Motley Fool Money - Wanting Fries With That May Cost You

Episode Date: October 30, 2023

Labor costs are just one concern facing restaurants. (00:21) Jason Moser and Deidre Woollard discuss: - Restaurant trends and consumer behavior. - The impact of rising labor costs on restaurants. - How delivery has changed the fast food landscape. (21:14) Asit Sharma joins Ricky Mulvey to look at a couple of Halloween stocks... one tasty and one a little bloody. Claim your five dividend stock recommendations: www.fool.com/dividends Companies discussed: MCD, CMG, DASH, UBER, DPZ, HSY, TMDX Host: Deidre Woollard Guests: Asit Sharma, Jason Moser, Ricky Mulvey Producer: Ricky Mulvey Engineers: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone, I'm Charlie Cox. Join us on Disney Plus as we talk with the cast and crew of Marvel Television's Daredevil Born Again. What haven't you gotten to do as Daredevil? Being the Avengers. Charlie and Vincent came to play. I get emotional when I think about it. One of the great finale of any episode we've ever done. We are going to play Truth or Daredevil.

What? Oh, boy. Fantastic. You guys go hard. Daredevil Born Again official podcast Tuesdays, and stream Season 2 of Marvel Television's Daredevil Born Again on Disney Plus. Hail the American Eater. Motley Full Money starts now. Welcome to Motley Full Money. I'm Deidre Wollard here with Motley Fool analyst Jason Mozer. Jason, how are you doing this Monday? Doing great. Nice

weekend. How about you, Deidre? I did enjoy that weather, but I don't think it's going to last. It seems like tomorrow we're going to wake up to the fall reality. Exactly. Well, Jason, I feel like everyone likes to talk to you about the financials. I like to chat food with you. And so let's talk a little bit about that. One of the things I'm thinking about right now is sort of the immediate future of restaurant stocks, given some of the consumer pressures where we talk about a lot like, you know, student loans coming. We know this spending can't last forever. So I want to kind of set the table a little bit and ask you a question.

How often do you get takeout or go to a restaurant? Yeah, I love talking food always. I mean, you know, I love to cook. So, typically, with our family, our family of four, it's kind of whittled down to a family of three with our older daughter at college now and younger daughters headed off next year. So we're kind of in a state of flux there, but I would say typically, probably on average, maybe two nights a week typically will eat out. Five nights, I'll be cooking here at home.

I mean, then that changes the schedule is going to go, but I would say on average, probably two nights a week, we're getting something out or having something delivered. Yeah, I think that's about right, given some of the surveys I was looking at this morning. They said the average American gets take out or eats out once or twice a week. So, you know, thinking about this, this is a sort of change over time that we've seen. And over the weekend on the show, we had Dylan Lewis's interview with Ron Schick. He was the founder of Panera and really kind of that original concept of fast casual. But one of the things I'm thinking about, as an investor, as someone who looks at restaurants, is, is that line between fast casual and traditional fast food and restaurants that you eat in at? Is that all becoming blurred? I mean, you think about something like Chipotle. Considered fast casual before, now over a third of their sales are digital. Most of the restaurants, even like a Panera, they're pushing the pickup. They're pushing, you know, they're pushing the digital aspect of things. What do you think? Is fast casual still an important?

important distinction? I mean, I think yes, to a degree. I mean, I definitely agree. I think it's becoming more blurred as distribution expands, right? I mean, if you think about back to the days where Chipotle was just sort of a novel concept, that I mean, I go back to, I don't know, what was it, 2000, right? 1999, 2000, where Chipotle is really just kind of coming online and people were seeing there was something more than just fast food.

