Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business Week Inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Hi, everyone, Welcome to the Bloomberg Business Wee Weekend Podcast. Well, we've officially entered the final month of twenty twenty four and with that the last jobs report of the year that will now weigh on the Fed's rate cut decision later on this month. For the latest on that, head over to Bloomberg dot com or check it out.
On the Bloomberg Now.
Tim and I we got our own read on the US economy and really the housing economy here in the United States, courtesy of the team over at the asset and real estate investment company Walton Global. More in just a moment.
Also this week, more records on Wall Street on that we have a consistently top performing fund manager who has returned on average twenty five percent annually over the past five years, all by investing in thirty stocks.
You're gonna want to take notes on that one plus.
As the auto industry tries to retool for the electric vehicle era, we see increasingly that road is paved with a few bumps along the way. We saw this this past week after the surprise departure of the CEO of Stilantis. Our take on the ev industry came courtesy of the CEO of the EV charging management software company Drives.
Also from the alt energy space, how to build out nuclear energy in the US with the chief nuclear officer of the nuclear company.
All of that to come, we begin with one often overlooked investment group, small and mid cap stocks. They just don't get any respect sometimes, although they.
Get talked about it.
You're Rodney Dangerfield.
I was going to go there, all right.
While all the attention has been focused on large cap tech stocks for a good reason, they've really fueled market gains, such as Nvidia, small caps finally, finally, finally seem to be making up for lost ground with the Russell two thousand trade your an all time high. WITCH hit a record about one week ago for the first time since twenty twenty one.
Ryan Kelly is the chief investment officer and portfolio manager at Hennessy Funds and invest in the small and MidCap space. It's got a pretty impressive track record to show for it. Ryan Co manages the Hennessy Cornerstone MidCap thirty Fund. It's return on average about twenty five percent annually for the past five years, putting the fund in the ninety eighth percentile, so beating pretty much just about everyone in the sector. He's stopped by to talk about strategy and picks.
So much of the large cap stocks are just dominated by the Magnificent seven still and in Vidia, you know, so far this year, twenty five percent of the S and p's returns have been from in Vidia. So one stock doing that much good and maybe sometimes that much damage right to one particular index is a lot. So we like the small and MidCap space because it's not as susceptible to a lot of you know, there's not megacaps that'll take over the index. It's traded in a
better valuation. Certainly some changes that are supposedly upcoming with less regulation, better corporate tax rate, that's going to benefit some of these companies as well.
Tariff policy.
Tariff policy could actually eat into some of their earnings.
For some of these MidCap stocks.
What's of those things you mentioned, what's actually priced in right now in your view? And we'll talk about some of these individual names soon. But the administration is in transition, yes, so, but we know the makeup of Congress pretty much. What do you think they'll be able to get done? So, therefore, what is priced down?
Very tough question.
I would say that tariffs are not completely priced in because I think there's still a disbelief that we can get to some of the levels that have been talked about. I think that personally it would be a very detrimental to the economy overall, and I hope that sort of more level heads come up with maybe a better plan. But if that is the case, we're getting the kind of tariffs we're talking about that really could hurt I think some of the longer term earnings of some of these company.
All right, let's get to it, because I want to talk names.
Your fund is up thirty seven percent year today, ninety eighth percentile.
You've had a great five years for the fund as well.
You pretty much are beating your peers, so kudos, kudos. We like to talk to people who perform your strategy. It's a one year rebalance. You reminded me when you sat down here in our studio, you just finished a rebalance. Tell us about that rebalance. It's thirty names and you said, only two have stayed in the portfolio from the past year.
Yeah.
So what we do is we really want to make sure that we're just going to continue to follow the same formula year in and year out. So this fund is twenty one years old. It has been done the exact same way since inception. We use a very disciplined process. That's actually on our website. It's the formula is listed there on how we do it. But the idea is that once a year, we'll look at all the portfolio and we'll look at the universe of.
Stocks out there, and we really a lot to look at it.
It's a lot, and so it's it's a quantitative based it's a formula based fund, okay, but it's based on fundamentals going back for many, many many decades when this was first put together. They look back at three four decades worth of data to see what really works.
On Wall Street. And so what we've what we.
Do is we look for companies in the one to ten billion market cap range. We look for a low price to sales, which is an interesting metric because most people use PE or to EBITDA or whatever. We look for a low price to sales of less than one point five times.
It almost thinks about some valuation that hasn't been recognized right.
As a result, a lot of times of the top line.
Get you'll get companies that are are in a bad part of the cycle or that are underperforming, that are about to turn. And the reason why we're okay doing that is that another important part of the metrics is we're looking for momentum, so we already want stocks that have turned. We don't want to buy an undervalued company that has a lot more to go on the downside, but rather buy a company that's a good company that's out of favor, that's on its way up.
So you're one of your old holdings that was one of your biggest holdings. With sprouts, Farmer's market uptically twenty two percent year to date, it's treading your time high.
You said bye bye.
Yes, so that in this most recent rebalance, it then moved way above our price to sales of one point five times.
Only about a third.
Of companies out there that are publicly traded trade below one point five times, so it's a pretty restrictive number, and that one way above it.
It performed very well for us, but now it's gone.
Okay, let's talk about some of the names that you're adding. One name that I think a lot of people would be surprised to hear would be Peloton. Yes, this is a company that has faced incredible pressure since the pandemic.
Why are you optimistic? Why are you bullish?
It comes down to the formula first and foremost.
It fits.
It trades at zero point seven times price to sales. We bought it around we're buying it around the five to six dollars mark. It's now approaching eight. So it has had to bounce back. You know, they're starting to improve on their cost side. You know, a new CEO is always an important and potentially beneficial it's certainly challenging, but we've seen that type of turnaround before, believe it or not. Crock we owned Crocs when nobody wanted Crocs,
and now all my children wear them. You know, we owned h We owned restorators hardware when people were not going nobody's going to go to a store. Yeah, yeah, and then they became. You know, it was an incredible turnaround story. So there's a lot of it may not come down to this particular name working the best, but it's just a representative.
Holding of what we'll own.
And the idea is you'll get something that's completely out of favor, that's beat down, that maybe has a second life.
Tell us about HERK.
So HERK holdings is this is so when we did the rebalance this year, we did find that there was a whole lot of consumer discretionary and a whole lot of industrials. And HERK is an equipment rental company essentially.
So as hri I and it's up about forty this year.
Mm hm. So that you know, this is typically what we do. We catch something as it's already gone up. We don't want to try to buy it on its way down.
Yeah, and with the idea you're okay that you've lost some of the momentum.
We're okay, we'd rather not try to time the bottom but participate once it.
Are you using AI at all now in your analysis?
No?
AI, this is wait or not.
I have to say this is so simple that it's almost almost too so, you know, and I come from a I come from an analyst background, where you don't know.
For the last year and a half, that's all we talk about is AI. But go ahead.
I came from the background where I covered banks.
I didn't know how old the CEO was, where he went to you know, where they went to play golf, all these kind of intricate pieces of data.
But this is really it's it's fundamental quant is.
What it's called in the idea is you really just want to boil it down to very simple metrics and just stay with it year in and year out.
And it's it's worked. Tim.
If you don't know loves to eat a lot, he just finished a sandwich, it will come up. Brinker International is another name that you like. Eat is a tick er. Love that it's up one hundred and eighty three percent, but you've got it in the portfolio for the coming year, so there's more momentum to the app side.
Yeah, so Eat Chili is the name brand. Also Cake Cheesecake Factory. Both of those are two restaurants that are now in the portfolio. Again, it's it's the same sort of situation we've looked for all these companies.
Cake is up thirty three percent.
This yeah, and you know, you look at these.
Names that we add in and an example that worked really well is super micro Computers. We owned and we owned it as it went completely up until it didn't, and we actually got rid of it because it was too expensive.
So who needs AI.
We just need Ryan Kelly Brian good to see you with you have a great holiday season. He is the chief investment officer at Hennessy Funds.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or watch us live on YouTube.
