Discover more from The 21 Hats Morning Report
Competing for Instagrammable Moments
Businesses are investing more in design, hoping customers will take and share more photos.
Here are today’s highlights:
There’s a way to get an SBA loan with no down payment.
A Gallup poll finds young employees increasingly disengaged.
Gene Marks says he needs to stop complaining about how hard it is to run a business.
Franchisees like to think they’re working for themselves. Increasingly, they’re really working for private equity.
THE 21 HATS PODCAST: DASHBOARD
Getting an SBA Loan with No Down Payment: This week, 21 Hats columnist and finance expert Ami Kassar assesses the state of small business lending. Among other things, Ami discusses why it’s important to manage your EIDL loan carefully, how much of a line of credit every business should have, how to get a zero-percent-down loan from the SBA, and how much progress he has made toward firing himself.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Businesses are spending more on design and art: “Thanks to a push for ‘Instagrammable moments’ in every business from restaurants to retail stores to hotels and even apartment complexes, the clichéd starving artist is eating well in Phoenix these days. Over the past few years as creating moments that go viral on social media has become a major marketing strategy for hospitality and other consumer-facing businesses, the demand for public or semi-public art has grown considerably, more than some artists in the Valley ever thought was possible.”
“‘I think that people now are more experiential than ever, and they have a higher level of expectation — whether they realize it or not — about being visually stimulated and experientially stimulated,’ said Lauren Bailey, the CEO of Upward Projects, the restaurant company behind such eateries as Postino and Joyride Tacos.”
“‘There's a big connective piece to social media and getting people to take photos inside your restaurant and the power behind that. Marketing efforts have changed a ton and there's a lot more organic — what I like to call guerilla marketing — and interestingly, it sort of ties back to art because it incites people to take photos of your business.’”
“In the Postino Highland location in Scottsdale, Upward created a matchbook wall with thousands of matchbooks from restaurants and bars from across the world including from Windows on the World, the World Trade Center and Studio 54. In Houston, she opened a Postino in a part of town once known to be a place for first-time homebuyers after World War II, so they hung keys on walls.”
“‘You have to see that one in person because the way we hung them they sort of glisten and dangle in the light because we hung them with these safety pins,’ Bailey said. ‘When they get blown on or people walk by them, they move.’” READ MORE
Lotus Cars has taken an unusual approach to getting attention on TikTok:
Gene Marks loves the U.K., but he’s glad he doesn’t have to run his business there: “My wife and I visit London a few times a year to see her family and our friends from university. We’re here again this time for the entire month of January, living as Londoners, staying in a rented house, taking out the trash — sorry, rubbish — and buying our food at Waitrose. The stay has given me time to observe, talk to people, and walk around. And here’s what I’ve learned: I need to stop complaining about how difficult it is to run a small business in the U.S.”
“Even when the economy is strong, the U.K. regulatory environment for businesses far exceeds what we have to deal with in the U.S. Most workers who work a five-day week must receive at least 28 days’ paid annual leave a year.”
“The government also requires employers to give their workers additional time off for when they’re sick. Employers are mandated to provide paid and unpaid maternity leave, as well as making contributions to their workers’ retirement, healthcare, and liability (workers’ compensation) plan.”
“Taxes — excluding the impact of state taxes — are higher here, too, with the country’s top rate being 45 percent for those earning more than £150,000 ($180,000) as compared to the U.S. top tax rate of 37 percent for those earning more than $523,000.” READ MORE
Increasingly, people who buy franchises end up working for private equity: “In the last year and a half, since The Little Gym was acquired by a private equity-backed firm called Unleashed Brands, [Tiffany Cianci’s] work has felt far less idyllic. According to legal filings, internal documents, and interviews with more than half a dozen other franchisees — most of whom requested anonymity so as to avoid retaliation — Unleashed began to demand higher fees and institute more stringent requirements, which the independent owners thought would threaten their profits. The day after Ms. Cianci organized her fellow franchise owners into an association to push back against the changes, the corporate office told her it was terminating her license on the grounds that she was chronically late in paying her fees. Given the timing, Ms. Cianci maintains in the legal filings that it constituted retaliation.”
“Along the way, Unleashed Brands surveilled Ms. Cianci’s business with undercover shoppers, met with her landlord and disparaged her to fellow franchisees. When she tried to salvage her business under a new name — it’s now called Teeter Tots Music n Motion — the company sued, accusing her of violating its trademarks and a noncompete clause in her franchise agreement.”
“The episode has plunged Ms. Cianci about $300,000 into debt and enmeshed Unleashed in a nasty court battle not long after it acquired multiple new brands. The outcome will be a test of just how much a franchisor can unilaterally change the rules of a business relationship that has served as an on-ramp to entrepreneurship for hundreds of thousands of people.” READ MORE
Young employees are feeling increasingly disengaged: “A new report from Gallup finds that large numbers of workers, especially Gen Zers and young millennials, are not engaged with their jobs. And that could make their climb up the career ladder harder, as well as hurt companies' overall performance. The Gallup survey of roughly 67,000 people in 2022 found only 32 percent of workers are engaged with their work compared with 36 percent in 2020. The share of workers found to be ‘actively disengaged has risen since 2020, while the share of those in the middle — those considered not engaged’ — has remained about the same. Engagement had been rising in the decade before the pandemic, following the Great Recession, but started to fall in 2021.”
“‘There's a growing disconnect between employee [and] employer. You could almost equate it to employees becoming a little bit more like gig workers,’ says Jim Harter, chief workplace scientist at Gallup and author of the new report.”
“Meanwhile, workers across different categories — onsite, hybrid, and fully-remote — all saw declines in feeling connected to the mission or purpose of their organizations. Clarity of expectations was also lower across the groups.”
“And the share of workers who said their company cares about their overall wellbeing has fallen dramatically, from about 50 percent early in the pandemic, when many companies rolled out all kinds of accommodations for employees, to half that today.” READ MORE
Chain restaurants are staking their futures on take out: “America’s biggest restaurant companies made a bet during the pandemic that you would rather eat the food cooked on their premises someplace else. Now they are gambling you will want to do so for years to come. The strategy from these giant chains is to orient their operations around drive-throughs and online ordering while testing new restaurant concepts that only serve food to go. They say these designs will make them more profitable and efficient since restaurants that bring fewer customers inside cost less to build, maintain and staff. The challenge these companies face is to make such changes without sacrificing hospitality. Their risk is that consumer behavior accelerated by the pandemic becomes fleeting, as happened with exercise bikes, streaming of movies and shopping from home.”
“Of all orders placed at U.S. fast-food restaurants in 2022, 85 percent were taken to go, according to market research firm the NPD Group. That is down from a high of 90 percent during 2020 but up from roughly 76 percent in the years leading up to the pandemic.”
“Starbucks, which long described itself as a ‘third place’ for customers to gather after home and work, plans to add nearly 400 U.S. stores with only delivery or pickup service in the next three years.”
“One such experiment is a location in suburban Fort Worth that opened last month. Its most distinctive feature is an automated delivery system for customers who order ahead on the McDonald’s app. When you pull up to the window in the ‘order ahead’ lane, a conveyor delivers your food or beverage with help from a robotic arm that pushes the bag out to the waiting car.” READ MORE
A new bill offers restaurants that missed out on Covid relief a special tax credit: “The legislation would create a special tax credit available to any business that applied for the RRF but did not get a grant — roughly 175,000 businesses. The Restaurant Revitalization Tax Credit would allow employers to offset payroll taxes of up to $25,000 per quarter in calendar year 2023 depending on how many employees the business had — with larger businesses gradually seeing less and less. Businesses must also have experienced average operating losses of at least 30 percent in 2020 and 2021 as compared to 2019 or losses of at least 50 percent in either calendar years 2020 or 2021 as compared to 2019. In addition, a business must have been in operation prior to March 14, 2020, and have paid payroll tax in at least two quarters in 2021.”
“There has been a small amount of good news for restaurants, with the SBA distributing about $83 million in unobligated RRF funding to businesses in November — about 169 of them, to be exact. The decision by the SBA to release the unused money ended a month long pressure campaign by outside groups.” READ MORE
COMMERCIAL REAL ESTATE
Michael Girdley has a lot of thoughts about how businesses should structure real estate purchases:
Landlords are having little trouble lining up new tenants for Bed Bath & Beyond locations: “After years of shrinking their real-estate footprints, big-box retailers such as bookseller Barnes & Noble and discount-clothing store Burlington have shown signs of expanding again. Demand for larger retail spaces is particularly strong in the Sunbelt region, where the population has grown significantly over the last decade but very little new retail has been built since the 2008 financial crisis, said Chuck McShane, director of market analytics for the Carolinas at CoStar Group. Retail’s surprisingly strong recovery from the Covid-19 pandemic persisted in 2022 as shoppers continued to spend in person.”
“Nationwide, retailers opened 2,400 more stores than they closed last year, marking the largest net expansion in a decade, according to commercial real-estate services firm Cushman & Wakefield.”
“Demand was particularly strong for shopping centers, where vacancy declined to 5.7 percent in the fourth quarter, the lowest level since at least 2007, while asking rents increased.” READ MORE
THE 21 HATS PODCAST
Shawn Busse, Liz Picarazzi, and Sarah Segal talk about when it’s time to give up on a product. For Liz, the problem product is her package locker, which is designed to defeat porch pirates but hasn’t really taken off—especially considering how widespread the concern is. Could the glitter-bomb guy be the answer to Liz’s marketing challenge? Or is it time for her to back off? Plus: In the age of Zoom and remote workers, what have the owners figured out about running effective meetings? And if you're pricing a range of services in a proposal, do you price your offering a la carte? Do you always charge the same prices? And is there a way to ease a client into a monthly retainer?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren