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- [00:05]
A
Hello and welcome to Money Talks, a special extra podcast from Slate Money where we have conversations about money with brilliant people. I'm Emily Peck. I'm the co host of Slate Money and a national correspondent at Axios. And I'm here today with Heather Hadden. Hi, Heather.
- [00:22]
B
Hey, thanks so much for having me.
- [00:23]
A
I'm so excited to talk to you. Heather covers restaurants for the Wall Street Journal and part of that involves covering the fast food industry, which is I realized as I was preparing for this show, an industry that I am obsessed with. I don't cover it and I hardly ever eat at fast food places, but I am very interested in fast food. I think it says so much about so much of just everything America. So Heather, I want to talk to you about a lot of what you're covering. Just like the current state of the industry considering price pressures. I want to talk about McDonald's and it's like return to the value meal. I want to understand what the hell Starbucks is up to right now. And I hope we have time to maybe get into the reason we reached out to you in the first place, which was Chick Fil a and its intense drive through strategy.
- [01:18]
B
Yes, they have a crazy drive thru strategy.
- [01:21]
A
Okay, so yeah, that's all coming up on Slate Money Talks. You're about to make a trade. Which u do you listen to? Is it get optioning those options.
- [01:39]
B
Or.
- [01:40]
A
Let's do a little research. Learn more@finra.org TradeSmart this message is a.
- [01:48]
C
Paid partnership with Apple Card. Fun fact, I never leave home without my Apple card. I mean would you want to miss out on daily cash back on everyday purchases subject to credit approval? Apple Card issued by Goldman Sachs Bank USA Salt Lake City Branch terms and more@applecard.com I don't even know where to start.
- [02:09]
A
I guess I'll start, Heather, just by asking you to give us the like state of the fast food business. We are talking in. It's almost Thanksgiving. Everyone right now is obsessed with cost of food specifically. So what's happening in fast food which is supposed to be cheap, right?
- [02:24]
B
Yeah. Fast food is supposed to be winning right now. This is the kind of economy where fast food should be doing good because people are struggling, but it is not. And there's a lot of things going on right now. One is people are still really just pissed off about prices being too high. They want their burgers and fries to be cheaper. And they really have held a grudge against a lot of these restaurant companies after the pandemic when the prices shot up. So Much. And even though a lot of these fast food chains have worked really hard to slash their prices, a lot of consumers just haven't gone back. And I think all kinds of people in the economy right now, you know, from fast food to people who go to Chipotle are just feeling strapped and they're looking for places to cut back. And you know, sitting in a drive through and getting a bag full of food is that maybe is not the best qualities. Is an easy way to cut back. So.
- [03:17]
A
So you write a lot about McDonald's. I feel like you're covering their sort of response to this. I mean, crisis. Yeah, for them. Walk us through what happened there because it seems like the company has been reporting kind of like weak earnings. I might have it confused with Starbucks. Falling same store sales, keeps blaming low income customers. I see McDonald's meals are over $10. That's too much. I mean, just give us like the McDonald's.
- [03:45]
B
Yeah, so you probably heard about that $18 Big Mac meal on the Connecticut turnpike, which basically blew up. I believe that was last year now. And it just kind of solidified everything people were feeling about fast food that it has just gotten too expensive. I mean, that location, as you know, it's a rest stop in a very high cost part of the country. So it was not really totally representative, but it basically made social media on fire with just this is too much. And so the company did resp. And last year they started those $5 meal deals which give you, yeah, four pieces of food and drink for five bucks to try to do something about that and to kind of move the needle that they had just gotten way too expensive. And so that started to help.
- [04:32]
A
Wait, can I ask you the $18 Big Mac meal? So that's a Big Mac fries and a drink for $18. Do we know how much it costs now at the same place in Connecticut?
- [04:41]
B
I have not gone back there. But one of the things they have done is they realize these combo meals should be. So they've been on what they call extra value meals, have been on their menu for a really long time. But I think over time franchisees who control the prices for these restaurants had kind of inched them up. And then the extra value meal really wasn't a good value anymore. And so the company did something really unusual, which was negotiate with its franchisees to drop the prices of these meals by around 15% and then also offer some special discounts. So in September and November, There was like $18 combo meals for lunch and dinner and $5 like Egg McMuffin combo meals for breakfast. And basically they were putting out their salvo that we are going to drop our prices, which is very unusual anywhere. I mean, you go to the grocery store where price is actually dropping and we're going to put some big money towards it. The company's actually spending millions of dollars to advertise, but then also to help the franchisees to bring these costs down. And then come January, they're going to see how it's going and then they hope it will stay. So this is a really unusual, I don't know, experiment with a company to actually have its franchisees agree to drop their prices and keep them at a certain level.
- [05:56]
A
Yeah. So I guess not really understanding how the franchise business works for McDonald's versus when I was reading your chick fil a coverage versus how it works for other fast food outlets, I wouldn't think that franchises have so much ability to set their own prices because isn't, isn't what they sell and how they work and their design so micromanaged by McDonald's itself. Like I didn't realize they had that much ability to control prices.
- [06:23]
B
They do. It's, and it's very important and it's kind of central to this disarrangement between franchisees and the company where the company can set national prices for certain, like advertised deals like 2 for 5 or what have you. But that the day to day prices, when you drive up to the drive through, most of those are set by the franchisee and they retain the right to do that, to hire their workers, to manage their workers. And it means that these are all operated as small businesses basically, as opposed to a big conglomerate that, you know, Starbucks basically owns all of its US stores other than the ones in airports.
- [06:59]
A
I mean, we talk about prices all the time on slate money and why they're going up. But for fast food, I was wondering why prices have gone up so much for McDonald's. How much of it has to do with labor costs? How much of it has to do with, you know, input costs? Like I know the price of beef is. It's been astonishing. So it's not surprising to me that a hamburger would cost a lot of money in 2025. So yeah, what do you think's driving all the price increases?
- [07:26]
B
And yeah, McDonald's in defending themself, has said that their prices are basically rising at or below cpi. So, you know, all restaurants have boosted their prices because after the pandemic labor became really hard to get. So in 2021, they really had to pay A lot more for labor. There's also been minimum wage increases, which means paying more for labor. And then there's all those input costs like you talked about, higher beef prices. But all that stuff that your burger is in, like the packaging and the wrapping and the container and when it's delivered, most all of that is imported from China. So all of that has gone up because of tariffs and other things. Yeah, and then all the little things, insurance, everything. So it's all gotten more expensive. And they, you know, these franchisees boosted their prices, and, yeah, it just got more and more expensive. And in, you know, in previous downturns, McDonald's has done well, but in this situation, they really were starting to struggle, and they had to, you know, do a mea culpa and say, we need to do something about this.
- [08:29]
A
Do you think that part of the problem, like, all restaurants have raised prices, and it's no longer surprising to me to go anywhere where, like, a burger and fries is going to cost me, like, 15, $20 or something like that. Do you think that? But the expectation with McDonald's is just different. Like, you expect it to be cheap, and you like customers, even the ones who can afford to pay. And, you know, probably a lot of them can afford to pay. It's just not okay. Like, they don't have the elasticity that maybe some other restaurants or fast food chains have.
- [09:01]
B
I think that's a great point. Yeah, people just expect McDonald's to be cheap. I hear a lot from our readers. People like to comment on stories that involve food. And even our readers, who generally more fluid subscription, they don't like pain a lot for McDonald's. So, yeah, a lot of. Even our readers have just said, you know, I'm just not paying those prices to feed my family. Like, you know, you go in and, you know, two kids, it's like 40, 60 bucks. I mean, who knows? It's just a lot of money. So, yeah, I think there is a personal kind of, like, feeling of, you know, the quality of this food maybe just is not worth the price and I'll just eat at home instead.
- [09:39]
A
How have McDonald's competitors in the burger world done, like your Shake Shack? Because I feel like Shake Shack has a more perception of quality, so maybe they have easier time raising prices. Like, maybe they're taking share from McDonald's.
- [09:51]
B
So they've actually had to compete in this value world in a way that they never have either. So their relatively new CEO has now introduced this 1, 3, 5, deal where if you order through the app, it's like a dollar for a drink or $3, I think for fries or $5 for shakes. And Shake Shake has never done anything like this before. But I think they realize also that people are just fed up with high prices and they need to feel like they're getting a deal even if they're still, you know, truffle burgers on the Shake Shack menu. Like, even if there's still things that are really expensive. They just need to feel like, oh, there's this option for a deal and that I'm not just getting hung out to try.
- [10:32]
A
Okay, but how much of this also is just like the changing tastes of Americans? Like, there's so many more interests that there's fast casual, maybe that's also doing poorly now also, but there's just many other options. Like maybe like price is sort of the breaking point for like more traditional fast food in the current environment.
- [10:50]
B
Yeah, I think it's a good point. I mean, you know, McDonald's has been around a long time, but the competitive set has vastly expanded. So there's Taco Bell for one is actually on fire right now. They're doing really well. But there's so many more types of food that you can get and get through drive thrus or delivered or, you know, conveniently at your doorstep. But then like you said, there's so many more fashion casual chains. There's sit down chains. I'm sure you've talked about Chili's.
- [11:18]
A
Not really.
- [11:19]
B
Oh, Chili's is doing really well.
- [11:21]
A
Why?
- [11:22]
B
Because they improved the operations and the food quality. And then they went really hard after McDonald's and did this three for me deal, which is three items for $10.99. And it basically went after McDonald's and said, you are a sucker to just sit in your drive through when you could sit down and have chips that are replenished and a soft drink and a big burger for 10.99 that and they went really effectively after young people on TikTok with these viral cheese pulls. I don't know.
- [11:54]
A
Viral cheese pulls. Okay, tell us. We need to know everything.
- [11:58]
B
Yes. So this is young people at Chili's pulling apart their mozzarella sticks and then filming themselves and, you know, asmr, I guess, like, ooh. And so getting these groups of appet with sauces, which is the way a lot of younger people want to eat these days, is like appetizers instead of meals and then filming themselves. And then Chili's really did a good job marketing it. Just being like, look at our appetizers. And cheese, abundant cheese, fried cheese. It's so great. Yeah, Chili's has done really great in a way that a lot of others haven't. And they're all trying to emulate it now. I mean, Chili's is just the magic restaurant chain right now.
- [12:39]
A
So they're like pulling cheese everywhere.
- [12:42]
B
Maybe not pulling, just pulling cheese, but they are advertising deals. So like Applebee says 2 for 25. And the sit down chains are trying to promote good deals because. Yeah, that's what it takes.
- [12:53]
A
I think I want to talk about drive thru now.
- [12:54]
B
Okay.
- [12:55]
A
Because you mentioned a few times now, like, why would you want to sit in your car and eat food? But when I read you have this great piece, which is why we wanted to talk to you in the first place back in, I guess, February of this year, which seems like a long time ago, about Chick Fil a and the evolution of its drive thru business. And one of the things that struck me reading it was like, I think you said 40% of chick fil A's sales were drive thru or something just really big. And similarly in fast food, like a big share of people are getting drive through. So has that changed since you wrote that?
- [13:32]
B
I think that's still the case. You know, drive thru is just very American. We've been perfecting this technology for a very long time because we are a car culture and people eat their food on the go. It's not very good for us, but that's how we do it. And what's interesting about Chick Fil a is they're actually the roots of their business are not drive thru, it's sit down. It's like if you go to a Chick Fil A, there's little flowers on the tables and they're all about their southern hospitality and they really, they really do it. You know, they have play places in their restaurants. But before the pandemic, and then definitely during the pandemic, of course the business all shifted to go and they really had to increase the capacity of their drive throughs because, you know, I'm sure you remember this during the pandemic there was huge lines of cars outside of these restaurants to go restaurants, Starbucks, whatever. And it was clogging traffic and it was causing all these problems. And you know, when you're a town and you're trying to figure out whether you're gonna have a Chick Fil a or not, if you see that there's these huge, just lines of cars in traffic, you might not let them be in their town. And that was happening to Chick Fil A. And so they've really spent a crazy amount of time and money and attention and staffing to make their drive through really work at optimal levels. So it's a whole science about, you know, speeding up the cars, but also making people feel that even if they're waiting, that they're not neglected. So they have these people out in the drive throughs with iPads and you order from a person, not just a speaker box, so it's an actual person who you can talk to as opposed to, you know, that garbled speaker box and making sure you get all the order right. And then there'll be people along the drive through to make sure things are okay and just, you know, and then they check it at the end and they make sure you don't need anything else. So they kind of guide you through the whole process to make you feel not antsy. But then they've also really made the science of capacity in drive thru a whole kind of really detailed process.
- [15:36]
A
You describe, like, they take videos of the drive through lanes, sometimes using drone footage. And then they have these like teams of analysts, basically like football coaches reviewing game tape. Reviewing drive thru tape.
- [15:50]
B
Yeah. The guy who came up with this is like a huge sports guy. And he basically went back to his alma mater and was like, can I make a game tape like a football game with our drive throughs? And they're like, well, we'll look into that. So they take footage from both inside what is called the cockpit of the restaurant, which is where all the people are with the bags and the napkins and getting all the orders together. They take footage there, they take footage from the actual drive through and then overhead footage to see the congestion and, you know, peak hours and try to see if there's bottlenecks in the cockpit with are the right workers, where they are enough workers. And then splice that together with the footage from the drive through and above to see how can they shave seconds off this process.
- [16:36]
A
I'm obsessed with this.
- [16:38]
B
It does seem to be working. And Chick Fil a needs it. Just because they do so much business in their restaurants. I mean, they're just incredibly successful. Each one of these restaurants is doing millions and millions of sales a year. So, you know, every second counts. You don't want people to turn around and just be like, no, I'm not sitting in that drive thru. And so, yeah, they've made a whole team to study this.
- [17:01]
A
Let's stop right there and take a break. And we'll be back right away with more from Heather Haddon on Fast food. This podcast is brought to you by Progressive Insurance. Do you ever find yourself playing the budgeting game, shifting a little money here, a little there and hoping it all works out well? With the name your price tool from Progressive, you can be a better budgeter and potentially lower your insurance bill too. You tell Progressive what you want to pay for car insurance and they'll help find you options within your budget. Try it today at progressive.com, progressive Casualty Insurance Company and affiliates Price and Coverage Match Limited by state law. Not available in all states.
- [17:46]
C
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- [21:09]
D
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- [21:43]
A
I wanted to ask you, and I don't know, I didn't see that you wrote about this, but you have like a bajillion stories. If you go to The Wall Street Journal.com, heather's author page is just packed with great stuff. But thinking about Drive Thru and you mentioned, you know, workers holding iPads and then kind of thinking about McDonald's, Starbucks, all of these companies. Digital ordering has become so pervasive. Like I don't really go to McDonald's very much but it's about to be Thanksgiving when we're taping, so we're going to hit the road and we'll probably hit a McDonald's and now you go to McDonald's, you just have to do the touchscreen. And I always hated ordering at McDonald's in the past because you approach the counter and there's so many people, and it's never clear where the line is. It's just like this, like, mob scene, and it stresses me out. I never know, like, is someone gonna bring me my order? What's happening? Like, it all comes all separate. I'm getting to the point now. They have these touch screens, and it's so much easier and less stressful. And I noticed Burger King, everyone has them. And then, you know, with Starbucks, you. You could order on the app. Five guys app labor has become a huge cost for these companies in places like California. They have, like, a fast food minimum wage, obviously. My question, I guess the question that I'm hoping you'll give me actual facts around is like, is fast food labor becoming obsolete in a lot of ways? Are they shrinking workforces thanks to all the new ordering technology, or does it somehow create more work?
- [23:09]
B
So I'd say both are true. That these kiosks and the fact that we are actually doing a lot of work for these restaurants now.
- [23:17]
A
Yes, we are doing the work.
- [23:18]
B
We are doing the work for them. We are punching in our Starbucks orders, and digital ordering just shot up so much during the pandemic, and people now continue to do it. So we are, yeah, we are replacing cashiers in a lot of ways by just doing it ourselves. So that is making these restaurants much more efficient on one hand. On the other hand, you know, there are these technologies. I don't know if you've heard of Flippy, which is like a. It's a burger or fried food making robot. And, you know, it's still in test. Like, it's. We're on to Flippy 3. And, you know, it can work somewhat, but really, we're still just so far away from replacing the labor of making food. It's just such a delicate process where you really need people to make it. And so people are expensive.
- [24:05]
A
But you save on cashiers at least.
- [24:07]
B
Yes, you're definitely saving on cashiers, you know, and the restaurants all say, we're reallocating our labor elsewhere. We're not just cutting people. But, you know, it is reducing hours when you don't need as many cashiers. So, I mean, that is helpful for them. But I think the cost of labor just continues to go up and up, whether it's California or elsewhere, because it's just more expensive.
- [24:27]
A
There's fewer people to take the jobs To I wonder if the immigration crackdowns this year have impacted fast food hiring at all.
- [24:35]
B
I don't think it has helped. No. You know, and it's certainly in particular areas where they're highly Hispanic. They're doubly burdened by. They're both having fewer customers come in because people are scared to leave their homes. And yeah, it's not great for workers, you know, and I hear that from fast food to high end restaurants and some of these restaurants really depend on, you know, a very specific chef to be coming in. And I'm in Chicago where there's just been an insane amount of deportations lately. So, yeah, it has not been great for the workforce. Right.
- [25:05]
A
And for the industry too. Like you're saying there's fewer customers now because immigrants, documented or no, are afraid to leave their houses. That's awful.
- [25:13]
B
And I was just talking to a CEO of a chain and she's like, well, I, we think maybe more of them are coming through drive thru. But still, like she did say, like, you know, we used to have a pretty swift lunch business and a lot of those folks were working in construction or working, you know, those kind of jobs and they're just not showing up as much.
- [25:32]
A
I was debating asking this, but we have a president who has really closely associated himself with fast food. McDonald's, specifically the filet o fish has that. Do you have anything to add? Like he recently had some kind of press conference, I believe with the McDonald's logo behind him. And during the campaign we all remember that he did something with the fry machine. It's unclear what he did.
- [25:56]
B
Yes, so I did watch that 45 minute press conference. It was wild. It went in all kinds of directions. But yeah, this is an event that McDonald's operators have every year in D.C. where they're basically lobbying. And so they were there actually to try to protect joint employer, which is the rule that allows them to, to set their own wages, hire their own workers. It means the company is not liable for all those things. It also makes it harder to unionize.
- [26:23]
A
It means the McDonald's, the big corporation, isn't responsible for the workers in the franchises, basically.
- [26:31]
B
And it's why the union campaign is happening at Starbucks and not at McDonald's, because Starbucks, those are their workers anyway. So, yes, this Trump press conference, it went in all kinds of directions. But the things that McDonald's was happy he said was protection, joint employer. He gave a big shout out to the extra value meals and said it was so great that McDonald's had lowered its Prices. And this shows that, you know, his work to reduce inflation is working because of these extra value meals, which was interesting. He did say he loves a filet o fish, but it should have more sauce. So, yeah, it was pretty wacky. But of course, you know, yeah, I mean, some of his policies have helped the industry, but some of them have not. And I think the National Restaurant association has been trying to lobby for immigration reform previously and now because they need workers. So they are looking for some kind of not skilled worker visa program, but less skilled worker program because they need these workers. Yeah, I think it's gonna be a big struggle for them to get that done, but it's been on the top of their agenda for a long time now.
- [27:42]
A
I guess we should talk about Starbucks. What the hell is happening if there's a mishap at Starbucks? Heather, I learned from your reporting that baristas need to latte.
- [27:53]
B
Yes.
- [27:55]
A
Listen, apologize, take action, thank and ensure satisfaction. That is latte. That's good. I wrote it down. And it's part of this whole. What would you call it, like, effort to revitalize, do something with Starbucks, make it somehow better.
- [28:11]
B
Yep. So much is going on at Starbucks. So much has happened with Starbucks. Like, Howard Schultz came back, then the CEO was fired, then he left. So now the current CEO is the former CEO of Chipotle, Brian Nicol, who was credited with really turning around Chipotle after its food safety scares. And so he's been there about a year. And Starbucks has had a really rough run where their sales have fallen for all the reasons we've been talking about. People just feeling like it's not worth it anymore.
- [28:40]
A
It's so. Wait, Heather, it's so expensive. Like, I got an iced coffee there the other day, a grande, which is their medium. And it was like. I think it was like $7. And I drank it in like 90 seconds. Not worth it.
- [28:55]
B
The prices are high. The experience has suffered. You know, there's a mosh pit of cups when you come to try to pick up your mobile order. There's so much more competition now. So, yeah, their Sams for sales have really been declining. And so he is trying to do things to improve the Starbucks experience, Basically make it worth it again and make it worth it for you to pay those prices, because they're not. They do not have extra value meals. Right. They do not.
- [29:22]
A
They really should. They super should.
- [29:24]
B
The previous CEO, for a minute, a hot minute, had kind of like a breakfast value combo for six or seven dollars. And then it, you know, went away. So.
- [29:33]
A
Oh, and plus, Starbucks is very breakfast aligned. And from what I understand from reading you, again, everyone should read you. Breakfast is like the first restaurant meal to go. Like, everyone, you know who's trying to cut back is like, I'll just make coffee at home. I'll just eat breakfast at home. So Starbucks must be like disproportionately hurting from that as well.
- [29:54]
B
Yeah, no, the McDonald's CEO has been very transparent about that. That breakfast is challenged. You know, people are just like, forget it. You know, I'll have my, my coffee and my bagel and my toast at home and then maybe I'll still get my bowl for lunch. But, you know, even that's starting to fade. So anyway, the, yeah, the Starbucks CEO is really just trying to make the experience better. The baristas friendlier, you know, quicker, make sure everyone is greeted warmly. So they're doing a lot of things to try to improve the experience. They're also doing a lot of things to try to cut costs. So they close a lot of stores, they've laid off a lot of people. You know, clearly this is a business that is kind of in a, in a moment where they're reckoning with where they are in the industry. And some things need to shrink if they're going to grow again.
- [30:41]
A
And it's interesting that they've leaned into customer experience and the greeting and redoing the cafes to be more, you know, welcoming, more like a place you'd want to hang out. Whereas, like, their competition is really leaning into like mobile ordering. No seats, like in New York. Blank street is everywhere now. It's cheaper than Starbucks. I mean, it's not really a place where you sit with your laptop. You had a whole piece also about Luckin Coffee. Is that how you say it? The Chinese coffee franchise. So I'm curious if that's gonna work out for them. Leaning into the experience piece and not just the make it cheaper, make it takeout piece.
- [31:17]
B
That is the big debate in the industry for sure. Yeah, there's all these to go. Only competitors now. Dutch Bros. I don't know if you've heard of them. And then there's just regular old Dunkin Donuts, you know, like always cheaper. Yeah, it's cheaper. You know, they've invested a lot in the quality of their equipment to make it better. I mean, they rip off every Starbucks drink now. I mean, and it's cheaper. But Starbucks says that they are starting to see some results from this. And it is really interesting. This holiday season, the union is again Striking in stores. But they had a record sales day during the holiday for these red cups, these reusable red cups. There's also these little bear things that everyone wanted.
- [31:57]
A
Bear things. Yeah, those are big.
- [31:59]
B
Yep. So they seem to be doing well currently. Like the CEO has said that we are doing great. You know, it's not just pumpkin spice latte. We are having a great holiday and you know, you get the cup for free. But the other, the drinks themselves you gotta pay for. So people are coming into their stores right now. Well, you know, this is the most important period for them. So if they weren't doing well, that'd be a real problem. The fact that they are, is good and probably, yeah. Ensures that for now, Brian Nicholl continues to do what he's doing because, you know, there's a lot of people watching his performance here for sure.
- [32:34]
A
How long have you been covering restaurants, fast food?
- [32:37]
B
Since 2019.
- [32:39]
A
How often are you eating at these places and what are you eating and tell me all about it.
- [32:44]
B
I would say periodically. So I, you know, I grew up eating this food for sure. I'm from New Jersey. A lot of times in the drive through at Burger King or eating at Friendly's or what have you. But I have to say, yeah, day to day, you know, I do have a nine year old. So that does increase your eating of fast food. And he is a great reviewer for me of chicken sandwiches. When the chicken sandwich wars were happening, it was like very useful to have his opinion. But yeah, I'd say day to day, I don't eat it a ton. And people often, when I tell them I'm a, you know, I cover restaurants, they're like, oh, what an amazing job. And I'm like, I'm not a restaurant reviewer.
- [33:27]
A
Right.
- [33:28]
B
Covering the businesses of these restaurants. But that said, in Chicago, you know, McDonald's headquarters is not far from me and I've definitely spent plenty of time in their special restaurant there where you can get the food from all around the world. I've spent a lot of time in Seattle tasting all kinds of interesting drinks that they are making up. In July, I was in Taco Bell in their headquarters in their innovation kitchen, which has all kinds of interesting things they're coming up with. Yeah. And these restaurants, I mean, it seems so just like por forma what they're serving. But the amount of work that goes into this food is kind of incredible. You know, the amount of product people who develop these drinks or these chalupas or what have you, it is, it's wild.
- [34:11]
A
What are some of the big trends you're seeing now? Like, cold foam seems to be everywhere. Cold foam and protein, I guess. I don't know if there is protein cold foam, but it seems inevitable. What are the things I remember when I was at HuffPost, our readers were obsessed with the Taco Bell, Doritos Locos.
- [34:27]
B
You know that one? Doritos, yes, absolutely.
- [34:30]
A
Anyway, there's always something that people are very obsessed with. So, like, what is it right now?
- [34:33]
B
Yeah, protein is huge, period. So Starbucks now has. Yeah, protein, cold foam. That's something that Brian Nicole came up with. Isn't that just milk?
- [34:44]
A
Like, I don't understand.
- [34:45]
B
It's milk with a powder in it. But the whole point is for it to not be chalky. And I think it's debated whether it's chalky or not. And, you know, each of those shots, I think, is a dollar or two for that cold foam. So, you know, you're adding more and more.
- [34:58]
A
It's just foam. It's just foam, Heather.
- [35:01]
B
I know, but cold is in beverages. It's all about cold. So even in the winter, all these young consumers are drinking their cold drinks, their energy drinks, their brightly colored drinks, their whatever drinks. So, yeah, I just got back from a conference last week in Las Vegas, the restaurant finance Business Finance Development conference. And the big things is still, it's just beverages and chicken. That's what people are just kind of obsessed with. That's where the growth is. Burger is challenged, pizza is challenged. Yeah, a lot of these other sectors are challenged, but a lot of the finance types in this world are just banking on more types of ways you can get beverages to go. Cold coffee, cold energy, whatever, and then just more ways to consume fried chicken. All right.
- [35:46]
A
Chicken and a cold drink is the winning.
- [35:48]
B
Yep, that's America. Okay.
- [35:52]
A
One last topic was I wanted to ask you what was up with tips, because I remember in the pandemic, we definitely talked about it at Slate Money. Axios was obsessed with it, too. Like, people were tipping more and more and more. And now my understanding is perhaps that's changed and people are tipping less and less and less.
- [36:08]
B
Yeah. So there's a real tip fatigue. People just have gotten sick of. I'm sure you have, too, of the digital screens where you're asked to tip all the time, including the airport or where have you. And the restaurant industry does not like those digital screens being everywhere because it hurts their own tipping and people being willing to tip. So I think, you know, there's both the digital screens, there's also all the service fees that started coming up also during the pandemic, you know, the healthcare worker relief tip or what have you. And so people just, yeah, have gotten sick of it. And tipping did fall earlier this year to much lower levels than it had been. I think it's stabilized now and maybe starting to tick up a tiny bit. You know, this is also the season where people might want to tip a little more, the holidays. But yeah, I think people are sick of tipping. And it's a really hot, contentious topic in the industry where some places like Chicago, where I am eliminated this way to subsidize workers wages called the tip credit. And it's supposed to be, you're supposed to still tip on top. But then a lot of these restaurants say now our labor formula doesn't work anymore and we have to like ask you for more money in addition to the tips. So it's all gotten pretty crazy. And whenever I write one of these stories, people are like, why can't we just be Europe. Why can't it just be like in Europe doesn't work.
- [37:26]
A
Danny Meyer tried, he tried to get rid of the. So the tipped wages. So that's this minimum wage that tipped workers earn. I think Federally it's like $2.13 an hour. And then you're supposed to make up the difference to the minimum wage, 725. The difference is supposed to be made up in tips. And if you can't make it up in tips, theoretically your employer pays it. I really doubt that happens. But then in some states now they got rid of that tipped minimum and workers just make the minimum wage, which I guess restaurants don't like, but McDonald's does like because.
- [37:57]
B
Yes.
- [37:58]
A
Which is interesting because they're very pro labor, as we all know. No. Why does McDonald's like getting rid of the tipped wage?
- [38:05]
B
Well, yeah, it's an interesting tactic that the CEO has taken lately in saying that it's just not fair that full service restaurants, that is competitors like Chili's get to benefit from this tipped wage. Whereas they don't. Whereas that they are. Workers have to earn the, you know, straight minimum wage. They don't benefit from tipping. Right.
- [38:26]
A
They have cheaper labor costs because of this.
- [38:28]
B
Yeah.
- [38:28]
A
Chili's.
- [38:29]
B
Yeah. Because you're subsidizing their wages with tips. So yeah, he went out and publicly and said this and then they dropped out of the National Restaurant association over it. And it was just, I mean it was suddenly that McDonald's was aligned with these very liberal groups that have been advocating to get rid of the tip minimum wage was just such a surprising development. Whether there's actually going to be follow through from that, I don't know. I don't think McDonald's is leading the movement to eliminate the tip wage, but it was super interesting. No one saw that coming on their bingo cards for this year. Fun. Yeah.
- [39:04]
A
Just to close it out, we talked about at the beginning. But fast food sort of just says so much about the United States and America and what it is. But, like, why do you think that is? What does it actually say about us? Like what's reflected back to us in the fast food world as you see it?
- [39:20]
B
Well, I think two things. One, both the business model, that it's all like entrepreneurs, right? Ray KROC and these McDonald brothers were entrepreneurs. You know, they were small business people and they, they still form the foundation of these restaurants. Even a big chain, they are running these businesses. So it feels very American in that sense.
- [39:37]
A
It's like an American invention, basically.
- [39:39]
B
And it's been a huge growth driver and it's a huge industry in the U.S. it's one of the biggest employers in the country. And that we like our food fast and cheap. We like it to be fast delivered, you know, hot and fresh and cheap. And there's a lot of things that have to be there for that to work, whether it's all the subsidies and the ingredients and flour in the buns of those hamburgers, or if it's just the labor models or what have you, or just they have to do incredible volumes. I mean, that's really what makes a business like McDonald's work is just, you know, billions and billions served. You have to just keep doing that to keep the prices cheap.
- [40:20]
A
And that is, I guess, the big challenge, keeping the prices cheap right now. Heather, thank you so much for coming on Slate Money Talks. I've really enjoyed this conversation.
- [40:28]
B
This was so fun. Thank you.
- [40:30]
A
And that's it for this episode of Money Talks. Thanks to Jessamyn Molly for producing and Shana Roth also for producing. We'll be back with a regular episode of Slate Money on Saturday with Felix and Elizabeth.
- [40:45]
C
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A
Uh, Limu is that guy with the binoculars watching us.
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C
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B
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C
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