Speaker 1: Welcome back to another episode of the Restaurant Report. Today,
Speaker 1: we're going to be looking at a market update and
Speaker 1: mainly looking at what is going on from a brand side,
Speaker 1: also some consumer trends where the market may be leaning
Speaker 1: in terms of sales and profits, and some of the
Speaker 1: challenges that we'll be facing here in the industry. Today
Speaker 1: is going to be a good one that I don't
Speaker 1: think you guys are going to want to miss. I'm
Speaker 1: going to be joined here by Sam Ocus, who is
Speaker 1: the editor in chief of Nation's Restaurant News. You guys
Speaker 1: know them over there at Informa. It's going to be
Speaker 1: a good, lively discussion and I want you guys to
Speaker 1: stick around. We'll be right back. This episode is brought
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Speaker 1: you there. All right, We're back here on the Restaurant
Speaker 1: Report and I've got Sam Olcus coming in with me
Speaker 1: today and Sam, how are you.
Speaker 2: I'm good, Paul, thanks for having me.
Speaker 1: Nice to see you. Very good. Likewise, listen, I wanted
Speaker 1: to you know, we talked a little bit about this
Speaker 1: on pree of the show. Tell me a little bit
Speaker 1: about where Informa is today. You mentioned there's some changes
Speaker 1: in the roles and you guys got some team changes.
Speaker 1: Give us an update a little bit of what's going
Speaker 1: over there.
Speaker 3: Yeah, sure, so if you don't know, Informa is a
Speaker 3: global event management company primarily based in London, but over
Speaker 3: the years they've grown to encompass also immediate side of
Speaker 3: the business as well. So we have our division is
Speaker 3: called Informa Food Service, and in Forma food Service encompasses
Speaker 3: six publications. Nation's Restaurant News and Restaurant Hospitality are two
Speaker 3: of them. Those are the two ioversee. We also have
Speaker 3: Restaurant Business and Food Service Director, and then we have
Speaker 3: two retail publications, Supermarket News and CSP. So it's all
Speaker 3: food related publications for the industry within Informa Food Service.
Speaker 3: But we are a part of the bigger event management
Speaker 3: company that is in Forma.
Speaker 1: Okay, so Informa has events obviously multi sectors that you
Speaker 1: guys track. Obviously, the food side is the big one
Speaker 1: that we're going to be diving in today. I want
Speaker 1: to kind of lead off with the topic around the
Speaker 1: layoffs because that's probably the biggest news that's been hitting
Speaker 1: here recently. Starbucks went in had some layoffs. We saw
Speaker 1: Brian Nickel kind of make a pretty drastic move in
Speaker 1: the space right now, and he also did a big
Speaker 1: kind of callback to his team saying, Hey, we're really
Speaker 1: focused on getting the job done. We want people to
Speaker 1: come back in the office. Are you seeing any other
Speaker 1: brands that are really kind of in that position right now?
Speaker 2: Yeah, certainly.
Speaker 3: You know, we've seen layoffs across the industry, Panera, Bloomin brands,
Speaker 3: a number of companies have announced they're going to do that,
Speaker 3: and you know, this is part of a broader trend
Speaker 3: across industries. I think, you know, post pandemic. To be
Speaker 3: honest with you, I'm surprised it didn't happen earlier. I
Speaker 3: think a couple of years ago we started to see
Speaker 3: a lot of layoffs at technology companies in particular, right.
Speaker 2: So, I think it was early twenty twenty three.
Speaker 3: You know, we were calling twenty twenty three the Year
Speaker 3: of efficiencies.
Speaker 2: Meta.
Speaker 3: The Facebook owner was I think laying off ten thousand
Speaker 3: employees something like that, you know, So we thought at
Speaker 3: that time, oh wow, so lots of layoffs coming all
Speaker 3: of the glut of the pandemic, especially in the tech sector,
Speaker 3: was going to have a domino effect and we're going
Speaker 3: to start seeing more layoffs as companies try to leverage
Speaker 3: technology to achieve efficiency. And it didn't happen as much
Speaker 3: in the restaurant industry then, So I think to some
Speaker 3: degree what we're seeing now is that kind of pushed
Speaker 3: back to where here in early twenty twenty five, companies
Speaker 3: are saying, look, we are too fat at the top,
Speaker 3: We've got too much especially you know on the corporate
Speaker 3: side of things, We've got to get a leaner ship here.
Speaker 3: We've got to have some efficiencies to improve our profitability because,
Speaker 3: as I think we'll probably talk about here, you know,
Speaker 3: profitability is taking a hit as costs of everything go.
Speaker 2: Up, as consumers pull back because of inflation.
Speaker 3: So in order to improve profitability, this is one of
Speaker 3: the ways companies are looking is at the corporate.
Speaker 1: Layoffs well, and I think you're hitting on it is
Speaker 1: the profit side of this. We'll look at some Chipoli
Speaker 1: numbers here in a minute, but this is something that
Speaker 1: has mostly been at the corporate level. However, I've also
Speaker 1: talked to a lot of operators here recently in the
Speaker 1: fast casual space. They've even talked about trying to slow
Speaker 1: their growth in terms of hiring and looking to hire
Speaker 1: more quality. So I'm kind of curious, do you think
Speaker 1: we're going to see a little bit of a shift
Speaker 1: in possibly the workforce and is this being aided in
Speaker 1: by maybe some of the improvements that we've seen from AI.
Speaker 3: Absolutely, I mean I think no doubt about it. For
Speaker 3: the last five to ten years, as we've watched a
Speaker 3: lot of the tech innovation come forward that in a
Speaker 3: lot of ways is doing the role of some employees.
Speaker 3: I mean, I think a very easy thing to look
Speaker 3: at is voice activated ordering and putting that in the
Speaker 3: drive through. So, just using that as an example, QSR
Speaker 3: brands in particular tend to do seventy to eighty percent
Speaker 3: of their business in the drive through lane, which makes
Speaker 3: the drive through order taker one of the most important
Speaker 3: people in that building, and if you replace that person
Speaker 3: with AI, if that's a voice activated AI that is
Speaker 3: taking your order, you're you're maybe not necessarily getting rid
Speaker 3: of that position, but you're going to reallocate that labor.
Speaker 3: And even as you reallocate the labor with your strong
Speaker 3: employee who was previously to making orders in the drive through,
Speaker 3: it's going to have that domino effect to where you
Speaker 3: aren't going to need that many employees in the restaurant.
Speaker 3: So that's just one example of throughout the operation, particularly
Speaker 3: in the back of house, I think you see a
Speaker 3: shakeup of technology taking over some of the roles of employees,
Speaker 3: a reallocation of labor, often toward the front of the
Speaker 3: house to provide hospitality. But it is affording the restaurant
Speaker 3: companies the ability to pull back on their labor, which
Speaker 3: of course is one of the biggest cost on your
Speaker 3: p and l anymore and getting more and more expensive,
Speaker 3: and of course the quality talent just isn't there when
Speaker 3: you're hiring, so tech makes a lot of sense in
Speaker 3: relieving the pressure of labor.
Speaker 2: So I think that's what you're talking about, Paul Is.
Speaker 3: I think a lot of companies are saying, okay, well,
Speaker 3: we're going to pull back on hiring. We're going to
Speaker 3: look for ways that tech can you make our operation
Speaker 3: more efficient, pick up a lot of the responsibilities that
Speaker 3: our employees previously were doing, and that's going to have
Speaker 3: the net effect of a couple of positions getting cut.
Speaker 1: Yeah, I think the key here when you look at
Speaker 1: the percentage of savings. I'll go in and I'll share
Speaker 1: this portion of the article. Let me kind of zoom
Speaker 1: in on that here as well. What you'll notice is
Speaker 1: Denny's CFO. This is Robert Verstek. He said that just
Speaker 1: the corporate support centers, which goes back to here. Now, granted,
Speaker 1: support centers are usually supporting maybe the operation side, but
Speaker 1: still saying that this would result in about a three
Speaker 1: and a half to four percent savings in their general
Speaker 1: administrative expenses. So I'm kind of curious if that is
Speaker 1: being impacted just by work that it's kind of like
Speaker 1: doze for the restaurant industry. Are we seeing kind of
Speaker 1: a cycle of saying, well, we just had some jobs
Speaker 1: that were a little bit more fluffed than they were productive,
Speaker 1: or do you think, oh, no, we're doing that on
Speaker 1: an AI by which is it or is it a
Speaker 1: blend of both.
Speaker 3: Probably a blend of both. I mean, if you look
Speaker 3: at what Brian Nicol has done at Starbucks. You know,
Speaker 3: when he announced that there would be layoffs, before they
Speaker 3: announced the scope of those layoffs, he said that they
Speaker 3: were going to target employees at the corporate level who
Speaker 3: you know, weren't in any kind of meaningful leadership position
Speaker 3: where they you know, they didn't necessarily have ownership of
Speaker 3: any particular project or division, which is you know, basically
Speaker 3: stripping out layers. Right. So I think that this is
Speaker 3: what a lot of private equity will do well to
Speaker 3: go exact bliness, they strip out the layers, right, And
Speaker 3: I think that's what some of these companies are doing,
Speaker 3: you know, and what perhaps DOJE is doing at a
Speaker 3: broader federal level. And so and whether you think that's
Speaker 3: right or wrong, by the way, that that has the
Speaker 3: effect of lowering your GNA. As the Dennis CFO was
Speaker 3: alluding to their finding hopefully some efficiencies, I mean, because look,
Speaker 3: you don't want to strip out the layers and then
Speaker 3: you know, in the months after that, find out oh,
Speaker 3: like those were actually quintessential employees that we needed to
Speaker 3: run this business. Yeah, so there is a danger to it,
Speaker 3: but I think if you're a little bit more precise,
Speaker 3: you're a little bit more calculated on who the people
Speaker 3: we need to have and who are the quintessential employees
Speaker 3: to running this company versus those who are maybe we
Speaker 3: have a little bit of fluff, maybe there's a little
Speaker 3: bit of glut here. There is a way I think
Speaker 3: you can do it to make it where you are
Speaker 3: saving and you are finding efficiencies as well. Yeah.
Speaker 1: I think the you know, the brands that I've talked
Speaker 1: to who have done and gone through the process of
Speaker 1: at least setting up a plan for twenty twenty five
Speaker 1: for reducing corporate workforce, most of them have kind of
Speaker 1: pointed it at, hey, we are getting to more AI
Speaker 1: tools that possibly I don't need as many people. In marketing,
Speaker 1: I don't need as many people. Maybe enfranchising A lot
Speaker 1: of that is being done now in new places. But
Speaker 1: to your point is if they just overreach, that could
Speaker 1: be obviously an issue for the brand going forward, especially
Speaker 1: on growth.
Speaker 3: Yeah, and I think yeah, and I to point out
Speaker 3: to just you know, the support part of support center,
Speaker 3: which is, if you have a company, let's just use
Speaker 3: McDonald's as an example, McDonald's is ninety five percent franchised
Speaker 3: and they have thousands and thousands of franchises or thousands
Speaker 3: of franchise operators. If you, as a sport center, cut
Speaker 3: the people who are supporting the franchisees, that of course
Speaker 3: has a trickle down effect, right sure, and you're going
Speaker 3: to start having disgruntled franchisees. You're going to have the
Speaker 3: restaurants start start falling apart, frankly, because the role of
Speaker 3: a support center is to do exactly that, is to
Speaker 3: support the restaurants. So that's where it's I think restaurants
Speaker 3: must be very very careful. They must say, we're not
Speaker 3: going to cut the part of this business that is
Speaker 3: ensuring a great experience at the restaurant level. Perhaps we're
Speaker 3: just cutting the parts of this business that I think, Paul,
Speaker 3: to your point, if you look at AI and data
Speaker 3: and how it's affecting, for example, supply chain, if you
Speaker 3: had a whole team of people who were in charge
Speaker 3: of the supply chain and managing supply and logistics, and
Speaker 3: suddenly you have AI that can do that very effectively, well,
Speaker 3: maybe you don't need as many people on that team
Speaker 3: because you have those tools that can do it for you.
Speaker 1: All Right, We're going to continue on the challenges in
Speaker 1: the industry. Obviously, this isn't a doomsday podcast, we do.
Speaker 1: We're going to talk about some good stuff too. Yes,
Speaker 1: in the end to kind of get into that, I
Speaker 1: want to talk about sales and profit. Obviously, one of
Speaker 1: the biggest issues that we're already faced with as recording today.
Speaker 1: We actually saw President Trump come in with not an extended,
Speaker 1: a more amped up tariff on Canada on aluminum steel
Speaker 1: went up to like fifty percent. But here's the point
Speaker 1: I'm getting at is that this unsettling feeling I think
Speaker 1: is probably in the gut of a lot of CEOs
Speaker 1: right now, even in the food space, because they're like, hey,
Speaker 1: what do we get from Canada? Because there could be
Speaker 1: another target, whether it's Mexico or Canada. We've already seen
Speaker 1: this will play a clip here from Scott Boat Ride.
Speaker 1: But if you look at just the inflation impact on
Speaker 1: American consumers, because this is going to trickle down probably
Speaker 1: into a lot of other areas, not just steal in
Speaker 1: an aluminum. But you'll notice here a couple of points
Speaker 1: that this article is hitting on right here from Bloomberg
Speaker 1: is they're really going after some of the core things
Speaker 1: low income households. And this is where I'm going on this.
Speaker 1: Let me kind of zoom in on that for everybody
Speaker 1: that's watching this over on YouTube. Low income households who
Speaker 1: spend a larger share of their budgets on goods, they're
Speaker 1: wealthy and tend to favor cheaper imports. This is going
Speaker 1: to bear the brunt of the hit on a lot
Speaker 1: of these So this being the FAE the face of
Speaker 1: potentially the restaurant industry as well, because QSR, fast casual
Speaker 1: target that household. And if we do see some pressures
Speaker 1: here from these other ancillary tariffs, do you think that's
Speaker 1: going to have an impact on the industry here in
Speaker 1: twenty five.
Speaker 2: Yeah, there's no doubt. There's no doubt.
Speaker 3: The National Restaurant Association wrote a letter to the Trump
Speaker 3: administration saying that it would be about twelve billion dollars.
Speaker 3: It would cost to the industry about twelve billion dollars. Now,
Speaker 3: I cannot keep up with what wave of tariffs are
Speaker 3: being proposed, and so that was perhaps a previous wave.
Speaker 3: That number might actually be higher now I'm not sure,
Speaker 3: but I think what you know, the Association is trying
Speaker 3: to point out is you know, we import a lot
Speaker 3: of food to this country. And if you think about
Speaker 3: something like Mexico and avocados, I believe it's something like
Speaker 3: ninety percent of the avocados in America are grown in Mexico. Something,
Speaker 3: you know, incredible like that. So you know, tariffs they
Speaker 3: have of course a huge impact on the food industry.
Speaker 3: And so when you think about twelve billion dollars, you know,
Speaker 3: you might say to yourself, Okay, in a one point
Speaker 3: five trillion dollar business, is twelve billion dollars just to
Speaker 3: drop in the bucket. But I think what you're getting
Speaker 3: at here, Paul, is the fact that that twelve billion dollars,
Speaker 3: especially if you hit a company, say a Mexican chain
Speaker 3: that serves a lot of avocados, and they have no
Speaker 3: choice but to increase their prices because of what they're
Speaker 3: paying on those imported avocados, for example, then yes, that
Speaker 3: will have a big impact on the low income consumer.
Speaker 3: And I think to that article's point, you know, the
Speaker 3: low income consumer, we are already seeing them pull back.
Speaker 2: You've already seen that inflation. Has they finally had enough
Speaker 2: with inflation?
Speaker 3: With menu prices going up twenty five thirty thirty five
Speaker 3: percent at a lot of chains. They can't take it anymore.
Speaker 3: They're tidening the belts, they're pulling back. And if you
Speaker 3: add this an additional layer in the tariffs on top
Speaker 3: of it, if you have to increase cost of goods
Speaker 3: that are imported from other countries getting these tariffs, yeah,
Speaker 3: they're going to have had enough and they're going to
Speaker 3: say I'm going to call it now.
Speaker 2: They have to eat so they you know, supermarkets are also.
Speaker 3: Selling goods that are affected by tariffs. So the unfortunate
Speaker 3: reality is that there's not a great solution for low
Speaker 3: income consumers. But we've seen throughout history that historically they
Speaker 3: will they will cut back on restaurants first, if they're
Speaker 3: cutting back on any expense.
Speaker 1: Well, and there are some there are some indicators out
Speaker 1: there that restaurants are trying to almost position themselves as
Speaker 1: an alternative option to even going grocery, to the grocery
Speaker 1: side of things, or blending, because I see this in
Speaker 1: a lot of families where they order something from a
Speaker 1: takeout restaurant and then they'll backfill it, you know, at home,
Speaker 1: whether it's a dinner or a lunch you know thing.
Speaker 1: I mean, even our family does that and it's pretty effective.
Speaker 1: I want to play a clip though for you. This
Speaker 1: is Scott Boatwright coming in from Chipotle and he has
Speaker 1: some interesting statements that he did in this in this
Speaker 1: interview here with Bloomberg. Let me play this for you.
Speaker 4: Let's start with tariffs, because we can't avoid the elephant
Speaker 4: in the room here, the single biggest way that tariffs
Speaker 4: are making your life actual potlein more difficult.
Speaker 5: Of course, tariff's impact everyone here in the US as
Speaker 5: we think about I know avocado supply is on the
Speaker 5: top of mind for a lot of US consumers. It
Speaker 5: is for us as you can imagine, we've gone through
Speaker 5: what we believe to be a very sound vendor diversification
Speaker 5: program as it relates to buying avocados. We buy everything
Speaker 5: that we can possibly pick up here in the US
Speaker 5: during the growing season that's here in California. But we've
Speaker 5: also moved out of Mexico, which was about eighty percent
Speaker 5: of our supply, to other countries like Dominican Republic and
Speaker 5: even Colombia, and reduce the reliance to about fifty percent.
Speaker 5: With further diversification efforts underway.
Speaker 4: So the diversification effort and the sourcing inside the US.
Speaker 4: How has that affected the cost? Has it increased costs
Speaker 4: for you?
Speaker 1: All right, I'm gonna pause it there. That was a
Speaker 1: crazy question. Increased costs? Why would you if you're increasing
Speaker 1: your costs? All right, but they are talking about diversification.
Speaker 1: So that's at least one you know, tool in their
Speaker 1: in their bin that they can go fight.
Speaker 3: Now.
Speaker 1: One thing it went on in that in that article
Speaker 1: and then that video to say is that Chipotle is
Speaker 1: not going to raise prices. My question to you how
Speaker 1: long can they hold the line?
Speaker 2: That's a great question.
Speaker 3: And you know that that is a bet that this
Speaker 3: is a short term thing. That's I think that's a
Speaker 3: bet to say, Okay, you know, the tariffs are coming in,
Speaker 3: maybe for as a short term uh you know thing
Speaker 3: that happens, but eventually, perhaps whether it's you know, consumer
Speaker 3: outcry or whatever it is, that perhaps they'll pull back
Speaker 3: on the tariffs eventually, or if it's some political stalemate
Speaker 3: that President Trump is you know, trying to get Mexico
Speaker 3: in Canada to do something, you know, and they've bend.
Speaker 2: To his will, you know, whatever that is.
Speaker 3: I think Chipotle's probably betting that this is not a
Speaker 3: long term thing that they're going to have to face
Speaker 3: and that they can go back to their preferred avocado supply.
Speaker 2: So who knows.
Speaker 3: I think if there's one thing about this administration, it's unpredictability.
Speaker 3: Nobody really knows. But to point out about the supply
Speaker 3: chain diversification, I mean, one of the luxuries I guess
Speaker 3: you could call it, unfortunately of the pandemic is the
Speaker 3: flexibility with which companies were able to get around supply
Speaker 3: chain you know, challenges because of course in the pandemic
Speaker 3: we saw as the borders shut down, companies had to
Speaker 3: get very creative in their supply They had to figure
Speaker 3: out logistically, you know, how can I get avocados, how
Speaker 3: can I get you know, vegetables, fruits, whatever it might be.
Speaker 3: And they developed that muscle of okay, let's diversify our
Speaker 3: supply chain. So that's a good tool to have in
Speaker 3: your toolbox now when you face tariffs and you can
Speaker 3: do as Scott was saying, which is okay, we're going
Speaker 3: to go you know source of course from our local
Speaker 3: California avocado growers, or go to Peru or Colombia, you know,
Speaker 3: So that is a solution. The unfortunate reality is that's
Speaker 3: also a logistical headache to have to do that. And
Speaker 3: the fact of the matter is there are also parts
Speaker 3: of this world that are you know, the soul growers
Speaker 3: and certain goods.
Speaker 2: Right.
Speaker 3: So, Mexico is one of the premier avocado growers. It's
Speaker 3: not the only one, but it's one of the premiere
Speaker 3: avocado growers. So, and we all know what supply chain.
Speaker 2: Two.
Speaker 3: The other thing is, depending on how much you might
Speaker 3: need of a certain good, you can't snap your fingers
Speaker 3: and make a supply chain appear there. You know, growers
Speaker 3: in years in some instances to get a crop planted
Speaker 3: and harvested. So it's not so easy as to say, okay,
Speaker 3: well I'm going to move my supply from Mexico to Peru.
Speaker 2: There we go. I've figured it out.
Speaker 3: You have to figure out things like, okay, well, who
Speaker 3: are the growers, how long do they have before this harvest?
Speaker 3: You know, how much volume is there, how much does
Speaker 3: it cost? How do we do you know, do we
Speaker 3: plan three years in advance and say we're going to
Speaker 3: go and plan that we're going to have Columbia supply
Speaker 3: some of our avocados instead. That is a headache. It
Speaker 3: is logistics a nightmare really to some degree. So you
Speaker 3: don't want to have to do it, but it is
Speaker 3: a possibility that you can do it.
Speaker 2: Well.
Speaker 1: Okay, So with that being the case, we'll stay on
Speaker 1: Chipotle here for a second because I want to show
Speaker 1: some data to you, because this is to me, I
Speaker 1: look at this, you know more from an analyst side
Speaker 1: of things. I'll talk about that in a second. I mean,
Speaker 1: we've been Saver has shifted a little bit of our
Speaker 1: business model here recently into from really a podcast in
Speaker 1: thought leadership only platform. We have another division where we
Speaker 1: do investment and here recently we also opened up a
Speaker 1: fund to do some investment in the restaurant space. I'm
Speaker 1: paying a lot more attention to these these data points,
Speaker 1: and one that I wanted to show you was this
Speaker 1: right here. This is coming in from Chipotle's basically their
Speaker 1: last quarterly and you'll notice here over twenty twenty three,
Speaker 1: especially in Q one of twenty four, it's continuing to rise.
Speaker 1: This of course is during price and for those of
Speaker 1: you that are not watching this on screen, let me
Speaker 1: zoom in on that. For you, Sam, looks like you're
Speaker 1: maybe and maybe people aren't seeing completely exactly what I'm
Speaker 1: showing here, but I want to make sure that in
Speaker 1: twenty three we start to see pricing rising. You'll notice
Speaker 1: here net margin continued to increase. So it's like fifteen
Speaker 1: three three this was in Q two that was their
Speaker 1: high point. Q three of twenty four drops to thirteen
Speaker 1: eighty seven. This is net margin, and then Q four
Speaker 1: I'm sorry, Q three Q four of twenty four it
Speaker 1: drops to eleven point sixty six. So I'm looking at
Speaker 1: declining margins here. In general, if you have declining margins
Speaker 1: and now you have potentially enough pressure from this administration
Speaker 1: that could push us into a soft recession, I don't
Speaker 1: know if that's a word, but you're going to see
Speaker 1: less activity, which obviously is top line sales. Yeah, how
Speaker 1: can Chipotle not raise prices? It just seems like your
Speaker 1: margins are down and your sales may be next. So
Speaker 1: how would you be able to avoid that?
Speaker 3: That's at some point something has to give, and you
Speaker 3: can hold the line as long as you possibly can.
Speaker 3: And I love the you know, I love the optimism
Speaker 3: and say no, no, we're.
Speaker 2: Not going to raise prices.
Speaker 3: We're not going to pass that cost on to the customer.
Speaker 3: But again with the inability to you know, nobody has
Speaker 3: the crystal ball to see what's going to happen six
Speaker 3: months from now, much less even just a month from now.
Speaker 3: You know, at some point, if this drags on longer
Speaker 3: and longer, if in fact, we do go into a recession,
Speaker 3: if that margin continues to drop, they have no choice.
Speaker 3: They will have to raise prices because, you know, you
Speaker 3: just something has got to give at some point. You
Speaker 3: have to have marchin to be a viable business, and
Speaker 3: especially a business like Chipotle. So it's not what they
Speaker 3: want to do in a lot of instances, it's the
Speaker 3: last ditch effort, but something's got to give.
Speaker 1: Yeah, I think this is the factor that almost every
Speaker 1: restaurant chain is going to be looking at in twenty
Speaker 1: twenty five because there is some shift here. There may
Speaker 1: be maybe a silver lining here in the sense that
Speaker 1: maybe there's some softening in the labor market which could
Speaker 1: open up at least the ability to operate the labor
Speaker 1: line a little bit better. We're definitely going to talk
Speaker 1: about that here in a second. On the back half,
Speaker 1: we're going to be talking about opportunities. So make sure
Speaker 1: and stick around on that. And of course if you
Speaker 1: guys did not know, this is something that you should
Speaker 1: be aware of, is that Saber Capital is now out there.
Speaker 1: We are out there taking deals. One thing that we
Speaker 1: are doing more and more with SAVER is looking at
Speaker 1: where the restaurant industry is growing. We think tech and
Speaker 1: early stage fast casual are the markets. So if you
Speaker 1: guys are interested, if you're whether you're a tech founder
Speaker 1: or may be a fast casual operator and you're looking
Speaker 1: to either get advisor or capital services, jump over to
Speaker 1: Saber dot FM and just hit that services section right
Speaker 1: there at the top. You'll see our capital and advisory page.
Speaker 1: Get there, bill out the form. Maybe there's something that
Speaker 1: we can do for you guys. Never know. All right, Sam,
Speaker 1: let's get into the next section here, and I want
Speaker 1: to talk about opportunities and there's several areas that potentially
Speaker 1: could really shift the business a lot. This year, everybody's
Speaker 1: been talking about AI. I mean, we've had so many
Speaker 1: podcasts just on that topic alone. Do you think technology
Speaker 1: integration this year twenty twenty five, not down the road,
Speaker 1: can have a true impact on this bottom line for
Speaker 1: the industry.
Speaker 3: No doubt, no doubt that technology will have an effect,
Speaker 3: especially if you look at again, if your margins are
Speaker 3: decreasing but labor costs are increasing, and you find a
Speaker 3: way to invest in technology that can and again perhaps
Speaker 3: replacer or reallocate some of your labor, you could potentially
Speaker 3: save on your labor costs with the help of technology.
Speaker 2: So one very easy way to look at that.
Speaker 3: Of course, you could also, you know, say, well, in
Speaker 3: your capital expensure expenditures, as you're growing and you want
Speaker 3: to shrink the footprint of your box, leverage technology for
Speaker 3: the sake of enhancing off premises business and ordering. You know, again,
Speaker 3: there's lots of ways in which you can weave tech
Speaker 3: into your business to save on your costs. And that
Speaker 3: is a good thing. That's you know, that's been true
Speaker 3: for the last many, many years. It continues to be
Speaker 3: the case. Of course, ramped up in twenty twenty with COVID,
Speaker 3: everybody started looking more and more at technology and how
Speaker 3: it could help your business. And the fact of the
Speaker 3: matter is there are a lot of ways now in
Speaker 3: which technology almost has to be the solution if you
Speaker 3: can't give anymore again on maybe your goods, but also
Speaker 3: your labor or your buildout costs and you can instead
Speaker 3: invest in some technology that that is maybe a one
Speaker 3: time investment that you know will replace some of your
Speaker 3: ongoing costs and labor. I think you have to do that.
Speaker 3: So yes, this year, that technology is there, it's available
Speaker 3: to you. It's more and more affordable, I think, especially
Speaker 3: for some of the emerging brands, because before it was
Speaker 3: kind of this playground for the maker chains. Yeah, I
Speaker 3: mean young brands McDonald's are out here acquiring AI businesses
Speaker 3: and building you know, young built to that new byte
Speaker 3: division where you know they put everything under that one umbrella.
Speaker 3: And that's great and they can do that as the
Speaker 3: largest restaurant company in the world, But what can that
Speaker 3: five unit burger chain do?
Speaker 2: What can that mom and pop do?
Speaker 3: And the fact of the matter is there's a lot
Speaker 3: more now that they can do in twenty twenty five
Speaker 3: than they could do even in twenty twenty two or
Speaker 3: twenty three. There is technology that is affordable and available now.
Speaker 3: I would caution we are also seen to some degree,
Speaker 3: I think, some tech fatigue. An interesting study from the
Speaker 3: National Restaurant Association that came out a few weeks ago.
Speaker 3: It was their State of the Industry Report, they found
Speaker 3: that I think it was twenty eight percent of restaurant
Speaker 3: operators said that they were not getting proper ROI out
Speaker 3: of their tech investments. And that was really fascinating because
Speaker 3: it was something like it was eighty something percent who
Speaker 3: said they're investing in technology, but only twenty eight percent
Speaker 3: said they were getting any kind of ROI out of it.
Speaker 3: And that's fascinating to me because I think your problem
Speaker 3: here is there's a lot of bells and whistles that
Speaker 3: you can become infatuated with in food technology. You think, oh,
Speaker 3: customers want you know, voice activated AI, customers want this
Speaker 3: shiny new toy, and you go in that direction. You
Speaker 3: invest in that technology only to discover, well, it's not
Speaker 3: really improving my profit margin substantially. It's not really you know,
Speaker 3: doing anything for me aside from you know, moving this
Speaker 3: business from here over to here. The customer once was
Speaker 3: giving their order to a person, now they're giving the
Speaker 3: order to technology, and it's really not you know, making
Speaker 3: any extra money or anything like that, or not saving money.
Speaker 3: So I think there is a little bit of the
Speaker 3: fatigue in saying, look, we got top heavy with our
Speaker 3: tech stack. We added all these layers we were told
Speaker 3: we needed to have We fell for some of these
Speaker 3: bells and whistles, and we're not making substantially more money.
Speaker 2: So what now?
Speaker 3: And that's the tech fatigue I think we're starting to see.
Speaker 3: And so technology is not going to go away. They're
Speaker 3: not going to you know, divest in the technology. But
Speaker 3: I think as an industry, we all have to take
Speaker 3: a step back, look at the technology we have that's
Speaker 3: been developed and find out ways to take out layers
Speaker 3: of the tech stack to integrate those you know, tech
Speaker 3: the tech platforms that brands have already invested in, and
Speaker 3: make it all work to the benefit of the bottom line.
Speaker 2: Because if you don't do that, operators will move on,
Speaker 2: they'll give up.
