They Say They Have a Deal
Today’s highlights: The best Christmas ever for the toy industry. Businesses can require employees to get vaccinated. And a very 2020 story about what entrepreneurs tell their spouses.
Congressional leaders reached agreement on a deal, and it will make expenses paid with PPP money tax deductible (with a catch): “Lawmakers had also appeared to resolve a nettlesome dispute over whether businesses that received PPP loans, and had them forgiven, will be allowed to deduct the costs covered by those loans on their federal tax returns. Those costs would be deductible under a final agreement so long as a PPP recipient can show a loss in revenue in 2020 compared to prior years, according to a lawmaker briefed on the deal.”
“The legislation includes stimulus checks for millions of Americans of up to $600 per person.”
“Congress would also extend federal unemployment benefits of up to $300 per week, which could start as early as Dec. 27.”
“The single-biggest expenditure in the legislation is about $325 billion in business relief, including about $275 billion for another round of Paycheck Protection Program funding.” READ MORE
Countries across Europe are barring travelers from the U.K. in an effort to keep out a highly infectious new strain of Covid-19: “The British government said on Saturday the new strain appeared to be spreading 70 percent faster than earlier variants and is responsible for a surge in cases in London and its surrounding areas. Recorded cases across the U.K. in the week to Sunday rose 51 percent over the week before. The emergence of the variant presents a serious setback for suppressing the pandemic before new vaccines can be rolled out across the country, suggesting major restrictions will continue into the new year.”
“The U.S. hasn’t yet followed suit.” READ MORE
Here’s how Bed, Bath and Beyond’s oversized, 20-percent off coupon became a cultural phenomenon: “We said that we’re not going to do advertising. No advertising of items, really. We were not going to change prices and run sales. That’s a very costly way of doing business. And plus, why not just tell the customer that we’ll give you a discount on the item you want — and not the one that we want to put on sale? We’ll mail a coupon, and it will be a lot cheaper.”
“The thing I remember being so intrigued by was that the company had not spent a dime on a branding campaign, ever.”
“The agency did all these markups, and they came up with this big, blue thing. It was big enough that when you put it into a pile of business letters and bills, you can see it behind all the other letters.”
“We organized our marketing plan to take advantage of the fact that it was a lot less expensive to send a coupon than to produce an entire catalog that had something like a 31-week lead time from a decision to having it in hand.” READ MORE
The EEOC has ruled that businesses can require workers to get vaccinated: “The guidance, issued on Wednesday, confirmed what employment lawyers had expected. ... Even so, employers may need to be careful about how they handle the process. Prescreening vaccination questions could violate an A.D.A. provision on disability-related inquiries.”
“A recent poll of about 2,000 New York City firefighters found that nearly 55 percent said they would not get a vaccine if offered one by their department, according to CNN.”
“Only 42 percent of Black Americans say they intend to be vaccinated, according to a Pew Research poll.” READ MORE
James Mermigis has been suing New York State on behalf of thousands of small businesses forced to shut down during the pandemic: “His clients include restaurants, gyms, Off Broadway theaters, comedy clubs, and pool halls. In addition to asking judges to loosen or even lift shutdown orders, the lawsuits intend to seek, collectively, up to $5 billion in damages. Judges have been skeptical of Mermigis’s arguments, but Mermigis keeps filing new cases.”
“The economic pressures for Mermigis’s clients, and other small businesses in the state, will only increase.”
“‘A hundred per cent of your bills, and thirty-three per cent of your income—how are you supposed to do that?’ [gym-owner Charlie] Cassara said.”
“‘I think people need to know: It’s not acceptable to lose my home, to have to dip into my child’s education fund, my I.R.A., or anything like that—to have it ruined—because I did what I was supposed to do.’” READ MORE
Is Silicon Valley destined to suffer the way Detroit suffered? “Palo Alto’s famed Sand Hill Road is no longer the only place startup founders flock as they seek to raise cash. The world’s biggest tech-focused venture capital fund is now SoftBank’s Vision Fund, which is Japanese-owned and Saudi-financed. Startups can also now go online to make deals. Or they can make connections at events like Portugal’s Web Summit, which attracts 100,000 in a normal year and has been credited with doing more than any other event to shape the world’s startup ecosystem. Paddy Cosgrave, Web Summit’s co-founder and CEO, said in an interview that ‘Silicon Valley will one day resemble the Detroit of today,’ referencing the city’s decline from its auto industry golden age.”
“Today, the country with the most startups per capita is Israel. The U.S. is ranked tenth.” READ MORE
The FDA has decided it wants to stop regulating French dressing: “French dressing is one of hundreds of foods — including mayonnaise, bread, ketchup and milk chocolate — whose makeup the agency controls. It has argued that many of the rules are more than 75 years old, and are no longer needed. The lengthy and legalistic regulations for French dressing require that it contain vegetable oil and an acid, like vinegar or lemon or lime juice. It also lists other ingredients that are acceptable but not required, such as salt, spices and tomato paste.”
