wearmanyhats

Consider a tale of two businesses.  First one, a diner located in a small town in Minnesota.  It was built for and owned by one woman who had it for thirty years, and was labeled as pretty much the best place in town to eat.  The food came out quickly, it tasted good, and every day there was one special meal that made the old folks come out for their one good meal of the day.  It was more than reasonably priced, and high school students would often slip down for a quick lunch.  She made them top priority at that time period, and usually twenty or so students lunched at noon on that same good meal, or hamburgers each school day. 

Then her daughter bought her out, added one more room for additional seating.  The food and service continued, until one day she closed it down, saying quietly that she resented her mother’s constant criticisms about the way she ran the place.

The residents were left to go to “the other place” in town, which had more expensive food, service that was interesting, and a long wait time.  Some residents went out of town, but most just stayed home to eat, and wished someone of value would buy back the old place.

Then it reopened under the management of the former cook, and residents streamed back in.  But there were changes and they were not smart ones.  Gone was the everyday good meal that the old timers liked, such as chow mein or turkey mashed potatoes, or sliced ham with baked potatoes.  Instead it was burgers and fries.  Gone, too, were the home made pies, and instead, cakes were there, sometimes to be served until they really should have been tossed.   Worse, sometimes the ten year old grandson waited tables, even on days when school was in session.  Finally, in between meals, the cook and staff would sit and smoke, until an unbreathable haze floated around.  Locals tried to tell them what they wanted, but the owners wouldn’t change.  Within a few months, rumors circulated that they couldn’t pay their bills, and shortly thereafter, the place closed.

Consider the other business, located just 28 miles to the north in a town four times larger than the town with the aforementioned cafe.  It was a Ford dealership, beautiful, shiny, with a service department that got recommendations from all over the area.  Two weeks ago, it closed, the employees were sent home, and the owners were meeting with the bankers.  Was there mismanagement?  Probably not.  Instead, it was a vicitim of poor job sales, inventory that just sat, and a local town that just quit buying gas hog cars.

Af first glance, these two look unrelated, and yet they have a few common elements.  Both served small communities, both closed during this most recent economic slowdown.  Most of all, both are victims of incompetence.  Ford should have figured out a decade ago that cheap gas wouldn’t last and to get out fuel efficient cars.  The local business owner should have seen about changing to a Toyota dealership, or if he was unable to do that, should have ordered as many fuel efficient vehicles as he could have.  He should have struck more deals, and most of all, bought the dealership at al lower price.  Any or all of these reasons could have led to its downfall. 

The first businesses to go during a recession, whether real or imagined, are incompetent businesses.  The next are luxury businesses.  In this area of Minnesota, the incompetent businesses are now gone.  The luxury businesses are still around if they are owned outright.

Now here’s the key for you and any reader of this blog, (and I hope you share it with others to read):  the next set of closures will be luxury businesses that are not owned outright by the owners.  This is important for you to know, in case your job hinges on it.  In about 10 -22 months, jobs in the theaters, restaurants, spas, and flower shops will begin to suffer.  Oil, when it hits $200 a barrel, as it will, will be responsible for the shattering of a second tier of our economy.  Cafes and restaurants will be squeezed on two ends:  by increases in food, and decreases in spending money in their customers’ wallets.  It will happen, unless something changes significantly, and right now there’s nothing in sight to see otherwise.

Oh, by the way, the little cafe reopened, this time under the ownership of the former waitress.  She got the place for a screaming deal, and has been frugal. It is starting to slowly get back its customers, and as long as she watches her help carefully, she should do well.

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