McDonald’s Price Cuts Could Signal a Recession (Here’s Why)

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Non -edible food, McDonald's. McDonald's is making

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a major move to win back budget -conscious customers

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by cutting prices on popular, sorry, popular

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combo meals starting this week. The new, quote,

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extra value meals, featuring classics like the

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Big Mac, the McCrispy, or Egg McMuffin, with

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fries, any drink will cost about 15 % less than

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ordering the items separately. To kick things

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off McDonald's is offering a Big Mac meal for

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just eight dollars and a sausage McMuffin meal

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for just five dollars in most areas though prices

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will now be one dollar higher and places like

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California and Hawaii kind of makes sense. This

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comes as McDonald's. faces a drop in traffic

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from a lower income customers, especially those

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making under $45 ,000 a year. The CEO does admit

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that many no longer see McDonald's as a good

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value, a big problem when your brand is built

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on affordability. Other fast food chains are

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likely watching this closely and will and could

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be. seeing the start of a broader fast food price

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war as inflation weary customers push back on

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rising costs. And this is something that I also

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find very interesting because about three months

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ago for my MBA program, I actually had to do

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a whole analysis on McDonald's, like who their

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customers were, what was their like kind of segmentation

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that they were focused on. And they have always

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been historically trying to be one of the cheapest

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fast food companies. And they kind of broke away

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from that. So what do you think, Alex? So there's

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there's two pieces that I find interesting about

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this. And I did watch his CNBC interview where

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he was talking about this big new initiative

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of theirs to drop the prices. Right. Two things,

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and he mentions lower income customers dropping

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off specifically those under $45 ,000 a year.

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There's another quote from that clip that I really,

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really liked where he very correctly identified

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that right now there are two different economies,

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right? There's an economy of everybody making

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under $100 ,000 a year and an economy of everybody

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making over $100 ,000 a year. And if you pull

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those people separately, they are seeing the

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economy in very different ways right now. and

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I think he's 100 % right. And the problem is,

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is that their core demo, as you so interestingly

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pointed out, is that under $100 ,000 a year demo.

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And the other piece that I saw in some of the

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commentary on this, I think Breaking Point said

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something on this earlier today, was that part

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of the reason McDonald's and everybody started

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getting so expensive is, They stopped doing the

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things that everybody criticized them for. They

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actually increased the quality of their freaking

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hamburger meat. They started paying people more.

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They started doing other things to get themselves

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out of the bad reputation they had for being

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absolute garbage, right? They started experimenting

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more and changing their menu and doing a lot

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of stuff. And that increased the price of their

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stuff, right? and so again as a child of the

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80s and 90s who remembers when a quarter pound

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of a cheese meal with fries and a small drink

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was a dollar 99 literally right and i have distinct

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memories of it being a dollar 99 um you know

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it's you know it's i think he's look they got

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to figure this out um And it's not affordable

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like if I go take my kid to McDonald's man, what's

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a happy meal like eight nine bucks now it used

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to be a buck 99 like And it is a huge red flag

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and what what the other commentaries on this

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is this is the canary in the coal mine Right.

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It's not the S &P. It's not the Federates It's

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what are people spending money on and and this

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is an area where people are really cutting back

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You know Yeah So you gotta know do you think

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this trick that somebody in the chat said it

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to franchise wars hashtag Taco Bell rising does

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do you think that this starts a price war I So

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I don't think so. Um, I it will with a couple

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maybe fast food chains, but overall like not

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a I don't know all -out or because Looking at

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the competition, it's got to be affecting all

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of them, though. Yes and no. So McDonald's took

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a huge hit when burger chains like five guys

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kind of came on the scene. It is really, really

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expensive, but they took a demographic of people

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that didn't mind waiting a little bit longer,

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didn't. Mind paying a little bit extra for that

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little jump in quality. Yeah a little jump in

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quality and McDonald's did take a little bit

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of a hit there and you kind of mentioned it where

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they McDonald's started to try to Experiment

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with you know, what can we do? Should we do higher

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quality? Another thing that people hated about

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McDonald's was their customer service sucked

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and that kind of correlates with the price or

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the salary that you're offering the employees.

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You're not getting high quality employees like

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now. There's no customer service. Every McDonald's

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I've been into in the last two years. I'm ordering

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on a fucking touch pad. Right. Oh, yeah. And

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I barely have any interactions with the employees.

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Yeah, definitely. But yeah, I it will with some,

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but some I don't know, some fast food places,

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they're just they're not They're in the same

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market, right? Fast food burgers. But they're

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going after different segmentations of customers.

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And I think they will get it, especially now.

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And with all the talk of the tariffs, we're seeing

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prices starting to go up on things. There's this

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freak out of AI people getting laid off from

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jobs. Yeah, I think people are going there's

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a not everyone there's a group of people out

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there. They're going to be looking at what can

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I what is the best value? Like when I'm rushing

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home with the kids from soccer practice Do I

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want to have to go into a store or into like

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a shop like five guys? Probably not. I want to

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do fast food Do I want to spend the money for

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Chick -fil -a? No, I want something. Is it Sunday?

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Can I not get Chick -fil -A? Very true. Is it

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Sunday? But yeah, so I think this is going to

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win back some of their customers that they lost.

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Because McDonald's was really, really founded

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on a very simple menu. And I believe when it

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was first founded, it used to just be you didn't

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have options. It was just one burger. You just

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got a burger. and a fry like that is it and it

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was just like that focus on being super simple

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a super simple process making it very quick very

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cheap very affordable and they've slowly over

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the years kind of got away from that so i think

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it's going to help mcdonald's and not necessarily

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everyone's going to try to lower their prices

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and start an all -out war so i would ask you

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a couple of questions right Based on the fact

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that you're talking about different segmentations,

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who do you think is McDonald's most direct competition?

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Is it just Burger King? No, it's not just Burger

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King. They're also competing with Wendy's. They

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do have Taco Bell. I know they don't make burgers,

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but they do have Taco Bell as a competitor because

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again, like think think college kid right that

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like that is a super simple market like segmentation

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to think about someone who is in college who's

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looking for super quick super easy on the go

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i don't have time to be here also i don't have

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any money what is the cheapest thing that i can

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put in my mouth besides dirt right so taco bell

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is actually a competitor there with that market

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segmentation I'm trying to think of the other

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ones that like was listed out and in the Yeah,

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but I it's like Wendy's Taco Bell And I would

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quit like Shake Shack Shake Shack's expensive

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too. Yeah Shake Shack my daughter and my wife

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both love Shake Shack, but Shake Shack So I don't

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put Shake Shack and taco and five guys in with

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McDonald's so yeah that's that's what i'm saying

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is they're separate they're outside of that yeah

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my my immediate again i go mcdonald's burger

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king wendy's i almost put taco bell oh and jack

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of the box i'll put taco bell in its own category

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because i'm like that's tacos right it's not

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burgers right um so those are the four i and

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again kind of going back to the price war again

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with them dropping their prices i do wonder if

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burger king wendy's can't really drop their prices

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anymore they already suck um But I wonder if

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Burger King does, right? Those two have always

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kind of like jostled and fought. So and look,

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the chat is going to kill me. So let's talk Seattle

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now in Seattle. For those of you who are watching

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from outside the Seattle area on YouTube, this

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is Dix. This is a Seattle institution. We love

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Dix. Here's the thing about Dix. A plain hamburger

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is two dollars and fifty cents, right? A plain,

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single, eighth of a pound grilled patty, no kind

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of, two bucks, right? 250, okay? Plain cheeseburger,

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$3, right? Fries, they only have one size. It's

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$3, right? Shakes, one size. It's four bucks,

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right? This is Dick's. And going back to what

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Jay was saying a few minutes ago, this is kind

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of what McDonald's originally was, right? Super

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limited menu, cheap. Fast. If you've ever been

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to a Dick's and say, walk up, there are no drive

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-thru locations, you walk up, hey, I'll take

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two deluxe and a thing and you're done, right?

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And it is cheap, okay? It's dirt, dirt cheap.

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Here's the interesting thing about Dick's, right?

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And I actually deal with this at my job because

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we're talking about who compices this for labor.

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Dick's starts their people at $22 an hour. And

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it's 100 % covered health insurance. 100 % employer

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paid. Okay. $22 an hour and they charge $2 .50

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for a burger. Okay. So companies that are not

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there, like they're... Look, you can pay people

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decently, but yes, we will talk about Dix. This

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is the list of locations. I love Dix. It's it's

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it's this That's probably the closest when you

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talk about the the Seattle analog I do again.

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I think it's a canary in the coal mine. I think

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it's it's Them freaking out about this is telling

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me that we are if we're not in a recession now

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Right, and we just haven't called it one yet

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It's coming You know what I mean look man when

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you're drunk sometimes you just need a big bag

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of dicks And there's no shame In a big bag of

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dicks. We had a big bag of dicks at my wedding.

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We had so many bags of dicks at my wedding Right.

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It was just dicks everywhere Okay Big greasy

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bag of dicks This is this is the this is the

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actual issue that we have with YouTube Look man

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Just is what it is Um, yeah, I think that's pretty

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much what we got for this topic. Do you anything

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else there to add Jay? I'm just like scrolling

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through So I'm looking at the Harvard study that

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I had to like for the Harvard case study Yeah,

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here you go. Competition. McDonald's competition.

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Burger King, Wendy's, Taco Bell. It does actually

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list Chick -fil -A as a relatively inexpensive.

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Yeah. That's that's it. That's their main competitors.

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Again, I don't put five guys in Shake Shack in

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the same conversation. Now, I will say this on

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the five guys Shake Shack discussion. I actually

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prefer Shake Shack now. I like their burgers

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better than Five Guys. I think they've got more

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options and I could put more good stuff on there

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for basically the same price.