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Saxbys Lets College Students Run the Business
"My college jobs were meaningless," says the CEO. "And no one was teaching entrepreneurship."
Here are today’s highlights:
Playing with TikTok? Be careful what you wish for.
Restaurant service charges are confusing everyone. Will they save the industry?
Once again, the return to the office appears to have stalled.
If only there were a solution to the structural labor shortage that lies ahead.
For some, TikTok can be a miracle drug, but it can also be extremely dangerous: “For small businesses, it's no small feat to survive going viral. About two months after opening early this year, Blue Tile Coffee, at Washington and Heights Boulevard, was featured on Houston Hotspots, an account that posts quick videos showcasing restaurants, cafes and outing ideas around Houston to its roughly 273,000 followers — about 12 percent of the city's population. In fewer than 15 seconds, the video showed off the cafe's big windows, comfortable seating and decor inspired by the white and blue tiles that mark many of Houston streets. Within an hour of the video being posted, people started flooding in, according to owner Jonathan Elkins. More than 10,000 people have watched the Houston Hotspots video, not to mention several other TikTok creators that visited in the days to come. Elkins said, adding that it was packed from open to close.”
“Some businesses design their interiors with neon signs or painted backdrops to encourage customers to take pictures and videos for social media. But Elkins had done none of that, and had no way to expect how quickly his cafe would blow up on social media.”
“Going viral made Blue Tile better overall, Elkins said. It brought in good business and helped train his staff with how to deal with it. Now busy shifts feel normal and normal shifts feel slow.”
“‘TikTok is so fast,’ said Nicole Markets, a content creator and consultant. ‘It’s the fastest type of marketing that anybody can do these days. It’s literally a blink of an eye and you’ve got people lined up at your door.’” READ MORE
Restaurant service charges confuse customers and even employees, but they’re not going away: “Dinner is over, the plates have been cleared and the server discreetly drops the bill on the table. But there’s something less familiar at the bottom of the check — a service charge, tacked on with little explanation.Questions immediately swirl. Is this a tip? Does it go to the wait staff? If not, should I leave more money? Is it rude if I ask my server any of this? ‘You shouldn’t have to ask,’ said Chloe Lynn Oxley, a project manager in Washington, D.C., who dines out frequently and — like many diners — is often bewildered by the fees. ‘It should be very clear what the service charge is, and what it is for.’”
“The charges are meant to help shore up a restaurant industry that has long run on slim profit margins and now faces a host of challenges, including inflation, labor shortages and an expectation — or mandate, in rising minimum wages — that workers get better wages and benefits.”
“To deal with all of this, an increasing number of restaurants across the country, from fast-food chains to fine-dining destinations, have in recent years added service charges of up to 22 percent, and sometimes more.”
“For restaurateurs, these service charges offer some flexibility. Gratuities are tightly regulated by law and can be distributed only to tipped workers. A service charge belongs to the employer, who can choose how to spend it, said Brian Pollock, an employment lawyer in Miami.”
“Many restaurant owners view the service charge with ambivalence, as a necessary but imperfect fix for an industry that looks increasingly unsustainable. ‘If we didn’t have the service charge, we might be out of business in a couple weeks,” said Graham Painter, who last year added a 22 percent charge at Street to Kitchen, a Thai restaurant in Houston.” READ MORE
A Philadelphia-based coffee company is training college students to be CEOs: “Saxbys now has ‘experiential learning cafés’ across five states, and recently opened its 18th location, this one at the University of the Arts in Philadelphia. The student CEO manages, on average, ‘an annualized million-dollar business with anywhere between 40 and 60 employees,’ [CEO Nick] Bayer says. ‘They make hundreds of decisions, big and small, every day with real consequences. It’s one thing to learn in the classroom, but this is a real live business.’”
“At Saxbys, experiential learning in campus cafés made up about a quarter of its business before the pandemic. That’s when Bayer says he realized ‘the world didn’t need another coffee company,’ and pushed forward with plans for the privately held company to earn B Corporation status and focus exclusively on expanding the student-run locations on college campuses.”
“‘My college jobs were meaningless,’ says Bayer, who as a first-generation college graduate had no choice but to work as an undergraduate at Cornell to pay for tuition. ‘And no one was teaching entrepreneurship.’” READ MORE
The return to the office has stalled: “When average city office-occupancy rates at the start of the year surpassed 50 percent for the first time during the pandemic, many landlords viewed this milestone as a sign that employees were finally resuming their former work habits. Those office-usage rates have barely budged as most companies have settled into a hybrid work strategy that shows little sign of fading. About 58 percent of companies allow employees to work a portion of their week from home, according to Scoop Technologies, a software firm that developed an index monitoring workplace strategies of close to 4,500 companies.”
“The number of companies that require employees to be in the office full time has actually declined to 42 percent, from 49 percent three months ago, Scoop said. Employees at companies with hybrid strategies work an average of 2.5 days a week in the office.”
“As long as unemployment remains low, workers have the leverage to entrench these policies, said Robert Sadow, Scoop’s chief executive and co-founder. ‘Employees are saying we are going to push really, really hard against being required to be in the office five days a week,’ Mr. Sadow said. ‘Most companies in the current labor market have been reluctant to push [back] that hard.’”
“New York City Mayor Eric Adams last week announced tax incentives for office-building owners to upgrade buildings constructed before 2000, hoping that a more modern workplace would boost occupancy. ‘Every office sitting empty means less funding for everything from schools to affordable housing,’ Mr. Adams said.” READ MORE
Other countries are responding to the labor shortage by lowering barriers to immigration: “Government actions to attract foreign nationals for skilled and unskilled jobs have spread from Germany to Japan and include countries with longtime immigration restrictions and some with a populist antipathy to streams of foreign workers. The U.S. remains an outlier. Hundreds of thousands of migrant workers have arrived through back channels, but the country isn’t openly welcoming more legal workers, despite the tight labor market. That hesitancy carries economic costs, including persistent worker shortages and wage inflation, according to economists and some U.S. officials.”
“Beyond being needed to fill pandemic-driven labor shortages, migrant workers are in demand to fill the gap left by retiring baby boomers and declining populations, economists and Western officials say. ‘The labor forces of richer countries are hollowing out,’ said Michael A. Clemens, an economics professor at George Mason University.”
“Germany is rewriting immigration laws to bring in more college graduates as well as blue-collar workers under a new points-based system. Points will be awarded based on age—younger people receive more—educational qualifications, work experience and German-language competency.”
“Canada announced plans late last year to take in nearly 1.5 million more migrants by 2025. Western Australia recently sent a delegation to the U.K. and Ireland to recruit tens of thousands of workers, including police, mechanics and plumbers.” READ MORE
Miguel McKelvey, the other co-founder of WeWork, has bought the boutique apparel maker, American Giant: “McKelvey paid $10 million last year for a controlling stake in American Giant, a made-in-the-USA apparel brand that became famous in 2012 for creating a sweatshirt called ‘the greatest hoodie ever made.’ His ownership of the fashion brand, which hasn’t been previously reported, is part of a larger vision he has for his post-WeWork life. He said he wants to revitalize American factories and restore them as economic drivers.”
“In 2021, McKelvey met Bayard Winthrop, the founder of American Giant, who was looking to raise capital. The two men believed in the importance of buying American-made, and Winthrop asked McKelvey if he’d be interested in going bigger — not just investing but taking over.”
“Winthrop makes the day-to-day decisions at American Giant, but McKelvey helps with strategy and branding. The WeWork co-founder envisions a future in which manufacturing jobs become more desirable careers.” READ MORE
Consumers are still spending money: “Americans boosted their retail spending in April for the first time in three months, a sign of consumers’ continued resilience despite high inflation and rising interest rates. Retail sales—a measure of spending at stores, online and in restaurants—rose a seasonally adjusted 0.4 percent last month from the month before, after declining in February and March, the Commerce Department said Tuesday.”
“Consumers spent more on autos and dining out last month, while boosting online purchases. They cut spending on gasoline and on big-ticket purchases such as appliances and furniture.”
“Consumer spending is the primary driver of U.S. economic growth. Tuesday’s retail figures add to a mixed picture of economic activity in recent months as the Federal Reserve raised interest rates to fight inflation by slowing the economy.” READ MORE
A startup from the co-founder of Pluto TV, Ilya Pozin, will give away 55-inch 4K TGV sets: “On Monday, Pozin officially unveiled Telly, a company that plans to ultimately give away millions of premium TV sets, for free (its online reservation system opened Monday morning for an initial batch of 500,000 sets). ‘For too long, consumers have not been an equal part of the advertising value exchange,’ Pozin says. ‘Companies are making billions of dollars from ads served on televisions, yet consumers have historically had to pay for both the TV and the content they watch. All of that changes today. When I co-founded Pluto TV, we created an entirely new model that offered amazing TV content to viewers for free. Now, with Telly, we are providing the actual television for free as well.’”
“As Pozin described the device, the 55-inch display operated as a standard TV, while the second screen displayed the weather, sports scores and stock prices, as a sponsored news ticker scrolled across the bottom. On the right was a square box where ads cycled through.”
“The Telly TV set is not a cheap discount-store TV. Pozin says that if it were to be sold at a similar markup to other TV sets, it would retail for more than $1,000, and that the goal was to build a ‘future-proof’ TV that would not be outdated in three or four years.”
“A free TV set, supported by advertising and data, has been a long time coming, with many marketers predicting it as ‘inevitable’ years ago. Already smart TV devices like Roku, Amazon Fire and Google Chromecast have brought their prices down close to zero, seeking to monetize through ads and data over time. And the price of TV sets has been on a steady decline as well, as device makers sell viewer data and deliver ads to their own operating systems.” READ MORE
THE 21 HATS PODCAST
Marketing Workshop: I Didn’t Know It Was Going to Work: This week, Shawn Busse and Loren Feldman talk to John Garrett about his contrarian approach to newspapers, marketing, and competition. Garrett has built a Texas-based chain of print newspapers that has managed to outcompete established news organizations and digital platforms for both community engagement and local advertising. Not surprisingly, when he first took out a $39,000 credit card loan in 2005 and started telling people that his business model would feature a monthly print publication that he would mail to everyone in his target communities for free, he didn’t get a lot of congratulations. And not everything he’s tried has worked. An expansion into Arizona, Tennessee, and Georgia, for example, failed early in the pandemic. But almost 20 years after its debut, a period during which most local publications have been in retreat, Community Impact is thriving.
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Thanks for reading, everyone. — Loren