Can We Get Some Service Around here?

As the pandemic fades, customers may be losing patience with poor service.

Good Morning!

Here are today’s highlights:            

• As lending conditions continue to tighten, some businesses are running short of options.

• American manufacturers are renewing their search for alternatives to China, but they’re not easy to find.

• John Arensmeyer backs the debt-ceiling deal even though it will cut funding intended to help small businesses.

• Is California going to ban Skittles?

CUSTOMER SERVICE

Businesses are rediscovering it pays to offer better service: “The patience that customers have extended to restaurants over the last few years is wearing thin, especially as menu prices climb and experienced workers are harder to find. A plaintive cry is rising from America’s dining rooms: Can we get some service around here? And not just any service. Diners say they crave a night out free from QR codes, waiters who don’t seem to care, and menus designed to glorify the chef and attract influencers. They want to feel like welcome guests again, wrapped in the kind of warm, competent hospitality they fantasized about while the pandemic took it all away.”

• “‘We gave restaurants a pass for many, many months, and I think we are at a place where people really miss the human touch and the little details,’ said Ed Lee, a chef and author who divides his time between Louisville, Ky., and Washington, D.C.”

• “Mr. Lee saw this month just how much small gestures mean the first day he opened Nami, a Korean steakhouse in Louisville. A woman held the restaurant’s oversize, stylized menu to her cheek and murmured, ‘Oh, a menu!’”

• “In Norcross, a small city north of Atlanta, Alexis Anin just opened Influence, an Afro-Latino restaurant and club where he is doing anything he can think of to make people feel that going out is a better idea than staying home. He made sure the booths feel luxurious and the lighting is flattering but not too dim. He set up a small patio for the Covid-wary who still don’t feel comfortable eating inside.”

• “‘You have to come up with different tricks to get them to stay in your building,’ he said. That includes making them feel secure. Even though the neighborhood isn’t considered dangerous, he added a security guard at the front door.” READ MORE

MANAGEMENT

There really are ways to make meetings shorter: “If you’re the meeting scheduler, consider doing away with one-hour or 45-minute meetings unless they’re mission-critical or involve many teams presenting updates. Ask yourself: Can we get everything done in 30 minutes? How about 15? Don’t overcommit on time you set aside in the calendar. Before you send the invite, ask yourself: ‘Do all of these people need to be at this meeting?’ You can always fill in those who aren’t in attendance with a short update, if needed. Meetings with too many participants are also likely to last longer. The person who organized the meeting should lead the discussion and be mindful of keeping it on track and on time. If that’s you and it’s not your strong suit, assign someone else to lead the meeting.”

• “The pandemic shutdown made Zoom a tool that nearly everyone had to start using, from CEOs to K-12 students. But weirdly, people didn’t seem to get much better at navigating Zoom’s many control buttons and getting sound to work. It’s 2023 and meetings are still marred with, ‘Can you hear me? Am I on mute?’”

• “And speaking of conversation, put a five-minute limit (or shorter) on small talk. If a team hasn’t met in a while, some pleasantries are fine, but don’t let it derail the agenda. For regular meetings, table social chat until after the meeting.” READ MORE

FINANCE

Lending conditions for companies and consumers continue to tighten, according to a Wall Street Journal analysis: “The slowdown is a consequence of the Federal Reserve’s interest-rate-hiking campaign against inflation, and it means there is now less money available for U.S. businesses and households to hire new workers, build plants, and pay the bills.”

• “Recessions over the past 30 years have closely tracked the willingness of banks to lend out the cash they collect from depositors. Bankers are charging higher interest rates on loans to consumers and corporations and for commercial real estate, according to the Fed’s senior loan officer opinion survey. They are also demanding that borrowers post more collateral.”

• “Companies that need borrowed cash to grow, or simply to stay afloat, are running out of options. Corporate bankruptcy filings have hit their highest number since 2010, according to S&P Global Market Intelligence.” READ MORE

MANUFACTURING

American manufacturers are stepping up their search for alternatives to China: “Foreign companies have had issues in China for years, but the growing tensions have unnerved businesses like Grey Duck Outdoor. The Minnesota-based watercraft maker contracts with Chinese factories to produce paddleboards, taking advantage of the country’s low costs and efficiency. Owner Rob Bossen said all of his paddle-board suppliers, including companies that make foam, resins, and injection-molded plastics, operate within a few miles of each other in the Shenzhen area. Bossen has good relations with his business partners, he said, but Russia’s invasion caused him to imagine what might happen if a similar disruption took place in China. ‘There’s risk to having all your eggs in the China basket,’ he said.”

• “Companies like Grey Duck are in a bind, industry officials said. China’s access to raw materials and ability to produce components for finished goods remains unmatched, and its dense supplier networks have yet to be replicated elsewhere.”

• “Grey Duck is seeking to blunt its China exposure with new products made in the U.S. It has begun making canoes in a facility near the Twin Cities, and Bossen said he might add other domestically produced watercraft to the lineup.”

• “Dan Harris, an attorney who advises companies doing business in China, said other executives remain blasé about the possibility of being targeted by authorities. ‘It’s very difficult to care about a raid on the Mintz Group when you can have your widgets made in China for 15 percent less and it’ll cost you a fortune to move,’ he said.” READ MORE

Since the Inflation Reduction Act, clean energy investments have been soaring: “Nine months since that law was passed in Congress, the private sector has mobilized well beyond our initial expectations to generate clean energy, build battery factories and develop other technologies to reduce greenhouse gas emissions. The law is doing exactly what it was designed to do: encourage private investment in clean energy. Tax incentives make the investments attractive, but businesses, along with rural cooperatives, nonprofits and others, must judge whether investing their own money in a hydrogen factory or a wind farm will pay off.”

• “Companies have announced at least 31 new battery manufacturing projects in the United States. That is more than in the prior four years combined. The pipeline of battery plants amounts to 1,000 gigawatt-hours per year by 2030 — 18 times the energy storage capacity in 2021, enough to support the manufacture of 10 million to 13 million electric vehicles per year.”

• “In energy production, companies have announced 96 gigawatts of new clean power over the past eight months, which is more than the total investment in clean power plants from 2017 to 2021 and enough to power nearly 20 million homes.”

• “Scott Moskowitz, the head of market strategy and public affairs for Qcells North America, which manufactures solar panel components in Georgia, summed up the impact of the law this way: ‘We will always look at the history of our industry in two eras now that the Inflation Reduction Act has passed’ — meaning the before and the after.” READ MORE

But maybe not in Texas: “For many Texas Republicans these days, renewable power is about as welcome as a porcupine at a nudist colony. In the state capitol in Austin, Republicans are targeting wind and solar power with a slate of bills that would clamp down on renewable projects by, among other things, adding additional environmental requirements and excluding them from a state tax break. Lt. Gov. Dan Patrick, who effectively controls the legislative agenda, has vowed that lawmakers won’t leave Austin this month without approving legislation that would spur the construction and maintenance of conventional power plants, calling renewable energy a ‘luxury.’”

• “Texas has more renewable energy projects on the grid and under development than any other state, according to the American Clean Power Association. More than a third of all U.S. clean-power installations last year were in Texas.”

• “Many state Republicans are arguing for measures to prop up conventional power sources, saying they are necessary to maintain the reliability of the electric grid following its near collapse during a freak winter storm in February 2021.”

• “Mona Tierney-Lloyd, head of U.S. public policy for Enel, one of the largest renewable energy developers in Texas, said the company would consider scaling back development plans if lawmakers passed bills that made projects more difficult or expensive to build. ‘I would call it an interventionist approach to the market, as opposed to what Texas has historically prided itself on—an open market with competition driving the development of new resources,’ she said.” READ MORE

POLICY

John Arensmeyer, head of Small Business Majority, supports the debt-ceiling deal—even though it cuts funding for small businesses: “Under the debt-ceiling agreement that is now pending before Congress, $30 billion of unobligated COVID-19 relief resources would be cut, including funding for several programs that small businesses rely upon. This would entail reduced support for the Economic Injury Disaster Loan program and the State Small Business Credit Initiative, a proven program that generates ten times the budget cost in private capital and is targeted to small businesses in under-resourced communities, particularly entrepreneurs of color and women. As many small businesses are still working to recover from the pandemic, reducing support for these programs hampers long-term recovery efforts.”

• “Additionally, the current debt-ceiling agreement decreases money for the Internal Revenue Service by $21.4 billion. Through provisions included in the Inflation Reduction Act, funding was appropriated for IRS enforcement to help ensure that big corporations and the wealthiest taxpayers pay their fair share, something that small business owners support.”

• “Clawing back funding will hamper the ability of the IRS to maximize revenue and sustain a more level playing field. It will also limit the ability of the IRS to assist small business owners seeking important tax information.” READ MORE

THE 21 HATS PODCAST

Best Of: What It Takes to Build a Business: So, I decided to give the 21 Hats Podcast crew this past week off. Between the Memorial Day holiday and our first 21 Hats in-person event in Chicago—attended by five of the podcast regulars—it seemed the right thing to do. It also seemed like a great opportunity to reprise one of our favorite all-time episodes. We first published it in December of 2021, and it features highlights taken from the podcasts we’d published up until that point that cover many of the risks and rewards of business ownership, including what it’s like to sell your business, to fire an employee, to risk your own home in order to get financing, and even to deal with serious mental health issues.

