Drink Juice and prosper

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With lifestyles that usually incorporate healthy choices, it’s no surprise Los Angeles has made the juicing trend a way of life. I had the privilege of interviewing Lucy Wagner, one of the original employees of The Juice, a cold pressed organic juice bar in Atwater, Los Angeles.

Lucy Wagner has been working at The Juice since day one and she has been through the business changes and expansion of the company for over 2 years. She shared with me her understanding on the day to day challenges the founders of The Juice has faced and her first hand perspective on business development.

What makes The Juice different from other stores is that they cold press all their juices. Cold pressing it’s a newer process in which the fruits vegetables are first crushed and then pressed in a huge hydraulic press (with a pressure equal to 5 times the pressure found in the deepest part of the ocean). Because cold pressing don’t produce much heat, it keeps more of the fresh ingredients’ nutrients intact. Traditional centrifugal juicers uses a fast spinning metal blade that generates heat which destroys some of the enzymes in the fruits and vegetables rendering less nutritious juice.

First The Juice store in Atwater

The founders of The Juice, Elizabeth and Melissa both believed in high quality juices and splashed out on the cold presser despite it’s $50,000 price tag. This was a huge cost to them but ensured the quality and nutritional value of their products.

The process of cold pressing is very labour intensive and each batch can take up to an hour. Since all juices are pre-made and bottled up, customers have complained about the lack of customization and not having juices made to order.

Even though The Juice now has 3 locations throughout LA (two in Atwater and one in the Arts District) they only have 1 juicer. Juices are usually transported to the two newer locations because it’s more cost efficient this way.

One of the biggest challenge that all juice bars face is the season’s effect on business. No only are these juice bars impacted by seasonal produce but they also have to deal with lower demand in the colder months. People often assume that with biotechnology we are able to get fruits in season all year round, this is not true. When fruits are off season, it’s harder to maintain the quality and a consistent menu. Organic Juiceries such as The Juice are particularly affected by this as they only serve organic produce which is more natural and harder to control.

And just as juices are hard to maintain in the colder months, business is too. In order to keep business during the winter Elizabeth and Melissa position the juices as post holiday cleanses and defence against the flu season. At $9 a bottle, The Juice is considered a luxury in the eyes of many people. Even though the US economy is no longer in a financial crisis, when people are not doing so well juices are the first things cut out. Restaurants experience a similar decline too especially when people try to eat in more and reduce unnecessary spending.

The regulars

In the beginning, the Juice served customers ranging from regulars to locals and people visiting the area. It was very much dependent on the customers within the vicinity. However to expand their customer base, the Juice has done promotions in local farmers markets and also partnered with other local stores and cafes around the area.

Currently they collaborate with Undefeated, a hip sneaker store in the Silver Lake area. Undefeated carries The Juice products in a small in-store fridge. For this partnership The Juice created a special “undefeated” flavour only available in that store. They’ve also worked with small cafes and coffee shops around the area to expand their local customer base and increase brand recognition. These small businesses are usually close enough that the customers can return back to the original The Juice store however not so close for cannibalization. The Juice has also partnered with Pop Physique and Soul Cycle in order to reach potential health conscious customers.

A quick stop at the Juice post Zumba lessons

Apart from expanding to other local businesses, The Juice is now available on Amazon Fresh. The Juice used to deliver their juices and cleanses to their customers for a small fee, however with the emergence of more online delivery services, it has allowed them to focus on creating a high quality product. This development has enabled a larger reach, as customers who were too busy to go in-store can now reach the product online. Association with a corporation like Amazon has also boosted it’s brand image.

Since starting the business in 2013, one of their greatest reasons for success is the location and the support from the surrounding community. In 2013, Atwater was a hip up and coming place in LA and there were cool new businesses in the area. Melissa and Elizabeth were very much a part of that community so they knew the trends of their potential customers very well. The seized the opportunity to set up in Atwater before the market was saturated with other stores. The neighbourhood has changed a lot since then, with more artisan coffee shops and boutique restaurants.

To the Melissa and Elizabeth expansion is all about timing and knowing the your customers. The neighbourhood needs to be new enough that rent prices are still low and other businesses are beginning to set up. Another great indicator is when there are a few health conscious restaurants who are beginning to be successful. Highland park is the current location The Juice is looking to expand into, it is a location that is starting to experience gentrification and already has a successful vegan donut place and vegan taco place in the area.

Visit the Juice at 3145 Glendale Blvd, Los Angeles, CA 90039

A Booming Housing Market in Low-income Communities, with Low Demand

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It’s been seven years since the burst of housing bubble in 2008, and the market started showing signs of recovery after 2012. It seems to be a good time to consider buying a house now, with the still-going-down 15-year fixed-rate mortgage fell to 3.08 per cent, slightly above the record low 3 per cent in May 2015, according to a Freddie Mac report.

As the mortgage rate now running below 4 per cent for nine straight weeks, the cost of getting a loan to purchase a new home has become a lot lower when compared to the data earlier this year. However, many potential first-time home buyers in low-income community, such as East Los Angeles and Boyle Heights, took a wait-and-see stance instead. More people in low-income areas have chosen to rent instead of buying houses.

“I’ve seen people renting for over 15 to 20 years,” said Alicia Bonilla, a mail carrier who moved to East L.A. in late 1990s.

Slow wage growth is not the only reason deterring potential homebuyers from owning houses in East L.A. In fact, the median home price has been hovering around $350,000 in the last quarter, which is still affordable comparing to surrounding areas of East L.A. and Boyle Heights. The median home value in Los Angeles County is much higher, at the price of $503,700.

