The restaurant industry is facing constant challenges, from inflation to shifting consumer preferences. But some brands are thriving despite the obstacles. Michael Halen, Senior Restaurant and Foodservice Analyst at Bloomberg Intelligence and host of Chopping It Up, knows exactly why. With deep industry research and years of experience tracking top-performing brands, Michael breaks down the trends, challenges, and opportunities that restaurant operators need to know.

In this episode of Give an Ovation, Michael joins Zack Oates to discuss how value perception impacts guest loyalty, why operational excellence is the key to long-term success, and how inflation continues to shape the restaurant landscape.

The Brands Winning on Value Perception (2:05)

“It’s not just about price—it’s about what you get for what you pay. Service, portion sizes, and the entire experience matter.” – Michael Halen

Michael explains how Texas Roadhouse and Wingstop have successfully attracted guests by offering more value, not just lower prices. With consumers being more selective about where they spend, these brands have built loyalty by delivering consistent quality, generous portions, and strong guest experiences.

The Role of Operations in Guest Experience (6:24)

“Restaurants that focus on operations—scheduling the right staff, simplifying menus, and running efficiently—are the ones that win.” – Michael Halen

Zack and Michael dive into why great guest experiences start behind the scenes. Brands that refine their processes, improve employee workflows, and maintain high service standards are seeing success, while those that neglect operations are struggling to retain customers.

Inflation’s Impact on the Industry (10:15)

“Inflation isn’t going away. Restaurants need to drive traffic, not just raise prices, to stay profitable.” – Michael Halen

Michael shares his insights on how inflation has affected restaurant profits and why traffic growth is the best way to counteract rising costs. He discusses how Chili’s turned their business around by focusing on core menu items, improving service, and strategically investing in marketing.

The Secret to Consistency in Restaurants (14:08)

“If you’re eating out less often, you want to be sure the experience is worth it. Consistency is everything.” – Michael Halen

Michael and Zack discuss how repeat customers expect the same great experience every time. Whether it’s food quality, service speed, or overall ambiance, restaurants must deliver consistency to keep guests coming back.

Who Deserves an Ovation? (16:00)

Michael gives a shoutout to Greg Frankfurt, a fellow restaurant analyst. “Greg is one of the sharpest minds in the industry. I love talking restaurant stocks and strategy with him.”

 

Transcript

00:00:00:02 – 00:00:20:04

Zack Oates

Welcome to another edition of Give Innovation, the Restaurant Guest Experience podcast, where I talk to industry experts to get their strategies and tactics you can use to create a five star guest experience. This podcast is sponsored by Ovation and operations and guest recovery platform for multi-unit restaurants. That gives all the answers without annoying guests with all the questions.

00:00:20:04 – 00:00:41:08

Zack Oates

Learn more at ovation up.com. And today we have a gentleman who has been on the speaking circuit. He knows this industry. In fact, he is paid to know this industry. Michael Harlan, the senior restaurant and foodservice analyst for Bloomberg Intelligence and the host of Bloomberg Intelligence, his restaurant podcast, chopping it Up. What’s up? Mr. Mike? How are you?

00:00:41:10 – 00:00:43:04

Michael Halen

I’m doing well, man. How are you?

00:00:43:06 – 00:00:57:07

Zack Oates

You know, it’s a beautiful day. It took me 90 minutes to drive. 20 minutes because of all the snow here in Utah. Finally. But for the skiers, come to Utah. Slopes are open, snows drain draining. So anyway, free refills.

00:00:57:07 – 00:01:00:08

Michael Halen

Snow. Fantastic. Man, the snow out there is beautiful.

00:01:00:13 – 00:01:03:19

Zack Oates

I wish it wasn’t snow. I wish it was sunshine. But. Hey, what? Are you in there?

00:01:03:22 – 00:01:04:14

Michael Halen

Can’t win them all.

00:01:04:20 – 00:01:23:13

Zack Oates

I’ve seen you speak. And obviously we talk a lot about the guest experience in this podcast, but I’d love to, like, dive in a little bit more into your research. First of all, for those people who don’t understand, what does the senior Restaurant and Food Service analyst do? What’s your typical day like?

00:01:23:15 – 00:01:54:19

Michael Halen

Oh man, a lot of reading, some playing around in Excel. I’m researching 17 publicly traded restaurant chains from McDonald’s to Shake Shack. You name it. The bigger the better. And then I also cover Sysco and U.S. foods, and so I’m constantly reading their publicly available documents, some tuning into their earnings calls, going to conferences and asking them questions and trying to project their earnings over the next couple of years and making recommendations, but kind of not about whether or not you should buy their stock.

00:01:54:19 – 00:02:02:05

Michael Halen

So, yeah, man, I follow this industry as close as anybody. I’m blessed because I love the industry. There’s great people in it.

00:02:02:07 – 00:02:05:11

Zack Oates

Who has had the most tumultuous last few years?

00:02:05:13 – 00:02:29:06

Michael Halen

Yeah, I think that award probably goes to Dine Brands. Bloomin brands has had a really rough 2024, but they’ve actually been able to expand their margins post pandemic. I would say Dine Brands. There was a lot of Applebee’s stores have been closed over the last four years or so. There was even more Ihop closures than they had expected last year.

00:02:29:06 – 00:02:47:08

Michael Halen

And out of all the companies I cover, Dine Brands seems to be struggling the most, resonating with customers. They tried to bring people back into the fold with aggressive value last year, and as the year went on, it seemed to resonate less and less so that they’re probably struggling the most.

00:02:47:10 – 00:02:58:12

Zack Oates

What should I be thinking about in terms of value? McDonald’s came out with the $5 meals. Is value still top of mind for people? Is that still where we should be looking at as restaurants?

00:02:58:14 – 00:03:19:23

Michael Halen

It is, but I think you need to look at it for as what you get for what you pay. It’s not just the price, right? How’s the service? How much food are you getting for that price? All of that factors in man. And we’ve seen some really interesting stuff. Wingstop and Texas Roadhouse have absolutely crushed it. Texas Roadhouse for quite some time.

00:03:19:23 – 00:03:49:24

Michael Halen

And a big reason, in our opinion, is how much food they give you on the plate. Both of those companies are spending a lot more money on Cogs than all the other companies I cover. The companies I cover spend about 29% on food costs, and those companies are 32 and 33% range. Yeah. So people recognize it. We have more discerning customers right now because they’re a little strapped for cash, and they’re recognizing what they get for what they pay at those two chains, and they’re visiting more frequently.

00:03:49:24 – 00:03:53:24

Michael Halen

Right. If you’re dining out less, you don’t want to take a risk, man. You want to go.

00:03:54:00 – 00:03:54:15

Zack Oates

Yeah.

00:03:54:15 – 00:03:58:01

Michael Halen

And get that good experience. You don’t have money to burn.

00:03:58:03 – 00:04:20:05

Zack Oates

I tell people all the time that there’s the convenience factor, which is just my expectation is exceed the effort to have the experience. And that’s about all about convenience. So when I go to Texas Roadhouse, I know that I’m going to walk out of there with leftovers. I’m impressed by the way, anyone who doesn’t walk out there with leftovers, but I know I’m going to walk out there with leftovers, and I know that I’m going to get a whole other to go container of rolls.

00:04:20:07 – 00:04:40:18

Zack Oates

By the way, here’s a good hack, Mike. You take those Texas Roadhouse rolls, you bring them home, you get the honey butter, you leave them on the counter. All right. You ready for this? Next morning, you wake up, cut them in half, and you do French toast. You dip them in eggs, and you cook them on French toast and cook them like French toast.

00:04:40:20 – 00:04:46:05

Zack Oates

And then you use the honey butter on top of that French toast. And it is an amazing breakfast.

00:04:46:11 – 00:04:54:22

Michael Halen

Texas Roadhouse French toast. That’s fantastic. So if they ever expand into breakfast, which I don’t see any time soon, that’s. That’ll be a bestseller right there. Yeah.

00:04:54:22 – 00:05:04:02

Zack Oates

I mean, if you’re doing $8 million, not even doing lunch, then. Yeah. Why? I mean, the Texas Roadhouse is around me. They don’t do lunch. I don’t know if that’s like a universal thing or not.

00:05:04:04 – 00:05:06:01

Michael Halen

Now they don’t most of them don’t they?

00:05:06:03 – 00:05:06:17

Zack Oates

I mean, that’s.

00:05:06:17 – 00:05:09:06

Michael Halen

Why they don’t need to they don’t they don’t need to.

00:05:09:10 – 00:05:27:03

Zack Oates

Well, thinking about this, because you have your Texas Roadhouse where I think people know that that’s a brand, that’s people are looking at and they’re like, it’s growing. It’s doing good things. Why? What is it about Texas Roadhouse that is having it grow and other casual Full-Service places are kind of on the decline.