If you’re new to the podcast, I think you’ll find that these conversations bring real context to the journeys of the entrepreneurs you’ve been following here. But even if you’ve heard some of these discussions before, I think you’ll find them a refreshing reminder that choosing to build a business can be a noble mission, but it generally doesn’t come with an owner’s manual. We’re all figuring it out as we go.

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

REGULATION

Thanks to Texas’s lack of regulation, tech companies are turning rural areas into tech hubs: “A farmer who lives near Elon Musk's Texas campus around 30 miles east of Austin says that the boom in development in the area means it's like ‘the Wild West.’ Harold ‘Skip’ Connett, an organic farmer in Bastrop, a rural area, told The Washington Post that industrial developments in the area were increasing truck traffic and pollution. ‘Between Elon Musk coming in here and all the sand and gravel mines ... suddenly this bucolic, pastoral prime farmland is now more than a thousand acres of an industrial site,’ Connett told the outlet. ‘There's no zoning, there are no rules. It's the Wild West.’”

• “A Bastrop County commissioner told The Post that the growth in development was ‘more than this county was ready to handle,’ but that it was allowed under the state's property rights. ‘This is Texas,’ the commissioner said. ‘If you own the property and you stay within the state laws, you can pretty much do what you want.’”

• “The Boring Company is facing criticism from local residents over its plans to treat its own wastewater and then dump it in the Colorado River. It applied for a permit last year to discharge 142,500 gallons in the river per day.”

• “‘I love Elon, and we need more industry here,’ a local real-estate agent told The Post. ‘I just don't want him to dump his poop in the river.’” READ MORE

A California bill  targets candy makers: “The state Assembly has passed a bill that would ban use of five chemical additives in food products, including a coloring agent found in Skittles—with its ‘taste the rainbow’ slogan—and Red 3, which is used in packaged cookies, frostings and other snacks. Consumer advocates backing the bill say these additives pose health risks and should be removed. Candy makers say federal regulators, not states, should determine the safety of food additives. The bill, dubbed the Skittles ban’ by its critics, has fueled a national debate over these additives and how the push might alter some beloved treats if it becomes law.”

• “Both sides are digging in for a fight in the California state Senate, where the bill goes next. Supporters bristle at the term ‘Skittles ban’” saying candy makers have plenty of other coloring options. They note that the five additives targeted by the California bill are already largely banned in the European Union.”

• “Mars, the company that makes Skittles, said in 2016 it plans to remove artificial colors from all its human food, but in 2021 halted that plan, saying it found that many consumers weren’t concerned about them. Mars said it would continue its efforts to remove them in Europe.”

• “Candy makers said they don’t want to face a state-by-state approach to regulation of their ingredients.” READ MORE

TAXES

Misfits Market is leaving what has been labeled the worst state for business taxes: “The Philadelphia-born grocery delivery startup was founded by University of Pennsylvania alum Abhi Ramesh in 2018 and later moved outside the city to Delanco, New Jersey. It reached a $2 billion valuation in 2021 and acquired one of its main competitors in September. Now, just months after undergoing a companywide consolidation that saw it lay off nearly 450 New Jersey workers, the company's official headquarters have shifted to its distribution site outside of Baltimore. Most of its corporate employees work remotely. ‘While Abhi still calls Philadelphia home, the company's HQ has shifted to our facility in Hanover, Maryland. As a company, we are a fully distributed team and don't have any official offices outside our five warehouse facilities,’ said Ken Shuman, a spokesperson for Misfits Market.”

• “Misfits Market launched in North Philadelphia in 2018 as a subscription box service that partners with farms to rescue organic, oddly shaped fruits and veggies typically rejected from grocery stores and deliver them to customers’ doorsteps. The company expanded its product offerings and quickly grew to a valuation in the billions.”

• “In February, Misfits Market shuttered fulfillment centers in Salt Lake City and Dallas, along with the Delanco location which had been open since 2020. It resulted in a total of 649 layoffs nationwide, or about 33 percent of the company's headcount. That workforce reduction was preceded by Misfits Market's acquisition of Imperfect Foods, the company's primary competitor in the ‘ugly’ grocery delivery space.”

• “According to the Tax Foundation, New Jersey is the worst state for business taxes, with Maryland slightly ahead at No. 46. The Garden State has a corporate tax rate of 11.5 percent for businesses with income over $1 million, compared to Maryland's corporate tax rate of 8.25 percent.” READ MORE

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Thanks for reading, everyone. — Loren