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TWST: Janice, what are your concerns and what are the factors that support a bullish outlook for casual dining, quick service restaurants and specialty restaurants?

Ms. Meyer: If I look at the group overall, these stocks trade with their return on capital. Therefore anything companies can do to enhance same-store sales, margins or capital efficiency should be rewarded by the market. From a bullish standpoint, in casual dining continued good same-store sales growth, as Andy pointed out, is key. Everybody fully expects same-store sales to slow from current rates. Most people have modeled a normalized same-store sales growth rate of 2%-3%, though normalized growth does vary by chain. To the extent that you have companies beating those numbers, those shares should do well. For fast food, any company that can accelerate their currently soft same-store sales would also be rewarded, as margins would almost have to improve. We think TRICON (NYSE:YUM) will be in that camp, but not until the second half of 2001. They have hired a new president for Taco Bell, and we are encouraged by what he is doing, though it will take time to see results. We remain disappointed with KFC, but they too have recently beefed up management, so we are more encouraged about their prospects. I would agree with something Damon said earlier, which is that some of the best opportunities may be in beaten down companies such as TRICON. They have been operating at below normalized rates, so if they can get same-store sales to improve and margins to expand, assuming there are no major changes in capital efficiency, there’s a gap between current business and a normalized level that can be closed. Even in an environment where cost pressures accelerate or consumer spending slows down, they should be able to improve returns.

TWST: Is this a reasonable store rollout plan as far as you're concerned?

Ms. Meyer: P.F. Chang's (Nasdaq:PFCB) has embodied a new breed of smaller restaurant company that keeps unit openings at a steady level, so investors can feel confident that year after year they can execute successfully. From a value perspective, our top pick would be TRICON. As Andy pointed out, it's a stock that's very cheap with three terrific brands. The interesting thing about restaurant investors is that when same-store sales turn negative, they sell the stocks without differentiating between concepts. So a Taco Bell is treated the same as Rainforest Cafe (Nasdaq:RAIN) or a Planet Hollywood (OTC BB:PHWD.OB). For a value investor that leaves a tremendous opportunity to sift through and find the real brands, and the concepts that we characterize as bent, but not broken. We think TRICON is one of them.

TWST: What's your target price for TRICON, and what kind of time horizon should an investor have with this story?

Ms. Meyer: Our target price for TRICON is $45. We think they're going to have a sloppy fourth quarter and first quarter, so we wouldn't be surprised to see the stock pull back 10% or more. And there could be some financial issues with Taco Bell franchisees that have bought stores from the company just as same-store sales weakened. But over the next 12 months you could get to a $45 stock and, frankly, over 24 months you could get a double. As soon as you get the first glimpse that same-store sales are turning positive, investors will view the company differently.