Happy Saturday!

Free gift idea for anyone looking to confuse and anger everyone at their company’s Secret Santa this year: Starbucks just launched a pumpkin spice latte NFT collection. Looks like you pick one up for about $13.

3 Numbers

$1.3 billion

Annual revenue for restaurant supplier Edward Don, which was purchased by Sysco this week. The acquisition gives Sysco a major player in the equipment and disposable packaging space. Transaction details weren’t disclosed, but Sysco did say that it plans to keep Edward Don operating as a stand-alone unit.

61,000

Jobs added by food-service establishments in September. The increase represents a milestone moment for the industry — for the first time in three-and-a-half years, total restaurant employment sits at the same level as prior to the pandemic. 6 million service-industry jobs were lost in March and April of 2020.

No. 2

Popeyes' new ranking among U.S. chicken chains, which places the Louisiana Kitchen ahead of KFC for the first time. Both can only look on in exasperation, however, at Chick-fil-A: the Atlanta juggernaut grew its market share in the chicken space from 38.3% to 45.5% last year.

Ozempic is not going to kill the restaurant industry

It took just a few weeks for Ozempic to make a transformation: from a promising weight-loss drug mostly taken by celebrities and the wealthy… into a full-blown existential risk to the restaurant industry.

Along with the will-they-or-won’t-they fun surrounding the Fed’s additional interest rate hikes, GLP-1 drugs like Ozempic are now being singled out as significant restaurant headwinds:

• Short positions on chains like McDonald’s, Chipotle, and Starbucks have expanded by $815 million in the last 30 days.

• The S&P Restaurant Index is down 12% over the past three months.

• And in the world of credit derivatives, Barclays just released a widely-read report that said fast-food credit market prices aren’t reflecting the downsides of the coming Ozempic wave. (Alright - “widely-read” might be a bit of an overstatement. But it got some play on my very niche Twitter feed.)

Ozempic Mania is even affecting publicly-traded restaurant tech companies, with Mizuho downgrading Toast from “Buy” to “Neutral,” citing Ozempic’s negative impact to restaurants as a key factor in its analysis. And of course, Ozempic has been a main driver in the recent soda and snack-food stock selloff – even stalwart PepsiCo saw its shares fall 12% in the last three months.

Ozempic has essentially become a meme in earnings calls and company documents: Mentions of the drug are up 228% over the last 90 days. As early as the beginning of August, industry watchers started to notice these trends and began writing hand-wringing analysis about the coming GLP-1 effect on the restaurant industry. (Oh, wait, that was me!)

So, with a veritable buffet of geopolitical chaos available to anyone following the news, should restaurant companies be singling out Ozempic as a major threat?

Well… the drug does work by decreasing a pretty important driver that brings in customers: their appetite. A Morgan Stanley research survey found that GLP-1 users decrease their calorie intake by 20% to 30% daily. People on the drug consume less (high-margin!) booze and report a diminished interest in sugary and salty foods. The same study estimates that 7% of the U.S. population will be taking obesity drugs by 2035, which would mean 24 million consumers would be eating in a significantly different way than they currently do.

But let’s not give up on restaurants just yet.

History has shown that restaurants are incredibly adaptable. Most chains evolve over time to meet changing consumer tastes. Over the past few decades, the industry faced threats in the form of the natural foods, low-fat, and low-carb diets (during the ‘70s, ‘80s-’90s, and ‘00s, respectively), and sales did this. (Spoiler: they went up.) If, in fact, 7% of the U.S. population is on Ozempic in 2035, restaurants have a decent chunk of time to prepare and adapt. Said analyst Brian Harbour last month, “If McDonald’s needs to serve more chicken sandwiches and carrot sticks to retain business, it can probably do so over time.”

About McDonald’s, which is typically cited as a potential loser in a world on Ozempic: if carrot sticks were to one day make up a decent share of its product mix, one could make a sure bet that they’d be served reliably and quickly out of prime real estate. And that also matters.

Fast food market size continues to grow despite the sector no longer offering the value proposition it did four years ago, because it’s still a very convenient way to get a meal. Unless Americans gain a few more hours in the day by 2035, they’re still likely to be pressed for time, meaning they place value on getting food quickly.

As for sit-down restaurants, one can ask if diners’ behavior ever fundamentally changes. When restaurants were required to put calorie counts on their menus, it was expected that guests flee when they saw the number next to the Oreo Extreme Dream Cheesecake. Instead, according to Cheesecake Factory president David M. Gordon, “Desserts are now 17% of sales versus 14% back then.” When you go out for a meal, generally speaking you want to enjoy yourself.

Finally, it’s worth wondering too just how much of this mania is affected by the more affluent world of market movers, who are more likely to either be on Ozempic or know people who are taking it. Ozempic is expensive, in limited supply, and not covered by health insurance, making it far beyond the bounds of most Americans today. That could change in the future, but for now, it’s still pretty fringe. And its long-term threat to the restaurant industry is overblown.

Name That Chain!

You get three hints to guess this week’s mystery chain:

• This soda-mad chain was the nation’s first to franchise. 

• In 1963, one of its franchisees topped a burger with bacon, inventing the Bacon Cheeseburger in the process. He later became president and chairman of the company.

• Bob Seger wrote the heartland rock classic “Night Moves” in a Michigan location’s drive-in.

WHAT IS THIS MYSTERY CHAIN? (The answer will be in next week’s email.)

Quick Hits

• Chipotle price hike… Chipotle announced this week that it’s planning a “modest” price increase to offset inflation-related costs — its first price increase in over a year. (Viktor Hovland might have to stop ordering guac.)

• Seems like a pretty easy operational lift… “Have-sies” (half fry, half onion ring combo sides) are hitting the Burger King menu this month. In other BK news, the company unveiled its new “Sizzle” prototype model at a franchisee conference last week. Two takeaways: The design is giving heavy ‘70s vibes with its earth tones and wood paneling, and kiosks appear to be front and center upon entering the building.

• Loyalty startup raises a bundle… Blackbird — which uses NFTs as identity cards to link customers with restaurant loyalty programs — announced last week that it raised $24 million in its Series A funding round. (A quick dip into editorial comment… While Web3 may face the misfortune of being labeled a 2021 buzzword, it does seem like this company is trying to solve a common problem to many labor-strapped restaurants: alleviating restaurant staff from having to plug a phone number into a POS. The promise of “frictionless” loyalty will always be interesting.)

• Quite the offer… In a sign of the value Domino’s places on its loyalty members, the pizza chain is now offering a free medium pizza to anyone who places an online order of $7.99 or more. Domino’s is calling the offer an “emergency pizza” giveaway — meant to be redeemed in crisis moments like a burned dinner, or debilitating munchies.

• Smokey/Peaks… A week after announcing its $30 million acquisition of Smokey Bones, Fat Brands announced plans to convert as many as 2/3s of the BBQ chain’s restaurants into Twin Peaks, another Fat Brands concept. Chairman Andy Wiederhorn is gearing up for a Twin Peaks IPO, and he called the conversions “rocket fuel” for Twin Peaks’ growth.

#Content Recs

• How Panda Express makes 110 million pounds of Orange Chicken a year — an impressively made-from-scratch process.

• Very interesting piece from RB’s Lisa Jennings on how the new wave of healthy fast-casuals are taking different routes in an effort to go national.

• Moving in a very different direction — here’s the story of how a chicken shortage led to the birth of the McRib.

• Wearing something unusual, complimenting your food choices, and other proven methods for servers to increase their tips. (Ashamed to admit how well the meal compliments work on me.)

• This new Post Malone and Cowboys-themed Raising Cane’s is a.) cool and b.) the most “Dallas” thing created in the last 20 years.

Finally — in an attempt to spur the imaginations of fast-food R&D departments across America — each week I’ll highlight an international LTO that should warrant at least some menu consideration in the States. This week: SPANISH MCDONALD’S. Creator Tommy WInkler has been highlighting on TikTok the cornucopia of unique menu offerings available in McDonald’s of Spain. Highlights include:

• McBBQ Bourbon Huevo burger (fried egg, bourbon barbecue sauce, smoked cheese, bacon, and crispy onion)

• McPotato wedges

• And finally… the Three-Patty McChicken

See ya next week.