SMALL BIZ: More seniors shun retirement
Older people are nation’s fastest-growing group of entrepreneurs
Sat. July 25 - 2009
Peter Schnitzler - pschnitzler@ibj.com
IBJ staff
For four decades, Jim Ashby worked as a manufacturing floor manager, first for General Motors Corp., then, after a buyout, for an Ingersoll Rand subsidiary. He likes to relax and fish, but Ashby considers himself too energetic for retirement.
He’s now 67 years old. And a first-time entrepreneur.
Three years ago, Ashby bought a black Lincoln Town Car and launched Ashby Private Chauffeur LLC. Now he spends his days transporting executives to and from meetings, driving wedding guests to receptions, and ushering the occasional celebrity around Indianapolis.
“If they need to be at the airport at four in the morning, they can rely on old Jim,” Ashby said. “The wife’s not going to get up. The dog’s not going to get up. But Jim will be there.”
These days, many seniors are following in the footsteps of Harlan “Colonel” Sanders, who famously used a Social Security check to found Kentucky Fried Chicken at age 65. Some of them have suffered massive losses to their retirement portfolios in the economic downturn and need to earn back their nest eggs. Others encounter ageism, and form their own companies when they can’t find jobs commensurate with their experience.
And then there are those like Ashby, who simply reject the concept of retirement. His whole life, Ashby said, he always wanted to work for a luxury hotel. One day he was “putzing” around Circle Centre mall downtown. He saw the Conrad Indianapolis, and decided to walk in, just to look around.
The concierge soon inquired if he could help Ashby, who responded by asking for a job application. Before he knew it, he had landed a post as a valet. Ashby said the Conrad’s managers told him he was one of the best “lobby ambassadors” they’d ever seen because he was so friendly. Within months, they made him the hotel’s chauffeur.
Soon, Ashby started handing out his card, offering his services when he was off the Conrad’s clock.
“I thought, ‘Hey, I can make a business out of this,’” Ashby said. “I liked the people, and they liked me.”
Ashby no longer drives for the Conrad. He now charges $60 an hour, with a three-hour minimum for events. Trips to the airport are priced by distance. He attributes the bulk of his success to a keen eye for detail.
For starters, Ashby keeps his car meticulously clean, and always has cold water and copies of publications like The Wall Street Journal aboard. He automatically opens doors and, when his passengers depart, Ashby double-checks to see whether they’ve forgotten a purse or cell phone. And Ashby gives himself a roomy time cushion, always setting off for pickups long before necessary. He prides himself on the fact that he’s never been late.
Not too old to hustle
Seniors like Ashby are disproving the notion that older people don’t have the energy or hustle to become entrepreneurs. In June, the Kansas City, Mo.-based Ewing Marion Kauffman Foundation set out to debunk the stereotype. The highest rate of entrepreneurial activity for the last decade has been among the 55-to-64 age group, said a Kauffman report, “The Coming Entrepreneurship Boom.” The lowest level of entrepreneurial activity was among 20- to 34-year-olds, defying the conventional image of the risk-prone Internet entrepreneur.
“The United States will, at some point, recover from the current deep recession. But the overriding question upon recovery will concern resumption of growth rate,” the report said. “Several facts have emerged in the course of Kauffman Foundation research that indicate the United States might be on the cusp of an entrepreneurship boom—not in spite of the aging population, but because of it.”
The Kauffman report noted that the baby boomers, now age 45 to 64, are entering their golden years. It also pointed out that life expectancy has risen, and people are staying healthier longer. Meanwhile, longterm employment with a pension attached is becoming a thing of the past.
Longtime advertising executive Hal Goldman embodies the trend. A senior, he asked that his age not be printed. His career included stints in top marketing jobs at major companies, like New Jersey-based Schering-Plough Corp. He finished in Indianapolis at Thomson Consumer Electronics. A decade ago, Thomson offered him a generous buyout. Goldman took it and decided to become an entrepreneur.
“You know the old story,” he joked. “It’s hard to make a lot of money working for a major company unless you’re the president, and I had no chance of being president of Thomson.”
He bought a dream home on a lake in Tennessee, founded a consultancy called Hal Goldman Associates, and kept busy on marketing projects for companies as diverse as New York-based Citicorp and Cleveland-based Sherwin Williams. It should have been a dream come true.
But Goldman found he didn’t like the feast-or-famine work flow of the freelancer. His clients generally brought him rescue jobs—complicated projects they couldn’t handle internally, usually with ridiculously short deadlines. Worse, he never got to see the results of his efforts. Goldman complains that he’d go to great lengths in research, then make detailed recommendations. But once he turned in a report, he seldom learned whether it was ever used, or just filed in the back of a drawer.
The lake house had its flaws, too. The nearest grocery store was an hour away, and forget about restaurants. Rather than commute by boat, Goldman sold it and moved back to Carmel. Then the stock market downturn took a big chunk out of his savings. Goldman said he’s still got enough to get by, but he likes to travel and help his kids financially. So he’s now looking for a full-time job with a large company.
Goldman said he’s sharper now than he was 25 years ago, but it’s tough to convince hiring managers.
It’s difficult to tell exactly how many seniors are entrepreneurs, since federal databases account only for self-employed people who formally incorporate their businesses. The number of U.S. citizens over 55 known to be self-employed has grown from 2.5 million in 2000 to 3.3 million in June, said Sara Rix, strategic policy adviser for the Washington, D.C.-based AARP.
But the elderly subset of the total population is growing even faster. If there’s a widespread proportionate upswing in senior entrepreneurship, Rix hasn’t seen it yet.
“I think workers today are hanging onto jobs if they have them. They may be dreaming about moving into self-employment when they retire, or using it as a backup when they leave or should they lose their jobs,” she said. “But small businesses fail at a really high rate. You’ve got to have something truly marketable to make a success of it, by which I mean earn enough to live on.”
Still, some seniors are undaunted by the economic downturn. Bill Alerding, 74, and his wife spent the majority of their careers doing development work in Spain, Mexico and Guatemala. They finally returned to the United States because of concerns over his elderly mother’s health.
Alerding’s not as focused on the recession as he is on an even larger trend—the influx of Spanish speakers into the U.S. work force. Companies are missing out on both sales and hiring opportunities if they ignore the fast-growing Hispanic population, he said. So in December, Alerding incorporated Profluent, an Indianapolis-based consultancy that aims to teach managers a working knowledge of Spanish in just a few weeks.
“I always thought retirement was the dirtiest word in the English language. What are you retiring from? That’s the most boring existence alive,” Alerding said. “If you keep using your brain, the older you get, the smarter you get.” •
Thursday, July 30, 2009
Wednesday, July 29, 2009
Recession puts dent in U.S. restaurant count
Recession puts dent in U.S. restaurant count
From Nation's Restaurant News
By Sarah E. Lockyer
PORT WASHINGTON, N.Y. (July 27, 2009) The total number of restaurant locations in the United States shrunk during the past year, as smaller chains and independents in particular had difficulty weathering the economic storm.
According to the latest NPD Group ReCount, which tallies all commercial restaurant locations in the United States, the number of restaurants fell 1 percent this spring to 577,178 locations. A little more than 4,000 restaurants were closed from a year ago, when the United States boasted 581,201 restaurants, according to NPD research. The latest data was collected from April 1, 2008, to March 31, 2009.
