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TWST: What are the key elements of the approach that you take to the restaurant industry at Salomon Smith Barney?

Mr. Kalinowski: Well, there’s definitely a series of criteria that we look at when we’re deciding which stocks to recommend within the restaurant industry. A powerful brand, for instance, would be very important. Essentially, you’re going to a restaurant not just for the food but for the overall experience.

TWST: What has been driving the improvement in the environment for restaurants over the past 12 months?

Mr. Kalinowski: From a fundamental perspective, this year has been quite good. 1999 was also a very good year. But there have been very different stock performances this year. Last year, by our reckoning, was the worst year of the 1990s for restaurant stocks. But this year (2000), the stocks have outperformed the S&P 500. I think part of that can be attributed to good restaurant companies tending to their existing restaurants and doing quite well. Also, there has been a very large sentiment shift favoring restaurants. A year ago, two years ago, technology stocks were much more in favor than they are today. Now people are looking for safe havens to put their money in, and restaurants is one place that people are thinking of as a safe haven.

TWST: Do you expect the supply/demand balance to remain favorable for 2001?

Mr. Kalinowski: Things have been good this year, and I would expect them to remain good, going forward. Demand growth tends to be fairly stable year after year at around 2%-3%; it’s really the supply growth that you need to watch. That overheated quite a bit in the mid-1990s. We finally got back to a much more stable and rational condition last year. That has continued this year, and we think it will continue on into 2001. That’s for two main reasons. First, you’re not seeing a lot of restaurant stock IPOs. Essentially, capital flowing into the industry is much more limited than it was five or six years ago. The other thing is that with unemployment so low, even if you did have a lot of capital to expand, it’s a challenge to find enough people to actually staff your restaurants.

TWST: Do you have any concern about McDonald’s (NYSE:MCD) sales, given the resurgence of concern about BSE, in France and possibly in other European markets?

Mr. Kalinowski: I just spent time in four European markets, meeting with the McDonald’s management teams as well as going around to the restaurants, both touring with management and by myself. Essentially, it was not a surprise to me to see November same-store sales down in Europe. What did surprise me was how quickly same-store sales snapped back in France, as they had done back in 1996 in the UK. By the time I left France, which was around December 8, they had already started comping positive again.

TWST: What’s your top recommendation in the group for 2001 and why?

Mr. Kalinowski: I’ve really been citing two stocks as my top picks, depending upon the client’s needs. For most clients, I suspect McDonald’s would be the top pick.

TWST: What is the most compelling reason to buy McDonald’s today?

Mr. Kalinowski: Well, I think the risk-reward is very favorable. Since 1965, the year in which the company had its initial public offering, it has had revenue growth every single year and it has had earnings growth every single year. So it’s a story that you can count on not deteriorating completely. It’s a very stable company in the grand scheme of things.