Now Facebook Wants to be TikTok

Offering further proof that no business should be tied too closely to the whims of any one platform.

Good morning!

Here are today’s highlights:

• Why are franchises so big in Texas?

• The latest jobless claims suggest the tight labor market could be loosening.

• FedEx Ground depends on some 6,000 small businesses—and they’re failing.

• Somehow, the Ukrainian tech sector continues to thrive.

SOCIAL MEDIA

Following TikTok’s lead, Facebook is splitting its feed in two and giving new emphasis to discovery: “Home is the new name for the tab you see when you first open the app and is designed for algorithm-based discovery with Reels, Stories, and other personalized content. Then there’s an entirely new Feeds tab, which contains recent posts from friends, groups, Facebook Pages, and favorites, with no ‘Suggested For You’ posts in sight. The two tabs will be accessible from both the iOS and Android versions of the Facebook app, where they will start to appear in the shortcut bar today. Meta’s press release says the contents of this bar are designed to change based on which tabs users spend the most time in, but tabs can be pinned to ensure their positions don’t change.”

• “Splitting the feed like this appears to be an attempt to balance Meta’s desire for Facebook to become more like TikTok — which recommends content from across its platform based on what its algorithms think you might be interested in — and its historical approach of focusing on the accounts and pages that people actually follow.”

• “But making the newly renamed Home feed the default shows where Meta’s priorities for Facebook lie, and Meta says that the feed is set to become ‘more of a discovery engine’ going forward.” READ MORE

FRANCHISING

Franchises constitute a higher percentage of businesses in San Antonio than in any other city: “Potranco Road in San Antonio’s fast-growing far West Side is lined with recently constructed buildings containing a certain kind of business: Dutch Bros Coffee. StorageMart. Jiffy Lube. 7/11. Notice the pattern? Nearly 10 percent of businesses in San Antonio are franchises, according to a 2019 analysis of Census data. That’s a higher rate than any other city in the country and nearly twice the national average.”

• “Franchising is a popular choice for many veterans, said Teri Villanueva, a San Antonio-based franchising consultant with FranNet, which helps connect prospective business owners with franchisors.”

• “San Antonio, whose city government has trademarked ‘Military City USA,’ is home to one of the largest concentrations of military bases in the United States.”

• “Another reason for San Antonio’s glut of franchises might be the simple fact that it’s in Texas. The state blows out every state with the franchise rates in its cities. According to the same analysis that put San Antonio first, Dallas and Houston claim the third and fourth ranks for top franchised cities.”

• “Even Austin — where ‘Keep Austin Weird’ originated as a slogan to support local independent businesses — ranks only a few pegs down the list, still far above the national average.” READ MORE

HUMAN RESOURCES

The tight labor market could be loosening: “New applications for unemployment benefits climbed again last week, reaching their highest point since late last year in a sign the tight labor market is slowly loosening. Initial jobless claims, a proxy for layoffs, rose to a seasonally adjusted 251,000 in the week ended July 16 from 244,000 the week before, the Labor Department said Thursday. Last week’s claims were above the 2019 pre-pandemic weekly average of 218,000, when the labor market was also strong, and at their highest since last November.”

• “Guy Berger, principal economist at LinkedIn, said the labor market has slowed since the beginning of the year. ‘It definitely doesn’t look recessionary,’ he said of layoffs trends. ‘I don’t describe it as alarming but it’s definitely less good than it was before.’” READ MORE

THE ECONOMY

FedEx delivery contractors are going bankrupt: “FedEx's largest delivery contractor warned on Wednesday that the company's thousands of contractors are in ‘dire’ financial shape due to rising costs — and without a hike in compensation, the delivery network could fall apart. Spencer Patton, CEO of Route Consultant, released a video and press release calling for a 50-cent per stop raise for delivery contractors and a 20-cent increase for long-haul trucking contractors by November 25. Patton has a fleet of 275 delivery trucks and 225 employees.”

• “‘The FedEx Ground network is in far more peril than what anyone realizes. If Wall Street analysts, if FedEx corporate, and FedEx ground understood the degree to which the network is in danger, there would be widespread panic,’ said Patton in the video.”

• “FedEx Ground, the company's largest delivery service by volume, depends on roughly 6,000 small businesses that contract with the company for doorstep deliveries. “ READ MORE

RETAIL

Toys R Us is trying again: “From this month through mid-October, the brand is opening shops inside every Macy’s store in the United States, Macy’s said in a news release Monday. The Toys R Us shops will start at 1,000 square feet and can be 10,000 square feet at flagship locations in Atlanta, Chicago, Honolulu, Houston, Los Angeles, Miami, New York City, San Francisco and San Jose. But the industry trends that contributed to Toys R Us’s initial downfall are still in place. Although consumers have been buying more and more toys every year in terms of dollars since 2019, according to a June report by NPD, a research firm, purchases increasingly happen online.”

• “Toys R Us filed for bankruptcy in 2017, worn down by nearly $8 billion in debt and growing competition from online rivals. Two years later, it tried to come back, reviving its website and opening two physical stores in Houston and Paramus, N.J. But the pandemic had other ideas.”

• “In August, under the new ownership of WHP Global — a brand management company that bought a controlling stake in Toys R Us in March — the toy seller embarked on a new e-commerce partnership with Macy’s. At the time, Macy’s pledged to open brick-and-mortar Toys R Us shops at 400 of its locations in 2022.”

• “The marriage between Macy’s and Toys R Us resulted in increased toy sales for Macy’s and new life for Toys R Us.” READ MORE

POLICY

A Texas law designed to crack down on banks that “discriminate” against guns may be backfiring: “Texas lawmakers, frustrated with what they viewed as liberal political activism from some of the titans of American industry, banned banks last year from doing business with Texas municipalities unless they could certify to the state attorney general they don’t ‘discriminate’ against the gun industry. The Legislative Budget Board, which estimates the costs of proposed legislation, predicted no significant financial impact on the state or on local governments.”

• “But in the first eight months since the law was enacted, local governments seeking to finance building projects through bonds — for instance school districts trying to build new football stadiums, cities looking to upgrade their airports — have already paid between $300 million and $500 million more in increased interest payments ....” READ MORE

THE RUSSIAN INVASION

So far, despite Putin’s efforts, Ukrainian tech companies are thriving: “Through supply chain disruptions, port blockades and even theft, Russia has throttled the grain industry and the trade in metals, Ukraine’s largest exports. The economy is expected to shrink a startling 30 percent this year, says the European Bank for Reconstruction and Development, helping to spark global inflation and adding to fears of recession and job losses. But there is no way to lay siege to the 200,000 computer engineers and code writers in this country, professionals who need just a laptop and an internet connection to earn a living.”

• “Figures from the National Bank of Ukraine show that in the first five months of this year, technology companies brought in $3.1 billion in revenue from thousands of customers, many in the Fortune 500, a jump from $2.5 billion a year earlier.”

• “Customers from Silicon Valley to Seoul have offered lots of ardent ‘We stand with Ukraine’ affirmations during video calls, tech executives say, and many seem eager to support and enrich the country.”

• “The worry is that at some point, perhaps soon, this noble impulse will collide with the unsentimental imperatives of running a business.”

• “‘You have only a short period of empathy from customers,’ Mr. Adamchuk said before the sirens went off that recent afternoon. ‘There is some period of empathy, and then it will pass. At that point the question is: Can you deliver or not?’” READ MORE

THE 21 HATS PODCAST

Employees Still Have the Leverage: This week, Jay Goltz, Liz Picarazzi, and William Vanderbloemen discuss how their businesses are holding up and whether they’ve gotten past the labor shortage (short answer: No). The conversation veers into a discussion of how to finance growth and what to do when your bank is unresponsive (find another one!). And then Liz explains her intense distaste for dealing with lawyers, accountants, and insurance agents and how she’s trying to cope with it. “Believe me,” responds Jay, “I haven't paid enough attention to certain things that I should have, and it's cost me. But yeah, we can't every day just do the inspiring, cool, fun, oh-my-God, we-had-a-big-sale, look-at-the-problem-I-solved thing. It’s all part of the package.”

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

If you see a story that business owners should know about, hit reply and send me the link. If you got something out of this email, you can click the heart symbol, you can click the comment icon below, and you can share it with a friend. Thanks for reading, everyone. — Loren