Shane Murphy (00:01.644)

Welcome back everybody. Today we are joined by Danny Klein. He's the editorial director for the QSR and FSR magazines which are largely considered to be the largest resources for the restaurant industry news and Insights, and so Danny we're super excited to have you on the show today and get your perspective on the industry and the things that you're seeing! Thanks for being here.

Danny Klein (00:26.913)

Yeah, thank you for having me and for the nice plug there. I'd like to agree with you on that front.

Shane Murphy (00:33.582)

I mean, I've been in the industry a long time and QSR and FSR have always been super powerful ways for me to glean insights. And so I've been really looking forward to this conversation today. Maybe before we do just dive in, could you take a minute or two and just tell us a little bit more about your background and how you got involved with the industry in the first place here?

Danny Klein (01:00.93)

Yeah, sure. so I have been with QSR and FSR for years, maybe a little less, over nine years, however you look at it. Before that I was a sports writer throughout the North Florida area. Started out in St. Augustine, which is a small beach town near Jacksonville, and then ended up going to Daytona Beach for a couple years. In terms of how I got here, very typical newspaper story. I was in the process of being laid off along with the rest of my entire department.

And in searching for jobs, somehow ended up on a company called Food News Media in North Carolina, which was at the time the parent company of QSR and FSR. It has since gone to different ownership. part of WTWH Media. But anyhow, yeah, just kind of was looking for something so I would stay working and ended up kind of finding a world that I...

I didn't know existed. was not familiar with B2B media in general. had spent my whole life on the consumer side of newspaper journalism and then also restaurants and hospitality. I didn't know what QSR stood for, didn't know what FSR stood for, didn't know what mise en place means or meant or any of these things. yeah, it was a little bit of a leap of faith and one that was brought about by circumstance, but

know, honestly, was one of the best turns of events in my whole life. So I have nothing but perspective on how lucky I was to just kind of fall into this.

Shane Murphy (02:50.018)

That's fabulous. Sometimes life picks us up from the ashes and those good opportunities just come out of nowhere. So that's fabulous.

Danny Klein (03:01.154)

Yeah, very, very random. You know, I wouldn't say I liked it the first two years, but I grew and that was not every, that was just, I just felt like I had no idea what I was doing. I was so used to being a sports writer. was everything that I had always thought I was going to be. My father wanted me to be a sports writer. was such like an embedded part of my personality that that's what I was going to do and how I identified with myself.

And so it took an adjustment period there to realize, you know, and then I would tell people what I do and they would always think I was reviewing five star restaurants and you'd be like, no, no, I'm writing about Burger King. But it's such a fascinating industry as you know, and the people within it are mostly amazing. And so you really do get hooked very quickly and that happened to me. And like I said, nine years later now it's the best.

I just couldn't be happier to be involved within the restaurant trade space and also for the company and the brands that I work for. have a very deep love for QSR and FSR at this point. We're launching new platforms in the last two years and these feel like extensions of myself. And just to have had that opportunity to create.

a conference which will be in 13 days from now here on August 21st and then another conference in November or not November, in February. So yeah, I'm very grateful that life turned out the way did on this professional front.

Shane Murphy (04:44.078)

That's great. You have such a unique view of the industry as a writer and a reporter. You just get exposure constantly to, I think, a wide variety of things, like the threats that restaurant owners are facing, the opportunities that are in front of them, how these things converge. Maybe what are some of the challenges that you've observed the industry has been facing recently?

Danny Klein (05:12.122)

Yeah, I mean it where to begin I will say the restaurant industry anyone who's within it knows that no matter what period of time you ask an operator that question there's always a lot of things on their mind it's just not a It is not an easy business to be successful in Yeah, I would say the the greatest myth out there especially in franchising is that it's a passive income business to open up a restaurant Which not at all the case?

But specific to this current time, of course, emerging out of this COVID fog and all that, it's really just the reality of the inflationary environment of what things cost, and whether it's labor or the commodities, it's real estate or what's become very difficult access to capital if you're a franchisee and you signed a five store deal, getting stores three to five open is not.

easy at all right now and so all these things end up resulting in one very clear signal to the consumer and that's higher prices on the menu. And so there's so much going on right now about what that means, the reflection of you know have McDonald's on earnings calls kind of talking about that value standing and how they're seeding some of it and trying to work to get it back. You know and if they're having that challenge with what you know we would call like a

a lower income cohort, whatever that might be to different brands, 45 ,000 and under in McDonald's case, there's a lot less traffic happening right there. And it's because they're eating at home, they're getting rid of the lunch day part, which tends to be really easy to replace. Breakfast, which is one of the highest margin businesses in QSR is also being replaced. You see this at Starbucks right now with.

the fact that people are electing to make their coffee at home. So there's a lot of consumer spend just going to what they're removing. It's not so much that they're not going to restaurants, they're just going less frequently. And so if that's the case, trying to battle for that value customer has become really, really difficult. That's why you see all these $5 meal deals in QSR right now.

