A Lawsuit Waiting to Happen
Consider this your annual warning about holiday parties. Cheers!
Good Morning!
Here are today’s highlights:
How much profit do you think your local cleaner makes on a dress shirt?
That all-you-can-eat shrimp deal did not go the way Red Lobster expected.
Returnless returns: That information is “not something that retailers want out there.”
So far this year, 543 venture-backed startups have shut their doors.
HUMAN RESOURCES
Consider this your annual warning about holiday parties: “Executive coaching firm Challenger, Gray and Christmas found that 57 percent of companies planned on having in-person holiday parties last year. As more companies push for in-person engagement and bonding, that number will likely grow. Yet the opportunity to let loose means a greater risk of behavior like harassment and discrimination, notes Michael Schmidt, a labor and employment attorney at Cozen O'Connor. ‘Holiday parties tend to be offsite, outside work hours, there's serving of alcohol — it's more of an informal and celebratory mood,’ he says. ‘It's easy to get into a mindset where people think the rules of workplace conduct no longer apply.’”
“Schmidt underlines that the same rules set by employers, from anti-harassment and anti-retaliation policies to dress codes, do apply to a work-sponsored party, regardless of location or time. For example, if someone arrives to a party in a costume one group may deem offensive, there would be just cause to bring the issue up to HR.”
“The same logic follows if someone said something offensive or made another employee feel uncomfortable because they had one too many drinks. Schmidt reminds HR teams that parties can't excuse inappropriate behavior, and it's legally dangerous to assume otherwise.”
“Other good practices include keeping party attendance voluntary — employer liability can be compounded if they require attendance — as well as offering food, stocking the bar with a plethora of non-alcoholic beverages, and organizing activities like a game of trivia or an end-of-the-year awards ceremony.” READ MORE
Small businesses have been outhiring big businesses: “According to ADP, small businesses under 50 employees added 95,000 jobs this fall, while large employers with 500 or more employees cut 83,000 jobs. The opposing trends point to small employers still needing growth in order to produce, while large employers can afford to trim their workforce down to mediate the effects of inflation on their businesses, explains Tina Wang, vice president of HR at ADP.”
“ADP found that only 18 percent of small businesses plan on changing wages in the next three months, compared to 50 percent of mid-sized businesses (companies with 50 to 999 employees) and 58 percent of large businesses (companies with 1,000 or more employees). In other words, small businesses need to rely on other tactics to entice and retain their workers, Wang says.”
“‘From a retention perspective, the most cited reason for small businesses' challenges is the demand for higher salaries,’ says Wang. ‘But if increasing wages is not an option, then employers need to have honest conversations with their employees. Transparency and communication are key.’”
“Wang emphasizes that while small employers may not be able to afford the best wages or benefits, they have the ability to connect with all their employees, which isn't as easily done at companies with 1,000 plus workers.” READ MORE
PRICING
At Kingbridge Cleaners & Tailors in New York City, it costs $6 to clean a dress shirt. How much profit do you think that generates? “The professional upkeep of clothing was one of the first things to go when the pandemic hit and most New Yorkers were suddenly sequestered in their apartments. Practically overnight, Kingbridge Cleaners & Tailors saw its business plummet, dropping 93 percent from the previous year. [Richard] Aviles didn’t take a salary for about two years when the whole industry essentially shut down. Kingbridge’s sales are still about 15 percent lower than they were in 2019, he said, as many office workers spend at least part of the week in sweatshirts instead of suits.’”
“Thirty-two people work at the [Brooklyn] Navy Yard facility, and another 12 at two storefronts. Cleaning staff work six days a week to combat the dust shaken off dirty clothes. Labor accounts for roughly 50 percent of a shirt’s cleaning cost.”
“Boxes of collar guards, cufflinks and buttons fill the cavernous space. Plastic covers placed over garments offer a sunny message: ‘I feel so much better.’ Supplies make up about 66 cents of the overall cost of cleaning a shirt.”
“An imported container of hangers, shipped to Kingbridge’s cleaning facility in the Brooklyn Navy Yard, cost about $3,500 in 2019. During the peak of the pandemic, the same container shot up to $22,000. It’s now settled at about $14,000.”
“Kingbridge, with stores in Brooklyn and Manhattan, makes a profit of about 13 cents from a single laundered shirt, after the cost of labor, utilities, rent, insurance, supplies and administration, said Richard Aviles, its president.” READ MORE
MARKETING
That all-you-can-eat shrimp deal didn’t go well for Red Lobster: “The Ultimate Endless Shrimp deal has been so popular that it helped cause a drop in third-quarter profit for the restaurant chain, which had to raise the price to $25 from $20. Thai Union Group, which owns a large stake in the chain, said in a third-quarter earnings call this month that the deal was in part to blame for an $11 million operating loss. Red Lobster hoped the promotion would bolster traffic at its U.S. locations through fall and winter, when its restaurants tend to be the emptiest.”
“Ultimate Endless Shrimp had already been a Red Lobster ‘guest-favorite’ staple for over 18 years. But the restaurant took it a step further this summer, offering the previously seasonal deal ‘all day, every day’ instead of just on Mondays.”
“The offer did in fact lead to a small bump in traffic compared with last year, according to Ludovic Garnier, the chief financial officer of Thai Union Group. ‘But something which was different from our expectations is the proportion of the people selecting this promotion was much higher compared to expectation,’ Mr. Garnier told investors this month.”
“Too many, perhaps, heeded the advice listed in Red Lobster’s own promotional material: ‘Insider tip: avoid grabbing the extra biscuit to leave room for endless amounts of shrimp.’” READ MORE
RETAIL
Actually, just keep it (but don’t tell anyone!): “As holiday shoppers return items purchased during Black Friday and Cyber Monday online shopping sprees, more U.S. retailers could tell them to keep items that cost more to ship back than they are worth. This year, 59 percent retailers offer so-called ‘returnless’ or ‘keep it’ policies for unwanted products whose returns costs exceed their value, according to returns services firm goTRG, which surveyed 500 executives at 21 major retailers, including Walmart and Amazon.com.”
“As retailers adopt technology to root out excess costs, more are embracing returnless policies for certain online purchases, said Shamiss, who declined to name companies that use them. That information is ‘not something that retailers want out there’ due to worries the policies could be abused by shoppers, he said.”
“The typical return costs retailers about $30. Returns drain profits because they must be transported, sorted and resold—often at a discount—or disposed of at a loss. That has helped prompt almost 90 percent of retailers to revise a range of policies this year, Ali said. Those changes also include offering store credit, charging for some returns, and encouraging shoppers to bring online purchases back to physical stores.” READ MORE
THE ECONOMY
The Fed’s preferred inflation gauge eased again in October: “The personal consumption expenditures price index, excluding food and energy prices, rose 0.2 percent for the month and 3.5 percent on a year-over-year basis, the Commerce Department reported. Both numbers aligned with the Dow Jones consensus and were down from respective readings of 0.3 percent and 3.7 percent in September. Headline inflation was flat on the month and at a 3 percent rate for the 12-month period, the release also showed. Energy prices fell 2.6 percent on the month, helping keep overall inflation in check, even as food prices increased 0.2 percent.” READ MORE
STARTUPS
It has not been a great year for venture-backed startups: “So far in 2023, 19 percent of all startup funding rounds raised money at a lower valuation for the company than they’d previously been awarded by investors. That’s up from just 5 percent in 2021, according to data from the equity management company Carta Inc. ‘You can’t sugar coat it too much, 2023 was a rough year for startups,’ said Peter Walker, Carta’s head of insight.”
“The increase in down rounds could mean that towering valuations are coming back down to earth after reaching unrealistic highs during recent years’ pandemic-fueled boom. Founders will also be forced to operate within a more frugal economic environment, encouraging more discipline and restrained spending.”
“So far this year, 543 startups shut their doors due to bankruptcy or dissolution, according to Carta. The third fiscal quarter saw 212 shutdowns, the highest number since the firm began tracking the data. Last year, 467 companies folded.”
“Artificial intelligence seemed the only bright spot for startups, with funding for related companies rising above every other tech category and reaching $17.9 billion, according to data from PitchBook.” READ MORE
21 HATS LIVE: FORT WORTH
This is your chance to meet all of your favorite 21 Hats podcasters (and Jay Goltz!): “There will be no speakers, only participants. We’ll have two deep-dive peer group sessions, and everyone will help choose the topics. Bring your own challenges! Bring your own opportunities! The event will feature good food in private restaurant rooms, visits to cool businesses—especially Laura Zander’s Madelinetosh manufacturing operation—and most importantly, the priceless opportunity to compare notes with other business owners on similar journeys.
THE 21 HATS PODCAST
Are Salespeople Built or Born? It used to be that best practices in sales were pretty standard across the board. But since the pandemic and with the advent of artificial intelligence, says Lance Tyson, founder of the Tyson Group sales consultancy, it’s like the Wild West out there. Suddenly, everyone’s playing by different rules, and the best sales approach can vary, depending on the seller, the target, the industry, the region of the country. The keys, Tyson says in this week’s bonus episode, are to pay attention and stay flexible.
Along the way, he addresses a host of hot-button topics: How important is it to see a prospect face-to-face? Is cold-calling dead? Will A.I. replace sales trainers? What’s the right balance between base and commission? How do you handle the salesperson who can’t or won’t be a team player? How do you get salespeople to take maintaining their CRM seriously?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren