Speaker 1: All right, We're back here on another episode of the
Speaker 1: Restaurant Report, and today is going to be a fun
Speaker 1: one because I've got Michael Halen with my great friends
Speaker 1: over here at Bloomberg coming in as one of the
Speaker 1: top analysts in the industry. Michael, how are you.
Speaker 2: I'm doing well. How are you, Paul?
Speaker 1: It's been good. I think a lot's happening in the
Speaker 1: space right now, more so Newswise, which we're going to
Speaker 1: be covering some stuff on Starbucks. We're going to hit
Speaker 1: shakeshack today, talk about the healthy category and also take
Speaker 1: a look at where money is going in the space.
Speaker 1: So everybody stick around, we'll be right back. All right,
Speaker 1: I'm back here with Michael coming in from Bloemberg Intelligence.
Speaker 1: Is it intelligence or do you guys have a different
Speaker 1: category with all the analysts we talked to some of
Speaker 1: the other guys and it's Bloomberg Intelligence.
Speaker 2: Yeah, that's what we call the department.
Speaker 3: But that's our research department, Compasses, equities, corporates, you name.
Speaker 2: It's all into that umbrella.
Speaker 1: So when you look at Michael, you're covering the space
Speaker 1: right now. Talk to me, first of all, what is
Speaker 1: your beat? Are you covering all publicly traded where they're
Speaker 1: going in terms of trends, cycles, how their revenues are doing.
Speaker 1: Give me kind of the one to one.
Speaker 3: Yeah, we cover seventeen of the largest publicly traded restaurant companies,
Speaker 3: US Foods and Cisco, and we're analyzing those companies individually,
Speaker 3: trying to project out earnings over the next couple of years,
Speaker 3: and writing research on how we think their business is
Speaker 3: going to go moving forward. And then you know, we
Speaker 3: also do a good bit of industry level research, so
Speaker 3: we talk a lot about trends and sales and margins
Speaker 3: and all that kind of stuff.
Speaker 1: Well, we got to talk about AI because this is
Speaker 1: something that we're seeing a lot of integration into major brands,
Speaker 1: including the supply chain as well, and the potential future
Speaker 1: here for the restaurant industry. When you're on the street
Speaker 1: right now, is is this a big deal in the
Speaker 1: restaurant industry yet or is it still kind of arms
Speaker 1: length of people trying to discover what's going on.
Speaker 3: You know, I don't think it's a big deal just
Speaker 3: yet because I don't think we've seen all the benefits.
Speaker 3: We've seen some benefits, I believe, you know, there's been
Speaker 3: a lot of work on big data, which is I
Speaker 3: guess was AI before it was called AI, right, And
Speaker 3: there was a lot of initiatives in terms of.
Speaker 2: Theoretical versus actual.
Speaker 3: Food programs as well as labor programs and sales projecting algorithms, right,
Speaker 3: and those are being improved by AI machine learning right now.
Speaker 3: And so that's the benefit i'd say we're seeing right
Speaker 3: now moving forward, though we expect much bigger benefits. You know,
Speaker 3: one that's probably really close to benefiting a company at
Speaker 3: Chipotle's HR program, right, because that's going to free up
Speaker 3: the managers to do a lot less interviewing, It's gonna
Speaker 3: it's going to free up a lot more of their
Speaker 3: time to touch the guests and make sure that the
Speaker 3: restaurants are running smoothly and and and focus on their
Speaker 3: day to day, which they personally they'd rather be focused on, right.
Speaker 3: And so that that's one that that should help Chipotle
Speaker 3: pretty soon. And then you know, we have stuff that's
Speaker 3: you know, still quite expensive and more down the line,
Speaker 3: but has you know definitely are are very interesting, right.
Speaker 3: And so sticking with Chipotle because they're on the bleeding edge,
Speaker 3: you know, they have the second make line, the automated
Speaker 3: second make line that's underneath the counter for to go orders,
Speaker 3: and uh, they're testing that and in quite a quite
Speaker 3: a few stores. You know, they tried the automated chip fryers.
Speaker 3: Those those didn't seem to work out as well. But
Speaker 3: the autocado the machine that cuts course appeals avocados for
Speaker 3: the guacamole, seems to be working pretty well. That's also
Speaker 3: being tested in a lot of stores. You know, places
Speaker 3: like Jack in the Box. They have these AI fryars
Speaker 3: and these automated drink machines that they're working on. But
Speaker 3: right now, all that technology is pretty expensive, right and
Speaker 3: so you know, as that technology costs decline and as
Speaker 3: minimum wages continue to rise, eventually they'll be an ROI
Speaker 3: on those things and they'll be more ubiquitous in the
Speaker 3: restaurant industry, but not so much right now.
Speaker 1: Well, okay, so you mentioned Chippotle. We got to go
Speaker 1: there for a second because obviously briannkel he jumps over
Speaker 1: to Starbucks. We'll talk about that in a second. But
Speaker 1: boat Rice got about right taking over the lead there
Speaker 1: looks like it's going to be a you know, a
Speaker 1: permanent position. What do you think about the management team
Speaker 1: right now, are you consistent with most of what the
Speaker 1: industry is saying is that this is a good cycle
Speaker 1: for Chipotle's team to kind of lead through this next phase.
Speaker 2: Yeah, I think so.
Speaker 3: You know, we we thought Scott boat right was the
Speaker 3: right man for the job. We were happy to see
Speaker 3: that he got the full time tag. They they dropped
Speaker 3: the interim tag on them, and you know, we we
Speaker 3: think that was the right move. They also, you know,
Speaker 3: last year they kind of quietly gave senior management team
Speaker 3: members pretty big raises and extended their contracts. And you know,
Speaker 3: I think part of that was fear that Brian Nicchol
Speaker 3: could try to poach them poach yeah, right, And so yeah,
Speaker 3: Brian Nichol seems to be a popular guy.
Speaker 2: A lot of people want to go work with him.
Speaker 3: So so yeah, by keeping that senior management team uh intact,
Speaker 3: I think was one hundred percent the right move. When
Speaker 3: you have a company that's going, you know, doing so
Speaker 3: well and outperforming for so long, you don't want to
Speaker 3: upset the apple cart, right, and so yeah.
Speaker 2: We think we think it was it was the right
Speaker 2: to keeping.
Speaker 1: A guy the ship on the rails. Well, the good
Speaker 1: thing there if you look at Chipotle, they've continued to
Speaker 1: experiment with new stuff, and I think that, to your point,
Speaker 1: is what they've done with some of their AI automation
Speaker 1: with HR. We just saw that story last week we
Speaker 1: report on it. But the interesting thing to me is
Speaker 1: that usually showcases that the brand has an appetite for
Speaker 1: some things like that that can be very you know,
Speaker 1: forward thinking. So good stuff for Chipotle. I think in general,
Speaker 1: they're probably one of the leaders out there in the market.
Speaker 1: Let's jump over to Starbucks for a second. I'll bring
Speaker 1: up the story Starbucks laid off eleven hundred corporate workers. Now,
Speaker 1: of course, this is Brian Nickel, the CEO, and this
Speaker 1: is six point nine percent of the non retail staff.
Speaker 1: That's a significant number there. So first of all, why
Speaker 1: did he do it? And does this change anything on
Speaker 1: the Starbucks forefront? What's your opinion?
Speaker 3: No, this is pretty unexpected from where I sit. You know,
Speaker 3: when when Brian Nichol took the job, he took over
Speaker 3: for a management team that struggled mightily, tried a lot
Speaker 3: of different tactics, didn't have a lot of discipline, you know,
Speaker 3: And one of the things that we right off the
Speaker 3: bat was that he was going to bring in accountability,
Speaker 3: a culture of accountability and transparency, right and if for
Speaker 3: people that weren't pulling their weight, you know, they should
Speaker 3: be worried. And he started with the senior management team. There,
Speaker 3: there was some changes right away at the top of
Speaker 3: the organization, and now it's making it, you know, down
Speaker 3: a little bit further into the other members of the
Speaker 3: corporate staff. But listen, this is a team that's been
Speaker 3: underperforming for quite some time, right, and so you know,
Speaker 3: these big organizations, it's easy for employees to get lost, right.
Speaker 3: And you know, you were joking around before we started this,
Speaker 3: but you know, you know, maybe they were influenced by
Speaker 3: the Dosee team try to run the operations a little
Speaker 3: bit more industry, right, And you know, I think I think,
Speaker 3: you know, he he wants change, He wants his people
Speaker 3: in there, like any good CEO does, especially with one
Speaker 3: like him, with his track record, he'll be able to
Speaker 3: attract employees, uh easily.
Speaker 2: So yeah, no surprise from where we said.
Speaker 1: Well, listen, we've seen the industry blue and brands let
Speaker 1: go seventeen percent of their support center workforce just last week.
Speaker 1: Denny's also said earlier in the month that it had
Speaker 1: undertaken some corporate layoffs. Then we saw Dine Brands terminated
Speaker 1: about nine percent of its corporate workforce. So this seems
Speaker 1: to be a consistent theme that's going throughout the industry.
Speaker 1: Do you think we're going to see more throughout twenty
Speaker 1: twenty five?
Speaker 3: Well, I would say what the common thread between those
Speaker 3: four companies has been seam source of sales underperformed. It's
Speaker 3: pretty vast underperformance last year, right, And so you know
Speaker 3: when you have chains that were putting up negative seam
Speaker 3: source sales, you know the revenue bas is shrinking. You know,
Speaker 3: this is not uncommon, right, And so I don't think so.
Speaker 3: I think I've heard. I think we've heard most of
Speaker 3: the announcements this year, because if you're going to do this,
Speaker 3: you want to do it earlier in the year so
Speaker 3: you get that benefit, you know, sooner, right in terms
Speaker 3: of lower SG and A. So I think we've heard
Speaker 3: most of the announcements for this year. I don't think
Speaker 3: that the companies that are performing really well are looking
Speaker 3: to cut headcount at the moment, right. It's the companies
Speaker 3: that had a really rough twenty twenty four that are
Speaker 3: looking to do this.
Speaker 1: Yeah, I want to bring up a story. You mentioned
Speaker 1: same store sales, and of course when you bring up
Speaker 1: that terminology, you cannot go without mentioning this right here,
Speaker 1: which is Chili's thirty one point four percent same store
Speaker 1: sales increase in Q two. What in the world was
Speaker 1: going on here at Chili's that would cause this kind
Speaker 1: of thing? Have you seen anything in terms of your
Speaker 1: research that has indicated this kind of growth for Chili's.
Speaker 3: Well, we didn't protect thirty percent. I'll tell you that
Speaker 3: nobody has, I mean the most. And I didn't know
Speaker 3: we were going to talk about this. Did you just notice
Speaker 3: my head?
Speaker 2: I just sell that, so I say, I got to
Speaker 2: bring it up. So yeah, I mean it's been incredible.
Speaker 3: I mean forever it's been the Dominoes turnaround, right like
Speaker 3: our pizza stinks, We're sorry, will make it better. And
Speaker 3: you know they did like a ten percent, and now
Speaker 3: Chile's now is compon thirty percent over a six and
Speaker 3: a half last year, which.
Speaker 2: Is crazy, something I've never seen.
Speaker 3: I don't know if it's ever happened for a mature,
Speaker 3: established brand of this size that's been around this long.