00:05:27:03 – 00:05:50:05

Michael Halen

I feel there are operators through and through and they always have been. They have that entrepreneurial culture where their GM’s basically buy into the business for a percentage of the operating profits. Right. And they’re all in man. Right. And they do a great job of connecting locally to the community. And they provide a great like, I said, a lot of food, a great experience.

00:05:50:05 – 00:06:08:05

Michael Halen

People love the line dancing. And man, it’s kind of experiential in that reason too, which is obviously was super hot prior to the pandemic and is making a nice comeback over the last couple of years. So yeah, man, for all those reasons, they just keep knocking the cover off the ball. But it’s really about running great restaurants.

00:06:08:07 – 00:06:24:06

Zack Oates

Yeah, the operations piece of it because that’s the kind of the next level because the first level is convenience, but the next level is consistency. And I know right before we were talking about what do you think the most important aspect of guest experience. And you said the operations, which I think is really interesting. Talk to me about that.

00:06:24:08 – 00:06:39:08

Michael Halen

Yeah. And I think it’s become a big point of emphasis for the companies I cover. All these large publicly traded companies. And because they’re seeing success with chains that are improving their operations. It’s funny, my friend Fred, the Frank has said.

00:06:39:14 – 00:06:40:20

Zack Oates

Love Fried.

00:06:40:22 – 00:07:10:04

Michael Halen

Fred is the man. But he said, I hate when companies say, we got to get back to basics, because why would you ever stop doing the basics? We’re seeing that though. We’re seeing some management teams come in, really try to pare the menu down right to make it easier in the back of the house, make sure they’re supporting their staff by scheduling enough people right in the front and the back of the house, right, and focusing their menu and their advertising on their core equities.

00:07:10:06 – 00:07:31:20

Michael Halen

Right. And also there’s technology as well, right. Server handhelds, tablets too, so that you can kind of pay and go all that kind of stuff to make the employees lives easier. Right. But they’re making their employees lives easier. They’re giving a better experience to the guests, and then they can ramp up the marketing and get people in the door, and they have good experience, and then they come back.

00:07:31:20 – 00:07:46:06

Michael Halen

And then you generate a lot of cash flow, and then you can remodel your stores more often or spend more money on R and M, and it just kind of creates this virtuous cycle that Texas Roadhouse has been in for a long time. Yes, for sure.

00:07:46:08 – 00:08:06:07

Zack Oates

And I think that’s such a interesting concept, though, because this whole concept of back to the basics, it’s like, well, yeah, but if you strip away all the technology, what are you doing? And what you’re trying to do is provide the same food, the same way to that customer and make sure they have a similar experience every time.

00:08:06:07 – 00:08:27:14

Zack Oates

Because like you said, people want to know what they’re doing with their money. And so if they’re eating out less, they want to make sure that they know that they’re getting exactly what they’re paying for. And which is why that consistency is key. We just can’t emphasize that enough. And obviously been in the feedback space. We see that that a lot of times these online reviews will pop up.

00:08:27:16 – 00:08:45:17

Zack Oates

I’ve been here 11 times and it was great, but things have just gone downhill and nothing’s really changed. It just happened to be that that evening, it was a bad shift. Someone had a bad evening, whatever it was. And we need to remember that you’re only as good as your last experience.

00:08:45:19 – 00:09:01:18

Michael Halen

That’s for sure, man. And like I said, people are a little strapped for cash, and they don’t want to have those bad experiences, right? They want to make sure that when they do eat out, it’s a great occasion. So yeah, to your point, consistent see is absolutely paramount in this business.

00:09:01:20 – 00:09:10:21

Zack Oates

So what are some other trends that we should be looking into. What are some things that we should be concerned about this year? Looking at just paying attention to?

00:09:10:22 – 00:09:19:04

Michael Halen

Sure. I guess I’ll start with the top line. People that read my research have complained for the last year and a half that I was kind of depressing.

00:09:19:06 – 00:09:20:20

Zack Oates

But.

00:09:20:22 – 00:09:48:16

Michael Halen

In my defense, I was right about 2024. So we’re seeing a little bit of better economic data here in the fourth quarter. Also, sales post-election seemed to improve a little bit based on blackbox intelligence data, which we use. And then you have asset prices at all time highs like so people with a 401 K with homes, people that own crypto are invested in the S&P 500, the stock market, Nasdaq, whatever it might be, are feeling pretty good.

