Morning Report

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The Best Management Training? Running a Waffle House

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MANAGEMENT

If you can manage a Waffle House, a Wall Street Journal article says, you can manage anything: “In case you’re not familiar, Waffle House is a closely held suburban Atlanta-based chain of 24-hour budget diners in 25 states that invariably reek of bacon. The company does not advertise, rarely changes its menu and refused to take credit cards until 2006. … The company declined to disclose its financials, but most estimates of its annual revenue exceed $1 billion. Waffle House says the share price of its employee-owned stock, which is based on its audited book value, has increased every year for the last 57. The company says it typically opens about 50 new restaurants a year.

“In reality, these statistics attract plenty of managers. And because Waffle House promotes exclusively from within, the good ones are rarely inclined to leave. ‘It’s probably one of the last places where you seriously have the ability to build wealth,’ says Randy Coleman, a former Walmart store manager who defected to Waffle House in 2005. What does it take to be a successful Waffle House manager? Speed, for one thing. To meet the goal of serving every customer in eight minutes or less, the waitstaff doesn’t bother punching orders into a computer. They write them down in a shorthand code and read them aloud to cooks, who remember them by arranging condiments on empty platters. A face-up mustard packet signifies pork chops, for instance. If the restaurant is busy or short-staffed, managers are expected to dive in. The company’s training program teaches them how to analyze P&L statements, but it also prepares them to cook, clean and wait tables.”

HUMAN RESOURCES

Microsoft Japan tested a four-day workweek this summer and saw a 40 percent increase in productivity: “Microsoft’s ‘Work Life Choice Challenge,’ held this August, saw the firm close its doors on Fridays and give its 2,300 employees three-day weekends for the full month to assess the merits of a reduced workweek. Over that period, the firm saw productivity, as measured by sales per employee, rise 39.9 percent compared with August 2018. That boon was thanks in part, Microsoft said, to meetings capped at 30 minutes and an increase in remote conferences. Meanwhile, the firm saw a fall in costs, with 23.1 percent less electricity used and 58.7 percent fewer pages printed over the period. The experiment, which also incorporated self-development and family wellness schemes, recorded largely positive feedback from employees, too, with 92.1 percent saying they liked the four-day workweek, according to the firm.”

The CEO of McDonald’s has been fired for having a consensual relationship with an employee: “[Steve] Easterbrook, 52, had been widely credited with turning around McDonald’s after it posted one of its worst financial performances in years, in 2015. A native of Watford, England, who previously ran the company’s British business, Mr. Easterbrook emphasized technological innovation, striking food-delivery deals with the third-party apps Uber Eats and DoorDash and acquiring smaller companies that specialize in machine learning and artificial intelligence. Last year, Mr. Easterbrook was paid more than $15 million.”

STARTUPS

Ethena makes customized sexual harassment training programs: “Ethena doesn’t want employees to ‘knock it out all at once’ in an hour or two of training at the end of each year. Instead, it’s creating what it calls monthly ‘nudges’ that deliver relevant studies and questions—information that can then be used in an all-hands meeting, for example, helping to reinforce its goals. It’s also focused on sending content and questions to people that’s iterative and that evolves based on how an individual responds. A new hire might answer very differently than a sponsor of other women within an organization, for example. It’s a stark contrast to the black-and-white scenarios that every employee is typically presented. (Think: ‘Judy and Brian go to a bar after work.’) … There’s also a heavy focus on analytics. If 60 percent of employees don’t know about a company’s policies around office dating, for example, or employees in an outfit’s marketing department appear to know less about an organization’s values than other departments, Ethena will flag these things so managers can take preventative action.”

A startup called Capital offers founders “venture debt,” which allows them to retain more equity: “Capital’s underwriting technology, dubbed The Capital Machine, determines if businesses have the growth potential necessary for an infusion of debt (by analyzing revenue and other financial considerations), then delivers term sheets within 24 hours. The expedited process cuts out the time-consuming elements of pitching venture capitalists, the company says, allowing businesses to go from zero to $5 million—or more—in a matter of hours. For companies that aren’t ready for a debt round, or that don’t meet Capital’s qualification, the company is offering access to a free calculator that determines the cost of a company’s capital based on their fundraising and valuation data. … Capital charges a five percent to 15 percent flat fee on its capital, investing a maximum of $50 million over time.”

