Category Archives: Food

Good News For Costco, Bad News For Consumers !

We must be getting old, here at Routing By Rumor world headquarters, because we’re not spotting deceptive consumer practices as quickly as we used to.  If you’re a regular visitor to these parts, you’ve heard us complaining about manufacturers who downsize their products, and about manufacturer’s practices we’ve termed “deception engineering“.

Case in point…  When last month’s “Costco Connection” advertising and propaganda publication  arrived (they call it a “lifestyle magazine” –  believe that, and we have an “infomercial” we want you to watch), we found great news on page 52  (View the April edition of Costco Connection here).  Costco announced, in a two-page article, that while other brands of tuna fish were shrinking their cans from six ounces to five ounces, Costco was increasing the size of their  “Kirkland Signature” house brand of tuna fish, from six ounces to seven ounces.  You don’t read good news like that every day.  Sounds like they’re making an already good value even better.  Break out the mayonnaise and strike up the band.  Happy days are here again!

Or are they?

It turns out that it’s good news for Costco, but bad news for Costco members (and, we suspect, for those cute little tuna fishies).  While it’s true that they have increased the size of their Kirkland Signature tuna fish by 16.6%, to seven ounces, consumers are not getting more tuna for their money.  The article in their Costco Connection magazine somehow forgot to mention the fact that the price per can actually increased even more than the size of the can!  Bottom line: You get more tuna per can, but the price per ounce has increased.

Silly us.  We thought we might be getting more tuna fish for the same price.  In actuality, while the size of the cans was increased a whopping 16.6%, the price per can has increased an even more whopping 20%.  Packs of eight 6-ounce cans  had sold for $9.99 in area Costco Wholesale warehouses.  Now that they have introduced packs of eight 7-ounce cans, Costco has raised the selling price to $11.99, a 20% increase.  By the way, didja ever notice how most grocery items at Costco seem to be sized so that the average price per package is around $10 or $12 ?  Throw 9 or ten items in your cart, and you just spent at least $100.  But we guess that’s the whole idea of shopping in a “warehouse” club.   And why does the price of everything have to end in “.99”, ie: $9.99, $11.99, $14.99 ?  We realize that Costco didn’t invent that pricing strategy, but if you’re shopping in a place like Costco, which says it caps  it’s margin** (see below) at 14%, it seems like a suspicious practice to cynical little us.  Like maybe if their normal markup dictates a selling price of $12.35, it gets rounded UP to $12.99, just because someone at Costco likes the number 99, and rounding it up to an even $13.00 might seem, well, excessive.  Yes, we know that 13 is not an even number, but you get the point.  Besides, 1300 IS an even number, which is sort of odd, when you stop and think about it.  Then again, maybe we’re paranoid, and when they have an item that should sell for $12.35, they decide to give their members a break, and round the price down to $11.99.  Yeah, right.  All we know is that if you look at your receipt the next time you shop at Costco, just about everything except random-weight packages of meat, poulty, fish, etc., will end in “.99”.  But even those random-weight items will have a unit price ending in “.99”, such as $5.99 per pound.

But then, there are a lot of odd things at Costco, like the fact that they will accept any credit card in your wallet, as long as it is from American Express.  And the fact that they don’t offer grocery bags, so you end up throwing 500 loose items into your car in the parking lot.  And the fact that they won’t accept any manufacturer’s cents-off  coupons, unless they are distributed by Costco themselves.  And the fact that they have pretty limited hours of operation, especially for the lowest-cost membership holders. And the fact (according to this New York Times article), that Costco refuses to accept food stamps (now issued as debit cards) for purchases.  And the fact that you’ll find horrifically environment-unfriendly packaging of many small items (especially electronic items) at Costco, which doesn’t seem to be getting Costco members too upset.  We’re talking huge plastic blister packs (which can’t be recycled, at least where we live), or combination plastic and cardboard blister packs, so that these small items are less likely to be stolen.  In our opinion,  some of the terribly excessive packaging at Costco and other warehouse-type retailers qualifies as a crime against the planet, even if it doesn’t happen to be illegal.

