
17:35
Speaker 3: You know, Oh my good, this is a great question.
17:38
Speaker 2: I I ultimately I don't think so if I were
17:41
Speaker 2: going to Vegas and bedding, I would not. You know,
17:44
Speaker 2: we've we've likened this, you know.
17:46
Speaker 3: Is this the the.
17:48
Speaker 2: Resurgence of a movement or is this kind of that
17:52
Speaker 2: death rattle before the patient goes under, that last kind
17:55
Speaker 2: of spasmive activity before it's over. I am completely shocked
17:59
Speaker 2: that they continue you as an entity to receive funding.
18:03
Speaker 2: Their their legislative political track record over the last couple
18:07
Speaker 2: of years has been abysmal. I mean, they've they've won
18:09
Speaker 2: in the City of Chicago, they've lost bout initiatives, and
18:12
Speaker 2: you know, Massachusetts and legislation Baltimore and you know, state
18:18
Speaker 2: of Mayor, all these places. They're just losing left and right.
18:21
Speaker 2: I don't think that they're going to be able to
18:25
Speaker 2: be successful in New Jersey. You never know, but unlikely.
18:29
Speaker 2: I mean, you gotta look down ninety five of what's
18:31
Speaker 2: happened in the restaurant industry in DC.
18:33
Speaker 3: It's a little more complicated.
18:35
Speaker 2: Obviously, COVID kept much of the customer base of the
18:39
Speaker 2: restaurant industry out of the city. Remote work kept it
18:43
Speaker 2: from backfilling up. And in the middle of this, the
18:45
Speaker 2: voter's passed this tip cradit elimination, which is just I mean,
18:49
Speaker 2: you know, kind of nailing the coffin for a lot
18:51
Speaker 2: of restaurant owners. But I think the issue can be
18:57
Speaker 2: framed in a way that the destructive impact that the
19:00
Speaker 2: tip cred elimination had, and it's just right down the street.
19:03
Speaker 3: I don't find a lot of fervor in New Jersey
19:06
Speaker 3: for what's going on.
19:09
Speaker 2: Similarly, they have this legislation in India in Illinois to
19:13
Speaker 2: replicate what Chicago did, and everybody's like, no, we're not
19:15
Speaker 2: doing that again, you know.
19:17
Speaker 3: So you know, I think it's kind of the death rattle.
19:22
Speaker 2: I just don't know where they're gonna get their funding,
19:24
Speaker 2: where they gonna get their funding note to continue. So
19:28
Speaker 2: I don't see it. I don't see it happening in Baltimore.
19:31
Speaker 2: I don't see it happening in New Jersey. I don't
19:34
Speaker 2: see it happening in Illinois. So we'll see where that
19:36
Speaker 2: movement goes. But there they're still active, you know, rattling
19:39
Speaker 2: their pots and pans. They were up in Albany this
19:41
Speaker 2: week rallying at the capitol about the bill up there.
19:44
Speaker 2: They were in Springfield this week riding on the pots
19:46
Speaker 2: and pans about the bill there, but I think it's
19:49
Speaker 2: just kind of for the short term cameras, and I
19:51
Speaker 2: don't think it has really any impact, gotcha.
19:55
Speaker 1: Yeah, And it's bummer to hear what's going on there,
19:57
Speaker 1: you know, in the with the restaurant industry in d C.
20:00
Speaker 1: Man our old stomping grounds.
20:03
Speaker 2: Yeah, it's it's it's a bad it's it's just a
20:07
Speaker 2: it's not even a one to two punch, but it's
20:09
Speaker 2: been a one, two, three punch for them, and it's
20:12
Speaker 2: been and now you know, half I guess a four
20:14
Speaker 2: punch is that their customer base was kept out of
20:18
Speaker 2: the city, their customer base was incentive not to come
20:21
Speaker 2: into the city, and now they're.
20:24
Speaker 3: All being fired. So it's like, what is going on?
20:28
Speaker 2: I mean, the housing market in d C is going
20:30
Speaker 2: to take a die. I mean, it's just a bad,
20:31
Speaker 2: bad time. If you were you know, Mike's Barn and
20:34
Speaker 2: Grill on Fifteenth Street, Man, it's got to be a
20:37
Speaker 2: really tough tough time to be a restaurant operator in DC.
20:43
Speaker 1: Yeah, for sure, man, I you know, I like to
20:45
Speaker 1: get there at least once a year. Hopefully my Jose
20:48
Speaker 1: Andres restaurants are still alive from Well, next time I
20:51
Speaker 1: get down there.
20:52
Speaker 2: Man, Yeah, that I love his email, his Mexican place
20:55
Speaker 2: on seventh that is, I could just bring him backpack,
20:59
Speaker 2: sleeping bag, his move into that joint. I love that place.
21:02
Speaker 2: It's fantastic, fantastic. So yeah, so what do you what
21:06
Speaker 2: do you when you when you were talking to you know,
21:08
Speaker 2: corporate leaders, what are they saying to Michael about this space.
21:11
Speaker 3: Are they nervous or they think it's all.
21:12
Speaker 2: Gonna kind of pan out and it'll die down, or
21:16
Speaker 2: what's when you talk to your folks, you know, what
21:19
Speaker 2: do they think.
21:20
Speaker 1: In regards to which topic?
21:22
Speaker 3: Just ability to turmoil?
21:24
Speaker 2: You know, the outlook, economic outlook, No, no, no particular
21:27
Speaker 2: policy and I'm asking about but just to kind of
21:32
Speaker 2: the overall, you know, all this stuff settle down, they
21:34
Speaker 2: get back to running the restaurants or is it just
21:36
Speaker 2: going to be a wild ride here for the next
21:39
Speaker 2: couple of years.
21:40
Speaker 1: It's interesting, right because we came out of last year,
21:43
Speaker 1: which was such a rough year for restaurants, right, Like
21:46
Speaker 1: the slow down and consumer spendings typically typically hits restaurants first.
21:50
Speaker 1: And you've had that, and but after the election, people
21:55
Speaker 1: start spending more money and you know, I was expecting
22:00
Speaker 1: some strength here in the first half of the year
22:02
Speaker 1: as we were lapping some weak numbers, and the industry
22:04
Speaker 1: got it with the oldest January and fourteen years we
22:08
Speaker 1: had snow, we had the worst flu season in a
22:11
Speaker 1: very long time, and then now we have uncertainty about tariff.
22:15
Speaker 1: So we just got started on the earning season. Chipotle
22:21
Speaker 1: reported yesterday and that was interesting. They're talking about a
22:26
Speaker 1: week second quarter and I don't think that's really surprised anyone.
22:32
Speaker 1: But what is a little bit surprising is that their
22:35
Speaker 1: numbers are actually weaker than what we're seeing in April
22:40
Speaker 1: through black Box Intelligence data. So the data in April
22:45
Speaker 1: it seems to be getting better, you know, post you know,
22:50
Speaker 1: tariff for drama. So really there's just a lot of uncertainty,
22:56
Speaker 1: you know, in the markets, by the consumer were and
23:01
Speaker 1: about what's going to happen. I mean, I think Chipotle
23:04
Speaker 1: sounded pretty positive that the second half was going to
23:08
Speaker 1: be a lot better than the first half, but that's
23:10
Speaker 1: typically what a company does when they miss first quarter earning.
23:13
Speaker 1: So how much is it is there sincere belief versus
23:19
Speaker 1: you know, what they want to tell the street right now?
23:23
Speaker 2: Us surprise to see Chipotle's numbered down a little bit.
23:26
Speaker 2: I just get you know, you know, I don't have
23:28
Speaker 2: my little microcosm of the world as a reference point,
23:31
Speaker 2: but I live with in you know, ten or fifteen
23:34
Speaker 2: minutes to two Chipotle's, and every time I go by
23:36
Speaker 2: and there's there's plenty of people there. I mean, they're busy,
23:39
Speaker 2: they're busy properties, you know, So that kind of surprised
23:41
Speaker 2: me when I saw that.
23:42
Speaker 1: Yeah, I was surprised that everybody their their trend. So
23:45
Speaker 1: there's you know, we look, we go back, do we
23:47
Speaker 1: look at two year trends, six year trends. You know,
23:50
Speaker 1: their six year trend was down ten percentage points from
23:52
Speaker 1: the fourth quarter to the first. Their two year trend
23:56
Speaker 1: was down over seven hundred faces points from the fourth
23:58
Speaker 1: quarter of the first a material slowdown, right that that
24:02
Speaker 1: seven hundred basis points is an old weather and flew
24:06
Speaker 1: in the shift of easter, right, so there's something going on.
24:09
Speaker 1: We're trying to figure it out. Management pointed to, uh,
24:13
Speaker 1: you know, efforts to clean their stores better and uh,
24:17
Speaker 1: you know, provide their customers with friendlier service. So I
24:20
Speaker 1: wish I had some more for you. By the end
24:22
Speaker 1: of next week. I'll have a lot more data on that.
24:25
Speaker 3: On that ask you another question. You're interviewing me, and
24:29
Speaker 3: now I'm interviewing you.
24:30
Speaker 1: But but you're a great host, So let's let's do about.
24:34
Speaker 2: So so on the you know, I remember a million
24:37
Speaker 2: years ago when I had you know, headful of Hair
24:39
Speaker 2: and heartful of Hope and Darden, we would talk about
24:42
Speaker 2: weather and you know, quarterly earnings reports and we were
24:44
Speaker 2: all very caught. Isn't the weather obviously, But you know,
24:48
Speaker 2: fast forward all these years and delivery is such a big.
24:52
Speaker 3: Part of the business.
24:54
Speaker 2: Now, you know, is how how much of delivery and
24:59
Speaker 2: not having to go out to get food has softened
25:01
Speaker 2: the edges of some of that weather stuff or is it?
25:04
Speaker 3: Are they just haven't been connected? Are they connected?
25:06
Speaker 1: You would think it will. But last year we saw
25:10
Speaker 1: consumers do a lot more pick up versus the third
25:14
Speaker 1: party delivery just because the the you know, price difference
25:18
Speaker 1: is massive. But I think there is something to that.
25:22
Speaker 1: You know, what we wrote in our earnings preview for
25:24
Speaker 1: Dominoes was that we expect Dominoes to perform most quick
25:28
Speaker 1: service restaurants because when the weather's really cold and snowy,
25:32
Speaker 1: you know, you're more likely to order a pizza than
25:34
Speaker 1: than to leave the house. So and pizzas, you know,
25:38
Speaker 1: the most cost effective way to feed a family. It's
25:40
Speaker 1: got it's got a great price point.
25:42
Speaker 3: It's getting up there though.
25:43
Speaker 2: We my my, my, my little humble Costa is no
25:46
Speaker 2: stranger to pizza delivery.
25:48
Speaker 3: It's like normal on tiers.
25:49
Speaker 2: Hey Joe, Hey doing but you can it didn't take
25:53
Speaker 2: long to uh get a pretty expensive pizza water, so
25:55
Speaker 2: that the prices are going up on that pretty significantly.
25:58
Speaker 1: Yeah, man, we're seeing it. We're seeing it. So and
26:02
Speaker 1: it's it's going to be interesting to see what's what
26:05
Speaker 1: opens with the tariffs, right, Like, most of our companies
26:07
Speaker 1: don't have that exposure, which is great. And when it
26:11
Speaker 1: comes to the food side, most of the increases that
26:14
Speaker 1: the companies are going to suffer and be passed along
26:17
Speaker 1: with modest price increases or just swallowed by the company
26:21
Speaker 1: without much of an issue. You know, Chole was talking
26:24
Speaker 1: about about fifty bases point increase in perpetuity to their
26:29
Speaker 1: cost to the tariffs. You know, what's more interesting, I
26:34
Speaker 1: think is you know the point you made earlier about
26:36
Speaker 1: equipment and a lot of the component components of the
26:39
Speaker 1: equipment especially are manufactured in China, and so that's a
26:45
Speaker 1: little bit more of a concern. But that's you know,
26:49
Speaker 1: it's going to eat into returns on investment a little bit,
26:51
Speaker 1: but I don't think it's enough to be completely prohibitive, right,
26:55
Speaker 1: But we're going to continue to watch cash on cash
26:56
Speaker 1: returns and yeah, and it's going to be more of
27:00
Speaker 1: the same. The companies that will provide the best returns
27:03
Speaker 1: on investment are going to be the ones that grow
27:05
Speaker 1: the fastest. Right, money flows to where it's treated best.
