Hello. The restaurant business has never been more interesting. Every Friday catalogue the most fascinating industry stories, contextualize them when I can, and mix in mediocre jokes.

3 Numbers

8.5 Million

Millions in sales for Portillo’s new location in The Colony, TX… since January. (The concept might have legs outside Chicago.)

75

% of Starbucks beverage sales attributed to cold drinks last quarter.

10,000

Number of people who offered to legally change their name to “Subway” in exchange for free subs for life. (Possible recessionary indicator?!)

M&A Back?

News about the restaurant M&A market makes for arguably the industry’s most fascinating reading. There’s just something to large numbers and previously unthinkable restaurant tie-ups.

We’ve been spoiled by the action in recent years. 2020 featured Yum’s Habit Burger purchase and the $11 billion Inspire/Dunkin’ acquisition. Things got really nuts in 2021, with RBI’s Firehouse buy, NPC International’s $800 million asset sale, and Fat Brands near-billion dollar 5-month spending spree.

But over the course of 2022 and the first few months of 2023, things slowed down considerably. The cost of capital continued to rise, and the spread widened between buyer and seller expectations.

The M&A winter may finally be thawing. Let’s recap:

• In June, Darden snapped up Ruth’s Chris Steak House for a cool $715 million.

• Also that month, SSCP Management won Corner Bakery’s bankruptcy auction with a $15 million bid (plus assumption of liabilities).

• And we continue to wait to see who’ll ultimately buy Subway - a potentially $10 billion deal that could be announced in the coming weeks.

The latest deal hit this week, with Garnett Station Partners-backed Authentic Restaurant Brands buying Pollo Tropical for $225 million. Pollo will join Primanti Bros in the Authentic portfolio.

New Prototype Looks Great. Can We Add Another 5 Drive-Thru Lanes?

On Monday, the WSJ wrote about the decline of dine-in traffic in fast food restaurants. The piece seemed to resonate - this isn’t exactly scientific, but I saw it posted non-stop on LinkedIn all week - and this quote got major play:

Also in the last 2 weeks, three of the industry’s biggest players unveiled new store designs that firmly showed they’re noticing where the winds are blowing:

• Chick-fil-A released designs for two new prototypes - an elevated drive-thru (bound for Atlanta in 2024) and an urban walk-up design (which will open in New York next year). The four-lane drive-thru concept will accommodate up to 75 cars.

• Taco Bell’s new Go Mobile concept eliminates the indoor dining room and adds an outdoor walk-up window.

• McDonald’s will begin testing its small-format “CosMc” design next year. Details are a little scarce, but the chain did unveil a small-format, nearly automated store in Fort Worth late last year.

The Chick-fil-A elevated drive-thru concept is especially striking. My TikTok algo recently bubbled up a video of Albaik’s 5-lane elevated drive-thru in Saudi Arabia, which shares a passing similarity to Chick-fil-A’s new model. The drive-thru design has the obvious benefit of clearing bottlenecks. But there’s something else that becomes clear in that video - the sheer scale of the operation seems to be a draw in and of itself.

Name That Chain!

This restaurant chain can lay claim to three extraordinary feats:

• It was the first national chain to give away a free toy with every kid’s meal

• In 1954, its founders patented the flame broiler

• By 1972, it was the second-largest chain in the country - and arguably the fastest growing

WHO IS THIS MYSTERY CHAIN? (The answer lies at the bottom of the email.)

Quick Hits

• The restaurant biz Nas vs. Jay-Z is here… Virtual Dining Concepts is countersuing MrBeast for $100 million (citing breach of contract) after MrBeast filed a lawsuit last month against VDC in the hopes of killing his namesake virtual brand. The (spicy!) countersuit summons can be found here.

• Real-life McDowell’s… A restaurant called “In-I-Nout” recently opened in Sinaloa, Mexico, serving burgers and shall we say “Animal-esque” fries topped with cheese, dressing and chopped onions. In-N-Out’s spokesperson declined to comment on the story, citing “ongoing litigation.”

• I, for one, would pay extra for Garlic Sauce… Papa John’s execs cited “franchisees prioritizing margin over transactions” as a contributing factor in franchisee sales falling 2.3% in Q2. (Translation: the prices got too damn high.) NRN notes they’ll look to turn it around this quarter with more menu innovations and improved digital marketing.

• “Pretty constructive feedback”… Is how Toast CEO Chris Comparato described (presumably heated?) discussions with restaurant clients after the company implemented - and quickly pulled - a $0.99 customer-paid fee on Toast online orders last month. Toast posted a Q2 loss of $98 million, but did report adjusted EBITDA profitability for the first time since its IPO.

• Guess who’s back, back again… Chipotle founder Steve Ells has raised $36 million for his new venture Kernal, a plant-based restaurant-concept that leans heavily on automation. The first unit should open in New York this fall.

• Carrols to the moon… The big-time Burger King operator has seen its stock jump 400% so far this year, making it the best-performing restaurant stock in 2023. Among other wins on the company’s most recent earnings report: 10.4% same-store-sales increases for its Burger King stores.

• Twitter discussion of the week... Goes to @RobLaBonne’s tweet/replies on Burger King and the merits of quick-service interior redesigns. (I’d be curious to get reader thoughts on this topic.)

• Steak ‘n Shake’s profits more than doubled year-over-year in Q2, but the company’s down 24 locations since the end of 2022.

• Speaking of Sardar Biglari… he is buying up El Pollo Loco stock. El Pollo Loco has welcomed him with open arms is adopting a poison pill.

• Qdoba expects to open 40 restaurants this year.

• Noodles and Co saw traffic fall 9.1% in Q2… although they cut the decline in July with a pivot towards value.

• Wendy’s night-time traffic grew double-digits in Q2 as staffing continues to improve.

• Dutch Bros has opened 131 restaurants since January 2021… and that’s just in Texas. Incoming CEO Christine Barone sees the company growing to 4,000 total cafes over the next 10-15 years.

• Krispy Kreme’s revenue grew 9% in Q2 thanks in part to its omnichannel delivery strategy; the company also says its test with McDonald’s is going well (doughnuts are being served in 160 McD’s locations).

• Serve - the autonomous sidewalk delivery robot startup (say that five times fast) - is going public via a SPAC.

#Content Recs

• The WSJ breaks down how McDonald’s creates country-exclusive menus. (Extremely intrigued by the chocolate hazelnut McPop…)

• The Bear hasn’t lost its fastball. Season 2 offers an insightful story of finding purpose, along with more of the most realistic kitchen scenes ever filmed (IMO). Watch it on Hulu.

• QSR Mag has a good deep dive on Inspire Brands.

• Few can break down a macro restaurant topic quite like Jonathan Maze. Exhibit A is this piece on burgeoning traffic issues at fast-food restaurants (paywall).

• Greg Flynn breaks down why he’s long-term bullish on Australia after announcing a 200-unit Wendy’s master franchise agreement this week (to go along with June’s 260-unit Pizza Hut Australia acquisition).

• The best restaurants at EPCOT, as ranked by Business Insider. (Space Bartender, a “Black Hole Fashioned," please.)

And finally -

During a recent late-night search for #content, I accidently hit my LG remote’s ‘up’ button and stumbled on the world of LG Channels. I remained in this strange land for several hours.

Reader, I can only describe the LG Channels as something like a fever dream - 300-plus destinations of content so niche, they sound like satire.

“What’s next in this world, a channel that’s just old episodes of Fear Factor?” (It’s real.)

“Oh, how about one that’s just people falling down?” (Also real.)

“That’s where TV is going - a channel that’s just people playing billiards all day.” (Yes.)

Anyway, I ended my journey with Majordomo TV - one of the newer additions to David Chang’s growing multimedia empire. Playing was The Dave Chang Cooking Show.

The show is true to its title - two hours of Chang cooking a meal for one or two guests. Crucially, it’s not edited for time, and there are no cutaways. Chang just… cooks a meal, armed only with the ingredients on hand and some info on his guests’ dining preferences. You see him screw up, improvise, get into and out of the weeds. It’s unexpectedly enthralling.

Arguably the most interesting part of the episode I watched occurred before the guests arrived. Chang began cooking, and as he focused on his work, relatively long stretches of time went by in which he didn’t say anything at all. Occasionally, he’d ask someone off-camera when the guests were coming, and he’d receive an indecipherable answer. The whole thing took on a Waiting for Godot quality. Were there guests? Were they actually coming? Was I asleep?

It turns out that watching an expert quietly ply his craft makes for hypnotic television. And it’s soothing bedtime TV. After the meal was plated, I slept like a baby.

TRIVIA ANSWER: Burger Chef

EXTRA BONUS CONTENT REC: Flameout is a pretty fascinating read about Burger Chef’s rise and fall. It had 1,200 units in 1972!