Now, we’ll admit that we aren’t going to stop buying Costco tuna fish.  It’s actually excellent quality tuna.  It is quite possibly the best quality tuna we have ever found, at any price.  But those good folks in Seattle must think their customers are idiots.  To be sure, the price per ounce has increased only slightly, and it’s still a good value.  But shamelessly hyping the increased size of their cans of tuna fish, and not mentioning that it’s now more expensive and was actually a better value before they increased the size of the cans isn’t what we would consider good news or being straightforward with their customers .  In our opinion, it borders on deceptive advertising.  Of course, you can’t  expect that manufacturers will go out of their way to let you know when they raise prices, downsize a product, or substitute cheaper ingredients, either.  What we don’t like is the fact that, in our mind at least, Costco’s announcement paints a picture that it’s now a better value, when the opposite is actually true.

Since when is raising the price (per ounce, per pound, per gallon, etc.) of a product, while at the same time, forcing you to buy more of it at once, a good thing for consumers ?  What ever happened to the warehouse club concept that as package size increases, so does value ?

For us, the appeal of shopping at Costco isn’t so much about price, as it is about quality.  After all, shopping at Costco means an extra shopping trip,  an annual membership fee, not getting your groceries bagged, often waiting in long lines at the checkout, limited shopping hours and very limited product selection.  Indeed,we can buy many identical items for less at the local supermarket, especially when they’re on sale or if we use manufacturer’s coupons.  What we like most about Costco is that the quality of their private-labeled items, such as their tuna fish, is generally superior to not only the national brands, but any brand at any price.  Even Jimmy Kimmel shops at Costco.  Watch Jimmy shopping at Costco on youtube.  We never knew a trip to Costco could be so much fun.

An article entitled “Costco’s Artful Discounts” (Business Week, October 9, 2008), says this of Costco CEO James D. Sinegal… “he’s constantly pushing his buyers to find creative ways to lower prices and add value while getting his managers to crank up their efficiency efforts”.  It seems to us that Costco’s new 7-ounce cans of tuna have failed to deliver the lower prices or added value which Mr. Sinegal is so fond of.  What they do seem to have provided is a lot of hype for Costco’s marketing efforts, and very likely a higher profit margin because a product’s shipping and packaging costs (especially for canned items) decrease (on a percentage basis), as container size increases.  There is very little difference in the cost of manufacturing a 7-ounce tin can, compared to a 6-ounce tin can.  In fact, in the case of Costco tuna fish, the old and new cans use exactly the same size lid; but the walls of the can are slightly taller.  Costco is also very good at finding ways to minimize shipping costs, for instance, by having their vendors redesign packages so that more of them can fit onto a standard shipping pallet.  We wouldn’t be surprised if Costco’s next “improvement” to their Kirkland signature tuna will be to offer it in new and improved square cans.  Think of all the space that will save in the pantry, and the fact that you won’t have to worry about your can of tuna fish rolling away, should you drop it.  That’s always been a big problem for households that live in hilly areas.  Now, if the United States mint would only start issuing square pennies !

1919 Australian Kooka Square Penny

1919 Australian Kooka Square Penny

So, what have we learned today, class?  We’ve learned that you get less for your money when manufacturers shrink the size of their products,  and sometimes, you get less for your money when manufacturers increase the size of their products.  Heads, you lose.  Tails, you lose.

Dear Costco… May we please have our old 6-ounce cans of Kirkland Signature tuna fish back again?  They were a better value.

Then again, maybe we should just pay our money, eat our tuna fish (mercury content and torpedoes be damned), and keep our mouth shut.  Mother always said you shouldn’t speak with your mouth full, and now it’s 16.6% more full.

– Routing By Rumor

**  “Margin” is not the same as “markup”.  For instance, if you buy an item for $1.00, and sell it for $2.00,  your markup is 100%, but your margin (the percentage of the selling price that represents your profit) is only 50%.   We’ve always felt that putting things in terms of profit margin instead of markup, especially as markups become greater, has the effect of making a seller’s prices seem more reasonable.

Advertisements

1 Comment

Filed under Business, Consumerism, Deception Engineering, Energy Conservation, Environment, Food, Journalism, Money, News, Retail, Retailers, Routing by Rumor, Scams, Shopping, Shrinking Products, The Planet, Your Money

Not All Half-Gallons of Ice Cream Are Shrinking !

A Costco Wholesale location (image from schaperco.com)

A Costco Wholesale location (image from schaperco.com)

Amid the pandemic of shrinking products that is sweeping the nation, its nearly impossible to find a half-gallon container of ice cream that is still a full half-gallon, or 64 ounces.