27:08
Speaker 1: Has there been progress on paid lead?
27:11
Speaker 3: You know, paid leaves?
27:12
Speaker 2: Super interesting issue, you know, the one that comes to
27:17
Speaker 2: mind obviously, the voters in Missouri in November past Proposition A,
27:22
Speaker 2: which established a new paid leave regiment in the state.
27:29
Speaker 2: The Republicans went to in the legislature tried to basically
27:34
Speaker 2: terminated cancel the will of the voters. A Democratic filibuster
27:38
Speaker 2: in the Missouri Senate has kind of derailed that effort,
27:43
Speaker 2: and it looks like their law will take effect next
27:47
Speaker 2: week May one. It's slow but steady. I think they're
27:51
Speaker 2: only probably still thirteen twelve states that have a mandated
27:57
Speaker 2: paid leave. I see what's been interesting in that space,
28:02
Speaker 2: and there are a couple of spaces. Portable benefits is
28:04
Speaker 2: another one where the politics over the last couple of
28:08
Speaker 2: years have shifted tremendously and we've been, you know, over
28:12
Speaker 2: the last ten or fifteen years, the paid leave has
28:14
Speaker 2: kind of been a pet project of the Blue team,
28:17
Speaker 2: right and setting up paid leave laws, sickly laws, whatever
28:21
Speaker 2: it may be. And so you've got the big blue states,
28:23
Speaker 2: the Californias and the New Jerseys and the New York's
28:26
Speaker 2: and Illinois's Conneticuts with their paid leave law Maryland. But
28:31
Speaker 2: what you started to see is in states like Vermont
28:35
Speaker 2: and New Hampshire, a number of states Kentucky kind of
28:38
Speaker 2: leader where Republicans have kind of gained the upper hand
28:42
Speaker 2: on this issue and look at paid leave from a
28:46
Speaker 2: perspective of not necessarily being a government program per se,
28:51
Speaker 2: but opening up the private marketplace and leveraging insurance companies
28:55
Speaker 2: to provide policies that either an employer can pay in
28:59
Speaker 2: full or in part.
29:00
Speaker 3: Like any other benefit. And it's taken a lot of
29:03
Speaker 3: air out of the paid leave issue.
29:06
Speaker 2: And unless it's just in big solid blue states, right,
29:10
Speaker 2: but there are a number of red states that are
29:15
Speaker 2: either passed or in the you know, having the CENTERFIC
29:19
Speaker 2: conversation about a market based paid leave program that is
29:24
Speaker 2: not necessarily mandated, but employers are certainly incentive to go
29:28
Speaker 2: down this road through the tax code or whatnot. And
29:31
Speaker 2: like I say, if you're the labor community, you're Bernie Sanders,
29:34
Speaker 2: you're pulling your hair out about this because it's really
29:36
Speaker 2: taken the leadership of the issue. And as it referenced earlier,
29:41
Speaker 2: it jives in nicely with their overall strategy of trying
29:44
Speaker 2: to make more inroads with working class voters and so forth.
29:48
Speaker 2: And I mean, the Democrats have essentially fumbled, in my opinion,
29:52
Speaker 2: my humble opinion, have fumbled the paid leave ball, and
29:56
Speaker 2: the Republicans have picked it up and run.
29:58
Speaker 3: Their own direction with it. But they're the one with
30:01
Speaker 3: the ball now.
30:01
Speaker 2: And so now the Democrats are reacting to what an
30:05
Speaker 2: enlarge measure are common sense approaches to paid leave, and
30:09
Speaker 2: it's driving them kind of crazy, if you will, same
30:11
Speaker 2: thing on portable benefits that we just saw a portable
30:13
Speaker 2: benefits legislation signed in the law in Tennessee and Alabama.
30:17
Speaker 2: And you know, who would have thought the Alabama legislature
30:19
Speaker 2: would be out front on creating benefits packages for as
30:23
Speaker 2: many employer employees as possible, right, I mean, it's just
30:26
Speaker 2: that the Blue team has squandered a bunch of these
30:28
Speaker 2: issues they've traditionally kind of owned. So it's been super history.
30:32
Speaker 2: I know, paid leave and portal benefits are very different,
30:35
Speaker 2: but one sits inside the other. That's super They're related obviously,
30:38
Speaker 2: so I spect you'll see more of that. We had
30:42
Speaker 2: some paid leave legislation I think for the fifth year
30:44
Speaker 2: in a row in New Mexico ran out of gas.
30:49
Speaker 2: I think the puck has just gone to a different
30:51
Speaker 2: part of the rink on this issue. And if Democrats
30:54
Speaker 2: want to do the New York style California style mandated
30:58
Speaker 2: benefit program, it's it's they're kind of run out of
31:02
Speaker 2: states that are amenable to that anymore, so they can
31:06
Speaker 2: have to they have to change the direction on this issue.
31:09
Speaker 3: So I find that issue pretty fascinating as well.
31:12
Speaker 1: Yeah, that's really interesting trying to leverage the private market
31:15
Speaker 1: and the tax code to incentivize employers.
31:17
Speaker 2: And yeah, and you would think when we're back to
31:20
Speaker 2: you know, pre COVID numbers of basically four percent unemployment
31:23
Speaker 2: and employers employees employers are back to competing for workers.
31:28
Speaker 2: Something like that is very attractive, right that they can
31:31
Speaker 2: now play and have some leverage over creating a benefit
31:35
Speaker 2: package that works for their employee at their their workforce,
31:37
Speaker 2: as opposed to this kind of paying into some fund
31:42
Speaker 2: that may stay in the paid leave fund. But we
31:45
Speaker 2: see many states you pay into one fund, it becomes
31:47
Speaker 2: the highway fund over there when the buddy is tight,
31:49
Speaker 2: you know what I mean. So it's it's actually a
31:52
Speaker 2: much more discipline approach and involved.
31:54
Speaker 3: In the market.
31:54
Speaker 2: And I think Republicans are kind of changing the game
31:57
Speaker 2: on that on that issue.
31:58
Speaker 1: Well, and I learned from your odd Pepperdine did a
32:01
Speaker 1: study on the fast acts impact in California and what
32:05
Speaker 1: did it find that they should listen to you?
32:09
Speaker 2: Well, I think it's you know, you know, when when
32:13
Speaker 2: the proponents of these types of policy proposals, whether it's
32:18
Speaker 2: minim wage increases or workforce standards boards, you know, you
32:22
Speaker 2: have no idea how it's really going to play out
32:24
Speaker 2: in the real world, you know, and they come out
32:26
Speaker 2: with these projections that this may happen and that may happen,
32:30
Speaker 2: and there's always initial reaction, there's always disruption.
32:35
Speaker 3: Maybe maybe employers don't.
32:38
Speaker 2: You know, in an industry like fast food where there's you know,
32:40
Speaker 2: two hundred percent attrition, maybe they just don't replace people
32:43
Speaker 2: as fast. They're nervous about what's going on. But my
32:45
Speaker 2: point being, it takes a year or two or maybe
32:48
Speaker 2: three for enough data to come back where it becomes
32:52
Speaker 2: statistically meaningful. Right, And what we're starting to see in
32:56
Speaker 2: the last three or four months California, you know, d C,
33:01
Speaker 2: these other areas, Chicago, you know, is is real data
33:07
Speaker 2: about what does this mean for employment? Unemployment benefits. You
33:11
Speaker 2: measure that, you measure new restaurants, starts, you measure applications
33:14
Speaker 2: for permits on liquor like whatever it may be, and
33:17
Speaker 2: you can start to get a picture of the impact
33:20
Speaker 2: of what it's happening. But again is that there's a
33:22
Speaker 2: couple of year lag and now we're seeing data, report
33:25
Speaker 2: after report, every report coming in to saying whoa this is,
33:30
Speaker 2: This has real rule implications and what Pepperdine And of
33:34
Speaker 2: course I don't know if you've ever been to Pepperdine,
33:36
Speaker 2: but it's one of those beautiful campuses overlooking Malibu. I
33:39
Speaker 2: don't know how anybody could study there, but so but
33:43
Speaker 2: my point being that you know, while growth while there
33:48
Speaker 2: was still growth in job categories in California, while there
33:53
Speaker 2: was still growth in quick service growth sector throughout the country,
33:58
Speaker 2: there was significant shrinkage in the in the fast food
34:02
Speaker 2: workforce in California. It went against national norms and national
34:06
Speaker 2: data points, and so it was really it was really
34:09
Speaker 2: easy to tie this policy outcome to that that data outcome,
34:14
Speaker 2: if you will, And I think you're going to see
34:17
Speaker 2: a lot more of that. We have a new head
34:19
Speaker 2: of research at the National Restaurant Association just announced this week,
34:23
Speaker 2: and I think you know, he's coming on board a
34:24
Speaker 2: lot of great time where there's now meaningful data coming
34:28
Speaker 2: out of DC and meaningful data coming out of California.
