Marketplace - American Public Media
Franchises, from fast-food restaurants to plumbing chains, are getting a lot of attention from lawmakers in California right now. A bill that would make it harder for parent companies to sever agreements with their franchisees passed in the state Assembly last week. It is headed to the state Senate next, where it is also expected to pass.
Keith Miller, who owns three Subway sandwich shops in northern California, supports the bill. He bristles at the power his parent company has over his business under current California law, which allows a franchisor to terminate a contract if franchisees stray from even the tiniest details.
“Fingerprints on the window — that’s in the operations manual that you must have windows and a front door that are clean and fingerprint free,” Miller says.
The bill moving through the California legislature right now, SB 610, would allow contracts to be severed only for “substantial and material breaches."
Miller, who is chairman of the Coalition of Franchisee Associations, says he hopes the bill will give franchisees like him a little more power in the franchisee-franchisor relationship.
That hope is shared by one of the nation's big labor unions, the Service Employees International Union, which has been paying for radio ads and digital media campaigns supporting the bill. As Christopher Calhoun, spokesman for SEIU California, told the Huffington Post: "Increasingly we are seeing franchisees and workers facing a similar challenge. Fundamental power imbalance enables multinational corporations to haul down billions at the expense of both workers and franchise owners."
But the bill could do damage to corporate brands and the franchisees who profit from those brands, argues Matt Haller with the International Franchise Association, an industry group that represents both corporate franchisors and franchisees.
“If franchisors can't maintain that brand integrity across their system,” Haller says, “then that's really going to be detrimental to the overall growth of franchising.”
The $2 billion deal to sell the Los Angeles Clippers is a record price for a basketball team. It also makes for a happy story because the sale of the Clippers means there are a lot of winners:
“Well, certainly, Donald and Rochelle Sterling,” the team’s original owners who bought the Clippers decades ago for $12 million dollars, says Andy Zimbalist, a sports economist at Smith College. He says the team and the NBA are also winners.
“Because having a retrograde embarrassing owner who won’t spend money on the team is not good for the whole league either,” he says.
Kevin Zanni, a manager with Willamette Management Associates, a valuation firm, notes that even the NBA commissioner comes out looking good.
“Because he gets rid of Sterling without having to force him out through the legal means to do it,” he says.
Finally, there’s the team’s new owner, Microsoft billionaire Steve Ballmer, another winner, says Smith's Andy Zimbalist: “If Mr. Ballmer didn’t have $20 billion of net worth, I would say that this is an awful purchase for him.“
But he does. He doesn’t have to worry about getting a return on this investment. #Win.
20 years ago this past Saturday, IBM's Simon Personal Communicator went on sale. It had a screen, calendar, and could send email, making it by some measures the world's first smartphone. The phone was not exceptionally well received when it was released. BBC Tech Reporter Claire Brennan joined us to explain exactly what it was.
“It looked and felt very different from the modern iPhones and Androids we are used to,” Brennan said.
It got its name from the game Simon says, a marketing attempt to emphasize the apparent usefulness of the device.
The phone was rather large and heavy, weighing half a kilogram, and was priced at the extreme high end of the market, costing $899 at launch.
The model, which was only sold in the US, was not commercially successful, a victim of its size, expense, and a lack of the digital infrastructure taken for granted today, such as wi-fi hotspots and cellular data.
Everybody has one, a moment or a story where money changes your life. This week, the band Future Islands and the unexpected financial side of making it.
“I think a big turning point was when we got picked up by a booking agent," says band member William Cashion. "That was the first allegiance in the music industry. We always felt like we were kind of on the outside. I booked our shows for about seven years, and we all just did everything, especially the first five or six years. We were going to Kinko's, making black and white Xerox copies and cutting them out in the van and burning CDRs."
"As soon as we brought on a booking agent it was like somebody waved a magic wand and we were just getting guarantees everywhere we went," Cashion says. "Which wasn’t a lot of money but it was like a door deal, it was like a pre-arranged amount of what we would get paid which totally changed the game for us as far as the kind of money we were making.”
But even when the band started making more money on the road, there were other unexpected financial problems.