That was one thing, but there wasn't digital, there wasn't really delivery in regard to those types of restaurants. And so they did kind of admit that new class, but you sort of look at what is fast casual. I mean, generally speaking, it's value oriented, but it's typically not focused on the full table service, but it advertises higher quality. Food than fast food and better ingredients, not really, you know, fewer frozen ingredients. I think Chipotle even brags about not having freezers on site at their stores. So it is one of those things where it feels like it's becoming more blurred, but by the same token, there's no question fast food traditionally as we know it. And let's just use McDonald's as the example because I think that's

the quintessential fast food brand that everyone can recognize. I mean, McDonald's is making big steps towards their, making their ingredients better. Right. I mean, you go back to 2015, where they introduced an antibiotics policy here in the U.S. to only source chicken raised without antibiotics important to human medicine, right? They also have committed to fully transitioning to cage-free eggs here in the U.S. and Canada by 2025. So, I mean, it's one of those things where it has, we sort of introduced this new class, but with that, it forced everybody else to kind of up their game because the consumer starts to expect more, really from everybody when it comes to the food that we're putting in our bodies.

Yeah, I think that's a really important point that we are expecting more from every I definitely want to talk about both McDonald's and Chipotle. So Chipotle reported first. They reported on Friday. A lot to like their in their earnings. They're still growing. They're able to pass on some of the costs of the ingredients to the consumers. But they and McDonald's, they've got this labor problem, especially for Chipotle.

So they want to get people through the restaurant in 15 minutes because if you've got the long line, people are going to see the line. They're going to leave. They've also got these rising labor costs, especially in California, where that's going up dramatically. Is there a point at which the company sort of has to figure out that dynamic tension between staffing to get people out the door and the increasing cost of labor? Well, they do. I mean, when you use Chipotle as an example there, when that first came online, I mean, like,

one of the drawbacks to going to Chipotle was you knew that everywhere you went, there was going to be a line that you had to wait in. Now, they were really good with throughput. I mean, they just, they had it down to a science where typically you could go to this line that went out the door and still somehow or another, magically you were in and out there in like 15 to 20 minutes max, and the quality of your food didn't really suffer. You know, we're certainly at a time now where labor has some leverage, and I think we're seeing it in strikes everywhere, right? You've got the UAW. I'm just reading where a CVS and Walgreens pharmacists are planning a three-day walkout. Employees everywhere right now, later,

Everywhere has some leverage. States are setting standards. One of my econ professors in college made the point early on in my time in school. At the end of the day, economics rule. And in capitalism, that's just a simple fact of the matter. So when companies' costs go up, they find ways to account for that. So, you know, that either comes in the form of higher prices or perhaps smaller portions, lower quality, whatever it may be. But at some point, prices get too high, business slows down, companies cut back on labor costs, and then you kind of go in the opposite direction. So, you know, over some period of time, you figure out a way to get to some sort of equilibrium.

And I think that's worked out pretty well. I think until now, this is an interesting stage in restaurants because of automation. And I don't know that we talk, you know, everybody wants to talk about automation in the form of self-driving cars. And they feel like self-driving cars are like, that's just... That's like the revolution of tomorrow. It's going to be something that we see on the roads here any day now. I've always felt like that's just probably further out than people think, because I think there's so many dynamics at play, insurance, safety, everything else.

But I think when you look at automation, automation is a real force for change in a number of industries, and you look at things like warehouses, self-checkouts and grocery stores, assembly lines. Restaurants are absolutely already experimenting with this. And in some cases, they're implementing it to their models. And so with Chipotle, you know, there working with things like the avocado thing that peels and pits avocados to make that work a little bit less tedious. You get chippy, the thing that's making and frying the chips. They're now working with this company to automate the digital orders of their bowls, right? They're taking that digital side of the business and sort of automating that in regard to that bowl. So I do think as labor

costs continue to rise, it becomes more and more a reality. It's not for everyone, of course. But I think for big restaurant concepts with offerings where they're standardized in many cases, I think it makes a little bit more sense. So, I mean, don't miscontrol what I'm saying. I'm not saying that the entire restaurant industry is going to become automated, but I do think we are going to see more and more restaurant concepts introduce that automation dynamic to improve their cost structures over time. Maybe at some point we see this new evolution of craft casual, where the differentiator is that we don't automate anything. It's all about. hand. And maybe that's what people want. I think that'll absolutely exist. But I do think

