Morning Brew Daily - How Panera Dodged $20 CA Minimum Wage & Gen Z Hates Dating Apps

Episode Date: February 29, 2024

Episode 269: Neal and Toby explain why Panera doesn't have to partake in California's new minimum wage law. Plus, Google's CEO says their latest Gemini AI blunder is 'unacceptable' and dating apps are scrambling to try and get Gen Z to use them. Neal shares his favorite numbers and why do we have a Leap Day? Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

Consider this comparison. PWC data found the percentage of CEOs who report revenue gains or cost reductions from AI is almost equal to the percentage who say they're still stuck. What separates these two groups? PWC points to a clarity issue. Even for CEOs, it's hard to tell what's AI hype, what's reality, and where this tech can make a tangible difference. Learn where AI can actually make an impact and what successful adoption looks like at

pwc.com slash US slash brew AI. That's pwc.com slash us slash brewAI. Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howell. Today is Leap Day. Why does February go into overtime every four years and is there a better way? Then we'll dive into Bumble's recent struggles and figure out why Gen Z kind of hates dating apps.

It's Thursday, February 29th. Let's ride. Wendy's attempt to turn the Baconator into a financial security. lasted all of 18 hours. Facing a firestorm of criticism, the fast food chain said it had no plans to implement Uber-like surge pricing at its location starting in 2025, reversing previous comments by its CEO that it was going to test dynamic pricing for its burgers and shakes next year. Wendy's did say that its investment in digital menu boards could allow them to change menu offerings at different times of the day and offer discounts and value to customers more easily during

slow times. Toby, what did we learn from this debacle? I think the PR narrative just escaped containment before they were really ready. I mean, people took experimentation with digital and venue boards to mean that they would dynamically increase prices, but now they're kind of saying that, no, no, no, we're going to use it to discount prices. We're going to use it to increase cost savings for you. So I do think that what they should have done is just slowly raise prices over time and then have this big announcement of, oh, we are lower. prices during off hours. We are saving you money. Instead, they got the entire reverse thing where people assume that they were raising prices during peak hours. So if anything, it was just

a PR debacle. It does go to show just how much people hate surge pricing. Yeah, absolutely. It's a trigger word for a lot of people, just especially from the Ubers and the lifts of the world. Okay, before we jump into our show today, let's hear one last word from our sponsor, Vime. Neil, what a journey we've been on with theme. Two months of presenting sponsorships. The Ving mug has become pretty iconic. I know. From getting people to spell its name right to reminding our listeners that VIM is the number one global leader in data protection and ransomware recovery.

Thanks for the memories, Vime. I'm adopting a don't cry because it's over, smile because it happened approached to it all. I can see it on your face. You're positively veeming. Give it to them one last time, Toby. If you're looking to protect your data or recover it if something's gone awry, check out VIM.com today. That's VEEAM.com. It's time to refresh your yard during spring backyard days at the Home Depot.

Get low prices guaranteed on propane grills starting at $179, like the next grill three burner gas grill. Or get $50 off a select Weber Spirit grill and bring big flavor to your backyard. Then set the scene with Hampton Bay string lights that, Bring it all together. Shop spring, backyard days for seven days at the Home Depot. Now through May 6th. Exclusion supplies to homedipo.com slash price match for details. There's a new labor law about to be introduced in the state of California,

raising the state minimum wage at fast food spots from $16 an hour to $20 an hour. But one restaurant chain is wriggling out of the pay increase, Panera Bread. The law has this weirdly specific exemption for chains that bake bread and sell it as a standalone item, which is kind of Panera's thing. Now, this has been throwing people for a loop. Governor Gavin Newsom told reporters last year that it came about as, quote, part of the sausage making of politics, which led people to put two and two together and realize that billionaire restaurateur Greg Flynn,

who owns 24 Panera bread locations in California, went to high school with Gavin Newsom and is a longtime donor to his political career. Now, Flynn insists he didn't play a role in getting the bread. exemption built into the bill, but he has heavily lobbied against it in the past, arguing it would all but kill the franchising business model in the state. Neil, what do we think about this political sausage and breadmaking? To borrow a phrase from my younger colleagues, this is pretty suss. It's just so bizarre, and you can't wrap your head around why there would be a very specific carve-out for breadmaking specifically. And then when you think, okay, so maybe McDonald's is going to