From a model portfolio to modeling what is going on in the US housing market? US Census Bureau and Department of Housing and Urban Development data show that sales of new home in the US slumped in October to the lowest in almost two years, as two hurricanes hit the South and affordability challenges continued to weigh on buyers.
On top of that, new single family home sales decreased seventeen percent last month to a six hundred and ten thousand annualized rate. The media estimate of economists surveyed by Bloomberg called for seven hundred and twenty five thousand. Meantime, home price gains in the US slowed in September as buyers gained more negotiating power in the housing market.
Katie Hubbard has a front seat to the housing market. She is the executive VP of Capital Markets of the privately owned acid and real estate investment company Walton Global, which has nearly four point four billion dollars of land under management and over ninety thousand acres under management in the United States. The company operates in the retail, industrial, and commercial sectors.
Our clients are typically the largest public homebuilders in The rate environment obviously is affecting all of the homebolders, but the large ones that have the scale and the ability to buy down rates have been doing just that and been gaining market share in a rising rate environment. It's been good for the large home builders who are are more competitive.
So it's it's okay, that's that's what's That's what's hard to understand, because you know, the idea is when rates go down, people can afford to buy more homes.
Hopefully that's the idea.
We haven't really seen that play out necessarily just because of the demand element here. But but how does it affect the way that home builders then come to you to purchase land?
Yeah, I mean it definitely, just because we're typically feeding the land to the largest public homebuilders and they're less rate sensitive. The smaller builders that that don't have the ability to bite down the rates are are more effective and can't really compete in the land space as well
as the large builders. We're also purchasing land ahead of needing it right now, so they're keeping an off balance sheet where smaller builders who are also affected by the mortgages, they don't have the ability to land bank like the
larger competitors do. But obviously when rates go down, you know in that sweet spot when it goes below six percent, I mean there's a lot of people on the sidelines right now that are waiting for that, and we think that that's going to be coming up into the next next probably won't be hitting below six percent this year, but next year could get a lot of consumers off the sidelines.
Katie, one thing I'm curious about and I want to get your take on this, and we want to get into kind of what people want in homes going forward. I mean, I don't know if the mega mansion or the MC mansions are gone. But before we do that, we talk about the housing shortages in the United States. It's not just a one or two or three year thing. It's at least ten years, if not more, and that you don't have affordable housing in great cities, be it New York or elsewhere for those people who work in
the city but can't afford to live there. So it's not just about building housing, but building housing, affordable housing.
Where it needs to be. So when you guys are acquiring land, is.
It in major cities, is it suburbs? Like, is it really feeding the demand that needs to be met?
Yeah, good question. So it's really it's regionally based. But we are typically on the outskirts of the cities where home bolders can build larger scale communities versus those infilocas because we're dealing on a larger scale land land supply. But yeah, absolutely, the homebuilders have adjusted the type of product mixes that they're building to just for that affordability factor.
They're building more efficient floor plans. Everything is getting smaller, smaller kitchen, smaller garages, smaller storage to build a smaller home just to make them more affordable.
What's considered doing higher.
Density to your point, Carol, less big bangs, and more amenities geared towards the people that are able to purchase the homes. So you're seeing more pickleball courts out there.
It's kind of funny what's considered affordable, Like, what do you guys consider affordable housing?
So the average new home is just hitting around in the four hundred and sixty seven thousand dollars range, and people are moving to the Northeast now for affordability. I mean you can Youngstown, Ohio, you can get a house for one hundred and seventy one thousand dollars. It's one of the most affordable markets. And then they're going to where their jobs are located. So for example, Syracuse, New York has a huge influx of people because Micron's building
on hundred billion dollar chip manufacturing plant. So if the jobs are there, then you know it's relative to that market. But Southern California, I mean it's still one of the most expensive markets and one of the most difficult places to build because land is so expensive, So it is very relative.
Like you said, well, that said, you do have quite a few assets in the state of California, quite a few in the San Diego area, a few in the Bay Area as well. What is attractive to you about that area given how expensive it is and how difficult it is for some home builders to actually build in California.
Doesn't scream affordable to.
Me, right, It's just it's the overall fundamentals of people wanting to be in southern California. So the demand is there, and you have a scarcity of land that's available for development. You used to have this mentality of you know, people didn't want things built in their backyards and nimbi mentality, Well, in California goes a step further. It's now called the Banana mentality, which is build absolutely nothing anywhere near anything.
So it makes it before I've never heard that that's the banana build absolutely nothing anywhere near.
Anything, exactly, and that is the California. It can be the California mentality. And so if you have the expertise and the boots on the ground to buy the land for the builders, the demand for people wanting to live there is there.
Nuts looking at the map of your website in terms of where you, guys, I guess have land and land assets, specifically Atlanta. Is it still on fire for you guys, or is that property land just sitting kind of empty and demand is cooled?
There definitely is demand there, but you are seeing less demand in the South. Like I mentioned the October numbers for the Southeast, we're down, but I mean it's still a good place for migration for the affordability.
Factor Texas too. Are people still fly to Texas?
Texas? Texas continues to be a stronghold. Almost all of the top public builders have a very large presence in Texas. But we're moving to places in the Northeast, like Delaware, where the public builders have told us they will take all of the land that we can bring them in a place like Delaware because you've got low property taxes, is no social Security income tax, strong employment, great schools, and the surrounding cities are just much more expensive.
You basically, in thirty seconds, just tell us you basically have no assets in the sort of northwest quadrant of the United States. I mean all the way from Iowa to Washington and Oregon.
Why is that we're going to be expanding our acquisition strategy, So we're going to be entering the Idaho market. We do land bank for d R. Horton in the Northwest, so we do have some assets holding land off balance sheet for them. So those are markets that worksploring.
Where's the most expensive place to buy land right now? Just ten seconds?
Southern California, I mean California markets are the most expensive and the most difficult.
That sun is perfect weather is going to cost you, Carol Master, of.
Course it does.
Katy is expensive.
Yeah, Katie Hebard, thank you so much, executivevice president Capital Markets at the privately owned asset and real estate investment company Walton Globble.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business App, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
This past week, news.
That General Motors is selling at stake in an electric vehicle battery plant in Lansing, Michigan, to South Korean partner LG Energy Solution, recouping about a billion dollars in investment from a facility that will still supply energy sales to the automaker's evs.
The move reflects a realization by the carmaker that it's battery cell plants in Ohio and Tennessee, along with some supplies from the new plan in Lansing, will be enough to meet near term demand for evs without additional capital investment. GM continues to grow EV sales, but a slowdown in demand and political uncertainty over the future of federal ed tax credits have made the future prospects for all electric vehicles less certain, and the push.
To accelerate EV adoption in the US is experiencing a massive roadblock, and that is the lack of charging infrastructure. In twenty twenty one, the Biden administration announced it would invest seven point five billion dollars toward charging infrastructure, with the aim of building five hundred thousand electric vehicle chargers by twenty thirty.
That move could experience an even bigger roadblock if President Electroump follows through on his campaign promise to scrap incentives for EV adoption, like the Biden Administration's National Electric Vehicle Infrastructure Program in the seventy five hundred dollars federal EV tax credit. California Governor Gavin Newsom is already preparing for a showdown with Donald Trump over the subsidy.
One company that was recently recognized as a leader in worldwide electric vehicle charging management solutions is Drives Drives as part of the five point eight billion dollar market cap publicly held company Vntier Corporation. Drive CEO is Andy Bennett.
In general, we think about batteries in two ways. Right, of course, host the batteries are in the car, right, so you have a battery management system that optimize is the use of that energy. But batteries are becoming more and more important for EV charging. In places like the United States. You have lots and lots of areas that you know effectively are constrained from an energy perspective, and
so you can put large batteries in those areas. You can control the flow of energy, so you can increase the number of cars you can charge. So batteries, when you're thinking about EV charging, there's really two parts of the equation, and the first is that battery in the car,
how it's behaving, how it's being utilized. And then those batteries that are going to be at gas stations all around the country that are going to give us extra capacity to really keep that charging experience as quick as possible.
So okay, so I'm just curious about you know, it's interesting I'm listening to you talking. I'm thinking about when we talk about the ev world, Andy, A lot of what comes up is about range anxiety or people being able to find a place to recharge. You know, if I pop on a highway out to Connecticut, I see the rest stops, they all have them, but in New
York City it's still really challenging. So I understand what you guys are doing, but I feel like, is this the cart before the worse in terms of having enough places just where people can charge before we kind of take it to the optimization level, which sounds like what you guys are doing.
Yeah, No, we do a little bit of both. So we build the software behind the world's largest charge point operators, so we call them CPOs. So think about evygo as a great example or shell, and that software is looking after the health of all those chargers out there. Is the network working, is it running? Energy is just one part of that total equation. Are you able to build? Are you able to show up to a charger? And actually you use your credit card to go make that work?
So without that, without that fundamental software, there is no charging, right. It's the infrastructure software that makes it work. But you're absolutely right. When you think about the frustration that folks have today, it kind of comes into sort of flavors. The first is, when I get to a charger, is it available? Right? And then if it's available, is everything working? And as we've seen in over the last couple of years, reliability is going up and up and up and up,
which is great. But then you nailed it. The second part is we just don't have enough charging today in place, enough public charging. So if you think about the United States, you know today we have roughly, let's say, about two hundred thousand available chargers to people. Most of those are what we call AC chargers, so they're lots slower than the DC fast chargers that you might.
See on the highway.
And if we were to keep up with really just the current sales that we have in evs right now by the end of next year, we would still need to build four times more charging infrastructure in the United States to meet that demand. Some of those projections say, by twenty twenty seven, twenty twenty eight, we would need to build eight times more than what we currently have just to satisfy that what you just mentioned, of course, which is range anxiety.
So a Trump administration, are we going to then ramp up the building of these because it does sound like we need them. Like, what are your expectations around policies in the EV world and what it means for the industry and your business?
Yeah, I mean, look, clearly there's some headwinds with some of the administrative changes. Some of the things that could be changed is you know, we could get a drop in passenger EV adoption, right, so if we don't have you know, the incentives, then some folks just aren't going
to go buy those cars. Now, having said that, for a company like ourselves that is building the software for the charge point operators, there's still such a huge gap between having enough of those chargers out there to deal with the current requirements, you know, versus what's actually there that we kind of some of us in the industry are happy to kind and get a little bit of a catch up time there, So no doubt I think if you think about, you know, right now, where are
we in terms of charging infrastructure growth for the year. Most of the projections at the beginning of the year said, look, we'll probably end up at around thirty percent year of a year growth in public charging. We actually know it's it's probably closer to thirty six or thirty eight percent growth. It's just an incredible cater I think about that, that's
a massive amount of infrastructure. The big CPOs are building as quickly as they can, and I think often we spend a little bit too much time maybe associating that build out with the Navy funding, the federal funding that came out. Most of that infrastructure spending happened way before the federal government ever started to step in and incentivize. So look, we still have a ton of demand. The big CPOs are still building at just breakneck speed.
That's going to happen.
It may it may get a little bit and press of course, but it's still going to happen at a very very fast rate, independent of the whole Navy funding pathway.
I'm wondering about just some basic question, Andy, if we think about where all the gas stations are in this country, why is it cost prohibitive for these gas station owners to just add one or two EV charging systems to their existing gas stations, Like why doesn't why why is this so difficult to do?
Yeah, I got you know, Tim, that's that's a really great question, you know, for me, I kind of to look for that answer.
One of the best.
Places to go look is in the Nordics, right where we know today over ninety percent of all new cars are evs. Look at the UK, Look at Europe, which is, by the way, one of the places my company has been for years helping charge point operators. You know, what you see as some gas stations are really well suited
for electrification and some some aren't. Maybe a couple quick comments about that, because you know, no matter what, we believe that the winners in this marketplace are going to be the fueling stations that also have other things, other amenities, other conveniences. So when you're in Oslo or outside of Oslo, whether you're in the urban area or you're you know, on the highways, what you see is EV charging stations that you know, have outdoor gyms, they have incredible food,
clean bathrooms, really nice amenities. The second you show up at one of these stations, you connect to their Wi Fi and you start to get coupons to go inside and save ten percent on a cup of coffee. It's a really really integrated experience, and we certainly see some of the larger retailers here in the United States starting
down that pathway Apple Green. You've ever driven on Route ninety five is a perfect example as you go through New Jersey, extremely innovative around what that experience will look like. But having said that, some of those places just aren't great spots, right. They may not have the ability to they might not have just the real state to bring
that in, they may not have the conveniences. And remember the average weight time is probably about twenty two minute minutes today as you're charging on a DC fast charger, so you generally want to get out of the car. You're going to expect other amenities. But when you go back to the European example, what we do see, especially in their urban environments is a slower, more methodical transfer, so over time they don't just go one hundred percent electric.
At those stations. They may have ten fueling pumps and two DC chargers to start with, and then they slowly pull out those pumping stations. Circle K is a great example in Europe where they have done this really fluid transition as the economics makes sense that DC fast charge is expensive. So just the way to think about it is break even on that investment probably close to about eleven percent utilization. It has to be being used eleven percent.
Of the time that it's there.
I will say, Carol, my trip to Norway a few years ago, the infrastructure just makes you cry when you compare it to US infrastructure.
The tunnels, the tunnels are incredible.
Just drill right through these mountains, miles long, totally well lit, not crowded at all.
Unbelievable.
Maybe Elon's onto something with the boring company.
I'm just saying, Hey, just got thirty seconds. Andy in a nutshell or word or two, how do you describe the EV market today?
You know, look, we make software behind these these charging companies. We we can barely keep up with the demand. And the growth that's taking place has been incredible. We're a company that's doubling year over year and just you know, building the things these folks need to be successful.
For us.
Your huge portion of the market still remains in Europe, the United States is is just starting to grow. I think we're going to see a little bit of a dent taken out of passenger EV charging. Nothing is going to stop the electrification of large scale fleets, though, that is picking up at a pace that is really fantastic. And why that's relevant is as that continues to be successful, we're going to see whether it's a passenger or a truck co charging at these different places so the infrastructures
can continue to roll out. At the end of the day, if you build a car, right, there's two things for you to go. Get people to buy an EV car, cut the costs of the battery, and get more EV infrastructure out there.
Totally makes sense.
Andy Bennett really enjoyed the CEO of drives joinining us right here on Bloomberg Business.
That's at drivz.
Very cool.
I love that you're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or watch us live on YouTube.
Last month of Bloomberg News, colleague Jennifer de Louis reported that the Biden administration is setting out plans for the United States to triple nuclear power capacity by twenty fifty, with demand climbing for the technology as a round the clock source of carbon free power.
Under a roadmap being unveiled a few weeks ago, the US would deploy an additional two hundred gigawatts of nuclear energy capacity by mid century through the construction of new reactors, plant restarts, and upgrades to existing facilities. In the short term, the White House aims to have thirty five gigawatts of new capacity operating in just over a decade. For a little bit of context, nuclear accounted for about one hundred
gigawatts of installed electricity generation capacity in the US. That was in twenty twenty three, so this would be a big jump.
Joe Clutches hoping to help the US get there. He's chief nuclear officer of the Nuclear Company, which is looking to build a series of nuclear power plants across the United States.
We aim to really develop and deploy new nuclear at large scale. We're aiming to help deliver in a way that we've never seen before, which is bringing clean, firm, sustainable power to the grid that will help solve some of these the issues we're going to see with the growth of AI, the growth of electrification related to vehicles
and manufacturing. And we believe that doing new nuclear construction in a way that is design, once, rense, and repeat many times at scale will get us into a position where we can really drive down the costs and create a product that is much needed for national security.
Frans, how do you do this?
And you can answer this question in a way that other people can't because you worked at Southern Company as operations director for the vocal units one and two, and then you also transitioned oversee vocal units three and four. So these are very expensive. They took years, decades, they were billions of dollars over budget.
How do you not repeat that at the nuclear company? Like, how are you going to do that differently?
Yeah, it's I think it's a great question. I get asked this question a lot. And Yes, my career started in the US Navy as a sub mariner working on nuclear submarines, and I've progressed through any utilities operating and maintaining nuclear facilities, and as you mentioned, had the great opportunity to help with the Vogel project, which was a
monumental effort by Southern Company, many lessons learned. The simplest way to help people understand this is this was a first of a kind build in our country with a first of a kind technology. We need to continue to use the lessons learned from projects like Vogel and many others that have occurred around the world to move us from a first of a kind project into what we
call enth of a kind. So we got to get through the early stages of capturing lessons learned on what is a really, really great design, and there's many others out there. You continue to use this same design, develop use those lessons learned. We think we can get forty
percent efficiencies through lessons learned. We also believe there's twenty to thirty percent savings in the use of digital technologies, whether those be digital twins, three D scans, drones, technologies that are available today that weren't necessarily available when these nuclear projects were occurring in the past. That is our path to really getting the costs of nuclear down and getting it in a position where it can provide what a lot of other forms of energy cannot provide, and
that's the security to the grid. To provide that firm ninety three percent plus capacity factor of clean energy.
The plants that were started by Southern Company, I just want to go back to right considered a milestone in US nuclear power construction, but they were seven years later that originally plan and a budget of more than double the preliminary projected cost of over thirty billion dollars. I would assume making nuclear power plants is difficult forgive by starcasm, but we know that this is not it. And you know,
Tim and I were talking before we got going. I had a dad who's an engineer who worked in the early space program and putting men on the Moon, and guidance systems and the system of government contracts of like low cost provider often being at the top of the list as a priority makes me a little hinky when we're talking about nuclear power. How do we get it right? How do we do it safely? How do we do it without the cost overruns?
Yeah?
So I think those are all great points, and there are obviously something There are problems that we are trying to solve at the Nuclear Company, and I believe we will we will solve again. The number one thing is, let's design a technology that works extremely well, and let's continue to rebuild the rebuild that technology many times so we can really capture the lessons learned and then get the cost benefits out of capturing those lessons.
So what is the different technology from maybe what was done by the Southern Company versus what you guys are looking to do.
Break it down for us.
Yeah, so we are not a technology provider. We are
a developer and we are a deployer. So we're going to we're going to develop these projects, whether you know related to where they're going to be cited, which partners we're going to work with, and then we have the team going to come in and perform the project management and deployment to get these from the numbers that you estimated down to half of what those have historically been through what I said before, the use of technologies, get in the right systems in place, locking that design down.
Remember when you're doing a first of a kind project, there are a lot of lessons that come out of that, and if you don't capture those lessons and continue to do it, then you've just thrown away all the value you get out of doing a technology. It'd be like if Henry Ford developed a model T built one and said that was way too hard to do. I'm not going to build anymore. You've got to keep iterating on that process to get it to a point that you get to the end of a kind cost on these technologies.
It's a very capital intensive process to say the least building a nuclear power plant. In terms of where your role is and just where the money is coming from. Give everyone an update and you guys are a startup, but give everyone an update on how much you've raised and how you think you'll be able to get there.
Yeah.
So we have investors on the company side, specific to the nuclear company that are investing to really fund our company. We'll continue through the process of a startup company to do our rounds of funding as needed. Specific to projects. We leverage public private partnerships, and then we'll be pulling in different investors associated with the public private investor partnerships
to drive the funding of the projects themselves. So we plan to roll up more information in the first quarter of next year related to where that funding is coming from and who those potential partners are, But for now, we don't want to share any more detailed information.
Can you tell us where some of the projects you're looking at would go.
Yeah.
At a high level, our theory is we're going to focus on projects that we can build quickly. We believe we need to bring we need to be building now. We don't need to be waiting on technologies. There's technologies
available that can be built now. So with that said, we are looking at sites, and we have an algorithm that helps with our site selection process that focuses on sites that already have some form of licensing and environmental work already completed, so we could start these projects sooner rather than later.
So Joe, help me understand something. So, as you said, you're a project management company, you're not a technology company, so you're not actually building them.
It's like you're a middleman. It sounds like right in terms of getting these done. Why do we need a middleman?
Want to just ultimately come through the government or utilities or states or power companies.
Figuring it out? Why do we need a middleman?
Is this more of an investor play, which is certainly of interest to the Bloomberg audience who are always looking for a different ways of investing, But is that what this is mostly about?
Yeah, I would say we're more of an orchestrator than a middleman. We certainly want to work the front end from an investment perspective and a financial perspective to make sure there's models where large utilities don't have to take this apple to risk all on their balance sheet. So
that's part of the problem we're solving. But we've also pulled together a team of experts that have built these projects recently in the United States and elsewhere that we're building the best project management team around to be able to go and really help the utilities and partner through
our consortium to drive down these costs quicker. What we've seen in the past in the seventies and eighties, when these facilities were being built, every utility would go about this on their own and they'd all want to do it a different way, so you never truly got to that end of a kind cost. We believe by using our consortium of utilities OEMs hyper scalers, we can bring more power to this and we can really use the rinse and repeat method to drive these costs down quickly.
No, I kind of understand the model, but let me just ask you then, who takes the capital risk and who actually takes the responsibility of making.
Sure that it's a safe plant. Ultimately.
Yeah, so again public private partnership. So we'll be working with the government on part of the capital risk. Will also be focusing with our investors to take on that capital risk, so it's not put directly onto utilities or rate base, with more of a build transfer.
Model, if you will.
As far as who controls the safety.
The excent So does that also mean that taxpayer risk? If the government's involved, it's also taxpayer risk, right, potentially it could be.
Now again, we'll release more information on the actual programs we're looking to use in the first quarter of next year, but I'll just leave it at public private partnerships for now and then yeah, go ahead, Yeah, the safety aspects. So part of our consortium is going to be large utilities that have historically operated these facilities for years. They would be the licensee and the ultimate owner of these projects once the build is complete.
Is this a model just twenty five seconds that really is for the US or I mean we're Europe and elsewhere outside the US already kind of all in on nuclear Is that part of it? And forgive me, I only got about twenty seconds here.
Yeah, yeah, I'll be quick.
So we initially, you know, we're building this company to help support the US market, but we are receiving a lot of interest overseas with all of the new nuclear projects going on there, and there was a lot of help needed in those areas.
Interesting stuff. Stay in touch as you can share more with us. Joe Kletcha, chief nuclear officer of the Nuclear Company.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter here on Bloomberg Radio, the Bloomberg Business App and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Plenty ahead in.
Our second hour of the weekend edition of Bloomberg Business Week, including America's favorite food group a patty in two buns with some stuff thrown on top from Humble backyard barbecues to Michelin starred menus, why the Hamburger continues to thrive with American consumers really global consumers.
Plus the twelve Days of Christmas may need a thirteenth verse about my true love going broke because of Christmas gifts, Carol, They're actually getting pretty expensive. And it's not because of you know, gold rings.
Yeah, this is so confused.
It's fine, it's fine.
I'm not bitter about it.
He is a little bit.
We'll explain later on First Up this hour. As many of us gathered with family around a table filled with trays of food for Thanksgiving, millions of Americans worry about where their next meal will come from. In twenty twenty three, about thirteen point five percent of households in the US, that's about eighteen million people were food insecure. This is according to the USDA, which defines food insecurity as quote.
At times during the year, these households were uncertain of having or unable to acquire enough food to meet the needs of all their members because they had insufficient money or other resources for food.
The picture is actually worse for households with children. We're nearly eighteen percent were effect by food and security and it's something that Claire Babinot Fontano is all too familiar with. She's the CEO of Feeding America. It's the US based nonprofit that has a network of more than two hundred food banks. Last year, Feeding America distributed more than five billion meals. So are things actually getting better?
Unfortunately, things are worse. I know that might be difficult or for any of us to wrap our heads around, but it's true. Food and security rates were lower during the peak of the pandemic than they are today are at their highest rates since the two thousand and eight two thousand and nine economic downtow.
Why is that.
Well in part because food and security captured the attention of the American publican policy makers dudent the pandemic, people saw those very long lines of cars on the road, or saw parking lots build with ten thousand cars, each car representing four to five families, and it got our attention.
When we are.
Intent on something, we tend to do something about it. So a lot of resources were directed toward food and security during that time. Since then, the lines have simply returned to the insides of buildings, but I think people think they've gone away. That makes opportunities like this one all the more important for the people that I sign up to serve every day.
Clear Why though, are people hungry in America? We're a rich nation, and I guess I wonder why that exists still.
Yeah, so that's a really complex question with complex answers and nuanced answers. But I will tell you one thing as an example. The largest are the fastest growing population of people who are showing up at food banks are people who do not currently qualify for any federal nutrition program so SNAP normally known as food stamps. They can't get SNAP. We have systems in the country that simply
don't work well. They don't think about how each could relate to each other, and how sometimes they perpetuate people staying down. We talk about it a lot. It's sometimes characterized, for instance, as benefits cliffs, where it is truly it happens all the time throughout the country that a person might get a one dollar an hour raise and lose all of their childhood care benefits. I get put away in extra one hundred dollars in the bank, and now
they no longer qualify for their housing. So it's a combination of things, and I'm hopeful that the Trump administration is going to sit down and bring in all of the different parts of the government, bring them together, and have them work together to come up with some effects.
You know, we talk about margins a lot here. Certainly when it comes to like an earnings are balance sheet and a company. But I just think about the slim margin or no margin that so many American families are trying to exist or you know, and live on, and it's just too fragile, Claire, I.
Was thinking as I was preparing for this segment. I mentioned USDA data at the top about thirteen point five percent of households in the US eighteen million homes were food and secure in twenty twenty three. This data come from the USDA's Economic Research Service, and I was thinking to myself, is this how valuable this information is because it gives us sort of a place to start our conversation with you, But also it's important to people like you because it gives you a baseline of how to
understand food and security in this country. We also know that the Trump administration, the incoming Trump administration, wants to cut two trillion dollars from the federal budget. I'm wondering if you think programs such as these important Economic Research Service data or other programs at the USDA are at risk as a result of the new administration incoming.
Well, I certainly hope not. I wish I had a crystal ball, but I don't. What I can say is that Beating America's network has been successful in working with every administration since our inception. We worked with the Trump administration during trade mitigation, for instance, that incredibly nutritious food that was being produced by US farmers, growers and producers, so much of it was actually sent into the charitable food system, where people received more access to nutrition than
they ever have. We have worked vigilantly as a network to make certain that we maintain a status of being non partisan, not bipartisan, which I say we reduce you to the lowest common denominator, but non partisan. We stand with people experiencing hunger. They tell us what they need, and when we get them what they need, communities thrive. When communities thrive build, since is thrived, the whole country thrives,
and it's simply not possible for people. If they can't they don't have enough food at home, it has a negative impact on everything that we value, and when they get what they need, it as a positive impact on everything that we value. So we're hopeful that we're going to continue to be able to get people to walk work across whatever those divides are that we've created between us and work with us as we work in communities across the country.
So, Claire, I think it's pretty honorable what you guys are doing and have been doing for years. Personally, I'd like to put you out of business and I would love to see no American go hungry. So tell me what is the root cause of why Americans are hungry in America today?
Is it? And you know, and help me fill out the picture here? Is it people that you are providing assistance for.
One, two, three, four, five, five years? Are they often getting assistants for a long time? Is it because they can't get a job that pays? Is it because they're a mom with kids and raising young kids?
Like?
What is it?
Why do we go hungry in America today?
Yeah, it's all of the above. So there are a group of people who come to us and it's just episodic. They had a big medical expense that they had difficulty addressing, and we're there to be helpful in that moment of crisis. There are others who have come to us because they're in college. I, for instance, was food and secure when I was in college. I had to turn to the very system that I'm so privileged that I get the
chance to help lead. And for me, it was during a period of transition when I was working really hard to create a different kind of path for myself. My parents hadn't had the chance to graduate high school, and here I was in college and I wanted to make good and I just couldn't make ends meet. So there was a lot of college hunger in the country. And they're also has generational hungry in this country. People who turn to us every year and who have many generations
turned to the charitable food system. We've asked them, so what is it that puts you in that line? And they've been answering. We follow a report every year in September, which is Hunger Action Month. It's called Elevating Voices to End Hunger Together, and it's where people experience and hunger tell us while they're in the line. So here's what they tell us. They say, it's because of things like
housing that's not affordable. Is because they don't have access to great health care and they care about their health. It's because of things like the benefits clip, which I alluded to in the earlier segment, where when they start getting ahead, the system actually pulls them backwards. So it's a lot of things. And we as Speeding America, we know that to solve hunger, we can't simply food bank
our way out of it. So, like you, we want to put ourselves out of business, and the way to do it is to be comprehensive and thoughtful and nonpartisan and do what's best for the whole country by lifting people up for experience in hunger.
Claire Carol and I were talking just a few moments ago and sort of asking the question of supporting a charity such as yours versus working closer to our own communities. How do you communicate that to people supporting Feeding America versus supporting a food bank in your hometown.
What's so beautiful is there is no versus. Feeding America has a national is a national infrastructure, but it is an intensely local organization. Those food banks are in local communities. If anyone listening and watching or to go to Feeding America dot org, all that you'd have to do is type in the soap the zip code for the community you care about the most, and there is a member of the Feeding America network that's serving that very community.
Having a national infrastructure allows us to have a lens of pulse, if you will, on where the greatest needs are, where the hotspots are. We provide funding to food banks and pantries. Again, there are over sixty thousand agency partners for Feeding America. Some of them are big, some of medium sized, and some of them are little bitty church pantries throughout the country, especially in rural America, where without those church pantries, there's so many people who would be
devastated because of the implications of hunger. So with Feeding America, you don't have to make a choice shows local. That's what we want you to do. We want you to support your local community, and what we do as a national organization is put you in the best position to be able.
To do that, all right, So appreciate getting some time with you as we get ready for the holidays, and we know it'll be season that is going to be tough for a lot of Americans.
So appreciate checking in with you. Claire.
Happy holidays and nice to talk with you again. Claire Babinot Fontano, CEO Feeding America, joining us there in New Orleans.
I was just looking for my local zip code to food pantries that are not at all affiliates, Like they don't look like you know, Feeding America branding at all. But are they filling Yes, City Harvest is one of them, very prominent one here in New York City.
Probably makes sense. I was looking at the list of partners.
It's a who's who of those in the food industry, and so they probably work together in filling that out.
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Here's the beat, Americans. We all love fanburgers.
According to a USDA study from twenty twenty, Americans consume an average of.
Two No, that's not true.
They're four burgers per day.
It's not true.
Oh my god. I can't tell you how much we've debated over the statistic this week.
No, Americans consume the equivalent of meat that would add up to two point four burgers per day if they were just hamburgers, but that stat includes all meat anyway.
It's about fifty billion burgers per year. I'm just gonna say, we eat a lot of burgers. Can we just think we're still make any sense?
He yeah, I got a lot of beef with this. Okay, funny.
Here's some more juicy facts that won't make your of mouth water when it comes to costs. In the second quarter of twenty twenty four, the average price of a fast food restaurant burger was eight dollars and forty one cents, up sixteen percent from five years ago. Even at McDonald's, the average price of a big Mac we're talking no fries, no drink, just the sandwich. Back in June it was five dollars and twenty nine cents. That's a twenty one percent increase from twenty nineteen.
That's a lot and you got to get the fries because that's why you go to McDonald's.
I'm just gonna put that out there.
Hey, someone who watches beef prices closely is Pat Conlin. He's the president of way Back Burgers, the fast casual chain that yes special is in burger's, fry shakes, and.
A lot more.
They've got about one hundred and fifty locations in the United States. Another twenty in countries including South Africa, Japan, Canada, and elsewhere.
We play in the fast casual segment and shake Schat Burger Shake Shaft.
Guys.
Okay, we're still waiting in Manhattan.
I'm just telling you, yep, very soon, you won't have to wait much longer.
We're going to open up our first restaurant, first Way Back Restaurant in Manhattan on Seventh Avenue in twenty Seventh Street should be in January, right across from f T. So then you you'll be able to get one of those two point four burgers per day.
I don't know what that means. I'll have to double check on that.
But talk fast casual, because you know, we talk about Chipotle, who is often credited with really creating it many years ago.
In terms of fast casual, it wasn't just the fast food places that we got in customed to. It was a little bit of an experience.
Right when I grew up, it was really fast food and now fast foods called QSR quick service restaurants. Yeah, fast asual started really with Chipotle, Panera Bread. Higher quality, elevated food, elevated experience in the restaurant, more fresh people, wanted a better quality burger, better quality salad to go to, and they're willing to pay more for that, for that quality, but also for the overall experience in the atmosphere of the restaurants.
How do you replicate that atmosphere of the restaurant in New York where rent is super high, spaces are small, and crowds are plenty.
You have to be fast.
So even though we do the order, we don't pre cook any burgers. We make the burger when you order it at the at the point of sale system. But it's really nowadays the digital ordering process is a big portion of our business.
So people order ordering head on the edge, on the app.
How much of your business line it's about between the app and online ordering and delivery.
It's about forty percent of our businesses digital orders.
How much is that up? Just in the last few wait?
Online app and delivery are forty percent of the business. Okay, forgive me go ahead.
And when you do.
Delivery, are you doing third party delivery?
Third party through Uber Eats, grub hub door.
Do you hate that and paying all those fees? Can I just put it out of the fees we pay this?
I know both of us pay the fees.
The restaurant tour pays commissions to those services, but we don't. I mean, if you had to start a delivery service of your own, there's a cost involved in that as a restaurant tour delivery guys, insurance cars, things like that. So there is a value to having them, and they bring certain guests to maybe not to the restaurant, but they bring them. They bring those sales into the restaurant because there are certain people.
That are only going to order delivery.
And when I was a kid, the only thing you can get on delivery was Chinese food a pizza. Now you can get everything under the sun.
It is so true.
Right in terms of diversity, I have to say some excuse me as I blow my nose, sorry, getting called five guys in and out way back Burger, smash burg or Burger Fat Burger, Johnny Rockets, what a Burger?
Red Robin's Heart, E's Jack in the Box, Wendy's.
Well, now you're getting into some fast foods.
Okay, But I'm just gonna say, there are so many Burger joints out there. How do you I understand fast casual and experience, but how do you stand out, Like, what's your fear about coming into a New York market when I can also go to PJ. Clark's and get a burger with brenets and be a like kind of an old speakeasy.
And have a really cool experience. But tell me how you do it.
Well, it has to be done.
I mean in the fast casual segment and even in the in the qs R a quick service restaurant service. Now quality everybody has quality food.
Okay, So now everybody doesn't have quality food.
Everybody has some semblance of quality or people expect.
People expect quality for the level of price they're paying.
Yeah, okay, fair.
So you have to have something other than just quality food. You have to have the atmosphere. You have to have that guest service. We don't call the people that come into our restaurant customers. We call them guests because we really believe that they're coming into our dining.
Room at our home. When you order at the POS station, we don't give you a number. We take your name.
So it may sound a little bit goofy, but it's a little bit different personalization. So then when we walk the food out to your table, we say pat double cheeseburger, not number twenty one, number twenty seven.
So it just makes you feel a little bit better as a guest. And then if you walk in and that person behind the pos system.
Remembers your name or maybe they remember that you get a bacon double cheeseburger all the time and an Oreo milkshake and they say that, and you're in with somebody and they catch your name or that, hey, you're getting that thing that same order makes you feel like a king is the guest.
So that's how you have to differentiate yourself today in the market. We know we have a great burger.
We know we have great hand dipped milkshakes made the old fashioned way in a metal tin spun, not pulled out of a machine.
So we know we have quality of food. It's that other atmosphere and that sense of nostalgia that's going to set us apart.
You're a franchise guy, Yes, that's all my life, your whole life, Yeah, your whole career. What's the franchise model here.
In terms of so how does it work?
I mean, are these all independently owned and operator? Are they company stores?
No?
There were one hundred percent franchise.
Okay, one hundred percent franchise, So an asset light model for you on the corporate side.
How do fees work? The franchise fees.
Initial franchise fee a license, so nump A restaurant is thirty five thousand dollars. You're ongoing royalties or five percent, and the advertising fee is four percent.
It's pretty typical to the industry.
Correct.
So all you need is thirty five thousand dollars up front in order to do it, plus the capex that you need to build out your location.
Yeah, the total investment is between five fifty to six fifty including the franchise.
How do you explain the footprint where restaurants are right now in the US? Is that because of who you found as franchisees? Is that deliberate? It's it's definitely. There are a lot, but they're concentrated in certain areas.
Yeah, we concentrate except for the one that we're doing in Manhattan. We really started we started in nineteen ninety one in Newark, Delaware. We've always been very successful in small towns. We are opening up the one in Manhattan, opening up one in New Orleans, so those are really our first forays into downtown areas, and that's we've been successful. But now through that downtown, through that was those small markets, now we're growing into the cities.
Who are you seeing as your typical franchisees. Are there a handful of people who have like ten of them or are they sort of one offs?
Now we're a little bit different than some other franchise companies. We look to award one franchise at a time where many other companies want you to.
Come in and do five or ten or take down a whole county. Want to be in.
Business with you first, See how you do. See if you're happy with us. We're happy with you.
We're all about growth, but we want to make sure we're growing with the right people. They do one of the time.
Does that mean you do have some franchise operators who have more than one.
So now over those years since we've been franchising, since two thousand and eight, we're about forty five percent of our system or multi unit franchisees. So they've reinvested in the brand and themselves. They know that it's working and they're happy and we're happy with them.
And you do stuff over internationally too, like woud I Ireland, South Africa, Japan, Canada.
Yeah, you're and you're continuing that, like, how do you like? What's that model and.
That models that model is a little bit different than the than the franchisee in the US. It's done by a master franchise and that person or that company actually becomes really the parent company in that country or that territory or that province, so they have to do everything that we do in the US.
Interesting, how quickly does somebody who sets up a restaurant a franchise and how quickly do.
They get their money back really depends upon how they set up if they're an owner operator and they're taking a salary and there, or if they are multi unit owners, it's a it's a different payback and how they set it up financially, whether they're paying all cash for it using their own money or if they're going to the SBA or a lending institution for financing.
Is the model such that the franchise e is actually in the back working getting because or her hands dirty.
No, that's there's something they need, notorious.
For that they need to know.
Yes, they need when we when you become a franchise e, you're going to have to learn how to flip burgers and drop fries and make milkshakes. The reason being not that that's going to be your function as a franchise. Your function is to grow your business and to get
a new guest every day. But you need to know because when you walk in, or when you when you look on a videotape and you see that the that the side of the floor is dirty because they've been hitting it with the mop and not cleaning, that you need to walk in and be able to catch that. So you need to go through the full training process. But no, we don't expect our franchisees to be in behind the grill every day. That would be a waste of their talent and their training.
We got about thirty four seconds, so they're gonna take a break and come back and talk some more. Do most franchises work out or are there a small percentage where it's just obvious Because you got to worry about the brand, the reputation.
One bad one can bring it down. So I'm just curious. Do most of them, like ninety percent of them work out?
Most of them, Yes, they do work out, and we have a great family of franchises across the across the US and across across the world. Yeah, there are some times where people either decide this isn't for them or it is a lot of work. The restaurant business is a lot of work. And you also have to have a personality to be in the restaurant business. You're not behind a desk. You have to be, you know, out there frontman. And if that's not for you, then then you shouldn't get into the restaurant pisins.
Pat talked to us about some of the logistics of you know, as Tim rightly pointed out, it's franchise ease, so asset light. But I am curious about food costs, labor costs, you know, building out in as you said, you're getting ready to open up and or have one location New York City.
It's expensive here in New York City. Talk to us about some of these dynamics.
Yeah, well, the food cost is again one of the reasons you get into a franchise model is we go out and we negotiate for one hundred and fifty restaurants for beef, for buns, for ice cream.
For soda, for all the supplies.
So you're not if you were going out and just negotiating for yourself, you wouldn't get that volume discount purchase. It also talks to the quality of the product, because we're getting the quality these consistency. So you get that same burger the McDonald's theory, whether you go to one in California or whether you come to one in New York or Florida, you get that same taste, same thing
with way Back. It is the same product across the US, So you get the volume discount in the pricing, you get the same quality and the consistency which the guest is looking for when they walk into a way Back or any franchise model.
And I forgot what the other part of your question was.
Labor costs, labor quests and even overhead of like building out like it's not going to probably cost the same to build in New York.
Versus maybe somewhere else across the unit or does it.
I don't know, No, I mean New York City is a different animal to itself, but it was an existing restaurant. So those are some of the spaces that we look for around the country, as long as it can't compromise
on the quality of the location. It has to be a number one location, triple A location, and if it was a restaurant location, great, You don't want to take a second generation restaurant that went out of business because it was a bad location, but it's going to save you fifty thousand dollars in build out costs.
So you do research. You're like, okay, who is here beforehand?
Right? Yeah?
And why did they go out a business? Is it in the back end of the shopping center? Was it a bad shopping center? Can you make a left hand turn? Is there a light to get in to get out? Or you know, taking your life in your hands if you have to pull your car out of that shopping center. So we do all that research along with our broker networks.
We have a real estate platform, a modeling platform that looks at the locations that that we're choosing with the franchisees and we hold their hand all the way through. That you asked earlier what type of people are coming into the system. It really spans the horizon. There are a restaurant people that come in, there are people that come out of corporate jobs, and there are people that
come out of it. It's really all across the board, but we have the training programs and the systems to be able to make them successful.
Okay, lots of questions here. You mentioned labor.
Labor, Yeah, I want to hone on that a little bit because we've seen labor costs over the last few years go up quite a bit. It's been tough in some markets even finding the labor. What's the labor picture you're hearing from franchisees right now.
One of our franchisees told me about six months ago that I said to you, and our first franchise opened up in Utah about a year ago, and I asked him, is there a labor any labor problems, labor issues finding labor in your market? And he said, Pat, there's no labor issues. That you have to pay what the what the going rate is in the area.
And that's really what it comes down to.
If a restaurant down the street is paying twenty five cents more an hour than what you're offering, you're going to have a labor problem. Minimum wage is a is a fictitious number. There is no yeah minuse the market determines that correct found. But if let's say your franchise e in a part of Utah, where the cost of living is higher, has to pay a higher wage than somebody based in Let's say this a sun belt state where you have a store where the cost of living
is lower. Is that reflected in the actual menu price too? Do they have do they have discrepancy or do they have the ability to have discrepancies within many pricing? Absolutely, we we don't force them to charge X amount for a burger or a milkshake. Labor has to be taken into account, just like rent has to be taken into account. The rent in New York City is going to be much different than the rent in North Carolina. That has to go into the menu prices. The food costs goes
into the menu prices. We were talking earlier about the price of beef and the price of proteins and how that has gone up over the last three four years. So that has to be accounted for, and you see that in menu prices and inflation and things of that nature.
I was looking at the menu. The menu looks great by the way. It got to a part though, where it had.
The non meat burgers. Carol I used to talk about these all the time. Does anyone order these anymore?
They still do the Impossible, the impossible plant based.
Yeah, the plant based. We carry the Impossible Burger and probably three four. It's just right around the pandemic is when we brought it on. That's when it was hot, yes, and it probably went up a couple of years after that.
It's funny.
We had it on as a limited time offer just before the pandemic hit and we weren't sure how it was going to go. And it was also going to be an expensive menu item, because that product was an expensive item to bring into the restaurant, and it turned out to sell very well, and we took it off because we had a limited amount of supply of it and never saw so many feedbacks four or five years ago, when.
Are you bringing that back?
The only reason I came into a Burger place was I saw that you had that online. Now that that has definitely waned and the plant based meat alternatives.
Have gone down somewhat, and so I don't know about you, Carol, but I went from like I loved those things, and then I kind of realized what was in.
On and I was never a fan for me, and I'm like, give me the cow. I was never the cow.
No, because I thought the amount of salt that was in it, and I had so many conversations with folks that were in the industry, and I'm like, I should be your customer, but it isn't a healthier option.
Yeah, we had.
It's really for it's really for people who who are not they're not vegetarians. They like meat, they like the taste of to beat. They were looking to cut down their their consumption of meat and going that way so worked well for us.
So I'm looking at a sweet bacon burger that's just oozing with bacon and cheese. Looks kind of yammy cheese fries. Yep, give me some fries, the bacon on the fries. I'm just saying, what happened to people wanting healthy or fair?
It's I think this has looked at it's healthy now, No to be fair like RFK healthy.
We've only got about thirty seconds like what people people looking and they want to eat healthy in January when they get their gym membership and when the calendar changes come February, everybody's back to eating those two three burgers a week.
Sorry, go ahead, are two point five burgers today.
They'll take the two point seven.
I'm just saying Pat Collins still with us preserve way Back Burgers. Bloomberger Director Broker Studio. First of all, private equity money that keeps getting involved into different worlds, good or bad.
Some of it's good, some of it's probably not good. We're very much about we're not private equity. We're owned by two partners.
And no debt on the company which owned what like they they're the franchise where the franchise or Jake's Franchising they have a concept. Yes, they own the franchise franchising companies called Jake's Franchising, And we're the parent company for way Back Burgers.
What do you think of the Jersey Micy purchase? Buying eight billion dollars?
Huge amount of money?
But we'll see what happens, you know, that's what the valuation if you look at it per per location is pretty high.
So did Steve Schwartzman overpay.
I don't know, we'll I guess we'll see in the years to come.
The business, Like I think about margins, how tight is it in a restaurant?
What are the margins?
Like?
It's tight?
You have to watch your food costs. I mean there are burgers. I think you were asking what's changed over.
The over the year eighteen ninety one. You guys started right.
So it started originally with in Delaware.
But when the beef came in, it came in in bulk and you had to roll. They called it rolling burgers, so you rolled them into little meatballs because it was all fresh burgers. So you did that in the back of the house and everybody you had to weigh each meatball before we pressed it. And the problem with that is like my mom did, but she kind of like, right, what you did, what you did at home, except your mom didn't put a lot of skin.
She did, and if one was bigger then the other, it didn't make a difference. At home.
My brothers got those. I got the smaller.
In the restaurant industry, again, you want consistency. But the problem is if that burger goes out bigger than it's costing you more as a franchise e. If it goes out smaller, then the guest is not getting the right side.
Stop that is burger small, That's right.
So we went to our burger supplier after years of doing it, and it was a labor issue. Rolling beef and nobody wanted to do it, and it was the employees didn't didn't like doing it. So we went to our beef supplier and said, and quite frankly, it was a food safety issue having hands on it. And we went to the our manufacturer and.
Said, is there a better way?
And they said, yeah, you know what, We've just started doing this where we can make your proprietary beef in a loosely formed puck they call it, and at your weight, your your specifications, and it'll come into you cryovacked and each patty is already done, so you take it out of the back of the house.
So that's a labor savings, it's a food cost savings because now i's a little bit more, don't cost the same amount of money.
Really, they'll just measure it for you.
They pre measured it saved us a lot of money and now there's you know, the team members loved it because and the franchise he's loved it because you're getting people out of the back of the house so you better able to serve guests in the restaurant. Same thing with our ice cream. We handscooped the milkshakes and the ice cream that we used to use was a French a vanilla bean ice cream. It sounds funny, very very hard, even though it's frozen at the same amount, and nobody
wanted to do it. You had to take the tub of ice cream out and sit it on the counter in the back for a little while that it thaw out a little before the team member could scoop it. And you were scooping hard ice cream.
It was tough.
I think about that with folks who doing ice cream. It's a lot of work, it is, I'm getting So what were we going to say? Did you automate it?
So we were eventually looking at that, but we went back to the ice cream guy and said, and he said, we can make an ice cream with a little more sugar content, and believe it or not, it's softer. It's still it's still at ten below zero, but it's softer. You can take that out at ten below and you can scoop it, and you can almost scoop it to order.
I'm getting Okay, we only have a couple minutes left, but I'm getting some questions from folks listening and watching right now, as as the person who's the president of the franchising firm do you have a view on unionization at all. We're seeing it happen at places like Starbucks, for example, Apple Store, Yeah.
Okay, I mean we're in the hospitality business, in the restaurant business.
And we want to make.
We're also one hundred percent franchised, so it's a little bit different than Starbucks, where they're.
All company owned units.
So we want to make our team members, we want what we want them to be fairly paid. I don't know whether we would take a stance one way or another on a on unionization.
All right, So if we're coming, is Tim mcgardenberger, is he Carolina?
Is he a Cajun? I know I'm an a one steakhouse.
I would do any of the above. I was looking at them any earlier.
Well.
Also, look at the cheesy, which is very plain. But it's four slizes of American cheese on a double patty burger with an inverted Butterbut that's magical.
Yes, no offense.
I've done that with hot dogs.
But it's a grilled cheese with a hamburger in the middle of it.
Okay, only thirty seconds. Technology, Kiosks and stores, what's going on? Kiosks and stores? We started again that came out of the pandemic.
We have about fifty restaurants across the US today that have the kiosks. Every new restaurant that's being built and being built with kiosks.
It again.
It's it's not so much of a labor savings but redeploying the labor in the restaurants so they can better serve the guests.
Five seconds.
Consumer doing okay, yeah, consumer or consumer consumer, Yeah, shopper's restaurant person who comes to a restaurant, you think they're doing okay, they're.
Not pulling back or anything.
No, no, I mean we see that our sales haven't slipped. So staff knockwood.
All right, Well, when New York opens, come on.
Back definitely, all right, take you. We'll meet you there for Burger deal.
Peconland President, way back Burgers, Thank you so much. Really enjoyed it.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Before we wrap up.
Our broadcast, we want to unwrap some data from the PNC Christmas Price Index. Now in it's forty first year, P and C has been keeping track of just how much the twelve days of Christmas cost, and spoiler alert, it's a lot.
Inflation is to blame for the rising costs of decking the halls kind of. I mean, yes, it's a little complicated, though. We dive into it with Amanda Gotti, chief investment officer at PNC Asset Management Group, who broke it all down for us.
The Christmas Price Indux is up really significantly and thankfully my favorite gift in the index, the Golden Rings, of course, is not the driver, as you said, It's really the services side of the equation, which we equate very much to the performers. That's really what's driving this year's calculation in terms of the Christmas Price Index, and also interesting, very much still a lot of services inflationary fire and
the broader economy too. So the numbers may look eyepopping, but the trends are actually quite similar.
But I don't understand the I don't understand the gold element here because gold is up thirty percent from a year ago. But in your analysis it's exactly flat from a year ago.
It's not just purely about the cost of the gold itself, it's the production and the creation of the ring. And so every year we go back to the same jewelry store and talk to them about their prices, and they have not raised prices on a year over year basis. So their margin is certainly coming down because the put cost has gone up, as you said, but they haven't moved the needle in terms of the price for the ring in total itself. That's a nuance, but notable, I think.
So.
Wait, the trends remind me.
Over the years, as we have talked to you about this, as we are a service led economy, has it increasingly been that the service side of the Twelve Days of Christmas is what kind of moves the needle when it comes to costs.
You know, it hasn't always been the case, but as the broader economy has shifted from goods to more services, we've actually seen a similar trend. The Christmas Price index isn't leading it necessarily, but we are seeing that shift in the underlying data and the calculation of the index. And so when you look at the performers in particular. I mean, think about it, the Tailor Swift effect, the Beyonce effect. We're going to pay anything to get our
hands on those tickets. And so the performers in the index are really garnering their big fair share of increases on a year over year basis.
Hey, and I was seeing the twelve Ladies dance? Are the is it eleven ten lords of.
Leaping, tenlors leading, ten lords of leader?
They were they were doing backup work, you know, for Taylor Swift, So like could have driven up the.
Cost that way six lane somewhere or another of the cost is way up. And consumers will pay anything for services these days.
What's up with the six GISA laying of eight point nine percent from a year ago? I thought poultry prices were flattered down, you know, it's.
It's sort of an interesting it's an interesting dynamic there. I have to say, you know, the backyard farming trend. Dare I say farm to table? Hopefully the geese aren't listening to me me here talking something about that. I know it is, isn't it? This is These are the cold hard analytical facts for you. But there are definitely some consumer oriented trends driving the demand for geese up relative to some of the other birds in the index. I mean, what are you going to do with turtle doves?
What are you gonna do with calling birds? You know, they're not the greatest of gifts, but geese I could get used to that.
You got to clean up after some of these gifts, which is never something that was encouraged in my home.
And they fly like you you know, it's end of the day.
I'm not I'm not sure what true love is really thinking buying all of these birds here. But nevertheless, we're not going to deviate from the classic holiday song. So this is what you get.
Well, this is what happened.
You know, we like to buy experiences these days, but they were more interested in things back then.
Carol.
Yeah, uh, that's so true.
You know.
I have sisters always like giving experiences, which I always thought was a kind of a cool thing. But I do think about that, right, experiences versus stuff. I wonder, uh, the Eight Maids of Milking.
Is it raw milk.
To get political political at all?
Oh? Boy?
Exactly? The fifth that could be a different cost equation. I'm just going to point that out, it.
Could be very different. Agreed, the underlying data as it relates to the maids of milking really ties very much to the minimum wage. And because the minimum age hasn't changed at all in many, many years, that one has
been holding pretty steady. We could talk all day long about, you know, the philosophical aspects of you know, wages and the minimum wage and where we are from an inflationary perspective, But until the minimum wage moves from a policy perspective, that one, unfortunately is holding.
Study.
We said, the cost of all gifts across the two hundred thousand dollars threshold for the first time last year today settles in three point six percent hire a two hundred and nine two hundred and seventy two hundred and nine thousand, two hundred and seventy two dollars.
Help me understand. Does this say to you though, in general, that we are living in a little bit of an inflationary environment?
Like, what does it tell you about if we step back about what it means in terms of the US inflation picture.
Well, I think we're certainly living in an elevated inflationary environment. I mean we're gaining on it relative to the peak of you know, nine percent in terms of CPI that we saw sort of in the of the pandemic trends that we saw there. But we haven't seen prices come down. We're not in a deflationary environment. It's really just that the rate of change on inflation is slowing, and so we are seeing some elements of the Christmas Price Index
flowing in terms of that rate of change increase. But nevertheless, things are on balance more expensive this year than they were last year, and it's just a reflection of the traditional economy as well.
Yes, Carol Masser, what's up with the partridge in a paar tree? I mean partridge on change? What my understanding is a seventeen point one percent jump in the price.
For a pair.
That's that's the traditional buying, that's not the Internet buying.
Okay, that's Mortar Absolutely right?
Is that there?
Can I get get back up here, Amanda Gotti.
Yes, absolutely. Last year we were teasing that we're going to make the partridge sit on a cardboard cutout because the tree was so darn expensive to try and control for prices. We should be saying the same thing this year. But the reality with the tree is we use that as a proxy for housing costs. And even though mortgage rates are moderating in the wake of some of the Fed policy actions we've seen these last few months, demand for housing continues to be really, really strong. We're net
short housing supply in this country. So house prices are really elevated, certainly, just like they were last year.
So if you want to buy the entire cost of the Christmas Song, if you buy it the traditional way, two hundred and nine thousand dollars, up three point six percent from last year. If you want to buy it online, close to two hundred and fifty thousand dollars. The rate of change for inflation was slower, was lower on the internet, but more expensive overall. To do this you can buy out pay later, yeah.
Which would be another sign in terms of how the economies.
Amanda Gotti over at PNC. Always fun when you join us, even if it is during the month of November and we're already not even a Thanksgiving yet, but talking about Christmas a couple days.
I know, did you see the decorations of around But.
Did if the trees are out?
What's happening?
This is Bloomberg.
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