that when you look at Chipotle's labor costs, historically, they've kept them down to that 22 to 23 percent range. Now they're in that 25 percent range. You look at California, for example, that's 15 percent of Chipotle's restaurants, and this new labor law is going to bump up their labor costs alone. Just California alone is going to bump up their labor costs by two and a half to three percentage points. That's something they're going to have to account for. And I think, To me, at least, automation is one of the most obvious solutions. Yeah, yeah. One of the things in Ron Shakespeare's book, he talked about was about specialness and people

wanting customization and how you scale that. So I think that is absolutely a concern. I want to stick on the labor for one other thing with McDonald's because I was listening to their earnings call. One of the things they talked about is the National Labor Relations Board has this new ruling that essentially talks about joint employees. and it would give McDonald's more responsibility for labor relations. This seems pretty huge.

McDonald's, they were sort of back and forth on it on the earnings call, the CEO, Chris Kempensig. He made it clear sort of the company's expecting this to be an ongoing fight. But McDonald's is this 95% franchise business. This is a U.S. thing. It's not an international thing. But it does feel like a big shift for the business if there could be the potential for unionization.

We've seen other businesses. like Starbucks struggle with this. I agree. I think it's going to be something that's ongoing. I don't think there is a simple solution nor probably a finish line here, but it does feel like this is a bigger threat now, particularly considering that employees are in more of a position of power, right? That doesn't last forever. This stuff ebbs and flows, but as a CEO, I mean, I would be concerned as a CEO, because

I feel like there's likely a sense of urgency on the part of labor to get as much as they can as quickly as they can because they know that this stuff kind of ebbs and flows. And you have to pick your spots, right? You negotiate some things. And then you have to kind of live with those consequences for a little while until your next opportunity comes up. This is just, I think, a big opportunity. This is a big window of opportunity for labor in a lot of markets, restaurants,

absolutely being one of them. Yeah, yeah, definitely. You know, they talked, McDonald's also talked about the fact that, you know, They feel like they're pretty good on staffing right now, and turnover has been a lot lower than expected. So that's sort of good news for them, but it's definitely something to keep an eye on. The other thing I want to talk about is, so we've got Chipotle, they're dealing with some pricing, you know, what can consumer bear. Similar for McDonald's, they like Chipotle. So much of it is digital now, around 40% for McDonald's.

And they're using a lot of promotions. They're using loyalty programs, things like that. Given that they're relying on this so much, do you think that that's a possibility that they could be relying on too much on that? Or do you think we're going to see more of that as the consumer weakens that every company is going to have to use that loyalty program a little bit to continue to push sales? So I think in quick service, they probably, you know, quick service is very tilted towards the value side of the proposition, right? I mean, we're as fast, casual,

They're using the quality argument to be able to bump those prices up a little bit. With quick service, they're focused certainly more so on the value side of things. And these companies have a lot of levers they can pull to gin up traffic. In inflationary times, presenting yourself as the greater value play in any way you can makes a difference. So I don't know that I would really worry about that right now. Now, I mean, you can't really overstate how important traffic is when it comes to restaurants, right? The operating leverage that comes into play can be profound when those traffic numbers stay healthy. You've got these fixed expenses that go into keeping the restaurant open, which just means

that the more and more traffic that you can push through those restaurants, they just become immensely more profitable. And so, you know, it'd be one thing if it was just a, if it was like a constant, right, if it was a Bed Bath and Beyond-style thing where you just knew that two weeks, two times every week, you're going to get a mailer that said, you just get this deal of a lifetime, right? You just can't pass it up. Well, it became very clear. This is just part of Bedbath and Beyond strategies. You were going to get those deals all of the time, because that was just part of the business strategy. If it became apparent that it was part of the company's

business strategy, then I'd be a little bit more worried. I don't know that's really the case when it comes to something like a McDonald's. Maybe smaller concepts that are trying to figure out ways to gain share, might rely a little bit more on that. But I think that's what I would look for, honestly, with the bigger chains, is if it became more of the norm, and I think you look, you look to times where inflation maybe isn't such a kick in the pants, and they're still doing that stuff, then you maybe know you've got a problem. I think right now, we can forgive them because really, they're trying to present as compelling a value proposition as they can. Yeah, that's interesting, because I've been thinking about that too with Domino's and how much

they're pushing their loyalty program and when the rewards kick in and things like that. Yeah. The other threat out here, and there's so much debate on whether or not this is a threat or not, is, you know, GLP1 drugs. I've joked on X about, you know, last quarter it was all AI. This quarter, every earnings call, but even vaguely touches either food or health. It's AI and GLP1 drugs. Banks are getting disrupted.

Everything's getting, yeah. It's so weird because now they didn't talk about it. it on the McDonald's call, which I was like, huh, interesting. But they did talk about it on the Chipotle call. CEO, Brian Nicol, he said he didn't think it's a threat because he sees Chipotle as this healthy option. I don't know. I've looked at the calorie count. I'm not so sure about that. But, you know, as we think about the kind of the share of stomach, the American eater going forward, do we factor this in or is this just getting so overblown? Well, I think it's definitely overblown. I think it's overblown because we just don't

know enough yet, right? I think this is another one of those headlines where, you know, the financial media loves to grab onto something, and this is one of those themes, and it's certainly been entertaining to a degree to see how many sort of how many different industries we feel like will be disrupted by this one little apparent, you know, magic bullet. To me, it's something to keep in mind, right? I wouldn't just dismiss it. I'm not terribly concerned at this point and I'm not convinced that it's some magic bullet that becomes, you know, some existential threat to restaurants. I mean, these are drugs that are still not fully understood. I mean, there are significant cost implications that have yet to be worked out.

And so just from that perspective alone, it's very difficult to say. I mean, I think that was part of the really the narrative in the Chipotle call was they haven't seen any impacts yet, but by the same token, it's really early on. So it's kind of difficult to say. I think it's worth considering, I mean, you know, think about the companies that are more domestic-focused versus companies that are international in nature. So, Chipoli, for the most part, I would say, is a domestic company. They have a slight, small international presence, but not something like a McDonald's. You know, you look at something like a McDonald's with that international presence,

where those drugs might not necessarily hold the same status, right? They may not necessarily carry the same weight, pardon the pun, as they would here domestically. The other thing to think about something like with a McDonald's, you get the lower price point, a bit more of a value consumer. That consumer probably isn't going to be willing to or perhaps even able necessarily to pay up for those drugs. Until we get some ideas to how insurance factors in there, if it does it all, maybe we learn more there. So again, I mean, not anything I would be terribly worried about today. But I also certainly wouldn't. wouldn't be dismissive of it. I think it's something to keep an eye on.

Yeah. And on the international part for McDonald's, too, these drugs are cheaper in other countries, too. So that's another thing to consider is that the U.S., we have that price barrier. That price barrier doesn't exactly exist the same way in other countries. So. Yeah. Yeah. And I mean, other countries, I don't think bear the same obesity concerns that we do here domestically either. So that's also something to keep in mind. The other thing I'm thinking about with restaurants with takeout is the delivery part, because the delivery part of it is so huge. Everybody gets everything delivered.

Later this week, we got earnings from DoorDash. Next week we get earnings from Uber, which, of course, Uber eats. I think every restaurant has an Uber Eats sign in their door, in their window, something like that. So I'm wondering, we talked about the consumer pressure. Do you think that some of these companies are going to, you know, are people going to actually get and go to get the food now if they are feeling a little more pressed. Yeah, I think that's a legitimate concern. I mean, I know, I'm not saying that my behavior is indicative of all others.

I mean, it absolutely impacts my behavior. I mean, when I, and I love convenience, don't get me wrong. I mean, I use DoorDash, I use Uber Eats, we love delivery. But by the same token, those costs keep going up. I mean, it is expensive to get stuff delivered to you. And, I mean, I saw this, this is funny meme on Twitter. It was like the cost of your order from whatever delivery company was $5, delivery fee, $3.95, total bill, $825.15.

It's like, where the hell did that all come from? It feels that way sometimes, though. It really does. And I think for me, you know, one of the concerns with delivery platforms is they're tremendous, tremendous convenience. But I mean, when you talk about restaurants exercising pricing power, I'm not sure it's as easy. for delivery platforms to do that, right? Again, it's getting more expensive to have stuff delivered. And so that's where these membership models come into play. And I think with DoorDash, with Uber

Eats, you know, Uber in particular things like Uber 1 and whatnot, I mean, looking at how these membership programs are growing for these companies, I think it could be a good sign as to their potential success in the coming years. Because, you know, the more subscribers you get, you know, they're subscribing for that value proposition and saying, well, I can pay you X amount of dollars a month and that's going to give me either free or very low-cost delivery. That gives you an idea of how many people really are taking advantage of that. And then the only other thing I would think of there is just when it comes to delivery in particular, you know, tipping culture is now front and center. I mean, consumers are starting to question stuff like that more and more and more.

if consumers start really waffling on the tip stuff, you know, I mean, that all of a sudden, now your labor becomes a little bit more disenchanted, right? Maybe labor doesn't see the value proposition in participating in that workforce, right? And so, you know, who knows how that all shakes out? But to me, I think with these delivery companies, the membership model is something to keep an eye on, because that is a way for them to really make those higher delivery costs seem a little bit more worthwhile. Thanks for talking food with me today, Jason. Thank you. If you're a regular Motley Fool money listener, you're probably well aware of how dividend stocks have the potential to really supercharge your portfolio's returns. Dividends have accounted for

around 40 percent of the total return of the S&P 500 since 1930, and of course have been an important tool for all-time grades like Benjamin Graham and Warren Buffett. Our top-notch analysts at Motley Full Stock Advisors certainly agree, and they've put together a list of five quality dividend payers that are also recommendations in our stock advisor service. The report is free to you, just as a thank you for listening to our podcast. No purchase necessary. Just go to fool.com forward slash dividends and we'll email it directly to your inbox. That's fool.com forward slash dividends to claim your five dividend stock recommendations now. It's almost Halloween.

Asa Sharma and Ricky Mulvey are getting into the spooky spirit with two stock picks. One, a sweet Halloween favorite, one, well, a little bloody. Awesome. We've got some Halloween stocks. We've got two of them, in fact. But the more important question is, what are you doing for Halloween? Well, so, Ricky, one of the things that I do every year is I bring Larry out of the closet. Larry is a werewolf, and he has his own distinct personality.

And he likes to greet the young kids in the neighborhood at the door and tell some stories and jokes. and just generally throw the newer kids for a loop. So, Larry is prepping for this Halloween. Wait, who's Larry? Larry is a werewolf. Oh. He's a live and breathe and werewolf. Happens to reside in my house, but we don't let him out.

Three hundred six, four days of the year, we don't let him out. But on October 31st, every year, Larry comes out, and he takes care of the Halloween duties at the Sharma household. Not me. Very nice. Let's sit back and relax and watch the show. Handing out some candy. Getting some werewolves out. Well, hope you got a full moon down in North Carolina.

I guess it would be a full moon no matter where you are. But anyway, that's me thinking about lunar stuff before as I buy time before we talk about our first Halloween stock. Wait, what's that awesome? Can I give us a very subdued? Our first Halloween stock. Let's proceed. Our first Halloween stock. I wasn't going to respond to it, but our first Halloween stock is Hershey's.

I mean, it's the perfect Halloween stock. It's the chocolate maker. It's been having a rough year. though. And this year, CEO Michelle Buck talking to the investors, saying that now the plan is to focus more on gummies. That's where they see the growth area for the confectionery. Is this a loss of focus, though, for a chocolate maker? You know, some would say, Ricky, that the last few years have been a loss of focus for a chocolate maker, but I will say that the focus was probably in the right place. I think it was

In this 2017-2018 period, Hershey started to acquire some salty snack brands. They bought Amplify snack, which was a company which specialized in things like salty popcorn. So this whole indulgent treats trend, which is not all about sweet things, but it's about the things you want to eat when you want to eat them and indulge yourself. Hershey was all over that. I thought they did well, and this is part of the trajectory of the stock. If you look at Hershey's, since that era, up until recently, it was on this juggernaut assent.