“We were pretty far in the red at the end of last year," says Samuel Herring. We pretty much sunk everything into the music as well as getting hit with 2012 taxes in the middle of producing the album and we were just like, 'Oh, we forgot about that.' We got hit really hard with taxes last year. Our accountant called us in one day and [said], ‘Umm … well first off you guys have very high taxes, because you made a lot of money last year, a lot more than I expected. And because you’re an LLC you’re in the highest tax bracket.’ I was kind of looking at the guys, ' Should we high five? We made it! Highest tax bracket!' And we got destroyed. We got destroyed by the US Government. Maybe they’ll come after us.”
But with the band's recent success, Future Islands is learning to balance their DIY upbringing.
“We’ve always worked solely out of necessity with what we could do, and I think that’s one of the reasons we’ve survived," says Herring. "It’s funny because now it’s at the point where we’re realizing we do need these certain crew members. And I’m fiercely shacking my head like, no, like I don’t want to do that! Even though it is time to give the reigns over because it’s too much for us now.”
Future Islands' latest album is "Singles." They're touring the U.S. this summer and fall.
When it comes to celebrity endorsements, there are plenty of success stories. Michael Jordan’s name brought in more than $2 billion for Nike last year, and back in May, Apple paid $3 billion to snap up rapper Dr. Dre’s Beats.
But there are some things a famous name just can’t seem to sell. Case in point: prepaid debit cards.
Magic Johnson and financial adviser Suze Orman pulled their prepaid cards about a month ago. Lil Wayne appears to be the latest celebrity to bow out. Try applying online for the Young Money card he endorsed, and you get an error page.
"This was sort of low-hanging fruit," says Matt Britton, CEO of the marketing agency MRY. "Prepaid cards is a growing phenomenon, so I think celebrities initially saw this as a great opportunity for 'me to be able to leverage my fan base.'"
Consumer spending with prepaid cards jumped 6 percent last year to more than $118 billion, according to the Nilson Report. The cards are increasingly popular with people who don’t want traditional checking accounts - and those who can't get them.
"A lot of these - particularly newer prepaid card offerings that have more transparent fee structures - make a pretty compelling option for them," says Greg McBride, chief financial analyst at Bankrate.com.
Hidden fees helped tank the Kardashian family’s attempt at a prepaid card a few years ago, and more cards now disclose their costs.
"The lack of regulation is the downside," says Susan Weinstock, director of consumer banking for the Pew Charitable Trusts. "These cards do not have any protection should you lose the card or it gets stolen."
Weinstock says federal regulators plan to weigh in on prepaid cards this summer. As for whether celebrities should keep endorsing them, Britton says it takes a star with a "pristine brand" and a broad enough fan base to make it work.
"LeBron James, maybe, especially since his move to Cleveland," she says.
Coca-Cola is buying a nearly 17 percent stake in Monster Beverage for $2.15 billion. Reaction can be summed up as such: It’s been a long-time coming, and it’s a win-win for both companies.
As part of the deal, Coca-Cola will transfer its existing energy drinks to Monster, and Monster will transfer its non-energy drinks to Coca-Cola.
“It really is well-suited for both organizations to focus on what they do, what they’re known for and what they do best,” says Darren Tristano, executive vice president with Technomic.
Consumers have been cutting back on sugary drinks lately, but the energy business has been growing. So while Tristano says these types of brand swaps are rare, it’ll allow each company to focus its strengths.
Coca-Cola was late to the energy drink game and its own brands haven’t been nearly as successful as Monster or its main competitor, Red Bull, says Ross Colbert, a global strategist for beverages at Rabobank International. Both companies have been successful at targeting younger, highly-active consumers.
“The category is very competitive,” he says. “It takes a lot of merchandizing.”
By clearing the decks of its other brands, Monster can focus on its core energy drinks, fed by the help of Coca-Cola’s huge distribution network. Coca-Cola will get some popular brands, too, like Hansen’s Natural Sodas.
“It adds some flesh to their portfolio, too,” says Tom Pirko, the president of the food and beverage consulting company Bevmark. “So we have a nice division of labor.”
Chalk one up for old media.
There was an article in the New York Times Thursday detailing the struggles of a woman working irregular hours at Starbucks. Really irregular, like working late into the night, then starting at 4 the next morning.
Now the company says it’ll do better.
Among other things, it has promised work hours will be posted a week ahead of time. And that it'll make its scheduling software more flexible.
Starbucks is far from the only company that uses workers when, and only when, it needs them. S0-called "just-in-time hiring" is a widespread practice in retail, hospitality and healthcare. There aren’t exact numbers on how many part-time workers fall into this category, but the number of people working part-time jobs, when they would rather be working full-time ones, was about 7.5 million in July.
The practice has caught on because employers don’t want to pay employees to sit around. And, thanks to computers, with all their fancy data and algorithms and software, employers can more easily figure out when all the sitting around might happen. Software scheduling programs ensure people are booked to work only when they are needed.
“They look at ongoing trends, they look at what a store or restaurant or whatever it is, did last year at this hour,” said Susan Lambert, a professor at the University of Chicago.
These predictive programs then factor in specifics. “In Chicago it might be whether there is going to be a Bears game, or what the weather is likely to be,” Lambert said.
And then they spit out a work schedule that can be tweaked again depending on how busy a place gets.
“It’s all about the cost-cutting,” said Peter Cappelli, a professor of management at the Wharton School of Business.
To make sure they have the staff they need, some businesses require employees to be on call 40 hours a week for part-time jobs.
“Sometimes they make them show up,” said Cappelli, “and you’ve got to commute and drive a fair bit, and then you discover whether or not they need you, but they require that you show up.”
All of which can make it very, very difficult to manage your life. To arrange daycare. Go to school. Work a second job.
There are companies out there staring to take these issues seriously, said Joan C. Williams, director of the center for WorkLife Law at the University of California Hastings College of Law.
Right now she’s working with the Gap on a pilot program to stabilize schedules.
In a statement, a Gap spokesperson said of the program: “We know that consistent and reliable scheduling is important to our employees. We are exploring ways to increase scheduling stability and flexibility across our fleet of stores.”
“If you want to be a high-road employer, who employs low-wage workers," says Williams, "'just-in-time' scheduling has begun to seem inconsistent.”
Williams said the focus on cutting costs by matching labor supply and labor demand ignores other business costs.
It also hurts a company’s bottom line, she said, when employees quit or don’t show up because they can’t balance their unpredictable work schedules with the rest of their lives.
Here's a neat confluence of my lousy night's sleep last night and the rise of big data and wearable technology.
Thanks to the Wall Street Journal and data provided by Jawbone, makers of one of those fitness bracelets, we now know all kinds of stuff. Like which city's residents get the most sleep: that'd be Melbourne, Australia at seven hours and five minutes a night.
The least? Tokyo at five hours and 45 minutes.
Kai looks back on this week, chatting with Linette Lopez from Business Insider and the Wall Street Journal’s Sudeep Reddy about the world economy and the spending power of the American consumer.
Imagine that you go to play a video game, and all of a sudden you see yourself – basically your face is put on a motion capture animation. And the thing is, you didn’t give anyone permission to use your face—make money off your face – and so you get mad and decide to sue.
The NCAA is the organization behind college sports, but it's also a massive business, one that makes nearly $1 billion a year in revenue through TV, video games, and merchandising.
All that is up in the air right now, the NCAA just lost a huge court case that could hamper its ability to make money.
The ruling could lead to college athletes being compensated in some way, more court cases are looming, and we wanted to put that in context.
A group of Mexican women, "Las Patronas," are helping migrants on their journey north. The BBC's Will Grant explains:
That simple, instinctive act of kindness by the young girls was to lead to the creation of Las Patronas, a charitable organisation which has helped tens of thousands of Central American migrants over the past two decades and which was awarded Mexico's most prestigious human rights prize last year.
The village of La Patrona lies in an otherwise forgettable corner of the eastern state of Veracruz.
Topics on their plate this week:
Topics on their plate this week:
Have you always dreamed of running through the storied Los Angeles Memorial Coliseum tunnel onto the field in front of 70,000+ roaring fans before a University of Southern California football game? Up until now, you usually had to play or coach for the team to have this "once in a lifetime experience," as the school calls it.