Danny Klein (07:27.909)

you know how profitable is that okay and if you're gonna have that what are you gonna bounce out with on the other side of the barbell and all these kind of things so I would say right now that's the biggest thing is traffic trying to clarify your value proposition and then if you're a brand whose value proposition is not rooted in price like say a first watch you're almost weathering the traffic storm a little bit so that you can get out on the other side in really good shape so

That's a question right now that faces a lot of brands is what is this, you if you're going to discount or you're going to do really big promotions, what happens when this sort of tapers off? And so that's, that's the era that we're in right now is hyper value focused guest who is pushing back on things and where that takes restaurants. I would say is the biggest thing at the moment.

Shane Murphy (08:19.31)

Yeah, you know, often when these types of challenges are facing our industry and you're right, like there's a never ending supply of challenges and the moment that one kind of is coming to a next wave, another one is moving in. But often there are opportunities that get created at the same time and you have a unique opportunity from your vantage point to see

not only the challenges and the changes in the times, but also how innovation and opportunities kind of converge surrounding some of those challenges. Maybe can you speak from that vantage point on opportunities and ways that people are going about managing the traffic and the value equation?

Danny Klein (09:09.357)

Yeah, you know, it's a really interesting question. You know, we just kind of got through what we call your summer earnings season and you could see some winners. know, like Texas Roadhouse is a good example of this. You know, they've been very cautious in the price that they've taken throughout this, you know, last couple years. But for them, it isn't so much the price, it's the execution. become, they're becoming better at actually running their restaurants with some technology.

know, wait list, pay at the table, yet at the same time, just making sure that their value is very clear on a couple of fronts, whether it's what the abundance in the product, you know, no string inflation, and just also the fact that for relative value and the experience you get, making sure they're staffing up all these things that they continue to be an outlier. And then you see a brand like Chili's, who just had an amazing quarter that was so far.

outside what is happening for most casual dining brands and they really did it through you know a value message where they went really directly at McDonald's it wasn't it wasn't veiled kind of saying you know if you're gonna pay the same amount of money for this big smasher burger that we're offering that you're paying at McDonald's look what we're giving you that's more and it's beyond just like what you're getting on the plate but also in the experience and they

through TikTok and other social media ended up just having this incredible stretch here. So that allowed them, if you really look at it, from an opportunity perspective, they took this climate and they spun it in a way that they could advantage themselves by using a marketing message that would not have been there before if this kind of blurring of the price lines didn't exist. And so I think you're seeing that a lot of brands right now, like Shake Shack is another one.

talking about kind of this gap between themselves and QSR is shrinking. And so they're able now to look at that and, you know, change the perception a little bit of what value means. You know, and then you just see crazy innovations. mean, just this morning, you know, posted this Chick -fil -A story where they're opening, I think it's tomorrow on August 22nd, a two -story drive -through that has the capacity to serve 75 cars at one time.

Danny Klein (11:30.363)

Right? So that is not, that's obviously not a reaction to value and what's happening at this present moment, but that is a reaction to what came out of 2020. you know, it looks a lot like the Taco Bell version of that, which also was a reaction to things, but done in a very Chick -fil -A manner. You know, I would say the difference between the two, because there's been a lot of discussion about that today is the Taco Bell version is really like a

a contactless apex as I call it of what that experience can look like if you want to go get food without you know really slowing down at all and the Chick -fil -A version is really a exercise in just volume. I mean they're going to be able to deliver just an astronomical figures out of that location and they're really a reflection of the fact that

they have the ability to move cars so quickly and effectively with the way that they operate. So I think that's what you're seeing kind of on a broad sense. You see the marketing, you see the value, you see brands being able to kind of clarify who they are, the consumer, and then you're seeing the innovation on the technology front, you know, across all sorts of brands, whether it's voice ordering at the drive -through, which Taco Bell is rolling to this two -story location that I mentioned.

and beyond. it's a really exciting time in a lot of ways, even though it's very challenging.

Shane Murphy (13:05.614)

Yeah, I certainly agree. Coming from the standpoint of running a software company and interfacing with investors and things there, it's interesting seeing external, like macro views of the restaurant space. And I've never been more bullish on

what's happening in restaurants and where things are heading. I think that, you know, that inflationary environment that you're discussing really has impacted a lot of current things that people are trying to just come together and innovate around. But all of that is just a short period and everyone is upping their game in every level of their business. Restaurants are getting more efficient. They're getting...

better at communicating to their guests. They're really sitting down and saying, what is the value that we bring beyond just price? Because prices, you can't survive on just the low margin when traffic is pulling back. And so as we go into the future, I'm really optimistic about where things come because restaurants are gonna be better equipped than ever before.

And then we'll get a tailwind and what are those brands gonna do and accomplish? It's gonna be incredible.

Danny Klein (14:38.201)

Yeah, I would say that this current landscape is a little bit of a zero -sum game, which is really good for the consumer. I wrote articles about this coming out of the pandemic a little bit, where basically quick service in particular really had no choice but to get better. And it wasn't so much, the COVID didn't invent a lot of the trends you see in quick service now, like the

order confirmation boards of the drive -thru and kiosks and a lot of this other technology and things of that nature. All it did was just force that innovation cycle to speed up in a way that operators were historically as a category very slow. Restaurants have this thing, this is definitely true in independence of course, but they operate on their gut. What do the consumers want?

Shane Murphy (15:26.862)

Yeah.

Danny Klein (15:37.979)

come in here every day I can try to tell you but that isn't so much how it happens now and the guest was really pushing restaurants toward a lot of know convenience fueled things to the contactless options to the mobile order ahead of the ability to have the different variety of omni -channel experiences you know to kind of operate your food on your own terms which is how if you look at the rest of retail I mean retail was here

years before food service was. You when you would call it an Amazon effect or whatever. Just this idea that if you want to go get something, like you do it how you want to do it. You either go to Macy's, although I guess they're closing a lot of stores, but you can go to the mall if you want, or you can order it and you know, get that email confirmation within seconds. But the order point in food procurement hadn't changed all that much. I mean, the point of sale

in particular, like that's ripe for innovation right now because it hasn't changed since the cashier got flipped out. But all these things, QSRs knew it's not as though it weren't on the whiteboard five years ago. They just were kind of not, there wasn't as much of a sense of urgency. And so to your point, beyond the fact that you had to do this during COVID because you had to reach guests outside the cafe, at this stage, you're looking at a consumer who

Maybe they go out to eat three days a week instead of five. And so who are you at this point to that person? And if you didn't know before, you're probably not going to survive. So that middle ground between the experiential and the transactional is fading a little bit. again, the person who wins there is the consumer. Because Taco Bell and McDonald's and Burger King, if you look at Burger King, it's a really good example.

They're hundreds of millions of dollars right now to update their asset base on this sizzle design and to become a more modern restaurant company that offers you variety in your ordering choice, more focus on the drive -through, locations that don't look like they're about to crumble, and kiosks inside. And so they're becoming better much, much quicker because they understand the stakes at hand.

Danny Klein (18:03.355)

It's not like people look at Burger King and go, man, that's expensive. Like it's Burger King, right? However, your value can be defined in so many more channels now that they're in a race to really become better. And so is everybody else. And so, like you said, I do think that there's a bullish kind of horizon here because the quick service industry was forced to maybe go 10 years in.

two years and now at this stage is really more optimizing that innovation. So yeah, we'll see what happens, but I do think that everyone is getting better or at least trying to get better and figuring out what it is they need to focus on.

Shane Murphy (18:52.814)

Absolutely. Now, Danny, this has been super fun. Thank you for sharing all these stories. I think you really highlighted some really awesome examples from everything from like how Chili's went about, you know, optimizing their messaging for the value equation, how Texas Roadhouse approached it, how, you know, we are facing these traffic challenges and value definition challenges and how we need to optimize through innovation.

This has been awesome with all the examples that you've given. How can the audience keep following these and getting in touch with these types of insights through either you or the magazines that you're a part of?

Danny Klein (19:39.223)

Yeah, well I would say obviously we have two websites, qsrmagazine .com and fsrmagazine .com. On both sides, there are newsletters you can sign up for that are completely free. The magazine is also free if you're a print copy type of person. You just need to be a qualified restaurant professional, which covers a lot of things of course.

So you can get it in print, you can get it online, both things are delivered and free to your inbox or mailbox. then, you know, I would just say social media, you you could follow me on LinkedIn, I post there all the time. I don't really believe in any other channel at the current moment. All our editorial staff are very active on there as are our two pages.

And yeah, in -person events, that's kind of on my mind right now. I don't know when this is airing. It might be after I've actually survived or not survived our September 3rd through 5th event that's coming up here. But that's something we launched last year and has become a very big thing that we do. And that's of course if you want to come and just see people in person and have these conversations from the stage. So yeah, I would start with social media and the websites.

go from there.

Shane Murphy (21:03.16)

Well, Danny, thank you so much for joining us today and I'm sure we'll try to drive as many followers as we can because this was some gold today. So thank you.

Danny Klein (21:13.39)

Yeah, thanks for having me.