But now, I think folks are tiring of the popcorn trend. While they're still having great volume at Hershey across this category, the retail takeaway, right? What's going off the shelves has slowed down a bit. And now they're talking gummies, as you point out. while, Coco is near an all-time high. So you've commodity pressure. CEO Michelle Buck talked about that on the last conference call.

You've got a semi-tired consumer in general. So there are some headwinds for this company for sure. It's still a market beater over the five-year period, having a rough year. I wonder if it's just that loss of focus. Also seeing a little bit of a softer consumer, CEO Michelle Buck, noting, quote, we've seen a little bit of softness in the season from some cohorts that have indicated affordability was a concern in their participation, and it wasn't just in candy. It was some other seasonal categories, including decorations, costumes, et cetera, end quote. So I'm going to give you a few stories

for Hershey. We've talked about the focus on the salty snacks, which salt chocolate seems like it worked together, but okay, what's the biggest story for Hershey here? You've got softer spending, shrinkflation. They're cutting down on those chocolate bars. You've got the weight loss drugs. Don't forget about those, Osset, GLP-G-1 drugs. You also have general trends, to healthier eating. You pick. I'm a pick shrinkflation, and I'm going to pose that against inflation. Those don't quite rhyme. Anyway, it sounded good this morning when I was going over our outline, Ricky. So shrinkflation, of course, Hershey's done a great job along with some other big

consumer goods multinationals in shrinking the size of packaging, starting to wrap candies individually, and making their margin off of that. It's a great way to counter a declining power of the consumer's dollar. But inflation, inflation is persistent, and the rhythm, the algorithm for these companies is to grow at one to two percentage points ahead of inflation. If you've ever heard me talk consumer goods, I always bring up this point. It's one of my favorite points. There comes a time in that inflation trajectory where investors have been wowed by the fact that a Hershey's can exercise pricing power and grow its sales beyond one to 3% a year, go to mid-single digits, high single digits, crack the double digits.

But inflation normalizes, guess what's going to happen to companies like Hershey? They're going to go back to their previous 1 to 3% annual growth rates, which means investors have to start focusing again on all the unfund stuff. That supply chain optimization, making the factories more efficient, hedging the commodities. Who cares about that, right? That's where we're headed back to. So I don't know if this is going to be the most exciting story. Right now, the thing I'm looking for is when the bleeding stops, when this stock will

sort of write itself, the chart looks appropriately for Halloween, pretty scary as of late. Yeah, right now, Hershey's at a three-year low point by whichever valuation, by most valuation metrics. There's lots of them. But price to sales, enterprise value, to earnings before interest taxes, depreciation, and amortization, aka Ibada. or your good old price to earnings metric, three year low points for all of those. How would you like to see management addressing this? Do you want them to talk more openly about buyback, signaling that, hey, we believe our stock is undervalued? Or they could just say, we're focusing on the business and we don't even mind what the stock is doing because we're just so focused

on the darn business. I love that. Last bit, Ricky, that's entirely what they should be doing. I think for me, I want to hear the boring stuff again. I want to start hearing them talk about operating margin and generating a little bit more free cash flow. To heck, because a lot of kids are going to be listening as we approach Halloween to Motley full money. So I'll just phrase it this way, to heck with the other stuff, right? Let's go back to basics. Let's optimize those factories. Let's get the product out. Let's have our distribution be efficient and show what a great running business we are. In a few months, we'll throw some more M&A out there. But I think I think, You're on point. Second company. For our Halloween special, we've had candy. Now, we've got a little

bit of blood. And that company is Transmedics, which is an organ supplier. It is a supplier of human organs, Osset. It's also now a private jet charter company. But can you give a quick primer as to what this company does? Yes. Now, speaking of blood, though, Ricky, before I jump into talk about this company, right now, face off, me versus you. Yes. Which I always associate with blood. and hard flicks and blood. Let's have a really sinister muhah ha ha. You versus me, you first. Muhahaha.