The hardest-hit categories were fine-dining independents, which saw unit counts fall 7 percent. Smaller family-dining chains were close behind, with a 6-percent drop in locations among chains of between 50 and 99 units and a 5-percent drop in locations among chains that numbered between 100 and 499 locations.
“It’s clear that independent restaurants and smaller chains have been most impacted by the slower economy,” said Susan Kleutsch, director of product development for foodservice at The NPD Group, a market research firm based in Port Washington, N.Y. “The recession appears to have weeded out restaurants performing poorly prior to the economic downturn, and this seems most true for independents and smaller chains that are likely having a hard time competing with the resources and marketing power of major chains.”
Restaurants have been battling such economic pressures as slowed sales from reduced consumer spending and increased operating costs, especially for commodities, as well as higher rent and labor expenses. The past year has brought high-profile unit closures at such chains as Bennigan’s, Steak & Ale, Ruby Tuesday and Ryan’s Grill Buffet & Bakery.
The largest chains, which NPD classifies as those with more than 500 units, posted unit growth in all segments except family dining, where growth remained flat. Among the largest chains, the number of total restaurant locations rose 1 percent, reflecting a 1-percent uptick in quick-service locations and a 2-percent increase in casual-dining restaurants.
In Nation’s Restaurant News 2009 Top 100 report, which covers the largest of restaurant chain operations ranked by total domestic foodservice sales, the aggregate restaurant unit count hit 195,227 for those ranked Nos. 1-100 in size, a 1.6-percent increase from a year ago.
In the 2008 Top 100 report, the unit growth rate equaled 2.2 percent.
Among NRN’s Second 100 chains, which are mostly mid-sized, growth-oriented brands, the aggregate unit count totaled 29,299, which was a 1.5-percent increase from a year ago. In the 2008 Second 100 study, unit counts among the Second 100 chains increased 1.8 percent.
From Nation's Restaurant News
By Sarah E. Lockyer
PORT WASHINGTON, N.Y. (July 27, 2009) The total number of restaurant locations in the United States shrunk during the past year, as smaller chains and independents in particular had difficulty weathering the economic storm.
According to the latest NPD Group ReCount, which tallies all commercial restaurant locations in the United States, the number of restaurants fell 1 percent this spring to 577,178 locations. A little more than 4,000 restaurants were closed from a year ago, when the United States boasted 581,201 restaurants, according to NPD research. The latest data was collected from April 1, 2008, to March 31, 2009.
The hardest-hit categories were fine-dining independents, which saw unit counts fall 7 percent. Smaller family-dining chains were close behind, with a 6-percent drop in locations among chains of between 50 and 99 units and a 5-percent drop in locations among chains that numbered between 100 and 499 locations.
“It’s clear that independent restaurants and smaller chains have been most impacted by the slower economy,” said Susan Kleutsch, director of product development for foodservice at The NPD Group, a market research firm based in Port Washington, N.Y. “The recession appears to have weeded out restaurants performing poorly prior to the economic downturn, and this seems most true for independents and smaller chains that are likely having a hard time competing with the resources and marketing power of major chains.”
Restaurants have been battling such economic pressures as slowed sales from reduced consumer spending and increased operating costs, especially for commodities, as well as higher rent and labor expenses. The past year has brought high-profile unit closures at such chains as Bennigan’s, Steak & Ale, Ruby Tuesday and Ryan’s Grill Buffet & Bakery.
The largest chains, which NPD classifies as those with more than 500 units, posted unit growth in all segments except family dining, where growth remained flat. Among the largest chains, the number of total restaurant locations rose 1 percent, reflecting a 1-percent uptick in quick-service locations and a 2-percent increase in casual-dining restaurants.
In Nation’s Restaurant News 2009 Top 100 report, which covers the largest of restaurant chain operations ranked by total domestic foodservice sales, the aggregate restaurant unit count hit 195,227 for those ranked Nos. 1-100 in size, a 1.6-percent increase from a year ago.
In the 2008 Top 100 report, the unit growth rate equaled 2.2 percent.
Among NRN’s Second 100 chains, which are mostly mid-sized, growth-oriented brands, the aggregate unit count totaled 29,299, which was a 1.5-percent increase from a year ago. In the 2008 Second 100 study, unit counts among the Second 100 chains increased 1.8 percent.
Tuesday, July 28, 2009
Starbucks Wipes Name From Seattle Location
Starbucks Wipes Name From Seattle Location
Friday, July 17, 2009
NEW YORK — Starbucks Corp. said Thursday it is wiping its name from one of its Seattle-area stores and adding alcohol to the menu.
The Seattle-based gourmet coffee chain said it is changing the name of one of its existing stores in its hometown to a name that reflects the neighborhood location. The store will be called 15th Avenue Coffee and Tea. It will open next week and will serve coffee and tea as well as wine and beer.
The company said it will then open two more Seattle-area stores without the Starbucks name in locations that aren't currently Starbucks stores.
The chain said if the rethought coffee shop is a success it will consider replicating it in other cities.
"It's interesting," said Morningstar analyst R.J. Hottovy, "especially since the Starbucks brand has been such an integral part of their success."
Hottovy said he thinks the Starbucks brand still "resonates" with those who drink coffee regularly. But, he added, with the recession now in its second year, the brand may be struggling more because it is considered "premium," and therefore expensive, by consumers.
The company has been unable in recent months to keep its sales growing as more consumers cut out small luxuries to save money. Starbucks is slated to report its fiscal third quarter financial results on Tuesday and analysts have largely predicted another same-store sales decline, particularly, in particular, that competition with lower-priced rivals like McDonald's Corp. has heated up.
McDonald's has been rolling out its own line of espresso-based drinks to all of its 14,000 U.S. locations and has been heavily promoting the beverages.
Andrew Hetzel, the founder of coffee consulting group Cafemakers, said Starbucks may also be renaming its stores to provide a testing ground for changes and, possibly, to bring in a new brand of consumer.
"It looks to me that they are testing a specialty sub-brand to see if they can capture some other segment of the market that would otherwise be disillusioned by a large corporate chain," Hetzel said, adding that opening only one at first "gives them a live shop to test changes in menu offerings, store design and, perhaps, procedures quickly" without disrupting operating stores branded with the Starbucks name.
Friday, July 17, 2009
NEW YORK — Starbucks Corp. said Thursday it is wiping its name from one of its Seattle-area stores and adding alcohol to the menu.
The Seattle-based gourmet coffee chain said it is changing the name of one of its existing stores in its hometown to a name that reflects the neighborhood location. The store will be called 15th Avenue Coffee and Tea. It will open next week and will serve coffee and tea as well as wine and beer.
The company said it will then open two more Seattle-area stores without the Starbucks name in locations that aren't currently Starbucks stores.
The chain said if the rethought coffee shop is a success it will consider replicating it in other cities.
"It's interesting," said Morningstar analyst R.J. Hottovy, "especially since the Starbucks brand has been such an integral part of their success."
Hottovy said he thinks the Starbucks brand still "resonates" with those who drink coffee regularly. But, he added, with the recession now in its second year, the brand may be struggling more because it is considered "premium," and therefore expensive, by consumers.
The company has been unable in recent months to keep its sales growing as more consumers cut out small luxuries to save money. Starbucks is slated to report its fiscal third quarter financial results on Tuesday and analysts have largely predicted another same-store sales decline, particularly, in particular, that competition with lower-priced rivals like McDonald's Corp. has heated up.
McDonald's has been rolling out its own line of espresso-based drinks to all of its 14,000 U.S. locations and has been heavily promoting the beverages.
Andrew Hetzel, the founder of coffee consulting group Cafemakers, said Starbucks may also be renaming its stores to provide a testing ground for changes and, possibly, to bring in a new brand of consumer.
"It looks to me that they are testing a specialty sub-brand to see if they can capture some other segment of the market that would otherwise be disillusioned by a large corporate chain," Hetzel said, adding that opening only one at first "gives them a live shop to test changes in menu offerings, store design and, perhaps, procedures quickly" without disrupting operating stores branded with the Starbucks name.
Monday, July 27, 2009
Example of the Law of Unintended Consequences
On June 22, Baby Sprouts Naturals went out of business. Congress killed it. Baby Sprouts Naturals is a small company making what it calls "natural, non-toxic baby products" such as "organic apparel," toys and the like. None of the company's products contains lead. But an anti-lead law Congress passed in 2008, the Consumer Product Safety Improvement Act (CPSIA), has snared even this leadless company in its trap.
Baby Sprouts Naturals is far from alone. Horror stories abound about small and large businesses, and, indeed, entire industries, closed or hobbled because of the Consumer Product Safety Improvement Act. The law sets new, absurdly stringent limits on how much lead any children's product can contain. It requires strict testing and labeling of all products intended for children and makes both manufacturers and retailers responsible for proving that such testing has taken place. It allows all 50 state attorneys general to take "enforcement" actions related to these issues and to hire outside counsel to do the legal work. It all but invites class-action lawsuits against children's product suppliers.
EDITORIAL: Lead in the head
Safety regulations kill jobs
By Thursday, July 16, 2009
Ballpoint pen manufacturers, makers of children's minibikes, used bookstores, thrift shops, vending-machine companies, clothing manufacturers, handmade toy outfits and all sorts of others are suffering because of various CPSIA provisions. Also hurt will be charities that resell donated products to raise money for social services. One result: The Salvation Army said that about 16,000 fewer people in substance-abuse rehabilitation programs will be served.
The law has caused "absolute chaos and disarray," according to Quin D. Dodd, the former chief of staff of the Consumer Products Safety Commission. Even businesses presumably intended to be helped by the law, such as the all-wholesome Baby Sprouts Naturals, are now swatted down by Congress' heavy hand.
CPSIA matters are reaching a head. Three new members of the bipartisan Consumer Products Safety Commission have been chosen since June 23. On Aug. 14, all children's products will be required to start carrying permanent "tracking labels" with manufacturing details so extensive that CNNMoney.com reports the "rigidity and complexity" could force small businesses to be shuttered.
On July 9, Mr. Dodd sent a petition (on behalf of clients) to his former agency requesting that it approve one of three forms of product test that do not require destroying a finished product. Current testing requirements are expensive because products must be destroyed to determine whether they are safe.
The agency itself has an almost impossible task. While its new, five-member board ought to grant Mr. Dodd's requests, along with requests to delay implementation of the requirement for tracking labels, the board itself can't be expected to keep covering up for this awful law's many defects.
House Energy and Commerce Committee Chairman Henry A. Waxman of California yesterday announced that a hearing on the CPSIA's problems, which had been tentatively planned for next week, will be postponed. Congress should not sweep its own mistake under the rug. Chairman Waxman should reschedule the hearing, sooner rather than later, and use it as a first step in an expedited process to completely rework this destructive law.
Baby Sprouts Naturals is far from alone. Horror stories abound about small and large businesses, and, indeed, entire industries, closed or hobbled because of the Consumer Product Safety Improvement Act. The law sets new, absurdly stringent limits on how much lead any children's product can contain. It requires strict testing and labeling of all products intended for children and makes both manufacturers and retailers responsible for proving that such testing has taken place. It allows all 50 state attorneys general to take "enforcement" actions related to these issues and to hire outside counsel to do the legal work. It all but invites class-action lawsuits against children's product suppliers.
EDITORIAL: Lead in the head
Safety regulations kill jobs
By Thursday, July 16, 2009
Ballpoint pen manufacturers, makers of children's minibikes, used bookstores, thrift shops, vending-machine companies, clothing manufacturers, handmade toy outfits and all sorts of others are suffering because of various CPSIA provisions. Also hurt will be charities that resell donated products to raise money for social services. One result: The Salvation Army said that about 16,000 fewer people in substance-abuse rehabilitation programs will be served.
The law has caused "absolute chaos and disarray," according to Quin D. Dodd, the former chief of staff of the Consumer Products Safety Commission. Even businesses presumably intended to be helped by the law, such as the all-wholesome Baby Sprouts Naturals, are now swatted down by Congress' heavy hand.
CPSIA matters are reaching a head. Three new members of the bipartisan Consumer Products Safety Commission have been chosen since June 23. On Aug. 14, all children's products will be required to start carrying permanent "tracking labels" with manufacturing details so extensive that CNNMoney.com reports the "rigidity and complexity" could force small businesses to be shuttered.
On July 9, Mr. Dodd sent a petition (on behalf of clients) to his former agency requesting that it approve one of three forms of product test that do not require destroying a finished product. Current testing requirements are expensive because products must be destroyed to determine whether they are safe.
The agency itself has an almost impossible task. While its new, five-member board ought to grant Mr. Dodd's requests, along with requests to delay implementation of the requirement for tracking labels, the board itself can't be expected to keep covering up for this awful law's many defects.
House Energy and Commerce Committee Chairman Henry A. Waxman of California yesterday announced that a hearing on the CPSIA's problems, which had been tentatively planned for next week, will be postponed. Congress should not sweep its own mistake under the rug. Chairman Waxman should reschedule the hearing, sooner rather than later, and use it as a first step in an expedited process to completely rework this destructive law.
Wednesday, July 15, 2009
209 Recovery Act - ARC Loan Program
About the ARC Loan Program
ARC loans can be used to make payments of principal and interest, in full or in part, on one or more existing, qualifying small business loans for up to six months. ARC loans provide an immediate infusion of capital to small businesses to assist with making payments of principal and interest on existing debt. These loans allow borrowers to redirect cash flow from making loan payments to investing in their businesses, to help sustain the business and retain jobs. For example, making loan payments on existing loans with proceeds from an ARC loan can allow a business to focus more funds on core operations, such as buying inventory or making payroll.
ARC loans are interest-free to the borrower, carry a 100 percent guaranty from the SBA to the lender, and require no fees paid to SBA. Loan proceeds are provided over a six-month period and repayment of the ARC loan principal is deferred for 12 months after the last disbursement of the proceeds. Repayment can extend up to five years.
The best candidates for ARC loans are small businesses that in the past were profitable but are currently struggling, yet have been making loan payments or are just beginning to miss loan payments due to financial hardship. FAQs for Lenders and Borrowers.
ARC loans are made by commercial lenders who are SBA participants. The SBA will pay these banks a monthly interest rate throughout the term of the loan. Lenders can find more information here. Non-SBA lenders can easily become SBA participants by working with their nearest SBA district office. Businesses interested in applying for an ARC loan should first contact their current lender.
ARC loans will be offered by some SBA lenders for as long as funding is available or until September 30, 2010, whichever comes first.
www.recovery.gov
ARC loans can be used to make payments of principal and interest, in full or in part, on one or more existing, qualifying small business loans for up to six months. ARC loans provide an immediate infusion of capital to small businesses to assist with making payments of principal and interest on existing debt. These loans allow borrowers to redirect cash flow from making loan payments to investing in their businesses, to help sustain the business and retain jobs. For example, making loan payments on existing loans with proceeds from an ARC loan can allow a business to focus more funds on core operations, such as buying inventory or making payroll.
ARC loans are interest-free to the borrower, carry a 100 percent guaranty from the SBA to the lender, and require no fees paid to SBA. Loan proceeds are provided over a six-month period and repayment of the ARC loan principal is deferred for 12 months after the last disbursement of the proceeds. Repayment can extend up to five years.
The best candidates for ARC loans are small businesses that in the past were profitable but are currently struggling, yet have been making loan payments or are just beginning to miss loan payments due to financial hardship. FAQs for Lenders and Borrowers.
ARC loans are made by commercial lenders who are SBA participants. The SBA will pay these banks a monthly interest rate throughout the term of the loan. Lenders can find more information here. Non-SBA lenders can easily become SBA participants by working with their nearest SBA district office. Businesses interested in applying for an ARC loan should first contact their current lender.
ARC loans will be offered by some SBA lenders for as long as funding is available or until September 30, 2010, whichever comes first.
www.recovery.gov
Tuesday, July 14, 2009
Monday, July 13, 2009
Federal Court Tells Out-of-State Wine Stores to Stay Out of New York
Federal Court Tells Out-of-State Wine Stores to Stay Out of New York
Appellate decision affirms state's right to ban shipments from stores in other states
Mitch Frank
Posted: Thursday, July 02, 2009
New Yorkers who order wine online from retailers in other states are breaking the law, according to a decision handed down Wednesday by a federal appeals court. The ruling is the latest salvo in the war over wine shipping, and only promises to spark further legal fights.
A three-judge panel on the Second Circuit Court of Appeals ruled unanimously that New York's law permitting in-state retailers to ship wine directly to consumers but forbidding out-of-state retailers from doing the same is constitutional and within the state's rights under the 21st Amendment. The ruling upheld a 2007 district court decision, Arnold's Wines, Inc. v. Boyle. An Indiana store and two New York consumers sued to overturn New York's law, arguing that the Supreme Court's 2005 Granholm v. Heald decision, which forbids states from discriminating between in-state and out-of-state wineries, also applies to wine retailers. The district judge dismissed the case and the appellate court has now concurred.
The case is just one of several in the battle between retailers and wholesalers. Since the Supreme Court handed down the Granholm decision, many retailers have argued that the decision covers their attempts to sell across state lines as well. In Texas last year, a federal judge agreed with their argument. That decision is being appealed, however, because the judge's suggested remedy appears impractical. A federal judge in Michigan struck down that state's ban on out-of-state retailer sales too, but the state government responded by passing a law banning both in- and out-of-state retailers from shipping wine to consumers.
After Wednesday's decision, both sides responded predictably. "This unanimous opinion clearly and forcefully reinforces the Wines & Spirits Wholesalers of America's view that the landmark 2005 Supreme Court decision in Granholm v. Heald preserved a state's right to control the distribution of alcohol. States not only have the right under the 21st Amendment, but also the responsibility, to require all alcohol be distributed through a controlled and regulated system designed to prevent underage access and ensure product integrity," WSWA president and CEO Craig Wolf said in a statement. "This decision out of the Court of Appeals is a strong affirmation of state power and will cast a long shadow over other pending cases, particularly the Texas Siesta Village case currently before the Fifth Circuit."
"Very simply, this court got it very wrong in their decision," said Tom Wark, executive director of the Specialty Wine Retailers Association. "It's not a surprising decision. This is the same circuit court that was overturned by the Granholm decision. What we have here in the 2nd Circuit's decision is something that squarely ignores the commands of the United States Supreme Court."
The debate centers on different interpretations of the Granholm ruling. On one hand, the court reaffirmed states' rights under the 21st Amendment to regulate alcohol sales and importation. On the other hand, it stressed that the Constitution's Commerce Clause forbids states from discriminating against businesses in other states.
Justice Anthony Kennedy wrote in the majority opinion, "Time and again this Court has held that, in all but the narrowest circumstances, state laws violate the Commerce Clause if they mandate 'differential treatment of in-state and out-of-state economic interests.' This rule is essential to the foundations of the Union. States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses. We have viewed with particular suspicion state statutes requiring business operations to be performed in the home state that could more efficiently be performed elsewhere."
"If we are victorious in our Texas case, you'd have disagreement at two different appeals courts, the kind of thing that tends to lead to the Supreme Court taking a case," said Wark.
For New York wine lovers, however, Wednesday's ruling may mean very little. Many out-of-state retailers continue to ship to consumers despite the law, which has proved hard to enforce.
Appellate decision affirms state's right to ban shipments from stores in other states
Mitch Frank
Posted: Thursday, July 02, 2009
New Yorkers who order wine online from retailers in other states are breaking the law, according to a decision handed down Wednesday by a federal appeals court. The ruling is the latest salvo in the war over wine shipping, and only promises to spark further legal fights.
A three-judge panel on the Second Circuit Court of Appeals ruled unanimously that New York's law permitting in-state retailers to ship wine directly to consumers but forbidding out-of-state retailers from doing the same is constitutional and within the state's rights under the 21st Amendment. The ruling upheld a 2007 district court decision, Arnold's Wines, Inc. v. Boyle. An Indiana store and two New York consumers sued to overturn New York's law, arguing that the Supreme Court's 2005 Granholm v. Heald decision, which forbids states from discriminating between in-state and out-of-state wineries, also applies to wine retailers. The district judge dismissed the case and the appellate court has now concurred.
The case is just one of several in the battle between retailers and wholesalers. Since the Supreme Court handed down the Granholm decision, many retailers have argued that the decision covers their attempts to sell across state lines as well. In Texas last year, a federal judge agreed with their argument. That decision is being appealed, however, because the judge's suggested remedy appears impractical. A federal judge in Michigan struck down that state's ban on out-of-state retailer sales too, but the state government responded by passing a law banning both in- and out-of-state retailers from shipping wine to consumers.
After Wednesday's decision, both sides responded predictably. "This unanimous opinion clearly and forcefully reinforces the Wines & Spirits Wholesalers of America's view that the landmark 2005 Supreme Court decision in Granholm v. Heald preserved a state's right to control the distribution of alcohol. States not only have the right under the 21st Amendment, but also the responsibility, to require all alcohol be distributed through a controlled and regulated system designed to prevent underage access and ensure product integrity," WSWA president and CEO Craig Wolf said in a statement. "This decision out of the Court of Appeals is a strong affirmation of state power and will cast a long shadow over other pending cases, particularly the Texas Siesta Village case currently before the Fifth Circuit."
"Very simply, this court got it very wrong in their decision," said Tom Wark, executive director of the Specialty Wine Retailers Association. "It's not a surprising decision. This is the same circuit court that was overturned by the Granholm decision. What we have here in the 2nd Circuit's decision is something that squarely ignores the commands of the United States Supreme Court."