roll out fresh bread and all these fast food chains are like, okay, so to get to wriggle out of this as well, I'll just start making bread. You look into the fine print and you realize there's a grandfather class that realizes that you have to have made bread by last September to be exempt as well. So this does appear, if you just look at it objectively, this does appear like a very specific carve out for Panera specifically. It also defined what counts as bread and that excludes bagels in croissant. So it truly is just breadmaking. And yeah, it really just kind of illustrates the what happens behind closed doors to get these bills pass. So it was the labor union that was kind of behind this service employees international, decided to adopt this super narrow carve-out

as the talks progress. It's kind of one of those things where you compromise on something in order to get everything else pass. And so clearly Panera bread and Flynn had a lot more lobbying power here than we're kind of letting on. Just to zoom out on the bill in general, this is a massive increase for minimum wage. I mean, this is a 25% increase going from $16 to $20 an hour. As you mentioned, fast food chains and franchisees have been up in arms about it, saying it's going to add so money cost to their business. McDonald's franchisees in particular said it's going to add $250,000 per location per year in California.

and California is the biggest state. It's also the biggest fast food market. Starbucks has 20% of its locations there. A bunch of other chains started there in and out McDonald's. It is this fast food hub, and this industry is saying it's going to be rocked by these changes, and it's going to increase prices for consumers as a result. Yeah, right now across California, around 25% of fast food employees earn that base wage already. So again, California was on the higher side when it comes to wages.

now will just push that number even higher. And the thrust of this law, obviously, is coming from a good place. It actually started all the way back during the pandemic when fast food workers were showing up for their low-paying jobs on the front lines while lots of higher earning white-collar workers got to work from home. And so the bill was kind of introduced as a means to offset some of those minimal benefits and low pay that fast food workers are getting. So you can see where it's coming from, but it does absolutely throw

the calculus of being a franchisee off in the state. And then when you realize the carve-out for Panera specifically, it gets a little more absurd. If I'm an economist, I'm probably thinking this is a great opportunity to do a little A-B test of how minimum wage laws affect business and jobs and things like that because you have kind of a natural experiment going on with Panera randomly not having to pay its workers more, but they might actually raise wages to compete in this labor market as well. So it'll be an interesting experiment. And if I'm a baker, I'm in-jubljury.

enjoying my time in the sun. This is your moment here, Baker, so embrace it. Moving on, Google is facing one of its biggest reputational crises in years, thanks to its faulty AI program, Gemini, forcing CEO Sundar Pichai to take a walk of shame a la Sertsi Lannister. Pichai addressed the controversy for the first time in a memo Tuesday night, acknowledging that some of Gemini's responses offended users were completely unacceptable and that Google got it wrong. Pichai said teams have been working around. around the clock to fix the problem. And the problem you might remember from Monday's show is that Gemini's image generator gave

historically inaccurate responses to prompts showing Asian Nazis and black Vikings. But the issues go further than that as people started to poke around and ask more questions to its chat bot this week. When Elon Musk asked Gemini, who has done more harm, libertarians or Stalin, the bot replied that it was hard to say definitively which ideology has done more harm. Gemini's image generator is currently in the shop for repairs, but Google's reputational hit might take even longer to fix, and to some analysts, Gemini's problems go beyond allegations of being woke and reveal much deeper rot at the tech giant.

Yeah, I think the most embarrassing part for Google is that it's been at AI for so long. Google's chatbot efforts actually date all the way back to 2013 when Larry Page was still CEO. They hired someone who was working on this idea of machines. one day surpassing human intelligence. There's also a report that almost three years ago, a pair of Google researchers started pushing Google to release this chatbot out to the wild. And apparently, execs pushback very heavily on this, said the technology didn't live up

to their safety standards. And all of a sudden, Google got lapped in the AI race and has been struggling in the subsequent months to catch up. Right. So this might be an example of Google feeling rushed to roll. out something that they didn't know was ready for prime time. And it appears it wasn't ready for prime time. But when you're in the public markets and you are wanting to attract investment, and you're seeing what's happening to Microsoft and all these other tech giants that are

getting so much money from shareholders and investors because of their AI prowess, then Google might say, like, oh, we got it. We got to get something going, especially because their search business is at risk from these chatbots. And it wants to show investors that it has a competitor. Gemini has just failed to live up expectations, even when it was launched a year ago, Bard, which was Gemini's first incarnation, failed in its public demo, and Google lost $100 billion in market value because of that. Yeah, so I was speculating with some of my more financially literate friends in a group chat last night, and it's basically like, how do you extricate yourself from your slump if you are

Google? And a lot of the answers that people were giving out was that it feels kind of like meta 18 months ago, where the way out is, one, you could do a successful AI demo and show, like, all right, we fixed Gemini. Gemini is looking good. Two, you could start paying a dividend like Meta did and just hop on kind of the recent trend of tech companies like Salesforce, like Meta, introducing dividends for their shareholders. Or three, you embark on a Zuck-like year of efficiency and say, hey, we understand there's some organizational issues at Google right now and just kind of reshape the company. So those were kind of like the three pass out of this that you could plot for it if you are Google CEO right now. There, please, Pechai is on the hot seat. Right.

I think it's very clear. Ben Thompson, who is a tech writer that everyone in the industry reads said that what happened with Gemini, it reveals rot within the executive management ranks and that everyone should be looking over their shoulder for their job, including Pichai. And when Ben Thompson says something like that, you know it's an actual threat. That seat is heating up. Let's move on. After a disappointing quarter to end the year that showed a net loss of $32 million, the buzz around the once hot dating app Bumble has been reduced to a low hum. As a result, changes are coming. Newly installed CEO Lindane Jones announced the company is laying off 30% of its workforce

and is planning to fully relaunch the app in order to loop in some more AI features, enhanced safety measures, and make it generally more appealing to younger audiences. Neal, this is not just a bumble. issue, though, the shine of dating apps is definitely wearing off for younger generations. 79% of college-age students say they do not use any dating apps, according to an Axios and Generation Lab survey. And Matt's Group, who owns the OG dating app Tinder, has struggled with declining revenue in user interests. It ain't pretty out there in Swipland right now.

No, it's not. I mean, whatever resonated with millennials in the dating app heyday of the 2010s is clearly not resonating with Gen Z. You can look at that 79% of college students not using dating apps and say, okay, this is the one time in their life where they're going to be surrounded by a bunch of people. Maybe when they graduate college and move into the real world where it's extremely lonely and you're an adult living in cities and don't have any friends, that might be an opportunity to hop back on the dating app. But compared to older users, younger users are

just not paying for them. So you see massive revenue declines. This appears to be a very big moment of reckoning for dating apps because they are just not capturing the younger audience. Yeah, dating apps are for people who feel like their networks have stagnated a little bit, who they can't meet anyone new, aka older people. And yeah, you're right, college age kids. You're surrounded by a lot of people your own age. Your social network is constantly fluctuating. You can go to parties.

You can meet new people. So it does feel like almost a strategic error that these companies are making, trying to gear their apps for a younger audience, just embrace kind of like the middle-aged person searching for love. I don't know if that's a good business strategy because you've got to hook these people when you're young. I think the problems go deeper than that. I think people express exhaustion with swiping.

They express fears over the creeps on the apps. They fear that they're just spending endless hours doing nothing, that it doesn't lead to anything. I think the ultimate problem is that the apps do not fulfill their promise of providing matchmaking services. So I think that's something that they need to resolve. So let's say we were the CEO of a dating app tomorrow. What would we do to turn the ship around? I mean, I don't wish to be in this position, but I would say I would AI the crap out of everything. Just make it easier.

Just make it easier to create profiles. Like one click of a button, take all of my best pictures from my camera roll, generate everything, about me, and that is what some of these companies are doing, and then just get your algorithm better to provide better matches. I think one of the main problems here is that you spend endless hours swiping and you don't find anyone that you actually want to go on a date with. If you can improve that and fulfill your value prop, which is you're going to find someone that you can date and do that better than I think people might spend more time on these apps. So I would just, yes, infuse AI into everything. See, I think that's a total

misconstruing of what dating apps actually do. Dating apps should not see themselves as a matchmaker. They should see themselves as an entertainment app. Their core product is the dopamine hit that you get when someone matches with you. It's not, they don't actually need to set up relationships. So I think that you should double down on the things that make people want to use the app, which is increasing the velocity of connections. And just forget about all the features that lead to longer lasting love. It's very cynical. But dating apps are entertainment apps. They are not actually matchmaking apps.

So as soon as CEOs embrace that idea and just make the velocity of matches and optimize for that, I think that you'll see more profitable dating app companies. Wow, we couldn't be on different pages. I feel like mine is a little more cynical, but I do think that it's an entertainment product. And so if I was CEO, let's start our own Neil's dating app, Toby's dating. Mine is very specific matchmaking services. Yours is more of a candy crush. Yeah, candy crust for singles. Okay, let's hear a quick word from our sponsors, but don't go anywhere because we've got your favorite Thursday segment, Neal's numbers, coming up right after this.

Study and play. Come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds. Get the Unreal College deal, everything you need to study and play with select Windows 11 PCs. eligible students get a year of Microsoft 365 premium and a year of Xbox GamePass Ultimate with a custom color Xbox wireless controller. Learn more at Windows.com slash student offer.

While supplies last, ends June 30th, terms at aka.m.m.S. slash college PC. You said this place was steps from the water. We just haven't found the steps yet. How much did we save? Enough. Enough to get lost. Or you could book a stay with Hilton.

Welcome to your ocean front. room. Just steps from the water. The Hilton sale is on now. Book on Hilton.com or the Hilton app and save up to 20% to get the stay you expected. When you want savings, not surprises. It matters where you stay. Hilton for this day. What is the greenest car in America?

That and more will all be revealed in Neal's numbers, the segment where I share three stats from the week's news that will make you feel something again. First up, the greenest car in America has been crowned, and shocker. it is not a fully electric vehicle. Instead, it's the Toyota Prius Prime SE, a plug-in hybrid that can go 44 miles on electricity before the gas kicks in. The report conducted by the American Council for an energy-efficient economy, not an efficient name for sure, evaluated cars based on their emissions while on the road and during the production of the car and battery, and the fact that a hybrid was named the greenest vehicle when there are 50 fully EV models available shows that above

of all, a lightweight and a small battery size win out in terms of environmental benefits. Take the Hummer Electric Vehicle, for instance. It was ranked near the bottom of the Green Scale right next to gas guzzling trucks because it weighs 9,000 pounds and its battery is more than 10 times the size of the Priuses. Toby, hybrids are on a roll right now. Hybrids are on a roll. This is not the first time that a hybrid has won this award. It run it back in 2020, 2022.

But the surprising thing is, as there's been more electric vehicle models rolled out, hybrids are still topping these efficiency and environmental-friendly metrics. So that's very surprising to me. And it just shows you that the components and the things that go into electric vehicles may not be as environmentally friendly as the eventual final product. So it's the battery making and just the sheer amount of stuff. Yeah, I mean, and the heaviness of the vehicle, their efficiency when they're driving, And the battery. I mean, we've talked about car bloat getting so big now, especially with electric vehicles and the batteries that power them have been getting bigger and bigger and bigger.

And sometimes you've got to go a little lightweight if you want to be environmentally efficient. There have been some critics of this ranking, though, because they say that many people, when they drive plug-in hybrids, don't actually plug them in. So they're driving on gas more than they think they are. So that is some sort of pushback to saying, like, it is surprising that a hybrid vehicle is greener than an electric. vehicle, and it's surprising because it's probably not true. I forget to charge my phone, so I totally get that people are forgetting to charge their cars as well. Meanwhile, hybrids are just kind of going crazy right now as consumers want to find that happy

medium from gas powered to fully electric with their range anxiety and finding charging infrastructure being a problem. Hybrid sales increased 76% in 2023, so they are on a role in Toyota, which has been leaning into them is reaping the benefits. For my second number, I'm going to give you a pop quiz and feel free to pause the podcast so you can have some time to guess. What do you think is the most common U.S. paper currency in circulation by number of notes? The answer is the $100 bill by a long shot and its lead is only growing.