Today, you can do it for $1,500, if you're a USC season-ticket holder. If that's too pricey, consider the pre-game locker room tour for $1,000, or a pre-game photo with the "World Famous" USC Song Girls for $750. (Added bonus: The money is considered a donation, so it's tax-deductible, but that's a different story.)
USC recently started selling these experiences and more for its upcoming season, but at least one former player says they commoditize something that shouldn't have a price tag.
“It does feel a little weird to me to put a price on running out of the tunnel to play a football game, which we were told as players constantly was a very earned and special right," said Petros Papadakis — who captained the USC football team in 1999 and 2000 — on Fox Sports Radio's Petros and Money Show. “It’s USC football. It’s supposed to be honorable to be in that locker room. I didn't think you could put a price on that.”
Craig Kelly, an assistant athletic director at USC, says what donors get to do won't match the specialness of actually playing on the team.
“Putting on the pads, the walk through the tunnel, coming out of the locker room, the meetings that they have and the speech before the game… all that’s included in what Petros is referring to and what we’re offering isn’t that," Kelly said.
Kelly says lots of schools lavish perks on donors, which is true. That’s how the game is played — the most generous boosters get the ear of the athletic director, get to travel with the team and get the very best seats.
At the University of Alabama, you can put your name on the coach’s office, for $1 million. What makes USC’s approach unusual is they’ve gone mass-market, according to Josh Rebholz, UCLA's senior associate athletic director for external relations.
"We do offer some of these experiences, but we really believe that many of them — like running out of the tunnel with the team and being on field pre-game — are pretty sacred assets, and so we try to limit who we offer them [to], and really, we try to only offer them to highest and most generous donors that we have," Rebholz said.
In other words, these prized assets are so sacred that they can only be sold for lots of money.
"Access for the sidelines for us can run as much as $100,000 a year," said Rebholz.
If you want to run out on the field at the Rose Bowl with the Bruins and join them in the locker room after the game, you'll have to write a half-million dollar check to UCLA.
So here’s the lesson, USC: It’s not that you’re commoditizing college football. Schools have been doing that for a long time.
It’s that you’re probably not charging enough.
Anjli Raval is a London-based correspondent for the Financial Times, but she recently took a trip through the U.S. to analyze home prices.
Her first stop was South Sacramento in Northern California, where she noticed home prices still stagnated:
These areas of California’s capital had some of the highest foreclosure rates in the US after the housing bust that wiped out $7tn of homeowner equity in the wake of the financial crisis. Since then, Sacramento has seen a rebound, at least on paper. But there are clear signs that it – and many other cities – are stuck in a multiyear housing hangover that has serious implications for economic recovery.
The standard playbook for an economic recovery often relies on a housing market rebound. But in the U.S., that rebound continues to stop and start depending on where you live.
Click play above to listen to Anjli Raval's interview, or read her story at FT
One way to tell a company if a company is a baby start-up? By its location. The farther an address is from the subway in New York – and therefore the cheaper the rent – the more likely the start-up will be a youthful one.
Which is the case with Kinisi. The company, which makes an environmental sensor to gauge problems like air pollution, was founded in June. You can measure its age like a baby's – in weeks.
Bryan Valentini, one of the company's five co-founders, says there are other quick ways to spot the youngest of young start-ups. “You can ask them, 'Do you have business cards?' Something simple like that," he said. And the answer for me would be 'not right now.'"
Does Kinisi have a human resources department? “You’re looking at it," he said.
Valentini says, for him, one sign a start-up has stopped being a start-up "is when you come in, you’ve started something and it stops being fun.”
What would older start-ups have to say? To find out, we stopped by Columbia Business School’s Startub Lab, hosted at co-working space WeWork in SoHo, an open-plan office with high ceilings, long tables and lots of entrepreneurs with laptops. You can practically smell the IPOs.
Working in a co-working space? Still a start up. Entrepreneurs at Columbia Business School’s startup lab in Soho.Sally Herships
“I’m not sure that a start-up ever stops being a start-up," said Benji Jack, a co-founder of start-up BoardRounds, which aims to improve follow-up for emergency room patients. His company has been around for a year, and Jack says start-up-ness is a frame of mind – being able to innovate and change quickly.
"I don’t think one can point to Google and say 'on this date, Google was no longer a start-up,'” he said.
Just a few SoHo blocks – but many years of start-up experience – away, are the offices of ShopKeep. Founded in 2008, COO David Olk described the company as a "petulant teen." "It’s a little bit more mature," he said, "but it doesn’t mean it’s not going to have its problems, issues and stumble to grow up into a normal human adult."
Olk says he agrees with Jack – that plenty of public companies are run like start-ups. “We’re a start-up," he said. "Look, we have a pool table, we have a kegerator, we have a Foosball table, we have free food.”
Olk said Shopkeep is a mature company and a start-up. As COO, now his focus is on day-to-day business. He doesn’t have to worry about capital like he used to, But he said the company retains its start-up qualities, like employees’ ability to make decisions and to take ownership of their jobs.
But then again, although ShopKeep has 130 employees, with offices in the UK, New York and Portland, it’s no Microsoft.
The problem with gargantuan companies, said Hayagreeva Rao, a Stanford professor and author of "Scaling Up Excellence: Getting to More Without Settling for Less", "is the larger you become as a company, the more likely are smart people inside the company to become dumb.”
Rao said he doesn’t mean smart people become stupid. Instead, he cited the work of anthropologist Robin Dunbar: “He studied a number of species to find out: What is the optimal size of a tribe or a social grouping?"
The magic number is around 150 people. Beyond that, Rao said, your tribe is going to break apart. The bigger a company is, the harder it is to know everyone’s name, let alone what they do.
Imagine you're the founder of a start-up that’s grown from two employees to 2,000: "You go to a meeting and you see a lot of people you don’t know – that’s like definitely a warning sign. You go to a meeting and say, 'who are these people? What the hell are they doing here?'" he said.
In other words: Once a company becomes successful, it can become its own enemy.
Rao said large companies like Google and Facebook are not start-ups. As they grow, he said, it’s nearly impossible to hold on to their original start-up-y culture. That’s why companies like Google give venture capital money inside the company – to try to stay Google-y.
At Columbia’s Startup Lab, Liz Wilkes, a founder of Exubrancy, an office health and happiness company, is working on her laptop. She says a start-up stops being a start-up when it stops feeling like a family and becomes an organization with hierarchy and systems. But she also says start-up-ness is cultural, which can, if a company isn't careful, be bad for business.
“You know when you meet that guy who’s like 40 and he’s wearing a backwards cap and he’s at the bar with your friends who are in their 20s?" she said. "And you’re like, this guy might be a little too old to be here? I do feel like there’s some of that in the start-up scene. Where a company, potentially to its detriment, has not formalized and organized in a way that they should."
Start-ups can get stuck in their teenage years, but they don't have to, Wilkes says.
Liz Wilkes, a founder of Exubrancy.com at work at Columbia's startup lab.Sally Herships
Growing up, while retaining just the right youthful qualities, for people or for companies, or for both, is tricky.
Cyrus Massoumi, CEO and founder of the physician location service ZocDocs, said there are three attributes that define startups: the first he says "is relative to speed, how quickly can you get decisions made, how quickly can you get new products and services." The second, creativity - "are you building new products and processes, are you growing?" And "of course, the last one is fun."
Even with over 600 employees, ZocDocs remains a start-up, Massoumi said. He pointed to the shag carpet skateboard near his desk. "Maybe that’s what makes it not a start-up, he joked. "When your team doesn’t let you ride your shag carpet skateboard around your office for fear that you're going to injure yourself."
"If you want to retain the attributes of a start-up as you get bigger, you absolutely need to focus on it. And it needs to be a top priority or you will lose it."
He nodded toward a stuffed monster, given out as inter-office award. Then, to a large bean bag chair, "we have the world's largest beanbag sitting here," and finally a ping-pong table in the cafeteria. "Ping-pong," he said, "is an important part of what we do."
[&amp;amp;amp;amp;amp;amp;lt;a href="//storify.com/Marketplace/when-does-a-startup-stop-being-a-startup" target="_blank"&amp;amp;amp;amp;amp;amp;gt;View the story "When does a startup stop being a startup?" on Storify&amp;amp;amp;amp;amp;amp;lt;/a&amp;amp;amp;amp;amp;amp;gt;]
Major League Baseball’s next commissioner, Rob Manfred, has been involved with labor negotiations for the league since the 1994 players strike. Since then, player salaries have risen far more quickly than pay for the average worker. For instance, the minimum salary for major league players has risen from $109,000 in 1995 to $500,000 today.
In 1995, a major league baseball player making the minimum salary earned about 4.4 times more than the average full-time worker. Today it’s 12 times more.
However, minor league players filed a lawsuit this year protesting low wages, with most earning between $3,000 and $7,500 for a five-month season, which translates to an annual wage of $7,200 to $18,000 a year.
Even major-league ball has a one percent. For minimum-salary earners, “the percentage increase is not as big as for the top players. The top players got a lot more,” says Barry Krissoff, a retired economist with the U.S. Department of Agriculture, a Mets (and Senators) fan, and the author of a 2013 article called “Society and Baseball Face Rising Inequality."
That comparison seems overstated to Scott Rosner, associate director of the Wharton Sports Business Initiative at the University of Pennsylvania. Income inequality is “a little more acute for society as a whole than it is for baseball,” he says. “No one who is a major-league baseball player is going hungry by any means.”
Owners have done well too. “Salaries are very much proportional to revenue growth as a whole,” says Joel Maxcy, a sports economist at Temple University.
And star baseball players don’t get paid as much as other top celebrities, says Michael Haupert, a sports economist at the University of Wisconsin. The sport’s best-paid player, Alex Rodriguez, took home $29 million in 2013. According to Forbes, Ellen DeGeneres earned $72 million.
Even other athletes out-earn baseball’s stars.
“Tiger Woods made a lot more money last year — even when he had a crappy year — than Alex Rodriguez,” says Haupert. Forbes estimated Woods’ earnings at $61 million.
Ferguson, Missouri has been dominating the news this week. Front and center in the photos and footage of the protests there are SWAT teams. Police officers who have been trained to use "special weapons and tactics." Turns out, it's a kind of policing that's caught on across the country. And it used to be that frequent flier miles were mostly used to buy airline miles. But these days, people are using their frequent flier stash to buy everything from cosmetics to back-to-school supplies. And the airlines are loving that. Plus, when the San Francisco 49ers take the field on Sunday for a pre-season game against Denver, it will be in their brand new stadium in Santa Clara in the heart of Silicon Valley. Considering that the 49ers were named in honor of San Francisco's first big economic boom, it's perhaps fitting that the team's new home is in the heart of tech-land.
At Defcon, a hacker conference recently held in Las Vegas, the big theme was the "Internet of Things."
Etemadieh reaches into the bag and pulls out the Wink Hub. It's a device that allows you to connect all kinds of smart devices to the hub, and control them from your phone.
“You can have light bulbs, thermostats, motion sensors,” Etemadieh says.
Pretty cool, right? Except Etemadieh isn’t showing me how it works, he’s showing me how to hack into it. He places a smart lock on the table; it's the kind you might find on a front door. He says if he can hop onto your WiFi, he can break into the hub.
“If I tell it true,” he says as he's typing in the command on his computer, “it’ll lock the door.”
Tell the computer “false,” and it unlocks.
The hacker community is shining a spotlight on the Internet of Things because they say a lot of manufacturers aren’t taking really basic steps to secure their smart devices from other hackers.
Mark Stanislav is with Duo Security. He says if hackers can break into one smart thing in your home, they can potentially go after every other smart device. He also says many companies are ignoring that risk.
“The type of company we see in the 'Internet of Things' right now is a company that’s crowdfunded or maybe one that’s Kickstarter-ing,” Stanislav said. “So, [they] really don’t have any money for security testing.”
Big manufacturers that can afford to take cybersecurity measures are often lax, too, says Cameron Camp, a security researcher at ESET. He says cybersecurity can add an extra layer of work that risks turning off consumers.
“It’s in the middle of the night, and you get up to get a snack, now you have to type in a password,” says Camp.
There’s also the fact that in consumer electronics, it’s all about getting your TV or refrigerator to market first. Cybersecurity adds time.
The hackers at Defcon say manufacturers are going to have to take that time once consumers find out just how vulnerable they are.