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Today’s Must-Reads For Entrepreneurs: Applebee’s Millennial Fail, WeWork’s Silicon Valley Pixie Dust

(As featured in Forbes- October 23, 2017)

Written by: Loren Feldman

News and insights from around the Web:

Retail

Here’s why chain restaurants are dying: “‘In 2016, Applebee’s unveiled new wood-fired grills in each of its 2,000 eateries nationwide. That move, they announced, would ‘decisively take back America’s neighborhoods.’ The marketing proposition, Tankel said, was that millennials would flock to Applebee’s for hand-cut meats prepared on wood-fired grills. ‘We looked like anything but what we really were,’ Tankel said. And it didn’t work, he tells me. I’m not surprised. Applebee’s ‘wood fired’ list featured items like an eight-ounce steak for $20.99. In fact, of all the chain sit-down restaurants — an industry where the average meal costs about $14 — Applebee’s has traditionally had one of the cheapest menus. ‘They abandoned the traditional Applebee’s customer,’ Tankel said. Sixty days after that program began, the franchise’s guest counts began dwindling — and sales started tanking.”

Startups

Is WeWork an overvalued real estate play fueled by “Silicon Valley pixie dust“? “When Adam Neumann pitches potential investors on his startup, WeWork Cos., he likes to rev them up with a jaunt through his company’s shared office spaces. Before arriving, the 38-year-old chief executive typically sends staffers a directive: Activate the space.’ WeWork’s employees swarm a lounge to host an impromptu party with pizza, ice cream or margaritas.”

Tony Fadell is betting big on Paris and looking for revenge on Silicon Valley: “As for Fadell’s Future Shape, it already includes chunks of some of the more promising non-Silicon Valley companies going—Superpedestrian in Cambridge, Massachusetts; Modern Meadow in Nutley, New Jersey; Convargo in Paris; DICE in London; CashShield in Singapore—and to a person their CEOs have described Fadell’s behind-the-scenes help as invaluable. Judging by the idolization that Fadell gets from young French coders, Future Shape will undoubtedly get early access to the startups that will emerge from Station F and elsewhere. His rock-star status is probably his main advantage as an investor. Will it be enough to beat Valley VCs at their own game? We’ll see.”

Human Resources

A legal battle between tech companies could destroy non-compete agreements: “Since California reasserted what’s considered the country’s most employee-friendly policy in 2008 in its state Supreme Court, California tech companies have been unable to enforce non-competes like Citrix’s in-state. … What happens when the employees don’t live in California, however, isn’t so clear. … While both suits could continue separately of each other, the company that files first often takes precedent, says Lemley. ‘The lesson that lawyers in California tell their clients is: If you’ve got a non-compete and are leaving for a California company, get to court first.'”

Tech giants are paying big salaries for artificial intelligence specialists: “Tech’s biggest companies are placing huge bets on artificial intelligence, banking on things ranging from face-scanning smartphones and conversational coffee-table gadgets to computerized health care and autonomous vehicles. As they chase this future, they are doling out salaries that are startling even in an industry that has never been shy about lavishing a fortune on its top talent. Typical A.I. specialists, including both Ph.D.s fresh out of school and people with less education and just a few years of experience, can be paid from $300,000 to $500,000 a year or more in salary and company stock.”

Marketing

A brewery in Florida offered a free beer for taking a stand against “racial supremacy”: “‘We’re in no position to tell you whether or not you should show up to protest or completely boycott Richard Spencer’s appearance.’ But the brewery offered an alternative. It said tickets to see Spencer speak at the University of Florida are free and available to the general public. ‘So starting then, and all weekend long, for every two tickets you bring in, we’ll trade you for a free Alligator Brewing draft beer,’ the brewery said. The tickets brought into the brewery will be ‘disposed of.'”

Health Care

The cheaper small-business health plans President Trump is pushing have a history of fraud: “These health plans, created for small businesses, have a darker side: They have a long history of fraud and abuse that have left employers and employees with hundreds of millions of dollars in unpaid medical bills. The problems are described in dozens of court cases and enforcement actions taken over more than a decade by federal and state officials who regulate the type of plans Mr. Trump is encouraging, known as association health plans. In many cases, the Labor Department said, it has targeted ‘unscrupulous promoters who sell the promise of inexpensive health benefit insurance, but default on their obligations.’ In several cases, it has found that people managing these health plans diverted premiums to their personal use.”

Manufacturing

On Friday, Australia closed its last car factory: “The decision to stop making cars in Australia reflects ‘the perfect storm of negative influences the car industry faces,’ Mr. Turnbull said. He pointed to the continued strength of the Australian dollar, high production costs, and a small domestic market that is both competitive and fragmented. The small size of the domestic car industry made it almost impossible to compete against foreign automakers. ‘It just didn’t reach the scale of operation,’ said John W. Freebairn, an economics professor at the University of Melbourne. ‘You have to compete with the smart U.S. manufacturers, the Japanese, the South Koreans and so on who are producing several hundred thousand units a year. Our guys were nowhere near that.'”

Amazon

Before cities spend billions to land Amazon’s HQ2, they might reflect on what Amazon’s HQ1 has meant for Seattle: “At first, it was quirky in the Seattle way: Jeff Bezos, an oversize mailbox and his little online start-up. His thing was books, remember? How quaint. How retro. Almost any book, delivered to your doorstep, cheap. But soon, publishers came to see Amazon as the evil empire, bringing chaos to an industry that hadn’t changed much since Herman Melville’s day. The prosperity bomb, as it’s called around here, came when Amazon took over what had been a clutter of parking lots and car dealers near downtown, and decided to build a very urban campus. This neighborhood had been proposed as a grand central city park, our own Champs-Élysées, with land gifted by Paul Allen, a Microsoft co-founder. But voters rejected it.”

Puerto Rico

Here’s how small businesses are trying to survive in Puerto Rico: “Small shops face a mountain of challenges: can they receive emergency aid? Can they repair their storefronts? Will customers ever return? That all depends on whether owners can se levanta — get up — says Alessandra Correa, a local business leader in San Juan. It’s a phrase that’s been repeated over and over again by Puerto Ricans since the storm hit. ‘We have to fight,’ she says. ‘Fight for our businesses, for our employees and our economy. Giving up is not an option.’ That’s why today Sanchez is slinging Styrofoam containers of fried steak and eggs for workers at Correa’s office in San Juan. It’s a far cry from the six-course tasting menu he whipped up at his restaurant. He’s hoping to raise $5,000 to buy a food truck so he can start over. It was an idea suggested by Correa, who had been a regular at Pera Maraya. She called him up after she saw the restaurant shuttered as she passed by one day. “Where are you?” she asked Sanchez. He was just sitting at home. ‘You can cook. You’re still alive, right?’ She invited him to set the pop-up lunch at her office.”

José Andrés has served more hot meals in Puerto Rico than the Red Cross: “Andrés is not just talking the talk, either. Since he arrived in Puerto Rico, he has put much of his life on hold in Washington, where he oversees ThinkFoodGroup, a company with more than a dozen restaurants, a catering division and a food truck. Andrés was in Puerto Rico, in fact, when he heard the news that Minibar, the chef’s gastronomic funhouse in Penn Quarter, maintained its two Michelin stars. In the three-plus weeks since Maria pummeled the island, Andrés has been home only three or four days, he said. He returned once after becoming dehydrated. ‘The reality here is very hard to escape. My question is, if we don’t do it, who’s going to do it?’ Andrés said about feeding Puerto Ricans. ‘Fresh food is hard to come by . . . Sometimes the only fresh food people are eating is fruit we are bringing. The only hot meal they are eating is the lukewarm meal we are bringing.'”

Litigation

A dispute between two founders almost destroyed Arizona Iced Tea: “But Ferolito persisted, so the two explored selling Ferolito’s half to a multinational that could be a strategic partner. Problem was, Vultaggio runs the place like an extension of himself. He loves to hire friends and family and cook pancakes and omelets for his nearly 300-person office staff on his birthday. The mandatory dress code that day: pajamas. He even wallpapers hallways and sometimes pastes the decals on tractor-trailers himself. The big suitors wanted something Vultaggio refused to give up: control. ‘I’ve seen what large companies have done to entrepreneurial companies,’ Vultaggio scoffs. ‘Sometimes they do well but most times not. They take the entrepreneur’s spirit, throw it in the garbage and fold it into their corporate philosophy.’ Needless to say, Vultaggio blocked the deals. Next came an avalanche of legal filings, beginning in 2008: claims by Ferolito that Vultaggio and the executives at Arizona were guilty of ‘oppression’ and ‘fraudulent conduct’ and had conspired to cut off Ferolito’s profit distributions to pressure him into selling back his shares at a steep discount; counterclaims by Vultaggio that Ferolito was putting his own interests before the company’s for ‘purely selfish reasons’ and that he even brought five armed men to Arizona’s headquarters to intimidate the staff. … Meanwhile, lawyers circled like hawks, questioning any move that might affect the balance sheet and thus the potential sale price. Top talent steered clear, worried that taking a job at Arizona meant unemployment within a few months. Plans for growth were put on hold. Vultaggio found himself spending more time dealing with the litigation than the business. Competitors pounced.”

Find the link to the full story below:

https://www.forbes.com/sites/lorenfeldman/2017/10/23/startups-retail-finance/#112a59704440

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