34:31
Speaker 2: So I think you're going to see a lot more
34:32
Speaker 2: of that in the industry. Be aggressive, and it's coming
34:34
Speaker 2: at a good time. Obviously, we went to talking about
34:37
Speaker 2: New Jersey earlier. It's now really easy to kind of
34:40
Speaker 2: show New Jersey and the Minneapolis Wage Standards Board idea
34:43
Speaker 2: they're playing with there, that there are actual implications.
34:46
Speaker 3: So just there's just a lag time.
34:48
Speaker 2: It's it's a two or three year lag time, so
34:49
Speaker 2: that data becomes meaningful and that's what we're finding now.
34:52
Speaker 2: And Pepperdine jumped on to some other end of the
34:55
Speaker 2: other thing tanks in California.
34:57
Speaker 3: That that did more How do I say this without
35:01
Speaker 3: impugning that that.
35:04
Speaker 2: Rightly extrapolated trends to come up with that those those
35:08
Speaker 2: those those outcomes, but it was a little more speculative.
35:11
Speaker 2: Like the Pepperdine study is like data right, and it's
35:15
Speaker 2: the first one in California, and I don't think it
35:17
Speaker 2: will be the last Biolama shots. So you know, our
35:20
Speaker 2: our our our task as an industry is how do
35:23
Speaker 2: we take that energy, that narrative, that data and make
35:26
Speaker 2: sure that seven thousand state legislators in the country know this,
35:31
Speaker 2: and five hundred and thirty five members of Congress know this,
35:33
Speaker 2: and fifty governors and all that kind of stuff.
35:35
Speaker 3: That's the that's the that's the NRA's job.
35:37
Speaker 1: So yeah, from what I've heard, there was a lot
35:40
Speaker 1: of kiosks being installed in California.
35:43
Speaker 3: Yeah.
35:44
Speaker 1: Oh thanks again for doing this man, I'm a big
35:46
Speaker 1: fan of your work. Where can listeners go to learn
35:49
Speaker 1: more about aligned public strategies and find the Working Launch podcast?
35:52
Speaker 2: Well, the Working Launch Podcast, Thank you for the plug
35:56
Speaker 2: is produced by Restaurant Business Magazine, so you can find
36:00
Speaker 2: it on their platform obviously all the Apples and Spotify
36:04
Speaker 2: platforms as well, and you can go to Align Public
36:07
Speaker 2: Strategies dot com. That's where we are and happy to
36:11
Speaker 2: help answer any questions and wax on poetically about the
36:15
Speaker 2: future of the restaurant.
36:16
Speaker 3: Energies VISE are the public policy and politics.
36:19
Speaker 2: So I appreciate Michael being on your respected podcast. It's
36:25
Speaker 2: find to listen to you. I learned more about the
36:28
Speaker 2: business and the numbers, and I'm not a numbers guy.
36:30
Speaker 2: I'm I'm the right brain guy, but I your podcast
36:35
Speaker 2: makes me makes me smart, So I appreciate.
36:37
Speaker 3: I appreciate all you do.
36:39
Speaker 1: Yeah, you got it, man, I appreciate that, and it's
36:42
Speaker 1: always fun speaking with you. Man. I want to thank
36:45
Speaker 1: the audience for tuning in. If you liked our discussion,
36:47
Speaker 1: please share with your friends and colleagues. Check back soon
36:50
Speaker 1: for an interview with Nick Kenner, the founder and CEO
36:54
Speaker 1: of Just Salad.