How Covid Made Shake Shack a Better Business
Before the pandemic, the fast food chain had almost no digital sales. Now they constitute more than 40 percent of the business.
Here are today’s highlights:
You can probably forget about that soft landing.
Could the Fed’s rate hikes put an end to the Great Resignation?
Here are questions you should ask before hiring your first employee.
Is a buy-now-pay-later wedding really a good idea?
Katie Fogertey, Shake Shack’s CFO, explains how the pandemic made the company a better business: “This company had hardly any digital sales prior to the pandemic. When Covid hit, we went full force on digital with the app, web, [and] third-party delivery. Now we have 43 percent of our sales coming from digital channels—and that doesn’t count our in-store ordering kiosks—even as our in-Shack business doubled.”
“But then we also can target our messaging to them when we have exciting new food products, are launching limited-time menu offerings, or run promotions. We’re able to get very strategic about who we’re targeting digitally.”
“Guests gravitate to kiosks because they want some time to sit with a menu, but we see that they’re more likely to order our limited-time offers and premium-ize their products. They spend more with us, and we can redeploy labor.”
“We put in pickup shelves at most of our restaurants. Guests who are looking for that to-go experience can come in and pick up their order, and they don’t have to wait with everybody else who is waiting for their food to be made.” READ MORE
What the Fed’s interest rate rise means for Main Street: “The Federal Reserve’s decision to raise interest rates by 0.75 percent, or 75 basis points, for the third-consecutive time at the Federal Open Market Committee meeting, is a step being taken to cool the economy and bring down inflation, but it is also putting small business owners across the country in a lending fix they have not experienced since the 1990s. If the Federal Reserve’s FOMC next moves match the market’s expectation for two more interest rate hikes by the end of the year, small business loans will reach at least 9 percent, maybe higher, and that will bring business owners to a difficult set of decisions.”
“Businesses are healthy today, especially those in the rebounding services sector, and credit performance remains good throughout the small business community, according to lenders, but the Fed’s more aggressive turn against inflation will lead more business owners to think twice about taking out new debt for expansion.”
“Partly, it is psychological: with many business owners never having operated in anything but a low interest rate environment, the sticker shock on debt stands out more even if their business cash flow remains healthy enough to cover the monthly repayment.”
“‘Demand for lending hasn’t changed yet, but we’re getting dangerously close to where people will start to second guess,’ said Chris Hurn, the founder and CEO of Fountainhead, which specializes in small business lending. ‘We’re not there yet. But we’re closer.” READ MORE
Expect slower growth, higher unemployment, and perhaps an end to the Great Resignation: “Federal Open Market Committee officials see the economy growing just 0.2 percent through 2022, down from the June projection of a 1.7 percent gain. Growth in 2023 and 2024 was also revised lower. The Fed officials' projected unemployment rate, meanwhile, was increased to 3.8 percent for 2022 and 4.4 percent for the following two years. Should the estimates prove correct, that would translate to roughly 1.3 million lost jobs over the next 15 months.”
“There's a ‘very high likelihood’ that the U.S. faces a period of below-trend economic growth, Fed Chair Jerome Powell said in a Wednesday press conference.”
“The chair later added that ‘higher interest rates, slower growth, and a softening labor market’ are all part of the economic pain Americans are likely to feel as the Fed moves to slow inflation.”
“Powell's words ‘should be translated as central bank speak for recession,’ Seema Shah, chief global strategist at Principal Global Investors, said. The central bank's latest projections spell out a years-long period of economic weakness.”
“‘With the new rate projections, the Fed is engineering a hard landing – a soft landing is almost out of the question,’ Shah said. ‘Times are going to get tougher from here.’” READ MORE
Home sales fell in August as mortgage rates rose: “The U.S. housing market slowed for a seventh straight month in August, the longest stretch of declining sales since 2007, as higher mortgage rates continued to undercut buyer demand. Home sales look poised to decline further in the coming months, economists say, as mortgage rates recently topped 6 percent for the first time since 2008, when the U.S. was in a recession. Many first-time buyers have been priced out of the market, and existing homeowners are opting to stay put rather than give up their current low rates.”
“The decrease in home sales is rippling through the economy. Consumers are spending less on housing-related items such as furniture and appliances, while construction of new single-family homes has also slowed.”
“The new home market, which accounts for about 10 percent of home sales, has also shown signs of weakness. A measure of U.S. home-builder confidence fell for the ninth straight month in September to the lowest level since May 2020, the National Association of Home Builders said this week.”
“Residential permits, which can be a bellwether for future home construction, also fell 10 percent, though housing starts rose 12.2 percent in August from July, the Commerce Department said this week.” READ MORE
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Tech offices are doing away with vaccine mandates and health surveys: “Many tech employers have relaxed their own COVID restrictions, according to Joe Du Bey, co-founder and CEO of the workplace experience and people operations software maker Eden Workplace. ‘Technology companies and leaders are behaving as if this is now a manageable problem,’ Du Bey told me. ‘They are returning to the office and to corporate events in a meaningful way.’ More companies have also been letting go of vaccine mandates and dropping symptom questionnaires for employees heading to the office, Du Bey said.”
“A similar trend has emerged with Officely, a desk-booking tool that customers use inside Slack. Officely users returned half as many health surveys in August as they did at the peak in March, co-founder and CEO Max Shepherd-Cross told me.”
“‘I suggest this means that the actual amount of positive cases in offices is substantially down,’ Shepherd-Cross said in a DM. ‘However, people are still worried about it, hence the smaller drop in companies requiring health surveys.’”
“According to new data from the desk-booking software provider Robin, workers booked 22 percent of available desks last week — the first time since mid-June that one in five desks were in use.” READ MORE
Here are four questions to ask before hiring your first employee: “For those thinking of hiring their first employee — whether to shoulder the workload or help scale the business — it's important to be strategic in the timing, [Max] Mirho said. For him, the decision to hire came down to math. ‘If you have the money and can predict that it's going to make you more money, or at least find you more customers, you should make the step,’ he said. Insider spoke with Mirho and two other serial entrepreneurs about when founders should hire and what to consider before extending a contract.”
“Is there a crucial part of my business that's missing? Krishna Pendyala was an engineer before launching his first multimedia startup, which relied on audiovisual technologies. He could cover the visual components but needed an audio expert to fulfill the company's other needs. His first hire was a cofounder who could bring the skills he lacked. ‘It was a 50 percent partner, because I felt he had as much to share as I did,’ Pendyala said.”
“Am I 'EATing' well? Pendyala said the next step is setting boundaries as a founder to ensure you aren't draining your energy, attention, and time, or EAT. ‘If you don't have energy and the attention capability, what good is giving something time?’ Pendyala said, adding that if an entrepreneur feels that any of these vital resources are depleting, it's an indicator that an additional teammate may be necessary.”
“Have I reached a stage where I could hire out tasks for demonstrably less money than my own hourly rate? For example, if you're a solopreneur offering consulting services for $300 an hour and your day is flooded with administrative tasks like updating the website or designing marketing graphics, could you hire a contract worker for $30 an hour to complete that work for you?” READ MORE
Here comes the buy-now-pay-later wedding: “At the advice of their wedding planner, Annie Lee of Daughter of Design in Miami Beach, the couple decided to put their nuptials on layaway, so to speak, by using the financial services platform Maroo. Introduced in July 2021, Maroo gives couples the option to pay its network of vendors in installments over a 12-month period, similar to how ‘buy now, pay later’ programs offered by companies including Afterpay and Klarna allow people to incrementally pay for clothing and home goods bought online.”
“The average cost of a wedding in 2021 was $28,000, according to a nationwide survey of 15,000 couples conducted by the wedding planning and registry website the Knot.”
“Maroo works like this: When a couple hires a vendor in its network, that vendor can submit a bill through the platform. The couple then has the option to split up the bill’s total cost over the course of three, six, or 12 months.”
“‘A wedding is a special and momentous occasion, but at the end of the day, it’s a party,’ said [Nicole] Lapin, who also hosts a financial advice podcast, ‘Money Rehab with Nicole Lapin.’ ‘I don’t love overreaching financially for a party,’ she added.” READ MORE
THE 21 HATS PODCAST
This week, Karen Clark Cole, Jay Goltz, and Sarah Segal talk about hiring an HR person: At what size does a business need a full-time person? Do you hire someone who has experience but who might not be used to getting his or her hands dirty? Or do you hire someone you can mold to fit the culture of your business? Jay, who likes to say the entrepreneur is often the worst person to interview candidates, is currently interviewing candidates to be his head of HR, and he’s a little surprised at how few resumes he’s been getting.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren