Lyft/Uber's nightmare scenario (now reality)
Hey Snackers,
We just found the smallest apartment in San Francisco (combo toilet/shower/sink).
Call it a double-hat trick — Stocks jumped for their 6th straight win as President Trump delays tariffs on China by 2 weeks, hoping a "gesture of goodwill" leads to a trade deal.
California disrupts the disrupters, classifying Uber/Lyft drivers as "employees"
Flashback to Uber's IPO in May... Deep in its filing paperwork (aka "S-1"), Uber listed a nightmare policy scenario under the "risks" section:
“Our business would be adversely affected if Drivers were classified as employees instead of independent contractors.”
That. Just. Happened... California's AB5 law (brutal name) passed late Tuesday to go into effect Jan. 1, pending the governor's signature (he said he'll sign). It requires Uber, Lyft, and other gig icons to grant full employee benefits, pay, and anniversary balloons to their drivers — that's instead of the 1099 form drivers currently get as independent contractors.
Uber's response = Not doing it... This seems destined for a legal battle. Here's how this law would be good and bad for the world:
- The Good: Uber drivers would receive reliable (and probably higher) pay, benefits, and the opportunity to unionize.
- The Bad: Uber claims it would need to schedule driver shifts, stealing their "drive when you want" freedom. The higher overall driver pay would also probably translate to higher prices for you and us riders.
Don't forget Uber & Lyft's dirty little secret... To transition from hugely unprofitable to actually make money, they've got 3 options:
- Pay drivers less (not happening with this new law)
- Increase prices for Uber rides
- Replace drivers with self-driving car technology
#2 could happen because of this new law. The pressure to get to #3 will be even greater.
Wendy's adds breakfast to the menu — and investors really aren't into it
Testing. Testing. Testing... After 300 test restaurants enjoyed solid results, Wendy's is adding the 3rd meal to 5K burger joints this year. Investors weren't feeling the most important meal of the day, dropping the stock 12%. Here's the 1st problem: History. Wendy's tried adding breakfast 3 times before ('85, '06, '10). It failed all 3 times.
Breakfast isn't a no-brainer... despite what Mom said. You'd expect that adding a meal would grow profits. Not necessarily. Wendy's downgraded its profit expectations for 2019 because breakfast is hard to make — and it hasn't even unveiled the menu yet (square-shaped waffles TBD).
- It's expensive. Wendy's is dropping a cool $20M across the stores before the first egg is cracked.
- You need more people. Wendy's currently opens at 10am. Early bird gets the 5am morning shift, and Wendy's is hiring 20K new workers for it.
- Franchise owners don't love this. 95% of Wendy's are owned by other people (not Dave's Legacy). You see Baconator hashbrowns, they see new training, updated fridges, and re-organized pantries that this announcement requires.
But breakfast is where the habits are... Those daily meat/egg/cheese + coffee pit stops are consistent habits that grow revenues for fast food. That's why everyone at the restaurant convention is talking about new plans for on-the-go breakfast options - not boring boxed lunch. Wendy's will need to break morning diners from their faithful Dunkin, McD's, Starbucks, and even Taco Bell rituals.
What else we’re Snackin’
- Quarter-pounded: McDonald's buys an artificial intelligence startup to up its drive-thru game (and that's its 3rd techie acquisition this year)
- Survivor: JCPenney surges 24% for its "store-within-a-store" strategy — launch outdoor apparel shops within 100 of its own stores
- Exchanging: Hong Kong's stock exchange just offered $37B to buy London's stock exchange — the combo would create Earth's 3rd biggest stock exchange behind the New York Stock Exchange and Nasdaq
- Gameover: GameStop will shut down 200 stores by the end of this year because you're probably streaming your games
- Breaks: Oracle falls on word its CEO is taking a health break and stepping down for a bit
- FYI: Airbus wants to use plane sensors to track how often you hit the bathroom mid-flight (data prevents toilet paper rationing)
Thursday
- SmileDirectClub's IPO on Nasdaq
- Earnings from Kroger
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