Speaker 3: Last thing Paul say is more and more restaurants are
Speaker 3: saying that hospitality is a differentiator. So it's sort of
Speaker 3: ironic that in this day and age, where so much
Speaker 3: technology is available to restaurant companies, they're talking more and
Speaker 3: more about how the human experience is actually what drives
Speaker 3: their business or drives their experience. And so I think
Speaker 3: in twenty twenty five there will be a continued push
Speaker 3: for more technology to improve the bottom line through efficiencies
Speaker 3: and through cost savings, but I think you have to
Speaker 3: find a way to leverage it in such a way
Speaker 3: that you're not replacing that human experience, that hospitality that
Speaker 3: can be a differentiator.
Speaker 1: Okay, so there's a couple things to unwrap there. One, yes,
Speaker 1: I would agree. On the tech side, there's a lot
Speaker 1: of technology out there that isn't really a product, it's
Speaker 1: like a feature. And you're right, there's a lot of
Speaker 1: these ninety nine dollars SaaS products. I talked to a
Speaker 1: brand that last week. They said they started to go
Speaker 1: in and try to figure out what was working. This
Speaker 1: was a small, small brand, and he said because so
Speaker 1: many of the operators they kind of let their guys
Speaker 1: run on their own, they ended up turning credit cards
Speaker 1: off to see what would break because each one of
Speaker 1: them had so many of these ancillary charges of different products, features, marketing,
Speaker 1: this all sorts of back office integration stuff that's been
Speaker 1: out there. So I would agree. I think we're probably
Speaker 1: going to see either a consolidation or maybe some roll
Speaker 1: ups in terms of the tech industry, or at least
Speaker 1: the food service space for twenty five. As far as hospitality,
Speaker 1: this is something that this is a conundrum to me,
Speaker 1: because you look at what happened after COVID, you would
Speaker 1: think that hospitality would have really accelerated, like people were
Speaker 1: just ready to go back and workers were ready to
Speaker 1: serve customers and all that. And it feels to me
Speaker 1: like third party got in the way of hospitality because people,
Speaker 1: It shifted the dining habits, It definitely shifted the behaviors
Speaker 1: of consumers, and now I think it's shifted the expectations
Speaker 1: of operations because we've seen declining sentiment around consumer satisfaction
Speaker 1: numbers not necessarily coming back for food service operations. So
Speaker 1: my question would be to this is if you've note
Speaker 1: if tech is being pared down and AI isn't necessarily
Speaker 1: ready just yet to pick up some of the slack
Speaker 1: of hospitality, and you have a workforce that now looks
Speaker 1: at the restaurant industry. I mean, I think we've done
Speaker 1: more damage to the industry in the last three to
Speaker 1: four years than we've done maybe in the last three
Speaker 1: decades in terms of worker perception of working in the industry,
Speaker 1: and they don't really want to work here. So how
Speaker 1: is hospitality going to come back without the aid of
Speaker 1: tech or at least some sort of big shift in
Speaker 1: the workforce. What are your thoughts.
Speaker 3: Yeah, I mean it has to be aided by tech.
Speaker 3: And I'll give you an example. So Denado's Pizza based
Speaker 3: here in Columbus where I am. You know, they have
Speaker 3: invested in automated pizza equipment, automated kitchen equipment that will.
Speaker 2: Sauce and cheese and slice a pizza.
Speaker 3: And I've seen it firsthand here in kitchen and Columbus,
Speaker 3: and you know it's it's robotics for sure, and it's
Speaker 3: it's fancy and fun and they're rolling this out to
Speaker 3: some degree throughout their system. But you know, I spoke
Speaker 3: with CEO Kevin King recently, and you know, he's very
Speaker 3: careful to point out, as a lot of restaurant companies
Speaker 3: are always very careful to point out when they talk
Speaker 3: about investing in AI. They don't want to say we're
Speaker 3: not replacing employees. This is not becoming a fully automated,
Speaker 3: no staff kind of thing. He's saying, it's it's you're
Speaker 3: again reallocating that labor to the.
Speaker 2: Front of the house.
Speaker 3: And Denado's is you know, it's a QSR pizza joint.
Speaker 3: You know, you walk in for the most part, people
Speaker 3: are placing their order on their app or online and.
Speaker 2: They walk in. All they need to do is pick
Speaker 2: up a pizza.
Speaker 3: But if before you know, somebody is having to rush
Speaker 3: out of the kitchen to say, what's your order? Oh yeah,
Speaker 3: here's your pizza, you know that there's that experience. Now,
Speaker 3: perhaps with more automated equipment in the kitchen, you have
Speaker 3: a couple of smiling faces at that table and say,
Speaker 3: let me know your order.
Speaker 2: How's your day going, by the way, while I get
Speaker 2: that order.
Speaker 3: So the point is is that in picking up a
Speaker 3: lot of the responsibilities of your kitchen staff, AI gives
Speaker 3: you the ability to really emphasize the experience, the hospitality,
Speaker 3: the smiling, friendly employee in a way that I don't
Speaker 3: think we have before because I think Paul to talk
Speaker 3: about perception of the industry and working in this industry,
Speaker 3: of course, it was always the industry of burger flippers, right,
Speaker 3: and you know, you had this perception that it's the
Speaker 3: bottom rung and I'm going to stand there flipping burgers
Speaker 3: for hours just to make a buck, right and by
Speaker 3: and large, to make minimum wage. And the fact of
Speaker 3: the matter is that today it's easier than ever to
Speaker 3: run a restaurant kitchen, right, there are so many of
Speaker 3: these things in some instances, at some restaurants, the burger
Speaker 3: flipping itself is robotic. You know, that's not widely available,
Speaker 3: but that's that's a thing you can have if you want.
Speaker 3: And so if you replace some of these menial tasks
Speaker 3: with robotics in AI and instead tell the employee, you know,
Speaker 3: why don't you come out into the front of house
Speaker 3: and you know, refill some beverages and smile and say
Speaker 3: hello to the customers, then you're creating that great experience.
Speaker 3: And so so again, the tech is complementing your labor
Speaker 3: and giving your employees, you know, a little bit of
Speaker 3: an easier job, maybe a more fun job, even so
Speaker 3: that they can feel like they're empowered to go give
Speaker 3: great hospitality.
Speaker 1: Yeah, I totally agree that the industry has a bad rap,
Speaker 1: but it's one that you know, has been kind of
Speaker 1: earmarked over the last you know, the last decade or so,
Speaker 1: especially when we lost so much of the industry during
Speaker 1: the pandemic. But I would agree, I think there are
Speaker 1: maybe some shifts occurring, especially as you see the transition
Speaker 1: of the current C suite, because we are starting to
Speaker 1: see a bit of a transition in terms of demographic
Speaker 1: that's that's sitting in these C suite jobs, which in
Speaker 1: my opinion, is probably going to be the gateway to
Speaker 1: possibly drawing in a different kind of workforce. That to
Speaker 1: your point, Listen, we've got a lot more different jobs
Speaker 1: now that completely are much more attuned to maybe doing
Speaker 1: some other startup work or you know, other industry, fintech,
Speaker 1: you name it. It might be more fun, and I
Speaker 1: think that that would be the draw in. I want
Speaker 1: to stay on topic here on the positive side of things.
Speaker 1: When you look at consumer trends and then also growth
Speaker 1: projections for twenty twenty five right now, I know you're
Speaker 1: looking at a lot of numbers and a lot of
Speaker 1: data from a lot of the big brands in terms
Speaker 1: of unit growth, et cetera. If you could sum it
Speaker 1: up and say, is twenty twenty five a growth here
Speaker 1: or not a growth here?
Speaker 2: I would have given you a different answer six months ago.
Speaker 3: Right I think that at the end of twenty twenty
Speaker 3: four there was a lot of optimism for twenty twenty five.
Speaker 3: We all thought, oh, it's going to be a growth here.
