“State of The Restaurant Industry” | The Disciplined Investor Podcast Clip

14September 2020

https://youtu.be/HXN_GoHivQg

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[Music] so let’s kind of talk about the uh some of the restaurant related and
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dining related video podcasts and things that you do i know you have
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um a lot of depth in that area and we’ve talked a bit about the whole restaurant industry and kind of what’s happening
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now in a in a pandemic age um i wanted to kind of get your take on
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what your what you’re seeing in the restaurant business from all your contacts in that area
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destruction um you know i’ve been in the industry for 20 plus now and you know i’ve never seen it like
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this there’s been nothing even remotely even in 2008 you know we were
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in 2008 2009 really 2008 was the big year that uh the industry really took a hard hit
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um but it was an interesting shift at that time you know we still didn’t have
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the kind of things that we have available today you know unbelievable smartphones bandwidth all
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those kind of things that enable a different response from the consumer than what we have today but also a
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different response from the you know the businesses but in 2008 it was bad
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but this is you know a magnitude of 10 worst when it comes to the restaurant industry itself that
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it’s just been decimated but i mean obviously with the new tools that they have
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you know if it was if we if this was pre-smartphone pre-internet it would be 10 times worse than it is now even
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right but but because it helps what other there’s got to be some new trends and
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some some things that company um in the restaurants like i’m not talking about the panerai
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i’m not talking about the mcdonald’s i’m talking about sure the smaller mom and pops that obviously
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we’re probably you know not raking in tons of money banking it like crazy for years right but you know they kind
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of make the ends meet and all that what are they able to transform well you know it’s
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it’s interesting because if you look at the industry it’s really broken up into um about an 80 20
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rule meaning 20 percent of the industry is mostly chain multi-unit concepts whether you look at a mcdonald’s you
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know starbucks all the big chains above 500 units and then the rest of the industry
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is these regional concepts or independents meaning you know independent operators which
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make up the bulk of the industry in fact the largest percentage of the industry so
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that’s the area that’s being hit the hardest now within that group there’s a few uh
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categories subcategories that live inside that group
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one is the um everything from the cafe owner to the fine dining restaurant operator
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the areas that are probably taking the largest hit um were the fine dining operators and
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they’re the ones that were not necessarily ready from a technology standpoint because they’ve
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never had to be they never had to uh prepare for online ordering they never had to have mobile
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uh and contactless payment they never had to have kiosk or any kind of uh any kind of technology
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that really enabled other than that at the table yeah order ticket
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that was it yeah it was just uh it was simple easy and that that industry is the one
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that is is probably taking the hardest hit fast casual which is the category that
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um really i’m the i would consider myself one of the uh leading experts in that category
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is in the end for those listeners that’s a chipotle um a panera bread those are the examples
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that are easily to understand uh that category is absolutely on fire they’re actually doing
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uh year over year um you know positive gains right now you’ve got you’ve got these restaurants were built
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for a pandemic now there are things that they’re having to change
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in the industry uh in relationship to their unit economics that are different because unit
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economics were built on pre-covet meaning you had to have a real estate um you know footprint that was x uh you
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had so much of your business that was put you know throughput from in
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you know in restaurant dining and they completely had to spend that and the only way that they were able to
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do that was technology but now technology but let me just rub you for a second because now they don’t
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need the real estate right because now we’re kind of the the wave of ghost kitchens yeah yep it’s
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starting to pick up and that’s become it is i think that was like oh that’s interesting too hey that’s imperative
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yeah the here’s the thing we are in a renaissance of restaurant and retail technology and
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i think everybody that’s in the industry already already knows this
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um kovid for whatever reason it’s almost like a blessing in disguise um
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for business i think and and i think when people listen to the same i think you’re crazy as hell that this is a
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blessing in disguise the reality is that most operators in retail restaurant
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you have to kind of pull them kicking and screaming into the future for years you have to remember i i was working
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with um operators in the late 80s early 90s with windows that just they had no idea
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and nor did they think they needed it right what’s this thing yeah exactly it just it was not a thing
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that was i mean so it took all over a decade to really get touchscreen
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implemented into restaurants and retail which is ludicrous i mean the the capability of what that system was able
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to do at that time in history uh was much like what the smartphone
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is doing to our society today um so i think what happened is kovid accelerated
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accelerated everything a decade in a matter of six months and i think that in itself has probably
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been something now there are going to be some casualties don’t get me wrong the restaurant industry already
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is down from 15 million people employed to 9 million wow they are already down from what was
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about 890 000 locations they’ve lost what is estimated to be about
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300 000 locations most of which were mom and pops you know fine dining restaurants casual
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dining chains that weren’t prepared for takeout and uh you know to go and delivery and um
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i think that uh you know the industry was already oversaturated so there was a lot of market there that
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just wasn’t necessarily ready uh to be able to make the next leap and and we started to see it there was a
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lot of you know acquisition starting to happen this was pre-covid there’s a lot of acquisitions
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starting to happen there was a lot of start a lot of movement in the market that were starting to change
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some of the directions of some of these companies including companies like starbucks
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mcdonald’s burger king etc and i just saw burger king’s release of their new
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virtual i won’t call it a virtual restaurant but it’s their new restaurant concept design
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it’s a contactless uh restaurant model and it’s it’s um it’s jetsons you know it’s
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literally you drive through you never touch a person your food’s pre-ordered prepaid
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pickup is faster footprints are smaller unit economics is going to be better because their real estate cost is going
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to be down labor cost is going to be shifted over to kiosk and robotics and ai
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i’m telling we are in an era where restaurants actually might become more profitable uh

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