Is It Time to Rethink Restaurants? 

Today’s Highlights: Car dealers struggle to sell electric vehicles. Should the PPP window be extended? And what happened when a VC firm tried investing in profitable companies.

THE 21 HATS CONVERSATION

Will restaurants ever be the same? Should they? On Tuesday at 3 ET, I’ll host a webinar conversation on the future of restaurants. Even in good times, restaurants are a tough business. Margins are thin, and the pay structure is challenging at best. And these have not been good times. Is this an opportunity to re-think the business model? The conversation will feature Ari Weinzweig of Zingerman's in Ann Arbor, Brian Canlis of Canlis in Seattle, and Carol Downs who ran Bella Luna & the Milky Way for more than 25 years in Boston -- until the pandemic forced it to close. Bring Your Own Questions!

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SALES

Tesla aside, car dealers are still figuring out how to sell electric vehicles: “Car dealer Brad Sowers is spending money to prepare for the coming wave of new electric models from General Motors. He is installing charging stations, upgrading service bays and retraining staff at his St. Louis-area dealership to handle the technology-packed vehicles. But when he considers how many plug-in Chevy Bolts he sold last year—nine, out of the nearly 4,000 Chevrolets sold at his Missouri dealerships—it gives him pause. ‘The consumer in the middle of America just isn’t there yet,’ when it comes to switching to electric vehicles, he said, citing the long distances many of his customers drive daily and a lack of charging infrastructure outside major cities.”

  • “About 180 GM dealers, or roughly 20 percent, have decided to give up their Cadillac franchises rather than invest in costly upgrades that GM has required to sell electric cars.”

  • “[Massachusetts dealer Chris Lemley] recalls Ford Motor rolling out an all-electric Focus that sold poorly and stacked up on his lot. It was discontinued in 2018.”

  • “Tesla’s influence on the electric-car market has created a new standard for car shoppers, offering an online transaction and a simplified lineup with no price negotiation.” READ MORE

GOVERNMENT SUPPORT

The PPP program is slated to expire at the end of this month: “Pointing to troubling survey data from August—showing still high levels of concern among U.S. businesses—a coalition of business groups led by the U.S. Chamber of Commerce sent a letter to lawmakers this week, urging them to extend the PPP through December 31, 2021. ‘Small businesses continue to struggle, especially minority-owned businesses,’ the business leaders wrote. ‘Extending the PPP deadline through the end of this year will ensure that the segment of small businesses facing the greatest obstacles do not get left behind.’”

  • “While the first round of PPP, which amounted to $349 billion, was exhausted in about two weeks, as banks routinely favored their existing and bigger ticket clients, this latest round has been marked by delays.”

  • “As many as one third of second-draw applicants received requests for more information, after the Small Business Administration's automated PPP system increasingly returned error codes arising from everything from mismatched data between one round to the next to straight up wrong information--like applicants who were told, incorrectly, that they had criminal records.” READ MORE

REOPENING

When a Mexican restaurant in Texas kept its mask rule, people threatened to call ICE: “This week, after Texas Gov. Greg Abbott (R) said Tuesday that he would rescind the statewide mask mandate while the vast majority of residents remain unvaccinated, the tough choice to enforce public health guidance fell to business owners, and Picos announced it would continue requiring masks. But, after such a challenging year, the reaction to their decision was disheartening, co-owner Monica Richards said: Several people sent hateful messages through social media and called the restaurant, threatening to report staffers to Immigration and Customs Enforcement.”

  • “‘It was just horrific,’ Richards said. ‘People don’t understand unless you’re in our business what it felt like, how hard it was to go through everything we went through during covid.’”

  • “‘Being Hispanic, and going through that immigration process, and finally receiving your papers, and then for somebody to start threatening you after you’ve been through all that, that’s crazy,’ she said. ‘t’s just heartbreaking.’” READ MORE

THE COVID ECONOMY

On Saturday, we asked Morning Report readers if their businesses were seeing signs of life. Paul Downs responded: “We received some nice orders this last week and are booked through the end of May. Considering we sell office furniture, that's a vote for normal work life sooner than I would have thought.” LEAVE YOUR COMMENT

How can Covid-hit businesses plan for the summer? “Fireworks by Grucci, the country’s best-known fireworks show operator, is providing clients with a measure of financial security this year. If they are forced to cancel an event, even at the last minute, because of the pandemic, they won’t lose their money. ‘It gives them the comfort’ they need, said Phil Grucci, chief executive and creative director of the business his family started in 1850. In the past few weeks, event planners have started to inquire about the Fourth of July and other dates, and Mr. Grucci has nearly 40 new contracts in the works.”

  • “The recent decision to add the clause, which requires canceled shows be rebooked, wasn’t an easy one, he said.”

  • “It can take up to a year to plan an event, and the closer it gets to the program date, ‘the more we have invested,’ he said.” READ MORE

ECOMMERCE

Target is investing billions to remodel brick-and-mortar stores (for ecommerce): “The concept is to have employees focus more on pick and packing and improved customer service. Target said it will invest about $4 billion annually to modernize the existing locations, including optimizing them for online order fulfillment and customer pickup. The move will build on a similar investment of about $2.65 billion that Target made in 2020.” READ MORE

FINANCE

A venture capital firm tries something crazy—backing businesses that make money— and fails: Indie.vc was launched in 2015 as a pilot program by O'Reilly AlphaTech Ventures, which was a typical early-stage VC firm. Its focus was sustainable — and often profitable — businesses that could use a capital boost but weren’t looking to hyperscale. It also allowed founders to buy back their stakes via ‘redemptions.’”

  • “The idea was to back the next GitHub, which became profitable early on and didn’t take any VC money for its first four years.”

  • “Limited partners were unimpressed, particularly as many of their other VC fund bets kept minting overnight unicorns.” READ MORE

OPPORTUNITIES

As Americans take to the road, Airstream is booming: “The pandemic has also ushered in a new Airstream customer base. Many of its new customers — 56 percent during the past eight months — are new to RV life, said Wheeler. The vehicles have traditionally attracted couples and singles, but this year there were more families. In response to customer requests, Airstream is also building a variation of its Flying Cloud model with a new floor plan. This one, says Wheeler, has a separate, tech-enabled office, including being WiFi-ready and with hookups for a computer and mounted monitor. The new model goes for $107,000.”

  • “RV shipments set records in November and December of last year, according to the RV Industry Association.”

  • “It will take a year for the company to fulfill existing orders.” READ MORE

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HUMAN RESOURCES

The robots are coming for white-collar workers: “These robots are here to merge purchase orders into columns J and K of next quarter’s revenue forecast, and transfer customer data from the invoicing software to the Oracle database. They are unassuming software programs with names like ‘Auxiliobits — DataTable To Json String,’ and they are becoming the star employees at many American companies. Some of these tools are simple apps, downloaded from online stores and installed by corporate IT departments, that do the dull-but-critical tasks that someone named Phil in accounting used to do: reconciling bank statements, approving expense reports, reviewing tax forms.”

  • “Recent advances in A.I. and machine learning have created algorithms capable of outperforming doctors, lawyers and bankers at certain parts of their jobs.”

  • “And as bots learn to do higher-value tasks, they are climbing the corporate ladder.” READ MORE

Remote work is reshaping America’s urban geography and creating Zoom Towns: “Smaller metro areas such as Miami, Austin, Charlotte, Nashville and Denver enjoy a price advantage over more expensive cities like New York and San Francisco, and they are using it to attract newly mobile professionals. Smaller cities like Gilbert, Ariz., Boulder, Colo., Bentonville, Ark., and Tulsa, Okla., have joined the competition as well, some of them launching initiatives specifically designed to appeal to remote workers. And more rural communities including Bozeman, Mont., Jackson Hole, Wyo., Truckee, Calif., and New York’s Hudson Valley are becoming the nation’s new ‘Zoom towns,’ seeing their fortunes rise from the influx of new residents whose work relies on such digital tools.”

  • “The productivity boost to the U.S. economy from remote work could be as high as 2.5 percent, according to research by Stanford University economist Nick Bloom and colleagues.”

  • “For cities, remote work changes the focus from luring companies with special deals to luring talent with services and amenities.” READ MORE

LOGISTICS

Global Shipping is in chaos: “Off the coast of Los Angeles, more than two dozen container ships filled with exercise bikes, electronics and other highly sought imports have been idling for as long as two weeks. In Kansas City, farmers are struggling to ship soybeans to buyers in Asia. In China, furniture destined for North America piles up on factory floors. Around the planet, the pandemic has disrupted trade to an extraordinary degree, driving up the cost of shipping goods and adding a fresh challenge to the global economic recovery. The virus has thrown off the choreography of moving cargo from one continent to another.”

  • “‘I’ve never seen anything like this,’ said Lars Mikael Jensen, head of Global Ocean Network at A.P. Moller-Maersk, the world’s largest shipping company. ‘All the links in the supply chain are stretched. The ships, the trucks, the warehouses.’” READ MORE

THE 21 HATS PODCAST

Episode 51: Chicago, New York, or Atlanta? Dana White was says she’s looking seriously at expanding to another city: “I'd like to make a decision by the end of March, and I'd like to be opening or in the process of opening by this fall. I'm waiting to see how the vaccine does.” Dana also talks about her experience with venture capitalists who seem to be telling her, “We’ll be happy to give you money—as soon as you don’t really need it.” Plus: Stephanie Stuckey explains her team’s recent three-hour debate about whether Stuckey’s should sell the road trip or the pecan. And Dana, Stephanie, and Jay Goltz discuss Clubhouse, the new social media platform. Is it just a time suck, or does it offer real value to business owners?