Archive for January 25th, 2010

Of course he’s anti-business … so say 77% of investors

January 25, 2010

Ken’s Take: Let’s see, unemployment is over 10% and businesses provide jobs … so, go to war with banks and business.  Hmmm.  Might work.

Bernanke gets the highest approval ratings — by far — so don’t reappoint him.  Hmmm again.

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Excerpted from Bloomberg: Obama Seen as Anti-Business by 77% , Jan 21,2010

U.S. investors overwhelmingly see President Barack Obama as anti-business and question his ability to manage a financial crisis, according to a Bloomberg survey.

  • 77 percent of U.S. respondents believe Obama is too anti-business.
  • Four-out-of-five are only somewhat confident or not confident of his ability to handle a financial emergency.
  • Only 27 percent of U.S. investors view the President favorably.

“Investors no longer feel they can take risks,” citing Obama’s efforts to trim bonuses and earnings, make health care his top priority over jobs and plans to tax “the rich or advantaged.”

Investors say Obama has been in a “constant war” with the banking system, using “fat-cat bankers and other misnomers to describe a business model which supports a large portion of America.”

The U.S. investors’ perceptions of Obama stand in contrast to those of their European counterparts, most of whom say the president strikes the right balance when it comes to managing business interests. Europeans, however, are more confident in Obama’s leadership on financial matters than Asians.

U.S. respondents give Geithner a 63 percent unfavorable rating and Summers 67 percent. One financial figure to find favor among U.S. respondents is Federal Reserve Board Chairman Ben S. Bernanke, who garners a 68 percent approval rating.

Unlike other recent presidents, Obama hasn’t selected a leading business executive for his cabinet or a top advisory role.

http://news.yahoo.com/s/bloomberg/20100121/pl_bloomberg/a8uii1bcrdmy

Posted in Financial Crisis | 2 Comments »

The UAW … California style.

January 25, 2010

Punch line: The pension liability created by lucrative union contracts was no problem … until folks started to retire … and live a lot longer than expected.

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Excerpted from WSJ: Public Employee Unions Are Sinking California,  Jan,22, 2010

Months after closing its last budget gap, the Golden State’s $83 billion budget is $20 billion in the red.

“This year alone, $3 billion was diverted to union pension costs from other programs.”

To balance the budget, California needs to take on its public employee unions.

Approximately 85% of the state’s 235,000 employees (not including higher education employees) are unionized.

Over the past decade pension costs for public employees increased 2,000%. State revenues increased only 24% over the same period.

There are now more than 15,000 government retirees statewide who receive pensions that exceed $100,000 a year.

Many of these retirees get a pension that equals 90% of their final year’s pay. The pensions for these (and all other retirees) increase each year with inflation and are guaranteed by taxpayers forever—regardless of what happens in the economy or whether the state’s pensions funds have been fully funded (which they haven’t been).

Note: Many of the retirees are former police officers, firefighters, and prison guards who can retire at age 50 with full benefits.

Full article:
http://online.wsj.com/article/SB10001424052748703699204575017182296077118.html?mod=djemEditorialPage

Posted in Financial Crisis | Leave a Comment »

Loss leader pricing – why do it?

January 25, 2010

TakeAway:  Though it’s facing a lot of resistance from its franchisees, Burger is mandating a profit killing price for the double cheeseburger. 

Why in the world would a global franchisor want to force it’s franchisees to lose money.  The answer is, of course the franchisor doesn’t want the franchisee to lose money.  The franchisor wants to use the item as bait to bring in customers and increase the sales of other, and most likely, higher margin products. 

If Burger King franchisees do not get this logic or have proof that this logic is false, then Burger King may have bigger problems to worry about.

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Excerpted from WSJ, “Burger King Franchisees Can’t Have It Their Way,” By Richard Gibson, January 21, 2010

The price of a double cheeseburger is generating a lot of heat among Burger King franchisees.

In an ongoing dispute that could affect how the nation’s hundreds of franchise organizations set prices, the burger chain is insisting that its two beef-patty sandwich be sold for no more than $1—in line with other items on its “Value Menu.”

But the company’s franchisees claim that at that price, they lose money.

Although the loss on each sandwich may only be a few cents, a typical restaurant might sell several hundred of the burgers each week.

Most franchisees are following orders for now, but the National Franchisee Association for Burger King, which represents restaurant operators across the U.S., filed a lawsuit last fall in U.S. District Court in Florida, asserting that the company’s franchise agreements don’t allow it to dictate prices.

Burger King … says it sees the value promotion as key to competing effectively in the current consumer environment …

A court ruling that’s favorable to Burger King could embolden other franchisers to mandate prices. Many franchisees have long regarded their power to set prices as testament to their independence.

Burger King’s arch rival, McDonald’s, faced a similar issue, when its franchisees rebelled against a $1 double cheeseburger. The matter was defused when the fast-food giant removed one of the sandwich’s two slices of cheese and renamed it the McDouble, cutting the cost of ingredients …

Burger King’s franchisees say they usually get the chance to sign off on price changes, and that they’ve twice rejected a $1 double cheeseburger. Burger King confirms that it previously didn’t dictate prices on individual items, though it did require a $1 maximum price on Value Menu items.

The company won a separate case in 2008 requiring franchisees to offer the Value Menu, which is core to its efforts to attract price-conscious consumers.

A company might choose to set prices if it thinks the stores are charging so much that its royalties—and its reputation—are being diminished. But most companies don’t like to rile their franchisees …

Some franchises … say they recommend prices, especially in connection with national marketing campaigns.  For example, Papa John’s is offering a special Super Bowl pizza for $11.99, though it notes in advertisements that the price is valid only at “participating” restaurants.

“Most franchisees follow our recommended national offers,” says Burger King’s SVP … since customers might argue with the store’s workers if they’re charged more.”

Edit by TJS

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Full Article
http://online.wsj.com/article/SB20001424052748704320104575014941842011972.html#mod=todays_us_section_b

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Posted in Mktg - Promotion | Leave a Comment »