Morning Ed: Food & Dining {2017.01.09.M}

If we want a species to thrive, it’s best to make it delicious.

I like cheese. Does this mean I should give heroin a try?

High-cholesterol food is okay now and go ahead and give your baby peanuts. Sugar, meanwhile, may be messing with your brain.

I’m going to go with “because they’re awesome.”

Tessa Newell explains how Taco Bell quietly went healthy.

Kevin Alexander says that the restaurant industry bubble is about to burst.

Related, it seems like we’re just not eating out anymore, though not necessarily because we can’t afford to.

Of all the fastfood places, I wouldn’t have guessed it Wendy’s to have the Twitter account with sass. Jack in the Box or Burger King, sure, but Wendy’s? Catherine LeClair introduces us to the woman behind the account.


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Will Truman is a former professional gearhead who is presently a stay-at-home father in the Mountain East. He has moved around frequently, having lived in six places since 2003, ranging from rural outposts to major metropolitan areas. He also writes fiction, when he finds the time. ...more →

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60 thoughts on “Morning Ed: Food & Dining {2017.01.09.M}

  1. Species: That’s a good looking pig, and by that I mean cute AND delicious! You can apply the same concept to other things, like elephants in Africa. That’s why the ban on ivory is such a disaster. Of course you also have to give locals some control of the resources otherwise they cut the policy off at the knees.

    Taco: I’m sorry, but I can imagine how a fast food taco is “good” much less “awesome”.

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    • This is not financial advice.

      The article says that chains are on the uptick, so maybe invest in something like Darden.

      Otoh, my understanding is that Darden is a bit overstretched, and subject to the same price & labor wage pressures as everyone else described in the article, so maybe not.

      Just dining out in my own metro area, it seems that the type of restaurants the author profiles are mostly in restaurant groups owned by a private partnership or LLC. So investment opportunities on the upside or the downside don’t seem widely available.

      And commercial real-estate nationwide continues to be a s***show all around, and getting closer everyday to the textbook definition of a market failure.

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      • Darden and its like have some advantages, though. They have tighter institutional controls over things like hours worked, size of labor force, and worker training than the standalone places. They have mass, which is a big help on product supply issues, both in terms of consistency of product and leverage in reducing cost of product. So it’s not an unreasonable thing to think that large chains have an advantage over high-end local places, and thus hope that they can continue to deliver profits to you as an investor.

        Find out which of the big chains is going to figure out the cool-counter service puzzle mentioned towards the end of that article. Counter service restaurants have substantially lower labor costs. There’s probably no solution to the rent riddle from the business’ point of view, but if you’re looking to invest, the chain that figures out how to emulate the future of “fine” dining on a scalable level will have high promise for profit.

        Or, if you were going to insist on venturing into a sit-down establishment, figure out if you can do a wine bar with maybe a dozen tapas on the menu. The markup on wine remains huge and tapas are cheap.

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      • In NYC, I’m seeing an uptick in restaurants like Essen (http://essenslowfastfood.com/) and others that are aiming to offer the convenience of fast food while offering more quality ingredients and healthful options. Other spots I see seem to be aiming almost for a niche of “Blue Apron but we do the cooking.” That type of food but without the dining experience (or costs or time) typically associated with it.

        No idea how they’ll fare but they seem to be popping up all over the city.

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      • Except it seems like the article is partly complaining that restaurants above fast-casual are gravitating towards fast-casual as a successful strategy to keep in business. Panera’s recently took over Applebee’s spot on the top 10 restaurant businesses in sales, leaving no sit-down restaurants in the top 10. It seems like being waited on at a table is being devalued.

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  2. Maybe JitB tacos are better on the mainland then they were in Hawaii, (or maybe they’ve gotten better in the last 8 or 9 years) because on the islands, they were preternaturally awful, even by fast food standards.

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        • That and White Castle. You need to invest just right before national legal recreational marijuana comes about for maximum profit and get out just before the novelty begins to die off.

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          • The novelty wears off quickly, it seems.

            For Colorado, anyway, the big thing was legalized medicinal coupled with a hands-off attitude toward getting a red card (a prescription card). Pretty much anybody could get a card provided they were willing to have their name put on a list and provided the affliction they claimed to have was *NOT* PTSD. (Back pain? Here’s your card. Insomnia? Please sign here. Diarrhea? Oh, mais oui! PTSD? Sorry, ma’am, that isn’t one of the afflictions we recognize as being treatable by marijuana.)

            By the time recreational rolled out, nothing changed. Everybody who wanted the substance either had a card or a friend with a card who was willing to go halfsies. Tourism went up, I’m told, but but tourist culture didn’t have a huge impact on normie culture wrt the weed.

            I’ve asked friends who work at the local liberal arts college about the college’s weed culture now that we live in a state with officially legal marijuana and I’ve been told much of the same thing each time: It ain’t really considered a party school anymore. Its students are now very much “IF YOU DON’T GET AT LEAST A 4.0 YOU WILL NEVER GET A REAL JOB” kinda people and there’s probably more of a market in adderall than there is in the old mary jane.

            All that to say: national legal recreational is not particularly likely to have an impact, if Colorado is any measure to go by. That is, you might take a bath if this is your investment strategy.

            Does anybody have stories from one of the other legal weed states?

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  3. I would also note that just because there’s a bubble in restaurants doesn’t mean that there will be a backslide in quality or the long-term trend. The popping of the internet bubble didn’t lead to a backslide in the internet’s growth, just that a hot field got overextended. If there is a restaurant bubble and there’s a pull back, we’ll see a culling of the marginal businesses, but I think the restaurant trend will generally continue apace.

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    • It’s also worth keeping in mind that the things the internet is doing now look exactly like the things it did in 1998, only slower and with more capital behind them. maps and directions, news reporting and gossip columns, shopping, streaming music, all supported by advertising.

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      • DD,
        Like fuck it is. The internet is now helping AIs learn how to speak English properly. The internet is now commercialized, bitcoins and dogecoins.
        And I imagine there are far more cat videos.

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  4. Also, if (as I suspect in my more dystopian imaginings) they are going to take added sugars away from me, can they please not mess with my enjoyment of cheese? That’s about all I have left at this point. (Also: do milk and yogurt – which also have caseins – have a similar effect? And I wonder now if THAT’S why the Ralph Wiggums of the world eat paste….though I guess it’s glue and not paste that’s made with casein.)

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  5. I read that restaurant bubble piece last week. I found it odd. First off, he eventually gets around to implicitly admitting that he is really talking about a certain sort of restaurant, not restaurants in general. And even within that group, a lot of what he writes about seems to be leading more to a market adjustment than a bubble burst. But what really strikes me is that he is describing a systemically unsustainable business model.

    He talks a lot about labor costs, and this clearly is part of the problem. The “bubble” part is that the demand for trained labor has outstripped the supply, putting cooks in a position to demand higher wages and/or less assholery by the chef. What he doesn’t seem to notice is that he is describing a far worse problem.

    The ideal location for a new restaurant (of this sort) is a part of town bad enough that rents are low, but not so bad that the customers will fear for their lives. This correlates strongly with the neighborhood gentrifying and rents rising. So stipulating that the restaurant is initially successful, one of its major expenses is certain to take a big leap a few years down the road. (What sort of lease do these restaurants have? Apparently not a ten year commercial lease. How long are they for?)

    It gets worse. The article doesn’t talk about this, but reading between the lines, the customer base is inherently fickle. Some will become regulars, but some (I suspect large) percentage is chasing the hot new thing. The restaurant opens with its idiosyncratic shtick, gets written up in all the right places, and becomes the not new thing. Until it isn’t. This is the problem with catering to a clientele that thinks the word “trendy” is a compliment. So just as your rental expenses are skyrocketing, the trendy crowd is moving on to the new hot new thing. Wackiness ensues.

    He realizes that prices have to go up. This is always painful. The customers are used to a certain price point. Raise your prices and there will be complaints. There is also the collective action problem. The restaurant that holds off on raising its prices might snare customers from the ones that do, returning thereby to profitability. But the hot new thing with the low rent will always have the advantage, albeit temporarily.

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    • The restaurant industry is really fickle. IIRC restaurants need to make a profit within a year or they go bust. Some restaurants can be really popular and still close up shop for one reason or another. Leasing space to a restaurant is tricky because once all the venting and set up goes in, the space is really only gone for restaurants and maybe bars.

      In general, restaurant customers seem dividable into two broad categories. People who always want to know what they are getting and those always on the look out for something new and interesting. Big cities and gentrification seems to attract the latter group more especially among young or youngish people with tiny kitchens and a lot of money.

      In SF, there are some restaurants that exist somewhere above fast causal but somewhere below fine dining that manage to have a few locations spots (2-5) and a good customer base. There is Soulva (Greek themed salads, fries, and Greek frozen yogurt) and Nopalito (fancyish Mexican) that come to mind.

      What SF seems to have trouble developing is local restaurants with moderate prices where you can go in and get a spot in 10-15 minutes or so. Even local neighborhood restaurants tend to become destination places in SF with long waits. And SF is not a chain friendly city.

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      • North,
        No, they really damn well fucking aren’t.
        The problem is the people you get to run them.

        Burger Joint was a bleedin’ joke, and it’s doing just fine. And it doesn’t advertise and the only way to find it is to step into a fancy hotel, and step around a curtain.

        Melt — the “Now you have to start a restaurant” consequence of losing a bet, it’s doing just dang fine. (I think the guys retiring on it, actually).

        Hell, Conflict Kitchen is doing fine, and it’s not even really a restaurant.

        Restaurants ain’t the issue, at least not yet. It’s the idiots who get told “you cook well, you should open a restaurant.”

        You EVER want to invest in a restaurant? Find someone who can do double books without blinking twice. Find someone who has been a chef (not a cook), and you’ll do just fine.

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      • It’s also one a lot of people think they can hack, often without a lot of relevant experience.

        Just watch Kitchen Nightmares or any other similar show, and what you see is people incredibly over their heads AND also kind of want to never eat in a restaurant again.

        For fear the people running that place got their application to Kitchen Nightmares rejected.

        (Honestly, Kitchen Nightmares should just be called “We all know this dysfunctional place will close in six months, so let’s take the brief window they still exist to show Ramsey shouting at people”).

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        • A lot of people think they could cook and clean and think that a professional kitchen is just as easy to maintain as a home kitchen. They are wrong. Turning out high quality food consistently and keeping a kitchen clean to regulation standards is very hard work. Than you have every other business concern on top.

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            • Thing is, your home kitchen you have a lot less chance for cross-contamination AND the damage you can do is…limited.

              In a restaurant? You can sicken hundreds of people in a single day just because you weren’t careful. (I toured a cruise ship kitchen once, not long after one of the nastier novavirus cases. The hygiene regulations were…draconian…and you could have performed surgery off any surface in there, and it was mid-way through the second dinner shift. Of course, they had people constantly cleaning around the chefs…)

              Also, there’s a big difference between “The kitchen has gotten messy because we’ve been cooking all day” and “the kitchen was messy BEFORE we started cooking”.

              I don’t mind kitchens with sauce stains at the end of the day. At the beginning of the day? That’s a different problem.

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    • Having worked in food service for a bit of time, it is also a killer industry to work in. If you own your own place, you’re working at least 10 hour days, 7 days a week unless/until you are comfortable trusting a manager to work absent your presence, something many owners just aren’t willing to do with a business that involves so much cash and basically impossible to track inventory. I worked for a guy who owned on spot and co-managed with his sister. He opened up a second location and they were both working even longer days and every day of the week, which was impossible for him with young children at home. He sold the second location despite its success because it was just too much.

      So on top of everything listed here, even successful restaurants can work their owners into the ground depending on how they are structured.

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  6. Finished reading the first two parts of Kevin Alexander’s series. I liked it better than Mr Hershberger did, but reading the 3rd part again this passage makes me question his entire series.

    Those elevated expectations now even extend to delivery. And the rising food delivery apps promising local, higher-quality foods at cheap prices (Munchery, Blue Apron, UberEATS, DoorDash, Postmates, etc.) are starting to seriously position themselves as, at best, major nuisances and, at worst, that annoying word everyone in the tech industry throws around: disrupters.

    “I think they’re the ones pricing out fine-casual dining restaurants,” says Anjan Mitra, owner of the DOSA restaurants in SF. “These apps are all backed by hundreds of millions from the VCs (venture capitalists) — so it doesn’t even matter that they’re all losing money. They can afford to pay chefs and line cooks and prep cooks more than any restaurant, and though many of them work with restaurants now, the bigger, ambitious ones are figuring out ways to completely cut restaurants out of the picture. And if that happens to take 10% of the revenue from a local sit-down restaurant, that’s a massive hit. That could be the difference between staying open or shutting down.”

    If Blue Apron is forcing you out of the restaurant business…then you’re not really in the restaurant business. I mean, I don’t know much about the rest, but Blue Apron is a boutique *groccery* delivery service – you still have to cook everything (and cut most things up)

    So I have no idea what the person interviewed by Alexander is even going on about in this portion, except maybe to slag on VCs and tech bros.

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    • “If Blue Apron is forcing you out of the restaurant business…then you’re not really in the restaurant business. I mean, I don’t know much about the rest, but Blue Apron is a boutique *groccery* delivery service – you still have to cook everything (and cut most things up)”

      Eh, I can easily see a middle to upper middle class DINK couple go from going out 2-3 nights a week to cooking in for 1-2 of those nights if they don’t have to go to the grocery store or look up the recipes.

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      • I’m not a DINK and I rarely eat in restaurants (some specific dietary restrictions) but DAMN if I could get grocery delivery where I lived I’d be all over that. Even with the surcharge. There are few things I find more depressing than having to battle the crowds at 4 pm at the local megalomart if it’s a week I failed to plan sufficiently to grab everything I needed in an early-Saturday morning run.

        I see restaurants as a form of “entertainment” more than I see them as a way of regularly getting sustenance. (And as I alluded to: I have to be careful about what I order and that removes some of the fun)

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    • If this is true, places like Dream Dinners are a much bigger threat, since everything is chopped and ready and you just have to toss it together (the recipes are designed to be 25-30 minutes from start to sit down – the ones that are longer are usually roasts, where you are just waiting for the oven to ding).

      I know since we started using that kind of service, we’ve gone out to eat a lot less.

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      • To me, it’s still a matter of niches. I’m no foodie or super taster, but even I have found the quality of what I am eating goes way up when I’m chopping the aromatics (e.g. garlic, onions, ginger) right before cooking instead of having them all cut up some indefinite time beforehand.

        The question is, does the dimishment in quality from pre choping put it too close to the level of the complete frozen meals that e.g. PF changs and Bertouli, put out at half the price? Or, if their tech is able to maintain the quality of pre-chopped ingredients, is that added price then worth it? Are all these at home meals replacing ‘fast-casual’? Fast food? Ethnic takeout? Is the problem the restaurants Alexander is focusing on are mostly charging 50 bucks a person for a 30 buck a person experience? (That can be traded off for a 5 to 15 buck a person experience at home?)

        (I don’t know the answer to any of these – but the Market (pbui) does)

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        • Honestly, I think there are too many variables with regards to food to draw any definitive statements about the impact of any one thing.

          There are some people who look at Blue Apron and think, “Hey… I can get restaurant quality food for half the price and all it takes is chopping a few things and 30 minutes? AWESOME!

          Other people will look at Blue Apron and think, “For $10 more, someone will cook the food and serve it to me and clean up afterwards?”

          Someone else will look at Blue Apron and think, “For a couple extra bucks I don’t have to go to the super market? Deal!”

          And another person will say, “Blue Apron? I could get like 9 Tombstones for that.”

          Anyone who tries to make a definitive statement about Blue Apron’s effect on the market is likely grasping at straws.

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