WEBVTT 1 00:00:00.120 --> 00:00:03.040 Welcome back to another episode of the Restaurant Report. Today, 2 00:00:03.040 --> 00:00:05.480 we're going to be looking at a market update and 3 00:00:05.719 --> 00:00:09.759 mainly looking at what is going on from a brand side, 4 00:00:09.919 --> 00:00:13.279 also some consumer trends where the market may be leaning 5 00:00:13.320 --> 00:00:15.160 in terms of sales and profits, and some of the 6 00:00:15.240 --> 00:00:18.760 challenges that we'll be facing here in the industry. Today 7 00:00:18.839 --> 00:00:20.600 is going to be a good one that I don't 8 00:00:20.640 --> 00:00:22.280 think you guys are going to want to miss. I'm 9 00:00:22.280 --> 00:00:24.679 going to be joined here by Sam Ocus, who is 10 00:00:24.800 --> 00:00:28.559 the editor in chief of Nation's Restaurant News. You guys 11 00:00:28.600 --> 00:00:31.359 know them over there at Informa. It's going to be 12 00:00:31.399 --> 00:00:33.960 a good, lively discussion and I want you guys to 13 00:00:34.000 --> 00:00:46.000 stick around. We'll be right back. This episode is brought 14 00:00:46.000 --> 00:00:48.280 to you in part by Gusto, the number one rated 15 00:00:48.439 --> 00:00:53.320 HR platform for payroll, benefits and more. With Gusto's easy 16 00:00:53.359 --> 00:00:56.679 to use platform, you can empower your people and push 17 00:00:56.719 --> 00:01:00.679 your business forward. Over four hundred thousand business is choose 18 00:01:00.759 --> 00:01:03.759 Gusto every day. And let's get into it, guys. There's 19 00:01:03.799 --> 00:01:05.840 a couple of things you can do with Gusto that 20 00:01:05.879 --> 00:01:08.799 you should check out. Some of the solutions that you're 21 00:01:08.879 --> 00:01:12.079 just absolutely going to want to know about is of 22 00:01:12.120 --> 00:01:15.680 course their business type new businesses and startups. 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All right, We're back here on the Restaurant 43 00:02:24.400 --> 00:02:27.000 Report and I've got Sam Olcus coming in with me 44 00:02:27.120 --> 00:02:29.319 today and Sam, how are you. 45 00:02:29.840 --> 00:02:31.319 I'm good, Paul, thanks for having me. 46 00:02:31.439 --> 00:02:34.800 Nice to see you. Very good. Likewise, listen, I wanted 47 00:02:34.800 --> 00:02:36.159 to you know, we talked a little bit about this 48 00:02:36.360 --> 00:02:38.520 on pree of the show. Tell me a little bit 49 00:02:38.560 --> 00:02:43.400 about where Informa is today. You mentioned there's some changes 50 00:02:43.400 --> 00:02:46.240 in the roles and you guys got some team changes. 51 00:02:46.240 --> 00:02:47.919 Give us an update a little bit of what's going 52 00:02:47.960 --> 00:02:48.400 over there. 53 00:02:48.879 --> 00:02:51.599 Yeah, sure, so if you don't know, Informa is a 54 00:02:52.120 --> 00:02:57.080 global event management company primarily based in London, but over 55 00:02:57.120 --> 00:03:00.400 the years they've grown to encompass also immediate side of 56 00:03:00.439 --> 00:03:04.360 the business as well. So we have our division is 57 00:03:04.400 --> 00:03:07.439 called Informa Food Service, and in Forma food Service encompasses 58 00:03:07.800 --> 00:03:12.199 six publications. Nation's Restaurant News and Restaurant Hospitality are two 59 00:03:12.240 --> 00:03:14.400 of them. Those are the two ioversee. We also have 60 00:03:14.479 --> 00:03:17.360 Restaurant Business and Food Service Director, and then we have 61 00:03:17.400 --> 00:03:21.120 two retail publications, Supermarket News and CSP. So it's all 62 00:03:21.120 --> 00:03:25.319 food related publications for the industry within Informa Food Service. 63 00:03:25.319 --> 00:03:27.159 But we are a part of the bigger event management 64 00:03:27.199 --> 00:03:28.240 company that is in Forma. 