Thursday, April 17, 2008

Save Your Failing Restaurant in an Eat-at-Home Economy

Author: Nick
Category: Money
Topics: ,

comic 14 - restaurant

Call it what you want—a recession, an “economic correction,” a figment of your imagination—the economy is hurting. And nowhere is that more apparent than in my belly. Just to make ends meet, I’ve had to cut down my daily caloric intake from 7,000 calories to a mere 6,750. This has had a devastating effect on the local restaurant industry: eateries in my neighborhood are closing down at a rate of one roughly every 37 seconds! (No! Not the Dunkin Donuts! Take the Taco Bell instead!)

Okay, so maybe the situation isn’t that bad, but one only needs to walk into a local casual dining establishment to see that people just aren’t eating out as much today. Case in point: in April 2007, when I went to an annual work luncheon for my small team at a local Italian restaurant, every seat in the place was packed by noon; at this year’s meeting, our 10-person team accounted for about half of the crowd at lunchtime.

If you’re a restaurant operator, you may be going out of your mind right now trying to figure out how to prop up your dwindling business. With rising food prices making it more expensive to cook up that plate of fettuccine alfredo, and rising fuel prices making it more expensive for both customers to get to the dining table and for restaurants to get the ingredients to their kitchens, the situation seems pretty dire all around. But fear not, suffering restaurateurs! My 25 years of food-eating experience and I are here to offer you a selection of tasty tactics you can use not only to ride out the restaurant recession but to help you see your best sales in years.

  1. Cut the fat off the menu. Well, not literally (we Americans love our lard, after all). If your menu is loaded with dishes that force you to keep expensive ingredients in stock while the dishes themselves aren’t that popular, you might want to move them off in favor of lighter, cheaper fare.
  2. Substitute ingredients… carefully. Is anybody really gonna notice if you replace that fresh-chopped tomato sauce with Prego? With lighter customer volume, now might be a good time to play around with different brands and suppliers. Just don’t make tons of changes at once or you could stand to upset a few of the regulars.
  3. Toss consumers a bone. Yes, you’re hurting financially, but that’s because we are too. While it might seem counterintuitive, lower menu prices and coupons can help bring in customers who might otherwise stay at home and heat up a can of soup.
  4. Reward frequent diners. Keep ’em coming back with deals like “pay 5 times, get the 6th meal on us.” Little rewards like this that make frequent customers feel special can help even the most budget-minded ignore rising food and fuel prices and sit themselves at your table week after week.
  5. Cut hours, even days. If it’s costing you more in electricity and staff than you bring in to keep that restaurant open until midnight, consider closing at 10pm. Or if Mondays are slow, money-losing days, maybe you should give your eatery the day off.
  6. Diversify. While cutting back on menu options is one way to cut costs, going the opposite direction might work too. In a dreary, upsetting economic environment like today, some customers may appreciate seeing some new and exciting dishes added to the menu. Or perhaps you could make some small tweaks to existing menu items to give them some extra ‘zaz and boink!
  7. Leverage the power of the internet. Does your restaurant have a website? If not, you’re losing out on one cheap, easy way for customers to find out more about your restaurant. Even a basic web page with a menu and directions could bring in more patrons, especially if your cuisine is unique and hard to find in your area.
  8. Get super-creative. Put your imagination to the test and see what you can come up with to help revitalize your restaurant’s image. Invest in your storefront, make Wednesday nights ’80s Karaoke Night, put in new dining furniture—the possibilities are only as endless as your savings account.
  9. Remember: sex sells. No, I’m not suggesting you install a stripper pole in the middle of your restaurant’s dining room, but you probably could stand to capitalize a little more on your hot college girl wait staff. On a related subject, there aren’t nearly enough Maid cafés in this country.

Hopefully following some of these steps will have your restaurant on the road to booming business again in no time. No need to thank me, restaurant owners… though if you really want to, I certainly won’t turn down a complimentary seven-course feast in my honor.

Tuesday, April 15, 2008

Interest Rates on ARM Mortgages Are Adjusting… Lower???

Author: Nick
Category: Money
Topics: ,

comic 13 - adjustable rate

In its continuing efforts to convince me to move to Canada, the U.S. economy has decided to further “reward” my decision to avoid risky adjustable-rate mortgages (ARMs) by throwing me this infuriating bit of news: some ARM rates are adjusting down.

Yes, some people are still getting priced out of their homes by their resetting mortgage rates that cause their monthly payments to skyrocket by hundreds or even thousands of dollars, but some lucky fools are now paying less today than they were two or three years ago. How can this be? Well, it all depends on what benchmark a mortgage lender follows when initially setting and later adjusting an ARM’s rate.

For example, consider the case of some bank that, for the sake of protecting the stupid, we’ll simply refer to as XYZ Bank. XYZ Bank has offered numerous adjustable-rate home mortgage loans dating back to 2003. Its most common product is the 5-year ARM—borrowers pay at a fixed interest rate for the first five years, after which the rate adjusts annually but no more than 1% at a time. XYZ Bank also offers 3-year and 1-year ARMs which, as you can surmise from their names, offer fixed rates only for the first three years or one year, respectively. At the time the mortgage loan is issued, and then annually after the fixed-rate period ends, XYZ Bank sets the mortgage’s interest rate based on the 1-year LIBOR rate. (In case you don’t know what the LIBOR is, it’s just an imaginary number established by magical banking elves from the mythical land of England.) The interest rate isn’t exactly the LIBOR rate; XYZ Bank tacks on a few extra percent for profit. The important thing to understand is that XYZ Bank’s ARM rates follow the 1-year LIBOR up or down.

Here comes the fun part. Customer A got a 5-year ARM through XYZ Bank back in March of 2003 when the 1-year LIBOR rate was just 1.34%. Customer B got a 3-year ARM through XYZ Bank in March of 2005 when the 1-year LIBOR rate was 3.84%. As a result, Customer B’s initial fixed rate was likely a couple percent higher than Customer A’s. Fast forward to March of 2008 when both Customer A and B’s fixed-rate periods end and their interest rates adjust by as much as 1% annually based on where the 1-year LIBOR rate is now. In March 2008, the 1-year LIBOR rate was 2.709%. That’s more than one percent higher than Customer A’s initial LIBOR rate and more than one percent lower than Customer B’s initial LIBOR rate.

one year libor index graph

So what happens? To make a long story short, XYZ Bank adjusts Customer A’s rate up by as much as 1% and lowers Customer B’s rate as much as 1%. As a result, Customer A’s monthly mortgage payment skyrockets $500 a month; he can’t afford it, and nobody will buy the house for anywhere near what he paid for it in 2003, so the bank forecloses by the end of Summer 2008. Customer B ends up saving $400 a month and buys Customer A’s house at a foreclosure auction for half of what Customer A paid for it in 2003. Customer A finds out and sleeps with Customer B’s really hot wife for revenge. Customer B and Mrs. Customer B end up getting divorced; she takes Customer A’s original house in the divorce agreement and moves in with her man-mistress (Customer A). Then the LIBOR rate jumps 5% and everyone loses their homes anyway. The end.

And just to prove I’m not making all of this up, here’s a link to a story over at FatWallet.com of a guy whose 3-year ARM just made its first adjustment—down 1% from the initial rate.

As for me, I still have my lovely 6% fixed-forever loan that seems like a really bad idea today but I’ll probably be happy I took in a few years once those ARM rates start shooting up through the stratosphere. Unless, of course, the imaginary English elves have anything to say about it.

Monday, April 14, 2008

Lemonade Stand Monopolies Made Easy

Author: Nick
Category: Money
Topics: ,

comic 12 - lemonade stand

Teaching your children proper money management skills at an early age is very important. Without being exposed to good financial habits at a young age, children can grow up to be reckless, greedy, or possibly even Federal Reserve Chairman. One of the best ways to give your children some experience with money is by helping them operate a small business. Unlike your typical kid-sized jobs like delivering newspapers or working for H&R Block, helping them run their own small business is a much better way to introduce your children to a wide variety of adult financial topics—everything from supply and demand to price gouging. It’s also a terrific method for bringing in a few extra bucks for yourself—I mean, your kids and their college funds.

One great small business that any set of kids can run almost entirely by themselves is a lemonade stand. Yes, the most cliché of all child-run money-makers is still one of the best. That’s because it’s a microcosm of the entire U.S. economy in one 2′-by-4′ wooden stand. For a startup investment of just a couple hundred dollars, your kids can experience all of the trials and tribulations of real grown-up finances—paying the bills, making ends meet, and mercilessly crushing the competition.

Of course, as with any business, it’s a lot easier to make more money if you’re the only lemonade stand on the block. So when the Joneses across the street read this post and decide to help their kids start their own stand to compete with yours, you’re going to have to take them down fast. Here are some tips that I stole from those brats three doors down for cornering the market in lemonade stands.

  1. Advertising is key. If you live in the dreaded cul-de-sac or some other area without a lot of vehicular or pedestrian traffic, you’re going to have to find other ways to get the word out about your fine lemonade establishment. Flyers posted on telephone poles may work, but don’t stop there! Target any place that may see lots of hot, sweaty people such as home improvement stores, gyms, and the romance section of your local bookstore.
  2. Cut down your expenses. Have you seen the price of lemons lately? Not to mention sugar, water, cups… You’ll have to be creative to earn a good profit in the lemonade business, and the best way to do that is to minimize your expenses. For example, go for paper cups over plastic. And instead of fresh lemons, use lemon cough drops.
  3. Hire attractive workers. I hate to break it to you, but your children could stand some improvement in the looks area. So while you’re stuffing away that hard-earned lemonade money to pay for their plastic surgeries, consider borrowing better-looking kids from family or friends. Adorable little girls in cute dresses covered in bows are sure to melt the hearts of anyone passing by your stand enough to score a slew of sales.
  4. Price competitively. If little Bobby and Jane next door are selling their lemonade for 20 cents a cup, your kids can sell it for 15 cents—even if it means taking a loss in the beginning. When Bobby and Jane don’t sell a single cup and run home crying to Mommy, your kids will be free to jack up their price 700 percent.
  5. Offer a rewards program. Encourage repeat customers by setting up a rewards structure for frequent buyers. Punch cards that give clients a free drink for every five or six purchases will keep them coming back every day. Just be careful of that creepy guy down the street coming back twelve times a day to your kids’ lemonade stand; he’s not there for the rewards program, that’s for sure.
  6. Don’t be afraid to play dirty. If your kids’ lemonade stand just can’t compete with the others in the area, then it’s time to pull out the big guns. After all, big guns are useful for scaring away other people’s children from their lemonade stands so your kids can sell their inferior product for twice the market price.
  7. Find a way to stand out. Anyone can run a lemonade stand, but you can help yours “stand” out by offering additional services you won’t find at your typical beverage vendor. How about a lemonade and leg-waxing stand? Or a lemonade and iPod repair stand. The possibilities are endless, and soon so will be your profits!

Following these simple tips will help your children learn just how the adult world of money really works. Just be sure to share the responsibility of managing the lemonade stand with your children so they can find out for themselves just how stressful and aggravating it can be to have to manage their own finances. They’ll either become the most financially responsible kids on the block… or they’ll be too scared to ever move out of your house.

Thursday, April 10, 2008

Punny Poll #31: Worried About College Tuition?

Author: Nick
Category: Money
Topics: ,

comic 11 - tuition

The previous Punny Poll asked you to forecast when gasoline would hit $4 a gallon in the U.S. With the average price still under $3.50 a gallon, the 30% of poll-takers who predicted the price milestone would be hit by Memorial Day 2008 will likely miss the mark; thank you, 30% of people, for being wrong. My vote, which pegged gas at four bucks next year, only garnered 13% of the vote. Another 17% selected “This is the stupid answer for this poll. Please don’t pick it or you will mess up science” which explains why the U.S. is losing to countries like China and India in the fields of math, science, and following directions.

Speaking of educational woes, I recently attended a recruiting event for my alma mater at which several parents expressed their concern over the rising price of tuition. This is good news for cheaper, state-run universities like mine, though some parents were even alarmed at the prospect of shelling out just a couple grand a semester for their child’s college education. As poor as I was, even without scholarships I could have afforded that much to help secure my financial future. When speaking to these worried parents, I tried to link to these articles on getting paid to go to college or at least getting a degree without taking on loans; alas, it’s hard to click on spoken words and open them in a web browser, so they’ll just have to keep worrying for a while.

But what about you? Does the high price tag of a decent college education have you worried about your child’s financial future? Or do you have a clever plan for handling the $317,000 per semester your kids will end up having to pay (and that’s just for textbooks!)?

[Read more…]

Monday, April 7, 2008

Seven Unconventional Ways to Fight High Grocery Prices

Author: Nick
Category: Money
Topics: , ,

comic 10 - gallon of milk

It all started a couple of weeks ago when I noticed a package of boneless chicken breasts at the grocery store that cost $9 a pound. Nine dollars for one pound of chicken—the slowest, stupidest, least tasty of all grocery-quality animals. I could get some real breasts for less than that. Fortunately there were some chicken nuggets in the next aisle on sale for $2.50 a pound, so those yearning for their chix fix would not have to go home hungry.

Unfortunately this was only the first of outrageous grocery store surprises that would greet us on that trip. Most produce items had increased in price by 20% since last year, milk won the race against gasoline to $4 a gallon, and even ramen noodles had gone up in price to 12 cents a package instead of 10. Even filthy rich people are not immune to these increases; fancy-food retailer Whole Foods recently announced that, in an effort to avoid raising its prices, it will now be known as Three-Quarters Foods.

If you’re feeling the pinch in your pocket book when you purchase your products at the supermarket, you’re certainly not alone. And if buying the necessities of life are keeping you from being able to afford your skyrocketing mortgage or raging alcohol addiction, here are some steps you can take to take back your grocery stores from high prices.

  1. Go on a diet. Statistically speaking, there is a good chance you are a fat tub o’ lard. (My apologies to the skinny bitches out there.) Take a close look at your diet and determine if you really need those 900 calories worth of potato chips you eat every day.
  2. Grow everything yourself. It’s not as hard as you think to be self-sufficient with just a little hard work, some packets of seeds, and 12 acres of rich farmland. And lucky for you, 12 acres of prime farmland in your town can be had for just $3.7 million. Kiss expensive groceries goodbye!
  3. Look at another store. I know a couple of people who haven’t been to more than one grocery store or supermarket in the last decade. In fact, my wife’s aunt has been going to the same corner grocery store for the last 32 years for all of her food and household needs, even after it became a post office in 1997. You might find that another store has the products you typically by for a little less than your usual place.
  4. Consider alternatives. Don’t just limit yourself to substituting fresh and wholesome chicken for processed chicken nuggets. Love milk but can’t afford $4 a gallon? Buy powdered milk by the boxful—enough for gallons and gallons of a milk-like entity—for pennies on the dollar. The possibilities are endless; of course, so are the price increases, so you’ll eventually have to substitute everything you like to eat with whatever you find in the day-old section of the bakery.
  5. Try online grocery shopping. One of the best parts of online grocery shopping is that it opens you up to a whole new world of deals and discounts that aren’t available in store. You’ll also find it can take half the time of in-store shopping without sacrificing quality.
  6. Cut out the middle man. If only you could buy your apples, bread, and dead cow parts directly from the farmer instead of having to pay extra for the supermarket middle man. Well, you can—just swing by your local farmers’ market where you can find some of the best produce and other all-natural food items, often for a good deal less than you’ll pay in a store.
  7. Join the shoplifting revolution! Okay, hear me out. If everyone starts shoplifting cartloads of groceries, supermarkets will have no choice but to drop their prices. Sure, some might call it looting, but I prefer the more modern term democratic price correction.

Yay! Now you can afford to eat again. Sadly, thanks to the high price of fuel, you can’t afford to drive to the grocery store anymore. But it doesn’t matter anyway because truckers can’t afford to deliver inventories to the stores. That $3.7 million for 12 acres doesn’t sound so bad now, does it?