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(A house was put for sale in East Los Angeles. Photo: Zihao Yang)

The booming for-sale housing market is on its way to reach record high since the housing market collapse in 2008. The median price for a 3-bedroom house in East L.A. and Boyle Heights was around $200,000 in 2012 and $310,000 last year, according to data released by Zillow.com.

For a neighborhood highly populated with working-class families and new immigrants, living in their own houses has always been a dream for many young residents. However, many potential homebuyers see this area merely as a springboard in their life to a better community.

“The accessibility to a lot of utilities such as transportation, Metro, freeways, airport – that’s why [people are renting in this area],” said Luis Negrete, a real estate broker who started his business in 1983 on the E. Third St., “other than that, I don’t see that much incentive to own.”

A housing market with ever-rising prices but sluggish real demand has seen an increasing number of houses for sale, but the number of potential buyers didn’t go up. Investors are less interested in investing in the area because of historical reasons, so most of the buyers are immigrants or families that have been living there for a long time, said Negrete.

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(Real estate agent Luis Negrete stands in front of his agency in Boyle Heights. Photo: Zihao Yang)

Due to its vicinity to downtown Los Angeles, Boyle Heights enticed many blue collar workers who want houses near their work locations but have no desire to own properties in the neighborhood.

“One thing that’s undeniable is the location. This is a prime location [for commute],” said Sergio Ramos, a realtor whose major business area includes Boyle Heights and East Los Angeles.

According to Negrete, the ideal final home destinations for the younger generation no longer include East L.A. and Boyle Heights, and the cultural root is not a factor as important as people thought to be. Instead, neighborhoods such as Pasadena and Hacienda Heights are becoming more attractive as places to own a property.

Take a walk on the streets in East L.A. and Boyle Heights, and you will be surprised to find how many houses were put for sale in the neighborhood recently. “They were not even for sale last month,” said Art Kawaguchi, an auto repair shop manager on the E. Third St.

But the number of home sales transaction remained flat and sluggish. Since 2012, not including investors, East L.A.’ housing market shifted further toward renting, said Ramos.

According to East Los Angeles Community Corporation (ELACC), the homeownership rate was only about 11 per cent in Boyle Heights, far lower than the average 46.9 per cent of Los Angeles County. On the national level, the homeownership rate is about 64 per cent, reported the U.S. Census Bureau.

“In this building, a lot of young families did move in. They are just trying to find a place to live on their own. But for them to buy a house, I believe they are not ready yet. They haven’t really mentioned it or talked about it,” said Jeremias Tomas, a property manager of Sol Y Luna Apartments on the E. First St.

It is projected that the mortgage rate will stay low after the Federal Open Market Committee decided to keep interest rates at record lows. But according to Fed Chair Janet Yellen, a Fed rate hike, which could affect domestic housing market, is still likely in 2015. The FOMC will host two more meetings this year, in October and December respectively. A Fed rate increase could make home loans costlier and discourage people from buying houses.

Economists predicted that in 2016, more first-time and younger buyers will “take the plunge on homeownership because the cost of renting will keep going up”, and that will “make the security of a fixed mortgage payment more attractive to more otherwise content renters,” according to a Los Angeles Times article.

Even if predictions suggest that the decreasing cost of buying a house will incentivize more young homebuyers to consider owning properties, in many low-income communities in Los Angeles, it seems that the younger generation are thinking of somewhere else to settle down in the long run.

 

 

Sources:

http://www.freddiemac.com/pmms/index.html

http://freddiemac.mwnewsroom.com/press-releases/mortgage-rates-calm-ahead-of-federal-reserve-decis-otcqb-fmcc-1217973

http://la.curbed.com/archives/2015/07/los_angeles_housing_market_bubble.php

http://www.chicagotribune.com/business/ct-mortgage-rates-slip-20150924-story.html

http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

http://files.zillowstatic.com/research/public/Neighborhood/Neighborhood_Zhvi_AllHomes.csv

Nerd Rising

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David Arnold is afraid the bubble is about to burst.

It happened in the ‘70s and again in the ‘90s. The market got hot and everybody wanted in. To keep up with rising demand, companies beefed up their supply, to the detriment of their products’ quality. Because the quality of the product declined, so did the demand, eventually creating deflation.

Not even the “Death of Superman” could save the comic book industry.

But now comic books — thanks in large part to a series of high-grossing superhero films — are booming again, and Arnold, a lifelong lover of comic books and now, an online retailer, can’t help but feel a little anxious about its surge. Especially because, as a reader, the overload of movies and reboots has become overwhelming.

“There’s a lot of dead weight in the marketplace right now,” says Arnold. “There’s a lot of books that don’t need to be there, and I think a culling is good.”

Arnold started his business, DNA Comics and Grading, two years ago. Overworked and unhappy with teaching, at the age of 36, Arnold looked at the stack of comic books and toys he had acquired over the years, items he jokingly referred to as his “retirement fund,” and decided to cash in.

“Little did i know how much stress running your own business is,” Arnold muses. “I think I traded in six in one, for half a dozen in the other sometimes.”

And as plush as it may seem to stay at home, throw a bunch of comic books online and watch the money rain in, as Arnold found out, it’s really not that simple.

Unlike a regular storefront, where business-owners can refuse customers service per their discretion, eBay has built in a lot of protections for the buyer that Arnold feels punishes the seller.

For example, if a package is delivered but a customer claims he did not receive it, Arnold is obligated to refund the cost back to the customer — even if the tracking says the package was delivered.

And if he doesn’t? His seller’s rating is at stake.

This is one of the biggest differences between selling online and selling through a brick-and-mortar storefront. When shopping online, customers don’t only search for the best prices but for the best seller ratings. As a customer, Arnold acknowledges that if he sees a seller rating of 90% or less, he typically will not order from them.

And unlike a traditional storefront, online storefronts are all the same distance — just a few click — away from the customer.

“It’s frustrating being a seller sometimes because you feel like the whole system is set up for the buyer, and as a buyer you feel really comfortable,” says Arnold. “You feel good because you know if you’ve got any problems, you can complain and the seller basically has to bend over backwards to do what you want in order to get positive feedback.”

This is called “feedback extortion” by those in the eBay community, and there’s not much a seller can do about it.

Another challenge in selling online is keeping on top of inventory. Because most of his items don’t command a huge ticket price, Arnold has to be very careful to dedicate time each day to update his listings so he can continue to push out his inventory and make a profit.

When it comes to selecting inventory, comic book retailers also have to be great speculators.

One interesting thing about comic books is that they can sell when the rest of the economy is doing poorly. During hard times, Arnold typically sees a spike in collectibles sales — that is, old comics with great historic or sentimental value, like the first appearance of a popular character, or even more notable — a death.

It may be that hard times cause people to reminisce on the good ol’ days, which they try to reclaim through memorabilia. Or it could be a touch of escapism — the same thing that typically drives audiences to the cinema during economic downturns.

But the profit margin on these old books can be tremendous. Considering that a new comic book retails at three dollars — and used ones can be rummaged for at no more than a buck — a $50 resell is a tremendous profit margin.

But now that the economy is in recovery, the comic book industry is sill riding high on a wave of comic book-inspired movies.

This means that many sellers forecast which books to stock based on which movies will be coming out in theaters.

“It’s become much more of a widespread phenomenon for people to hunt for old issues because it’s a character from a movie or something like that,” notes Arnold.

“The first Rocket Raccoon was a five dollar book ten years ago … but (right) before the movie came out it was a $5,000 book. And now it’s cooled back down to $300-500 for a nice copy.”

Arnold hopes to open his own storefront soon. Not only is a storefront helpful in pushing out inventory, but as an online seller, Arnold, an “old guard nerd,” can’t take advantage of what so many comic book fans really go shopping for: community.

“Inevitably, the other thing about comics is that you always get one person that comes in and [is like] ‘I haven’t read comics in five years, what’s cool, what should I get into?’ and you don’t go into best buy and go ‘I haven’t watched a move in five years, what movie should I buy?’” says Arnold.

With decades of avid reading under his belt, Arnold has the clear advantage over some pubescent part-timer behind the counter.

“It’s a different marketplace, and the customers are weird because they wanna hang out, they don’t wanna just buy things and leave. They want to socialize. Nerds are very passionate about their nerdliness.”

Making IT Chocolate Cake

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2620ce1Internet technology has become an essential part of every day life. The economic boom in the United States during the late 1990s was in part due to the expansion of websites and search engines. Over time, businesses began to utilize the technology in order to remain profitable and relevant.

Today, computer technology continues to evolve. Many companies need people who are fluent in the language of the Internet. Internet technology consultant firms play an interesting role in how companies function in the 21st century. Daniel Cohn, an IT consultant from Atlanta, Georgia who created his own firm over twenty years ago, says the purpose of his company is to provide hassle-free managed IT for other small and medium businesses.

“We talk about providing IT chocolate cake for our clients: Delivering the best experience for them without them having to worry about the ingredients. We help avoid the avoidable problems and minimize the impact of the unavoidable ones,” said Cohn.

His company, Cohn Consulting Corporation, provides services ranging from cyber security and maintenance to disaster recovery solutions for small business owners. Since the business of IT consulting depends on the state of other businesses, his consulting firm tends to mirror what the overall economy does.

“Our business is spread over multiple sectors. We are not niched, so things may be down in one sector but up in another, which keeps us in a fairly steady state.”

Cohn says the ‘infrastructure-focused’ and ‘utility-like’ nature of the IT consulting business keeps economic activity flat for most of the year. However, during the first and fourth quarters of every year, companies do their budgeting and spending, which leads to cyclical fluctuations in economic activity.

“Companies look to change their IT environment or at least spend on it while they have the money,” said Cohn.

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During the recession, the company changed its business model from break/fix to management services. Instead of paying a fee for a single service, clients started paying a regular fixed amount on a monthly basis. It gave the firm an opportunity to gain new clients, dealing with higher-priced services, who were looking to control their costs.

“Even in a down economy, we tend to stay flat or grow,” said Cohn, “From 2008 through 2014, we grew revenues each year by 10 to 20 percent.”

Due to investments in new technology and the recent growth in profits, the Cohn Consulting Corporation continues to expand with an efficient system benefitting the consumers and the producers. Nevertheless, the company faced and continues to face major challenges in keeping the profitable machine functioning.

“A lot of small businesses run their business more on hope and nerve. When I first started my business, it was easy to spend money. Once things flattened out, I lost money and I didn’t even know it. I hired a business consultant. There’s all sorts of metrics you need to be looking at like individual profitability of clients. I learned how to understand numbers,” said Cohn.

Cohn also mentioned the reason some of the IT consulting firms did not survive the recession was because they did not switch their business model to match the needs of the clients.

