Food & Finance High School Coffee Shop a Winner

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This past October I was invited to speak about Restaurant Profitability at the Food and Finance High School in New York City. I met with a group of students who were planning a “pop-up” coffee shop, Murphy’s Beans ‘N Dreams that would be located at the entrance of their school and run for one week in December.  The students impressed me with their questions, including one about how to turn around a business in trouble.   I answered that one key strategy would be to get an honest appraisal of what is going on, which would require various team members to provide open and honest assessments.  (For more on this see Alan Mullally’s description of how he did this when he became CEO of the beleaguered Ford Motor Company, in “American Icon.”)

Students also asked how a business owner knows they are getting good prices from their suppliers. Answer: get competitive supplier quotes, based on your product specs. They also asked, how they could  stand out in the competitive restaurant space. Answer: know what makes your offering truly distinctive, and publicize that aspect.

Another satisfied customer at Murphy’s Beans ‘N Dreams

They did successfully complete their project and it was terrific to see it in action. I stopped by and was pleased to find that the Murphy’s Beans ‘N Dreams team was handling the morning rush efficiently, the place was attractively laid out, the coffee was delicious, and there was an impressive assortment of baked goods, fruit and sandwiches too.  Congratulations to Ms. Loehr’s class.

 

 

Science Industry & Business Library Celebrates its Twentieth Birthday!

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The Science Industry & Business Library (SIBL) is the New York Public Library’s premiere business library.  SIBL celebrated its 20th birthday this week, and held a celebration which aptly recognized the library’s value and importance to a broad community of entrepreneurs, small business ownersSpeaking at SIBL celebration, and others.

Some years ago, I had become known to the SIBL director Kristin McDonough as a frequent user of SIBL, and agreed to be videotaped for the NYPL archives, talking about the ways I use the library to help my clients.

In the same spirit, I was invited to this week’s birthday celebration, and asked to speak about the value SIBL has been to me and my clients.

As I told the attendees, NY City small business owners typically don’t have the in-house research capabilities which they would need to uncover information about growth, key competitors or typical profit margins in their industry.  But they certainly have a need for these insights, to help inform them on the best strategic courses of action.  This is where SIBL is an invaluable resource, with on-line user access to research databases such as First Reference, Ebsco Host, Plunkett and D&B, and expert research librarians who can advise you on the offerings of these research databases, and many others.

National Geographic’s Surprising (and Disappointing) Journey

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When I showed my daughter the American Airlines map on our flight to her freshman year at Washington University in Saint Louis, and asked her if she could name the states surrounding Missouri, she got pretty mad at me.     I’m sure there was a point in her public school education when she was required to learn the names of the 50 states, and identify them based on their shapes and/or placement in a map, but that was a distant footnote in her 12 years of public schooling.  If she wasn’t able to name all eight contiguous states as she headed off to college, I hardly thought it was some failing on the part of the National Geographic Society.

As a long time subscriber of National Geographic, I have come to count on the magazine to whisk me to places I will never visit in my lifetime, and to dazzle me with landscape and nature photographs the likes of which I will never have the access or talent to take myself.    Fifteen years ago, before going on a rafting trip down the Alsek River, I was able to learn about the section of the Yukon that the river crosses by accessing back issues of National Geographic at the NY Public Library.  Today I would probably do the same research on Flickr, and although I am still a National Geographic subscriber, that is part of National Geographic’s dilemma in this digital age.

All that said, it was upsetting to read earlier this month that 21st Century Fox would be buying 73% of the newly formed National Geographic Properties, to become its majority owner, with National Geographic Society becoming the minority owner  (the two organizations will have 50:50 board representation).  I teach financial literacy, and have shown students it is an easy enough thing to go to Guidestar.org to obtain a not-for-profit organization’s 990 report and read about its financial results.  For example, at the end of 2013, National Geographic Society had $72 million in fixed income investments, $64 million in hedge funds, $58 million in money market funds, and nearly $30 million in real estate investments.

The rationale for the sell-out to Fox was that it would allow the National Geographic Society to build this $200+ million endowment to nearly one billion dollars, and “basically double its investment in an array of science, research and education programs.”   But when it comes to funding geographic literacy, how much funding is enough, and was it really necessary to capitalize National Geographic Properties’ future cash flows in this way, to amass one billion dollars of endowment right now?

What is the opportunity for the National Geographic channel to do more to combat geographic illiteracy?  Last night the offerings on National Geographic Channel alternated between “Drugs, Inc.” and “Underworld, Inc”; not a lot being done to teach our youth about geographic literacy going on there.

And what is the role of our schools, in adopting syllabi that focus sufficiently on geographic literacy, instead of letting it fall between the cracks?    If National Geographic Society has a vision of how to improve geographic literacy education in the U.S., has their CEO Gary Knell walked south on 14th Street and across the Mall to share it with U.S. Secretary of Education Arne Duncan?

I went hiking in Glacier National Park the summer of 1979 with friends, and it rained for six straight days.  The weather cleared for the seventh and final day, for our hike down from Swift Current Pass, and we got a great view of the Grinnell Glacier.  I am returning to Glacier next summer, and will check out some of the same trails and views including a much diminished Grinnell Glacier.   Weather goes through cycles, but the gradual disappearance of the Grinnell Glacier is evidence to me (and many scientists) that planet Earth is warming.

Given Fox’s track record for disputing climate change, which of the National Geographic executives will be brave enough to risk their $400,000+ salary to propose that the magazine write a major piece on climate change once the deal with Fox is consummated at year end?  And will future climate change coverage be scientifically sound and objective?  I wish the National Geographic Society had just raised the 2016 subscription price of National Geographic magazine as needed in light of its declining subscribership, and figured out how to make do with their current $200+ million endowment, and not sold out to Fox.

Crumbs to be Quite a Workout for Lemonis

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Crumbs closure and announced bankruptcy last week raises questions on how it got to this point, and what is attracting Marcus Lemonis and the owners of Dippin Dots to buy the chain, subject to bankruptcy court approval.

 

Crumbs always felt to me like a stock offering in search of a strong business concept.   The sterile retail stores made profligate use of 1,000-1,200 square foot of space per unit to sell primarily sweet baked goods.   Many of their stores are on expensive Manhattan avenue addresses, where Gray’s Papaya manages to get by with just a quarter of that square footage to sell hot dogs and papaya juice, and Korean grocery stores get by with approximately half that space.

 

The expense and high calorie count of a single Crumbs cupcake likely reduces the possibility of bulk purchases, and the shops are sadly lacking in any kind of diverse cross-selling product offerings. Ironically, the Crumbs closest to my home is located next to a Modell’s sporting goods store and an Equinox gym, and around the corner from a yoga studio. A strategic alliance with Starbucks which was formed in August 2012 lasted only 13 months.

 

Crumbs achieved public ownership through the creation of 57th Street General Acquisition Corp, a so-called “blank check” company whose pitch to shareholders was basically “there are plenty of risks, but trust us, we’ve done this before, we know what we’re doing.” And while Crumbs management may have been strong at operations, in fact the brand was too narrow a platform, leaving them exposed to the end of the five-year cupcake craze.

 

All of which leads to the interesting question of why Marcus Lemonis (star of CNBC’s “The Profit”) is jumping in to attempt to snatch the chain from bankruptcy, and where exactly does he see the value which make Crumbs worth the risk?   It is probably more about the chance to acquire a distribution system for his growing portfolio of baked goods and sweets than the marketing allure of the Crumbs brand.     As Lemonis told the “Daily News” on 7/11/14, “we know that in order for this business model to succeed it must have a diverse offering. Our hope is to create America’s sweet and snack shop.”     Buying Crumbs out of bankruptcy will afford Lemonis a platform to do the kind of triage he does so well on “The Profit,” only instead of maximizing the selling potential of a single pie shop/wine store/gym, he now gets to do the exercise for a sixty plus unit sweets chain.   Should be quite a workout.

The Long Wait for Food Safety Modernization

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I was recently a “guest-blogger” for my good colleague John Dunham, founder of the economic consulting firm John Dunham & Associates. The topic I chose was the Food Safety Modernization Act, and the implications and reasons for its delayed implementation. Below is the start of my contribution, for the entire blog posting, please go to John Dunham and Associates – Monthly Manifesto.

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President Obama signed the Food Safety Modernization Act (H.R. 2751) into law on January 4, 2011, but two and half years later is our food any safer? A folksy video posted on the FDA website vividly explained the need for the 2011 bill in these terms:

“The last major update to our food safety laws was way back in 1938, and a lot has changed since then. Our food now often travels more than we do. It arrives from farms and facilities across town or around the world, on trains, ships and trucks. At the same time, pathogens are changing, adapting, and sometimes becoming stronger and harder to defeat. At any point from farm to table, pathogens such as Salmonella, E. Coli or Listeria can catch a ride, and spread to virtually any food. And people are living longer, and with chronic disease, making them more susceptible to food-borne illness. For these reasons, we need a Food Safety system for the Twenty-First Century.”

The Food Safety Modernization Act (FSMA) of 2011 was intended to shift the emphasis from reaction to prevention of food safety issues, by requiring mandatory preventive controls for food facilities, mandatory produce safety standards, and protections against the importation of unsafe food products. Further, the FSMA gave the U.S. Food & Drug Administration (FDA) stronger tools in terms of mandated inspection frequency, records access, accreditation of testing laboratories, and when all else fails, authority to mandate recalls of unsafe product. These were all well-conceived policy changes, driven by the highly-regarded FDA head, Dr. Margaret Hamburg. Unfortunately, the FDA has been dragging its heels in creating and implementing the specific new rules needed to gain the desired benefits of the new law, so our food safety has actually not been improved – even 30 months after the law was passed.