business news in context, analysis with attitude

One MNB reader had some thoughts about our story about how 7-Eleven may be using federal immigration enforcement tactics as a weapon against franchisees with which it is less than enchanted:

I tend to think that this is less of a case where corporate is using federal agencies to eliminate franchisees versus using the learnings that come from federal raids and investigations to root out franchise holders they deem as not in compliance with their franchise holder agreements.  It is undoubtedly a mess, but in my opinion, 7 Eleven’s bigger issue is that their franchise agreements fail to give them the necessary control of their stores – ultimately their brand – to effectively compete in today’s changing convenience market.

The inconsistency of the 7 Eleven store experience, outdated merchandising and product offerings, cleanliness of their interiors and exteriors, etc., are all contributing heavily to their losses as more contemporary operators like Wawa, Sheetz, Racetrack, etc., transform their stores to meet the needs of today’s shopper.  The failure of 7 Eleven to proactively manage franchisees to improve performance against the key dimensions that matter most to shoppers will be their failure.

Despite their location advantage in countless markets, they do not seem to have the vision or operational standards that can allow them to leverage this effectively.  If you know the beer wholesaler system, you are likely familiar with the non-wavering stance they take with their distributor or wholesaler franchisees on operational excellence.

AB used to have a program called “dimensions of excellence” that each wholesaler was rated on quarterly.  It resulted in fresh inventory, clean facilities (scrubbing a truck bay was a frequent occurrence) and stellar, consistent execution.  That’s what 7 Eleven needs to be focusing on as they transform non-performing franchisees.  Simply changing owners won’t change the outcome.  They need to hold franchisees to a high standard as an on-going part of their agreements.

MNB reader Jeannine Wilkins had some thoughts:

Interesting and scary article. Makes me wonder if there is something about the old school C-Stores that motivates ugly behavior. I worked for Cumberland Farms as a teenager many years ago. After two weeks two investigators came in and “interviewed” me in the back room for at least an hour. They accused me of stealing $100 and offered me three choices: pay them back the $100 and keep my job, give up my job or file for an appeal. I was a teenager and it was a second job in addition to school and I really didn’t care about it, I also didn’t steal the $100 and was pissed about being accused and how they tried to intimidate me so I just quit. It never occurred to me no one stole the $100 – I just assumed I was blamed as the new employee. Then years later my brother saw something in the news – turns out for a while there that kind of behavior was standard procedure at Cumberland Farms and someone had started a class action suit. I was in college by then and still received mail at the same address so the forms came in – I filled them out honestly, indicating I really didn’t feel I had suffered any loss (unlike some folks who needed the job). It took a few years but eventually I received $3,700 as a part of the class action settlement. Not too bad for a couple weeks part-time work as a teenager J.
It did make me wonder what idiot came up with the idea. If I had stolen the money and returned it – why would they want me as an employee? And how many potentially good employees did they tick-off with the accusation who just walked away like I did?

On another subject, from MNB reader Barry J. Sullivan:

I want to mention a side of the Amazon HQ2 story I saw come across on Twitter this past Monday. Take it as you want, but do use it as food for thought (pun intended). If Amazon gets what they want by having three HQ’s, one in each of three states, they will in fact have two Senators from each state to do their bidding, and they will “play” those Senators off each other. This also will allow Amazon to use the laws of whatever state they need to make “things” go in their favor. Just a few points to ponder.

Excellent point.

But, to be fair, Walmart has stores in 41 states. Do you think it does not flex its muscles in those locations to the best of its ability? Don’t you think every company with multiple locations does the same thing?

I agree with your concerns … but are you maybe holding Amazon to a different standard because it is Amazon?

MNB reader Dan Jones wrote:

Amazon cannot win.  As a big company they are a big political target.  Amazon has built a spectacular business, and people in Seattle complain about real estate and congestion.  Amazon split the HQ2 decision to benefit two communities and people complain.  And even with the split, NY is complaining HQ2 (HQ½?)  will still be too big a strain on housing.