“The financial goals of the services and the company are not in alignment,” said Cohn, “You could make a thousand bucks profit if the client has more problems. It’s now in my interest for them not to have problems.”

Folders_CloudOnce Cohn restructured his organization, part of his growth plan involved getting larger clients. This led to his firm competing against national and local IT consulting companies with larger pools of clients.

“I’ve been having strategic wins against Dynasis and Blue Wave. They are the big gorillas in Atlanta. You see them on billboards. They have brand recognition,” said Cohn.

Companies like Comcast and Dell have now entered the competition, providing their own Internet services including phone updates for customers. Cohn believes the commoditization of the IT consulting industry makes it a greater challenge to make sure his company remains a viable choice for customers.

“Everyone does management services,” said Cohn, “Suddenly you’re competing against the cable vendor. Now, the price is being driven down. But, the other companies will just throw an engineer at the problem.”

Cohn thinks many people today are now questioning the need for IT consultants as they move their information to a cloud provider. He argues clients need people like him to help them pick the right Internet option for their business.

“The question remains whether you want to be Godiva or Hershey’s chocolate,” said Cohn, “How do you be the Godiva? When there are people that can safely say you are more worth it than these other guys. If you own the relationship with the customer, you will be successful. You want them coming to you. You want to be the trusted advisor. You are the indispensible option.”

Over a Cup of Tea

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15 years ago, Nitin Ashar backed his entrepreneurial skills to start his own company in the service sector. Now he is the CEO of Truevalue Marketing Services, a private company engaged in the commerce of ready to drink beverages and vending machines. Currently his business caters to the corporate sector on a local and national level.

Under Mr. Ashar, Truevalue has expanded its horizon in terms of competitiveness, quality and growth. He has carefully monitored movements in the sector to take advantage of changing customer needs to expand his business. For example a major secular shift in the sector would be a transition from premixes (powdered tea and coffee) to fresh milk, which is now widely consumed. Additionally, cyclical booms in the economy have also benefitted the company. Increasing growth within all companies has led to even small local offices demand for machines. As a result there are more customers to provide to. However, following growth there is dip, which hurts expansion. For example during the 2008 financial crisis, the company suffered with reduced demand and loss of existing customers. In on case, Infosys, a major tech company, closed down its contract leading to removal of 480 machines (leased) from their offices. Mr. Ashar also complained that several customers made late payments, which led to cost cutting within the company. Consequently, workers had to be laid off. However, being knowledgeable about the downturns of the economy, Mr. Ashar adapted. He spotted shifting consumer demands to make changes for the survival of his company. During a tough phase from 2008-2011, Mr. Ashar improved on his distribution channels, so that he could target small clients as well. Additionally, he was also willing to consolidate with large clients who would provide him a contract on a pan India basis. Lastly, ever since, Mr. Ashar believes in diversifying to minimize risk. This strategy helped his growth, as expanding into different cities would provide cash inflow when one channel would fail.

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Given the importance of the two crops, tea and coffee, raw material prices have a major impact on business operations. An increase in prices of dairy products would lead to increase in business cost. Given that the firm cannot proportionately prices to remain competitive, the company would suffer from losses. “Despite the current raw material prices in India falling, the company must offer discounted prices to customers to remain in the market”, Mr. Ashar. Additionally, infrastructure also has a significant role in the business. Given governments investment in infrastructure, it is estimated that there will be an increase in the number of companies in the coming years, which would provide more customers to cater to. Summing up, high inflation and increase in infrastructure would both serve to reduce unemployment, thereby more mouths to feed, which would promote growth for the business.

By operating in the service sector, the major challenge faced by the company is manpower. This includes technical and operational activities. Besides, there is a great demand for customisation to satisfy customer demands. For example companies such as Vodafone and Cap Gemini had requested to obtain customised machines to suit the demands of their employees. Lastly Mr. Ashar complained about the unpredictable weather being an important challenge. He said, “The presence of drought in New Zealand couple of years ago had raised the prices.” Given certain varieties of tea and coffee are imported from New Zealand, an unpredictable change in weather affected his business negatively.

It seems that the previously mentioned factors were not the only challenge Mr. Ashar faced. An important component of the business was access to capital. Although interest rates played minimal role, capital dictated the operation of his business. He said that given the recent boom in the economy there is more access to capital which makes it easier to have more machines available for customers. However, on tracking back to 2011, where the economy was still recovering minimal capital access meant that Mr. Ashar could not execute orders from major companies such as Wipro and Deloitte for 500+ machines.

An hour into the interview with my uncle, I asked him about the competition existing in the segment. He mentioned that even though his company was one the top 10 companies operating in the western region of India, there was increased competition from local firms operating in each city. Major competitors included Nestle and Cafe Coffee Day. In terms of the competitive landscape, more companies are offering fresh milk, which is the preferred option over premxes. Given that it is the “healthier and fresher” option, there is increasing pressure on companies to provide high quality fresh milk. An increase in competition has hence led to the company providing reduced prices to maintain its competitive adavantage. Additioanlly, the company provides discount on larger volumes. For example, last year the compan secured a contract with Vodafone on an pan India level leading to reduction in the prices charged.

After having completed my interview I believe that I have gained enough knowledge about the company as well the industry. In order to gain more knowledge about the market it make sense to talk to customers since they set the trend. Knowing their perspective can help me understand what the future holds for this segment. Also speaking to competitors would also give me a better understanding their operations and outlook. However, my uncle being their competitor I doubt I will get a few minutes of their time. Lastly there is one macroeconomic data that I have observed. For example there has been an increase in demand for tea and coffee over aerated drinks. This goes back to argument of switching towards a healthier living. Hence demand for tea and coffee is definitely on the rise opening up great potential for this segment to grow with my uncle ready to take advantage of it.

