We Are Survivors
In our latest 21 Hats Podcast episode, the owners talk about why some companies emerged stronger from the past two years.
Here are today’s highlights:
The U.S. economy is flashing a warning sign.
There’s a pretty good reason there’s a shortage of truck drivers.
The fun may be ending for meal-kit companies.
Why the American entrepreneur who controls Papa John’s franchisees in Russia is keeping the doors open and sticking around.
THE 21 HATS PODCAST
We Are Survivors: This week, two years after the pandemic first hit, Shawn Busse, Jay Goltz, and Liz Picarazzi talk about what they’ve learned, what they’re doing differently, and whether their businesses have gotten weaker or stronger. Plus: public companies are increasing prices aggressively and then bragging on earnings calls about the extra profits those increases are generating. Is there a lesson in this for privately owned businesses? Also: why does Jay seem more invested in his picture frame business than in his home furnishings business?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
The U.S. economy is flashing a warning sign: “The yield curve is flattening. Wall Street closely watches the difference, or spread, between short-term government bond yields, most notably the 2-year Treasury, and longer-term bond rates like the 10-year Treasury. As that spread diminishes, investors worry that the yield curve could eventually invert, meaning that short-term rates would be higher than long-term yields. As of Friday, the difference was just 0.25 percent, with the 10-year yield at around 2 percent and the 2-year yielding 1.75 percent.”
“When investors want higher rates for short-term bonds, it's an indication that bondholders are nervous. Typically, rates for long-term bonds are higher because you have to wait longer to get paid back.”
“The yield curve inverted in 2019 before the 2020 Covid-induced recession. It also did so in 2007 before the 2008 Global Financial Crisis/Great Recession. And it inverted in early 2000 right before the dot-com/tech stock meltdown.” READ MORE
More companies are offering phased retirement programs: “Phased retirement programs—which allow workers nearing retirement age to cut back on their hours while keeping some pay and benefits—are growing in popularity. Human-resource executives say the pandemic has opened bosses to flexible work arrangements, while the fierce hiring market and higher-than-expected rate of retirements have motivated managers to find ways to retain older workers with key skills. In a forthcoming survey of 1,736 HR executives world-wide from consultant Mercer, about 38 percent say they offer phased retirement, more than double the 17.2 percent that did so before the pandemic.”
“In the U.S. 23 percent of employers had these arrangements in 2021, up from 16 percent in 2016, according to the Society for Human Resources Management.”
“A growing subset—8 percent, up from 6 percent in 2019—have introduced formal programs, which generally target older workers who meet certain criteria.”
“Obstacles to adopting phased retirement programs can include the risk of lawsuits for allowing some—but not all—workers to participate, said Chantel Sheaks, vice president of retirement policy at the U.S. Chamber of Commerce.” READ MORE
In case you were wondering why there’s a shortage of truck drivers: “Today, long-haul truckers are some of the most closely monitored workers in the world. Cameras and sensors dot their trucks, watching the road, the brakes and even the driver’s eye movements. Once, when his truck’s cabin heater broke, Mr. Knope was forced to sleep in freezing temperatures for several days while traveling across northern Ohio and New York because an automated system made sure his engine was turned off at night. The company told him there was no way to override the system.”
“Just imagine finishing 10 hours at a desk job, only to return to your apartment to find the heat didn’t work.”
“Then imagine your apartment was your office and most nights dinner was a microwaveable burrito or a bag of fast food.”
“And then imagine your desk job required you regularly press a little pedal, you couldn’t stand up, you had essentially no face-to-face contact with co-workers, and if a bathroom didn’t easily present itself you were forced to use a plastic jug — all while a computer or a person at a desk hundreds of miles away monitors your every move.” READ MORE
FOOD & BEVERAGE
As we return to more normal life, meal-kit companies are struggling: “Meal-kit delivery giants like HelloFresh, Sunbasket, and Blue Apron are faring worse or dealing with much slower growth, especially compared to 2020 record highs, partly due to fierce competition from more than a dozen newer companies like Freshly, EveryPlate and others. Plus, several grocery stores, like Kroger, are also getting in on the action, with its purchase of Home Chef. Competition is also coming from fully reopened restaurants hustling to regain customers, as well as delivery companies like DoorDash and Uber Eats.”
“Restaurants have also gotten into the mix — Chick-fil-A and Denny’s have each launched make-at-home meal kits.”
“‘Many people had greater disposable income and more time on their hands. Dinner choices were severely limited, and consumers were left with this gap to fill,’ said Mo Dezyanian, a marketing professor at Centennial College in Toronto. ‘All of that is being reversed right now.’”
“Meal-kit delivery services may also have contributed to their own obsolescence, providing the training wheels for far more people learning how to cook during the pandemic, some experts say.”
“Discounts like $130 off your first order; or the first 16 meals free, make the cost to sign up new subscribers high. And some consumers are looking for the one-time bargain, with no intention of converting to a long-term subscription.” READ MORE
Insurance companies have been selling lots of cyber policies, but the war in Ukraine has them nervous: “Sales of cyber insurance more than doubled last year to about $15 billion as companies sought to protect themselves from the costs of ransomware and computer viruses that could cripple their operations. Like most insurance policies, these have exclusions for acts of war. The aim is to protect insurers from claims tied to cyberattacks by governments, their militaries or groups that work for them. But a judge in New Jersey poked a hole in that exclusion last year in a ruling that essentially said a common acts-of-war exclusion doesn’t cover cyberattacks.”
“Now, insurers are exploring ways to toughen up that language in future contracts, amid concerns that they could get hit by cyberattack claims under existing policies stemming from Russia’s invasion.”
“With the risk higher, insurers are being more selective than ever about the clients they will take on or renew, looking for robust network security. ‘It’s a very onerous process for an insured today to buy cyber insurance,’ said Henry Clark, head of professional and executive risks at Australian broker Honan Insurance Group.”
“Cyber insurance can be a stand-alone policy or part of a wider coverage package, addressing such things as costs to fix a breach, restore data, notify customers and monitor their credit. Terms can vary widely.” READ MORE
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THE RUSSIAN INVASION
The American who controls Papa John’s franchisees in Russia is staying in Russia and keeping the doors open: “These Papa John’s shops are primarily owned by Russians through a franchise agreement with a company controlled by Christopher Wynne, a Colorado native who has lived part time and worked in the country since the early 2000s. And even as the war with Ukraine continues and numerous global food brands and retailers suspend operations and stop selling goods in Russia, little has changed with his operation, said Mr. Wynne, 45. ‘The best thing I can do as an individual is show compassion for the people, my employees, franchisees and customers without judging them because of the politicians in power,’ he said.”
“Mr. Wynne, who has a home in Moscow, has plans to open 20 to 40 more restaurants in the country this year.”
“He did acknowledge those plans could be derailed by two factors: a deep contraction in Russia’s economy … and any retaliatory move by the Russian government against American and European brands that have paused Russian operations.”
Mr. Wynne said he hoped his business, PJ Western, which had $59 million in revenues in 2020 and oversees the franchisees that employ 9,000 people, ‘will not fall in this category since the business continues to operate.’”
“‘The vast majority of Russian people are very clear-headed and understand the dark gravity of the situation they’re in,’ he said. ‘And, at the end of the day, they appreciate a good pizza.’” READ MORE
Here’s a look at how tech startups with employees in Ukraine have been affected: “With the large community of software developers in Ukraine and Boston’s growing cluster of tech companies who employ them, SOC Prime is hardly the only [Boston-area] startup directly affected by the war. Analytics software company DataRobot and automation app developer AirSlate are assisting hundreds of their programmers who are in the region. And some individuals are jumping into action as well, from venture capitalist Semyon Dukach, who personally flew to Romania to hand out cash to refugees, to Andrew Smeaton, chief information security officer at DataRobot, who went to Ukraine to drive a co-worker out of the country.”
“Ukrainian cybersecurity specialist Andrii Bezverkhyi spent months preparing for a Russian invasion. Bezverkhyi’s company, SOC Prime, is based in Boston, but he and about 70 other employees worked from his native Ukraine.”
“But early on the morning of Feb. 24, as Russian troops crossed into Ukraine, Bezverkhyi was nonetheless caught off guard as the sound of a nearby explosion woke him at his apartment in Kyiv.”
“‘I thought it was just a bad dream,’ he recalled. ‘I looked out the window and I didn’t see anything. I thought maybe I’m being paranoid.’ Then came another explosion ― and a third.”
“‘We opened the dishwasher and started to unload it,’ he said. ‘Then we thought, No, we should not do that. . . . We need to go now.’” READ MORE
NFT-related startups have attracted more than $2.6 billion in investment money in the past year: “That total is up more than 25-fold from the year-ago period, when companies featuring NFTs raised just over $90 million. Things are not cooling either. At this week’s SXSW confab in Austin, NFTs are front and center, featured in panel discussions, a hackathon, festival merchandise and even a promotional appearance by Dolly Parton featuring NFT collectibles.” READ MORE
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