Speaker 3: Inflation has surely peaked, you know, all signs point to
Speaker 3: more capital flooding the market, you know, more emerging brands
Speaker 3: getting that deal they were looking for, you know, more
Speaker 3: more opportunity, right. You know, I attended the Finance show
Speaker 3: in Las Vegas the week after the election, and I
Speaker 3: mean I think you were there to Paul maybe it
Speaker 3: was very positive, Yeah, very positive they were getting and.
Speaker 1: Nobody was like over the moon. Yeah totally.
Speaker 3: And look, you know not this not a political statement,
Speaker 3: right or left. I think the the opinion at the
Speaker 3: time was just a business friendly administration is coming in
Speaker 3: and is going to improve a business climate for restaurants
Speaker 3: in all industry, and that is going to be a
Speaker 3: good thing. The unfortunate reality has actually been that again,
Speaker 3: there's a lot of volatility. There's a lot of unpredictability
Speaker 3: with the Trump administration. You know, no matter whatever his
Speaker 3: endgame is here, the decisions so far have been kind
Speaker 3: of all over the map.
Speaker 2: And when you know, it creates that volatility.
Speaker 3: I mean, you and I are talking a day after
Speaker 3: or two days after, you know, the Dow plunged eight
Speaker 3: hundred some points.
Speaker 1: Well it just took another hit this morning because of
Speaker 1: the increased tariffs on aluminium steel.
Speaker 3: So yes, yeah, yeah, so you see the direct impact
Speaker 3: of what's going on just politically in the administration, but
Speaker 3: also on top of that, you have consumer confidence has plunged.
Speaker 3: You see, inflation has not in fact peaked, and in fact,
Speaker 3: you know, there are some indications that maybe it goes
Speaker 3: back up again. Now we're talking, oh, maybe we're going
Speaker 3: to go into a recession in twenty twenty five. So
Speaker 3: you know, the unfortunate reality is that there was a
Speaker 3: lot of optimism and perhaps that on that optimism was unmerited.
Speaker 3: And I don't think twenty twenty five is going to
Speaker 3: be a growth here in the long run, although I
Speaker 3: will say it depends on what metric you look at growth. Right,
Speaker 3: we may may see yet some top line growth. Some
Speaker 3: companies are going to be just fine with top line,
Speaker 3: but as we've already talked about, you know, the bottom
Speaker 3: line is probably not going to marketly grow. Unit growth
Speaker 3: will be pretty stubborn. As you know, capital kind of
Speaker 3: stays on the sidelines. So it's really hard to say,
Speaker 3: you know that this will be a growth year unless
Speaker 3: you're trying to look into some of the minutia of
Speaker 3: things and say that that might be growth.
Speaker 1: Okay, so I have a maybe a contrarian position on
Speaker 1: that only because it's possible. And then this again is
Speaker 1: more it's not I wouldn't call it conspiracy theory level,
Speaker 1: but you know, it's looking at the market and also
Speaker 1: the guy who's leading the market, which is Trump, and
Speaker 1: you consider some of the positions. This is a business guy,
Speaker 1: that's you know, he understands financing, probably more so than
Speaker 1: anything other than real estate. And one thing that is
Speaker 1: happening later this year is the government has nine point
Speaker 1: two trillion in government debt that's going to be I
Speaker 1: think it. It's going to need to be refinanced later
Speaker 1: this year. So if he is constructing I'm not saying
Speaker 1: that this is happening, but if he is constructing a
Speaker 1: push on the market enough to get the Fed to
Speaker 1: lower the federal funds rate, meaning interest rates, and we
Speaker 1: see interest rates start to decline, which means potentially for
Speaker 1: businesses and people investing in businesses, Okay, interest is coming down,
Speaker 1: I can start building again. It's possible we could see
Speaker 1: an almost about face on this now. Granted we are
Speaker 1: definitely teetering on the line of going too far, I
Speaker 1: would agree. I did a poll this morning on x
Speaker 1: let me see what was the results so far? It
Speaker 1: is about four hundred votes in there. And I asked
Speaker 1: the question, I'm looking at the poll right now. Trump's
Speaker 1: knew fifty. This was on THEA and the Canadian steel
Speaker 1: and aluminum terraffs, but it was just in general, should
Speaker 1: he continue to push on terraffs? And right now the
Speaker 1: audience is split. Right now, it's fifty one point two
Speaker 1: percent no and forty eight point eight percent yes. So
Speaker 1: that's that surprised me a little bit. I thought there'd
Speaker 1: be more of people still pushing no. You know, the
Speaker 1: US is getting a bad rap, that kind of thing.
Speaker 1: So maybe Trump will pull back a little bit. And
Speaker 1: if he does and the FED does lower rates, I
Speaker 1: mean that's good for franchises. It's good for capital expenditure CAPAX,
Speaker 1: which always usually means more jobs. The question is is
Speaker 1: does it mean more revenue into the bottom line. So
Speaker 1: I'm kind of with you on that is, we may
Speaker 1: not see the revenue numbers, but we may see growth
Speaker 1: in terms of building units. Are you seeing any of
Speaker 1: that right now? Yeah?
Speaker 3: I mean I would say what you just described is
Speaker 3: absolutely a possibility. Right that is, I think there is
Speaker 3: a best case scenario here, that leads to interest rates
Speaker 3: coming down, that leads to more investment in the space,
Speaker 3: that leads to more willingness to grow one hundred percent.
Speaker 2: I think you're right.
Speaker 3: I think the hard part about this is again some
Speaker 3: of the unpredictability, but also the fact that you know,
Speaker 3: so far tariffs are more an idea than they are
Speaker 3: you know, an actual thing that's hurting our wallet. Right,
Speaker 3: So I think once tariffs do be you know, come
Speaker 3: into place and actually impact the market, which could take months,
Speaker 3: is the big one.
Speaker 1: Yeah, that's the date that almost all this stuff goes
Speaker 1: into effect. So that's most right now it's market allegedly second,
Speaker 1: and then this might have been an April fool's joke
Speaker 1: all along.
Speaker 2: Nothing surprises me anymore, Paul, I will say.
Speaker 1: That a trillion off the uh yeah, Like, you.
Speaker 3: Know, look at the end of the day, the consumer
Speaker 3: is is what what the consumer feels is what goes.
Speaker 3: And what the consumer is going to potentially feel is
Speaker 3: strained in their expenses and they're going to feel hit
Speaker 3: on all sides. I mean, look at the auto industry
Speaker 3: and if some of these tariffs come down for auto
Speaker 3: and you know, for the automotive industry and and you
Speaker 3: know new cars cost is up to twelve thousand dollars
Speaker 3: more or whatever they were reporting. You know, the fact
Speaker 3: is on all ends we could feel you know, cost
Speaker 3: go up, and if that happens, and if consumer sentiment drops,
Speaker 3: then the administration will respond to that presumably, right, So
Speaker 3: like it's I think there is a perfect version of
Speaker 3: what you explained where this could end up being a
Speaker 3: positive for the economy and it does lead to more
Speaker 3: investment and growth because of interest rates coming down. But
Speaker 3: the sad reality is is that you know, you pull
Speaker 3: one lever and it affects you know, eighteen different things
Speaker 3: over here, so you run over and pull this other
Speaker 3: level of effects eighteen different things over here. And it's
Speaker 3: just almost like a game of whack a mole that
Speaker 3: it's just really hard to read what it will actually
Speaker 3: do to the consumer marketplace.
Speaker 1: And I've never seen anything like this. I've never seen
Speaker 1: anything like this market right now, the way that it's
Speaker 1: responding to these just these blurts. It seems like from
Speaker 1: the White House that's coming in. Let's continue on the
Speaker 1: track because I have two other questions that I want
Speaker 1: to get to you before we end up here. Sure,
Speaker 1: a couple of things is around value and loyalty and
Speaker 1: really kind of this shift toward how And there's two areas.
Speaker 1: One is on the B two C side, how businesses
Speaker 1: are getting consumers to create more loyalty to their brands.
