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Reasons why New York Sucks - Page 621

post #9301 of 11480
Quote:
Originally Posted by archetypal_yuppie View Post

Connect the dots...

Obviously the owner should maximize his/her rents. The businesses that can afford the spaces are able to afford them via the revenues/profits that they're able to generate. I.e. people are patronizing the new stores more than the old ones. Voting with their wallets.

My views on economics are obviously not as informed or as enlightened as yours, but I'm not sure this is the case, Chains can afford these spots b/c of the economic power of the parent company. They can take a $$$ hit for a while and still survive, and they're willing to make the investment in order to have a presence in such a potentially lucrative market. They sell more stuff (DR just about everything) and can bring in more $$$ than say an old fashioned coffee shop or a shoe repair store. to you and Milton Friedman that might mean people are voting w/ their wallets but to me it isn't necessarily so
Edited by romafan - 4/8/15 at 1:24pm
post #9302 of 11480
Quote:
Originally Posted by archetypal_yuppie View Post

People vote with their wallets - reality is they want to go to those big box stores more than they do to the crumbling whatever.

The people who want to go to those big box stores are the people moving in to the boxes being built on top of them.

They are willing to pay more than the people who lived in the shitty apartments that used to be there, so it all must go away.

Eventually those places will just be stuffy douchebags with nothing interesting around...and the next group of people with a bit of money who don't want to move in next to all of the squares will look for the next neighborhood to colonize. Rinse and repeat for generations.
post #9303 of 11480
How does this all play out in European cities? Stronger preservation laws?
post #9304 of 11480

London has had this problem for a few years now, it's mostly retail chains everywhere and quite sad sometimes.

post #9305 of 11480
Quote:
Originally Posted by romafan View Post

My views on economics are obviously not as informed or as enlightened as yours, but I'm not sure this is the case, Chains can afford these spots b/c of the economic power of the parent company. They can take a $$$ for a while and still survive, and they're willing to make the investment in order to have a presence in such a potentially lucrative market. They sell more stuff (DR just about everything) and can bring in more $$$ than say an old fashioned coffee shop or a shoe repair store. to you and Milton Friedman that might mean people are voting w/ their wallets but to me it isn't necessarily so

I don't know if Starbucks exactly engages in predatory pricing. I think most of their outlets are profitable from day one. They have a pretty sophisticated model for locating stores. They know what they are doing and they are very efficient at doing it.
Quote:
Originally Posted by Piobaire View Post

How does this all play out in European cities? Stronger preservation laws?

Partly that. In some countries, the supply chain is too chaotic to properly support mega restaurant chains. They still exist in these countries but logistics are much more difficult than in the U.S.. There are cultural factors, too. Even if it had a good supply chain, Starbucks is going to have a real uphill battle in Italy.

London has great logistics and a lot more chains. Starbucks are starting to pop up and EAT and Cafe Nero are everywhere. I would say this is sad except that consistent chain restaurants have been a fantastic addition to the London food scene. And if you've ever been in an EAT, that should tell you something.
post #9306 of 11480
Quote:
Originally Posted by romafan View Post

My views on economics are obviously not as informed or as enlightened as yours, but I'm not sure this is the case, Chains can afford these spots b/c of the economic power of the parent company. They can take a $$$ hit for a while and still survive, and they're willing to make the investment in order to have a presence in such a potentially lucrative market. They sell more stuff (DR just about everything) and can bring in more $$$ than say an old fashioned coffee shop or a shoe repair store. to you and Milton Friedman that might mean people are voting w/ their wallets but to me it isn't necessarily so

You're making the same flawed assumption that Nick Carraway did.

"Chains can afford these spots b/c of the economic power of the parent company."

The rent is an operating cost. It is ongoing and periodic. What matters is that the (specific location) enterprise can throw off enough cash on an ongoing operating basis to make a margin above its operating costs.

The difference in financing costs, though it might not be irrelevant, is definitely not the driver of national brands taking over high-demand locations. The driver is (specific location) enterprise's ability to generate better returns from the spot, and therefore pay higher rent.

In other words, there is not mystery cash flow stream flowing into the specific location starbucks franchise that enables it to pay the rent. It is generating that money itself, which apparently the mom & pop before it could not.

Executive summary: You can attribute close to 100% of their taking over to brand awareness / reputation and economies of scale (low costs).
post #9307 of 11480
Quote:
Originally Posted by archetypal_yuppie View Post


In other words, there is not mystery cash flow stream flowing into the specific location starbucks franchise that enables it to pay the rent. It is generating that money itself, which apparently the mom & pop before it could not.

mom & pop also don't have 22,000 other stores that allow them to use their size and scale to leverage the price of milk and coffee down to pennies per cup poured. Starbucks does, and it's obviously a factor that allows them to have hundreds of consistent beverage options that no mom & pop store could possibly have.
post #9308 of 11480
Depending on the location, and they are rare, showcase shops don't have to generate cash returns on a SF basis sufficient to cover the rent. HQ just has judge them to be of sufficient branding value to the enterprise that they can run at a local operating loss. I know that is the case on some sections of Madison Avenue (60s-75th or so). (I was going to make the preceding sentences even more gibbering and jargony but made myself ill.)

But that has nothing to do with gentrification in the East Village.
post #9309 of 11480
Quote:
Originally Posted by dopey View Post

Depending on the location, and they are rare, showcase shops don't have to generate cash returns on a SF basis sufficient to cover the rent. HQ just has judge them to be of sufficient branding value to the enterprise that they can run at a local operating loss. I know that is the case on some sections of Madison Avenue (60s-75th or so). (I was going to make the preceding sentences even more gibbering and jargony but made myself ill.)

also true for many places around Times Square (I could be totally wrong and that Olive Garden could be killing it with their rent-busting breadsticks)
post #9310 of 11480
Quote:
Originally Posted by gomestar View Post

also true for many places around Times Square (I could be totally wrong and that Olive Garden could be killing it with their rent-busting breadsticks)
My guess is that they are minting money there.
post #9311 of 11480
Quote:
Originally Posted by gomestar View Post

mom & pop also don't have 22,000 other stores that allow them to use their size and scale to leverage the price of milk and coffee down to pennies per cup poured. Starbucks does, and it's obviously a factor that allows them to have hundreds of consistent beverage options that no mom & pop store could possibly have.

Sort of true. Three words that allow small business to tap into huge purchasing power: group purchasing organization.
post #9312 of 11480
i don't know how much that is going to help when a developer decides you've had your time, and now this area can be fancy so lets 3-5x one of the single biggest costs that NYC retailers have to deal with (rent).
post #9313 of 11480
I thought you were talking more COGS there when you mentioned cost of milk and coffee. GPOs can really help smaller organizations compete against Goliath competition.
post #9314 of 11480
Just to throw something else at this, but large corporations also have a ton of costs that small businesses don't...
post #9315 of 11480
Yeah like $2k going to a union schmoe if you wanna move Bob's computer from Bob's old desk to Bob's new desk 4 feet away. Cause you're not allowed to not use the schmoe.
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