30% of McDonalds Insolvent?

So says a Nomura analyst report:

"We are in the throes of a deep depression, and nothing is changing," one franchisee wrote in response to the survey by Nomura analyst Mark Kalinowski. "Probably 30% of operators are insolvent."

How come?

"The CEO is sowing the seeds of our demise. We are a quick-serve fast-food restaurant, not a fast casual like Five Guys or Chipotle. The system may be facing its final days."

Perzactly!  "The system." It's just not possible to build out 14,000 stores to do one specific thing well and then change it to a Chipotle (aside from being "like Chipotle" is a different failure.)  McDonald's was designed to borrow massively and cheaply to buy subsidized corn, sugar, pork, chicken, soybeans, sodium, wheat, beef, milk and cheese, rendered to its lowest common denominator and sell it as food.  it is designed to be addictive and is cumulatively harmful. They were in trouble when they have to lure children in with free toys.  The infrastructure and talent is hardwired and purpose-built, the thing has to be bankrupted to  mark it to market, in order for any chance of profitability with those assets.

McDonald's food is not worth the money, their assets cannot be repurposed to what is worthwhile, what customers they have are too poor to follow them up market (or care).

It was a great ride, made possible by mal-credit.  It's on it way out.  When the subsidies go, good food will fall in price because the land USA devotes to subsidizing gmo food will be recovered to grow wholesome food.  The 47 million Americans who claim themselves unable to feed themselves will have better choices at lower prices.

Big Ag is dying out.  The secret TPP is supposed to save them, and finish off small farming in USA.  The customers will win.  We just need to get customers what they want.

The most revolutionary thing you can do in USA is start a business.

Feel free to forward this by email to three of your friends.

Bookmark this post --- Email this post

Wexner and the Lessons of The Limited

Here is a critical bit of info from a titan who says he learned it as a kid.  Yes, that handing down of information has been broken by FIRE.  Here is Leslie Wexner:

“When I was a kid, before my first store, they talked about stores as theater and retail as theater. It still is,” says the 77-year-old, attired casually in gray slacks and a blue oxford. “Retailing is a free form of entertainment.”

FIRE is the massive, false economy which will continue to degrade, as our "enemies" improve, slowly surely. The guy not only received an education from an earlier generation, he never bought into the dot.com  madness. Here...

In defiance of e-commerce evangelists, he opened 50 new locations in the last year.

Yes, brick and mortar is where the customers are, plus good old fashioned mail order. Catalogs drive sales to internet where orders are placed...

His online business is not the focus, but it’s doing just fine, accounting for $1.5 billion of his annual sales.

The selling is out of the catalog, the transaction is on the web. And he hasn't started exporting yet...

And there are billions more waiting for Wexner outside of America’s borders. 

What he has done is franchised it out to other countries, that is having no presence of his own companies overseas, just let locals import and manage the brand in their respective countries.

Wexner found a problem and worked on a solution...

When his father left on vacation, Wexner tried to solve the riddle of why his dad had always worked so hard but never made any money. He found a stack of invoices, and on a piece of scrap paper began tallying the cost and profit from each item in the store.
The numbers added up to a counter-intuitive conclusion. Although big-ticket items like dresses and coats looked like they had huge margins, they actually made no money because they sat on racks forever. All of the store’s profit came from less glamorous items like shirts and pants. 

His dad fired him...

... founding a rival store to his father’s with a $5,000 loan from his aunt in 1963. He put a limited selection of clothing in the store–only the shirts and pants that flew off shelves–and named the place The Limited. ...He made $20,000 of profit in his first year, twice as much as his dad’s best. The secret was his focus on only a few products, a revolutionary idea at the time. 

Steve jobs studied him...

Wexner says that Steve Jobs (or presumably it was Jobs–”what’s-his-name from Apple,” Wexner says off-handedly) was one of many to credit The Limited boss with inventing specialty retail. “Probably did,” he shrugs.

I recall the era well.  There were countless people opening "boutiques."  Most of them were crammed with merchandise and went under.  Wexner did it right. He tried to figure out how Victoria's Secret worked when it was a one man operation in San Francisco. The founder sold out to Wexner,

His financial advisors had warned him that $1 million was too much for the business. Wexner let Raymond run it under The Limited’s umbrella for a while, and his deputies rolled their eyes as it bled millions more. When they examined the financials more closely, they realized the only way Raymond had been making any money before the acquisition was from a secondary business selling mail-order sex toys. Wexner fired Raymond and moved headquarters to Columbus. 

Wexner took the same idea and made it profitable.  Raymond could not, so he had ventured into something desperate and kept it secret.  Raymond failed at his next venture, and then killed himself.  Why do two people working on the same project diverge so terribly: billionaire v suicide.  Perhaps it gets to how they process suffering...

By the common definition of wealth, Wexner was unhappy...

“By the time I’m in my early 30s, I’m, by most measures, enormously successful. And the more successful I was in terms of business achievement and accumulation of income, the more ineffective, unhappy I was.”

Read the article for how Wexner dealt with it...  And comes the question...

After 51 years as CEO of his company, is Wexner thinking about retirement? He smiles, having known the question was coming. 

Of course not.

Update:  Victoria's Secret puts out 400 million catalogs a year...  if that generates $1.5 billion in online sales, then that is $3.75 per catalog.  Not worth it, unless the catalog drives people into the stores plus online.  Wexner owns both sides, the website and the brick and mortar, and links both through dead tree advertising.  You should too...

Feel free to forward this by email to three of your friends.

Bookmark this post --- Email this post

When Minimum Wage Goes to $15 an Hour

Say good-bye to fast food jobs...


Feel free to forward this by email to three of your friends.

Bookmark this post --- Email this post

Franchising

Well now here is another article from the same source... there is an opportunity to subscribe to this email service out of Hong Kong, and I recommend it.  Here is a quote which in a nutshell explains why Hong Kong is getting richer and USA is getting poorer:

Hong Kong’s legal climate couldn’t be more conducive to opening a franchise, according to Robert Esser, Managing Director of Pantry Magic. “The lack of regulations for franchises in Hong Kong has been great. It’s not complex. Our business is governed only by our agreement with our partners,” he says. 

Full article here.

Bookmark this post --- Email this post