MCD Black book Call On Monday
We are LONG MCD
CALL DETAILS:
|
Part of the LONG thesis for MCD is a simplification strategy brought on by the pandemic. We were happy to see that MCD continues to pursue that strategy, with a story on Bloomberg, 'McDonald's Shrinking Menu Means Healthier Foods Are Vanishing.' McDonald's transitioned to a slimmed-down menu in April 2020 to quickly fill drive-thru orders and provide better service, even if it's short-staffed kitchens. It cut items that were more complex or didn't sell as well and, importantly, limited breakfast to only morning hours. Heally foods have never sold well at MCD because it is not what the core MCD consumer wants. As an unrelated side note, this fact also gave us confidence that BYND would never be successful at MCD!
DPZ continues to keep Delivery options open
In 2019, Domino's CEO Ritch Allison said he'd "have a tough time sleeping at night" if the company had to use a third-party delivery service. Does that mentality still exist with the new management team?
A driver shortage is forcing Domino's (and others) to possibly embrace delivery alternatives and make other structural changes to their operations. The driver shortage is due to a combination of factors, including:
- Drivers seeking more flexible schedules
- Food delivery drivers are getting paid less than ride-share drivers
- High gas prices prevent workers from moving to food delivery jobs
PZZA has embraced TPD (third-party) drivers, which appears to be reflected in Q1, where Domino's same-store sales were down 3.5% YoY, with delivery sales down 10.7%, and PZZA was up +1.9%. Will Domino's embrace third-party delivery partners? The CFO did not rule out the possibility. At the ISI conference, the CFO said, "I think we're definitely getting more confident that we'll be able to reduce the gap based on what we're seeing. Is it going to go all the way to where we can fulfill all the demand on sales? We hope that that's going to be the case. We don't really have a clear line of sight yet to that, which is why we said, If we don't – if we don't really have that full capacity to return to our system, we are open to other options."
The big question is, how much do consumers prefer a Domino's driver in a Domino's uniform coming in a Domino's car to deliver your Domino's pizza in a Domino's Heat Wave Box? How much does that DPZ brand experience influence a consumer purchase decision?
Another SBUX Brand issue
SBUX is a SHORT
The battle over the Starbucks bathroom has resurfaced following comments from CEO Howard Schultz, "We have to harden our stores and provide safety for our people," he told The New York Times DealBook D.C. Policy Forum. This represented a change in the company's thoughts on security issues and was likely influenced by his "town hall meetings" with employees - "I don't know if we can keep our bathrooms open."
The move would reverse a policy Starbucks instituted in 2018 in the wake of the arrest of two Black men in one of its Philadelphia stores. At the time, Starbucks announced that "any customer is welcome to use Starbucks spaces, including our restrooms, cafes, and patios, regardless of whether they make a purchase." The company apologized for the event and closed all its U.S. stores for a day for staff to attend an anti-bias training. Howard Schultz was executive chairman at the time, implying he influenced the decision to open restrooms, cafes, and patios to all customers regardless of whether they made a purchase.
What has changed for him to reverse the policy issue? "We don't want to become a public bathroom, but we're going to make the right decision 100% of the time and give people the key because we don't want anyone at Starbucks to feel as if we are not giving access to you to the bathroom because you are 'less than.'"
The cynical stock analyst in me says the CEO is doing everything he can to slow the unionization movement, even if that may mean a short-term hit to the brand.