65 00:03:29.199 --> 00:03:35.439 Okay, so Informa has events obviously multi sectors that you 66 00:03:35.439 --> 00:03:37.840 guys track. Obviously, the food side is the big one 67 00:03:37.879 --> 00:03:40.319 that we're going to be diving in today. I want 68 00:03:40.360 --> 00:03:43.560 to kind of lead off with the topic around the 69 00:03:43.639 --> 00:03:46.319 layoffs because that's probably the biggest news that's been hitting 70 00:03:46.759 --> 00:03:51.319 here recently. Starbucks went in had some layoffs. We saw 71 00:03:51.400 --> 00:03:54.840 Brian Nickel kind of make a pretty drastic move in 72 00:03:54.919 --> 00:03:57.039 the space right now, and he also did a big 73 00:03:57.680 --> 00:04:00.680 kind of callback to his team saying, Hey, we're really 74 00:04:00.680 --> 00:04:03.400 focused on getting the job done. We want people to 75 00:04:03.400 --> 00:04:05.240 come back in the office. Are you seeing any other 76 00:04:05.319 --> 00:04:08.319 brands that are really kind of in that position right now? 77 00:04:09.400 --> 00:04:10.159 Yeah, certainly. 78 00:04:10.560 --> 00:04:14.960 You know, we've seen layoffs across the industry, Panera, Bloomin brands, 79 00:04:15.120 --> 00:04:17.120 a number of companies have announced they're going to do that, 80 00:04:17.160 --> 00:04:19.680 and you know, this is part of a broader trend 81 00:04:19.720 --> 00:04:23.199 across industries. I think, you know, post pandemic. To be 82 00:04:23.240 --> 00:04:25.279 honest with you, I'm surprised it didn't happen earlier. I 83 00:04:25.319 --> 00:04:28.399 think a couple of years ago we started to see 84 00:04:28.600 --> 00:04:32.079 a lot of layoffs at technology companies in particular, right. 85 00:04:31.959 --> 00:04:33.720 So, I think it was early twenty twenty three. 86 00:04:33.839 --> 00:04:35.920 You know, we were calling twenty twenty three the Year 87 00:04:35.920 --> 00:04:36.879 of efficiencies. 88 00:04:37.639 --> 00:04:37.920 Meta. 89 00:04:38.000 --> 00:04:40.920 The Facebook owner was I think laying off ten thousand 90 00:04:40.959 --> 00:04:43.600 employees something like that, you know, So we thought at 91 00:04:43.600 --> 00:04:46.439 that time, oh wow, so lots of layoffs coming all 92 00:04:46.480 --> 00:04:49.639 of the glut of the pandemic, especially in the tech sector, 93 00:04:50.079 --> 00:04:52.000 was going to have a domino effect and we're going 94 00:04:52.040 --> 00:04:55.240 to start seeing more layoffs as companies try to leverage 95 00:04:55.240 --> 00:04:58.839 technology to achieve efficiency. And it didn't happen as much 96 00:04:58.839 --> 00:05:00.800 in the restaurant industry then, So I think to some 97 00:05:00.839 --> 00:05:04.000 degree what we're seeing now is that kind of pushed 98 00:05:04.079 --> 00:05:07.360 back to where here in early twenty twenty five, companies 99 00:05:07.399 --> 00:05:10.319 are saying, look, we are too fat at the top, 100 00:05:10.360 --> 00:05:13.600 We've got too much especially you know on the corporate 101 00:05:13.639 --> 00:05:16.560 side of things, We've got to get a leaner ship here. 102 00:05:16.600 --> 00:05:20.600 We've got to have some efficiencies to improve our profitability because, 103 00:05:20.839 --> 00:05:22.920 as I think we'll probably talk about here, you know, 104 00:05:22.959 --> 00:05:26.639 profitability is taking a hit as costs of everything go. 105 00:05:26.720 --> 00:05:29.120 Up, as consumers pull back because of inflation. 106 00:05:29.319 --> 00:05:32.480 So in order to improve profitability, this is one of 107 00:05:32.279 --> 00:05:34.920 the ways companies are looking is at the corporate. 108 00:05:34.600 --> 00:05:37.560 Layoffs well, and I think you're hitting on it is 109 00:05:37.680 --> 00:05:40.480 the profit side of this. We'll look at some Chipoli 110 00:05:40.600 --> 00:05:43.519 numbers here in a minute, but this is something that 111 00:05:43.759 --> 00:05:47.480 has mostly been at the corporate level. However, I've also 112 00:05:47.560 --> 00:05:49.639 talked to a lot of operators here recently in the 113 00:05:49.680 --> 00:05:53.519 fast casual space. They've even talked about trying to slow 114 00:05:53.600 --> 00:05:57.000 their growth in terms of hiring and looking to hire 115 00:05:57.079 --> 00:06:00.319 more quality. So I'm kind of curious, do you think 116 00:06:00.360 --> 00:06:03.279 we're going to see a little bit of a shift 117 00:06:03.839 --> 00:06:09.439 in possibly the workforce and is this being aided in 118 00:06:09.519 --> 00:06:12.519 by maybe some of the improvements that we've seen from AI. 119 00:06:13.480 --> 00:06:15.480 Absolutely, I mean I think no doubt about it. For 120 00:06:15.519 --> 00:06:17.759 the last five to ten years, as we've watched a 121 00:06:17.759 --> 00:06:21.079 lot of the tech innovation come forward that in a 122 00:06:21.120 --> 00:06:23.839 lot of ways is doing the role of some employees. 123 00:06:23.920 --> 00:06:26.160 I mean, I think a very easy thing to look 124 00:06:26.199 --> 00:06:30.399 at is voice activated ordering and putting that in the 125 00:06:30.480 --> 00:06:33.879 drive through. So, just using that as an example, QSR 126 00:06:33.879 --> 00:06:36.480 brands in particular tend to do seventy to eighty percent 127 00:06:36.519 --> 00:06:38.839 of their business in the drive through lane, which makes 128 00:06:38.879 --> 00:06:41.120 the drive through order taker one of the most important 129 00:06:41.160 --> 00:06:44.920 people in that building, and if you replace that person 130 00:06:45.319 --> 00:06:48.920 with AI, if that's a voice activated AI that is 131 00:06:49.000 --> 00:06:53.600 taking your order, you're you're maybe not necessarily getting rid 132 00:06:53.639 --> 00:06:55.959 of that position, but you're going to reallocate that labor. 133 00:06:56.000 --> 00:06:58.480 And even as you reallocate the labor with your strong 134 00:06:58.519 --> 00:07:01.160 employee who was previously to making orders in the drive through, 135 00:07:01.720 --> 00:07:04.079 it's going to have that domino effect to where you 136 00:07:04.279 --> 00:07:06.560 aren't going to need that many employees in the restaurant. 137 00:07:06.680 --> 00:07:10.319 So that's just one example of throughout the operation, particularly 138 00:07:10.360 --> 00:07:12.319 in the back of house, I think you see a 139 00:07:12.399 --> 00:07:15.639 shakeup of technology taking over some of the roles of employees, 140 00:07:15.680 --> 00:07:18.120 a reallocation of labor, often toward the front of the 141 00:07:18.120 --> 00:07:21.959 house to provide hospitality. But it is affording the restaurant 142 00:07:21.959 --> 00:07:26.680 companies the ability to pull back on their labor, which 143 00:07:26.720 --> 00:07:30.480 of course is one of the biggest cost on your 144 00:07:30.480 --> 00:07:32.720 p and l anymore and getting more and more expensive, 145 00:07:32.759 --> 00:07:35.199 and of course the quality talent just isn't there when 146 00:07:35.199 --> 00:07:38.279 you're hiring, so tech makes a lot of sense in 147 00:07:38.319 --> 00:07:39.800 relieving the pressure of labor. 148 00:07:39.839 --> 00:07:41.319 So I think that's what you're talking about, Paul Is. 149 00:07:41.319 --> 00:07:43.360 I think a lot of companies are saying, okay, well, 150 00:07:43.399 --> 00:07:45.040 we're going to pull back on hiring. We're going to 151 00:07:45.040 --> 00:07:48.480 look for ways that tech can you make our operation 152 00:07:48.600 --> 00:07:51.680 more efficient, pick up a lot of the responsibilities that 153 00:07:51.720 --> 00:07:54.199 our employees previously were doing, and that's going to have 154 00:07:54.240 --> 00:07:56.839 the net effect of a couple of positions getting cut. 155 00:07:57.439 --> 00:08:00.240 Yeah, I think the key here when you look at 156 00:08:00.240 --> 00:08:03.160 the percentage of savings. I'll go in and I'll share 157 00:08:03.240 --> 00:08:05.680 this portion of the article. Let me kind of zoom 158 00:08:05.720 --> 00:08:09.199 in on that here as well. What you'll notice is 159 00:08:09.360 --> 00:08:14.399 Denny's CFO. This is Robert Verstek. He said that just 160 00:08:14.519 --> 00:08:17.120 the corporate support centers, which goes back to here. Now, granted, 161 00:08:17.160 --> 00:08:20.600 support centers are usually supporting maybe the operation side, but 162 00:08:20.759 --> 00:08:24.639 still saying that this would result in about a three 163 00:08:24.680 --> 00:08:27.079 and a half to four percent savings in their general 164 00:08:27.839 --> 00:08:31.000 administrative expenses. So I'm kind of curious if that is 165 00:08:32.039 --> 00:08:35.679 being impacted just by work that it's kind of like 166 00:08:36.240 --> 00:08:38.960 doze for the restaurant industry. Are we seeing kind of 167 00:08:39.000 --> 00:08:41.720 a cycle of saying, well, we just had some jobs 168 00:08:41.720 --> 00:08:45.000 that were a little bit more fluffed than they were productive, 169 00:08:45.600 --> 00:08:47.559 or do you think, oh, no, we're doing that on 170 00:08:47.600 --> 00:08:49.279 an AI by which is it or is it a 171 00:08:49.279 --> 00:08:49.919 blend of both. 172 00:08:51.039 --> 00:08:52.720 Probably a blend of both. I mean, if you look 173 00:08:52.759 --> 00:08:55.279 at what Brian Nicol has done at Starbucks. You know, 174 00:08:55.360 --> 00:08:57.799 when he announced that there would be layoffs, before they 175 00:08:57.799 --> 00:09:00.720 announced the scope of those layoffs, he said that they 176 00:09:00.720 --> 00:09:03.120 were going to target employees at the corporate level who 177 00:09:03.320 --> 00:09:06.159 you know, weren't in any kind of meaningful leadership position 178 00:09:06.320 --> 00:09:09.279 where they you know, they didn't necessarily have ownership of 179 00:09:09.320 --> 00:09:13.480 any particular project or division, which is you know, basically 180 00:09:13.480 --> 00:09:16.279 stripping out layers. Right. So I think that this is 181 00:09:16.320 --> 00:09:17.720 what a lot of private equity will do well to 182 00:09:17.759 --> 00:09:19.879 go exact bliness, they strip out the layers, right, And 183 00:09:19.919 --> 00:09:21.759 I think that's what some of these companies are doing, 184 00:09:22.279 --> 00:09:24.720 you know, and what perhaps DOJE is doing at a 185 00:09:24.759 --> 00:09:28.440 broader federal level. And so and whether you think that's 186 00:09:28.480 --> 00:09:30.320 right or wrong, by the way, that that has the 187 00:09:30.360 --> 00:09:34.039 effect of lowering your GNA. As the Dennis CFO was 188 00:09:34.279 --> 00:09:38.639 alluding to their finding hopefully some efficiencies, I mean, because look, 189 00:09:38.720 --> 00:09:41.639 you don't want to strip out the layers and then 190 00:09:41.799 --> 00:09:44.960 you know, in the months after that, find out oh, 191 00:09:45.080 --> 00:09:47.720 like those were actually quintessential employees that we needed to 192 00:09:47.799 --> 00:09:51.080 run this business. Yeah, so there is a danger to it, 193 00:09:51.120 --> 00:09:53.039 but I think if you're a little bit more precise, 194 00:09:53.080 --> 00:09:55.879 you're a little bit more calculated on who the people 195 00:09:56.000 --> 00:09:58.720 we need to have and who are the quintessential employees 196 00:09:58.720 --> 00:10:01.720 to running this company versus those who are maybe we 197 00:10:01.799 --> 00:10:03.600 have a little bit of fluff, maybe there's a little 198 00:10:03.600 --> 00:10:05.720 bit of glut here. There is a way I think 199 00:10:05.759 --> 00:10:07.159 you can do it to make it where you are 200 00:10:07.240 --> 00:10:10.360 saving and you are finding efficiencies as well. Yeah. 201 00:10:10.360 --> 00:10:12.840 I think the you know, the brands that I've talked 202 00:10:12.840 --> 00:10:16.000 to who have done and gone through the process of 203 00:10:16.080 --> 00:10:19.000 at least setting up a plan for twenty twenty five 204 00:10:19.240 --> 00:10:22.559 for reducing corporate workforce, most of them have kind of 205 00:10:22.559 --> 00:10:25.879 pointed it at, hey, we are getting to more AI 206 00:10:26.080 --> 00:10:29.399 tools that possibly I don't need as many people. In marketing, 207 00:10:29.440 --> 00:10:32.519 I don't need as many people. Maybe enfranchising A lot 208 00:10:32.559 --> 00:10:35.200 of that is being done now in new places. But 209 00:10:35.360 --> 00:10:38.480 to your point is if they just overreach, that could 210 00:10:38.519 --> 00:10:41.679 be obviously an issue for the brand going forward, especially 211 00:10:41.679 --> 00:10:42.240 on growth. 212 00:10:42.679 --> 00:10:44.600 Yeah, and I think yeah, and I to point out 213 00:10:44.639 --> 00:10:47.279 to just you know, the support part of support center, 214 00:10:47.440 --> 00:10:49.919 which is, if you have a company, let's just use 215 00:10:50.000 --> 00:10:53.720 McDonald's as an example, McDonald's is ninety five percent franchised 216 00:10:53.720 --> 00:10:57.039 and they have thousands and thousands of franchises or thousands 217 00:10:57.080 --> 00:11:01.600 of franchise operators. If you, as a sport center, cut 218 00:11:01.679 --> 00:11:04.480 the people who are supporting the franchisees, that of course 219 00:11:04.480 --> 00:11:06.679 has a trickle down effect, right sure, and you're going 220 00:11:06.759 --> 00:11:09.759 to start having disgruntled franchisees. You're going to have the 221 00:11:09.840 --> 00:11:14.000 restaurants start start falling apart, frankly, because the role of 222 00:11:14.039 --> 00:11:16.200 a support center is to do exactly that, is to 223 00:11:16.679 --> 00:11:20.480 support the restaurants. So that's where it's I think restaurants 224 00:11:20.559 --> 00:11:23.639 must be very very careful. They must say, we're not 225 00:11:23.799 --> 00:11:26.679 going to cut the part of this business that is 226 00:11:26.799 --> 00:11:30.519 ensuring a great experience at the restaurant level. Perhaps we're 227 00:11:30.559 --> 00:11:33.039 just cutting the parts of this business that I think, Paul, 228 00:11:33.039 --> 00:11:35.799 to your point, if you look at AI and data 229 00:11:35.879 --> 00:11:38.759 and how it's affecting, for example, supply chain, if you 230 00:11:38.840 --> 00:11:41.480 had a whole team of people who were in charge 231 00:11:41.480 --> 00:11:45.840 of the supply chain and managing supply and logistics, and 232 00:11:45.960 --> 00:11:49.480 suddenly you have AI that can do that very effectively, well, 233 00:11:49.519 --> 00:11:52.200 maybe you don't need as many people on that team 234 00:11:52.320 --> 00:11:54.080 because you have those tools that can do it for you. 235 00:11:54.840 --> 00:11:57.720 All Right, We're going to continue on the challenges in 236 00:11:57.759 --> 00:12:00.799 the industry. Obviously, this isn't a doomsday podcast, we do. 237 00:12:00.840 --> 00:12:03.440 We're going to talk about some good stuff too. Yes, 238 00:12:04.039 --> 00:12:06.240 in the end to kind of get into that, I 239 00:12:06.320 --> 00:12:09.480 want to talk about sales and profit. Obviously, one of 240 00:12:09.519 --> 00:12:14.000 the biggest issues that we're already faced with as recording today. 241 00:12:15.039 --> 00:12:18.840 We actually saw President Trump come in with not an extended, 242 00:12:19.120 --> 00:12:23.600 a more amped up tariff on Canada on aluminum steel 243 00:12:23.919 --> 00:12:26.480 went up to like fifty percent. But here's the point 244 00:12:26.639 --> 00:12:30.600 I'm getting at is that this unsettling feeling I think 245 00:12:30.720 --> 00:12:33.440 is probably in the gut of a lot of CEOs 246 00:12:33.600 --> 00:12:36.080 right now, even in the food space, because they're like, hey, 247 00:12:36.919 --> 00:12:39.120 what do we get from Canada? Because there could be 248 00:12:39.159 --> 00:12:42.200 another target, whether it's Mexico or Canada. We've already seen 249 00:12:42.240 --> 00:12:44.320 this will play a clip here from Scott Boat Ride. 250 00:12:44.799 --> 00:12:48.320 But if you look at just the inflation impact on 251 00:12:48.600 --> 00:12:51.840 American consumers, because this is going to trickle down probably 252 00:12:51.840 --> 00:12:54.440 into a lot of other areas, not just steal in 253 00:12:54.480 --> 00:12:57.679 an aluminum. But you'll notice here a couple of points 254 00:12:57.720 --> 00:13:00.279 that this article is hitting on right here from Bloomberg 255 00:13:00.960 --> 00:13:03.480 is they're really going after some of the core things 256 00:13:03.519 --> 00:13:06.080 low income households. And this is where I'm going on this. 257 00:13:06.159 --> 00:13:08.759 Let me kind of zoom in on that for everybody 258 00:13:08.759 --> 00:13:11.399 that's watching this over on YouTube. Low income households who 259 00:13:11.399 --> 00:13:14.120 spend a larger share of their budgets on goods, they're 260 00:13:14.120 --> 00:13:16.639 wealthy and tend to favor cheaper imports. This is going 261 00:13:16.679 --> 00:13:18.240 to bear the brunt of the hit on a lot 262 00:13:18.279 --> 00:13:22.200 of these So this being the FAE the face of 263 00:13:22.399 --> 00:13:26.919 potentially the restaurant industry as well, because QSR, fast casual 264 00:13:27.639 --> 00:13:31.440 target that household. And if we do see some pressures 265 00:13:31.440 --> 00:13:34.720 here from these other ancillary tariffs, do you think that's 266 00:13:34.759 --> 00:13:36.720 going to have an impact on the industry here in 267 00:13:36.759 --> 00:13:37.399 twenty five. 268 00:13:37.759 --> 00:13:39.480 Yeah, there's no doubt. There's no doubt. 269 00:13:39.799 --> 00:13:42.919 The National Restaurant Association wrote a letter to the Trump 270 00:13:42.919 --> 00:13:46.240 administration saying that it would be about twelve billion dollars. 271 00:13:46.279 --> 00:13:48.799 It would cost to the industry about twelve billion dollars. Now, 272 00:13:49.399 --> 00:13:51.919 I cannot keep up with what wave of tariffs are 273 00:13:51.919 --> 00:13:55.360 being proposed, and so that was perhaps a previous wave. 274 00:13:55.480 --> 00:13:57.799 That number might actually be higher now I'm not sure, 275 00:13:58.240 --> 00:14:00.480 but I think what you know, the Association is trying 276 00:14:00.519 --> 00:14:03.799 to point out is you know, we import a lot 277 00:14:04.000 --> 00:14:06.679 of food to this country. And if you think about 278 00:14:06.720 --> 00:14:09.679 something like Mexico and avocados, I believe it's something like 279 00:14:09.759 --> 00:14:13.759 ninety percent of the avocados in America are grown in Mexico. Something, 280 00:14:14.320 --> 00:14:18.600 you know, incredible like that. So you know, tariffs they 281 00:14:18.639 --> 00:14:21.200 have of course a huge impact on the food industry. 282 00:14:22.000 --> 00:14:24.399 And so when you think about twelve billion dollars, you know, 283 00:14:24.399 --> 00:14:26.200 you might say to yourself, Okay, in a one point 284 00:14:26.200 --> 00:14:28.679 five trillion dollar business, is twelve billion dollars just to 285 00:14:28.720 --> 00:14:30.639 drop in the bucket. But I think what you're getting 286 00:14:30.679 --> 00:14:33.200 at here, Paul, is the fact that that twelve billion dollars, 287 00:14:33.360 --> 00:14:36.159 especially if you hit a company, say a Mexican chain 288 00:14:36.200 --> 00:14:38.600 that serves a lot of avocados, and they have no 289 00:14:38.799 --> 00:14:41.159 choice but to increase their prices because of what they're 290 00:14:41.200 --> 00:14:45.840 paying on those imported avocados, for example, then yes, that 291 00:14:45.919 --> 00:14:48.919 will have a big impact on the low income consumer. 292 00:14:48.960 --> 00:14:51.799 And I think to that article's point, you know, the 293 00:14:51.840 --> 00:14:55.360 low income consumer, we are already seeing them pull back. 294 00:14:55.519 --> 00:14:59.519 You've already seen that inflation. Has they finally had enough 295 00:14:59.559 --> 00:15:00.000 with inflation? 296 00:15:00.360 --> 00:15:02.960 With menu prices going up twenty five thirty thirty five 297 00:15:02.960 --> 00:15:06.159 percent at a lot of chains. They can't take it anymore. 298 00:15:06.200 --> 00:15:08.399 They're tidening the belts, they're pulling back. And if you 299 00:15:08.480 --> 00:15:11.480 add this an additional layer in the tariffs on top 300 00:15:11.519 --> 00:15:14.200 of it, if you have to increase cost of goods 301 00:15:14.240 --> 00:15:17.039 that are imported from other countries getting these tariffs, yeah, 302 00:15:17.360 --> 00:15:19.279 they're going to have had enough and they're going to 303 00:15:19.320 --> 00:15:21.480 say I'm going to call it now. 304 00:15:21.480 --> 00:15:24.639 They have to eat so they you know, supermarkets are also. 305 00:15:24.519 --> 00:15:28.840 Selling goods that are affected by tariffs. So the unfortunate 306 00:15:28.840 --> 00:15:31.039 reality is that there's not a great solution for low 307 00:15:31.080 --> 00:15:34.720 income consumers. But we've seen throughout history that historically they 308 00:15:34.720 --> 00:15:37.919 will they will cut back on restaurants first, if they're 309 00:15:37.919 --> 00:15:39.120 cutting back on any expense. 