00:00We didn't think it was a great idea to just try to lap these really strong comps with just value,
00:05A.
00:06B, they kind of screwed up the whole value thing.
00:09They pulled the BOGOs, buy one, get one offers.
00:13They took away a lot of discounts on the app, which their lower income consumers use all the time.
00:19And they pushed a 10 items for $3 menu that kind of fell flat.
00:25And so all of those changes that happened actually created an increase of prices for their consumers.
00:36So that paired with a tough year-over-year comparison showed up in their results today.
00:42The company is embarking on a multi-year plan to become more than just a fast, cheap meal with the
00:48aim of being the first choice for family outings and other occasions.
00:51How are they going to do that?
00:53You know, listen, we'll probably see more tie-ins.
00:57You know, last year was the Minecraft meal that was absolutely a monster for them globally, right?
01:02So they're going to have to use some more tie-ins.
01:06You know, it's going to be tough.
01:09You know, I think what we're seeing is McDonald's kind of taking some of these family occasions away from McDonald's
01:17this year.
01:17You know, Burger King has remodeled their restaurants, improved the quality of the food, and really done a nice job
01:24of building back sales over the last few quarters.
01:28And I think McDonald's is feeling it, and that's why they're kind of talking about that segment, because it seems
01:34like they may be losing some share there.
01:37I think what the real drivers of this will be are, you know, beverages.
01:42I think beverages is a very good opportunity for them to grow sales in the afternoon, day part.
01:47You know, I think they can take sales away from Sonic, who is a big competitor in the beverage space
01:53that does a nice job in that, you know, 2 to 4 p.m. lull where the restaurants are staffed.
02:00And so they're primed to do more business.
02:02It's very incremental sales in that day part.
02:06You know, they're going to do some more training, some retraining in the fourth quarter to help boost their operations.
02:11I think they're not going to do what they did this quarter, which was just throw too many different marketing
02:17initiatives against the wall, right?
02:18You have to be more disciplined in today's market because, you know, these windows, everyone's marketing and everyone's putting out
02:28LTOs and new food items and discounts out there all the time because the low-income consumer is struggling.
02:35And so what we're seeing now is that promotions are only giving you these chains a lift for one or
02:42two weeks.
02:42And then it fades.
02:43And then it fades.
02:44And so, you know, if you're constantly marketing something new every couple of weeks, you know, it gets confusing for
02:52the consumer, confusing for the employees.
02:55It just kind of makes a mess of things, which happened this quarter.
02:59Yeah, it just becomes noise in the background.
03:01A lot of analysts are saying that the results are kind of the secondary story.
03:05The bigger story here is a change in McDonald's USA leadership.
03:10Joe Erlinger is out, and Skye Anderson, who was the COO, comes in.
03:16Do you see this changing things dramatically for McDonald's?
03:20I don't think so.
03:21I mean, Erlinger did a great job, you know.
03:25So, you know, that may be viewed as a loss by some, but Skye Anderson has been there for a
03:32long time.
03:32She's worked very closely with Joe and the U.S. team in charge of operations.
03:38So, you know, she has a long track, strong track record at McDonald's.
03:41So I don't expect too much of a change there.
03:45Cyclo, what is it again?
03:47Cyclospora.
03:48Yeah, what is that?
03:51It's a parasite that causes, you know, very, very bad diarrhea.
03:56And so this is something that's impacting the lettuce?
04:00Yes, yes, this is impacting lettuce.
04:03There was a pretty big recall.
04:04Taylor Farms is a big supplier.
04:06And Taco Bell getting caught up in it.
04:08And Taco Bell got caught up.
04:09There was some news today that wasn't a good look for them, right?
04:12So, you know, somebody got a hold of some emails that showed they knew about this outbreak maybe a couple
04:19weeks before they let their consumers know.
04:21And so, yeah, not a good look for them.
04:24Also, there was a couple of deaths.
04:26I think there were people that were, had health issues prior to cyclospora, but that's uncommon for cyclospora deaths, right?
04:33That's more of like an E. coli thing.
04:36So not great for Yum! brands, but, you know, at the same time, they just divested Pizza Hut.
04:41People are going to forget about the cyclospora.
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