Starbucks Under Fire for Cool Runnings

It seems as if Starbucks has a bunch of clean freaks running the show. In fact, they are so fanatical that they seem willing to take heat from environmental groups just to keep the knives and forks spic and span. According to Starbucks themselves, each and every location has a sink they call a “dipper well” which is used to clean spoons and other utensils.

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Bad Business Deal Deconstructed: Part II

Part I of Bad Business Deal Deconstructed

Here’s where I come in…

I keep telling Bob he is missing out on an opportunity and he should be trying to capture more of the money that he is lining someone else’s pocket with. I concoct the idea to start a side business and bring in the contractor that Bob negotiated with as a partner. Bob hedges as he normally does, because anything outside his comfort zone makes him freeze like the Tin Man.

I continue to extol the virtues of this type of arrangement until Bob relents. So, we sit down with our contractor friend at a Starbucks to hash out a deal, which he has no idea is coming mind you. Let me preface this by saying that I didn’t have my A game on this day and I should have avoided this kind of half a million dollar negotiation….But I pushed on.

I laid out the proposed terms:

1. We will continue to drive leads via our marketing efforts and the business along with some initial working capital, labor, and accounting.
2. Mr. Contractor brings the crews and the existing equipment he already owns.
3. We pick a day on the calendar, and we launch the business. The business will fund itself through the existing deals it is already has in the pipeline, and we split all profits 50/50.

Sounds like a no brainer right? This is about the time all Hell breaks loose

Our contractor friend, feeling very defensive suggests that we have lost a bit of our minds, and we should continue with the previously arranged 10% fee. I suggest that if we continue to spend $60 to make $1, that Bob wouldn’t be in business much longer to provide leads to anyone, therefore, we need to reconsider the 10% and that I was open to other suggestions. I was once again told that it’s going to be 10% and that was it since it was already worked out not that long ago between our contractor pal and Bob, this isn’t the time to re-negotiate anything.

Remember, I am feeling a bit pissy this day and I am now pretty upset. I explain in a much louder tone that Mr. Contractor should not make me feel bad for providing him and his family with free business, and that maybe it would be better if I took our leads across the street. With that, I thought we would be much better served if we were to break up this meeting and regroup.

We all shook hands and went our separate ways; which, when thinking about it, was the worst thing I could have done. I left feeling very much like Mr. Contractor was doing me a favor and that I should be happy with whatever we were getting. Bob, cursing much less than me, had that same bitter taste in his mouth.

I got home to find an email from our friend informing me that he would only be talking to Bob going forward. I thought this was a bad idea because Bob is a great guy, but he can be easily manipulated and I was not going to allow that to happen. I immediately replied and explained that that is not how it is going to happen, and presented him with our new terms on a take them or leave them basis, I had had enough of this guy.

Stay tuned for the final installment on Monday!

Barnes & Noble vs. Amazon: Long Tail Wins Everytime!

It was with mild amusement that I read Barnes & Noble’s 2nd quarter profits were down 15% blaming it on sluggish consumer spending. The amusement came from Amazon’s announcement in July that their 2nd quarter sales were up 41%.

Why?

It wasn’t that long ago that Barnes & Noble was tearing through the countryside opening up store after store while leaving a bloody trail of mom and pop Book shops in their wake.

Don’t get me wrong, I am for big business as much as the next guy, and I applaud any company that can build itself up from one store to ten stores to one thousand stores and so on. I mean that’s what the American success story is all about right? Companies like Wal-Mart, Starbucks, and Home Depot all started from a single location.

So throughout the 80’s and 90’s the book retailer grew rapidly and it seemed as if nothing could stop it. Then along came Amazon. Amazon took the long tail approach to books that no brick and mortar seller could even consider. But I am certainly not telling anyone reading this post something they don’t already know. The point to this post is this.

Grow or die!

Barnes & Noble got fat and lazy, giving away the low ground to Amazon and allowing the online giant first mover advantage which B&N have yet to recover from. Banes & Noble have been playing follower the leader ever since. This brings us to their weak-ass excuse for bad Q2 earnings.

What’s my point?

That fantastic quarter that Amazon had in the face of “sluggish consumer spending” came from an increase in media to 31% and to 58% in electronics and other general merchandise so people are buying other things besides books. Maybe you should check it out.

Pandit’s Gambit: Bad for Business - Good for Baseball?

It’s Sunday night as I write this post and I am taking stock of the things I did this weekend. While the last two days were jam packed with birthday parties and barbecues, the following is a list of seven things I didn’t do this weekend;

1. Fire or plan to fire more than 6000 people
2. Lose $2.5 billion in the last three months
3. Take $11.7 billion in write downs tied to the mortgage abortion
4. Give my shareholders their company’s lowest stock price since 1998
5. Spend $400 million for the naming rights to the new Mets stadium
6. Piss off former Citigroup employees who are Mets fans
7. Piss off Prince Alwaleed Bin Talal Alsaud, one of my largest shareholders for the last twenty years
   

That’s right home gamers, Vikram Pandit, the embattled (French for about get canned) CEO of the world’s largest financial institution has been a busy little beaver trying to put lipstick on this pig of a stock since Citi paid $600 million to buy his hedge fund and bring him on board. Since then, he has made one bad move after another. The latest mess he has gotten himself in is #5 or, ‘I’ll take spending shareholder’s money frivolously for $400 million Alex.’

Why?

Because this deal was dumb and someone in his PR department should have squashed it. Does he really need to spread the gospel of Citigroup this way right now? I mean really, is anyone left in New York that doesn’t know who Citigroup is? For the love of Pete Starbucks makes fun of the number of branches Citigroup has in Manhattan!

Now Mr. Pandit, I understand you have a business to run and another 350,000 employees to feed. But someday (soon) when your career at Citigroup is over, you are going to reflect back on the ef up’s that caused the board to chase you out of town like crazed villagers with pitchforks, and this stadium deal has to rank right up there.

Why?

Because ten years from now this isn’t going to matter, but right here, right now, you’ve unwittingly upset, insulted, and pissed off a lot of people by taking $7.5 billion in cash from Abu Dhabi to cover your ass on the mortgage mess, then turn around and piss away $400 million of it to see your logo in lights on yet another building.

Yeah, I can see it now, they are going to write books about you, they might even teach a class at the Wharton school on how to take an international banking instituion, run it like a hedge fund straight into the ground, then parachute out unscathed. We’ll call it “Pandit’s Gambit.”

Starbucks Down But Not Out!

Looks like Starbucks realized they needed to shut more stores, 600 included the total from the last round. As a businessperson, accepting a retrenchment is hard to do. When you have been in growth mode for decades, then suddenly you have to slam on the brakes, not for survival, but to keep the A-holes on Wall Street happy, has to suck.

So Howard, I feel for ya. But what’s the old saying, “what doesn’t kill you only makes you stronger.” I don’t think $4.00 coffee is going to win out over $4.00 gas, so something obviously has to give. But it is these times that guys with vision attack. If Schultz didn’t have to keep Wall Street happy, he would expand in markets like this because there are plenty of opportunities out there to capture market share.

But, before you expand, you must retract, so 600 stores and 12,000 people will be “insert corporate doublespeak here.” Which leads me to this funny video from Louis Black that is quite apropos: