Redboxes to Rib'boxes? Stick with the Food Trucks

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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.

[continued from "The Dining Game"]

Slepko:  You write a little about vending machines and how even in Japan – the vending machine capital of the world – even their noodle dispensaries aren’t very good.  Any hope for food in vending machines in America?  Any chance as DVDs begin to fade away, Coinstar (NASDAQ: OUTR) will start converting their Redboxes into Rib’boxes?

Cowen:  When you have big homes, big refrigerators, a lot of space, will vending machines dominate for things other than impulse buys?  I don’t think so.  In Japan, it’s clear.  Your home, your fridge is so tiny that the vending machine is your refrigerator.  I don’t see people in Kansas seeing it in the same way.

Slepko:  For me the most revelatory passages in your book were about food trucks and reservations.  You write that the future will be a mobile one – a deregulated food truck revolution.  In many ways the migration of lunch preferences to food truck offerings and the jockeying for reservations in places like Paris have a lot of insights that would help explain the economics behind Facebook (NASDAQ: FB) and similar social media IPOs.  What does this food truck phenomenon tell us about dining and technology?  How do Twitter, Facebook, and others play into this?

Cowen:  Food trucks would do much better if they weren’t regulated out of existence in a lot of places.  The main issues is a legal one – like will it be allowed.  If they are allowed, they will flourish (or flourish much more).  Obviously, restaurateurs don’t like them, and when it comes to influence on city councils, we know who usually wins that battle.  So it’s all about legal risk.  But, we see more of it.  They're here in northern Virginia.  I don’t even know if they are legal, but they are here.

Social media has been a big help in assisting them in advertising when and where they are.  It’s huge.  Also more sophisticated immigrants has helped too.

Slepko:  Why have food trucks not been replicated by Wendy’s (NASDAQ: WEN) or incorporated into Darden Restaurants (NYSE: DRI) strategy? 

Cowen:  It’s a lot of legal risk.  So, if you are going to put a lot of corporate capital into this new strategy and you could be shut down at any time, then why do it?  It’s a lot of upfront.  However, if you are a Bolivian immigrant and your investment is a year’s worth of savings with some real payoff, you might consider it.

Slepko:  Do you think it’s more likely as the food truck companies get bigger they will be acquired by traditional fast food providers (or will they acquire the fast food providers)?

Cowen: I think they’ll be autonomous for a quite a while.  They require a lot of local knowledge, and what they’re cooking could be fairly idiosyncratic.  Also, I don’t think they are high margin, so the idea that one of those big companies (which is awesome at logistics) is going to move in, compose some tweets, and figure out where the crowds might be that day just doesn’t seem worth it.  But if you are an immigrant with family help and friends, and buy a truck so you can make a fairly good living, then I think that’s where it’s at.

[continued in "Logistics not GMOs the Future of Agriculture"]

 

 

 


Nick Slepko (hukgon) has no position in any company mentioned here at the time of publication. The Motley Fool owns shares of Darden Restaurants and Facebook and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook. 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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