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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. We also believe that sustainable methods of retaining quality employees are very important.

TWST: Do you prefer the franchisee route or the company-owned store? Which approach works best in international markets?

Mr. Kalinowski: Well, it depends on the company and the type of concept. For Wendy's (NYSE:WEN) or McDonald's (NYSE:MCD), I definitely think franchisees add a significant amount of strength to the system. Typically, the better franchisees will be some of the very best operators you'll have in the entire system, and they also know the local markets quite well and can maintain that community contact that some consumers like to see between restaurants and their communities.

TWST: How successful has TRICON (NYSE:YUM) been overseas?

Mr. Kalinowski: TRICON has been somewhat of a mixed bag, although my opinion has gradually improved over the last few months. Their Kentucky Fried Chicken concept, for example, has done very well in China - they actually have more units of that than McDonald's has of its units. Just in general, I think chicken and pizza are two types of food items that international markets can support quite well. So Kentucky Fried Chicken and Pizza Hut have done marvelous jobs of exploiting that. But TRICON's track record has not been perfect. A few years back they had over 100 restaurants in Brazil; today, to my knowledge, they have none. I contrast that with McDonald's - which definitely suffered some near-term financial hits because of Brazil's weakened economy a couple of years back, but rather than cutting the amount of restaurants, McDonald's has chosen to take the long-term approach and continues to actually expand their presence in the market. Now they have basically shut out competition in Brazil for a long time to come.

TWST: Are there any companies that you would suggest that investors underweight, downplay, deemphasize, avoid, whichever euphemism you prefer?

Mr. Kalinowski: There is one neutral-rated stock in our portfolio. Frankly, I wouldn't sell it short. I do think it's more of a turnaround play, though, and that would be TRICON. TRICON owns Pizza Hut, KFC and Taco Bell. Domestically, Pizza Hut is doing quite well. Pizza, as a category, is slowing, but Pizza Hut itself is taking share from its rivals. But unfortunately for TRICON, KFC and Taco Bell have not been living up to expectations lately. I think it will take some time for those concepts to turn around.

TWST: What do you think has happened?

Mr. Kalinowski: It's a variety of issues. For example, at Taco Bell, you find too many of the restaurants are dirtier than they should be, and too many of them don't offer as quick service at the drive-thru as they should. Now, to fix that problem, they've done a great job in attracting a new president over there, a man by the name of Emil Brolick. He came from Wendy's. I think that over time Mr. Brolick will turn Taco Bell around, but again it's not a quick fix. So at this point in time I am not suggesting investing in TRICON.