The Wall Street Journal found that the number of Benjamin's in circulation more than doubled between 2012 and 2022, faster than the growth of any other denomination. there are now 18.5 billion $100 notes floating around compared to $14.3 billion for the second place $1 bill. This may be surprising since many of you probably don't use $100 bills to buy things or even carry them around in your wallet regularly. But that may be the key to explaining why there are so dang many. They enter circulation far more quickly, then they leave. Because people hold rather than spend $100 bills, they can last over a decade longer than ones and fives. I think the issue here with some of you is that you're bringing $100 bills to a $1 bill fight.

The reporters at the Wall Street Journal went around and started trying to pay with a $100 bill at various establishments. They tried to buy a $4.95 bottle of kombucha out of vegan restaurant and was denied. First of all, where you find a $4 bottle of kombucha anywhere in New York? But I do think it's a matter of hassle for the business owner. They usually have to verify it with one of those markers or hold it up to the light. And again, if you're buying something under $5 with a $100 bill, that's a lot of change that they have to produce. So I'm not totally on the thing that $100 bills are completely going extinct and being used. I tend to use them.

I was not to say, you seem like a guy that would totally carry around some bills and throw $100 down for a $5 purchase. Not for a $5 purchase, though. If you're getting like, I don't know, bruns for two and it gets you up to $85, then it feels right. And sometimes you can just, there's nothing better than just leaving a Chris Humber. $100 bill as the tip for a meal as well. Where do you get them? ATMs don't dispense $100 bills. I played poker.

And so the payouts are often come in $100 bills. I haven't played in a while, by the way, mom or grandmomm, if you're listening to this, I've been off the poker grind, but that is where I'm procuring my $100 bills. And one of the interesting things that people are so reluctant to part with $100 bills is something called the denomination effect. and research shows that people are less willing to buy something when they're given a $100 bill compared with $520s, because something about breaking up $100 makes you feel like you're losing it a little more. Yeah, it needs to be a special occasion. It needs to be a nice meal or something.

All right, my final number is the perfect encapsulation of why you shouldn't blame presidents for high gas prices or applaud them when gas is cheap. Energy markets just have a total mind of their own. Consider that the top 10 U.S. oil and gas producers have almost tripled their profits. under President Biden, who has criticized the industry and championed green energy policies. Fossil fuel giants are set to bring in net income of $313 billion in the first three years of the Biden administration, three times as much as they did during the same period under Donald Trump, who is much more sympathetic to their cause. Much of this has to do with external forces driving the price of oil higher. During Trump's administration, the pandemic causes price to plunge, severely denting energy profits. But after Russia invaded Ukraine and travel demand surge,

coming out of the pandemic, prices have shot back up, and it's led energy companies, in Biden's word, to make more money than God. I mean, if you just look at the market caps of the top 10 energy company, too, they're up. It's up to over a $1.1 trillion, or up 132% over the period as well. So it really is just a reflection of what is happening in the broader world. And it just totally goes against the narratives that Biden is kind of squashing energy production, domestic energy production, sorry. And yeah, so it kind of flies in the face of some of those criticisms that Republicans have been lobbying at them.

But you're totally right that we should divorce what's happening in energy markets from whoever's in the office because this is showing that it's kind of divorced between the two. Yeah, U.S. energy, U.S. oil production is now at a record high. It is the largest oil exporter in the world. And it also passed Qatar last year as the world's largest liquefied natural gas exporter. fun fact for you. It's Leap Day, Neil, so let's all take a moment to remember how kind of dumb our current Gregorian calendar is. So we all know it takes the Earth around 365 in a quarter days to orbit the sun. But our calendar doesn't account for that quarter day, which creates this awkward

idiosyncrasy known as a leap day. But it doesn't have to be this way, Neil. There are better options out there. Allow me to introduce you to the Hank Henry Permanent Calendar under the HHPC. system, the years divide up into four three-month quarters. The first two months of each quarter are made up of 30 days. The third has 31, which all adds up to 52-7-day weeks in a 364-year day. But the true magic of this calendar is that all the years would perfectly repeat themselves. Christmas would come on the same day every year. New Year's same day. Every date would fall on the same day. The amount of accounting woes companies could avoid, the amount of regularity, that the people could enjoy, this is the future we could be living in deal.

Do you like that? Do you want that sort of regularity and dispense with the spontaneity of saying, hey, when is July 4th this year? Oh, Thursday's sick. I get off work because this calendar would intentionally put holidays on weekends because there's a lot of cost savings that occur from that. The U.S. would is estimated to would be, the U.S. would be able to save $150 billion from putting federal holidays on the weekend, which is what this.

calendar would do. So it would kind of be a buzzkill for the week, but it would save money and it would save a lot of time and stress trying to figure out, hey, is Christmas on Wednesday? Like, do I, what does that? How does that work out? How should I make travel plans? It does definitely help companies more because, remember, there has been a lot of kind of reporting and accounting fiascos over the years. One of the most famous ones was fall in, in Q4, 2012, Apple suffered one of its worst one-day losses ever due to a simple calendar-generated year. Basically, that a lot of analysts forgot to account for the fact that Apple's Q4 2012 was one week shorter than the same quarter a year before. Because, again, due to our weird calendar, fiscal quarters often don't end up lining up with a year.

And every five or six years or so, companies have to add in an additional year to kind of make up for the difference. So this kind of stuff really does impact business in leap years. We've gotten a little bit better as time has gone on, but it has caused disruptions to say the least. It also had this really interesting quirk of saving Australia from a recession. So Australia was about to dive into a recession of two negative quarters of GDP growth in 2020. But because there was an extra day, they added $5.2 billion to their GDP, and that allowed it to just take over the positive line. So because of the extra day, people were working, people were contributing to the economy, people were buying things. That spared Australia from a technical recession back in 2020.

But that also reminds you that if you're a salaried worker and you're working an extra day for free here. Don't remind people of that. But I also think it's very funny that leap day bugs are so common that Microsoft Excel still miscalculates 1900 as a leap year. it's technically not, but in order to stay compatible with other programs that have miscalculated leap years over time, Microsoft Excel intentionally has like this weird quirk into it. So if you go down the rabbit hole of one, alternative calendars and then two, all the ways leap years impacts our economy, it's a fun rabbit hole. Let's end this show with a deep thought. I mean, leap years to me just show how futile it is for humans to be able to wrap our minds and make sense of time over. generations over millennia. We can't put it in a neat package. It is it's on its own. We're trying to organize it. We're trying to make sense of it. And yet it

constantly escapes us. 365 days. 0.25. We just can't organize it. Humans, we gotta let nature just run its own course. All of our best attempts will ultimately fail, except for that one calendar. I kind of like that idea. That was a good one, but I like the spiel nail. I'm with you on that.

Okay. That is our show for this Thursday. Have a wonderful leap day, everyone. Use this extra day as an opportunity to try something you wouldn't normally do in a standard 365 day year. I'm going to be off tomorrow so you will be in the steady hands of Toby and not Toby, but I'll still read your emails, which you can send to Morning Brew Daily at MorningBrew.com. Let's roll the credits. Emily Milliron is our editor and producer. Raven Loo is our associate producer.

Euchenwa Ogu is our technical director. Billy Minino is on audio, hair and makeup, knows where Kate Middleton is. Spill the tea. Devin Emery is our chief content officer and our show is a production of Morning Brew. Show today, Neil, let's run it back tomorrow. Yamava Resort and Casino at San Manuel is California's number one entertainment destination for today's superstars.

Catch the Jonas Brothers return to the Yamava Theater stage on April 30th, the powerful vocals of Demi Lovato on May 17th, and the signature Southern Country Rock of Eric Church on July 19th. Tickets on sale now at yamavaitheter.com, only at Yamava Resort and Casino, celebrating its 40th anniversary.

You win? Must be 21 to enter.