Speaker 3: Absolutely incredible. Kevin Hawkman and his team has done a
Speaker 3: phenomenal job. And it's a similar playbook. Uh you know
Speaker 3: that Brian Nicols is looking to execute in Starbucks. Right,
Speaker 3: It's like nail the operations, right. They right off the bat,
Speaker 3: they simplified the menu, right. They actually took discounts away,
Speaker 3: you know, because because constant discounting is basically just telling
Speaker 3: your your customers that the fluid rights on the menu, yep, right,
Speaker 3: And so they removed the discounts, which you know was
Speaker 3: a bold move to do last year in the midst
Speaker 3: of a you know, restaurant.
Speaker 1: Recession, casual dining sector.
Speaker 3: Yeah, yeah, one hund so and and shrinking the menu
Speaker 3: and bringing backbusters and putting more labor into the stores,
Speaker 3: getting that experience, right, nailing that experience, and then from
Speaker 3: there really pressing the gas on the marketing side. And
Speaker 3: their their marketing team is the best in the business.
Speaker 3: I mean, they're absolutely crushing it on social media, through TikTok,
Speaker 3: through their TV advertising. They have ads ads, you know,
Speaker 3: taking shots at QSR and and and the high prices
Speaker 3: that qs are.
Speaker 2: They're doing really well right on TikTok.
Speaker 3: You know, they're changing the menu based based on some
Speaker 3: of the things that they're their customers are doing on
Speaker 3: TikTok and they're paying attention.
Speaker 2: It's very reactive.
Speaker 1: Yeah, very reactive. Brand, somewhat nimble, seems to be somewhat nimble.
Speaker 1: Do you think this is all leadership driven or do
Speaker 1: you feel like maybe there is a new wave of
Speaker 1: talent starting to make their way into these brands right
Speaker 1: now and we're starting to see the results of this.
Speaker 2: Well. Good leaders bring good talent with them.
Speaker 3: Kevin Hockman brought in George Felix and Jesse Johnson and
Speaker 3: many of the people he had worked with in the
Speaker 3: past at Young Brands and.
Speaker 2: Taco Bell as well.
Speaker 3: So no, he's brought some great talent in there with him,
Speaker 3: and this is a brand that people used to love
Speaker 3: exactly right, And I think that's what you know. I
Speaker 3: got a chance to sit down with Kevin a couple
Speaker 3: of weeks ago, and he said he was like, this
Speaker 3: was a great brand once apon of time, you know,
Speaker 3: and I just saw that there was a lot of
Speaker 3: potential here. And I told him I loved your brand
Speaker 3: twenty years ago, and then about ten years ago, my
Speaker 3: son loved your brand when he was little and he'd
Speaker 3: always want to go there. And I was like, oh, man,
Speaker 3: I don't know to chilies, you know, but it's changed
Speaker 3: over the last three years. They've leaned pretty hard into
Speaker 3: the stuff that's made Chilies great, you know, the differentiation,
Speaker 3: the different menu than the other casual dining competitors, really
Speaker 3: leaning more into that Southwestern cuisine. And yeah, man, it's
Speaker 3: been an incredible, incredible result.
Speaker 2: Yeah.
Speaker 1: I think they also because this is something that my
Speaker 1: wife brought up not too long I said, Honey, we
Speaker 1: got to go to a Chili's. It was after I
Speaker 1: saw these numbers. I haven't been to one in at
Speaker 1: least three years, and I went in for the first
Speaker 1: time in a long time. And first of all, the
Speaker 1: one thing I noticed, more so than anything, was their
Speaker 1: customer service had really elevated, and the greet was better,
Speaker 1: the service speed was better, the check back was better.
Speaker 1: They made sure all the entrees were right, and they
Speaker 1: then they asked if we liked them, and I was like, Okay,
Speaker 1: this is a different kind of experience at a casual
Speaker 1: dining restaurant, so I kind of see maybe this has
Speaker 1: started to seep down into their operations. Which is cool
Speaker 1: to see a brand like Chili's which is obviously. I mean,
Speaker 1: this is kind of these kind of numbers and performance
Speaker 1: pretty amazing.
Speaker 3: There's just a lot of low hanging through right like
Speaker 3: that the operations twenty years ago, this was Chili's right
Speaker 3: and now they're exactly getting back getting back to that,
Speaker 3: which is great to see.
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Speaker 1: you there. We got to hit on Shakeshack. They're opening
Speaker 1: up their kitchen innovation lab. This is coming up in
Speaker 1: Atlanta this year, so it's going to test whip meant layout.
Speaker 1: So I'm kind of interested to see if they've got
Speaker 1: maybe a new layout planned. But also they're going to
Speaker 1: improve on processes and optimizations. I don't know where shakeshack
Speaker 1: would really I mean, because their speed is pretty good
Speaker 1: inside the restaurant itself. But it's good to see an
Speaker 1: innovation lab starting, you know, in a major brand like Shakeshak.
Speaker 1: Anything that you think this will do in terms of
Speaker 1: improving what Shakeshak is bringing to market.
Speaker 3: You're bringing up all of the companies we're most excited
Speaker 3: about this shift. So this has been this has been fun, Paul.
Speaker 3: So there is some low hanging fruit here as well.
Speaker 3: And so when Shakeshak was created, it was created by
Speaker 3: the Union Square Hospitality Group, and it really has a
Speaker 3: fine dining type set up in the sure not how
Speaker 3: you should be running a fast, casual, quick service burger joint.
Speaker 3: And so there needs to be work done on the
Speaker 3: kitchen layout. And what what new CEO Rob Lynch has
Speaker 3: talked about is he wants a line that you know,
Speaker 3: starts on one end of the restaurant and ends at
Speaker 3: at the at the drive through window, right. And so
Speaker 3: they want to they want to improve their speed of
Speaker 3: service in the in the kitchen, uh, And then that's
Speaker 3: going to tie in pretty closely to the drive through, right.
Speaker 3: Rob Lynch is a big believer in the drive through.
Speaker 3: But wait times have been you know, pretty poor, and
Speaker 3: it makes sense, right when you're making food to orders
Speaker 3: drive through is going to be slow, right, and so
Speaker 3: they're going to have to make some some changes to their.
Speaker 2: Drive through processes.
Speaker 3: But he's a big believer on it, and so although
Speaker 3: it hasn't been very incremental just yet, you know, he
Speaker 3: believes that that this is going to be a huge
Speaker 3: driver for this company. And you know, these are the
Speaker 3: two areas that that innovation kitchen is going to focus on.
Speaker 2: First, well, if.
Speaker 1: They get into a scenario where they can reduce some
Speaker 1: of the build out costs, because that that will open
Speaker 1: up maybe some real estate opportunities for them, which I
Speaker 1: think we'll expand maybe give some venue to expand the
Speaker 1: brand itself. And if you look at where they are
Speaker 1: right now in terms of their growth and what they
Speaker 1: could bring to the market. Back to your point is
Speaker 1: drive through seems to be one of the growing sectors
Speaker 1: for Shakescheck and it's a very good competitive edge for
Speaker 1: them if they can actually speed it up. So that
Speaker 1: will be a big one for Lynch if he pulls
Speaker 1: it off. I'm going to look at this one in
Speaker 1: a few months and see if it's actually had some
Speaker 1: kind of impact on drifting. We get new shake checks
Speaker 1: down here, in Florida where am we finally got one
Speaker 1: out very close to our studio here and with your
Speaker 1: drive through not too long ago, and exactly the same
Speaker 1: problem is that made to order you know, spends that
Speaker 1: drive through time up to around seven to nine minutes,
Speaker 1: and that is just unfortunately too long for most consumers.
Speaker 3: Yeah, yeah, yeah, And it's you know, listen, the dining
Speaker 3: room and the drive through the they work good together
Speaker 3: in terms of easing pressure on one versus the other, right,
Speaker 3: and maybe the opposite for Shakeshack.
Speaker 2: So whereas us are you know, people use the dining
Speaker 2: room only when the drive through line is too long.
Speaker 2: Well maybe at Shakeshack it's the opposite.
Speaker 3: If the dining room's too busy, I'll use the drive
Speaker 3: through lean right, But they can use pressure on the
Speaker 3: other channel, which is nice to have.
Speaker 1: They've done a good job, I think with the design
Speaker 1: of their restaurants too. In general, most of the news stores,
Speaker 1: you know, they all kind of have unique footprints. I'm
Speaker 1: intrigued to see what Lynch comes up with because of
Speaker 1: his background and how he can you know, increase throughput,
Speaker 1: because I like this whole idea around the line really
Speaker 1: maximizing what drive through speed could be. But with that
Speaker 1: that's probably going to open up and they mentioned it
Speaker 1: in the article, is going to open up a lot
Speaker 1: of opportunity in terms of a kitchen equipment, which could
Speaker 1: really get intriguing if they implement some of this new
Speaker 1: advanced you know tech that seems to be coming in
Speaker 1: from the kitchen industr in terms of you know, back
Speaker 1: of house stuff, so a lot of low hanging back
Speaker 1: to your point, a lot of low hanging fruit. Let's
Speaker 1: get into the healthy eating category, all right, So this
Speaker 1: has been a category that has been winning for years,
Speaker 1: you know, I'd say easily the last decade protein bar
Speaker 1: courses talking about this. But I'm more intrigued with your
Speaker 1: opinion on, first of all, how and if healthy can
Speaker 1: truly maintain its current market position or do you feel
Speaker 1: like we're going to start to see a little bit
Speaker 1: of a shift, because if you look at shakesheck covet
Speaker 1: to a certain extent, I would say a little bit
Speaker 1: more healthy, but still very you know, very decadent in
Speaker 1: the sense that you really get really great food there.
Speaker 1: Do you think healthy as maybe run its course or
Speaker 1: do you feel like it's still got an opportunity.
Speaker 3: Here now it still has an opportunity because gen Z
Speaker 3: loves it.
Speaker 2: Right.
Speaker 3: Gen Z is is you know, it's a small, uh
Speaker 3: demographic cohort, but they are the trendsetters right now. And
Speaker 3: chains that are attracting large numbers of gen Z seem
Speaker 3: to be outperformed. They are outperforming so and they a
Speaker 3: lot of them want you know.
Speaker 2: Healthier food.
Speaker 3: Right, it's going to continue to do better on the coasts.
Speaker 3: I think Middle America is going to take longer, I think,
Speaker 3: to adopt some of these healthier eating habits, but not
Speaker 3: we We think this is here to stay.
Speaker 1: You mentioned u gen Z and the healthy eater and
Speaker 1: eat healthier eating habits, and then I look at you know,
Speaker 1: some of the categories that are big, you know, really
Speaker 1: big market share for a lot of these casual dining
Speaker 1: which has been you know, the liquor business and the
Speaker 1: beverage business. Now you're talking or we hear more and
Speaker 1: more of gen Z is going to where uh you know,
Speaker 1: the mocktail concept. Do you think that's going to split
Speaker 1: up or start to adjust product mix and some of
Speaker 1: those day parts for some of these casual dining chains.
Speaker 1: Since we're seeing some of that healthiness, maybe seep into
Speaker 1: other brands.
Speaker 3: Uh yeah, Texas Roadhouse just announced a mocktail program, right,
Speaker 3: so this is this is here and and and I
Speaker 3: don't think the the push you know, the lower alcohol
Speaker 3: consumption is just gen Z, right, because a lot of
Speaker 3: go across Yeah, a lot of gen Z members are
Speaker 3: are you too young to drink?
Speaker 2: Anyway?
Speaker 3: But you know, when I was at you know, you
Speaker 3: know these restaurant conferences.
Speaker 2: People really like to get after it.
Speaker 3: And I wasn't drinking at the last ICR conference, and
Speaker 3: there was a lot of people that I know that
Speaker 3: I'm friendly with or friends with that were not drinking.
Speaker 3: They were all partaking in dry January. So this is
Speaker 3: you know, very much a headwind for full service dining
Speaker 3: establishments casual dining, right, And so the mocktail program is smart.
Speaker 3: You can offset some of that loss with some fancy,
Speaker 3: expensive non alcoholic drinks.
Speaker 2: Yeah, there you go.
Speaker 1: Well, I think, you know, if it's hitting the right
Speaker 1: vein in terms of how some consumers are kind of
Speaker 1: going in on this. Typically you see those kind of
Speaker 1: things or you know, the calorie counters in the beginning
Speaker 1: always you know, kind of resolution based. But it's starting
Speaker 1: to last and it seems though the people we've talked to,
Speaker 1: the strategies are working in terms of creating a lot
Speaker 1: more unique menu offerings, doing like energy infused stuff in
Speaker 1: some of the categories. Now we're starting to see some
Speaker 1: more savory elements, so it's getting very creative, which I
Speaker 1: think could blend into a new opportunity there. Back to
Speaker 1: your point on healthy eating that will be interesting to watch.
Speaker 1: I want to talk about funding because this is a
Speaker 1: story that surprised me that came across Nation's Restaurant News
Speaker 1: and Just Salad, which for those of you listening in,
Speaker 1: this is a I would say a medium sized chain,
Speaker 1: not a massive chain, but they drew in about two
Speaker 1: hundred million in funding on a round that was multi
Speaker 1: lad here. But the bigger question to me, Michael, is
Speaker 1: when you look at where the market is right now
Speaker 1: on these medium sized regional chains and or maybe some
Speaker 1: of these chains like a Chipotle, or not a Chipotle,
Speaker 1: but like a Chili's or some of the other emerging
Speaker 1: casual dining concepts that could be going out after cash,
Speaker 1: do you think this is something that is kind of
Speaker 1: a one offer. Do you feel like there's more money
Speaker 1: opening up to the market right now.
Speaker 3: We think there's more money opening up backup restaurant finance.
Speaker 3: In November, a lot of the bankers that we know
Speaker 3: had become more bullish about twenty twenty five versus twenty
Speaker 3: twenty four. There's a lot of pent up demand for deals.
Speaker 3: Twenty twenty four. Obviously, we're in that restaurant recession. It
Speaker 3: was a tough year for valuations and deals, and you know.
Speaker 2: Buyers and sellers had to get really creative.
Speaker 3: But things that seem to be opening up, and you know,
Speaker 3: seam store sales have improved. I know they've been kind
Speaker 3: of bumpy, especially here in February with some of the weather,
Speaker 3: but they have improved since before the election. And then
Speaker 3: I think we have some really you know, I know,
Speaker 3: we have some easy uh saame sort of sales comps
Speaker 3: to lap and so you know, top lines should be
Speaker 3: getting better here. We have asset prices near all time highs,
Speaker 3: which should boosts you know, middle and upper income consumer spending,
Speaker 3: and so, you know, I think there's a brighter outlook
Speaker 3: right now, and we'd expect a lot more deals to
Speaker 3: get done this year than last year.
Speaker 2: For sure.
Speaker 1: What are you looking at for twenty twenty five that
Speaker 1: you guys, when you're researching all these brands and you
Speaker 1: see these opportunities that seem to be starting to bud
Speaker 1: for some of these chains, do you think we're going
Speaker 1: to see some more breakouts like what we saw with
Speaker 1: Chili's in twenty twenty five for some other brands.
Speaker 3: Well, you know, we wrote in our year ahead out
Speaker 3: look was that, you know, we're really where we're seeing
Speaker 3: a lot of movement and success is with like just
Speaker 3: nailing the operations and then marketing right. And so that
Speaker 3: what we've seen Chili's do and and continue to do,
Speaker 3: and actually now the same store sales are accelerating. There's
Speaker 3: some companies that have management changes that we think can
Speaker 3: use a similar playbook to boost their same source sales.
Speaker 2: And we've talked about all but one.
Speaker 3: We talked about Starbucks, we talked about Shake Shack, we
Speaker 3: talked about and then it was uh.
Speaker 2: Cracker Barrel. Cracker Barrel is the other one.
Speaker 3: We think Cracker Barrel has a pretty they have a
Speaker 3: new ceou. We think she's doing a phenomenal job. We
Speaker 3: think she has a great plan for boosting you know,
Speaker 3: same source of sales and traffic going forward. And uh,
Speaker 3: that's another company we think has a pretty good opportunity.
Speaker 1: Do you think that demographic has shifted for Cracker Barrel
Speaker 1: some or or is it just there maybe their approach
Speaker 1: toward their own business itself of just remodeling it to
Speaker 1: where it's going to get better in terms of performance. Yeah.
Speaker 3: So the food, you know, the food innovation, you know,
Speaker 3: is going to be a big one this year to
Speaker 3: help draw in.
Speaker 2: You know, draw in customers.
Speaker 3: But it's really it's the same thing starting with the operations, right,
Speaker 3: It's like getting nailing the service, getting the experience right,
Speaker 3: you know, and then it's menu innovation. So now when
Speaker 3: we bring in a customer, they're not going to have
Speaker 3: a bad experience and they're going to want to come back, right,
Speaker 3: And so they've nailed those. Now they're going to market
Speaker 3: more aggressively.
Speaker 2: Right.
Speaker 3: They're doing some stuff on TikTok as well. They're doing
Speaker 3: more advertising during NASCAR and Bravo, which has a huge
Speaker 3: overlap between CDR customers and Bravo watchers.
Speaker 1: Right.
Speaker 3: And so now they're they're you know, advertising around more
Speaker 3: relevant modern food. It's you know, their typical Southern like
Speaker 3: classics with a twist, right, and and and then the
Speaker 3: remodels will be next year. The remodels are are a
Speaker 3: big part of drawing in the gen Z customers. Right,
Speaker 3: They're gonna have a brighter, brighter tones in terms of paint,
Speaker 3: They're gonna have more lighting in the stores, and they
Speaker 3: think that will help attract the younger generations.
Speaker 1: Yeah, that's what I'm a little bit more excited about
Speaker 1: is to see a new design theme kind of brought
Speaker 1: forward to because we are seeing quite a few brands
Speaker 1: that that have done some fairly successful remakes over the
Speaker 1: last few years in terms of just what they've done
Speaker 1: from a design standpoint. So Cracker Barrel, of course, has
Speaker 1: been a long standing brand that kind of lives in
Speaker 1: that theme, you know, of very southern roots, and I
Speaker 1: get it. So it'll be interesting considered.
Speaker 2: It was interesting. Sorry, yeah, it was interesting.
Speaker 3: It's a it's an old country store theme, so they
Speaker 3: thought and for the longest time they were right that
Speaker 3: they didn't have to do a full remodel of the
Speaker 3: stores because it's in an old country store, right, And
Speaker 3: it was a great you know, point of emphasis for
Speaker 3: investors going back ten years ago. It is like this
Speaker 3: company spends way less on cap X and then they
Speaker 3: can use that cash to buy back shares and pay
Speaker 3: a dividend.
Speaker 2: Right, And but it caught up to them, right.
Speaker 3: The younger generations want.
Speaker 2: You know, they're more discerning and then they almost what
Speaker 2: they want.
Speaker 1: Yeah, yeah, so always do for sure. Michael has been
Speaker 1: good catching up with you. I love to do the
Speaker 1: rundown on where some of these are. Each quarter we
Speaker 1: try to look at what's happening in the performance. Obviously
Speaker 1: we're ending up here in Q one and getting ready
Speaker 1: to in March. Uh So this will be a good
Speaker 1: one because we'll get a chance to see some new
Speaker 1: earnings come in hopefully soon and see how some of
Speaker 1: these brands are doing. So we'll definitely get you back
Speaker 1: on the show. But thanks for coming in today. I
Speaker 1: appreciate it.
Speaker 2: Sure think you.
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