Speaker 1: And then ironically on the B two B side. And
Speaker 1: this is something that I wanted to show because this
Speaker 1: was over on your website. I'm not sure who wrote this.
Speaker 1: Let me was it was it you that wrote this
Speaker 1: or who was the author of this Katie Kate Finley? Okay,
Speaker 1: so Kate wrote this article over on Nation Restaurant News
Speaker 1: and it is called B to B influencer marketing gains
Speaker 1: gains traction? All right, So this is on the B
Speaker 1: to B side, which was really got my attention because
Speaker 1: this is something that we talk about all the time.
Speaker 1: And it's interesting because I've started to see a reach
Speaker 1: out mostly from food companies and tech companies to even
Speaker 1: companies like us that are that are I would say
Speaker 1: we're more of that B to B influencer because we
Speaker 1: talked with a lot of brands and so we could
Speaker 1: easily drop a name. But what do you guys see
Speaker 1: in terms of the influencer market? Do you feel like
Speaker 1: this is a thing. Is it a fad? What's going
Speaker 1: on here? And is it even meant for the restaurant industry?
Speaker 2: Yeah?
Speaker 3: I wish I could tell you it was a fad,
Speaker 3: because now that I'm an old man, I don't understand
Speaker 3: the influencer marketplace nearly as much as my younger counterparts.
Speaker 2: But no, it's not.
Speaker 3: It is is certainly here to stay in some form
Speaker 3: or fashion. Of course, things change every single day when
Speaker 3: it comes to social media. Whatever trend or you know,
Speaker 3: whatever anybody's talking about on social media changes every single day.
Speaker 3: But the format of certainly video, of the social media apps,
Speaker 3: the community that you have in your social media app,
Speaker 3: the format of personal brand, so the influencer as the brand,
Speaker 3: these are things that are not going away. It's something
Speaker 3: that even in media we're contemplating. Because for us, I'm
Speaker 3: sure you are, Paul, like, we're figuring out okay, you know,
Speaker 3: we media, we transition from print to digital, We transition
Speaker 3: from digital to you know, sort of the first version
Speaker 3: of social media, which was just posting on Twitter and Facebook. Yep,
Speaker 3: this is version two and it is very video driven
Speaker 3: and as you and I speak here, right, this is
Speaker 3: a visual video mo.
Speaker 1: Oh yeah, this will get club clipped into several shorts
Speaker 1: and totally that I see the impact obviously, we you know,
Speaker 1: we're zeroing in on Saver. We've got almost two hundred
Speaker 1: thousand subs on YouTube. We just clipped on our other network,
Speaker 1: which is Finance and Tech Crypto, we clipped over one
Speaker 1: point two million subscribers. And I am amazed every day
Speaker 1: at the amount of outreach to our company that our
Speaker 1: brands or businesses asking us to do stuff. You know
Speaker 1: that our influencer based. So I would agree. I think
Speaker 1: it's going to stick around. The question to me has
Speaker 1: always been, you know, where does the line draw? You know,
Speaker 1: where does that line I get that, you know, sponsorships
Speaker 1: and you know sports listen, the sports industry has been
Speaker 1: laden with this forever. You know, Nike signs Lebron, he
Speaker 1: does a shoe, and you know, I get it. I
Speaker 1: understand that that's you know, but in the area of
Speaker 1: the restaurant industry, I'm often wondering if if it truly
Speaker 1: I just don't know. I'm still I'm still at a
Speaker 1: quandary with this one.
Speaker 2: Yeah, and it's a couple of things.
Speaker 3: I mean, the first thing I'll say, is that social
Speaker 3: media really kind of flattens the media world in that
Speaker 3: everybody is media now, right. So you have your traditional
Speaker 3: role of take nations restaurant news, for example, as a
Speaker 3: BDB publication, we have that traditional role of being between
Speaker 3: the restaurant brand and the restaurant manufacturer.
Speaker 2: And we still are.
Speaker 3: We still happily serve that role, and I you know,
Speaker 3: I'm optimistic that we will continue for generations to come.
Speaker 3: But the fact of the matter is is is when
Speaker 3: we look around us, you know, we of course are
Speaker 3: not the only game in town. And that is not
Speaker 3: just other traditional publications that we compete with. It is
Speaker 3: just people out there who decide I'm going to have
Speaker 3: a sub stack.
Speaker 2: I'm going to have a lind I'm going to have a.
Speaker 3: Podcast, and you know what, power to them if they
Speaker 3: find their audience. That's the great thing about social media
Speaker 3: and multimedia in general is that you can go find
Speaker 3: the resource that speaks to you in the best possible
Speaker 3: way that you understand and that informs and educates and
Speaker 3: enhances what you're doing.
Speaker 2: And that's great.
Speaker 3: So I would never take away from anybody who's building
Speaker 3: their own little brand as media even if they're outside
Speaker 3: of a traditional media organization. But but it's also makes
Speaker 3: up for a lot of noise, and so.
Speaker 1: Yeah, how do you identify the signal from the noise?
Speaker 1: That's the that's the challenge that I often see is
Speaker 1: that if you don't, maybe it's going to go like this, Sam,
Speaker 1: maybe we're going to see a layer of influencers that
Speaker 1: are high, high quality that could compete, I won't say compete,
Speaker 1: but could rival or at least get in the same
Speaker 1: discussion with traditional media outlets. Because I think that's probably
Speaker 1: happened in the political news arena. I think we're there now.
Speaker 1: Maybe it will happen in food or retail possibly, But
Speaker 1: to your point, yeah, how do you discern the just
Speaker 1: the noise that's in yeahdustry, some.
Speaker 2: Other factors at play here.
Speaker 3: I mean, one thing is I've read studies about burnout
Speaker 3: among influencers.
Speaker 2: And you know, this is.
Speaker 3: A while ago that I read this, but at the time,
Speaker 3: this was maybe two years ago. They said that the
Speaker 3: average influencer burns out after about three years. So there's
Speaker 3: a problem inherent to this, which is if I'm an
Speaker 3: influencer and I gain a huge audience and it's my
Speaker 3: face at the center of that. Well, when I decide
Speaker 3: it's time to give up that brand is gone, I
Speaker 3: don't pass it on to the person who is in
Speaker 3: line for that job. So that is one factor at
Speaker 3: play that influencers will burn out because the pressure to
Speaker 3: create is in tense, and especially in this day and age,
Speaker 3: where you have to kind of say the right thing
Speaker 3: or you're going to offend somebody, like you're walking a
Speaker 3: tightrope at all times. So that will burn people out.
Speaker 3: But the other thing is is that the pendulum is
Speaker 3: always swinging right. I mean, this is true politically, this
Speaker 3: is true with a lot of things, which is right now.
Speaker 3: We're all about the personal brands, the influencers, and at
Speaker 3: some point the pendulum may swing back to where it's like,
Speaker 3: you know what I want, not an individual personal brand,
Speaker 3: I want just you know, a media brand, a reliable source.
Speaker 3: My loyalty goes to nr N because I've read them
Speaker 3: for decades, you know. So either way, we have to
Speaker 3: meet them where they are. We have to meet them
Speaker 3: on social media where they're looking for video, or we
Speaker 3: have to meet them in the print publication. We still
Speaker 3: print every single month, and we have to trust that
Speaker 3: the audience will find their way depending on how they
Speaker 3: tend to learn best. But it is that noise that
Speaker 3: is really hard for us to deal with and the consumer,
Speaker 3: you know, especially when you're trying to figure out who
Speaker 3: do I follow, who do I believe?
Speaker 2: It's it's all over the place.
Speaker 1: Well, it's a cycle.
Speaker 2: You know.
Speaker 1: I've been in media since the mid nineties, and I
Speaker 1: remember when we first started publishing in the mid nineties,
Speaker 1: we launched a website and at the time, you know,
Speaker 1: media was still mostly print and it was when in
Speaker 1: our end was Lebar Friedman. I think at the time
Speaker 1: it was still Lebar Friedman. And I remember when that
Speaker 1: was a weekly magazine. Yeah, crazy, right, I imagine that
Speaker 1: every week it was like the little Bible that would
Speaker 1: always come in the mail. And you just said, it's
Speaker 1: a monthly publication. Now it's monthly monthly. Wow, times have changed.
