12/13/19

Delta Airlines Amex Credit Card

Since 2010, Delta Airlines and American Express have had a co-branded credit card arrangement. Not such a big deal, say you?

You would be wrong, dear reader. It is a huge deal.

 1. In 2018, eight percent — 8% — of all Amex traffic was on this card.

 2. The Delta Skymiles/Amex card came out of the gate hot making more than $1.4B in gross revenue for Delta in 2010.

 3. In 2018, that revenue number is $4B.

 4. That percentage of Delta’s profits is more than 35%!

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11/4/19

McDonalds CEO And His Consensual Romantic Relationship

This guy, this divorced Steve Easterbrook guy, was the Chief Executive Officer of McDonalds, by all accounts a good one.

So, he admits to having a “consensual romantic relationship” with an employee who is below him in the food chain at McDonalds. [Get it. The food chain. At McDonalds.]

Everybody is below the CEO in the food chain at McDonalds — well, except for Mickey. Mickey is above the CEO. Maybe the Hamburglar?

Easterbrook was a good CEO at McDonalds and is credited with having introduced a number of initiatives (all day breakfast, delivery, tech innovations) that had the stock solidly in the win column, but he exercised poor judgment and managed to get himself fired from a job that paid him $21.8MM in 2017. Ouch.

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10/11/19

Tootsie Roll — A Curious Story

Comes now the curious story of Tootsie Roll. I love Tootsie Rolls. My local Wells Fargo Bank used to have free Tootsie Rolls.

The Tootsie Roll was invented and manufactured for the first time in 1907 (this date is in dispute). Yesterday, and every day for the last few years, they made 64,000,000 Tootsie Rolls at the Tootsie Roll Industries plant in Chicago.

64,000,000 Tootsie Rolls per day

The Tootsie Roll was named after the daughter of the inventor, who died in a tragic suicide when his candy company failed.

The company is public and has been a damn good performer. Look at this chart. [We need a better chart, Big Red Car. This one is a little fuzzy. Shut up.]

In addition, the company has paid a dividend that has increased for the last fifty years. Hello, America!

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10/2/19

We Work — What Did We Learn?

I have been a skeptical voice on We Work since the beginning — meaning since I read their S-1, understood their business model, and learned about Adam Neumann, who I accused of being a toxic force on the company as a leader and a manager.

This was long before the guy got fired. Never liked him. Thought he was a poseur. Real estate as a service, my ass.

What I am not skeptical about is the market for co-working spaces as a real estate product. I think they are good.

In my personal real estate career, we had some vacancy in a suburban mid-rise office building and converted it to what was then a co-working space. We used to use the term “office suites.” It turned out very well for us.

 1. We collected (earned) 2X the market rental after expensing all operating costs. Meaning when we added up the individual small office rentals, subtracted all the costs — we got twice the rent we would have gotten had we rented it to an arms length, independent third party.

 2. We sold the business, as an operating entity subject to a lease, to a third party, Regus.

 3. We got a solid tenant in Regus paying a slightly above market rent and did not have to spend a penny in tenant improvements.

This was back in the 1990s.

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09/30/19

Rent The Wrong Way

I have never rented anything from Rent the Runway, the unicorn women’s “unlimited closet in the cloud” fashion site, your secret door to the latest in the rag trade.

You can rent clothing by the one off, on a subscription basis, and buy the clothes at a discounted post-rental price. They send you (gratis) a second size to make sure you can fit into their clothes. It is a first rate business.

Though I have never rented a dress (don’t carry the right size for Big Red Cars), I have always loved the business concept, their financial model, their innovative business development, their founder story, and their web site.

The company was founded by a couple of Harvard MBA women in 2009 — Jenny Fleiss and Jenn Hyman (bit of irony, no? couple of “Jens”). It is a profitable unicorn.

However, if today you go to their website, you will find the following message:

Currently all one-time Reserve rentals must be scheduled for delivery after 10/15.

Thanks for your patience as we upgrade our system!

Imagine the conversations within the company that resulted in that sentence appearing on the website. In addition, the company  is not taking any new “members” for any of their programs.

In essence, the unlimited closet in the cloud is out of business for 2-3 weeks. Closed for tech remodeling! Never saw that happening!

How does a company weather a 2-3 week unannounced cessation of their business when they are an immediate gratification B2C, cutting edge fashion business? 

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09/24/19

The Cult of Personality and Adam Neumann of We (We Work)

Since time immemorial, American business has always revered the iconic startup leader whether it was John Davison Rockefeller, Sr — American business icon, considered the wealthiest American of all time, and a generous philanthropist; or, the Steve Jobs, Jeff Bezos, Bill Gates stories. Sam Walton was an iconic, successful businessman.

All have a “larger than life” nature to them. They fall into the category of the iconic American business billionaire. These folks, however, come with a full bag of positive and negative traits.

In the modern startup world, we have folks like Travis Kalanik, formerly of Uber, and, now Adam Neumann, of We (We Work).

What we are confronted with is the “cult of personality” wherein the business becomes synonymous with the leader or founder.

This can be good or bad.

In the case of Sam Walton, it is generally perceived as a positive thing. Folksy Old Sam was a gimme-cap-wearing, pickup-driving, Easy-Rider-rifle-rack-shotgun-owner, bird-hunting, bird-dog-loving man of the people from the heartland.

Walmart HQ never left Bentonville, Arkansas, and Bentonville never left Sam.

Sam Walton and his pickup truck at the beginning:

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09/16/19

Ooops, I Forgot! Sorry, That Will Cost $92.5MM

The story of how Vintage Capital Management, a private equity firm, “forgot” to send a letter that cost them $92.5MM makes YOUR story about what happened when you forgot the 2% organic milk sound petty and minuscule by comparison. Allow me to expound on this.

You’re at your weekly writer’s critique group reading, critiquing, making pithy comments, and you receive a text from your beloved.

“Can you please pick up some milk on the way home? We’re out. Thank you, sweetie.”

You read the text and dismiss it, well, because you were getting a critique on your latest literary masterpiece and that understandably consumes your entire bandwidth.

When you get home, your beloved asks, “Did you get the milk?”

[Seeing you empty handed, she does not use the nominative of address of “dumbass” because she is a Southern woman of considerable breeding and refinement. But, let’s admit it — she is tempted.]

“What milk?” you reply, as you slap your forehead, thereby dislodging and rebooting your brain.

Though it is ten in the PM and you desperately want to watch the latest Jack Ryan episode, you hop into your SUV, drive to the half-mile away, all-night grocery (listening to the Bruce Springsteen E Street Band Sirius channel), and pick up a gallon of two percent, organic milk. You do not buy any other kind of milk because in your household “milk” means two percent, organic.

That is what happens when you inadvertently “forget” to do something.

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