The debate centers on different interpretations of the Granholm ruling. On one hand, the court reaffirmed states' rights under the 21st Amendment to regulate alcohol sales and importation. On the other hand, it stressed that the Constitution's Commerce Clause forbids states from discriminating against businesses in other states.
Justice Anthony Kennedy wrote in the majority opinion, "Time and again this Court has held that, in all but the narrowest circumstances, state laws violate the Commerce Clause if they mandate 'differential treatment of in-state and out-of-state economic interests.' This rule is essential to the foundations of the Union. States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses. We have viewed with particular suspicion state statutes requiring business operations to be performed in the home state that could more efficiently be performed elsewhere."
"If we are victorious in our Texas case, you'd have disagreement at two different appeals courts, the kind of thing that tends to lead to the Supreme Court taking a case," said Wark.
For New York wine lovers, however, Wednesday's ruling may mean very little. Many out-of-state retailers continue to ship to consumers despite the law, which has proved hard to enforce.
Monday, July 6, 2009
Slow economy means Central Indiana businesses are changing hands at a slower pace
Slow economy means Central Indiana businesses are changing hands at a slower pace
Slow economy means fewer deals, but prices are holding steady
By Nicole Blake
Posted: July 4, 2009
Have a business for sale?
Now is not the time.
Fewer Indianapolis businesses are being sold, and those that do make it to the closing table are netting a lower price with sellers footing more of the financing responsibility, according to area business brokers.
The number of businesses sold in Indianapolis and Carmel and reported to BizBuySell.com dropped 77 percent in the second quarter of 2009 compared with the same period last year, according to the online service. BizBuySell.com is the largest online directory of small businesses for sale nationwide.
Only three transactions were reported to BizBuySell.com in the second quarter this year, compared with 13 during the same time last year, BizBuySell reported.
The median sale price was $250,000, the same as in the second quarter of 2008.
Blame it on the economy.
"People looking (to purchase a business) don't have as much money as they had before," said Mike Handelsman, general manager of BizBuySell.com.
Handelsman said rising unemployment has increased the pool of potential business buyers, but they aren't equipped to assume the risks in a down economy.
"To make matters worse, banks just aren't willing to back business purchase transactions to the same level that they had in the past," he said.
BizBuySell.com issues a quarterly report that examines national business sales transactions.
More than 70 major metropolitan areas had 1,040 transactions during the second quarter of 2009. That was a 50 percent drop from the number of businesses sold in the same period last year.
Businesses typically stay on the market six to 12 months, but the sour economy has added 60 to 90 days to the waiting period, said Larry Battershell, a business broker for Sunbelt Indiana Business Resource. The company represents business sellers.
Especially hard-hit are businesses in the food and beverage industry, Battershell said.
The prices for such businesses have dropped 10 percent to 30 percent among those businesses sold through his company.
Rather than risk netting less on a sale, business owners are waiting, said Battershell.
"For those that aren't under immediate pressure to sell, they've pretty much gone to the sidelines," he said.
Additional Facts
BUSINESS FOR SALE
This is a sampling of some of the 103 Indianapolis-area
businesses listed for sale at BizBuySell.com.
»Bar/restaurant in Broad Ripple: $250,000.
»Coffee shop and cafe near the Geist area: $175,000.
»Chiropractic practice in Hamilton County: $135,000.
»Day-care center in Johnson County: $110,000.
»Dry cleaning plant west of Indianapolis: $195,000.
Source: BizBuySell.com
Slow economy means fewer deals, but prices are holding steady
By Nicole Blake
Posted: July 4, 2009
Have a business for sale?
Now is not the time.
Fewer Indianapolis businesses are being sold, and those that do make it to the closing table are netting a lower price with sellers footing more of the financing responsibility, according to area business brokers.
The number of businesses sold in Indianapolis and Carmel and reported to BizBuySell.com dropped 77 percent in the second quarter of 2009 compared with the same period last year, according to the online service. BizBuySell.com is the largest online directory of small businesses for sale nationwide.
Only three transactions were reported to BizBuySell.com in the second quarter this year, compared with 13 during the same time last year, BizBuySell reported.
The median sale price was $250,000, the same as in the second quarter of 2008.
Blame it on the economy.
"People looking (to purchase a business) don't have as much money as they had before," said Mike Handelsman, general manager of BizBuySell.com.
Handelsman said rising unemployment has increased the pool of potential business buyers, but they aren't equipped to assume the risks in a down economy.
"To make matters worse, banks just aren't willing to back business purchase transactions to the same level that they had in the past," he said.
BizBuySell.com issues a quarterly report that examines national business sales transactions.
More than 70 major metropolitan areas had 1,040 transactions during the second quarter of 2009. That was a 50 percent drop from the number of businesses sold in the same period last year.
Businesses typically stay on the market six to 12 months, but the sour economy has added 60 to 90 days to the waiting period, said Larry Battershell, a business broker for Sunbelt Indiana Business Resource. The company represents business sellers.
Especially hard-hit are businesses in the food and beverage industry, Battershell said.
The prices for such businesses have dropped 10 percent to 30 percent among those businesses sold through his company.
Rather than risk netting less on a sale, business owners are waiting, said Battershell.
"For those that aren't under immediate pressure to sell, they've pretty much gone to the sidelines," he said.
Additional Facts
BUSINESS FOR SALE
This is a sampling of some of the 103 Indianapolis-area
businesses listed for sale at BizBuySell.com.
»Bar/restaurant in Broad Ripple: $250,000.
»Coffee shop and cafe near the Geist area: $175,000.
»Chiropractic practice in Hamilton County: $135,000.
»Day-care center in Johnson County: $110,000.
»Dry cleaning plant west of Indianapolis: $195,000.
Source: BizBuySell.com
Thursday, July 2, 2009
Marriott gets a wake-up call
Marriott gets a wake-up call
Shaken by the plunge in travel, the hotel giant presses ahead with a makeover: freshening its look, trying new brands, and preparing a successor to the patriarch.
By Marc Gunther, contributor
Last Updated: June 25, 2009: 10:10 AM ET
(Fortune Magazine) -- Next time you order breakfast at a Marriott, you may notice something new about the bacon. Instead of being served in identical six-inch strips, it now comes in an assortment of sizes. That's because senior executives of Marriott, after sampling four or five varieties of bacon in a blind taste test, found that an irregular cut, which costs less, tastes just as good as the rectangular slices traditionally served in the company's hotels.
Although J.W. "Bill" Marriott Jr., the company's longtime chairman and chief executive, had his doubts, he approved the new specifications when he learned that they would save about $2 million a year. "Times are changing," says the 77-year-old CEO.
Consistency has long been the watchword for Marriott International (MAR, Fortune 500), the lodging giant (sales: $12.9 billion). In its 82-year history, the company has had just two CEOs, both named Marriott: Bill Marriott Jr. and his father, J. Willard Marriott, who with his wife, Alice, opened a nine-stool A&W root beer stand in Washington, D.C., in 1927. Not until 1957 did Bill Jr. persuade his father, who hated debt, to open the company's first hotel.
Over time Marriott hotels became the favorite of Middle American business travelers who knew what to expect there -- a clean room, traditional furnishings, a smile at the reception desk. "Marriott is the most reliable of brands," says Bjorn Hanson, an industry analyst who now teaches at New York University's Tisch Center for Hospitality, Tourism, and Sports Management. "There's a saying in the industry that Marriott puts heads in beds."
Now, though, because of several factors -- the severe economic downturn, the increasing sophistication of road warriors, and the fact that none of Bill Marriott's four children is positioned to take over the business -- change is coming to this conservative family-run company. The company is aggressively cutting costs while trying to protect its worker-friendly culture. It is modernizing the look and feel of its hotels and launching a new brand, called Edition, with Ian Schrager, godfather of the boutique hotel. And this spring Arne Sorenson, a lawyer, the company's CFO, and a relative newcomer to Marriott, was named president and chief operating officer, putting him in line to succeed Bill Marriott as CEO.
For the time being, it is up to Bill Marriott to steer the company through an industry slump that is even worse than the one that followed the 9/11 terrorist attacks. "This is the mother of all recessions in my lifetime," he says. People are traveling less, even as the supply of hotel rooms is increasing, a double whammy that has driven down occupancy rates and prices. For the first three months of 2009, Marriott's revenue per available room, an industry metric known as revPAR that is the rough equivalent of same-store sales in retailing, dropped by about 17%.
Literally adding insult to injury, Washington politicians heaped scorn on luxury travel and corporate meetings after executives of bailed-out AIG (AIG, Fortune 500) were caught last fall gallivanting at a St. Regis resort in Dana Point, Calif. Almost immediately hundreds of meetings and conferences were canceled to forestall criticism, notably a pricey Wells Fargo (WFC, Fortune 500) employee-recognition trip to Las Vegas. At a Ritz-Carlton operated by Marriott in Half Moon Bay, Calif., more than 30 groups called off plans for retreats, seminars, and incentive meetings. Defending his industry, Marriott wrote an op-ed piece in the Washington Post calling for an end to the "toxic rhetoric."
Based in suburban Bethesda, Md., Marriott operates and franchises over 3,200 hotels under more than a dozen brands, including Ritz-Carlton, Renaissance, Courtyard, and Fairfield Inn, with properties in 66 countries and territories from Armenia to Vietnam. The casual observer may be surprised to learn that the company owns only six hotels; it began selling off the real estate in the 1980s, shifting to its current business model, which requires less capital and minimizes real estate risks. Marriott operates about half of the rooms in its system, including most of the upper-end hotels, and franchises the rest. Franchise fees are the least volatile source of cash flow in the hotel business, acting as a buffer in difficult times. Even so, the recession has hit Marriott's financial results like a rock band visiting a hotel room. In the first quarter of 2009, revenues were $2.5 billion, a 15% year-over-year decline, and net income was $87 million, a 28% drop.
To fill more rooms, Marriott is offering free nights and discounted rates. You can stay at a brand-new JW Marriott in Medan, Indonesia, for just $85 a night, or book a room at a Marriott beach resort and casino in Cura�ao for $120. Cutting expenses is another option, but it's complicated by Marriott's oft-stated desire to treat its people right. Since its early days, when J.W. Marriott put a doctor on the payroll to tend to his waitresses and kitchen help, the company has provided employees with good benefits, lots of training, and opportunities to advance. "If the employees are well taken care of, they'll take care of the customer and the customer will come back," Marriott says. "That's basically the core value of the company." Most Marriott managers got started as hourly workers in the hotels, and all but a handful of its senior executives have been promoted from within. Pay for hotel managers depends not just on the profitability and guest satisfaction scores of their hotels but also on how they are rated by their staff. Nevertheless, Marriott laid off about 1,000 people last year, from a total payroll of about 146,000. Some other workers had their hours reduced, and executives will forgo bonuses.
Guests may notice changes too, and not just the bacon. At some hotels, Marriott replaced Häagen-Dazs ice cream with the less expensive Edy's brand. (The company says Edy's, which isn't as dense, is also easier to scoop at banquets.) Breakfast buffets offer fewer varieties of fruit. Even Ritz-Carlton is trimming expenses, curbing opening hours for spas and restaurants. No cost-cutting move got more attention than Marriott's decision to eliminate automatic delivery of newspapers to guest rooms. The company estimates that it will deliver 50,000 fewer papers every day, or 18 million a year, an unwelcome development in the reeling newspaper industry. "In this economic climate, it isn't responsible to keep giving guests something they don't want," Marriott says. "You'd see guests come out of the room and step on the newspaper, and they weren't even picking it up."
Meanwhile, Marriott has been making over its brands, which needed sprucing up. A couple of years ago Robin Uler, the company's chief creative officer, took Bill Marriott Jr. to dinner at Prime One Twelve, a high-end steak house in Miami's South Beach. Noisy and crowded, with wood floors, contemporary d�cor, and a menu to match, the place was hopping despite its high prices. Then they returned to the Marriott restaurant across the street, which was dead. "So do you still want carpets and booths far away from one another with no noise?" she asked him.
Lobbies in many Marriotts are morphing into "great rooms" with free Wi-Fi, where modular furniture can be arranged for meetings, socializing, or casual dining. "An empty lobby is not an inviting place to be," Sorenson says. "The great room is about bringing back life." If hotel guests spend a few extra dollars on a latte or a glass of wine instead of sitting in their rooms, all the better. Ideo, a cutting-edge consulting firm, helped Marriott redesign public spaces as well as guest rooms for Courtyards and TownePlace Suites.
Marriott is also getting outside advice as it prepares to enter the hotly contested category of boutique hotels, where Starwood's W, the hip Monaco chain, and several independents have grabbed market share at lofty room rates. Edition, Marriott's new brand, expects to open five hotels next year, with boutique guru Schrager and Bill Marriott Jr., both famously detail-oriented, collaborating on design. "I'd like to see a little bit of color in the rooms," Marriott says, not quite buying the monochromatic convention of so many boutique brands. "So people, when they wake up in the morning, don't just look at a gray or brown."
Replacing Bill Marriott as CEO won't be easy. "If there's one executive in the hotel industry who is revered, it is Bill Marriott," says NYU's Hanson. Marriott visits about 200 hotels a year, inspecting kitchens and signing autographs for rank-and-file workers. He checks out rivals too. "I sneak into competitors' kitchens more than you'd know," he says.
By contrast, Sorenson, who is 50, has never worked in the hotels, although he has had responsibility for Marriott's European operations since 2003. "He's young, he's bright, he understands the finance side of the business very well, and he accepts the role of the family," Bill Marriott says. The family owns about 25% of the company's shares (worth a little more than $2 billion at today's prices), and Bill Jr.'s oldest son, John W. Marriott III, an investor in hotels, is vice chairman.
Sorenson refers to his boss as "Mr. Marriott" and says having the family meaningfully involved in the company is an advantage because it "allows our customers and associates to connect with something that's personal." A Midwesterner who was born in Japan -- his parents were Lutheran ministers -- Sorenson is a good fit for the folksy Marriott culture, which has been shaped by the Marriott family's Mormon faith. "There's not much elitism here of any sort," he says. An advocate for Marriott's sustainability efforts, including a pioneering effort to help preserve the Amazon rain forest in Brazil, Sorenson drives a Prius to work.
Bill Marriott prefers his collection of Ferraris and Maseratis. Fit, trim, and diminutive, he walks on his treadmill four nights a week and took up Pilates training when his daughter told him he seemed to be getting even shorter. He calls retirement a "disease" and says, "I like to go home at night, but I still love to go to work in the morning." Even in these tough times? "It's all I've ever done," he says, not sounding like a man with plans to speed off into the sunset.
Shaken by the plunge in travel, the hotel giant presses ahead with a makeover: freshening its look, trying new brands, and preparing a successor to the patriarch.
By Marc Gunther, contributor
Last Updated: June 25, 2009: 10:10 AM ET
(Fortune Magazine) -- Next time you order breakfast at a Marriott, you may notice something new about the bacon. Instead of being served in identical six-inch strips, it now comes in an assortment of sizes. That's because senior executives of Marriott, after sampling four or five varieties of bacon in a blind taste test, found that an irregular cut, which costs less, tastes just as good as the rectangular slices traditionally served in the company's hotels.
Although J.W. "Bill" Marriott Jr., the company's longtime chairman and chief executive, had his doubts, he approved the new specifications when he learned that they would save about $2 million a year. "Times are changing," says the 77-year-old CEO.
Consistency has long been the watchword for Marriott International (MAR, Fortune 500), the lodging giant (sales: $12.9 billion). In its 82-year history, the company has had just two CEOs, both named Marriott: Bill Marriott Jr. and his father, J. Willard Marriott, who with his wife, Alice, opened a nine-stool A&W root beer stand in Washington, D.C., in 1927. Not until 1957 did Bill Jr. persuade his father, who hated debt, to open the company's first hotel.
Over time Marriott hotels became the favorite of Middle American business travelers who knew what to expect there -- a clean room, traditional furnishings, a smile at the reception desk. "Marriott is the most reliable of brands," says Bjorn Hanson, an industry analyst who now teaches at New York University's Tisch Center for Hospitality, Tourism, and Sports Management. "There's a saying in the industry that Marriott puts heads in beds."
Now, though, because of several factors -- the severe economic downturn, the increasing sophistication of road warriors, and the fact that none of Bill Marriott's four children is positioned to take over the business -- change is coming to this conservative family-run company. The company is aggressively cutting costs while trying to protect its worker-friendly culture. It is modernizing the look and feel of its hotels and launching a new brand, called Edition, with Ian Schrager, godfather of the boutique hotel. And this spring Arne Sorenson, a lawyer, the company's CFO, and a relative newcomer to Marriott, was named president and chief operating officer, putting him in line to succeed Bill Marriott as CEO.
For the time being, it is up to Bill Marriott to steer the company through an industry slump that is even worse than the one that followed the 9/11 terrorist attacks. "This is the mother of all recessions in my lifetime," he says. People are traveling less, even as the supply of hotel rooms is increasing, a double whammy that has driven down occupancy rates and prices. For the first three months of 2009, Marriott's revenue per available room, an industry metric known as revPAR that is the rough equivalent of same-store sales in retailing, dropped by about 17%.
Literally adding insult to injury, Washington politicians heaped scorn on luxury travel and corporate meetings after executives of bailed-out AIG (AIG, Fortune 500) were caught last fall gallivanting at a St. Regis resort in Dana Point, Calif. Almost immediately hundreds of meetings and conferences were canceled to forestall criticism, notably a pricey Wells Fargo (WFC, Fortune 500) employee-recognition trip to Las Vegas. At a Ritz-Carlton operated by Marriott in Half Moon Bay, Calif., more than 30 groups called off plans for retreats, seminars, and incentive meetings. Defending his industry, Marriott wrote an op-ed piece in the Washington Post calling for an end to the "toxic rhetoric."
Based in suburban Bethesda, Md., Marriott operates and franchises over 3,200 hotels under more than a dozen brands, including Ritz-Carlton, Renaissance, Courtyard, and Fairfield Inn, with properties in 66 countries and territories from Armenia to Vietnam. The casual observer may be surprised to learn that the company owns only six hotels; it began selling off the real estate in the 1980s, shifting to its current business model, which requires less capital and minimizes real estate risks. Marriott operates about half of the rooms in its system, including most of the upper-end hotels, and franchises the rest. Franchise fees are the least volatile source of cash flow in the hotel business, acting as a buffer in difficult times. Even so, the recession has hit Marriott's financial results like a rock band visiting a hotel room. In the first quarter of 2009, revenues were $2.5 billion, a 15% year-over-year decline, and net income was $87 million, a 28% drop.
To fill more rooms, Marriott is offering free nights and discounted rates. You can stay at a brand-new JW Marriott in Medan, Indonesia, for just $85 a night, or book a room at a Marriott beach resort and casino in Cura�ao for $120. Cutting expenses is another option, but it's complicated by Marriott's oft-stated desire to treat its people right. Since its early days, when J.W. Marriott put a doctor on the payroll to tend to his waitresses and kitchen help, the company has provided employees with good benefits, lots of training, and opportunities to advance. "If the employees are well taken care of, they'll take care of the customer and the customer will come back," Marriott says. "That's basically the core value of the company." Most Marriott managers got started as hourly workers in the hotels, and all but a handful of its senior executives have been promoted from within. Pay for hotel managers depends not just on the profitability and guest satisfaction scores of their hotels but also on how they are rated by their staff. Nevertheless, Marriott laid off about 1,000 people last year, from a total payroll of about 146,000. Some other workers had their hours reduced, and executives will forgo bonuses.
Guests may notice changes too, and not just the bacon. At some hotels, Marriott replaced Häagen-Dazs ice cream with the less expensive Edy's brand. (The company says Edy's, which isn't as dense, is also easier to scoop at banquets.) Breakfast buffets offer fewer varieties of fruit. Even Ritz-Carlton is trimming expenses, curbing opening hours for spas and restaurants. No cost-cutting move got more attention than Marriott's decision to eliminate automatic delivery of newspapers to guest rooms. The company estimates that it will deliver 50,000 fewer papers every day, or 18 million a year, an unwelcome development in the reeling newspaper industry. "In this economic climate, it isn't responsible to keep giving guests something they don't want," Marriott says. "You'd see guests come out of the room and step on the newspaper, and they weren't even picking it up."
Meanwhile, Marriott has been making over its brands, which needed sprucing up. A couple of years ago Robin Uler, the company's chief creative officer, took Bill Marriott Jr. to dinner at Prime One Twelve, a high-end steak house in Miami's South Beach. Noisy and crowded, with wood floors, contemporary d�cor, and a menu to match, the place was hopping despite its high prices. Then they returned to the Marriott restaurant across the street, which was dead. "So do you still want carpets and booths far away from one another with no noise?" she asked him.
Lobbies in many Marriotts are morphing into "great rooms" with free Wi-Fi, where modular furniture can be arranged for meetings, socializing, or casual dining. "An empty lobby is not an inviting place to be," Sorenson says. "The great room is about bringing back life." If hotel guests spend a few extra dollars on a latte or a glass of wine instead of sitting in their rooms, all the better. Ideo, a cutting-edge consulting firm, helped Marriott redesign public spaces as well as guest rooms for Courtyards and TownePlace Suites.
Marriott is also getting outside advice as it prepares to enter the hotly contested category of boutique hotels, where Starwood's W, the hip Monaco chain, and several independents have grabbed market share at lofty room rates. Edition, Marriott's new brand, expects to open five hotels next year, with boutique guru Schrager and Bill Marriott Jr., both famously detail-oriented, collaborating on design. "I'd like to see a little bit of color in the rooms," Marriott says, not quite buying the monochromatic convention of so many boutique brands. "So people, when they wake up in the morning, don't just look at a gray or brown."
Replacing Bill Marriott as CEO won't be easy. "If there's one executive in the hotel industry who is revered, it is Bill Marriott," says NYU's Hanson. Marriott visits about 200 hotels a year, inspecting kitchens and signing autographs for rank-and-file workers. He checks out rivals too. "I sneak into competitors' kitchens more than you'd know," he says.
By contrast, Sorenson, who is 50, has never worked in the hotels, although he has had responsibility for Marriott's European operations since 2003. "He's young, he's bright, he understands the finance side of the business very well, and he accepts the role of the family," Bill Marriott says. The family owns about 25% of the company's shares (worth a little more than $2 billion at today's prices), and Bill Jr.'s oldest son, John W. Marriott III, an investor in hotels, is vice chairman.
Sorenson refers to his boss as "Mr. Marriott" and says having the family meaningfully involved in the company is an advantage because it "allows our customers and associates to connect with something that's personal." A Midwesterner who was born in Japan -- his parents were Lutheran ministers -- Sorenson is a good fit for the folksy Marriott culture, which has been shaped by the Marriott family's Mormon faith. "There's not much elitism here of any sort," he says. An advocate for Marriott's sustainability efforts, including a pioneering effort to help preserve the Amazon rain forest in Brazil, Sorenson drives a Prius to work.
Bill Marriott prefers his collection of Ferraris and Maseratis. Fit, trim, and diminutive, he walks on his treadmill four nights a week and took up Pilates training when his daughter told him he seemed to be getting even shorter. He calls retirement a "disease" and says, "I like to go home at night, but I still love to go to work in the morning." Even in these tough times? "It's all I've ever done," he says, not sounding like a man with plans to speed off into the sunset.
Wednesday, July 1, 2009
SBA Tweaks Rules Of 504 Loan Program
JUNE 26, 2009
SBA Tweaks Rules Of 504 Loan Program
By RAYMUND FLANDEZ
In its latest effort to help cash-strapped entrepreneurs, the Small Business Administration on Wednesday permanently changed a key loan program so that businesses can refinance if they plan to expand or buy equipment.
Previously, business owners could only take advantage of the SBA's 504 program when they sought new loans to buy real estate, upgrade machinery and make improvements. Now, borrowers can refinance any existing fixed-asset loan as long as the amount is 50% or less than the total cost of expansion.
The change is designed to help business owners restructure debt under better terms and "improve their cash flow and enhance their viability so that they can grow and create jobs," said Hayley Matz, an SBA spokeswoman.
For instance, a business owner who wants a $1 million loan to expand could refinance $500,000-worth of existing equipment debt, for a $1.5 million total 504 loan package at a better interest rate, Ms. Matz said. The small-business borrower must also create or retain a job for every $65,000 guaranteed by the SBA, a change from $50,000.
Some industry experts, however, doubt that this will help struggling small businesses that need to pay a 504 loan coming due soon. Many aren't in an expansion mode and so aren't poised to take advantage of the debt refinance provision.
"Most are struggling and working overtime to figure out how to be able to survive this economy," says Bob Coleman, publisher of the Coleman Report, a newsletter for SBA lenders.
As of last week, the SBA has approved 3,900 loans under the 504 program since its fiscal year began in October, down 41.5% from the 6,671 loans in the same period a year earlier. Total dollar amount of those loans has dropped 42.5% to $2.28 billion, from $3.97 billion a year ago.
This change is the latest initiative that the SBA has rolled out in the past few months as part of President Obama's stimulus package. Since mid-February, the agency has reduced fees for its loans and raised the guarantee on most of its 7(a) loans, the SBA's flagship program, to as much as 90% from 75% to 85%. Last week, it rolled out an emergency-loan program for established businesses that are cash-strapped. Next week, the SBA plans to launch a loan program that would make it easier for car dealers to buy inventory.
"This is one more piece of the Recovery Act that is going to have a direct impact and put more money in the hands of small business owners just when they need it most," SBA Administrator Karen G. Mills said in a statement. "Lower interest rates mean lower payments and less money going out the door each month in debt repayments."
Write to Raymund Flandez at raymund.flandez@wsj.com
Corrections & Amplifications
Borrowers can refinance any existing fixed-asset loan to expand or buy equipment, not just an SBA-backed loan, as a previous version of this article implied. In addition, a business owner who wants to get a $1 million loan to expand can refinance $500,000 worth of existing equipment debt, for a $1.5 million total 504 loan package. An example of how a business can use the program in a previous version didn't accurately represent the scope of the program.
SBA Tweaks Rules Of 504 Loan Program
By RAYMUND FLANDEZ
In its latest effort to help cash-strapped entrepreneurs, the Small Business Administration on Wednesday permanently changed a key loan program so that businesses can refinance if they plan to expand or buy equipment.
Previously, business owners could only take advantage of the SBA's 504 program when they sought new loans to buy real estate, upgrade machinery and make improvements. Now, borrowers can refinance any existing fixed-asset loan as long as the amount is 50% or less than the total cost of expansion.
The change is designed to help business owners restructure debt under better terms and "improve their cash flow and enhance their viability so that they can grow and create jobs," said Hayley Matz, an SBA spokeswoman.
For instance, a business owner who wants a $1 million loan to expand could refinance $500,000-worth of existing equipment debt, for a $1.5 million total 504 loan package at a better interest rate, Ms. Matz said. The small-business borrower must also create or retain a job for every $65,000 guaranteed by the SBA, a change from $50,000.
Some industry experts, however, doubt that this will help struggling small businesses that need to pay a 504 loan coming due soon. Many aren't in an expansion mode and so aren't poised to take advantage of the debt refinance provision.
"Most are struggling and working overtime to figure out how to be able to survive this economy," says Bob Coleman, publisher of the Coleman Report, a newsletter for SBA lenders.
As of last week, the SBA has approved 3,900 loans under the 504 program since its fiscal year began in October, down 41.5% from the 6,671 loans in the same period a year earlier. Total dollar amount of those loans has dropped 42.5% to $2.28 billion, from $3.97 billion a year ago.
This change is the latest initiative that the SBA has rolled out in the past few months as part of President Obama's stimulus package. Since mid-February, the agency has reduced fees for its loans and raised the guarantee on most of its 7(a) loans, the SBA's flagship program, to as much as 90% from 75% to 85%. Last week, it rolled out an emergency-loan program for established businesses that are cash-strapped. Next week, the SBA plans to launch a loan program that would make it easier for car dealers to buy inventory.
"This is one more piece of the Recovery Act that is going to have a direct impact and put more money in the hands of small business owners just when they need it most," SBA Administrator Karen G. Mills said in a statement. "Lower interest rates mean lower payments and less money going out the door each month in debt repayments."
Write to Raymund Flandez at raymund.flandez@wsj.com
Corrections & Amplifications
Borrowers can refinance any existing fixed-asset loan to expand or buy equipment, not just an SBA-backed loan, as a previous version of this article implied. In addition, a business owner who wants to get a $1 million loan to expand can refinance $500,000 worth of existing equipment debt, for a $1.5 million total 504 loan package. An example of how a business can use the program in a previous version didn't accurately represent the scope of the program.
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Son Isaac on Camel in Tangiers
