America's Kids: From French Fries to Frenchified

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“Whether it’s the restaurant or the supermarket or the kitchen supply shop, it’s hard to think of sector that is more commercialized and more replete with entrepreneurship and innovation.  It is all monetized. … Quality customers are often more important to a restaurant than a quality chef.”

Professor Tyler Cowen’s recent book, An Economist Gets Lunch, is his latest success at illustrating “markets in everything” – and like his wildly popular blog, Marginal Revolution, the engaging read’s ideas and insights are also directly applicable to making discerning choices in stocks, partnerships, and other investments.

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Slepko:  You spend a substantial portion of the book explaining why kid-driven economies are terrible for food-lovers.  Have you ever been to a Chuck E. Cheese (NYSE: CEC)?

Cowen:  I have, and it’s not good.

Slepko:  The food or the experience or the whole concept?

Cowen:  Maybe it’s good for a child, but it’s not good for me.  I would say maybe the whole concept.  Children like soft and sweet and maybe gooey, and that’s not good for food usually – and a lot of American food has become soft and sweet and fairly bland.

Slepko:  Considering the food trends you discuss in your book, do you see something like Chuck E. Cheese going through an expansion this decade, or are they likely to decline if they don’t change their ways?

Cowen:  I can’t speak to them in particular, but I think that food companies that have quality food products will do very well over the next ten to twenty years.  People are eating better and food companies are finding ways to make the food much better without the price going up much. 

Slepko:  Would you say that the opposite has been true for the last twenty years?

Cowen:  I would say this trend [with quality food] started about five to seven years ago – and I think Chipotle (NYSE: CMC) was the breakthrough.  You’ll see a lot more people following in their footsteps with different kinds of foodstuffs and cuisines where you haven’t seen it done yet…With Chipotle, it tastes really good.  If you get their spicy sauce, it’s spicy and tastes fresh.  If you get the carnitas, they are slow cooked sous-vide so they are genuinely tasty, and soft, and moist, and really quite good.  They also have an assembly line system that works well that you can get through without it being too painful.  They are more expensive than McDonald’s (NYSE: MCD), but not by much and the meal is much, much, much better.  I consider Chipotle to be a work of genius.

Pizza also tastes much better now, almost across the whole country – not just in New Haven, Brooklyn, and New Jersey.  Here in northern Virginia there are five good pizza places, and that wasn’t true three or four years ago.  People are figuring out how to spread and chain things and how to make them replicable.  It’s already begun changing the restaurant world.

Slepko:  Recently I was in a supermarket in Guayaquil [Ecuador’s New York] and a section of the produce was “Disney-approved” and there was a whole aisle festooned with Mickey and all the rest.  The prices were substantially higher – in some cases, the prices would make Whole Foods look like a lemonade stand – but their angle seem to be guaranteeing high quality fruits and vegetables.  Since it was Disney (NYSE: DIS), I assumed it was targeted at families.  What impact might Disney have in extending its brand in the food sector?  Is America’s kid-driven economics taking hold in other markets as well?

Cowen: This is all new to me, but I would say that I see American food moving away from the tastes of children, and families thinking like French families have thought for a long time:  You should raise your children to appreciate good food – even if it takes a bit of work.  Mexican families do the same thing when they get their kids used to spicy food when they are young.  I believe the idea that everything for the American kid will be dumbed down-foods driven by cartoon dinosaurs and tasting like Lucky Charms is more the past than the future.

Slepko:  Does this observation apply to the future of the Disney Empire in general?

Cowen: I’m not anti-Disney at all, they do a lot of great stuff.  They put out Grantland, [the ESPN sports and pop culture website], which I think is phenomenal.  They’ve published me and Bill Simmons and Malcolm Gladwell.

Slepko:  You don’t mention gratuities in your book.  What is your tipping point?

Cowen:  I err on the upside.  My last foreign trip was Korea and my first meal there I left 20% on the table and they came running out of the restaurant after me because they felt they needed to give it back.  So at that point, I figured that’s how the local customs were going to be and I adapted.  I start off by over-tipping and see what happens.

Slepko:  In your travels, do you see America’s influence on the global tipping culture, or is it still regional and local.

Cowen:  I think countries will move towards tipping as the value of their time increases.  The idea that you go to Europe on a Sunday afternoon and are sitting there with your friends enjoying Weiner Schnitzel, but are there for four hours because it's a no tipping culture with not too many waitresses (because of crazy labor laws) and they can’t afford to hirer part-timers is something the world is moving away from.

Slepko:  Why do we tip at the end if we want to get the benefits of it?

Cowen:  If you really care about service you can and should signal at the beginning that there might be a good tip at the end.  There are many ways to say something like good service is really important to us and we really appreciate it in a non-pushy, non-aggressive way.  Most servers will respond…Incidentally, I have never been treated badly in France (and I’ve spent six months of my life there), and as for Paris cliches it doesn’t seem to be any different than with other big cities. 

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Nick Slepko (hukgon) has no position in any company mentioned here at the time of publication.  The Motley Fool owns shares of Walt Disney and McDonald's. Motley Fool newsletter services recommend Walt Disney and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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