Stop Worrying About the Competition
Carey Smith says most owners should ignore other businesses and put their energy into differentiating their own.
Here are today’s highlights:
There’s a surprising new work-from-home trend that employers aren’t going to like (but restaurants do).
Teen employment at restaurants has taken off.
New York City has a law about using A.I. in hiring decisions that could have national implications.
Nicholas Gray helped make hot dogs and papaya juice a New York phenomenon.
Carey Smith, founder of Big Ass Fans and Unorthodox Ventures, says too many businesses focus on their competitors: “At Unorthodox Ventures, we see this problem a lot. Many founders we talk to spend an unhealthy amount of time and energy looking over their shoulder, afraid someone might be gaining on them, or changing course because of what they perceive the competition is doing. We've watched as companies signed one-sided distribution deals just to squeeze out potential competitors. Let the competitor make that bad decision. And we've watched as others have raced to market and made entirely preventable mistakes. ‘Don't worry about the competition,’ I tell them. ‘Ten and 2, 10 and 2,’ I say, like an old driving instructor who's spent too many years riding shotgun. ‘Keep your hands firmly on the wheel and your eyes on the road in front of you.’”
“Still, they have a hard time staying focused. They can't take their eyes off the rearview mirror. They're fixated on the competition because they think they'll lose out if they don't, when in fact the opposite is true: They'll lose out because they do.”
“Possibly the saddest victim of competition anxiety I've ever encountered was a fellow who owned a single hardware store in downtown Indianapolis. He and I crossed paths at a televised business event years ago. This poor guy defined his competition as Lowe's and Home Depot, and was fixated on matching their prices.”
“I told him to cut that s--- out and focus on his strengths—like his easily accessible downtown location and individualized service—and to offer customers special tools or services that no big-box store could match. Put the energy you're wasting on worrying to far better use by differentiating your business. Look ahead, not behind you, I urged him.”
“Unfortunately, his store closed a few years later. The world needs more local hardware stores run by people who know how to fix things. It most definitely could have used his.” READ MORE
The latest work-from-home trend? Brunch. “For diners, the ability to indulge midweek largely reflects the changing nature of how many people work. As people work more self-driven hours, these meals of chicken and waffles, eggs Benedict, seafood with warm grits, and other dramatically interpreted dishes are being used as a midweek culinary respite of self-care and sometimes self-indulgence. Restaurants see the potential profit as the sweet and savory meals are often easy to make and cheap to produce. There’s also the added potential earnings if the food comes paired with a bubbly beverage.”
“Before launching the first Gocha’s Breakfast Bar in the Atlanta area in 2018, Gocha Hawkins was a hairstylist. She moved from Miami to Atlanta’s southside in 2010, saw a dearth of quality restaurants in her high-income Black neighborhood, and decided to bet on all-week brunch. She says she plans to open two more locations soon.”
“Michael Reed is executive chef and co-owner of Poppy + Rose, a brunch restaurant with two Los-Angeles-area locations open daily from 9 a.m. to 3 p.m. He remembers launching the first in 2014 in L.A.’s downtown Flower Market. He says there wasn’t much brunch competition then. Today, led by dishes like brown butter waffles with brined and spiced fried chicken, Poppy + Rose is profitable, grossing almost $3 million annually, he says. That is triple the gross from 2015.”
“First Watch, a Bradenton, Fla.-based daily breakfast, brunch and lunch chain, has seasonal menus featuring French toast, breakfast tacos and granola bowls. Revenue has climbed from $436.4 million in 2019 to $730.2 million in 2022, Chief Executive Chris Tomasso says. He says all-week brunch has helped power the expansion, along with having most of his restaurants in residential areas as more people worked from home.” READ MORE
The great return to the office has suffered another blow—the worst allergy season in recent memory: “The pollen has tormented employees—and any co-workers within earshot—as they constantly sniffle and interrupt presentations and meetings with coughing and sneezing fits. Samantha Santos, a 35-year-old New Yorker, said she runs into her office bathroom sometimes to hide her coughing attacks. ‘Coughing and sneezing is so not office etiquette,’ said Santos, the chief of staff for a team of real-estate agents.”
“After her coughs subside, she said she follows a new norm in a Covid-19 world: reassuring her co-workers she isn’t contagious. She keeps a stockpile of Covid tests at home and takes one whenever she feels sick. ‘Don’t worry,’ she tells colleagues. ‘I just took a test.’”
“Allergies have given new meaning to the term congested commute. On one train ride, a fellow passenger asked Santos, who was wearing a mask, why she was there if she was sick. She explained it was allergies. ‘The city is making me feel sick,’ she said. While Santos is sneezing away, she still cringes when someone coughs nearby.” READ MORE
Despite the minimum-wage hikes around the country, teen employment in restaurants is surging: “In 2022, there were 1.9 million workers nationwide aged 16 to 19 in ‘food services and drinking places,’ according to annual averages compiled by the U.S. Bureau of Labor Statistics. That was a nearly 12 percent increase from 2019, even as overall employment in such businesses fell 6 percent over the same time period, part of a mass exodus of restaurant workers and the closure of scores of eateries across the nation during Covid.”
“Of course, restaurants have always been a popular workplace for teens. The difference now is the high concentration of such young employees. Of the 38,000 or so teenagers working in the Austin metro last year, about 16,000 were in the food service sector.”
“[Jessica] Dersen [of Workforce Solutions Capital Area, a workforce development nonprofit] encourages business, whether in food service or otherwise, to begin engaging with potential workers while they're in high school. Workforce Solutions hosts career fairs in five school districts in the Austin metro and Dersen finds teens to be a very captivated audience through these events.”
“There are some unique benefits to employing such workers, business owners said. They are often driven and eager to learn. ‘It's really refreshing to be able to present to them: here's what it's like to work at Kerbey Lane and here's what our expectations are and here's how we go about treating our people and here are our values and here are the things that we think differentiate us from your typical service industry job," [Kerbey Lane CEO Mason] Ayer said.” READ MORE
New York City has a law going into effect that will govern the use of artificial intelligence in hiring decisions: “The city government passed a law in 2021 and adopted specific rules last month for one high-stakes application of the technology: hiring and promotion decisions. Enforcement begins in July. The city’s law requires companies using A.I. software in hiring to notify candidates that an automated system is being used. It also requires companies to have independent auditors check the technology annually for bias. Candidates can request and be told what data is being collected and analyzed. Companies will be fined for violations.”
“The law applies to companies with workers in New York City, but labor experts expect it to influence practices nationally. At least four states — California, New Jersey, New York and Vermont — and the District of Columbia are also working on laws to regulate A.I. in hiring. And Illinois and Maryland have enacted laws limiting the use of specific A.I. technologies, often for workplace surveillance and the screening of job candidates.”
“But even before it takes effect, the New York City law has been a magnet for criticism. Public interest advocates say it doesn’t go far enough, while business groups say it is impractical. Businesses have criticized the law. In a filing this year, the Software Alliance, a trade group that includes Microsoft, SAP, and Workday, said the requirement for independent audits of A.I. was ‘not feasible’ because ‘the auditing landscape is nascent,’ lacking standards and professional oversight bodies.
“But a nascent field is a market opportunity. The A.I. audit business, experts say, is only going to grow. It is already attracting law firms, consultants and start-ups.” READ MORE
Businesses should start preparing for a new rule that will require them to disclose their ownership: “The rule, finalized by the Treasury Department in 2022, requires businesses with fewer than 20 employees and less than $5 million in revenue to report ownership and control information to the Financial Crimes Enforcement Network as part of an effort to cut down on fraud, money laundering and the funding of terrorism that could run through anonymous business entities. Companies formed after Jan. 1, 2024, will have 30 days to file that information. Existing companies will have to start filing that information starting Jan. 1, 2025. Violations of the new rule could result in penalties of $500 a day to a maximum of $10,000 and up to 2 years in jail for egregious violations.”
“‘They need to go ahead and start developing a process and identifying who their beneficial owners are and collecting the information required for the act,” said Chris Sloan, an attorney at law firm Baker Donelson.”
“Sloan said they also need to have a mechanism for updating the information if it changes — an area he expects will be a common trouble spot for businesses. That’s because companies will have to update their information with the Treasury Department whenever they change the information required under the new rule. One best practice is to designate a specific point person for compliance with the rule.”
“Sloan said the ownership information will remain private and accessible only to ensure against financial crimes. ‘All this beneficial owner information is explicitly not going to be publicly available. It’s not going to be subject to FOIA requests,’ Sloan said. ‘It's intended only to be used for investigatory purposes to combat money laundering.’” READ MORE
A year ago, cruises were half empty: “Cruise lines are seeing occupancy levels above 100 percent on many ships, largely due to the discounts and promotions many cruise lines offered in late fall and winter. Passengers are encountering long lines for activities on board, sold-out excursions and stressed-out crew members, a year after all but having ships to themselves. In extreme cases, cruise lines are canceling some people’s trips after overselling. Royal Caribbean Group reported that the occupancy rate across its cruise lines averaged 102.1 percent during the first quarter of 2023, up from 57.4 percent in early 2022. Norwegian Cruise Line Holdings says the occupancy rate averaged 101.5 percent during the first quarter and projects it to average 103.5 percent for the full year.”
“The average starting cost of a five-night cruise on a major cruise line for an inside cabin is $743 in June, according to data from cruise website Cruise Critic. That’s up from $551 during the same month last year.”
“Much like airlines, cruise lines sell more reservations than they can accommodate for a given booking, cruise industry executives say, under the expectation that some portion of travelers will choose not to go. ‘Hotel companies don’t build a property with the goal of having empty rooms and sports teams don’t build stadiums to have empty seats,’ Chris Chiames, chief communications officer at Carnival Cruise Line, said in an email.” READ MORE
Nicholas Gray helped make hot dogs and papaya juice a New York thing: “Nicholas Gray, the founder of Gray’s Papaya, a storefront hot-dog stand whose culinary eccentricity, competitive prices, clever sloganeering, and apparent immutability earned the affection of New Yorkers young and old, rich and poor, died on Friday at a hospital in Manhattan. He was 86. The cause was complications of Alzheimer’s disease, his daughter Natasha Gray said. Pastrami on rye and bagels and lox, to name two canonical pairings of New York cuisine, possess a kind of self-evident logic. Papaya juice and hot dogs, the specialty of Gray’s Papaya, seem, conversely, like favorites of separate — perhaps opposing — sociocultural groups. Yet this odd couple gained Original Ray’s Pizza-like ascendancy in local dining.”
“The papaya-frankfurter combination was not yet a major local phenomenon when, one day in 1973, Mr. Gray, a recently divorced Wall Street stockbroker who was discontented at work, walked by Papaya King, at East 86th Street and Third Avenue. It was crowded with happy people. The tropical juice reminded him of his homeland, Chile. The bright neon sign and the hot dogs spoke to his fondness for Americana.”
“He quit his job and entered a franchise agreement with Papaya King to open a location at 72nd Street and Broadway on the Upper West Side. After two years, he went independent and named his restaurant Gray’s Papaya. Soon his knockoff was itself being knocked off.”
“The store announced its opening with good news for the hot dog hoi polloi: 50 cent hot dogs, compared with Papaya King’s 75. (The price remained 50 cents until 1999). In 1982, Mr. Gray began offering what he called the Recession Special: two dogs and a tropical juice for $1.95. That bargain, which withstood several recessions, now goes for $6.45.”
“In addition to Gray’s Papaya on the Upper West Side of Manhattan and Papaya King on the Upper East Side — the leading purveyors — New York establishments selling hot dogs and papaya juice have included 14th Street Papaya, Chelsea Papaya, Empire Papaya, Papaya International, Papaya World, Papaya World II, Papaya Heaven, and Papaya Paradise.” READ MORE
THE 21 HATS PODCAST
Is PR Worth the Effort? This week, William Vanderbloemen says good public relations is absolutely worth the time and money. Paul Downs, on the other hand, says PR hasn’t worked for him. At this point, he says, there are all kinds of ways he’d rather spend his time and money. Meanwhile, Sarah Segal, who owns a PR firm, offers some tips on how to approach and how to employ a firm effectively. Along the way, we discuss what’s expensive when it comes to PR and whether owners can just do it themselves. Plus: Paul explains how he dug himself out of a sales hole by not doing anything differently. And we find out how the owners feel about all of the new ways they’re being asked to leave tips. Spoiler alert: they’re not loving it.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren