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The Latest Supply-Chain Snafu
Restaurants are increasingly desperate to find a fresh source of disposable cups.
Here are today’s highlights:
Inflation accelerated in January.
A failed co-founder’s regret: raising money and trying to scale.
Here’s how some businesses benefit from disclosing pay ranges.
One family’s fight to save its restaurant.
THE COVID ECONOMY
Inflation accelerated in January to a 7.5 percent annual rate, a 40-year high: “The January number includes a once-a-year revision that affects seasonally adjusted data for the past five years. The Labor Department also updated the list of goods included in the calculation, known as a spending basket, to reflect consumer habits in 2019 and 2020. Prices for autos, household furniture and appliances, as well as for other long-lasting goods, continue to drive much of the inflationary surge, fueled by pandemic-related supply-and-demand imbalances.”
“Most economists expect the dynamic to fade as businesses adapt and demand normalizes.”
“But it isn’t clear when supply snarls will ease enough to take pressure off prices, particularly because of recent disruptions from the Omicron variant of Covid-19.” READ MORE
Car insurers are rushing to raise rates: “Many insurers are boosting premiums by 6 percent to 8 percent while some are asking for double-digit increases, according to industry executives and analysts. The rising rates are an example of inflation leading to more price increases as businesses try to compensate for higher costs. After having a stellar year when lockdowns kept many drivers off the roads, insurers struggled in the second half of 2021. Auto insurers posted dismal fourth-quarter results, and laid out plans to raise rates.” READ MORE
Mark Zandi says inflation will fade with the pandemic:
Disposable cups are the latest supply-chain shortage: “Restaurateurs and suppliers around the country face the same empty cupboard. Disposable cups imported from China and elsewhere are stuck in ports along the mucked-up supply chain. American paper mills are short workers. And the U.S. hasn’t caught up from the extreme cold snap in Texas last year that suspended production of resins used to make plastic cups and the coating on paper cups.”
“At Wetzel’s Pretzels, a California-based chain known for its hot pretzels and lemonade, franchise holders have joined forces to scour the inventory of local restaurant suppliers and whatever is available on Amazon. They send group alerts when they hit pay dirt.”
“‘Think about how creative you are in finding a Covid test. It’s like that,’ said Jennifer Schuler, Wetzel’s chief executive. Paper-goods suppliers told her they were running at half capacity because they were short-handed, she said.”
“Khari Parker, co-owner of Connie’s Chicken and Waffles in the Baltimore area, said area restaurants have a handshake deal to share high-demand supplies, keeping track of who owes whom with a promise to square up later.” READ MORE
Wander helps remote workers find idyllic locations with fancy desks and Teslas: “Nine months ago, [John Andrew Entwistle] founded Wander, a short-term-rental company designed for remote workers and travelers to enjoy the finer things. Wander's five homes come equipped with fitness areas, tricked-out workstations with curved monitors, high-quality microphones, and cameras — and, yes, high-speed internet. Plus, each has a Tesla for guests to drive. ‘We're seeing this massive shift within travel and how people live and work, and it's clear that this is going to continue for quite a while,’ said Entwistle, who is also Wander's CEO. ‘Even though people want to go on vacation, it's really nice to have a great desk setup.’”
“Wander owns and operates five properties in what the company calls ‘inspiring’ settings: one each in Bandon Dunes and Port Orford, along the Pacific Ocean in Oregon; one north of San Francisco along the Pacific Coast Highway in Gualala, California; one by the ski mountains of Lake Tahoe in Truckee, California; and one tucked between the desert haven of Palm Springs and Joshua Tree National Park in Yucca Valley, California.”
“Prices range from $350 a night for the two-bedroom house in Bandon Dunes to $900 a night for the roomier three-bedroom property at Wander Tahoe Slopes in Truckee.”
“Entwistle and his team just raised $20 million in Series A funding, with plans to expand to more than 50 properties by the end of 2022.” READ MORE
A co-founder explains the failure of Sweat From Home, a fitness startup: “When gyms in New York City shut down at the onset of the pandemic in March 2020, fitness trainer Brendan Bellantoni found himself unemployed after being laid off via email. But Bellantoni, who says he’s ‘not the type to cry over spilled milk,’ wasted no time and was on a call with a colleague within 15 minutes of receiving the bad news. ‘We jumped on Zoom and started Sweat From Home that night,’ he says. The co-founders had existing personal training clients from their previous employer, Orangetheory, which meant they could get started with Sweat From Home’s virtual training business immediately. Bellantoni held the first class the morning after being let go, with 60 clients in attendance.”
“‘My partner and I had different visions of what we wanted to do,’ he says. ‘We both wanted the business to succeed. We just had different ideas and approaches on how to achieve that, ultimately ending the relationship.’”
“After its first seed round, Sweat From Home spent $80,000 on marketing — for which they got a nearly zero percent return. The co-founders hired a marketing consultant that charged $20,000 for just three months of work, yet customers were not signing up for classes.”
“Bellantoni also regrets raising money and trying to expand into a larger virtual fitness company, when he thinks they might’ve had a chance if they stayed as a small, independent gym that could transition back to in-person classes when the demand changed.” READ MORE
There can be advantages for businesses that disclose salary ranges in job postings: “‘When people are searching for work, [compensation] is the most salient concern typically. So if they don't find the [salary] information they need, they may not waste the time going through the process at all,’ said [Julia Pollak, chief economist at ZipRecruiter]. At the same time, employers can also create a more qualified applicant pool. ‘It saves them the time and energy of searching through candidates who are never going to accept the job... people will self-select out when the [salary] is too little,’ said [Katie Donovan, founder of consultancy Equal Pay Negotiations].
“She added that when companies are more upfront about salaries, it can help create trust. ‘They feel more respected and apply more when there is the information...it's like, OK, they are treating me like a human being.’” READ MORE
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The star-crossed American Dream mall is looking for an extension on a $1.7 billion construction loan: “The talks are part of a larger effort to restructure the mall’s $3 billion in debt and avoid bankruptcy for the massive shopping and entertainment complex in New Jersey’s Meadowlands, the people said. The mall also has about $800 million in municipal bonds that are senior in repayment rank to the construction financing. Triple Five said last week that the mall nearly depleted a reserve account to make a $9.3 million interest payment on another $287 million of municipal bonds supported by sales tax receipts.”
“American Dream’s 2019 opening came after almost two decades of development delays, and just months before the arrival of the Covid-19 pandemic, which shut down retail shopping and entertainment venues. American Dream reopened in 2021.”
“The mall’s sales for the fourth quarter, typically the biggest for retailers because of holiday shopping, totaled $82.4 million, down almost 1% from sales in the third quarter.”
“Don Ghermezian, co-chief executive officer of American Dream, attributed the decline to a confluence of disasters: Flooding from Hurricane Ida in August and September damaged some shops, followed by an electrical fire that damaged the mall’s indoor ski slope and several other stores.” READ MORE
The inside story of how one family fought to save its restaurant: “Janet wasn’t too worried as she pulled into the covered garage that Wednesday morning at the Westfield Wheaton mall, where she was protected from the elements on her short walk to Hollywood East on the first floor. She figured Alan had a cold. Plus, she had a business to run, a Cantonese/Hong Kong restaurant that was a fixture not just of the Maryland suburbs but of the wider D.C. region, thanks largely to its dim sum service.”
“Hollywood East supported not just Alan and Janet but also two of their four sons: Corey, 35, and Tim, 29. Both worked at the restaurant and could do just about any job required. Hollywood East was also a part-time gig for their eldest son, Jeff, 38, a personal trainer who handled the restaurant’s social media accounts and sometimes its online ordering system remotely from his home in Irvine, Calif.”
“In 2019, according to tax documents shared with The Washington Post, Hollywood East earned the family $1.26 million in gross sales.”
“To Janet and Alan, Hollywood East was more than a way to support the family. For 24 years, their restaurant had been a place to gather, to share stories, to create memories. It was the place where they celebrated the Lunar New Year, where Alan and his sons performed traditional Chinese lion dances to ward off evil and bring good luck.”
“But such good-luck rituals were no match for the pandemic. Over the next 22 months, the family would be tested like never before, both personally and professionally. They would put all their effort and ingenuity into keeping their restaurant, the place where Pops had poured so many drinks and forged so many friendships, alive. Would it be enough?” READ MORE
THE 21 HATS PODCAST
Have You Considered Not Taking Investors? This week, Jay Goltz, Liz Picarazzi, and Dana White talk about the advantages and disadvantages of bringing in outside capital and expertise—something both Liz and Dana have considered. “I have a background in Russian literature and credit card marketing,” says Liz. “I'm now a manufacturer, so if I could have an outside investor who either brought that to the table or could help me with it, that would be really valuable.” But of course, there are trade-offs. Plus: we also talk about Dana’s looming franchise sales, why it’s so hard to hire lawyers and accountants, and whether there’s an opportunity for Jay in framing NFT art.
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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