Truepill is one of several startups trying to disrupt the $400 billion pharmacy industry: “Last year its revenue reached $48 million, helped by the fast growth of direct-to-consumer customers like Nurx, which sells birth control, and Hims, which focuses on remedies for hair loss, erectile dysfunction and acne. This year Truepill could double its revenue to $100 million, as it expands its customer base beyond direct-to-consumer medications to prescriptions that treat more serious illnesses. … Pharmacy is a roughly $400 billion business in the United States, yet only recently have entrepreneurs begun tackling the market. In 2013, two young founders launched PillPack, a retail pharmacy startup that was acquired by Amazon last year for around $750 million. Other newcomers followed, including New York City’s Capsule, which grabbed $270 million in funding to do same-day prescription delivery refilled via text.”

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THE ECONOMY 

American manufacturing continues to slide: “The ISM Manufacturing index came in Friday at 48.3 percent, an increase from September’s 47.8 reading, but it was the third consecutive reading below 50 percent, indicating a contraction in the sector. … The news could temper exuberance from an unexpectedly strong report of 128,000 new jobs in October, which had been expected to come in considerably lower due to a strike at General Motors.”

There is a flood of oil coming to market: “And it is not coming from the usual producers, but from Brazil, Canada, Norway and Guyana—countries that are either not known for oil or whose production has been lackluster in recent years. …Together, the four countries stand to add nearly a million barrels a day to the market in 2020 and nearly a million more in 2021, on top of the current world crude output of 80 million barrels a day. That boost in production, along with global efforts to lower emissions, will almost certainly push oil prices down. Lower prices could prove damaging for Aramco and many other oil companies, reducing profits and limiting new exploration and drilling, while also reshaping the politics of the nations that rely on oil income.

“The new rise in production is likely to bring economic relief to consumers at the gas pump and to importing nations like China, India and Japan. But cheaper oil may complicate efforts to combat global warming and wean consumers and industries off their dependence on fossil fuels, because lower gasoline prices could, for example, slow the adoption of electric vehicles.”

REGULATION

The EPA is rolling back Obama-era rules meant to limit the leaching of heavy metals like arsenic, lead, and mercury into water supplies: “The EPA will relax some of those requirements and exempt a significant number of power plants from any of the requirements, according to the two people familiar with the Trump administration plan, who requested anonymity because they were not authorized to speak about the new rules. The move is part of a series of deregulatory efforts by the Trump administration aimed at extending the lives of old, coal-fired power plants that have been shutting down in the face of competition from cheaper natural gas and renewable energy generators. Coal ash, the residue produced from burning coal, was dumped for years in holding areas near power plants, largely without regulation, but it came to the public’s attention after spills in North Carolina and Tennessee sent mercury, cadmium, arsenic and other heavy metals from the ash into water supplies.”

Small businesses are bracing for the effects of a federal mandate limiting the use of anonymous shell companies: “The House in October passed a bill requiring most limited-liability companies, among other firms, to tell the Treasury Department who their primary owners are. A companion measure has been introduced in the Senate. The legislation aims to crack down on entities that are used as vehicles for hiding or moving illicit funds. The bills would require companies with 20 employees or fewer and no physical office to provide owners’ names and other personally identifiable information. The House measure calls for annual submissions; the Senate bill gives businesses 90 days to report ownership changes and a year to report changes to addresses or other personal information. … 

“Affected companies would likely have to hire accountants or lawyers to make sure they comply, said [Anne] Zimmerman, who also co-chairs a small-business advocacy group that focuses on tax-related issues. Her group hasn’t taken a position on the bill, she said. If enacted, the requirements could result in as many as 30 million beneficial-ownership filings annually, according to a Congressional Budget Office analysis of the House bill published in September. The analysis described the total cost to businesses as substantial without providing an estimate. The House and Senate measures would require companies to submit information about owners who hold at least a 25 percent stake or who exercise substantial control. The information would include names, birth dates, addresses and copies of government identification.”

SOCIAL MEDIA

Silicon Valley is worried about the rise of TikTok: “Late last year, Facebook launched a TikTok clone called Lasso. That app has been downloaded fewer than 500,000 times, mostly in Mexico, according to Sensor Tower. While many videos in TikTok’s endless feed of 15- to 60-second clips have hundreds of thousands of ‘likes,’ the videos in Lasso’s nearly identical feed typically have a few dozen. At YouTube, executives are also considering ways to imitate TikTok, including adding similar video-editing software within the YouTube app, according to a person familiar with the conversations who spoke on the condition of anonymity because the plans are private. Google, which owns YouTube, also held acquisition talks with Firework, a TikTok imitator that is aiming for older users, according to three people close to the talks who requested anonymity because the negotiations were confidential. One of those people said Google decided against acquiring Firework.”

And that’s what’s ahead.

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