CNBC reported last week that Sen. Bernie Sanders (I-Vermont) has introduced a new bill “that would prevent large companies from buying back stock unless their employees are paid at least $15 an hour.

“The proposal is aimed squarely at the nation's largest bricks-and-mortar retailer: Walmart … The legislation is titled The Stop WALMART Act, or The Stop Welfare for Any Large Monopoly Amassing Revenue from Taxpayers Act … It would also require large employers to give workers up to seven days of paid sick leave for themselves or to care for a family member. In addition, it caps executive compensation at 150 times the median employee wage. Under the bill, companies with more than 500 workers would face these new restrictions.”

I commented:

The bill isn’t going anywhere, but it does serve to start to stake out 2020 positions as politicians prepare for potential presidential runs.

I’m not sure that this kind of stuff should be legislated, but I do sympathize with the idea that front line workers rarely are treated with the same largesse as the folks in the corporate suites. And I agree that companies ought to invest in their employees before buying back stock and increasing c-suite compensation packages.

But a law to force it? I don’t think so.

MNB reader Liz Braciak wrote:

Thanks for your thoughts on the WALMART bill introduced by Bernie Sanders. While I agree it isn’t going anywhere in a Republican Senate, I do not agree that we shouldn’t legislate these requirements.

Big Business will always look out for itself as was seen during the industrial revolution. It wasn’t until laws were put in place in 1938 with the Fair Labor Standards Act that children were taken out of the sweatshop environment, and a defined workweek was established ensuring overtime pay. Had this New Deal legislation not been implemented, many companies would have continued abusing employees both physically and monetarily rather than shifting to the eventual pension system that drove huge growth in the 1950’s. Now that the pension programs are going the way of the dinosaurs, having faith and trust that a company cares about their employees can be seen in the value they place in their CEO’s salaries versus the average worker. Millennials are paying attention to these details in the companies where they are searching out opportunities. An index for the CEO should be seen as a driver of growth, not a death sentence. If the company makes more money, and increases the average worker’s salary, the CEO’s salary can be increased as well. Besides, companies always find the loopholes when they really want to.

We had a breaking news report on Friday about how European discounter Lidl, which has struggled to get a foothold in the US since it first opened an office here more than three years ago, announced that it is acquiring Best Market, a privately held, family-owned 27-store chain of supermarkets in New York, mostly on Long Island, and New Jersey. The move, it seems to me, is a way to start a new phase of growth, where acquisition will help it gain share in places where they have none.

One MNB reader wrote:

Sure hope they come to New England and take on Shaws.. aka Cerberus !!

On another subject, from another reader:

Self-scan (either on APP or at end of shopping trip)  is a great idea but when a shopper scans a $10 bottle of wine instead of the $50 bottle in their shopping cart, the retailer loses money (unless inventory consigned by distributor).

Costco got rid of their self-check out in a few cities because of wine theft. Members would have a box of wine and scan the cheap bottle twice and not scan the expensive one.  The checkers at the departure door didn’t always check label names when they marked the receipt.  (That’s how it was reported to me by Costco cashiers.)

I worry that moving to APP scanning will mean more high theft items go into lock-boxes, defeating the time saving benefit.

I’ve always been told by retailers that they see a lot more shrink/theft in manned checkout lines, not self-checkout. It happens and it is regrettable … but I think most shoppers are honest.

I did a piece the other day about the Organically Grown Company, which is using trust law “to structure its operational and funding model to support purpose-based entrepreneurship, ownership and succession … Previously employee- and grower-owned, OGC is making a bold move to buy back all the shares from its stockholders and transfer them to the Sustainable Food and Agriculture Perpetual Purpose Trust.”

This prompted MNB reader Seth Hunnicutt to write:

Reading your post today brought to mind a local San Antonio company and, given your love of all things cinema, I thought you’d especially appreciate hearing about it.

Santikos Entertainment was founded in 1911 as Santikos Theaters  by Louis Santikos, a Greek entrepreneur. The business was family owned and operated by his son, John L. Santikos, until his passing in 2014. Upon his death, Mr. Santikos donated Santikos Entertainment to the San Antonio Area Foundation to ensure the successful operation of his business and to make annual charitable donations, establishing an enduring legacy. They now operate as a for-profit company whose sole purpose is to give back to non-profits in the San Antonio area.

Current president and CEO, David Holmes, says this on the Santikos website: “You can see a movie anywhere, but every time you see a movie at Santikos, you become a vital part of our charitable legacy because a portion of every ticket, drink or snack purchased goes back to organizations that improve our society. All movies have a beginning and an end, but when you see a movie at Santikos, the end of the movie is just the beginning.”
Their “authentic purpose” makes them the first choice when our family sees a movie, and knowing that we are supporting our community by doing so takes the sting out of our $20 concession bill for two drinks and a bucket of popcorn.

Great story. Thanks for sharing.

MNB took note the other day of a USA Today reports on how Drinkworks, a joint venture between Keurig and Anheuser-Busch, this week debuted its first product - the Drinkworks Home Bar: “Similar to the Keurig Coffee Maker, the Drinkworks Home Bar uses pods to make cocktails, beer and mixers … The machine costs $299, with each pod costing $3.99 individually or $15.99 for four. There are currently 24 drinks available – including Mojitos, Long Island Iced Teas and Moscow Mules – with ‘many more to come,’ according to the company.”

I commented:

And humanity teeters on the verge of losing yet another skill - making a decent drink. That talent now will go the way of tying a bow tie and driving a car with a manual transmission. The end of western civilization, I call it.

One MNB reader responded:

The drinks can’t possibly be that good. Any discerning drinker won’t trade a pre-mix for fresh ingredients. I’m also struggling to figure out who the target demographic for this would be. Rich frat houses?

Very funny line from MNB reader Mary Schroeder, commenting on the story about how a new National Bureau for Economic Research study showed that in states where marijuana is legal, the birth rate is up, apparently because “its consumption heightens sensory perception, increases relaxation, reduces stress and diminishes anxiety. A feeling of relaxation may change attitudes toward taking sexual risks by becoming less concerned about the consequences of sexual intercourse, including reducing protection or taking on more sexual partners.”

She wrote:

Is the National Bureau for Economic Research going to research Barry White albums next?


Now that’s why I love MMN and its readers.

I wrote the other day about my visit to Siena College, which led MNB reader Gary Loehr to write:

I am a Siena Alumnus, class of ’80.  Great school, great culture.  I like to refer to the Franciscans as the fun loving Catholics. Glad so see that they are offering this program.  Feels like they should bring in one of the Golubs to guest lecture.

Wouldn’t be surprised if they have.

I also listed the terrific colleges where I’ve had the privilege of speaking/teaching over the years, which prompted MNB reader Frank Fay to write:

Just a plug for DePaul University and their sales leadership/category management program that Dan Strunk created with the team there.  I was fortunate to have taught Cases in Category Management and co-teach Science of Retailing, etc. with Laura Lee Larson.  I was so energized by the undergraduates and graduate students I taught!  What great programs for future leaders!

Agreed. I would’ve mentioned DePaul, but they’ve never invited me to teach there. But I’m available, should they call.

Finally, even after doing this for 17 years, it still is a thrill to get emails like this one:

 A friend/coworker of mine clued me into MNB a while ago and it has become an important part of my morning routine in the office. In addition to helping me stay current with industry news, your work is a good reminder that there are still people who value critical thinking, civil discourse, and thoughtful considering of other people and their opinions. It’s refreshing and encouraging. Sometimes I agree with your views and sometimes I see things differently, but – without fail – I appreciate your work and approach. Keep it up.

As long as I can.
KC's View: