They can cut fat up and down that administrative chain and still pay the line folks a reasonable wage. I've worked in corporate America long enough to know that's always the case.
Again, Costco.
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So, what if Guitar Center DOES go under...
- Thread starter Michedelic
- Start date
They can cut fat up and down that administrative chain and still pay the line folks a reasonable wage. I've worked in corporate America long enough to know that's always the case.
Again, Costco.
Not at all, we just hijacked this thread. But all those mental midgets prowling the floors at GC are probably going to starve because they can't afford Big Macs. so it all ties in.
This math isn't really saying what you think. All analysis needs to be subjected to the BS test (If I hear it and I say "Oh, bulls***, then I look again) I run a side-business and have been an analyst for a decade.
Mistake #1 - Retail prices include markup. In this example, I'd guess maybe 20-25%. That $0.88 is honestly more like $0.60, bit that doesn't matter, 'cause it doesn't pass the BS test...
Mistake #2 - You can't switch freely between percentages and dollars whenever you want. Need to use one or the other in order to make sense. You also brought in a new undefined variable (food cost), and multiplied it, which you already did. This also runs afoul of the BS test.
If the minimum wage goes up $3/hour, that mean it goes up $0.20/minute. How many burgers can a PT staffer make in a minute? Maybe 1 every two minutes? Forty cents in labor per item? That's an increase of 10% in COGS per unit
Mistake #3 - Not a 69% increase, more like 10%, and even that's a stretch. I get $4 base + $0.40 extra labor + $0.10 markup = $4.50 That's a 15% increase, much better than the imaginary 70%.
If we add suppliers as well, it gets even less drastic. 30% food cost ($1.20), with additional 10% labor ($0.10) means that, even if profits aren't cut at all (not gonna happen), and in a worst-case (also not happening), your $4 burger gets to $4.60
$0.50-$0.60 per burger so that millions of people can be lifted out of poverty seems like a good deal to me. Even though it just won't happen. Market sets the price in food-land.
That's an awfully sketchy and generally unsupported conclusion. 92% of the workforce makes more than the minimum and will be more indirectly affected ($0.50 cents more for a burger doesn't matter quite as much to the six-figure crowd) so the damage will be pretty spread out.
Also, I'm not sure that "government conspiracy" means what you think it means.
Mistake #1 - Retail prices include markup. In this example, I'd guess maybe 20-25%. That $0.88 is honestly more like $0.60, bit that doesn't matter, 'cause it doesn't pass the BS test...
Mistake #2 - You can't switch freely between percentages and dollars whenever you want. Need to use one or the other in order to make sense. You also brought in a new undefined variable (food cost), and multiplied it, which you already did. This also runs afoul of the BS test.
If the minimum wage goes up $3/hour, that mean it goes up $0.20/minute. How many burgers can a PT staffer make in a minute? Maybe 1 every two minutes? Forty cents in labor per item? That's an increase of 10% in COGS per unit
Mistake #3 - Not a 69% increase, more like 10%, and even that's a stretch. I get $4 base + $0.40 extra labor + $0.10 markup = $4.50 That's a 15% increase, much better than the imaginary 70%.
If we add suppliers as well, it gets even less drastic. 30% food cost ($1.20), with additional 10% labor ($0.10) means that, even if profits aren't cut at all (not gonna happen), and in a worst-case (also not happening), your $4 burger gets to $4.60
$0.50-$0.60 per burger so that millions of people can be lifted out of poverty seems like a good deal to me. Even though it just won't happen. Market sets the price in food-land.
That's an awfully sketchy and generally unsupported conclusion. 92% of the workforce makes more than the minimum and will be more indirectly affected ($0.50 cents more for a burger doesn't matter quite as much to the six-figure crowd) so the damage will be pretty spread out.
Also, I'm not sure that "government conspiracy" means what you think it means.
So this thread has gone from a GC discussion to a forum for tea-party folks.
Great.
Great.
I basically grew up in the kitchen. My first job was washing dishes at 14. Worked exclusively in kitchens until 1999. I have a bachelors degree in business from the University of Missouri. I've been running my own catering business for 11 years. I am a BA in the corporate world, and have spent time at fortune 500 and mid-cap companies. I've been doing that since 1999.
Who said anybody was selling things below cost? That wouldn't be a very good idea.
You are multiplying numbers, but you're ignoring products. Burgers are not numbers. McDonald's sells burgers.
If you base reasoning on flawed math the result is bad. I don't see where the cost would go up so very drastically. Just doesn't add up.
... lifting millions of people out of poverty. They will obviously not benefit at all.
I used to have to go there... but now the local stores here are kicking but and blowing GC out of the water with pedals (boutique) and prices are way better plus they always offer me good deals since I get most of my stuff from there.... still a bummer GC has an awesome used gear selection.
Government conspiracy in this context was a reference to the increase in taxes. And it is the government that is pusing the increase. Don't take it too seriously.
How many bugers can an employee crank out in an hour? Don't know, but it is not all about making the burger and putting it in a bag. The patty has to be unloaded from a truck and put in the freezer. It has to be removed from the freezer. The buns and condiments have to be unloaded and stored. Then it has to be taken out of the freezer. A person has to take the order. All the ingredients have to be staged, cooked, baged, and served. Then the entire restaurant has to be cleaned.
Now, I don't know if using 1 hour for 1 burger is correct. I will have to do some research on that. but the actual labor cost per hour does increase by 69 cents. .88 / 1.30 = 67% - sorry I was off 2 points earlier.
And one final note. I am offended that you use the term BS test in regard to my posts. I don't do that. So mind your mouth.
Businesses run on numbers, you should know that. The burger is only an object. The typical COGS is based on revenue, not burgers.
If there is a flaw in my math, please point it out. The only thing wrong that I now recognize might be using 1 hour of labor for 1 burger. But, when you think about the unloading and storing of inventory, inventory shrinkage, cleaning the restuarant, manning the cash register, cooking, packaging, and serving, it may not be that far off. I would have to do more research to determine the accuracy.
And here is a site that closly resembles my numbers except my 22% appears to be low for labor cost. I should be using the 30 - 35% they use. I see other sites that support the 30 - 35 range, so I guess my information is old. I haven't managed a fast food restuarant since 1970/
Sorry, but it will not lift millions out of poverty. There are not that many minimum wage workers to start with (I think about 9% of the workforce) and as we know, when wages go up, prices go up and you are right back were you started.
My first trip to McDonalds was in 1961. A buger was 15 cents, a coke was 15 cents, and an order of fries was 15 cents. But anyone making more than $10,000 per year was doing really well.
http://www.huffingtonpost.com/2013/07/29/mcdonalds-salaries_n_3672006.html
15 cents in 1961 = $1.19 today, consistent with the prices of a basic burger from the "Dollar Menu". Minimum wage in 1961 was 1.15, equal to $9.12 today.
I'm not trying to make this political, I'm saying that you are factually incorrect about how labor expenses are handled by businesses and that it's silly to blame labor costs for Guitar Center's recent/current financial problems.
I'm not trying to make this political, I'm saying that you are factually incorrect about how labor expenses are handled by businesses and that it's silly to blame labor costs for Guitar Center's recent/current financial problems.
I'm also a six-sigma black belt, so here's how I figure it: 30-45 seconds/unit processing (remove from freezer, queue, cook, pack, etc) plus 1:15-1:30 of non-processing (taking orders, cleaning floors, filling ketchup dispenser, unloading trucks, etc). Exclusive of managers etc, that gives me my 2 minute guess. It's probably a pretty good guess, because Mickey Dee's is already awfully efficient as a business. Wish that made the food better.
An increase in the minimum wage will affect less than 15% of all workers in America. There's no sign of that in the previous analyses. When you multiply the total labor cost like that, using the absolute worst-case scenario, it doesn't take into account the people that don't get a raise or the people that don't get much of one. That's a pretty big flaw.
Although all those employees don't make minimum wage, some would still be affected (all the $9/hr folks). That 67% labor increase number doesn't mean that ALL the labor costs increase 67%, just the 9% of people that make $7.25. There are some people that are going from $9 to $10/hr (11% or whatever) and many, many other people that aren't getting anything.
If you're using a high-level approach, A goodly portion of McD's labor costs are people like shift leaders and managers that won't get anything but a headache from the increase. Will managers get a 67% increase (eg $60k raised to 100k)? No way. Will I get one? Not a chance. At the store where I used to work (for me it's been like 15 years), it would probably affect 60% in some way, 40-50% of those folks would have been minimum wage, and almost none would be full-time.
If it takes an hour (in total) for each burger, my McD's would have made (18 emp x 6 hours/emp) about 100 burgers a day in our 1000 ticket/day store that served maybe 1500-1700 burgers-or-whatever/day.
The numbers I used are the ones I actually use to plan my catering jobs, which are usually-but-not-always profitable. I usually expect 3 hours of loading and unloading and paperwork and prep and all that stuff to each hour of real cooking from my guys. I budget 25% of net for labor and 30% for food cost, plus 30% for overhead, and a little profit (simplified).
9% of the workforce is about 2.000.000 people and a majority of those folks are part time, and impoverished, making less than $10k/yr. Prices DO go up when wages go up, but it's nothing like the 1:1 correspondence that you're assuming.
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Okay, you are correct on the management payroll and it is included, so that does make my analysis a bit skewed, but I don't know the ratios for management vs labor to make thos adjustments. It appears your numbers are backwards from what I understand the norms are. I would expect food cost in the 20s and labor in the 30s. But, you know your business. I do think 2 minutes per unit is a little understated, but this is getting to be a fun exercise, so I plan to go do more research.I'm also a six-sigma black belt, so here's how I figure it: 30-45 seconds/unit processing (remove from freezer, queue, cook, pack, etc) plus 1:15-1:30 of non-processing (taking orders, cleaning floors, filling ketchup dispenser, unloading trucks, etc). Exclusive of managers etc, that gives me my 2 minute guess. It's probably a pretty good guess, because Mickey Dee's is already awfully efficient as a business. Wish that made the food better.
OK.
An increase in the minimum wage will affect less than 15% of all workers in America. There's no sign of that in the previous analyses. When you multiply the total labor cost like that, using the absolute worst-case scenario, it doesn't take into account the people that don't get a raise or the people that don't get much of one. That's a pretty big flaw.
Although all those employees don't make minimum wage, some would still be affected (all the $9/hr folks). That 67% labor increase number doesn't mean that ALL the labor costs increase 67%, just the 9% of people that make $7.25. There are some people that are going from $9 to $10/hr (11% or whatever) and many, many other people that aren't getting anything.
If you're using a high-level approach, A goodly portion of McD's labor costs are people like shift leaders and managers that won't get anything but a headache from the increase. Will managers get a 67% increase (eg $60k raised to 100k)? No way. Will I get one? Not a chance. At the store where I used to work (for me it's been like 15 years), it would probably affect 60% in some way, 40-50% of those folks would have been minimum wage, and almost none would be full-time.
If it takes an hour (in total) for each burger, my McD's would have made (18 emp x 6 hours/emp) about 100 burgers a day in our 1000 ticket/day store that served maybe 1500-1700 burgers-or-whatever/day.
The numbers I used are the ones I actually use to plan my catering jobs, which are usually-but-not-always profitable. I usually expect 3 hours of loading and unloading and paperwork and prep and all that stuff to each hour of real cooking from my guys. I budget 25% of net for labor and 30% for food cost, plus 30% for overhead, and a little profit (simplified).
9% of the workforce is about 2.000.000 people and a majority of those folks are part time, and impoverished, making less than $10k/yr. Prices DO go up when wages go up, but it's nothing like the 1:1 correspondence that you're assuming.
When I managed Pizza Huts, we were expected to hit 22% in labor cost. If we improved that, we got the difference as a bonus. If we didn't, we got yelled at. A few months in a row of > 22% would get you fired. But that was 1970.
They don't serve duck at McDonalds. What's wrong with you?I like duck.
Enlightening chat, thanks for your input.
I was just thinking of what I would do if I were CEO of GC or whatever parent company they're a part of:
Transition it into a support service for their online retailing. This would mean:
Transition it into a support service for their online retailing. This would mean:
- Reducing square footage to smaller buildings.
- Putting emphasis on luthier-type support and customer service related to their online distribution.
- Fix the stupid search problems on the GC website.
- Reducing inventory drastically. Keep the basic/ high selling models. If people want to try a particular type of instrument, they can specially order one with a 30 day return policy (which they already do). When I say drastically, I mean drastically. Maybe 5-10 basses that are used as display models.
- Reducing turnover by offering higher pay. Have the people there actually know what they're doing or at least know where to find out more information. Smaller square footage and product would mean large layoffs.
- Roll Musician's Friend and GC into one product!
- Get out of the accessory market or at least relegate it to online. Do people really buy straps and cords from GC? Their prices are insultingly non-competitive!
Not so bad if there's a sale or something. Even if there's not, I still get little stuff when needed at or near retail. Shipping can eat up savings on low $ items in a huge hurry.