310 00:15:39.200 --> 00:15:42.039 Well, and there are some there are some indicators out 311 00:15:42.039 --> 00:15:47.840 there that restaurants are trying to almost position themselves as 312 00:15:48.480 --> 00:15:53.639 an alternative option to even going grocery, to the grocery 313 00:15:53.639 --> 00:15:56.120 side of things, or blending, because I see this in 314 00:15:56.159 --> 00:15:59.120 a lot of families where they order something from a 315 00:15:59.120 --> 00:16:01.960 takeout restaurant and then they'll backfill it, you know, at home, 316 00:16:02.000 --> 00:16:03.960 whether it's a dinner or a lunch you know thing. 317 00:16:04.039 --> 00:16:07.279 I mean, even our family does that and it's pretty effective. 318 00:16:07.480 --> 00:16:10.159 I want to play a clip though for you. This 319 00:16:10.240 --> 00:16:14.799 is Scott Boatwright coming in from Chipotle and he has 320 00:16:14.840 --> 00:16:17.799 some interesting statements that he did in this in this 321 00:16:18.120 --> 00:16:20.120 interview here with Bloomberg. Let me play this for you. 322 00:16:20.240 --> 00:16:22.720 Let's start with tariffs, because we can't avoid the elephant 323 00:16:22.720 --> 00:16:25.000 in the room here, the single biggest way that tariffs 324 00:16:25.039 --> 00:16:27.600 are making your life actual potlein more difficult. 325 00:16:29.480 --> 00:16:32.000 Of course, tariff's impact everyone here in the US as 326 00:16:32.039 --> 00:16:35.000 we think about I know avocado supply is on the 327 00:16:35.039 --> 00:16:37.200 top of mind for a lot of US consumers. It 328 00:16:37.240 --> 00:16:39.919 is for us as you can imagine, we've gone through 329 00:16:39.960 --> 00:16:43.039 what we believe to be a very sound vendor diversification 330 00:16:43.200 --> 00:16:47.120 program as it relates to buying avocados. We buy everything 331 00:16:47.159 --> 00:16:49.679 that we can possibly pick up here in the US 332 00:16:50.240 --> 00:16:54.200 during the growing season that's here in California. But we've 333 00:16:54.240 --> 00:16:57.679 also moved out of Mexico, which was about eighty percent 334 00:16:57.679 --> 00:17:01.639 of our supply, to other countries like Dominican Republic and 335 00:17:01.679 --> 00:17:05.440 even Colombia, and reduce the reliance to about fifty percent. 336 00:17:05.920 --> 00:17:08.240 With further diversification efforts underway. 337 00:17:08.880 --> 00:17:12.279 So the diversification effort and the sourcing inside the US. 338 00:17:12.440 --> 00:17:15.599 How has that affected the cost? Has it increased costs 339 00:17:15.599 --> 00:17:15.920 for you? 340 00:17:16.279 --> 00:17:18.160 All right, I'm gonna pause it there. That was a 341 00:17:18.240 --> 00:17:22.519 crazy question. Increased costs? Why would you if you're increasing 342 00:17:22.599 --> 00:17:25.839 your costs? All right, but they are talking about diversification. 343 00:17:26.240 --> 00:17:29.559 So that's at least one you know, tool in their 344 00:17:29.759 --> 00:17:31.240 in their bin that they can go fight. 345 00:17:31.359 --> 00:17:31.519 Now. 346 00:17:31.559 --> 00:17:33.640 One thing it went on in that in that article 347 00:17:33.680 --> 00:17:36.160 and then that video to say is that Chipotle is 348 00:17:36.160 --> 00:17:39.359 not going to raise prices. My question to you how 349 00:17:39.400 --> 00:17:40.839 long can they hold the line? 350 00:17:41.599 --> 00:17:42.440 That's a great question. 351 00:17:42.640 --> 00:17:44.839 And you know that that is a bet that this 352 00:17:45.000 --> 00:17:47.640 is a short term thing. That's I think that's a 353 00:17:47.680 --> 00:17:50.119 bet to say, Okay, you know, the tariffs are coming in, 354 00:17:50.200 --> 00:17:53.519 maybe for as a short term uh you know thing 355 00:17:53.559 --> 00:17:57.880 that happens, but eventually, perhaps whether it's you know, consumer 356 00:17:57.920 --> 00:18:00.759 outcry or whatever it is, that perhaps they'll pull back 357 00:18:00.799 --> 00:18:03.640 on the tariffs eventually, or if it's some political stalemate 358 00:18:03.680 --> 00:18:05.960 that President Trump is you know, trying to get Mexico 359 00:18:06.000 --> 00:18:08.960 in Canada to do something, you know, and they've bend. 360 00:18:08.839 --> 00:18:10.759 To his will, you know, whatever that is. 361 00:18:11.880 --> 00:18:13.920 I think Chipotle's probably betting that this is not a 362 00:18:13.960 --> 00:18:16.200 long term thing that they're going to have to face 363 00:18:16.519 --> 00:18:20.839 and that they can go back to their preferred avocado supply. 364 00:18:21.039 --> 00:18:23.119 So who knows. 365 00:18:23.400 --> 00:18:26.200 I think if there's one thing about this administration, it's unpredictability. 366 00:18:26.519 --> 00:18:30.880 Nobody really knows. But to point out about the supply 367 00:18:30.960 --> 00:18:35.039 chain diversification, I mean, one of the luxuries I guess 368 00:18:35.039 --> 00:18:39.000 you could call it, unfortunately of the pandemic is the 369 00:18:39.079 --> 00:18:42.960 flexibility with which companies were able to get around supply 370 00:18:43.079 --> 00:18:47.759 chain you know, challenges because of course in the pandemic 371 00:18:47.839 --> 00:18:51.200 we saw as the borders shut down, companies had to 372 00:18:51.240 --> 00:18:54.000 get very creative in their supply They had to figure 373 00:18:54.000 --> 00:18:57.119 out logistically, you know, how can I get avocados, how 374 00:18:57.160 --> 00:19:00.079 can I get you know, vegetables, fruits, whatever it might be. 375 00:19:00.680 --> 00:19:04.839 And they developed that muscle of okay, let's diversify our 376 00:19:04.880 --> 00:19:07.440 supply chain. So that's a good tool to have in 377 00:19:07.480 --> 00:19:10.160 your toolbox now when you face tariffs and you can 378 00:19:10.160 --> 00:19:12.160 do as Scott was saying, which is okay, we're going 379 00:19:12.240 --> 00:19:14.440 to go you know source of course from our local 380 00:19:14.759 --> 00:19:19.440 California avocado growers, or go to Peru or Colombia, you know, 381 00:19:19.559 --> 00:19:22.680 So that is a solution. The unfortunate reality is that's 382 00:19:22.720 --> 00:19:25.799 also a logistical headache to have to do that. And 383 00:19:25.880 --> 00:19:27.680 the fact of the matter is there are also parts 384 00:19:27.720 --> 00:19:31.160 of this world that are you know, the soul growers 385 00:19:31.160 --> 00:19:32.000 and certain goods. 386 00:19:32.079 --> 00:19:32.279 Right. 387 00:19:32.359 --> 00:19:36.200 So, Mexico is one of the premier avocado growers. It's 388 00:19:36.200 --> 00:19:37.880 not the only one, but it's one of the premiere 389 00:19:38.000 --> 00:19:40.920 avocado growers. So, and we all know what supply chain. 390 00:19:40.920 --> 00:19:41.079 Two. 391 00:19:41.119 --> 00:19:42.799 The other thing is, depending on how much you might 392 00:19:42.839 --> 00:19:45.720 need of a certain good, you can't snap your fingers 393 00:19:45.759 --> 00:19:48.279 and make a supply chain appear there. You know, growers 394 00:19:48.279 --> 00:19:51.759 in years in some instances to get a crop planted 395 00:19:51.839 --> 00:19:55.359 and harvested. So it's not so easy as to say, okay, 396 00:19:55.359 --> 00:19:57.920 well I'm going to move my supply from Mexico to Peru. 397 00:19:58.039 --> 00:19:59.839 There we go. I've figured it out. 398 00:20:00.279 --> 00:20:02.680 You have to figure out things like, okay, well, who 399 00:20:02.680 --> 00:20:05.680 are the growers, how long do they have before this harvest? 400 00:20:06.039 --> 00:20:08.079 You know, how much volume is there, how much does 401 00:20:08.119 --> 00:20:09.720