 

Wings & Wall Street

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On August 13th, 2007 Rick took a leap of faith and opened his take-out style restaurant, “Wings Plus.” In an effort to once again make a decent living, he invested every last dime from the sale of his house, after downsizing, into a small storefront in Port Washington, NY, located on the North Shore of Long Island.
At the time of opening, Rick was also in process of selling his family sports bar, located in Bayside, Queens, which had been in the family for over 60 years.
“It was a tough time. I had no income. My brother and I were selling our family bar, which at one point had been the pride of my family, and I was pouring every last one of my pennies into a new business. Not to mention that the economy wasn’t looking too hot.”
But Rick saw a hole in a community filled with just pizza parlors and Chinese take out.
“The Buffalo Wings were the claim to fame at our bar. People went crazy for them. I figured, why not bring em to the island?”
This was at a time when Buffalo Wild Wings had not reached the east coast quite yet, and chicken wing chains were not really on the radar yet. He came up with “Wings Plus,” meaning they of course had chicken, but also a whole lot more. Hence the “plus.”
It seemed like a win-win. Keeping a piece of the old family business alive while creating a new legacy to start supporting his wife and child again.
“It was a bittersweet time. I was sad to have to lay my father’s business to rest, one that I had run with my siblings for over 20 years. But it was what needed to be done. And I was excited to venture into something new with a long-time friend, who I was able to secure as an equal partner. Together we put in about $250,000 to create Wings Plus.”
The first six months of being open went extremely well. He hired a decent staff, pulled over some cooks from the old sports bar and within a month, he felt they had found their groove. The fall season brought in all of the football fans ordering for their Sunday games, and Super Bowl Sunday brought in unimaginable sales. The community seemed to like the new establishment, and Rick noticed quite a few repeat customers coming through the doors.
By the end of the first year they were closer than projected to breaking even. Rick and his partner were very pleased, and if things had continued the way they were going they would have made back their investments by the end of the second year. But unfortunately things did not go as planned. The fall of 2008 was rough for Wings Plus.
“The only thing that carried us through that fall and the beginning of winter, was football Sundays. Even with those, cash flow was extremely low.”
Rick noticed a major change in how people were paying. Customers were starting to use their credit cards way more frequently then before. He said it went from being about 50% cash business to around 25% cash business. Not to mention that sales seems to be declining each month.
Discouraged after a less than stellar year, Rick and his partner were left wondering if they had made a big mistake. Part of the reason they chose to open up in Port Washington was because of the amount of wealth in the community. The median household income in Port Washington is approximately $109,000, a little more than double the national media household income. It is an extremely wealthy community, with many of its community members being business people who commute and work in the Financial District in Manhattan. But that does not mean they weren’t feeling the effects of the 2008 recession.
“It was clear that something was going on. People were not spending money. Average order amounts were way down. Customers began questioning prices. And on top of all that, the price of chicken was going up.”
By the end of year 2 they were forced to raise prices, which definitely turned off some people, but it was essential to their survival at that moment in time.
Rick and his partner decided to invest in some marketing and promotions at the start of year 3. They put out various coupons in local papers and pennysavers, tested out some deals on Groupon, and created an email rewards program. While year 3 was still pretty slow, their investments in marketing paid off, and they decided to go for year 4. By this point, they were extremely close to breaking even, and mid-year 4, Rick and his partner finally saw the return.
Currently Wings Plus is doing just fine. Of course it has not been completely smooth sailing, but Rick is proud to have made it through such a horrible recession, and has come out with a profitable business. He is hoping to open up a second Wings Plus in 2016.
But Rick is a little worried about the future. New York seems to be pushing for a $15 an hour minimum wage. This would be catastrophic to Wings Plus.
“Most of my workers are part-time students. I pay my cooks well, but there’s no need to be paying my counter people who work 5-hour shifts at a time, $15 an hour. I already pay them above minimum wage. That would be the end of Wings Plus.”
In the meantime, Rick is planning to move forward with opening a second location, and looks forward to creating a Wings Plus legacy.

Starting a Small Business During the Wake of the Recession

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The sun is beaming brightly as a few clouds lay scattered throughout the brilliant blue sky. Even as California enters the autumn season it’s a beautiful day that can certainly boast weather conditions that would cause our friends residing on the east coast to become envious of during this time of the year. Faring at around 80 degrees it’s the perfect weather to be enjoying the outdoors. It’s California dreaming at its finest.

However, even with suitable weather conditions, one small business owner remains frustrated as he struggles to bring in customers to his carwash despite his best efforts. One would think that if the forecast predicated sunny days ahead and an individual had a dirty car that he would probably head to the carwash this week to get it cleaned. The logic behind that thought seems simple enough, and that would have been the likely scenario a few years ago. However, unfortunately, that is not the case anymore, and Chol Shinn of Los Altos Carwash in Long Beach has experienced this downward shift firsthand.

It has been less than eight years since the economic crisis ended in 2009 that economists have deemed “The Great Recession”; and it would appear that our economy is finally humming along the road to recovery. It’s no surprise that the recession hit Americans hard as our national unemployment rate skyrocketed to an unsettling 10 percent in 2009 according to the United States Department of Labor. Yet, for small business owners, such as Shinn, they have upheld determination to hold onto their business and the hope that the economy will turn around soon.

