Is SS coping with the EU CRISIS

[ProgMatinee]

You're only talking about a handfull of companies here, and in some cases the risks for investment was to compensate for an ever-growing payroll demand. I'm talking in general.

I don't think so. Lets talk about the food industry since its near and dear to my stomach...lol.

Hops, Chevys, Bennigans, Benchwarmers... do you really think employee salaries killed these brands? 90% of their employees make minimum wage or work on tips.

It was incredibly bad BUSINESS AND INVESTMENT/REAL ESTATE decisions that killed these brands. Not employees. The only businesses that salaries kill are unionized. Unless you consider CEOs and other execs. Those guaranteed salaries kill companies. For most companies their employees are expendible and can be hired for less if necessary. So I can't blame employee salaries here.

 

[thenammagazine]

I don't think so. Lets talk about the food industry since its near and dear to my stomach...lol.

Hops, Chevys, Bennigans, Benchwarmers... do you really think employee salaries killed these brands? 90% of their employees make minimum wage or work on tips.

It was incredibly bad BUSINESS AND INVESTMENT/REAL ESTATE decisions that killed these brands. Not employees.

How do those companies outsource?

Waiters working for minimum wage is a decades old concept anyway but is kinda irrelevant given most don't even declare non CC tips for taxes, so there are perks to the jobs you're talking about.

But let's be realistic. Whats killing those businesses has more to do with the recession and people staying home or choosing less expensive alternatives when dining out.

 

[ProgMatinee]

Sorry, but no. What's killing those businesses is taking on debt and/or bad leases so they can open 300 new stores every year because their execs and stockholders/investors have hard ons for unrealistic growth.

They see up and coming restaurants with x growth and think they can mimic it. Instead they should have been comfortable with steady earnings and positive cash flow.

Not all businesses need to double or triple every year. They just need to retain solvency and cash flow.

Investors who have no understanding of long term stewardship of a business lead these places to ruin. Thats the problem with mob investing as opposed to private ownership.

 

[thenammagazine]

Sorry, but no. What's killing those businesses is taking on debt and/or bad leases so they can open 300 new stores every year because their execs and stockholders/investors have hard ons for unrealistic growth.

They see up and coming restaurants with x growth and think they can mimic it. Instead they should have been comfortable with steady earnings and positive cash flow.

Not all businesses need to double or triple every year. They just need to retain solvency and cash flow.

Investors who have no understanding of long term stewardship of a business lead these places to ruin. Thats the problem with mob investing as opposed to private ownership.

Because opening new restaurants and not having the patrons to fill the seats affects absolutely nothing, right? You ask a guy in the ever-growing line at EDD what he's having for dinner. I doubt it'll be "Oh, we're hitting up Hops, Chevys, Bennigans or Benchwarmers!"

 

[ProgMatinee]

But that boils down to bad business decisions.

DON'T OPEN NEW RESTAURANTS IF YOU DON'T HAVE CUSTOMERS!

When you take on debt to do that you risk having to close the restaurants you already had.

Is this revolutionary thinking or something?

 

[thenammagazine]

But that boils down to bad business decisions.

DON'T OPEN NEW RESTAURANTS IF YOU DON'T HAVE CUSTOMERS!

Is this revolutionary thinking or something?

There's more to it than you're thinking. Deals were probably set in place, contracts signed, etc., before the recession hit. It would've likely cost them more in legal actions to back out of the agreements, than follow through. Remember, declaring bankruptcy nowadays doesn't forgive any and all debt owed. They would still be responsible for paying out the contracts as well as any penalties for defaulting. But in the end, it still boils down to a lack of patrons.

 

[ProgMatinee]

It revolves around execs and investors who are only temporary custodians of the business risking the long term health of a company for short term gains (to boost their bonuses).

Investors (and it gets worse when we start thinking about how watered down ownership is via mutual funds) don't understand the businesses. They see Chipotle of the 2000s and see skyrocket growth. Well their growth is because a)great company and b)its easy to grow when you're small. Exponential math and such. Its harder to grow when you're already big.

But investors see stocks of Chipotle split and stuff and they tell the management to replicate the growth, to the risk of the entire company.

Sometimes its okay that a business does well enough to pay its current employees, cover their debts, and have a little extra to pay dividends or something. Nothing wrong with that. But when you start taking profits and leveraging unsustainable growth with debt. You're screwed.

You can't blame the waitresses for that.

 

[thenammagazine]

At some point you're going to have to tie this all together. You initially stated outsourcing, then investors (which I kinda agreed with), growth/espansion and now you're back on investors.

In the end, again, it's boiled down to a lack of patrons. You make business decisions based on growth, not a-day-at-a-time estimations of profit. That's a failed business practice and you'll never realize your full market. As I stated earlier, I bet a lot of these expansion deals were put in place long before the recession started and were based upon a consistent increase in patrons.

 

[ProgMatinee]

Sorry, but lack of understanding on your part is not a failure on my part. It is all tied together. Do you think decisions of growth and expansion are not dependent upon the desires of the investors?

The lack of patron problem would not be a problem if these companies didn't open way too many establishments. More establishments=more tables. Pretty simple here.

If you started 4 more magazines of the exact same subject matter when there were no readers to justify it would you blame the lack of readers for the failure or would you realize that was a dumb move?

 

[thenammagazine]

Sorry, but lack of understanding on your part is not a failure on my part. It is all tied together. Do you think decisions of growth and expansion are not dependent upon the desires of the investors?

The lack of patron problem would not be a problem if these companies didn't open way too many establishments. More establishments=more tables. Pretty simple here.

If you started 4 more magazines of the exact same subject matter when there were no readers to justify it would you blame the lack of readers for the failure or would you realize that was a dumb move?

No, you're not understanding.

Let's use magazines as an example.

Let's assume for 2011 I have X number of sales and it's been growing exponentially since 2004 when I first started. Since doing so, readers have expressed interest in us branching out into magazines based solely on gear, pistols, rifles and fields. So, based on our growth, I meet with investors and get them to finance us branching out into an additional 4 magazines. Remember, the consistent growth over the past 7 years shows we should be more than financially capable of pulling this off. So, the investors green light the new magazines. I then contract writers, graphic artists and the print shop to assist with producing them. Then, come late December, the economy tanks and the first thing cut by airsofters is recreational spending. Now, suddenly, I'm contractually obligated to fulfill the contracts, but since the economy tanking, our readership on the main magazine has dropped by 40%. I'm still contractually obligated to print those four new magazines as well as the current one as the money from the investors has already essentially been spent and I now have to worry about penalties for backing out of said contracts, so I'm left with nothing short of producing the whole lot and taking the financial hit when they don't sell as that hit is less than the penalties I'd pay for defaulting.

My point is, you can't just say, "Oh, business sucks now. Sorry guys!" and walk away. There's more accountability to it than that, both morally and legally.

 

[ProgMatinee]

Your example makes sense, but its not really my example. If you truly had the justification of the growth and then the ____ tanked, that is understandable. The key to your analogy may be that the private owner of the company (who presumably feels responsibility and stewardship of the company and its employees) is the driving force of the risk and then sought out investors.

I think that's not the case with some of these publicly owned companies. Here they have investors with no expertise, no stewardship, and merely short term goals, are leading the short time executives and management in what to do. If you have weak or bad management who will not tell the investors to f off, the company will fail.

This is compounded with the fact that most owners are watered down even more via mutual funds, in which case they only care about the overall success of the mutual fund, but thats too indepth for this discussion....

Anyway, here is my analogy.

Lets say you took the magazine public. Maybe they kept you as the CEO. The investors are telling you to break up the magazine into multiple rags not because the airsoft industry calls for it, but because Food Network Magazine recently spun off 5 rags based on their tv hosts and it was a huge hit.

That's my point is I think a lot of uneducated investors are taking the growth of 1 company and trying to force another company that may be in a completely different point in their companies life cycle into what the other is doing.

 

[thenammagazine]

Your example makes sense, but its not really my example. If you truly had the justification of the growth and then the ____ tanked, that is understandable. The key to your analogy may be that the private owner of the company (who presumably feels responsibility and stewardship of the company and its employees) is the driving force of the risk and then sought out investors.

I think that's not the case with some of these publicly owned companies. Here they have investors with no expertise, no stewardship, and merely short term goals, are leading the short time executives and management in what to do. If you have weak or bad management who will not tell the investors to f off, the company will fail.

This is compounded with the fact that most owners are watered down even more via mutual funds, in which case they only care about the overall success of the mutual fund, but thats too indepth for this discussion....

Anyway, here is my analogy.

Lets say you took the magazine public. Maybe they kept you as the CEO. The investors are telling you to break up the magazine into multiple rags not because the airsoft industry calls for it, but because Food Network Magazine recently spun off 5 rags based on their tv hosts and it was a huge hit.

That's my point is I think a lot of uneducated investors are taking the growth of 1 company and trying to force another company that may be in a completely different point in their companies life cycle into what the other is doing.

It really doesn't make a difference, whether it's a group of people making the decision or one person. Companies don't throw all the eggs in one basket and suddenly decide to expand. It would've been them paying close attention to charts depicting profit margins over the course of several months/years. I'm certain that if the economy held, those restaurants would be reaping the rewards of a well planned campaign for expansion. Unfortunately the economy came along and suddenly pulled the carpet right out from underneath them.

Of course, in all this, Starbucks remains the anomaly. I just don't understand how a business that charges $4 for a cup of coffee has maintained growth with the tenacity of an unhindered cockroach infestation, despite the failing economy.