00:09:48:18 – 00:10:14:24

Michael Halen

You know. And since we’re lapping that really weak result of 2020 for a restaurant recession, in my opinion the comparisons are easier. And so for that reason we should do better. I’m not a raging bull because low income consumers are still kind of crimped by inflation. It’s cumulative and it’s been four years of inflation, five years of price hikes on the SR side of which I don’t think is helping them right now.

00:10:15:01 – 00:10:36:00

Michael Halen

Yeah. And that kind of leads us to probably our bigger concern. And it’s really the inflation side. We could see three and a half or more percent CPI in the second half of the year, pretty far away from the Fed’s 2% target. I don’t think we’re going to go back to five, six, seven and 8% anytime soon. But in our opinion, inflation isn’t going away.

00:10:36:00 – 00:10:58:00

Michael Halen

I think it continues to kind of crimp restaurant profits. And in our opinion, we’re going to continue to see a wide divergence between the winners and losers. We’ve seen it so far now in a big way, man. You look at places like Chili’s driving a 30% comp well, in the fourth quarter with 20% traffic. Right. And then you have other chains that are negative in the quarter.

00:10:58:02 – 00:11:05:17

Michael Halen

So we expect to see that. And that all follows from what I said earlier about these more discerning customers that really, really want to.

00:11:05:17 – 00:11:06:08

Zack Oates

Have.

00:11:06:10 – 00:11:07:21

Michael Halen

A good experience when they go out.

00:11:07:23 – 00:11:18:07

Zack Oates

So what do we do as the bout of inflation is not going to get off our throat anytime soon? How do we respond to that? As restaurants, there’s only so much you could charge for a burrito.

00:11:18:09 – 00:11:44:17

Michael Halen

I think it’s really about that experience piece, right? I think it’s number one, making sure your operations are nailed. Whatever you need to do, pair the menu, refocus your menu, make sure you have enough labor on the floor. Right, because you need to drive traffic. That’s the best way to combat inflation is driving that top line driving operating leverage through your model.

00:11:44:19 – 00:12:08:04

Michael Halen

Right. And maybe you can squeak out a little bit of margin expansion and operating profit dollars despite the inflation. So that’s it man. It’s running great restaurants. It’s kind of nailing the marketing piece I mentioned Chili’s and this was their playbook man 30% is insane. They lapped a 6.5% comp the year prior, so it wasn’t like they were negative or something the year before.

00:12:08:06 – 00:12:26:01

Michael Halen

And they nailed the operations. They actually cut back on discounting because they knew they were giving their customers a much better experience with much better food. They focused their menu and then they started turning on the marketing. And now they’re running, man. They’re running. They have a great marketing team and they’re crushing it.

00:12:26:03 – 00:12:47:21

Zack Oates

I think Chili’s can have another 30% growth year if they get more of those chips that are like combined together. Those like super chips with 4 or 5 that get like fried together. And then when you dip it, it’s like if they just had a bowl of those super chips. I think that alone, that alone I think has chance of going 30 to 30%.

00:12:48:02 – 00:12:56:11

Michael Halen

Well, maybe less. And maybe they monitor TikTok really closely for trends of their customers. Man, maybe you should get on there. Start asking for it. You might get it.

00:12:56:13 – 00:13:28:06

Zack Oates

Yeah. Well, I, I think that’s the thing is like listening to your customers, I think it’s so important to understand what’s going on, but also following people like you to understand what are the big players doing and how can we learn from them. And not that, hey, McDonald’s did a $5 meal like we need to as well. But I will tell you, when I go to McDonald’s with I got four kids and a wife and like when the six of us go to McDonald’s and I’m walking out of there paying 65 bucks, I’m thinking, that’s a lot of money for McDonald’s.

00:13:28:08 – 00:13:28:23

Michael Halen

Yeah, man.

00:13:29:04 – 00:13:51:08

Zack Oates

And all of a sudden, if I could use the $5 menu and I’m coming in there more often because I want the play place, what I’ve been doing, because when the $5 meal wasn’t there is we’d eat at home, and then we’d go to McDonald’s for ice cream and let them play the play. That’s right. But like in order to get people there more often, increase that traffic, get them coming back, make sure it’s consistent.

00:13:51:08 – 00:14:05:20

Zack Oates

I think all these things are the core principles of running a great restaurant, and I think that what you’re sharing here and the writing that you’re doing, even though might not be so optimistic, but it’s realistic, right?

00:14:05:22 – 00:14:18:12

Michael Halen

Yeah, man, I got to keep it real. McDonald’s is an interesting one, man. The E coli definitely hurt. Oh yeah, hurt their fourth quarter. But they shared some good news on their fourth quarter earnings call the other day.

00:14:18:12 – 00:14:25:15

Zack Oates

So the other day wasn’t it the 30 was like the super early morning. Not that day.

00:14:25:17 – 00:14:46:03

Michael Halen

Yeah. The day after the Super Bowl. They had me up real early man. But it’s okay. But at least they had good news to share. December traffic went positive, which was a positive surprise. They expect the E coli impact to completely fade by the beginning of the second quarter. So once we see that happen, then you’re going to see them start to push harder on marketing.

00:14:46:05 – 00:14:57:05

Michael Halen

You’re going to see snack wraps and chicken strips return, and they’re going to be marketing around that. You may see more famous meals because those have done so well as well as the adult Happy Meals.

00:14:57:08 – 00:15:01:06

Zack Oates

Famous meals like is there going to be a mike meal? Are they going to do one for you?

00:15:01:06 – 00:15:21:21

Michael Halen

Oh no, not anytime soon. But you know what? I did a TV interview on the day of earnings and they asked me about Trump’s impact on McDonald’s. I’m like, I don’t think there’s been an impact. But then I thought about I was like, maybe they should have a Trump meal. You know, a Trump famous meal. You might piss off half of the country, but it might also be a success or promotion.

00:15:21:21 – 00:15:22:03

Michael Halen

I don’t know.

00:15:22:03 – 00:15:31:03

Zack Oates

7700 people would like it, but you know what? Well that’s awesome. Well, Mike, I know you post a lot. You share a lot out of people find you.

00:15:31:05 – 00:15:50:20

Michael Halen

Oh, yeah. So Mike Hanlon on LinkedIn, Twitter as well. We post a little bit there, but more so on Twitter email and one at Bloomberg dot net is my email address. If you’re interested in our research list, I send out reminders about our shopping It Up podcast, and I send out industry level research once or twice a month.

00:15:50:22 – 00:15:52:11

Michael Halen

Those are your best bet.

00:15:52:13 – 00:16:00:17

Zack Oates

Awesome. And oh yeah, forgot last question though, Mike, who is someone that we should be following, who’s someone that deserves an ovation?

00:16:00:19 – 00:16:02:12

Michael Halen

Oh, restaurant chain.

00:16:02:14 – 00:16:09:16

Zack Oates

Or an individual? Someone that we should be following. That’s besides you. Obviously, everyone needs to follow Mike, but. But who’s someone else that we should be following?

00:16:09:18 – 00:16:15:06

Michael Halen

Well, we mentioned Fred, the Frank. Everybody in the restaurant. Oh, she should be following close attention to Fred the Frank.

00:16:15:06 – 00:16:18:19

Zack Oates

Not just to his ideas, but to his fashion.

00:16:18:21 – 00:16:21:22

Michael Halen

Oh my God. Yeah, he’s a fashion plate. Is his sport coats.

00:16:21:22 – 00:16:22:15

Zack Oates

He’s nice.

00:16:22:17 – 00:16:42:15

Michael Halen

The glasses. Yeah. That’s the she’s. Fred’s the man. Love that guy in my space I’m gonna give a shout out and ovation to my guy. Greg Frankfurt. I’ve had him on my podcast a few times. We’re in the same business. I love chopping it up with him, talking about restaurant stocks and the management teams and just industry stuff.

00:16:42:15 – 00:16:45:14

Michael Halen

So I’ll give my guy, Rick. Greg, innovation.

00:16:45:16 – 00:16:53:18

Zack Oates

Awesome. Love it. Well, Mike, for chopping it up with me here on given ovation. Today’s ovation goes to you. Thank you so much for joining us. I give it ovation.

00:16:53:20 – 00:16:55:06

Michael Halen

Thanks for having me.

00:16:55:08 – 00:17:17:20

Zack Oates

Thanks for joining us today. If you liked this episode, leave us a review on Apple Podcasts or your favorite place to listen. We’re all about feedback here. Again, this episode was sponsored by ovation, a two question, SMS based, actionable guest feedback platform built for multi-unit restaurants. If you’d like to learn how we can help you measure and create a better guest experience, visit us at ovation up.com.