I Need a Business Model
For our latest podcast episode, we went looking for a business owner confronting a challenge who would be willing to participate in an ask-me-anything exercise. Which owner would it be?
Good Morning!
Here are today’s highlights:
Applebee’s is offering a subscription deal that can deliver $1,500 worth of food for $200. Predictably, it’s proving popular.
A bipartisan bill that would restore expired tax breaks for businesses is stalled in the senate.
When California tightened regulations on pork production, some businesses protested; another doubled its market share.
New research indicates the Great Recession effectively provided 4 percent of all 55-year-olds with an extra year of life.
THE 21 HATS PODCAST
I Need a Business Model: This week, we offer you a taste of the 21 Hats Live event we held in Fort Worth two weeks ago. It’s a different kind of event where there are no speakers, only participants. It’s pretty much a three-day, peer-group session for business owners, where we share challenges and insights and make connections. There were 25 of us, including most of our podcast regulars. For me, the highlight was an exercise that Chris Hutchinson of the Trebuchet Group facilitates. He calls it a “Fish Bowl” because the idea is to have an owner stand up and expose everything about a specific challenge that he or she is confronting. Fortunately, we had one owner who was gracious enough to agree to reveal all, to answer any question.
And that owner was, well, it was me, actually. The truth is, this was a priceless opportunity for me to get some feedback from a focus group of smart entrepreneurs who were already familiar with 21 Hats.
It even got a little emotional, mostly because a couple of the owners were kind enough to say that, had it not been for 21 Hats, their businesses might not have survived the pandemic. We recorded the whole thing, and if you have any thoughts after listening to it, please send them my way.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
MARKETING
The Applebee’s weekly date-pass subscription is so popular it’s almost impossible to get: “Emily Brooks and her husband had some of their first dates over chicken strips and fries at an Applebee’s in Grand Forks, N.D. This year they plan to have 52 more dinners at the chain. A dinner date at Applebee’s is one of the hottest tickets in American dining, thanks to escalating food prices. A $200 Date Night Pass subscription worth $1,500 in weekly meals at Applebee’s sold out in less than a minute earlier this year, the company says, as couples like the Brookses look to spice up their relationships and save money.”
“Applebee’s, enshrined as an American date-night destination in country star Walker Hayes’s 2021 hit ‘Fancy Like,’ often advertises unlimited servings of wings or $1 margaritas. In January the chain announced an inaugural run of date-night passes: gold cards that cover up to $30 of food and nonalcoholic beverages across 52 weekly Applebee’s visits through early next year.”
“Consumers from more than 40 states scooped up the passes within 60 seconds, the company says. Daters who missed out were livid, including some who said they had placed a pass in their online basket but couldn’t complete the transaction. Peyton says the company increased its customer-support staff leading up to the pass sale, but was still caught off guard by the high interest. The company declined to say how many passes it offered initially, but it held a drawing for 1,000 additional passes in February.”
“After hearing about the Applebee’s passes, Brooks set an alarm and began clicking just as they went on sale. The couple was bowled over when Brooks clinched one. ‘Oh my word!’ she recalls thinking. ‘That’s unbelievable…we were really excited.’ They took photos holding up the gold pass when it arrived in the mail a few days later.” READ MORE
TAXES
A bipartisan bill to revive tax breaks for businesses stalled in the U.S. Senate: “U.S. businesses, big and small, have united behind a bipartisan bill to revive expired tax breaks for research and equipment spending, help that many see as critical to competing with foreign rivals or even surviving. The problem: They can’t get Senate Republicans—usually their allies—to budge. The House passed the measure 357-70 in January, but GOP lawmakers have stalled the bill in the Senate. Aside from business provisions, the measure would expand the child tax credit and curtail the fraud-ridden employee retention tax credit.”
“The tax change causing the most pain started in 2022. It requires companies to deduct domestic research costs over five years instead of doing so immediately. Other changes affect capital expenses and interest deductions.”
“The pro-bill coalition, including business groups and progressive anti-poverty activists, is readying a potential final push before tax filing season ends next month. So far, radio ads, letter-writing campaigns and calls from CEOs to senators haven’t moved the needle.”
“‘Some of these provisions have been expired since the end of 2021,’ said Neil Bradley, executive vice president of the U.S. Chamber of Commerce. ‘It’s kind of a now-or-never’ moment, he said.” READ MORE
HUMAN RESOURCES
Minneapolis boosted pay for ride-share drivers, and now Uber and Lyft say they’re leaving town: “This all could have major implications for how people move throughout the metro, whether it be for work, business travel, sporting events, or entertainment. Minnesota has 10,335 rideshare drivers, with about a third of the most active drivers doing almost 70 percent of all trips, according to Axios.”
“The new ordinance sets a citywide pay minimum for rideshare drivers at $1.40 per mile and 51 cents per minute and goes into effect May 1. Other stipulations in the ordinance state that the rate applies to portions within the city's limits, the driver must receive at least $5 per ride and 80 percent of any cancellation fee charged to a rider if they cancel after the driver has already left for the pickup, according to Axios.”
“Despite Uber and Lyft's threats to leave, it's unclear exactly how this situation might play out. As Uber and Lyft have suggested, there may be a state-level push by the Minnesota Legislature to override Minneapolis' ordinance.”
“Driver advocates and legal experts have expressed doubt the ridesharing companies would actually make true on their threats, Axios reported. They've pointed out that the two companies are still operating in New York City, New York state, and Washington state, all of which implemented new rules establishing a higher driver pay.” READ MORE
MANUFACTURING
For some manufacturers, the new goal is zero defects: “Ford Chief Executive Jim Farley has said the automaker must reach ‘a zero-defect destination,’ telling investors last year the company has used assembly-line artificial intelligence and extensive test drives to catch problems in Super Duty trucks. Stellantis, which is similarly targeting zero defects, said more than 100 new quality standards have led to a double-digit percentage drop in warranty claims. Companies in industries as varied as pharmaceuticals and snack foods have announced zero-defect goals, as has Brewer Science, a Missouri-based maker of chemicals and materials used in semiconductors that calls itself ‘a pioneer of perfection’ in a promotional video.”
“Joseph Delaney, vice president of quality at Hatch Stamping, said the Michigan-based auto-industry manufacturer has made huge strides. Hatch uses robotic vision systems and sophisticated sensors to find and contain defective parts. The company is exploring A.I. applications that could further improve error detection, though Delaney said getting to absolute zero will be challenging given the complexity of the parts and the number of things that could go wrong.”
“The zero-defect regimen of Schneider Electric, which makes products for the energy industry, includes torque wrenches that indicate when the correct tension is reached and AI tools that find anomalies. Aamir Paul, the company’s president of North America operations, said the company encourages employees to speak up—anonymously, if they prefer.” READ MORE
VENTURE CAPITAL
Venture-backed startups hired far fewer workers in 2023: “That's according to Carta, a cap-table management platform that tracks employment statistics, venture funding, and other data for more than 40,000 startups. Startups on Carta made just 267,818 new hires in 2023, which is about half of the 523,487 hires made in 2022. Startups added 525,827 new hires in 2021, Carta said. That's perhaps not surprising, given how layoffs and shutdowns have permeated across the startup sector in 2023. But it shows even as the venture-capital-backed startup sector sees rapid growth from artificial-intelligence firms, that still wasn't enough to keep startups from experiencing a major drop in hiring last year.”
“As hiring slows for startups broadly, the job market for engineers remains strong. The percentage of engineering hires ticked up last year, increasing from 23.8 percent of hires in 2021 to 27.1 percent last year.” READ MORE
INTELLECTUAL PROPERTY
A restaurant and an e-commerce site are fighting over the name Quince: “The photos of pots and knives alongside scattered tomatoes, shallots, and garlic looked as if they could have been pulled from the website of her restaurant, where a 10-course tasting menu costs $360. Even the font at the top of the email was familiar, down to the Q's curlicue. But [Lindsay] Tusk's restaurant doesn't have a cookware line. It recently collaborated with artisan knife-maker Everett Noel on custom $470 steak knives, but those wouldn't ship until June. When Tusk looked a bit closer, she realized that the email was from an entirely different company: a startup also named Quince best known for its inexpensive cashmere.”
“The Tusks say they've dealt with one-star Yelp reviews and Better Business Bureau complaints directed at the e-commerce brand for two years. At least 15 returns have been delivered to the restaurant from sheepskin rugs to T-shirts, the Tusks say, and confused shoppers keep calling the reservation line to ask about refunds.”
“The startup has filed to dismiss the lawsuit, writing in its opposition brief in February that there were at least 117 businesses in the U.S. using the name ‘Quince.’ It acknowledged calling its cookware ‘Michelin-worthy’ in a ‘single marketing email’ but said it had never used the phrase in other marketing material.”
“‘This lawsuit is meritless,’ Zachary Briers, a lawyer who represents Quince.com, told BI in a statement. ‘The restaurant charges hundreds of dollars for lavish tasting menus, which it serves to some of San Francisco's wealthiest residents,’ Briers added. ‘Quince.com sells affordable sweaters and linens to online shoppers.’"
“‘To have a VC-backed kind of company come in and just be the Goliath to our David — it just feels like it's a very uneven situation,’ Tusk told BI. ‘And that makes it even harder for us.’” READ MORE
FAMILY BUSINESS
“There is no IPO. We’re not for sale:” “Forbes estimates the Clemens family, now in its sixth generation, is worth at least $1.1 billion. The majority of that fortune comes from owning 94 percent of Clemens Food Group—longtime employees and charities own the rest. The clan also owns $200 million worth of real estate around the East Coast, including developments around their headquarters in Hatfield, Pennsylvania, as well as other investments. In addition, Clemens owns a lot of its supply chain, including a feed mill in Indiana, another under construction in central Pennsylvania, and a fleet of 156 trucks.”
“In 2023, California started enforcing Proposition 12, which legally bans farms from keeping pregnant hogs in crates barely larger than their bodies—a practice that animal care expert Dr. Temple Grandin compares to forcing a person to spend months strapped in an airplane seat. (There are now 15 other states with some sort of crate law.)”
“But competitors, including America’s largest pork processor, Smithfield, have fought the new regulations, even shutting down plants rather than comply. Those openings helped double Clemens’ market share last year, rising from 2 percent of the U.S. fresh pork market to 5 percent and going from 1 percent of the bacon market to 2 percent.” READ MORE
THE ECONOMY
It turns out that recessions offer a surprising benefit: “There's a reason governments spend so many taxpayer dollars digging their economies out of recessions. Families lose their homes. Children go malnourished. New grads spend years struggling to get their careers back on track, forgoing marriage and kids and homeownership. But a growing body of research suggests that recessions are good for at least one thing: longevity. Puzzlingly, it appears that economic downturns actually extend people's lives.”
“The latest evidence comes from ‘Lives vs. Livelihoods,’ a new paper by four researchers led by the renowned health economist Amy Finkelstein. They found that during the Great Recession, from 2007 to 2009, age-adjusted mortality rates among Americans dropped 0.5 percent for every jump of 1 percentage point in an area's unemployment rate. The more joblessness, the longer people lived — especially adults over 64 and those without a college education.”
“‘These mortality reductions appear immediately,’ the economists concluded, ‘and they persist for at least 10 years.’ The effects were so large that the recession effectively provided 4 percent of all 55-year-olds with an extra year of life. And in states that saw big jumps in unemployment, people were more likely to report being in excellent health.”
“The answer was pollution. Counties that experienced the biggest job losses in the Great Recession, the economists found, also saw the largest declines in air pollution, as measured by levels of the fine particulate matter PM2.5. It makes sense: During recessions, fewer people drive to work. Factories and offices slow down, and people cut back on their own energy use to save money.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
You’re Still Using a 20-Year-Old CRM? This week, Gene Marks tells us it’s time to update your clunky old technology. There was a time when he understood why owners said they were sticking with the old stuff because it wasn’t broken and they didn’t want the pain of fixing it. But those days are over, says Gene. If you have any hope of selling your business or passing it on to the next generation, it’s time to act. Plus: Why Gene thinks most owners need to get out of their offices more. And why he opposes a ban of TikTok.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren