Businesses Conclude Covid’s Not Going Anywhere
Today’s highlights: Sushi is on a roll. Micro-PE firms are looking to buy blue-collar businesses. And the raging battle over who gets to call themselves plain vanilla.
THE MORNING REPORT PODCAST
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A slew of micro-private equity firms are looking to buy blue-collar businesses: “A common trait of these businesses is that they have relatively low barriers to entry. Practically all you need to start a landscaping company is a lawnmower and a truck. Couple that simplicity with the reliable demand for services, and you get a lot of people starting profitable businesses, but relatively few growing past a certain scale. Botkin sees big growth potential in taking a blue-collar business that has hit that ceiling, and applying white-collar management and marketing techniques to maximize cash flow.”
“‘To me, this business is labor and fuel, because if I can control labor and I can be efficient with fuel, I'm going to make money,’ he said.”
“One of the key advantages of buying a business versus building one from scratch is that you get a built-in customer base, which would otherwise require a lot of time and money to grow.” READ MORE
THE 21 HATS CONVERSATION
At his firm, Permanent Equity, Brent Beshore is taking an unusual approach to buying businesses: He invests in businesses with no timeline to sell them. He doesn't force those businesses to take on debt. He's happy to keep the leadership team in place. What is he thinking? Would he be interested in your business? Join our webinar conversation Tuesday at 3 ET to find out. Bring your own questions.
A run on sushi is helping some businesses survive: “Customer appetites for to-go sushi are rising, from $10 grocery-store rolls to elaborate, exquisitely packaged meals costing hundreds of dollars. Japanese restaurants say the demand is helping them to stay afloat, and to reach new customers through delivery and to-go options. The number of sushi restaurants open in the U.S. grew by 5 percent last year as numbers for steakhouses and Italian restaurants fell, according to online-directory Yelp.”
“Sushi was the most searched takeout cuisine on restaurant-reservation platform Tock during the last three months of 2020.”
Supermarket sushi sales were up 23.2 percent in the four weeks ended on Jan. 23 compared with the same period in 2020, according to Nielsen data.”
“Los Angeles-based Erewhon Market is selling about $3,000 worth of sushi per store a day, 10 percent more than before the pandemic, said CEO Tony Antoci.” READ MORE
In this week’s Saturday Survey Question, I asked about your favorite business tools. We got a couple of votes for Moleskin notebooks, and several other interesting comments, including this from Steve Krull of Befoundonline.com: “HubSpot, HubSpot, and more HubSpot. Compared to the behemoth SalesForce, using their sales tools is like skipping through a field of lavender & sunflower. The marketing pieces make life easier too and while we don't use the CMS, it's built well. The best part: it's integrated from the ground up instead of patched together like other stacks.”
THE COVID ECONOMY
There is a growing consensus that Covid will be around for years—and big business: “The ease with which the coronavirus spreads, the emergence of new strains and poor access to vaccines in large parts of the world mean Covid-19 could shift from a pandemic disease to an endemic one, implying lasting modifications to personal and societal behavior, epidemiologists say. ... Endemic Covid-19 doesn’t necessarily mean continuing coronavirus restrictions, infectious-disease experts said, largely because vaccines are so effective at preventing severe disease and slashing hospitalizations and deaths. Hospitalizations have already fallen 30 percent in Israel after it vaccinated a third of its population. Deaths there are expected to plummet in weeks ahead.”
“But some organizations are planning for a long-term future in which prevention methods such as masking, good ventilation and testing continue in some form.”
“Meanwhile, a new and potentially lucrative Covid-19 industry is emerging quickly, as businesses invest in goods and services such as air-quality monitoring, filters, diagnostic kits and new treatments.” READ MORE
The slow vaccine rollout has businesses shifting expectations: “The slow start of the Covid-19 vaccine rollout, along with the arrival of new virus variants, has dashed some business leaders’ hopes for getting back to normal in 2021. Consumers are unlikely to resume travel, dining out and shopping in stores at a pre-pandemic cadence until later this year, chiefs of some large companies told Wall Street analysts and investors in recent weeks. Some CEOs said consumer activity could pick up as soon as spring. Others pointed to a recovery later in the year—or even 2022.” READ MORE
Some companies are charging Covid fees that could be illegal: “ Businesses across the country are increasingly charging coronavirus-related fees, ranging from a $5 disinfection charge in a hair salon to $1,200 for extra food and cleaning in a senior living center, which are often undisclosed until the customer gets a bill. According to a survey by The Washington Post of attorney general offices and financial departments in 52 states and territories, U.S. consumers in 29 states have filed 510 complaints of coronavirus-related surcharges at dentist offices, senior living facilities, hair salons and restaurants.” READ MORE
A weak jobs report clouds the outlook for recovery: “The American economic recovery showed new signs of stalling on Friday as government data underscored the pandemic’s brutal damage to the job market. U.S. employers added 49,000 jobs in January, the Labor Department said, dashing hopes that the new year would bring immediate relief. The private sector added just 6,000 jobs, barely enough to register against the millions of positions lost during the pandemic.”
“The unemployment rate fell to 6.3 percent, from 6.7 percent. But the decline came partly because hundreds of thousands of people left the labor force, a sign that the downturn could leave lasting scars.”
“A year earlier, the unemployment rate had been 3.5 percent, a 50-year low. The economy still has nearly 10 million fewer jobs than it did before the pandemic.” READ MORE
In case you want another look, here are all of the Super Bowl commercials: “It took about two more months than usual for CBS to sell ad space for the game, with newcomers and commercial staples alike shelling out about $5.5 million for a 30-second spot.” READ MORE
There’s a raging battle over who can claim to be plain vanilla: “The lawsuits started in 2019, when Spencer Sheehan puzzled over a can of A & W Root Beer stamped with the words, ‘MADE WITH AGED VANILLA.’ ‘I looked at it and said, ‘Yeah, I don’t think it’s correct, or completely truthful,’ said Mr. Sheehan, a lawyer in the Long Island suburbs of New York City who decided to sue Keurig Dr Pepper, which owns the A & W brand. Now a battle over vanilla is playing out in federal courts across the U.S., with more than 100 proposed class-action cases filed over vanilla flavoring, many by Mr. Sheehan, within the past two years. At issue is one question: Is vanilla really vanilla without vanilla beans?”
“Due to high costs and fluctuating supply, many manufacturers now instead use ‘natural flavor,’ a catchall term for flavoring that uses ingredients including those derived from plants.”
“In court documents asking the judge to toss the case, McDonald’s lawyers argued that vanilla is a flavor, much like Rocky Road or Tutti-frutti. The lawyers included roughly 50 comments on a Facebook post from Mr. Sheehan’s firm as evidence that a reasonable consumer wouldn’t expect real vanilla.”
“Under a photo of a perfectly twisted soft serve, the post from Mr. Sheehan’s firm said: ‘Does your Vanilla Soft Serve Ice Cream contain real vanilla? Not according to class-action lawsuits and investigations.’ The commenters mostly mocked the post or groused about broken soft-serve machines.” READ MORE
THE 21 HATS PODCAST
Episode 47: Optimism in D Minor: William Vanderbloemen tells Karen Clark Cole and Dana White that he’s cautiously optimistic about 2021 because his clients are cautiously optimistic and because he’s expecting lots of turnover as the pandemic recedes. We also talk about why Karen is tired of being a best-kept secret and how Dana handles customers who have to be fired.
Plus: there’s a new tax credit you should know about that William calls “pretty incredible” but that seems to be getting lost in the PPP shuffle.
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