As a means for both small and large business owners to sustain the operation of their companies during the recession and these few years following the economic crunch, they have had to adjust and make changes to the way in which they manage their establishments.

Shinn has shared that he also had to make some significant changes to the way in which he operates his carwash. The first major change that happened to Los Altos Carwash would be the large but gradual cut in the size of its staff. Shinn revealed that when he first purchased the business in 2007 during the wake of the recession that he carried over the same staff that had been employed with the previous owner. However, as the economy weakened he was forced to cut his staff’s work hours, which eventually lead to many individuals quitting. Currently, Los Altos has a total of seven employees, which is a huge difference when compared to its 2007 staff numbers of roughly around 25 employees.

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Furthermore, Los Altos Carwash has also had to cut local advertising costs and provide special offers and coupons as a way to generate more customers. Shinn has being working vigorously with nearby shops and the California State University of Long Beach to craft special discounts for residents.

There have been both secular and cyclical shifts that have affected Shinn’s business. A particular shift that Shinn has observed in the carwash industry is the transformation of hand carwashes becoming express washes as means of cutting labor costs. The monetary benefits of running an express carwash is great and would be appealing for that matter solely. However, Shinn rationalized that express washes, which are simply the machine operated ones that customers would experience at a gas station, do not perform the same job as a hand carwash would and would not achieve the same sense of “clean”. Express washes are quicker and cheaper, but are not nearly as efficient as a hand wash. Therefore, this transition could be seen as a secular shift that has caused a loss of revenue and customers to hand carwash owners that refuse to give into the change.

In addition, other factors, such as gas prices and minimum wage, have affected Los Altos Carwash. Shinn has shared that the rising cost of gas prices have caused many people to drive less. Therefore, if an individual does not drive his or her car then there would be no need to have it cleaned.

“I don’t understand how customers expect me to keep to same prices and make a living when the cost to operate my business is on the rise,” explained Shinn. The rise in minimum wage has impacted Shinn’s business because he has had to raise his prices slightly to meet the new cost of minimum wage and still make some profit. By raising the price of his carwash packages to even a dollar more, Shinn has received numerous complaints from his customers.

Certainly, factors such as interest rates have also played a role on the challenges that Shinn has faced. For example, during the recession interest rates were at a historic low. However, it was difficult for individuals to qualify for these loans. If citizens were unable to qualify for a loan then he or she would be incapable of making large purchases such as a new vehicle. Shinn has noted that individuals with new cars seem the most concerned with the cleanliness of the vehicle and would come in more frequently.

Shinn has also disclosed that he believes that the carwash industry in itself is in a downward spiral. Prior to purchasing the business, Shinn revealed that he was under the impression that getting a carwash was a typical necessity that one would do often. However, he has come to the realization that getting a carwash is a luxury and if an individual does not have a disposable income then getting their car wash will not be on the top of his list of priorities. While many of the car washes in the surrounding area have gone under, Shinn explains that he believes he has been able to survive due to the fact that he and his wife purchased the property that the business is on and that has made all the difference.

Timely storyteller

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Erin Germain, 34, is a media innovator who gets clients from other innovators. The changing economic landscape has made old media companies fall apart while newer and smaller entrepreneurs profit from each other.

Tuija Pallaste

 

One o’clock Wednesday afternoon Erin Germain, 34, sits on a sunny patio at the campus of University of Southern California. On the table in front of her she has her laptop and a plate of falafel.

Germain is having a meeting. Another two participants are her business partner and a client with whom she plans a video shoot. All three are on their phones miles away from each other wearing earphones.

Germain has one hour to manage her business and have lunch before her lecture at journalism school starts at 2 pm. She is a journalism graduate student who knows for sure that there are job opportunities in her field of study. She is creating those opportunities herself.

 

Media environment is in turmoil and economic situation has long been uncertain and that is exactly why Germain has for two years now ran her own production company called For Example.

“I would not have my business if the current landscape would not be what it is.”

For Example is specializing in producing documentary-style videos for companies and non-profit organizations. “Branded content” it is called. Her videos are beautiful stories of ordinary people sharing their life experiences or attending events.

“For us it works best if there is a good and authentic story that includes the brand,” Germain explains.

Sometimes there is just a story and the brand is integrated into it.

Companies and non-profits use the videos for their PR and marketing. For Example creates ideas, finds the right people and uses its’ distinctive visual style to match clients needs. They have worked for small non-profit campaigns and huge brands like Neutrogena, Lenovo and LEGO.

The idea of documentary-style branded content is Germain’s own. When she started two years ago there were not many companies doing that kind of videos.

Now branded content has became a big trend in the media business along with “native advertisement”. No wonder it has. After many profitable decades the advertisement revenues of traditional media companies dropped in 2010s to the level of 1950s, Brown Institute of Media Innovation counts. Print adds nearly disappeared, and banner advertising turned out to be a poor replica of traditional advertising in the internet.

 

Germain finished her undergraduate studies in media arts 13 years ago when the dot.com bubble had recently burst and many old media companies were losing their wealth. Social media was getting a stronger hold of the media ecosystem.

Germain did not have specific career expectations. “I had no idea what I wanted to do.”

Her uncle had an empty apartment in Chicago. As she was promised a free place to stay she applied for an internship at Oprah Winfrey’s Chicago-based Harpo.

She got in. Harpo is a success story and Germain loved her job at research department, but she missed her family in California. With her work experience at Harpo it wasn’t difficult to get into Los Angeles’ TV industry. She ended up producing reality TV shows, medical shows, travel shows and documentaries, as a freelancer in LA.

“Every three to six months I had a different job.”

She even went to teach English and video production in Ecuador.

“When I was in between jobs, I started to do some thing for non-profits.”

All these works proved to be significant when she finally set up her own company. She had learned to cope the uncertainty and to connect with a lot of different people. Most importantly: she had what good storytelling required.

“I learned how to tell a great story from some of the best people in the industry.

 

First assignments For Example got through a pitching site called Tongal – which itself was a sign of changing media economics. Companies worked on tight marketing budgets and this new internet service helped them to find freelancers and productions companies in a new money-saving way.

Tongal explains its’ idea like this:

“1. Businesses like LEGO post projects to Tongal. 2.Tongal community goes to work generating ideas. 3. Winning ideas are chosen.”

”Tongal community” means professionals interested in sending their work proposals via Tongal to realize a project.

For Example immediately gained success on Tongal. They were chosen to be The Tongaler of the Month in November 2014.

The site ranks the “Tongal community members”, and For Example is currently nr 21 in production (having earned $259,725)

“Tongal allowed me to start” says Germain.

Budgets can still be tight. Germain needs a crew of 2-15 people for the videos.

“On our biggest shoots we have a cameraman, a sound person, a make-up person and a technical person and more.”

“It is always balancing with the budgets. I was working on documentaries where budgets were never big so I know how to do it. We are not relying on special effects but on a good story. A million dollar idea does not work out well with 10,000 dollar budget.

Thanks to her numerous freelance jobs she knew a lot of freelancers.

“I knew good ones that I trusted. If they can not do it they always recommend someone else.”

 

Germain has finished her phone meeting and falafel lunch on the patio.

For Example is a limited liability company and a partnership. One thing Germain did not know when she started: how to ran a business.

“I still have no idea about that side sometimes. I am always learning as I go.”

She asked her college friend to be a co-founder as she had experience of marketing. They both work where their laptops are. Laptops, software and internet connection are all they need. Other technical gear comes from the people they hire.

Germain is often at campus. She got a fellowship to do post-graduate studies and decided to go for it. As an entrepreneur she can arrange her timetables and eventually she would like teach branded content.

“Now everybody is doing it,” she says.

Want to Start a Business? Try an Alternate Path

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Entrepreneurship is such a trending word it seems anyone can start his own business. But not everyone is lucky enough to obtain an entrepreneurial opportunity. The owner of Home Brite Cleaning Services, Siraj Mirza, is part of an alternate trend which people buys an existing business and makes smart modifications to help the business prosper.

Home Brite Cleaning Services is a professional cleaning services company started in 2009 that provides private home cleaning, pre move-in and pro move-out cleaning, office cleaning and post construction cleanup services. The owner of Home Brite, Siraj Mirza, currently in his mid-40s, used to be a banker working with foreign banks; he was laid off during the recession in 2008, leaving his wife, Tess Zaidi, under heavy financial pressure. After changing jobs for a few times, Mirza decided that he didn’t want the stress of managing credit portfolios anymore, so he purchased the national franchise and canceled original contract deals restricted to cleaning services in Beverly Hills and Studio City areas. Instead, Mirza and his wife created their own brand, Home Brite, and started serving personalized home cleaning services to multiple areas within LA County.

Mirza recalled that when the business first started out in 2009, sales kept going down for a year because of the downturn that entire U.S. economy was undergoing back then. “Life was very stressful in 2009, we had lost one of the properties we owned to foreclosure”, said Tess. Thanks to the recovery of overall U.S. economic conditions and Mirza’s hard work, Home Brite has been able to double its business sales every year since 2011. In addition, Home Brite improved its service quality, and it started its marketing campaign, as well. As a result, Home Brite is able to reach steadily growing annual sales of 200,000 dollars in 2014.

The most dominant change that Home Brite made to its business is personalizing its services. Mirza knows his customers very well in person and remains accessible to his customers through text messages and phone calls daily. For private home cleaning service requests, Home Brite is able to respond very quickly and arrange timely services for its customers. By maintaining its high quality of service, Home Brite is able to maintain its loyal customers while increasing the number of new customers. Another factor that helps Mirza with increasing sales is diversifying the projects his team works on. For example, he himself would work on smaller apartment cleaning, and his other team of 6 people would work on larger projects such as post construction cleaning for an entire house.

According to Home Brite owner Mirza, he refers the housing market and national unemployment rate as two broader economic data that impact his business. Since the service Home Brite provides is essentially a discretionary service, the demand for home cleaning services depend largely on people’s economic conditions. When unemployment rate is low, people can afford discretionary services; however, when unemployment rate rises, people are losing jobs and thus are less likely to afford discretionary expenses. Another factor Mirza concludes that affects his business is the housing market. A robust housing market creates more demand for house cleaning services, yet a weak economy reflects a low level of investment that results in less demand for services.

The biggest challenge Home Brite faces with currently is to find reliable employees due to the nature of service it provides. “It makes me nervous”, said Tess, “we have not experienced anything bad, but I always want them [the cleaning team] to be extremely careful with expensive items”. Indeed, many people who use cleaning services worry about the same trust issue. In order to maintain the loyalty of both its employees and customers, Home Brite owner Mirza says he would choose to grow the business at a controlled manner. He notes that he does not want employees who are “constantly not available or constantly changing jobs”; it is not the size of a cleaning team that matters but really the quality of its service that matters.

In general, the lowering of interest rates has allowed investments pour into construction, which creates more jobs in post construction cleaning for cleaning services such as Home Brite. “When more buildings are being built, it increases our sales”, said Mirza. One may think that access to capital is a requirement for starting a business, but for a smaller business like Home Brite, Mirza used his savings to finance the initial stages of the business. Once the business is up and running, there is little capital they had to acquire from banks.

The major competition for Home Brite comes from independent workers who are not registered with residential apartment buildings. Another competition comes from national cleaning franchises such as Merry Maids and Molly Maids, because these companies are capable of much stronger marketing campaigns, especially their powerful online presence. On the other hand, Home Brite holds its own advantages. Mirza and his team are flexible in time scheduling and they always respond quickly to customers. Besides, their services have no territory restrictions. “When I talk to people who used to use other larger maid service companies, customers have complained that they never answer the phone or response to text messages, and they keep changing the times”, says Tess. Although Home Brite has not been able to raise prices for the past 5 years, it has not yet had to offer discounts to attract customers either.

“We are currently bidding for a few larger projects over 100,000 dollars per job”, Mirza says. “We now show up as the No. 1 post construction cleaning team in LA County.”

Diversification of jobs has increased Home Brite’s competitiveness in the market. In the mean time, by maintaining good relationships with its current customers, Home Brite is taking the purchased franchise onto a fruitful path.

The Current Econo-meat Status of PSC

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                      Photo Credit: PSC Website

“Would you like to have some coffee before we get started, Kevin?” Meghan Fink, owner of Pasadena Sandwich Company asked me with a gleeful smile on her face. That’s what it’s all about here in the Pasadena Sandwich Company, customers first.

Pasadena Sandwich Company (PSC) is a family-owned restaurant that has been operating in the town of Pasadena, California for over 20 years. This family style restaurant is a costumer-oriented company, placing customers’ satisfaction at the core of their business mission, and treating each one like a family member. After their dad passed away 5 years ago, the Fink siblings decided to keep the restaurant that their dad has built from the ground up by running it together. Jonathan, the youngest of the 4, comes in to work every day at 6:30am just to roast the meat that they would serve later in the day. I had the blessed opportunity to have a little chat with Meghan, who was very happy to help me, about the economy and how her company works.

PSC has been described by Meghan herself as a company that is impacted by a secular shift. Since food is a necessity good, and is inelastic in economic terms, business has been steady for the past few years. Since the Pasadena community is rather small, as compared to big cities such as Los Angeles, people are always around to drop by for a quick lunch break. “The only time of the year where business is slow would be in August,” explained Meghan. “People go to vacations in August so that’s the only real impact we see on our sales.” However, since the pattern happens every year, the company knows what is coming on every August and hence are not impacted in a significant way. Also worth mentioning, was Meghan’s own little theory of how more people would come in to the restaurant at the second day of the day when there’s a weird weather pattern. “On a rainy day, the restaurant will be quiet, however, a day after that the restaurant will be crowded with customers!” Meghan laughed as she explained her theory.

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                         Main Counter of PSC

When asked about whether the 2008 recession did a major impact on the restaurant, Meghan explained how in 2008, which was when her dad was still running the restaurant, they did not see a crazy hit on the company. Because of the reasonable price that they have kept for many years, and the great quality and quantity the restaurant served, people were still coming in the restaurant regularly amidst the recession. The only impact they see during the recession was to their catering business, which slowed down as compared to previous years.

The company, which is impacted most by the retail trade sales and food services sales has faced a few challenges over the years. One of which was the recent drought that the state of California is facing. Due to the recent drought, there has been a shortage of the supply of roast beef. This is a challenge for the company as beef is one of the core ingredients they use for their sandwiches. Another factor that affected their supply is the bird flu. To my surprise, Meghan revealed to me that the bird flu, is in fact happening right now! Due to the bird flu, there have been changes to the price of poultry meat such as chicken and turkey by the providers of PSC. However, Meghan also explained how the company has been loyal to their providers, whom they have been in business with ever since PSC is opened and hence even if prices were to increase, it will increase by only a little amount.

“Being a small business in California is also becoming more challenging,” Meghan explained. “The state is passing fewer and fewer things, and recently, they only declared 3 days of sick pay for the whole year!” That impacts the business as man-power is one of the company’s main resources. Since PSC is a small business, they do not have that much of a resource. There’s a total of 10 employees, including the 2 siblings, Jon and Meghan who are running the store. “If they raise minimum pay to $15 an hour, that will be what impact the business the most.” Explained Meghan. When asked if rising rates play a role in their business, Meghan simply replied, “Not really, tax goes up, and people go upset! But they still come in regularly, it is what it is.”

Being a part of a community that has a close relationship with each other have also helped PSC to become the successful company that they are today. PSC does marketing locally, they support schools and non-profit organizations and company by giving gift certificates. PSC is very big on the “Community for community” service, proven by the recent “Gobble Tournament” they did for a local high school where they fed football teams. Moreover, Cal Poly Pomona has just recently used PSC for one of their marketing class as an example of a company that helps the community by serving them, and in turn, the community helps them back. The customers of PSC have gone as far as helping them set up their social media, without even being asked! PSC’s popular social media sites such as Yelp, Facebook, and even their own website were set up by their own customers. Their customers do it for them as a part of the strong community support that they have for one another.

Operating a business by yourself might be a very challenging and risky thing to do, considering the roller coaster pattern of our economy, but with the help of family and a strong community, a small business can soar to great heights, as evidenced by PSC’s on going success.

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A picture with Meghan Fink, Co-Owner of the Pasadena Sandwich Company