I have a GC (a very nice one) quite close to where I live so I'll toss in some of the reasons I end up shopping there instead of other places (MF.com, Sweetwater, Mom n Pop)
1) Financing - This is first because it's the biggest. Big box stores and large retail chains can do this and I have to say I've NEVER seen a Mom n Pop joint even come close to offering what they can. 15% discount on new items when trading in AND 18 months no interest financing? I'm sorry, I have great credit and plenty of financial savvy, there is no benefit to me buying from a hole in the wall store on this front.
2) Return Policy - No store likes to take stuff back, but I've had some really rude smaller stores where I intended to come back and purchase something later but didn't because of how I was treated trying to return. GC in Houston did give me some of the "Come on man! It's a beautiful bass!" but after a little kidding around they quit and returned my item without a problem, this is another reason I'll come back again, I'm not afraid of buying something I might not like.
3) Used Section - With the nationwide search online and ship to store option, you can find some FANTASTIC deals on used gear. I've gotten some of my favorite basses this way from them.
4) Space - Sometimes this can be overdone (in that you can't get help), but several Mom n Pop stores will just harass the crap out of you when you step in the door. No, I just plugged this bass in so I don't know if it sounds "Totally freakin gnarly" or not yet. The bass is also marked up about $100 more than anyone else is selling it, so what motivation do I have to buy it here? It's not as if you're doing anything but promulgating myths with your sales strategies (i.e. - Don't want to underpower that cabinet!, 4x10 for the highs and 1x15 for the lows!, etc).
GC isn't perfect by any stretch and it varies a lot from store to store, but I'm just not seeing any other stores doing much better in Houston IME. If I had my own residence, I might go to Sweetwater or MF for new stuff, but that used section for GC is hard to beat!
1) Financing - This is first because it's the biggest. Big box stores and large retail chains can do this and I have to say I've NEVER seen a Mom n Pop joint even come close to offering what they can. 15% discount on new items when trading in AND 18 months no interest financing? I'm sorry, I have great credit and plenty of financial savvy, there is no benefit to me buying from a hole in the wall store on this front.
2) Return Policy - No store likes to take stuff back, but I've had some really rude smaller stores where I intended to come back and purchase something later but didn't because of how I was treated trying to return. GC in Houston did give me some of the "Come on man! It's a beautiful bass!" but after a little kidding around they quit and returned my item without a problem, this is another reason I'll come back again, I'm not afraid of buying something I might not like.
3) Used Section - With the nationwide search online and ship to store option, you can find some FANTASTIC deals on used gear. I've gotten some of my favorite basses this way from them.
4) Space - Sometimes this can be overdone (in that you can't get help), but several Mom n Pop stores will just harass the crap out of you when you step in the door. No, I just plugged this bass in so I don't know if it sounds "Totally freakin gnarly" or not yet. The bass is also marked up about $100 more than anyone else is selling it, so what motivation do I have to buy it here? It's not as if you're doing anything but promulgating myths with your sales strategies (i.e. - Don't want to underpower that cabinet!, 4x10 for the highs and 1x15 for the lows!, etc).
GC isn't perfect by any stretch and it varies a lot from store to store, but I'm just not seeing any other stores doing much better in Houston IME. If I had my own residence, I might go to Sweetwater or MF for new stuff, but that used section for GC is hard to beat!
Last time I checked workers were paid a reasonable wage, relatively speaking, even when paid minimum wage, in 1970. I'd guess at that point labor costs would be a big factor. Now I'd have to guess it's less of a factor as executive compensation has skyrocketed pretty far past 1970s levels.
Went GC Highland Park Il.earlier this month to buy a stand and Schaller Straplocks.
Usually there are guitars on display in the center open area where you walk in.
On my visit there was practically nothing there!Just on the walls.
My response was.
"Uuuuuhhhh Huh!"
I have to say.The last two basses I bought weren't bought from a "brick and mortar"
At least not locally.
Most of the time GC and Sam Ash have the same ol'same ol'.
I will use them for quick,small purchases and repairs.But for a major buy.No.
But I do thank Sam Ash for carrying Tune basses for a while.
Usually there are guitars on display in the center open area where you walk in.
On my visit there was practically nothing there!Just on the walls.
My response was.
"Uuuuuhhhh Huh!"
I have to say.The last two basses I bought weren't bought from a "brick and mortar"
At least not locally.
Most of the time GC and Sam Ash have the same ol'same ol'.
I will use them for quick,small purchases and repairs.But for a major buy.No.
But I do thank Sam Ash for carrying Tune basses for a while.
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