“The F.D.A. said consumers had come to expect that French dressing will contain tomato or ‘tomato-derived ingredients’ and will ‘have a characteristic red or reddish-orange color.’ The dressing also tends to have a sweet taste, the agency said.”
“But some formulations, such as low-fat French dressing, contain less than the required amount of vegetable oil (35 percent by weight), and there is no evidence that consumers have been deceived or misled when buying those varieties, the F.D.A. said.” READ MORE
THE COVID ECONOMY
Parents feeling “covid guilt” may have ignited the toy industry’s best Christmas ever: “After a terrible year of remote school, canceled birthday parties and little vacationing, parents and grandparents ridden with so-called Covid guilt are spending a lot more on puzzles, crafts and games. And this is setting up the U.S. industry for its best Christmas in years—and maybe ever. ‘I’ve been in the toy industry for 30 years, and sales are just about as good as I've ever seen them,’ said Jay Foreman, chief executive officer of closely held toymaker Basic Fun. Retail purchases of his company’s toys, including Tonka trucks, have been up more than 30 percent since August and show no signs of slowing down, he said.”
“‘Toys are a way for parents to treat their kids when they are so worried about what’s going on in the world.’” READ MORE
Stuck at home, consumers are spending more on wine and spirits: “The pandemic has been a boon to retail alcohol sales of all kinds. Beer sales are up, as are those of wine and vodka. Even the lowly vermouth — the anonymous mixer that blends with the name-brand spirits in martinis and Manhattans — has seen a spike in business as consumers substitute drinking at home for visits to local bars or restaurants. What has also changed in the pandemic is consumers’ choice of libations: They’re drinking more expensive bottles.”
“‘The higher end wines are doing better than the lower end wines,’ said Peter Mondavi Jr., a third-generation owner of the Charles Krug winery in Napa Valley.”
“‘During a traditional recession, which this is not, people do buy down,’ Mr. Mondavi said. ‘They abandon the higher-end category.’” READ MORE
“One block of Boston’s Water Street offers a window on the pandemic’s toll: “The financial devastation felt on Water Street is not confined to this short block. It radiates all over the world. Baldini has never met Billy Don Grant, a skilled tomato grower in the Florida Panhandle. But it’s not hard for him to imagine Grant’s plight. The fact that Baldini sells a sad fraction of the Italian sandwiches he once did means he uses fewer tomatoes. That means Grant sells a fraction of his crop, leaving thousands of tomatoes unclaimed in warehouses or rotting on the vine. On it goes.”
“The side effects ripple out far and wide, tracing an arc of financial destruction that runs from a delivery driver in Chelsea to a paper mill in upstate New York to a family in Honduras, exposing the vital but fragile dependencies in the modern business world with every failing link weakening the next in line.”
“Water Street may lack the glamour of Newbury Street, the grandeur of Commonwealth Avenue, or even the funky spirit of Centre Street, but it is as good a place as any to tell the story of this interwoven and badly damaged economy, the one that doesn’t just bind businesses but also the people who run them.” READ MORE
THE 21 HATS PODCAST
Episode 43: All It Takes Is One Mistake: This week, in our final podcast of the year, Paul Downs, Jay Goltz, and William Vanderbloemen discuss the impact this year has had on their businesses and on themselves. William talks about the positive side of having to get back to a startup mentality: “It's definitely been a silver lining in the middle of a very dark cloud.” Paul talks about hoping he can offer his employees a good place to work for as long as possible: “I can give them probably another 10 years. And then beyond that, I don't know what will happen.” And Jay talks about the mistake he made that could have been fatal for his business: “If I wouldn't have gotten the PPP money, I don't know…”
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HOW MUCH DO YOU TELL YOUR SPOUSE?
The following reader response, which says so much about 2020 and about the resilience of entrepreneurs, comes from Liz Reisch Picarazzi: “My husband was mostly in the dark about my businesses until 2019, when a business line of credit didn't materialize and we had to personally finance a large inventory purchase. To have our house as collateral for an SBA loan was already pushing it. Now we were making ourselves the line of credit. He was not pleased, but went along with it.
“After having just scratched a huge check for the inventory, the pandemic hit and we couldn't sell it, so repaying the ‘line of credit’ was impossible. And then, he lost his job, which was the stable paycheck and health insurance. It's looking like that was a blessing in disguise, because he joined the business as COO and is strong in the areas where I'm quite challenged (especially inventory planning!).
“It's not that there were secrets before. But there were a lot of things that he never heard about because he didn't have the bandwidth to help. Now, everything is in the open, and if anything, he and the team now keep things from me because I'm not good with the details and prefer to hear about things after they're fixed. So now I'm the spouse who's in the dark!” MORE READER COMMENTS
The Morning Report will return in January. Please stay safe.