‘Being Isolated Is Just a Bad Idea’

In our latest podcast episode, the owners talk about the importance of getting outside perspectives on how they’re building their businesses.

Good Morning!

Here are today’s highlights:            

• A Gallup survey finds most employers are not in touch with their employees.

• Inflation continues to cool, and McDonald’s says its customers don’t want fries with that.

• Brands are shifting their advertising spend to influencers—at least according to a platform that manages influencers.

• Gene Marks has a problem with Florida’s tough, new immigration law. He doesn’t think it goes far enough.

THE 21 HATS PODCAST

This week, Hans Schrei and Shawn Busse talk about why they put their businesses through accelerators, and Paul Downs explains why he might have done the same thing if accelerators had existed back when he started his business—”although,” he says, “I was probably too dumb to realize the value of it.” Hans, who just completed a 13-week accelerator program with his partner, Luis, also tells us how Wunderkeks fared while he and Luis were in the program, what they got out of it, and why they felt it was worth giving up the equity that was the price of admission. Plus: why Shawn went to an employee’s college graduation and how Paul managed to take a vacation. Oh, and Paul also talks about what surprised him about the recent 21 Hats event in Chicago.

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

HUMAN RESOURCES

A Gallup survey finds U.S. employees less engaged and more stressed: “Half of workers aren’t engaged on the job, putting in minimal effort to get by, according to research by Gallup released Tuesday. Employee engagement in the U.S. declined for the second year in a row. There is also a growing share of the workforce that is disengaged, or resentful that their needs aren’t being met. In some cases, these workers are disgruntled over low pay and long hours, or they have lost trust in their employers. ‘Employers are just not as in touch with employees,’ said Jim Harter, chief workplace scientist at Gallup and lead author on the report. Some of the recent shift in attitude stems from workers having unclear expectations from their managers.”

• “Workers’ frustrations have been building since 2021, after Gallup-measured U.S. worker-engagement levels hit their highest level on record in 2020. In the spring and summer of 2020, as Covid-19 spread and there was social unrest in the wake of George Floyd’s murder, executives at many companies had town halls and listening sessions with employees, communicating organizational mission and keeping workplace relationships strong.”

• “This year, more companies are trying to bring workers back to offices as bosses fret about worker productivity and loyalty.”

• “Gallup surveyed more than 60,000 people in the U.S. to compile the report, which has tracked Americans’ sentiment about their jobs since 2000, and says engaged workers are more productive and tend to stay at their jobs for longer.” READ MORE

New York City is introducing the first minimum wage for food delivery workers: “Starting July 12, New York City’s app-based delivery workers must be paid at least $17.96 an hour, not including tips — the first such minimum pay-rate in the country for an industry that exploded in popularity during the pandemic. The increase, which will go into effect nearly two years after the City Council passed a set of bills designed to improve conditions for the workers, was announced by Mayor Eric Adams over the weekend. Critics say the rule does not go far enough to compensate the workers, who must absorb a range of expenses as independent contractors, including frequent injuries on the job. And industry groups argue that the added costs could throttle opportunities for some workers and pass on costs to consumers and restaurants, which already pay high fees to use the apps.”

• “The city’s more than 60,000 delivery workers, who courier takeout, groceries and other goods, are paid an average of about $11 an hour, after factoring in tips and expenses, less than New York’s $15 minimum wage, according to an analysis by the city. They also cover their own health insurance, business expenses and additional taxes.”

• “The new law, first proposed in 2021, will eventually raise the workers’ minimum wage to at least $19.96 an hour in 2025, or more, based on inflation.” READ MORE

RETAIL

Westfield is turning over the keys to its downtown mall in San Francisco: “Most recently, the mall was rocked by the announcement in May that Nordstrom would not renew its lease, leaving a huge hole across five floors of the mall. The mall's occupancy rate currently sits at 55 percent with the string of recent closures. ‘Given the challenging operating conditions in Downtown San Francisco, which have led to declines in sales, occupancy and foot traffic, we have made the difficult decision to begin the process to transfer management of the shopping center to our lender to allow them to appoint a receiver to operate the property going forward,’ Westfield said in a statement.”

• “A number of nearby stores have also announced their closure, including Old Navy’s flagship location on Market Street and Nordstrom Rack, which sits across from the mall on Fifth Street. Just around the corner, on Fourth Street, the Metreon shopping and entertainment complex is bringing in art pop-ups to fill a number of its many vacant storefronts.”

• “Westfield cited declines in sales from $455 million in 2019 to $298 million in December 2022, with visits decreasing from 9.7 million to 5.6 million during the same period. The company said nearby properties like Westfield Valley Fair in San Jose were experiencing relative increases in sales and foot traffic recovery.” READ MORE

THE ECONOMY

Inflation continued to slow in May: “The inflation rate cooled in May to its lowest annual rate in about two years, the Labor Department reported Tuesday. The consumer price index, which measures changes in a multitude of goods and services, increased just 0.1 percent for the month, bringing the annual level down to 4 percent. That 12-month increase was the smallest since March 2021, when inflation was just beginning to rise to what would become the highest in 41 years. Excluding volatile food and energy prices, the picture wasn’t as optimistic. So-called core inflation rose 0.4 percent on the month and was still up 5.3 percent from a year ago, indicating that while price pressures have eased somewhat, consumers are still under fire.” READ MORE

Americans are spending less on hotels, flights, restaurants, and funerals: “Across the country, there are signs that Americans are pulling back on restaurant outings, hotel stays and airline tickets, after months of exuberant consumption. Spending on a range of services, including international travel, taxi rides, and clothing alterations, fell in April for the first time this year, according to federal data. People are also spending less on public transportation, child care, and funerals.”

• “OpenTable data shows fewer people are dining out. Airbnb expects bookings growth to slow and average daily rates to fall this quarter compared with last year, as people opt for cheaper lodging than they did a year ago. And at McDonald’s, executives say customers are increasingly forgoing fries with their meals.”

• “Debbie Milner, who owns a dog-grooming business in Jacksonville, Ark., says business never really picked up after the pandemic. But in recent weeks, things have ‘rolled even more downhill.’”

• “She grooms about a dozen dogs a day, down from 40 to 60 a few years ago. Many of her regulars are strapped for cash, which means they’re coming in far less frequently than they used to.”

• “People that were coming in every six weeks are now here every five months,” said Milner, who started Debbie’s Wagging Tails Grooming about 20 years ago.” READ MORE

MARKETING

A study from a platform that helps brands manage influencers found that brands like influencers: The study “found 67 percent of the companies surveyed increased their influencer-marketing budgets from 2022 to 2023. That's despite the increased scrutiny on marketing budgets overall, the report said. Most of the brands that increased their influencer-marketing budgets — 76 percent — were diverting funds away from other marketing activities. The bulk of those dollars came from paid advertising, followed by email marketing and owned-social-media marketing, the survey showed. It's a sign that brands have become more dependent on creators to help them meet consumers where they are, Brittni Starr, CreatorIQ's SVP of corporate marketing, told Insider.”

• “Most of the companies surveyed measured the success of their influencer-marketing investments with these metrics: 51 percent measured engagement, 28 percent measured conversion, and 11 percent measured impressions. The companies surveyed ranged in size from less than 15 employees to over 10,000. All the brands had invested in influencer marketing.”

• “The study also points out that 77 percent of the companies surveyed approached creators for partnerships who had already promoted their products organically, showing brands are looking to work with creators who may already have established audiences for their products.” READ MORE

CUSTOMER SERVICE

Even the baristas find those tip screens awkward: “Jason Delossantos, a barista at Tidal Tea in New York City, often has to teach his customers how not to tip. Two teenagers recently asked him, voices hushed, how to bypass the tip screen while other customers waited in line at the bubble-tea shop. Delossantos showed them: Tap ‘customize,’ and select zero. Sensing they felt guilty for stiffing him, he said it was OK. The expansion of point-of-sale technology that prompts customers to tip at coffee shops, convenience stores and fast-food restaurants has caused no shortage of angst for consumers who wonder what, or whether, to tip when they purchase chewing gum or a latte. The baristas and checkout staff on the other side of the tip screen say the interactions are no less awkward for them, even if the tip prompts put extra money in their pockets.”

• “Workers said they start making the customer’s order as soon as they flip the screen to the customer, to avoid having to stand at the counter while the payer decides on the tip. Or they avert their eyes.”

• “Brandon Hall, 26, a barista in New York, said that tips are now part of the conversation when he interviews for a cafe job—hiring managers tell him the tip average in addition to how much he is going to make an hour.”

• “Calysta Webb, the owner of Berry Bay Smoothies in Washington state, sometimes takes drink orders at her stores’ drive-throughs. Then she hands the customer a device to swipe a credit card, select a tip and make the payment. Webb, 31, used to skip the prompt to tip before giving the payment device back to the customer, figuring that, as an owner, she didn’t need the gratuity.”

• “One day, a customer complained about not having an option to tip. To avoid more awkward moments when she is working, Webb now leaves it up to the customer to decide to tip or not—and she says she gives the tips to her staff.” READ MORE

Fast food chains are testing chatbots in their drive-throughs: “Besides White Castle, McDonald’s, Wendy’s, and Dunkin’ are all testing AI-driven chatbots in drive-throughs. The bots ‘talk’ through drive-through speakers, with the order tally popping up on a screen for customers to review. Workers on headsets listen in, ready to intervene if things go awry. The robots, which employ conversational-style AI algorithms used by technologies such as OpenAI’s ChatGPT, can take burger orders, substitute cheddar for American cheese and thank customers for their patronage. They also are programmed to encourage customers to binge on an extra burger or a dessert. Unlike a human, chatbots are never shy about selling more, nor do they need a break or get distracted by other business, said Michael Guinan, White Castle’s vice president of operations services.”

• “Some customers say they are sick of cranky fast-food workers who can’t hear their orders through defective speaker boxes, and look forward to the robot revolution. A number of restaurant workers agree.”

• “Presto Automation is one of several companies training chatbots to work drive-throughs. The San Carlos, Calif.-based company currently is designing AI systems for chains including Del Taco, Carl’s Jr., and Checkers, and is testing how to personalize its machines with custom voices, including one sounding like Santa Claus.”

• “​​White Castle has retooled Julia since first putting it to work in 2020, and it now sounds more conversational, saying things like ‘you betcha’ and ‘gotcha,’ Guinan said.”

• “Del Taco is testing its own chatbot, also named Julia, at five locations. Executives said that programmers are teaching it to not be thrown off by the weird orders the California-based chain’s drive-throughs occasionally encounter late at night.” READ MORE

THE 21 HATS PODCAST: DASHBOARD

Gene Marks has a problem with Florida’s new immigration law: He doesn’t think it goes far enough. That’s because he thinks it gives businesses with fewer than 25 employees an unfair advantage. Gene also warns that several “huge tax increases” are looming for small businesses -- but are they really tax increases? Plus: striking the right balance between salary and commission when paying sales people.

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

Thanks for reading, everyone. — Loren