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The Flying Banzini

Most long term residents of Saskatoon woke up listening to Rambling Dave Scharf on C95.  A lot of people came and went but there was always Rambling Dave.  Well one day he announced he was leaving to move with his wife Heather to Ottawa.  My mornings have never been the same.

For those of us who have followed Dave on Twitter, we were intrigued to see that he was opening a restaurant and he was going to document how it all went.  There has been some good times and some bad times and I have been struck by how honest he has been.  

This is from one of his recent posts.

With my consultants, I have just completed a careful review of our operations. Specifically, I am trying to figure out two things:

(1) What amount do we need to hit for weekly sales such that I no longer see bank accounts going down? I pay myself a modest salary so at this point I will be happy to see break even. We had very strong sales in September. October was OK. November has been weak. This is probably an annual reality. We will do very well in the spring summer and fall and not as well in the cold and dark. Presently, we are between $2K and $4K below where we need to be breaking even. We are still well financed so there is no worry but, of course, it’s not fun to be losing money. We planned to lose money for three months. And… well… three months is up next week. The biggest area of growth for us in takeout. I should have been working on the takeout part of the business a long time ago but some rather remarkable life circumstances had me out of the game for a couple of months. I am back. And, I am focused on growing the take out business. Online takeout ordering is now available (link at the top of the page). Please help me out and pass the word. Place your order and it’s ready for you at the time you choose.

(2) Food costs. We have been aggressively working on getting more efficient with labour. We have made remarkable progress in this area and our labour cost is WAY down from where it was with no noticeable change in customer service. In fact, I think our service is better than it was because we are each getting better at what we do. But, we do not have a good handle on food cost. We need to know what everything on our menu costs so that we can ensure that it is properly priced for our customers. We started out with a pretty clear picture, lost our focus, and now must get it back.

I have great confidence in The Flying Banzini. Every day I delight is seeing customers in my restaurant enjoying the vibe and the food. I great almost every customer at the door and I ask, “Have you been in before?” I think at least 50% have someone in their party who has been. In the long term, we are going to be just fine. Word will continue to spread and I am confident that my little restaurant will continue to grow. In the short term, though, we need to stop the slow bleed.

The food looks so good that I want to head to Ottawa to check it out but it is posts like this that are so cool and add to the story of the restaurant.  It’s a big risk opening any business and I am glad that Dave is letting us in on the ups and downs of the experiment.

Hands-On Bavarian Count Presides Over a Pencil-Making Empire

Count Anton-Wolfgang von Faber-Castell has been known to hurl wooden pencils from the tower of his castle to the stone courtyard below.

It is not a petty fit of pique by a mad Bavarian aristocrat. The 72-year-old count, the eighth in a long line of pencil makers, just wants to prove how durable the pencils that carry his family name are.

The Faber-Castell family has been making wooden pencils by the hundreds of millions here in a storybook setting, bisected by the swift Rednitz River, which was once the main source of power here. A torrent of brightly colored pencils flows from clattering machines in a century-old factory with a tile roof and windows framed in pastel hues.

Faber-Castell is the largest maker of wood-encased pencils in the world and also makes a broad range of pens, crayons and art and drawing supplies as well as accessories like erasers and sharpeners. About half the company’s German production is exported, mostly to other countries in the euro zone. That means that Faber-Castell contributes, at least in a small way, to Germany’s large and controversial trade surplus — which now rivals China’s for the world’s largest.

Faber-Castell illustrates how midsize companies — which account for about 60 percent of the country’s jobs — are able to stay competitive in the global marketplace. It has focused on design and engineering, developed a knack for turning everyday products into luxury goods, and stuck to a conviction that it still makes sense to keep some production in Germany.

“Why do we manufacture in Germany?” the count asked during an interview at the family castle near the factory. “Two reasons: One, to really make the best here in Germany and to keep the know-how in Germany. I don’t like to give the know-how for my best pencils away to China, for example.

“Second, ‘Made in Germany’ still is important.”

Not all its factories are in Germany. But when Faber-Castell, which is privately held and had sales of 590 million euros, or about $800 million, in its last fiscal year, manufactures in places like Indonesia and Brazil, it is at its own factories.

In contrast to many American companies, like Apple, that have outsourced nearly all production to Asia, Faber-Castell and many other German companies make a point of keeping a critical mass of manufacturing in Germany. They see it as central to preserving the link between design, engineering and the factory floor.

Trader Joe Has a Brother. He’s Even Better

Separated in 1960, the two brother set out to create two very different business empires

Chances are that you have never set foot inside the best grocery store in America: Aldi. And even if you are lucky enough to be in one of the 32 states where Aldi is, perhaps you were put-off by the cardboard boxes in lieu of shelves, or the row upon row of suspicious-looking off-brands. What is this place? Why do I have to put down a deposit to check out a cart? What is the weird giant shelf by the exit? And what do you mean, I have to pay for a bag?

Calm your hormones, meine Schatzis: Aldi, which is short for Albrecht Discount, is the American incarnation of a German grocery chain that is so ubiquitous in the Vaterland that almost 90 percent of Germans shop there. (Not all German imports are luxury cars, beer, and super-cool glasses.)

Aldi is part of a charming subset of Teutonic trade: the brother-run company that cleaves in twain. Shoe aficionados already know the story of the Dassler brothers, Adolf and Rudolf, whose bitter feud resulted in the creation of Adidas and Puma. (Germans pronounce Adidas differently—some might say correctly—AH-dee-das, from Adi Dassler.) But outside Germany, few know about grocery-store kingpins Karl and Theo Albrecht (who was kidnapped in 1971!)—even though Karl, with a reported net worth of more than 17 billion euros, is the richest man in Germany (Theo’s descendants are a close second).

The Brüder founded their discount-store empire together. A disagreement in 1960 over selling cigarettes hastened a partition, and an epic game of grocery-store Risk: Theo would rename his business Aldi Nord, and would control territories north of the Rhine, plus a healthy chunk of Europe. Karl would head up Aldi Süd, and get southern Germany, more of Europe, plus the U.K. and Ireland. But both companies operate stores in the United States—Aldi Süd operates as Aldi, and Aldi Nord as the now ubiquitous Trader Joe’s.

But whereas Trader Joe’s employs just one major cost-saving device—private labeling—everything else about it is Americanized. The place is swarming with upbeat employees; cashiers stand at the till and bag your products for you; you just grab a cart willy-nilly and they trust you to put it back. Aldi also private-labels (those $1.99 “Millville” Rice Squares are Chex, you guys!), but what makes it a more exciting venture—and even cheaper than Trader Joe’s—is that it has imported the entire German grocery experience (aside, alas, from employees yelling at you if you do something wrong).

Research shows CEOs who live frugally make better leaders

The flashier they are, the more open they are to fraud.

But according to research to be published in the Journal of Financial Economics, bosses who enjoy the finer things in life can be bad for their companies. The researchers hired private investigators to uncover the personal assets of a sample of American chief executives. They then compared those who own trinkets such as a yacht, a $75,000 car or a super-expensive house against a list of companies cited for fraudulent accounting by the Securities and Exchanges Commission. After controlling for things such as its size, the probability that a firm with a flashy CEO will commit fraud, they found, increases by 6% a year for every year that he is at the helm. At firms run by more frugal heads, on the other hand, the likelihood of fraud decreases by 61% every year.

Interestingly, this is not because ostentatious bosses feel pressure to maintain their lifestyles. Indeed, such CEOs are no more likely to be fraudulent than their parsimonious peers. Rather it is underlings who cook the books. This might be because such CEOs tend to hire executives with a similar mindset to their own. The study found, for example, that a chief financial officer is more likely to own a yacht if his boss does. They also tend to socialise more with directors at the firm—at country clubs and the like. Being part of such a pally clique means they are less likely to monitor what the others are up to, thinks Aiyesha Dey of the University of Minnesota, one of the authors.

Bosses with expensive lifestyles are also more likely to introduce equity-based incentive schemes, the report finds. Closely linking remuneration to the share price may encourage staff to caress the figures. Furthermore, says Ms Dey, such CEOs tend to run businesses the way they do their personal lives, prone to showy acquisitions and less regard for the long-term consequences.

Short interviews with small magazine publishers

Magazine publishing is a dark art. But the world of niche publishing—people who create magazines for necrophiliacs or donkey hobbyists, or for those of us who like to ride really small trains—features its own requirements.

Miniature Railway is hardly nostalgic. Henshaw is in the midst of creating a comprehensive map of all the miniature railways in the United Kingdom. “We estimate there are 1000 in total, but many are private, known only to a small group of friends. I have agreed to only show 400.” Henshaw admits that “quite a few” of those 400 are private. In August, The Telegraph wrote a feature on the “irresistible” romantic allure of a garden steam train. Apparently a popular activity among enthusiasts is cooking bacon and eggs in a shovel over the burning coals of a miniature train’s engine.

“There are many miniature railway enthusiasts in Australia, Canada, the U.S., and Germany, and a few in India too,” Henshaw says. “Most other nationalities find the whole subject perplexing.”

Miniature Railway’s ads are what you might expect: miniature railway destination spots, model train expos, and a locomotive plates maker in Droitwich (“NOT the cheapest, PERHAPS the most expensive, PROBABLY the best.”) The articles are also what you might expect—fascinating to the miniature railway enthusiast, slightly Greek to the rest of us. In the magazine’s pictures, Caledonian blue–polished trains snake through tall-treed woods and people convivially gather near cobbled tracks.

I wouldn’t imagine the cozy ethos of this digest-sized publication would translate well into digital modes, and David Henshaw more or less agrees. “I suspect that most small publications will go digital within a few years, but Miniature Railway is one of the few that will not.” One of the merchandise items featured on the back cover includes a heavy-duty binder with gold embossed letters intended to hold print copies. “Our readership is older, more traditionally minded.” Henshaw does express concern that soon there will not be enough printers around to print at a reasonable price—the print run per issue, which comes out tri-annually, is 800 and costs $1,800 (yearly subscriptions are $12 a year domestically).

Henshaw calls the economics of paper dubious. “These are interesting days!”

Another day, another botched procurement for the Canadian government

Interest article in CBC that highlights the problems the Canadian Forces has with procurement and that is we don’t build enough naval vessels (or buy enough military hardware) to have the needed expertise to do it well (which even countries like the United States find complicated enough)

IMC’s report was overseen by its president, Tom Ward, a veteran of the industry who was in charge of building the Canadian Coast Guard icebreaker Henry Larsen. Ward declined to comment on his report or to say why it had so little impact. But shipbuilding experts say that the moribund state of the industry in Canada means that government officials know little about shipbuilding — so expert, third-party reviews of such massive contracts are essential.

“There’s no expertise in government,” said business professor Michael Whalen of Mount Saint Vincent University in Halifax.

“Who’s going to look at those issues and the proposals from the Irvings and their subcontractors? We don’t have anybody, because they haven’t worked in that area for 30 or 35 years. So we’re going to go out to third-party consultants who do have that kind of expertise and can advise us. Are we getting value for money? Are we getting the right ship for the money?”

 

Value investing in arenas

As a hockey fan, this kind of hurts

Josh Harris said Newark’s Prudential Center was a more important financial piece in his purchase of the New Jersey Devils than the hockey team itself.

Harris and David Blitzer, a New Jersey native and senior managing director of Blackstone Group LP, purchased the National Hockey League franchise last month in an agreement that also gave the partnership control of the Prudential Center.

Located three blocks from Newark’s main transportation hub, the $385 million Prudential Center was opened in 2007. Harris called it “one of the most modern arenas in the country.”

“And we think that with the new capital structure and the new ownership group and the new management that we put in, that we’ll be able to make this arena really realize its potential financially,” Harris said in a Bloomberg Television interview.

Harris, who bought the National Basketball Association’s Philadelphia 76ers in 2011, acquired the NHL team in a deal valued at about $300 million.

Harris has already made changes to the Devils’ business personnel, hiring Scott O’Neil as chief executive officer. The former president of Madison Square Garden Sports, O’Neil is also the chief executive of the 76ers.

Harris said he viewed the Prudential Center as complementary to New York City’s two main arenas, Madison Square Garden in Manhattan and the Barclays Center in Brooklyn. The home of theNBA’s New York Knicks and NHL’s New York Rangers, the Garden is completing a $1 billion private renovation. The $1 billion Barclays Center, home of the NBA’s Brooklyn Nets, opened last year.

“If you’re a big concert event and you stop in New York, you’re probably going to play one of MSG and Barclays, and this arena,” Harris said of the Devils’ home.

O’Neil said in another Bloomberg Television interview last week that the Prudential Center was the fourth-highest grossing arena in the nation, behind Barclays, the Garden and Staples Center in Los Angeles. He didn’t offer specific figures or the source of his information.

Located about 11 miles (18 kilometers) from New York City, the Prudential Center has been a one-tenant building since the Nets moved to Brooklyn prior to the 2012-13 season. Harris said the venue’s concerts and special events would be enough to sustain the building without a second professional team.

“Having a basketball team, an NBA team, in this arena is not in the business plan right now,” Harris said. “We don’t think it’s necessary.”

Interesting bit of arena drama right now in New York.  You have Madison Square Garden being evicted, the Nassau Coliseum being totally renovated and refurbished, the Baclay’s Centre opening, and now the New Jersey Devils being purchased not for the team, but because it gives them access to Newark’s Prudential Centre.

In case you think this is just a New York thing, check out what MSG is doing with the old Los Angeles Forum, a building many thought would be torn down.

The first thing to consider is that arenas are costing $300 million dollars at least with many heading towards the $500 to a $1 billion range (depending on land prices).  Older arenas like Nassau and The Forum now have tremendous value, if you can call a $100 million renovation a value, in part because modern arenas have become so expensive, they aren’t viable in non-premier markets.  Remember that the City of Edmonton is paying a subsidy to the Edmonton Oilers to operate their new arena and Glendale is paying a large subsidy to the Coyotes to manage their arena.

China’s latest debt filled adventure: Regional Transportation Hubs

50 cities in China are all racing to become regional transportation hubs.

More than 50 mainland cities have answered Beijing’s call for cleaner economic growth with plans for aviation hubs – airports clustered with industrial zones.

They hope the projects will attract investment in the logistics, high-technology and finance sectors, the sort of businesses Beijing is encouraging as it seeks to move the economy away from an over-reliance on smoke-stack industries.

But critics argue the projects will exacerbate the problem of debt-fuelled construction, which local authorities have used for years to boost their economies.

Such “plans often start high key, but end poorly”, government researcher Wang Jun said.

“It is not necessarily a good thing for the whole nation, as so much investment will often lead to overcapacity and increase local government debts,” said Wang, who works at the China Centre for International Economic Exchanges. “There are already signs of redundant investment, as some regions in China have too many airports, which are not in full operation.”

Wang Xiaohua, an aviation consultant at Kent Ridge Consulting in Fujian, said developing an aviation hub involved more than simply building an airport.

It first of all required minimum annual passenger flows of 10 million and cargo volume of 200,000 tonnes, she said. Only Beijing, Shanghai, Guangzhou, Chengdu, Shenzhen and Kunming met that criteria last year.

The mainland will need more airports as the economy grows, but profits are elusive. Of the mainland’s 183 airports, 143 lose money, data from the Civil Aviation Administration of China shows. That suggests that more than 60 of the 80 new airports envisioned in the latest five-year plan to 2015 will end up in the red.

More then one economist has said that the country whose debt we all should be working about is China and articles like this do little to convince people otherwise.

100 Ideas to Improve Saskatoon: 1. Cut Red Tape

Saskatoon loves to talk about how it is a business friendly city and touts our lower taxes. As other cities have learned, being business friendly means a lot more than lower taxes, it means less red tape.

In 2010 the City of Calgary created the Cut Red Tape program to reduce red tape at The City of Calgary. The focus of the program was to remove red tape and make changes that result in our citizens and businesses seeing visible improvements. Some of those changes were small, constant irritants and others may be larger, fundamental issues in regulations or business processes. The aim is to shift our culture from a regulator perspective to a facilitator. The program has been supported by Council and funded through approved applications to the Council’s Innovation Fund on a project-by-project basis.

There are some real cost savings both to taxpayers and to the city.  Take a look below.

Cut red tape total savings

Cities around the word are hearing from world class businesses that “business friendly” is a lot more than low taxes, it’s about creating a climate where business can be conducted easily.  It’s something that Saskatoon has a way to go on but as Calgary is showing, it is something that can be improved.

Dealing with The Bank of Montreal

A couple of years ago I had a prepaid phone with Virgin Mobile.  My account had constant technical problems.  Nothing nefarious but it just didn’t work.  I would call in and the tech support people would immediately realize this account was messed up and would escalate the problem to more senior people.  The more senior people would realize the problem was really messed up.  It would get escalated (while I would get emails about the problem about every 30 minutes letting me know that a) it was messed up and b) they hadn’t given up on it.  I would get credit or something for my time but eventually someone at Virgin decided the problem could not get fixed and they just set up a new account and moved over my number.

While Wendy and I moved to Bell, we think highly enough of Virgin to keep Mark’s cell phone with them and a large part of it has been exceptional customer service.

Bank of Montreal in Saskatoon

Lately my debit card hasn’t been working with the Bank of Montreal.  It locks me out if I enter the PIN number in wrong and some times it just locks me out.  I end up having to pay with credit and each time I call them up and I explain the problem.  This is where it goes bad for me.  They tell me that the system doesn’t work the way I describe it and it must be me.  I have even been called a liar by the customer service reps.  Instead of resetting my PIN, they make me go down to the branch so I can get it reset there.

The branch clerks are just as unhelpful.  They too tell me that what I am describing is impossible.  It’s nice to be called dishonest in person and over the phone.  

The last time it happened, Wendy forgot her wallet at home and used my bank card.  She used my old PIN number once and it locked her out.  Again, we tried to explain on the phone and then in person and we were both called a liar and at the branch, they just blamed my card again.

Wendy and I have a joint account.  Her card doesn’t work that way, just mine.  It’s obviously a problem with either the BMO database or a weird account setting but no one offers to even look into the problem and that is what drives me crazy.  I can handle a messed up account or software issues.  I can even handle a “I have no idea why this is happening but I am working on it” answer but each time over the last two years I have walked away and realized that they a) either didn’t give a rip what was going on or b) are so disempowered that they literally can’t do anything to fix it.  Either way it says a whole lot about the bank and how it treats its customers.

Right now I have given up on BMO.  Air Miles are great but not if it means we great treated like this.

Walmart’s Worst Nightmare

Meet the Low-Key, Low-Cost Grocery Chain Being Called ‘Walmart’s Worst Nightmare’

Retail analysts say that the world’s biggest retailer has reason to fear a small grocery chain that’s based in Idaho and boasts a business model that allows it to undercut Walmart on prices.

So about that eye-catching Walmart quote. Those are the words of Burt Flickinger III, a widely respected supermarket retailing industry expert who works for the Strategic Resource Group. Flickinger was quoted in a recent Idaho Statesman story about WinCo, a chain of roughly 100 supermarkets in the western U.S., based in Boise.

“WinCo arguably may be the best retailer in the Western U.S.,” Flickinger says while touring a WinCo store. “WinCo is really unstoppable at this point,” he goes on. “They’re Walmart’s worst nightmare.”

Flickinger isn’t the only industry insider discussing WinCo and Walmart in the same breath. “While many supermarkets strive to keep within a few percentage points of Walmart Stores’ prices, WinCo Foods often undersells the massive discount chain,” the industry publication Supermarket News explained last spring.

This is where it gets interesting.

While all of these factors help WinCo compete with Walmart on price, what really might scare the world’s largest retailer is how WinCo treats its employees. In sharp contrast to Walmart, which regularly comes under fire for practices like understaffing stores to keep costs down and hiring tons of temporary workers as a means to avoid paying full-time worker benefits, WinCo has a reputation for doing right by employees. It provides health benefits to all staffers who work at least 24 hours per week. The company also has a pension, with employees getting an amount equal to 20% of their annual salary put in a plan that’s paid for by WinCo; a company spokesperson told the Idaho Statesman that more than 400 nonexecutive workers (cashiers, produce clerks, and such) currently have pensions worth over $1 million apiece.

The Conservatives are Paying Two Bureaucrats $500k Each to Run an Office that Doesn’t Exist

Nice gig if you can get it

Even among Ottawa insiders, few would be aware that two officials running a tiny agency Flaherty set up to try to create a national securities regulator beat them all. Douglas Hyndman, chairman and chief executive officer of the Canadian Securities Transition Office (CSTO), makes $534,043, and Lawrence Ritchie, the CSTO’s executive vice-president and senior policy adviser, $537,469. Their salaries are public because Hyndman is on long-term loan to the feds from the British Columbia Securities Commission, while Ritchie is similarly seconded from the Ontario Securities Commission, and both B.C. and Ontario publish “sunshine lists” of salaries over $100,000. They are still technically on the provincial payrolls—even though they’ve been working for Flaherty since 2009—with Ottawa compensating their home provinces. (The Harper government’s refusal to support Alberta MP Brent Rathgeber’s private member’s bill to publicly disclose federal salaries over $188,000 led to Rathgeber quitting the Tory caucus last spring; the government wanted to reveal only a handful of salaries over $444,661.)

At a glance, their pay seems out of whack by federal standards. After all, Hyndman and Ritchie together oversee only about 20 employees. Poloz, by comparison, commands about 1,240 at the central bank. But Flaherty has staked more on his high-priced ringers than the size of their shop might indicate. In an email exchange with Maclean’s, Hyndman said his “relatively small staff” belies the complexity and importance of what the CSTO is trying to accomplish. “We are using the expertise of a core group drawn from provincial securities regulators, plus some additional staff, to develop critical improvements to Canada’s system of capital markets regulation,” he said. “We also need to maintain the flexibility to move forward on either federal legislation or a co-operative scheme with the provinces.”

That last part about being ready to pursue either of two very different policy options is key. Flaherty set up the CSTO back in 2009 to bring about his goal of establishing a common Canadian securities regulator, replacing a hodge-podge of provincial stock market commissions. But some provinces challenged his plan in court. In late 2011, the Supreme Court of Canada ruled that Ottawa was overstepping its jurisdiction. Despite that severe setback, Flaherty kept trying to coax provinces to come onside voluntarily—that’s the “co-operative scheme” Hyndman mentions. But if those overtures to the provinces fail, the court ruling left the federal government room to regulate in limited areas on its own—that’s Hyndman’s “move forward with federal legislation” option.

In fact, indications from federal officials suggest they are not optimistic that enough provinces will sign on to salvage Flaherty’s original grand plan. For instance, Hyndman said the CSTO’s “primary focus right now is developing proposed legislation and implementation plans that will be needed if no agreement is reached with provinces on a common regulator.” But exactly what parts of the financial marketplace the federal government will set out to regulate on its own has not yet been announced. It’s the subject of considerable speculation among private-sector experts. Flaherty’s office says the aim would be “preventing and responding to systemic risks, such as those posed by over-the-counter derivatives.”

Figuring out ways to regulate trading by sophisticated investors in derivatives, which go by exotic names such as “currency forwards” and “credit default swaps,” is a hot topic in international policy circles, largely because failures on this murky side of the market are blamed for the 2008 global credit meltdown and the recession that followed. Hyndman even suggests that losing the Supreme Court case focused the federal government’s attention “precisely where Canada needs to do a better job to get regulation right.”

Whatever slice of the market Flaherty decides to tackle, settling on that approach shouldn’t take much longer. “Our planning horizon is in months, not years,” Hyndman said. On whether he and Ritchie will go back then to their provincial jobs, or stay on to run an agency set up to bring new regulations into force, he said only, “We have not sought, nor been offered, permanent federal positions.”

Before you get all that upset, that is probably a deal for two guys of that talent who would make much more in the private sector.  That being said, it probably won’t get enough provinces to sign on and in the end, will be a lot of money down the drain.

Mark Cuban on Starting Your Own Business

Downtown Detroit

Look at what Detroit Economic Growth Corporation has done for downtown Detroit and I again have to wonder why we are not telling this story about Saskatoon?

Live and make money in Edmonton

So Detroit isn’t the only place with a compelling story.  Take a look at this video about why you should move and dream in Edmonton.

Here is Mayor Stephen Mandel making the argument to invest in Edmonton

And now Paul Douglas, the CEO of PCL explains why they work and live in Edmonton.

Of course a video on how awesome the University of Alberta is and how it will make your business money.