WalletPop

Sneaky restaurant tricks: Ten to watch out for

Carol Vinzant — 2008-05-15T08:00:00+00:00

Filed under: Budgets, Entrepreneurship, Food

Restaurants are feeling the pinch in two directions. With money tight, consumers are cutting back on how often they dine out. Meantime, food costs more. Way more.

Egg prices have doubled in the last six months. Dairy, chicken, beer and bread crumb prices are all climbing higher. Even when the core commodity escapes the trend, packaged ingredients and other restaurant supplies are more expensive as the costs of transportation climb due to higher fuel prices.

When people do go out, they are ordering less. "Appetizer sales are down. Dessert sales can almost disappear," says Dan Simons, principal at Vucurevich Simons Advisory Group, a restaurant consulting firm. "And the most expensive items on the menu aren't sold as much."

Restaurants know there's a limit to how much they can raise prices without driving off already broke customers. So for now, many are looking for ways to raise prices and cut costs that won't be too obvious.

The next time you go out -- if you can afford to go out at all -- see if you can find your favorite restaurant working any of these old gimmicks. Read on and you may even learn some tricks you can use to stretch a buck in your kitchen at home:

Cut back on portions:

Restaurants normally spend between 25% and 40% of their budgets on food, according to Barry Brown, president of Profit Strategies Solutions, which sells software for restaurants to manage inventory and profitability.

So if they can make a smaller hamburger and still sell it for the same price, their profits go up. Milk shakes at family diners that could once be split three-ways may now truly be single serve. There are reports of some restaurants buying smaller plates so customers won't notice they have reduced portions and chefs won't be tempted to heap on food to make dishes look appealing.

Eric Arthur, president of Marketplace Management Group, a restaurant procurement company in Collierville, Tenn., expects to see more junior-sized portions offered on menus. "You might have a shot-glass-sized dessert. It gives the customer the opportunity to say 'I can still have some dessert' and it gives the owner the opportunity to still add a dollar to the bill," says Arthur.

"Americans have been kind of spoiled. We have supersized everything," Arthur says. "That's not necessarily the way it is in the rest of the world."

Cut back on the most expensive ingredients:

Maybe the recipe calls for five sticks of butter. In good times, the baker adds six because she thinks it tastes better. But in tough times, she'll stick to five (or worse, substitute a stick or two of margarine in the recipe). The chef may prefer to load up on shrimp when preparing his signature gumbo, but he knows his job depends on restricting the number to four or five per serving.

Brown recommends restaurateurs get very strict about standardizing portions at times like these. They might tell their cooks, for example, to use 10% less chicken in entrées or chop off less of the strawberry when they make shortcake. "Usually, either they switch to a scale or offer additional training," says Brown.

Managers may shift to dishes that call for less expensive ingredients -- for example, from beef to chicken or from chicken to pasta. Consumers may want these lower priced alternatives, and restaurants like them because they can often make a higher profit margin on them.

"If you see a resurgence of liver and onions, don't be surprised," says Simons. "It's an old school comfort dish for a lot of people and the cost is low."

Maybe the chef used to get the highest quality beef available. Those generous days may be coming to a close. If you see a menu item for some kind of marinated steak, it may be a flank steak, a cheap, tough cut that has been marinated and pounded to submission, said one chef at a private club who asked not to be identified. You may see more items with ground chuck, otherwise known as hamburger.

One chef who works with VSAG says that he makes up for the everyday image of hamburger meat by insisting on only the freshest beef from his vendors. "I know it's not super fancy, but if prepared well it is heavenly," says the chef. "It is all about the age of the chuck: the fresher the better! 'No age please,' that is what I insist to my vendors when ordering chuck."

Cut back on freshness:

Food distributors are charging restaurants fuel surcharges these days because of high gas prices. So, restaurants are trying to cut back on the number of deliveries they get. Instead of getting fresh produce every day, they get bigger quantities less frequently.

Other kitchens may switch to frozen for items that they rarely use but want to keep on hand, such as avocados.

Use everything (even if that means recycling items):

Here's a simple example: The chef may prefer to discard tomatoes that aren't the ripest red. But, these days, to make use of every last tomato ordered, you might see a few green slices make their way onto your hamburger.

Restaurants also need to be extra-efficient about using everything they buy. In order to be prepared for a dinner rush, they need to have lots of extras on hand -- rolls, desserts, side dishes, cuts of meat for entrées. But if they have a slow night, they don't just throw the extras out.

An efficient manager knows how to use every last piece of food. That new special soup? Could be just an excuse to use some meat and vegetables they got for another dish but didn't sell. A salad bar can be the serving site of last resort for cheese or vegetables that are about to turn. See lots of chili? It may be a disguise for leftover hamburger. Bread pudding? That's yesterday's Danish. Homemade croutons? A great use of stale bread. Potato skins? A terrific way to use the leftover baked potatoes (which have to be baked in advance because they take so long.) Potato soup? More rerun potatoes.

You get the message.

Pour weaker drinks:

Your favorite bartender is probably not stingy with portions. Bartenders have a way of pouring generous drinks and maybe even offering one on the house. But now his boss may be breathing down his neck to ensure he is not so glad-handed.

The biggest wasted item at restaurants that Brown sees is liquor. "It isn't necessarily theft, just over-usage of the item," Brown says. "It's not even that they're sloppy or generous. It's just not being a machine." Now the price of beer is rising, putting owners on high alert.

Bartenders can easily over-pour a drink without even trying (of course, the potential for a good tip doesn't exactly disincentivize them). In the United Kingdom pubs must sell liquor in 25 ml or 35 ml servings and have bar gadgets that pour exactly that amount. Maybe they'll start becoming a common sight in the U.S., too.

Switch to a cheaper brand of certain ingredients:

Restaurant owners have become compulsive shoppers. That's quite a change. Eric Arthur says restaurant owners normally stick with the same supplier year after year, almost like baseball players stick with lucky socks. Now they're trying many suppliers and many brands.

For restaurant owners who are less fastidious on quality, a switch to a cheaper supplier can mean lower quality. If your favorite grilled cheese doesn't taste quite as good as it used to, a change in supplier could well be the reason.

Don's Dock in Des Plaines, Ill., is one of the most popular seafood restaurants in the Chicago suburbs. Owner Andrew Johnson, whose family has been in seafood for 70 years, is determined not to skimp on the fish and shrimp. "With our seafood, we're not going to sacrifice the quality," Johnson says. "We just shop around more."

The huge hike in grain prices means that a bag of breadcrumbs went from $19 a bag to $37 over the last year. Instead of shifting to a lower quality, Johnson spends more time comparing prices. "For breadcrumbs there used to be one or two suppliers. Now we have six or eight purveyors," Johnson says.

Switch to cheaper toilet paper, take-out containers and bags:

"Paper and disposables, oh my gracious, that's the very first place I start," says Arthur. "There are big bucks, I mean, big, big bucks in that." Sometimes owners can get the same items for less if they just spend more time shopping. Or, they may decide that food quality is sacrosanct but napkin quality is not.

Arthur asks restaurant owners what they pay for cups and trash bags and is often surprised by the answer. "Someone may be paying $80 a case for trash bags that they could be buying for $20," he says. "Do you know how many extra sandwiches they'd have to sell to make up that $60?"

Push the highest profit margin items, not the best-tasting ones:

"Most restaurants want to sell the best thing on the menu," says Arthur. "They're not thinking, 'What's the thing I'm going to make the most money on?'" That changes once they figure out their food costs.

Often the signature dish may not be all that profitable. But a pasta dish can offer a low cost for the eater and a drastically lower food cost for the restaurant. Arthur recommends restaurants look to add low cost, high margin dishes. In other words, it's better for them to make $2 off a $12 entrée than to make $2 off a $25 dish -- even though making the $25 dish may be more fun.

Another technique: A restaurant that uses a professional menu designer will steer eaters to the high margin items. Big chains are already well-practiced in this mystical art; now smaller restaurants are seeing what a boost it can give their bottom line, says Michael Kristoff, president and creative director of Kristoff Creative, a Nashville, Tenn., design firm.

"There's a psychology to it, an engineering the placement of things," says Kristoff. "The third item in a list is generally the most selected item. So that's where you would put your highest margin item." Profitable items may also get stars or boxes around them. You may see prices de-emphasized. Kristoff steers restaurants away from the typical diner menu where all the prices line up in a column.

"That's the last thing you ever want to do -- the number one biggest mistake," Kristoff says. "People easily see the prices and start shopping by price. Price should be the last consideration. People on budget are going to do that anyway but you don't want to force it on them."

Slowly raise prices so it's not as noticeable:

Restaurants normally raise price only once or twice a year. Now you'll see many more increases along the way. That's because prices are moving as much in a month as they used to in a year.

Andrew Johnson has had to raise prices four times in the last two months at his seafood restaurant. He now prints only 500 menus at a time instead of 5,000. He used to check his ingredient prices every couple months; now he makes sure to look every week.

Eric Arthur says restaurant owners are always reluctant to raise prices, fearing they'll drive off customers. But he's worked to convince his restaurant clients that in this downturn, the only restaurants that survive will be the ones that raise their prices regularly to keep up with costs.

Beg for sympathy from your customers:

You may start seeing signs about higher commodity prices. Or news articles pinned to the window. Or hear desperate justification of the higher prices in a conversation with the owner. They want to make sure you know they're not just being greedy.

Most restaurateurs are passionate about keeping their food quality up and won't compromise on their signature dishes. But with customers cutting back on dining out and food prices soaring, they have little choice but to find creative new ways to trim costs.

Carol Vinzant is a freelance writer in New York.

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Beat the postage increase: Print out your own stamps!

Bruce Watson — 2008-05-13T17:30:00+00:00

Filed under: Bargains, Budgets, Entrepreneurship, Home, Technology

Well, it's happened: postage has, once again, gone up. If you're like me, you probably send a letter through the mail once or twice a month, which means that the postage rate increase is now burning a massive 2¢ hole in your pocket. On the bright side, I generally pick up any pennies that I see on the sidewalk, so I should be able to make up the difference with about a half mile of walking.

I'm joking about this, but there was a time when the postage change would really have upset me. For a while, I used to sell a lot of items on eBay. One of the ways that I set myself apart from my competitors was by offering a standard fee for shipping and handling. If my buyer lived in the next town over, I made a fair bit of money; if he lived in Montana, I ended up losing dough. When the Postal Service used to up its rates, I had to up my rates, which made my flat rate fee seem a little less like a deal.

My fellow Walletpoppers have suggested some solid ways of undermining the postage increase. For example, Tom Barlow noted that, currently, "Forever" stamps are outperforming numerous stocks, and that buying large amounts of them is a nifty way to save a lot of postage money. However, as Tracy Coenen noted, it really doesn't make that much of a difference for "casual postage users" such as myself. Moreover, as my daughter has a tendency to affix stickers to the cat whenever she gets a chance, I prefer to minimize the number of stamps that I have laying around the house.

Another solution that neither involves a long-term stamp commitment nor a postage-laden kitty is electronic postage. Basically, you open an account with a company that is licensed to sell electronic postage; among others, this includes Stamps.com and Pitney Bowes. You buy the company's proprietary machinery and begin printing out your own stamps. Although electronic postage carries a startup cost, it certainly pays dividends in terms of time and effort, particularly when you consider how long the average post office visit takes (in my neighborhood, it's about an hour).

The postal service is also working to sweeten the deal. Express Mail users who print their own postage save 3% off the price of sending a package, while Priority Mail users will save 8.2%. Beyond that, even regular stamp users will save money by minimizing postage overpayment. Obviously, electronic postage isn't for everyone, but if you send out a lot of mail, it could help you save a lot of money.

Bruce Watson is a freelance writer, blogger, and all-around cheapskate. His favorite stamp was the one for National Proctological Awareness Month. He bought a couple hundred and used them to mail all his bills.

eBay seeks to strangle its Australian sellers

Gary E. Sattler — 2008-05-13T17:00:00+00:00

Filed under: Entrepreneurship, Ripoffs and Scams, Shopping, Technology, Fraud

We should be used to this by now. Yet another money grubbing directive has surfaced from mother eBay Inc. (NASDAQ: EBAY), As covered in a story in The New York Times, eBay has decided to test market the strategy of allowing payment for transactions on its site solely through its wanton money portal, PayPal. The company intends to run this test on Australian eBayers. I wonder if our mates Down Under would be willing to tell us how they feel about this strategy?

eBay is claiming that this change in operating procedure will lower the incidences of fraud on the site. That's funny coming from them, when you consider that the worst eBay fraud nightmares generally run through its own PayPal system. I can believe that eBay's own fraud exposure might be cut by funneling everything through PayPal, but that's about eBay's bottom line. It's not about the bottom lines of its loyal patrons. The matter is further examined in this Associated Press article.

BloggingStocks reports that, as it stands right now, PayPal collects 2.9% from every sale which runs through its system in the U.S., plus another .30 cents for any sale under $3,000. The picture gets even gloomier for Australian eBayers, where PayPal charges 4.4% on sales, plus the additional .30 cents. What percentage of eBay Australia's sales currently run through alternate payment means? That's what I want to know.

If this change is enacted by eBay against the entirety of it's operations, it will be just one more step in the inevitable creation of "Wal-Bay", a site where large volumes of foreign made junk will be peddled by a thin crust of well protected sellers. In the meantime, alternate online selling strategies continue to take hold and grow as eBay's own growth has stalled. eBay can fake revenue growth for just so long. It's only a matter of time before things really start to get ugly over there.

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Squeaky hips leave customers' noses out of joint

Bruce Watson — 2008-05-12T17:00:00+00:00

Filed under: Entrepreneurship, Insurance, Retire, Health

When I was a kid, my favorite Wizard of Oz character was the Tin Man. The Lion was furry, but obnoxious, and the Scarecrow was nice, but a little too spastic. Toto was a yappy little dog and Dorothy was a girl and everyone else was just too damn weird looking. The Tin Man, though, was warm and caring, could blow steam out of his head, and made all kinds of fun sounds. He was just too damn cool.

I thought about the Tin Man recently because of some problems that Stryker Orthopaedics has been having with some of its replacement hips. Apparently, the company has a line of ceramic-lined hips that are guaranteed to last far longer than conventional plastic hips.

On the bright side, the hips have, thus far, lived up to their promise: in most cases, they are showing far less wear-and-tear than their plastic competitors. On the down side, 1-7% of these implants have developed an obnoxious squeak. Unlike the Tin Man, however, Stryker's customers can't get rid of their squeaks with a precise application of oil; they need to get their hips replaced again, a costly and intense surgical procedure with tons of potential complications.On one level, this seems pretty funny. After all, most of Stryker's squeakers aren't feeling any pain from their squeaking joints, nor are they suffering from dislocation, infection, or any of the other life-threatening problems that are often associated with prosthetic installation. The replacements are still good, and will probably continue to function for decades to come. On the other hand, after listening to the sound of a squeaking hip, I realized that this is no laughing matter. Having to constantly hear the sound of a chalkboard every time I walk would drive me crazy. Add in the fact that, as one patient complained, "it can interrupt sex when my wife starts laughing," and you've got a real quality-of-life issue here.

Hopefully, I've got a few years before this becomes an issue for me; one of the best parts of being a member of "Generation X" is that I've got the whole "Baby Boomer" cadre standing in front of me, waiting to work out the kinks on any new technology. That having been said, I hope that Stryker can find a way to square things with its hip customers!

Bruce Watson is a freelance writer, blogger, and all-around cheapskate. He is hoping that brain transplant surgery is a reality by the time he's in his eighties.

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Need to pay off your student loans? Sell a kidney!

Bruce Watson — 2008-05-12T14:30:00+00:00

Filed under: Debt, Entrepreneurship

My youngest sister was born with a debilitating liver condition. After a few operations and a brief period in which my mother collected her bile and kept it in the fridge (bile, by the way, looks an awful lot like limeade), Ella was put back together. Now, 24 years later, she is still going strong.

In the process of taking care of Ella, my mother ended up learning about all the resources that were available to parents of children with liver disease. She began working for liver groups and ultimately formed a nonprofit group of her own. This meant that much of my childhood and adolescence was spent staffing health fairs, attending nonprofit events, passing out organ donor cards, going door-to-door, and selling things to raise money. In fact, my sisters and I even collected and traded organ donor cards from different organizations. Along with my "Spastic Colon" t-shirt, organ donor cards were the best part of the gastroenterology conventions that we had to go to with fair regularity.

The problem with transplantation is that there simply aren't enough organs out there. Around the world, people are waiting on transplant lists for the hearts, lungs, livers, and other vitals that they desperately need. Unfortunately, most people are still uncomfortable with the idea of giving up their organs, often out of a belief that their organ donor status will be used as a consideration when it comes to giving them medical care. This, of course, hasn't been helped by urban legends about organ thieves, movies about cloning for organ harvesting, and pretty much the entire literary career of Robin Cook, who seems unhealthily fixated on the idea of taking organs out of unwilling patients. Even Monty Python got into the act with a live organ donation segment in their film The Meaning of Life!

According to The Sydney Morning Herald, Dr. Gavin Carney, an Australian nephrologist, recently addressed Australia's transplant crisis. Apparently Australia has one of the lowest organ donation rates in the world; for example, while 1,800 people are currently waiting for a kidney transplant, only 343 transplants were performed last year. Australians are, supposedly, going overseas to have transplants done in less-developed countries under conditions that are dangerously unsanitary and of questionable legality. Dr. Carney's suggestion is that the Australian government begin buying organs from healthy young donors. He suggested that the sum of $47,000 for a kidney would be about sufficient.

On the one hand, Dr. Carney's solution is horrific, and it's easy to imagine how a legalized organ trade could lead to all sorts of abuses. Moreover, while the notion of healthy young people giving up organs to support wealthy, aging baby boomers is far too easy to imagine. That having been said, I feel like Dr. Carney's plan might have some merit. To begin with, the current organ donation trade is far from fair and honest. For example, while hundreds of people are waiting for organs, Pennsylvania's Governor Robert P. Casey received a heart and a liver mere hours after signing up for the transplant program at the University of Pittsburgh. Similarly, doctors, hospitals, and insurance companies receive hundreds of thousands of dollars for each transplant, while donors receive nothing. This has become a real issue in the case of John Moore, the patient whose cancerous spleen was used to produce Interferon. Moore's spleen has generated billions of dollars, but he has never made a penny off of the produce of his body.

Regardless of its legality, it's pretty clear that there is currently a market in organ donation. Whether this takes the form of African organ sales or political figures who mysteriously rocket to the top of the transplant list, it's clear that the worldwide organ shortage is creating ideal circumstances for criminal abuse. A well-regulated domestic organ market could reduce these problems while providing compensation for donors. The question is if such a market would work, or if it would only become the staging ground for further abuses.

In the short term, I'm going to take care of my organs. Even if I never need both of my kidneys, I have a feeling that a healthy lifestyle might be a good investment; after all, I've got a little credit debt...

Bruce Watson is a freelance writer, blogger, and all-around cheapskate. He wants everyone to know that he's a liver, not a fighter.

Marketing your small business: How did you find me?

Tracy Coenen — 2008-05-12T13:00:00+00:00

Filed under: Entrepreneurship

In my business, I use very strategic advertising to market my business, along with many unpaid forms of marketing like blogging and participating in online communities. Whenever I receive an inquiry about my services, one of the first questions I ask is: "How did you find me?"

This has been one of the best moves I could have ever made regarding my marketing and advertising. No longer do I wonder if a particular piece of expensive advertising is helping my cause. I know exactly which publication or search engine sent a potential client my way.
The benefit to my business is obvious. There were certain advertising opportunities that were expensive and brought me absolutely no business. I'm not upset that I tried those avenues, as there did appear to be potential with them in the beginning. But I'm glad that I was able to find out quickly if they were working and not renew the ads. I've been able to put those advertising dollars to use on other opportunities that may net me some clients.

I also found out that some of the least expensive forms of advertising I use are some of the most effective. I never would have guessed that when I started my business! If you're in a business like mine where it's easy to ask potential clients how they found you, do it. You might be surprised to find out which marketing methods are working for you and which are not.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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Outsourcing: South Carolina is someone's China

Josh Smith — 2008-05-12T11:00:00+00:00

Filed under: Entrepreneurship

The circle of outsourcing appears to be coming complete. Ashes to ashes dust to dust, high wages to high real estate values! Several Chinese firms are outsourcing to the U.S. to save money on...wait for it...manufacturing jobs!

Liu Keli, a Chinese businessman from the Shanxi province in China is investing 10 million dollars in South Carolina to open a plate printing factory. The factory will employ approximately 120 American workers who will be paid $12-13 per hour. Liu's reasoning for opening in South Carolina is simple, it is cheaper for his company to operate in the U.S. than it is to operate in China.

One of the areas in which Liu will save the most is in real estate here in the states. The plate making company saved 75% on the cost of land by building in North Carolina. Additionally utility prices in the U.S. are much cheaper than in China and also more reliable in South Carolina than in China. Even though labor costs are higher in the U.S. Liu is taking advantage of a tax credit from South Carolina to make up for some of the increase in labor expenses.

This whole arrangement is interesting to me because it seems to represent the way trade and global business can work out. When there aren't regulations to stop a business from opening a location anywhere on the globe, smart companies will find the areas which make the most business sense to operate in. I'm not a complete optimist when it comes to globalization but stories like these do a lot to re-enforce my opinion that the market can sort out complex issues on its own!

