🍩 Dunkin's franchise treat
Hey Snackers,
KIDZ BOP (still a thing) is thriving. While streaming of Cardi B party anthems took an 18% dip, Kidz Bop's G-rated hits scored a 10% jump on Spotify in March. Home-bound children are bopping to: I just took a DNA test turns out I'm 100% that kid (actual lyrics).
Stocks dipped after a week of historic gains fueled by optimism on the slowing spread of coronavirus. Now governors of 9 states are planning for an eventual reopening.
Also, we're down to the Great 8 matchups in our #SnacksMadness bracket: 1st up is Domino's Takeout vs. Popeye's Chicken Sandwich — Vote for the winner.
Dunkin' doesn't own a single one of its own locations — and that's good right now
America runs on Dunkin'... but Dunkin' runs on a 100% franchised biz model — that's coming in pretty sweet during the corona-conomy. Dunkin's 21K stores are 100% owned by independent people. Dunkin' sells the rights to use its brand and open up shop — as long as the Boston Kremes are kremy and the Caramel Iced Coffees are extra-syrupy, no one will care who owns it. Dunkin' cashes in on franchises in 3 way:
- Selling rights to operate the brand: Dunkin' gets to expand its empire, while the owner gets to cash in on Dunkin's brand fame, recipes and loyal customers (for a "franchise fee").
- Selling stuff to operate the brand: The franchise owner is obligated to purchase Dunkies essentials — like ingredients, uniforms, and plastic furniture — straight from corporate.
- Share of sales: Owners must pay Dunkin a percentage of the franchise's sales and an upfront fee for the privilege.
Franchising is the democratization of fast-food fortunes... By paying regular fees to franchisors like Domino's or McDonald's, entrepreneurial franchisees get a share of Big Fast Food's profits. You've heard of landlords — Dunkin' is the franchisee's brand-lord.
Franchising means lower risk, but also lower potential reward... for corporate. The franchise owner (not Dunkin') pays for the building, the employees, and all the biz expenses — so it's this franchisee who loses out most when the biz is closed. Dunkin' has limited investment, so the only thing it's losing when sales are down is a cut of those sales. But franchise owners reap a greater percentage of profits when business booms.
Coronavirus money pain catches up to states, hitting all forms of tax revenue
Where'd that state tax go?... The virus economy has plunged spending, caused major layoffs, and stuck a knife in travel. The economic pain felt by individuals and businesses is catching up to states, which are losing their most important sources of revenue:
- Sales Tax: Your cold brew costs $4, but your state slaps on a nice 7% tax on top. Rates vary state by state (some, like New Hampshire, don't charge it). But highly sales tax-dependent states like Florida and Nevada are struggling as spending plummets (aka, nothing to tax).
- Income Tax: Just when you thought you were done filing taxes, there comes the state section. Income tax revenue is plunging as 17M have been laid off across the country — plus the filing deadline was extended by 3 months to July 15, meaning delayed cash flow.
- Tourism Tax: That reason your hotel bill is higher than list price (even when you didn't raid the minibar). Can be collected by states or cities/counties. Las Vegas is missing out on 12% resort fees thanks to shuttered hotel/casinos.
States use that money for key resources... Like public schools, roads, and unemployment benefits. Now, at the same time that revenue is down, states are spending more on unemployment and medical expenses — a double-whammy for the piggy bank. Even states with a lot of cash saved up (like Arizona) will likely be running deficits by 2021.
States and cities rely on your earning/spending... Since that's significantly down, we can expect some big budget cuts ahead — and maybe even some bankruptcies. The state's piggy banks will recover after its people and businesses do. Just like individuals and businesses, states can:
- Get credit ratings based on ability to pay back loans.
- Take on debt by issuing bonds.
- File for bankruptcy when they can't pay back debt.
- Get bailed out by the federal government in billions of aid.
What else we’re Snackin’
- Wait: Amazon puts new grocery delivery customers on a waitlist as it tries to tackle a surge in demand from existing customers.
- Approved: The FDA authorized an emergency-use COVID-19 test for saliva samples — that could increase the number of screenings by tens of thousands more daily.
- Uneazy: More trouble for struggling weed deliverer Eaze as one of its top partners, Caliva, ditches to launch its own delivery.
- Unload: Delta and United consider selling airline miles early (and at a discount) to their credit-card partners JPMorgan and Amex to raise much-needed cash.
- Pork: Smithfield closes its South Dakota pork plant after 293 of the plant's employees are diagnosed with COVID-19 — that 1 location processes 4.5% of all US pork.
Tuesday
- Earnings expected from Johnson & Johnson, JPMorgan Chase, Wells Fargo and JB Hunt
Disclosure: Authors of this Snacks own shares of Amazon and JPMorgan
ID: 1148832