That's pretty good, actually. My turn. Muha ha ha ha. Oh, you went deeper. I think I overdid it. At any rate, transmetics, let's talk. This is a company which specializes in the art and science of perfusion. That means getting a liquid through an organ, and in fact, they do this,

for organs which have been donated. So, transmetic is a very worthy cause here. It's a company that's trying to solve the problem of horrible statistics of organs, which can be moved to locations where a transplant is awaiting. How to take the failure rate, which is a super high, and bring it down. So they've perfected a method of transporting organs. Primarily, we're talking about hearts, lungs, and liver. As you mentioned, this is a company, which is a company, which is a company, has a lot of interest on Wall Street. They have been scaling at an incredible rate. The last quarter, I think net sales were up 156 percent over the prior year quarter. But management does want to take the business a step further. And as you mentioned, following the last

reported earnings in August, the company closed on an aviation acquisition. This is a small charter plane operation. What Transmedics is trying to do is to have that whole. whole supply chain from start to finish. So not just be able to preserve the organ while it's in transport, but to transport it. Now, the stock has suffered because of this. Some see a bloody future ahead. I think we'll probably get much more detail when the company reports in just a few days. Now that they've closed the acquisition, it has a pretty small balance sheet. So we have to see what the impact of, number one, the acquisition. Number two, their decision to buy some more small planes since that acquisition. We've got to see how far that balance sheet will be stretched.

I was a little surprised when management briefly discussed the acquisition last quarter that they're really leaning towards purchase of planes rather than leasing of planes because I think that's a better economic model for them. The reason why this has become such an interesting stock to watch is you have many investors who are saying you've got a great company whose stock is crash is a wonderful buying opportunity. They have no nearest competitor in this business, and now they're going to own that whole supply chain. But then you have other people, maybe those who have invested in the aviation industry before, who are saying, wait a minute, look, it's pretty expensive to own planes. It's expensive to maintain them. And I will note personally,

Ricky, that transmetics is going to have eight different hubs, which are going to give it coverage to near most of the continental United States. I see some trouble brewing because coverage is one thing. And that's in the medical industry, what you really want to do is be able to get near patients for whatever your therapy or solution is. But in the aviation industry, utilization is important too. They're going to have to really focus on utilizing those planes because they have tremendous fixed costs, even small planes. It's a company now who's really, really good at medical devices, a 70% gross margin. Now they're going to have to manage op margin on the aviation side, and I think it's going to be a wild story to follow. I'm closely looking at the company, but man, need more data and maybe a few quarters under

their belt as an aviation operator to see if this whole complete, holistic idea can work. So that was the problem they were trying to solve is basically, if you got an Oregon, you don't have a whole lot of time with it before you need to do. to put it in a body no matter what tech you got. And so the way they tried to solve that is, hey, we'll just have planes that we can use at any time. We don't have to rely on any third party in trying to solve this problem of not a lot of organs that are being donated, being utilized, and then the investors are sort of shaking their heads saying that's going to be too expensive for you, not a young fast-growing company, but for a fast-growing company.

Some are. I mean, some are thinking that this just sounds like mergers and acquisitions, grow through acquisitions, to make that market bigger and to grow even more, they've got to now provide the logistics. And I think there may be a point to that argument, but then you've got a lot of investors who have spent time in the medical industry saying, look, this is still such a great company, and it's some $14 billion market, very small company. They can continue to expand, and I think the idea will work. So it's a real binary, controversial investment thesis that, Like I said, it'll be so much pleasure to watch play out whether you own shares or not. All right.

As we close this out, we have a very important question, which is your top three Halloween candies. I want to set some context for this offset because last year you ran into a little bit of trouble. I asked you for your top three Halloween candies and you gave us, us listeners, Reesies. Number two, fun-sized snickers. Number three, onion rings. Number three is not a candy. So then I asked you for a candy and then you gave us a tradition of going to a little. local drive-through chain called Cookout. And then I said, that's not a candy. And then you suggested,

quote, one of the myriad flavors of milkshakes that are also very popular at Cookout, end quote. I'm so glad we have transcripts of this show. Finally, you gave us watermelon jelly ranchers. It was like pulling teeth. It was like pulling teeth. So I will ask you one more time this year, 2023, Asit Sharma, what are your top three Halloween candies? Well, first, Ricky, I want to say, Again, because the kids are listening, what the heck was I think in last year? A lot of you members and listeners have an idea that The Motley Fool is really easygoing show. You've got Ricky, you've got Diedra, you've got Mary Long. So many cool hosts and producers like Dan Boyd, who are just so late back.

If someone goes off script, I mean, what could possibly be the consequences, right? I don't even want to get into all the stuff I went through after that, not just like the professional writing up and putting that memo in the file, but like the reprogramming, the deprogramming, et cetera. So I'm going number three with Brock's candy corn. Ricky, just because you don't like a product doesn't mean it's not investable. I've never really enjoyed candy corn, but I will note it's got tremendous staying power in the market. It's got some scary ingredients just to read this out.

Okay, sugar, corn syrup, confectioners glaze, parentheses, shalac, salt, dextrose, gelatin, Sesame oil, artificial flavor, honey, yellow number six, yellow number five, and red number three. Okay. So, this isn't even a candy you like. Exactly. I'm ready to shut that. This is your top three favorite Halloween candies, and the number three is not even a candy. How hard is it to find a candy you like?

I've got, I'll do three right now, Osset. Number one, Reese's Pieces, number two, nerds gummy clusters. Number three, Tony's Chaco, Lonely, Toffee, chocolate bars. But we're done. You can't even, we've gone through three paragraphs and you can't find a candy you like. You know, I like chocolate only. More candy for the money, more chocolate for the money. I love those huge bars.

Okay, I was trying to get work in an investing take on a very popular candy that I don't like, but I know lots of people do. Sometimes there are great companies out there for one reason or another. They don't click with you, but they click for other people. All right. Let's go to number two, Ammon Joy Mounds Variety Pack. Ricky, sometimes you feel like a nut, sometimes you don't. Ammon Joy's got nuts, Mounds don't. Consumer discretionary spend has just been barreling ahead this year. It was a driving force. Behind that 4.9% GDP growth rate last quarter, everyone is still seeking small

experiences, delightful experiences. The Amon Joy Mounds binary is the ultimate expression of consumer freedom and choice. Asset, this is two candies. We were looking for three candies. We're not at number one, and you have two candies for number two. Well, it's a binary. And I note, because we have transcripts. Keep noting.

Those who will be interested can go back to the transcript. I believe I did call out the variety pack, the Aminjoi Mounds variety pack. Yes, the variety pack means multiple types of candy in one pack. Number one. Number one. My personal number one for 2020 is Pumpkin Roll here. Imagine Ricky doing a drum roll on a jack-and-a-lantern. Twizzlers! This is one of the few candies that don't contain chocolate, which still have a legit claim to be thought of as comfort candy, Ricky. Originated in 1845. Look, in 22 years, they'll be celebrating their 200th anniversary, certified kosher, dairy-free, totally vegan, a favorite in the cinema concessions case, and just 19 grams of sugar per serving.

That's less than many breakfast cereals in the aisles. Twizzlers are many things to many people. Asset, I appreciate these history lessons, ingredients, questionable ties to investing, and next year, I look forward to learning what your top three Halloween candies are. But wait, Ricky, just when you thought there was no more goodness. Here's a bonus.

Because our producer, Dan Boyd, gave me permission before the show. I want to talk about a candy that also made the low. list. This is the McFeast. Yes, you Youngens, who've never seen this. This is a hamburger that McDonald's rolled out a 100% Aussie beef patty with cheese, tomato, lettuce, onions, and pickles on a sesame seed bun. Plus, it came. Usually, you, let's, we've got to end the segment, Osset. We're at hamburgers. Now, I usually thank you for your time and your insight, but this time I'm saying we got to go. The show's over. You will thank me later when McDonald's brings this back as limited time.

I'm order. Last thought, it came top with three sauces, mustard, ketchup, and McChicken sauce. Awesome, Charmer. I'll see you later. Thanks, Ricky. See you soon. As always, people on the program may have interest in the stocks they talk about. And the Motley Fool may have formal recommendations for or against. So don't buy ourselves stocks based solely on what you hear. I'm Deidrell Willard. Thanks for listening. We'll see you tomorrow.