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The business of mommy blogging

Tracy Coenen — 2008-05-10T15:00:00+00:00

Filed under: Entrepreneurship, Extracurriculars

While many people blog just for fun, for others, this is serious business. There are blogs that are easily recognized as business ventures (like this one). And there are many that maybe aren't so quickly dubbed to be commercial enterprises.

"Mommy blogging" is one of the fastest-growing an most popular sections of the blogosphere. What is it? It's exactly what it sounds like: Mommies blogging about their lives. Many of them are doing it because they want to engage with others about the life of a mother and wife.

And others are doing it as a business venture. Advertisers have zeroed in on the mommy blogging culture and are spending big bucks to get exposure to the audiences of these blogs. They say that "word of mom" is one of the best marketing tools a company can have. And blogging can be very lucrative for the chosen few, who can rake in six figures if their audiences are big enough. Dooce is one example of a mommy-blogger gone nova.

Here's more about the business of mommy blogging from earlier this week on The Today Show.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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Nothing but "brew" skies for beer fans

Bruce Watson — 2008-05-09T13:20:00+00:00

Filed under: Entrepreneurship, Food

File this on under "incredibly obvious million dollar ideas that you wish you'd thought up first."

Having met more than a few true-blue beer hounds in my day, I realize that I am, at best, a novice beer connoisseur. That having been said, I have a few definite preferences, and there's nothing like being able to mosey up to a bar and order my favorites. Unfortunately, however, I often find myself staring down the barrel of a two or three item beer list and wondering if I've somehow been magically whisked away to Mogadishu. Seriously, I understand that not everyone will have Double Black Stout, but can't we do a little better than PBR, Budweiser and Miller Genuine Draft?

Well, my salvation has finally arrived.

Last month, Eric and Will Stephens, a pair of brothers, launched Beermenus. Basically an online restaurant and bar database, Beermenus allows users to check out the beer listings of hundreds of New York watering holes. Visitors can search by brand, restaurant, or neighborhood, and can compare prices at numerous places. They can then check out the restaurants' websites and get directions through Google maps.

Unfortunately, the site is still a little small, offering listings for only 170 bars. Worse yet, it only deals with bars and restaurants in Manhattan, and doesn't even really offer much above 96th Street. On the bright side, though, the brothers Stephens are already working on extending their database, and have plans to explore New York's other boroughs. Ultimately, they want to create Beermenu listings for other cities as well.

In the meantime, I have a friend in San Diego who might be looking for a million dollar idea...

Bruce Watson is a freelance writer, blogger, and all-around cheapskate. Living in Southwest Virginia, he had a friend whose "moonshinemenu" site was a real hoot. It wasn't quite internet-ready, as it was carved on the trunk of a tree...

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Inside a cash register-free business

Brandon Barker — 2008-05-07T14:30:00+00:00

Filed under: Entrepreneurship, Food, Shopping, Simplification

The City Café Bakery in downtown Kitchener, Ontario serves hot coffee, bagels, croissants, tarts and brick oven pizza with a quirky, outgoing staff and a neighborhood atmosphere. However, it does not have a cash register.

According to Bakers Journal, owner John Bergen, a former ceramics designer, wanted to open a bakery where he could "walk in anytime and it's a place where I can belong." For Bergen, that kind of business would involve simplicity and the honor system.

Bergen says. "What irritated me about going into [other bakeries], for example, was waiting in line for something as simple as getting a donut and a coffee. So the thought was, someone can pour his own coffee, grab his own bagel, cut it himself, throw the money in, and walk out. We don't touch 60% of the transaction."

Customers order their items, tally up the total and put their money in a fare box from an old bus. To make things simpler, prices are rounded off to the nearest quarter with taxes included. They do not take credit cards.

Every six months they check the numbers, and only once did they come up short. But, Bergen believes that customers are more likely to overpay than underpay. "Some people come in and want a $2.75 loaf of bread," he says, "but they see we're busy so they throw $3 in and walk out." The City Café Bakery also discourages tipping and they don't answer their phone, so that customers won't have to wait for service while an employee is on the phone. Woo hoo!

But, how's business? According to Bergen, every week the City Café Bakery dishes out 3,000 bagels, 1,300 croissants, 1,000 desserts, and an untold number of pizzas, sandwiches and loaves of bread.

Not too shabby.

B. Brandon Barker also writes for Political Machine.

[Thanks to Kottke.org]

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Great deal or desparate plea? Buy a Chrysler and get $3 gas for next 3 years

Geoff Williams — 2008-05-06T14:30:00+00:00

Filed under: Entrepreneurship, Saving, Transportation

If you haven't been thinking of buying a Chrysler lately, maybe you should. The Detroit News is reporting that Chrysler LLC is offering customers guaranteed gas prices for the next three years. Our sister blog, the ever-vigilant, AutoBlog, was one of the first to report the news yesterday.

The sales plan is called "Let's Refuel America," and almost every Chrysler, Dodge and Jeep vehicle being sold allows you to also sign up for a gas card that will reduce the price you pay to $2.99 -- for the next three years.

Clearly, it's an interesting deal and possibly a fantastic one, depending how high gas prices go. Currently, The Detroit News reports, someone would save approximately $1,000 per year if you have a 12-mile-per-gallon vehicle. People who are not interested can get a different incentive like a rebate or a cash bonus.

But I don't know what's more depressing -- that Chrysler has to bribe people with cheaper gas to buy its cars... or that $2.99 is now considered a deal at the pump.

Geoff Williams is a business journalist and the author of C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America (Rodale).

How much do you want to earn each month as an Herbalife distributor?

Zac Bissonnette — 2008-05-05T13:00:00+00:00

Filed under: Entrepreneurship, Ripoffs and Scams

Over on BloggingStocks, I've written about Barry Minkow's allegations of fraud at multi-level marketing giant Herbalife.

Here on WalletPop, I thought it might be worth taking a look at Herbalife -- especially its recruiting tactics -- from the personal finance perspective.

On the Herbalife webpage, there's a form you can fill out to receive more information about becoming an Herbalife distributor. Among the questions:

How much would you like to earn monthly?
An extra $500
An extra $1,000
An extra $2,000
The sky's the limit!

Well who couldn't use an extra $500 a month? But a better question is: What are your chances of earning an extra $500 each month as an Herbalife distributor? The company's statement of average gross compensation (PDF) tells the story.

Only around 25% of Herbalife distributors reach the rank of "Supervisor" or higher, which qualifies them to earn commissions on their sales volume and the sales volume of those they sponsor. Of that 25% that reach "Supervisor" or higher, 87.5% are supervisors, with average annual earnings of $549. That's $45.75 per month. Another 5.8% are at the "World Team" earnings level, with average annual earnings of $4,219. That's getting better, but still about $150 below the minimum amount you could check off under how much you'd like to earn monthly on Herbalife's questionnaire.

Think about it: only 6.6% of "leaders" fall into a category reflecting average earnings of more than $500 per month. And only 25% of all distributors reach any of the "leader" categories. So the chances of a distributor earning "an extra $500" per month are about 1.65%!

Is it misleading to make "an extra $500" the lowest dollar level on the questionnaire when the chances of reaching that level are only slightly higher than the chances of any given newborn turning out to be a genius? It sure seems like it to me.

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Recesssion watch: Unnatural business combinations

Tom Barlow — 2008-05-04T09:00:00+00:00

Filed under: Entrepreneurship, Recession

This post is part of a series about real-life signs we're in a recession.

Tobias Buckell tells me that the dojo in his hometown has added a new side business to its martial arts; balloons. This is one example of a growing movement of small businesses compensating for falling sales by adding new business products, sometimes with comedic results.

In my neighborhood, the local model train shop is now also making banners. Signs announcing the lure of 'free internet inside' are on every business door except the portable toilets.

I see the potential for ancillary businesses as a great way to weather the recession. For example-

A combination funeral parlor and Ebay shop (sell off the estate)
Why not cross Terrier breeding with ditch digging?
A diaper service / defumigating service would be a natural.
Tobacconists could make a mint selling bottled oxygen.
Why don't laundromats sell deodorant?
How about a combination pizza parlor & Weight Watcher's center?
An optometrist that runs a car body shop on the side.
And pick your politician - shouldn't they be selling bottled gas?

What is the funniest or oddest business combination you've seen?

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Recession watch: Selling your gold at home parties

Kyran Pittman — 2008-05-03T09:00:00+00:00

Filed under: Debt, Entrepreneurship

This post is part of a series about real-life signs we're in a recession.

Move over Pampered Chef and Mary Kay. The latest in-home sales "party" concept has reversed the usual guest-to-rep cash flow. Instead of pixie-sized portions of a demonstration omelet, or a makeover that makes your dog bark at you when you get home, the new guest takeaway is cash.

So claim the many "gold party" services cropping up (curiously, overwhelmingly headquartered in Detroit). Companies like My Gold Party and Gold Party by ADI offer to help convert your friends' gold to cash, either by supplying you (for a fee) with the equipment and training for do-it-yourself appraisals or by sending a representative to your home who will set up shop in your kitchen.

Trading your bling-bling for cash is nothing new, of course. Many folks have turned to the jewelry chest when times are hard. Traditionally, you don a scarf and dark glasses and do it quietly in a back room across town. What's new is the idea that parting with Mom's locket or Dad's pocket watch is a rollicking good way to spend a Friday night, accompanied by spinach dip and boxed wine.

As has been reported by WalletPop previously, would-be gold brokers should proceed with caution, particularly if they are required to make an investment upfront. And there are compelling arguments for keeping the lid on your jewelry box for now.

Kyran Pittman blogs at Notes to Self.

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Recession watch: We've lost some competitors... and it hurts

Gary E. Sattler — 2008-04-29T15:00:00+00:00

Filed under: Debt, Entrepreneurship, Tax, Career, Wealth, Recession, Bankruptcy

This post is part of a series about real-life signs we're in a recession.

Normally, the loss of competitors in your field of business could possibly be considered a good thing, giving a boost of orders and income to your own business or employer. In today's economic climate however, the loss of competitors gives me cause for concern. Even as we struggle to accommodate growth in our facility, I'm worried by the downfall of some of our wood products compatriots. I know I've written that it doesn't pay to cry over lost manufacturing jobs, but that doesn't mean we should be without compassion either.

The National Federation of Independent Businesses (NFIB) reports for March that its Small Business Optimism Index is at its lowest point since the second quarter of 1980. Businesses are complaining that increased selling prices are not keeping up with overhead inflationary pressures. Nearly one-quarter of the NFIB survey respondents indicated that they raised employee compensation by a margin which is outstripping profitability increases. I believe that therein lies the downfall of my company's fallen competitors.

One of the biggest concerns I have with these job losses is that they tend not to be felt outside their own regions. We as a country lose a hundred good jobs here or there every day, in a hundred unnamed places. But it doesn't make the headlines because it doesn't sell advertising space. Government statistics never paint the whole picture either. The government bean counters expect that we're too dull to understand that the loss of a well-paid machinist is not mitigated by the addition of yet another undocumented food service worker. They only give you the bottom line numbers, painted with a broad and blurry stroke of the brush.

So, my employer's loss of competitors has a core which tastes quite bitter. As I work my long hours I sometimes pause to think; Was that competitor we lost as much a buyer of my goods as it was a rival? Could my employer be the next to go under, or my neighbor's, or yours? Please say a quiet prayer for the unemployed among us, then get back to work. That is, if you still have it.

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SmartBike: One way to combat the rising cost of fuel prices

Geoff Williams — 2008-04-28T16:30:00+00:00

Filed under: Entrepreneurship, Reduce, Reuse, Recycle, Travel

This idea could go places.

The Washington Post reported Saturday that sometime in mid-May, SmartBike DC, a bicycle-sharing program, is going to get moving.

Metal racks are appearing throughout the city, enough for 120 red three-speed bicycles. For $40 bucks a year, bikes can be rented as many times as a person wants--though each rental can last no longer than three hours, and the hours are restricted from 6 a.m. to 10 p.m. (If you don't bring it back within three hours, you're charged $200.)

The idea is that you get a magnetic card to swipe at a bike rack downtown, enabling you to remove the bike. Take it for a spin. Get your exercise. Go to the store. Commute to the office, if it's convenient. (Park it at another bicycle rack near your place of employment and then hope that a bicycle is there when you get off work.)

It's a public and private partnership between Washington D.C. and the advertising conglomerate Clear Channel Outdoor, which has automated bike rental systems in France, Norway, Sweden and Spain.

The Post's article says that SmartBike DC is still working out some kinks: like will it be possible to park the bicycle outside of a store, go into the store, return with your purchases and not find yourself squinting into the sun and watching a teenage kid making off with your bike.

Still, it sounds like a great idea, and as I said, one that could catch on. Especially if gas prices keep going up.

Geoff Williams is a business journalist and the author of C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America (Rodale).

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How to find yourself in "estate" of bargain bliss

Gillian M. Kalson — 2008-04-28T14:30:00+00:00

Filed under: Bargains, Entrepreneurship, Reduce, Reuse, Recycle, Shopping

The most recent estate sale I went to with my friend Annie was like walking into a dollhouse full of "what Ever Happened to Baby Jane" lookalikes. The "sale matrons" running the show belonged to another era unto themselves.

This was an authentic estate sale. We had hit our mark. The signs were visible on every piece of furniture and every item down to the Victorian-inspired lace eyelet curtains hanging from the enormous bay window of the mock Georgian home we had entered.

Some sales pass under the guise of estate and turn out to be glorified tag sales where the majority of items are spread out on tables in the front yard, and only a limited amount of household treasures are purchasable. An authentic estate sale is run by a family who opens their own home to the public after the death of a loved one, or in desperation before moving far away, or by a company hired by a family to do its research and appraisal.

One downside to bargain hunting at sales where the owner is not directly selling her own wares is that the bargains tend to be more scarce. This is because the hired hands or sale companies know their stuff and are less likely to sell an object of desire for less than its vintage value. They're also strict! I made the mistake of sitting on one of the three vintage sofas in the living room of the last sale I went to a little too long and was told that my time was up and that I needed to move on to another room. The estate matron explained to me in the strict tone of an authentic auctioneer that visitors were not allowed to sit on the furniture unless they were "seriously" considering buying.

I made my way to another room and ended up breaking a gold rimmed vintage wedding band wine glass which I had to pay for along with the other three I bought to match my parent's set for their wedding anniversary. Feeling like a bull in a china shop -- literally -- I made my way upstairs to peruse the vintage, if not antique, linens, most of which had been hand-embroidered with different flowers and leafy grape clusters.

Spring is the season for estate sales, although you can find them advertised year round on Craigslist and in the back of most newspapers. Come early, or else it will be picked over by mid-morning, and avoid sales where you sense the presence of estate matrons. They're stingy and, like you, they know a bargain when they see one.

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Entrepreneur's Corner: Can you boost sales by doing good?

Amey Stone — 2008-04-28T13:00:00+00:00

Filed under: Cards, Entrepreneurship, Charity

"Cause marketing" is a current buzzword in corporate circles. It stands for a simple idea: that you can convince more people to buy your products if you promise to give some of the proceeds to a social or environmental cause.

Consumers get to buy something they like and do good at the same time. Businesses fork over some of the profits, but get a halo effect (hopefully), for encouraging a greener planet, end to poverty, cure for breast cancer and the like.

Product Red may be cause marketing's most conspicuous recent example. It is a brand licensing effort started by U2's Bono and Bobby Shriver. Companies including Gap, Apple, American Express, Microsoft and Dell have participated, creating specially branded "(Product) Red" items and contributing 50% of the gross profits to the Global Fund for AIDS, Tuberculosis and Malaria. It has been criticized since such a small portion of dollars people spend on the products actually makes it to Africa, but also heralded as a huge success for raising $100 million for the Global Fund in just two years and generating goodwill toward the companies involved.

Here's a new cause marketing effort that may be the first aimed specifically at small businesses: Kiva.org, a microfinance site which allows individuals to make loans as small as $25 to entrepreneurs in developing nations, teamed up Advanta to launch the KivaB4B program in mid-April. Advanta issues a Kiva-branded small business card and will match grants made by cardholders to Kiva dollar for dollar (up to $200 a month). Entrepreneurs get to flash their Kiva credit card, which has no fee and low rates, plus they get an insignia to put on their web page or office that shows they are supporting entrepreneurs in the developing world. "Entrepreneurs recognize the value of getting a little seed money," says Ami Kassar of Advanta. "This program allows them to be the good guys and show they care about the community."

Can small companies create their own cause marketing efforts, while avoiding any potential pitfalls? Bryan Specht, an expert in corporate responsibility with Dig Communications in Chicago, believes it can be a terrific strategy for increasing sales and building customer loyalty if done right."There is a huge opportunity here for small businesses to gain market share and take on the big boys in whatever sector they are working in through smart cause marketing efforts," he says. Specht offers these tips for how small companies can benefit from cause marketing:

Don't just support your own pet cause. Make sure it is an issue your target market cares about. Cause marketing works best with young consumers and boomers.

Do it in a way that will provide real benefit to a cause (it can't be too small a percentage of profits to be meaningful, for example). Research from branding firm Cone Inc. finds that consumers believe the most important issues for companies to address are health, education, environment and economic development.

Don't think that you can charge more. Cause marketing is more about gaining a competitive advantage and building brand loyalty than it is charging a premium. Consumers won't necessarily pay more just to participate, Specht warns.

Start small. Try a cause marketing effort first on a local level. For example, a toy store could run a promotion where part of the sales goes to support a local school. If it works, you can build on ways to support educational efforts from there.

A recession may not be the ideal time to start a cause marketing effort, which can cost money and eat into profits. But if sales are slowing and you're casting about for a new marketing strategy, cause marketing may be worth a try.

"In most industries, it won't be the key to success," says Specht. "But it a competitive environment, especially right now, it can give you a real advantage."

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If you've left the house and don't like how you're dressed...

Geoff Williams — 2008-04-24T17:30:00+00:00

Filed under: Entrepreneurship, Shopping

I admire entrepreneurs who come up with really new, novel ideas for a product or service. For instance, last year, I interviewed a guy who started an insurance company to protect clients from weather -- and not just hurricanes and tornadoes, but an ordinary rainy day on a golf course or a car wash, since, let's face it, on days like that, those business owners don't stand a chance of making a profit. I always thought that was clever, and from what I know, the company's doing very well.

And then a few years ago, I spoke to a woman about a company she was starting, thinking that it might make a good article, but my story never went anywhere, nor did her business, I believe, but it was unique. She had a business where she would scatter a loved one's ashes anywhere in the world. But since the grieving person had to pay for her travel expenses, I kept thinking, "Why shouldn't the grieving person just go and do it themselves and get a vacation and probably much more healing out of it? And how hard is it to scatter someone's ashes, anyway?" And that's probably why, as far as I know, her company didn't last long. But she had done the task for a friend, and it had gone well, and so she came up with this business concept.

But I salute Indian entrepreneur Jagdeep Kapoor, whose company Grabbit Franchisee Lette has come up with what I believe is a first. Grabbit is a vending machine business, and it's currently trying to interest establishments in purchasing...vending machines that sell shirts.

Yes, just when you thought you've heard it all, I'm happy to say that you haven't.

I don't know if the idea would fly in America or Canada, but maybe it will in India. After all, Grabbit already has vending machines in India that sell jewelry and cosmetics. Why not shirts? It would be perfect for the person who is always giving the shirt off their back.

And from what I've read at Fibre2Fashion, an international business trade e-zine for the textile and garment industry, Grabbit already has 700 malls in India that have grabbed the concept and plan to install these shirt-filled vending machines. You can buy the shirts with a credit card, and they claim that you can easily enough get refunded if, say, you guessed the wrong size. Actually, it may not be that difficult; from what I understand, they expect a lot of people who don't have an actual storefront to buy these machines, and so maybe someone will be standing nearby and offering customer support.

At any rate, it's an interesting idea and kudos to the company's creativity. I also can't help but admire the wordsmith who came up with their catchy slogan: Vending Without Ending.

Geoff Williams is a business journalist and the author of C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America (Rodale).

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Stupid business owner tricks: Closing the gas pumps for a day

Tracy Coenen — 2008-04-24T14:00:00+00:00

Filed under: Entrepreneurship, Transportation

It's one thing to take a stand and make a statement. It's another thing to deliberately sabotage your own business with something foolish. And sabotage is exactly what a gas station owner in Mequon, Wisconsin is doing today.

To "protest" high gas prices, the owner of Towne Market Mobil has closed all the gas pumps. Harvey Pollack says his convenience store is staying open, but customers won't be able to buy any gas. Here's what's so stupid about this: This isn't sending a message to anyone. It's only hurting the owner of the business.

Trust me, motorists aren't paying high gas prices because they want to. They don't stop at your gas station to fill up because it's a special little treat to watch those numbers on the pump. They are just as upset about gas prices as the owner is. And the gas prices are largely so high because of a whole bunch of market conditions which frankly aren't going to change any time soon.

But customers need gas and they're going to fill up. Incidentally, they'll be filling up at the gas station across the intersection from this guy. And buying items at that convenience store too. (The convenience store is where the owner makes the real profits.) So Pollack says he's happy to lose the $300 to $400 profit he otherwise would have made today. It's his choice to do this, but I think it's pointless and foolish.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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