Speaker 1: But my point being is that, you know, we started
Speaker 1: off with the web. Nobody thought that even the Internet
Speaker 1: was going to be a thing. And then I merged
Speaker 1: our business at the time, which was fast Casual and
Speaker 1: QSR Web, and we merged over the NetWorld. Things started
Speaker 1: going more digital. But even then, my partners at NetWorld
Speaker 1: because at that time it was I think twenty two
Speaker 1: thousand seven or eight, and I said, guys, we've got
Speaker 1: to double down on podcasting and video. We just have
Speaker 1: to do it. We just got to double down on
Speaker 1: podcasting and video right now. We cut our first podcast
Speaker 1: in two thousand and seven and it did terrible.
Speaker 2: No no listeners.
Speaker 1: Nobody was listening. We had like five listeners. Yeah, so,
Speaker 1: and I think they're all our friends.
Speaker 2: Yeah.
Speaker 1: But my point is is that maybe that we are
Speaker 1: entering an era like that, is that we don't know
Speaker 1: what we don't know yet because who knows what's going
Speaker 1: to happen with AI. The integration of even media itself
Speaker 1: is probably going to speed up. Short is already going
Speaker 1: like crazy. So yeah, I don't know. It's going to
Speaker 1: be a funky next decade.
Speaker 2: All right.
Speaker 3: When I'll just real quick on that, I'll say that
Speaker 3: one thing that my my boss, Joe Donnelly, our president,
Speaker 3: he and I talk about all the time is if
Speaker 3: we don't if we don't follow this path into video
Speaker 3: and social media, ten years down the line, we're irrelevant
Speaker 3: because today's Jenry, you know, audience member, is tomorrow's CEO.
Speaker 3: And if tomorrow's CEO wants video on TikTok to inform
Speaker 3: them on the restaurant industry. We have to start that
Speaker 3: now for sure.
Speaker 1: Hey, listen, we'll be happy to help you.
Speaker 2: I noted.
Speaker 1: Listen, let's hit on the last question here, and this
Speaker 1: is about third party delivery off premise. You know, catering
Speaker 1: has grown. We you know, it was a fairly good industry.
Speaker 1: We saw a little bit of the explosion again during
Speaker 1: the tougher times of the industry, but third party really
Speaker 1: made its its statement. It probably is what I still
Speaker 1: believe it's what saved the restaurant industry because we would
Speaker 1: have had a lot more casualties had that not been
Speaker 1: a potential, even though we had a lot of casualties.
Speaker 1: But here's my question to you. Now, I feel like
Speaker 1: third party continues to take advantage of the industry in
Speaker 1: terms of these fees. Do you think we're going to
Speaker 1: see these fees come down? And do you think they're
Speaker 1: going to openly start sharing data with the industry without
Speaker 1: some pressure, because right now, I mean, other than grub
Speaker 1: hubbling off some people last year and Postmates and Uber
Speaker 1: still fighting it out to a certain extent, what are
Speaker 1: your thoughts on third party Do you think it sticks
Speaker 1: around for a long time or what's your position.
Speaker 3: Well, the answer to your first question is nope. I
Speaker 3: don't see fees coming down. I don't see the sharing
Speaker 3: of data. I don't see them sharing data because why
Speaker 3: would they, Why should they?
Speaker 2: They don't have to.
Speaker 3: They have all the leverage in the world, alizaar, I mean, yeah, look,
Speaker 3: if you take a step back and look at this,
Speaker 3: it's amazing because in you know, I agree with you
Speaker 3: on the fact that if the pandemic had happened in
Speaker 3: twenty ten, eleven twelve, what would this industry be because
Speaker 3: it didn't have that in its back pocket. But when
Speaker 3: it happened was almost like bizarrely perfectly timed that door,
Speaker 3: Dash and grub have had just come up and they
Speaker 3: became this great solution. So I agree with you that
Speaker 3: they really saved the industry in a lot of ways.
Speaker 3: The problem is is even then we were talking about
Speaker 3: it as the necessary evil, because it was like, well,
Speaker 3: what other option do you have?
Speaker 2: This is where the consumer is going. You must be
Speaker 2: where the consumer is.
Speaker 3: These are marketing platforms as much as anything to get
Speaker 3: in front of people. And if you're not doing it,
Speaker 3: you're going to lose out. And you know, for a
Speaker 3: little bit there in the pandemic, I wondered about, you know,
Speaker 3: maybe there will be alternatives come up. Maybe there will
Speaker 3: be I always thought maybe if you could figure out
Speaker 3: some sort of CoSystem where local business come in together
Speaker 3: and they invest in delivery drivers or something.
Speaker 2: There's got to be something. It never embers happened.
Speaker 3: And so until the alternative emerges, what you're going to
Speaker 3: see is third party can continue to consolidate, continue to
Speaker 3: gain the leverage, and continue to use that as a
Speaker 3: cudgel in the industry and say, wow, we can keep
Speaker 3: charging these fees and not share our data because there's
Speaker 3: literally no other option that you have but to do so.
Speaker 1: It's that the consumer might put some pressure on that,
Speaker 1: because I mean, pricing right now on a Chipotle bowl
Speaker 1: through Uber this is out of hand. Guys, come on.
Speaker 3: I agree, well, and I think it changes consumer behavior
Speaker 3: and you decide to get in your car.
Speaker 2: At least that's what it has been for me.
Speaker 3: I will look at I'll go through the door dash thing,
Speaker 3: I'll look at what it's going to cost me in fees,
Speaker 3: and I say, well, it's two miles five minute drive
Speaker 3: versus ten dollars in fees?
Speaker 2: What do I value more?
Speaker 3: And it depends on my mood or money, and yeah,
Speaker 3: and I think the consumer, the average consumer is probably similar.
Speaker 3: I think it was the Domino's earnings call recently where
Speaker 3: they talked about the fact that they see some indication
Speaker 3: that the low income consumer is pulling back on delivery
Speaker 3: in particular. And I think that's where we're going to
Speaker 3: have to watch very closely. Is I mean the low
Speaker 3: income consumers is pulling back on restaurants spending in general.
Speaker 3: But I mean, of course they would pull back on
Speaker 3: something that comes with layers of fees, like third party delivery.
Speaker 2: So it will be fascinating to see what.
Speaker 3: Happens with that in twenty twenty five, because I think
Speaker 3: that's the only thing that forces the hand of these
Speaker 3: third party companies is if consumers just say forget this,
Speaker 3: this is.
Speaker 2: Not worth it.
Speaker 3: I'm gonna drive the mind and get off my couch.
Speaker 3: And if that happens, they will be forced to make
Speaker 3: some sort of change.
Speaker 1: Well, and I think it's been a you know, it's
Speaker 1: a hard business to make money at these logistics companies.
Speaker 1: There's a lot of overhead in it, and granted a
Speaker 1: lot of them are trying to go into more automation.
Speaker 1: If we do see some sort of robotic, real true autonomy,
Speaker 1: whether it's in vehicles or in the actual robots themselves
Speaker 1: that are coming, maybe we get to a commodity product,
Speaker 1: but it's probably a decade away, you know, before pricing,
Speaker 1: you know, because the competitive nature I think of AI
Speaker 1: could get you into a layer of building out a
Speaker 1: logistics system as elaborate as what Uber and Postmates have
Speaker 1: you know now in the marketplace. So, man, Sam, this
Speaker 1: has been a good one. I love chatting with people
Speaker 1: that really dive deep on this, so it has been
Speaker 1: great having you on the show today, and thank you
Speaker 1: so much for stopping in. We appreciate it.
Speaker 2: Thanks for having me, Paull You.
Speaker 1: Bet all right, you guys. As I said, if you're
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