First, manufacturers, including one of the downsizing leaders, Breyers (Unilever), shrunk their half-gallon ice cream containers to 56 ounces. More recently, almost all brands have downsized yet again, to 48 ounces (1.5 quarts). See our previous article about Breyer’s shrinking their ice cream containers. These days, the freezer at Routing By Rumor headquarters usually does without ice cream. Funny, but when we walk down the frozen food aisle in the supermarket and see the miniaturized containers of ice cream, we loose our taste for the product.

By the way, we realize that we may be jumping to conclusions by blaming the ice cream manufacturers for cheating us out of our hard-earned ice cream. It is entirely possible that this is what is actually going on.

But ice cream lovers (and lovers of value) rejoice ! If you shop at Costco Wholesale, you will still find full half-gallons of “Kirkland” ice cream. Sixty-four creamy, delicious, luxurious, decadent, fat-laden ounces. At about $4.50 per half-gallon, it’s less expensive than the anorexic-looking downsized containers of name-brand ice cream at the supermarket, which contain 25% less product. And Costco’s house brand of ice cream is available in any flavor you like, as long as it’s vanilla. That reminds us of what Henry Ford said about his Model T back in 1909. Poor Henry. He never knew the joy of shopping at Costco.

Henry Ford with his Model T Ford

Henry Ford with his Model T Ford

One of the tenents of shopping at Costco is that you sacrifice variety for value. You also have to buy a carton of two half-gallons at a time, but how many people are going to complain that they are forced to fill up their freezer with ice cream ?

One thing you won’t have to sacrifice is quality. Costco branded products have never disappointed us. We have found them to always be superior to the national brands in quality and/or value. Here’s a particularly stark example. Gallon containers of milk are $2.25 at Costco. Many local stores charge more for a half-gallon of milk than Costco charges for a gallon ! There are many items at Costco that are priced at less than half of what you’d pay at your local supermarket.

Lest you think that we are little more than shills for Costco, you’ll want to know that we aren’t crazy about everything at Costco. While many items at Costco might be slightly less expensive than your supermarket’s everyday prices, you’ll pay less, sometimes a lot less, at your local supermarket when it’s on sale. Meat and poultry are perfect examples of this. And when you consider that many items at Costco are sold in huge packages, it won’t be a bargain if you have to throw away half of it because you couldn’t finish it before it went bad. For instance, a 25 pound sack of flour, a gallon of mayonnaise, or a five gallon jug of vegetable oil are just a bit more than we need. An interesting thing about these institutional-sized packages is that in many cases, the price per pound/quart or whatever unit of measure is used, is not significantly different from your normal supermarket-sized packages. With some items, such as Del Monte or Libby ‘s canned vegetables, you sometimes end up paying more per can at Costco, despite having to buy a case of a dozen or so cans of peas or string beans, than you would if buying a single can at the supermarket. Same thing goes for cans of soda (“pop”, for our Southern readers). We think that in some cases (pun intended), Costco hopes you think you’re getting a bargain simply because you’re forced to buy such large quantities at a single time. Call it “warehouse club buying momentum”, if you will. When you get home and start calculating whether that two-gallon jug of mustard that will last you for the next twelve years was really a good buy, you start to have some regrets, even though it was only nine cents an ounce. The bottom line is that you have to keep your guard up at all times when shopping at a warehouse club. For us, we’re better off purchasing many items at a local supermarket.

When you factor in the obligatory ID check at the entrance to Costco, which is guarded by Cerberus himself (good doggie !), and the veritable strip search before they’ll let you leave, a trip to Costco isn’t a bowl of cherries (but it is arguably a bowl of vanilla ice cream). At least Costco doesn’t conduct a cavity search. We get enough of those when we visit our dentist.

Even if you don’t have a Costco membership, you can still do better when you shop at your local supermarket. While most supermarket half-gallon house brands of ice cream have shrunk to 56 ounces, they are still a better value than the 48 ounce containers that have become the new standard among the name brands, and the house brands are usually very good quality.

Now, if Costco can manage to keep their half-gallon containers of Kirkland ice cream a full half-gallon, why can’t all the the other brands manage to do the same ? That has to qualify as one of the great mysteries of the Universe.

1 Comment

Filed under Automobile Manufacturers, Business, Cars, Consumerism, Deception Engineering, Food, Home, Money, Retail, Retailers, Routing by Rumor, Scams, Shopping, Shrinking Products, Your Money

The Banking Meltdown Is Just A Symptom Of A Much Larger Problem

They’re comparing this week’s financial events in the United States with those that led to the start of the Great Depression. But make no mistake, the United States’ economy has been headed for disaster for years now. The loss of decent-paying jobs, the record number of home foreclosures and the depressed real estate market are all symptoms of a far greater problem. The near-collapse of the American banking system may be linked to the mortgage crisis, but look for a root cause elsewhere.

The looming failures of financial giants including Lehman Brothers and Merrill Lynch, and insurance companies such as AIG, have created shock waves felt from Wall Street to Main Street. For the first time in memory, people were concerned that the money in their bank accounts, money market accounts and retirement plans was at risk. A 1929-style run on the banks appeared to be imminent. Indeed, people started pulling their money out of money market accounts at an unprecedented rate. Even investment professionals are running scared. Putnam Investments was so rattled by recent events, that they suddenly decided to close and liquidate their $12.3 billion institutional Putnam Prime Money Market Fund, which had experienced a run of redemptions last Wednesday. (Read about money market funds “breaking the buck” in this cnn.com article, or in this blogger’s posting.) In the seven days ending this past Thursday, Americans collectively pulled a quarter of a trillion dollars out of their money market accounts, an indication that people are frightened. This has led to the government announcing that money market mutual funds will now be insured in much the same way that FDIC insurance protects bank deposits, although the insurance coverage is currently planned for only the next year (we think you can bet your bottom dollar (pun intended) that this insurance will become permanent).

Within the space of just a few days, the government’s $75 billion bailout of AIG grew into a proposed $700 billion bailout of the entire mortgage mess. (Didn’t something like that happen in the movie “The Blob That Ate Pittsburgh”?) The government certainly has the ability to print as much money as it needs to put out these brushfires, but it’s foolish to believe that the federal government throwing money at the problem will make it go away for any length of time.

The economists here at Routing By Rumor point to two very basic problems that the country’s economic woes can be directly attributed to. The first problem is that America is sending about half of it’s cash to the Middle East to buy oil. The second problem is that the rest of America’s cash is being sent to the Far East, mainly to China, to pay for just about everything else we consume. Unless this situation changes, the U.S. economy will never recover, and the current round of federal bailouts are just the beginning.

America has made little progress towards energy independence, despite 35 years having elapsed since the oil crisis of the early 1970’s gripped the nation. A second oil crisis in the late 70’s, as well as dramatic increases in the price of oil in the recent past have done nothing to break our dependence on foreign oil.

America has become dependent on China for almost all consumer goods. This is not only foolish from an economic perspective, it also presents a grave risk to America’s national security. We manufacture almost nothing domestically any more. We’ve said this before, and we’ll repeat it again… God help America if we ever go to war with China, because if that should ever happen, you might as well just go ahead and hang a picture of Chairman Mao in your living room. Now take a look at Walmart, the largest retailer in the United States. According to wakeupwalmart.com, more than 70% of the goods on Walmart’s shelves are made in China. To be fair, that’s probably no different than any other American retailer, but in our mind, Walmart is little more than a sales agent for China, Inc.

Just how bad have things gotten ? According to this CNN article, the United States Department of Agriculture says that 50 percent of the apple juice imported into the United States comes from China (an estimated 161,000 tons of apple juice compared to the 110,000 tons produced in the United States). If we’re reading those numbers correctly, that means the United States only produces 25% of all the apple juice it consumes.

Apple juice !!! What the hell is happening to our country ?

People, there’s something very, very wrong with the U.S. economy, if we can’t even grow our own apples in this country anymore. We’re in deep, deep trouble if we’ve even become dependent on China for apple juice.

They better come up with a new saying, because “As American as apple pie” doesn’t hold true any more.

When the presidential candidates show up for their next press conference or debate, in addition to the standard questions about abortion, the death penalty, Iraq and tax reform, perhaps someone can ask them to take off their shoes and tell us where they were made, and whether they see that as a problem. Or, ask them to remove all of their clothing that was NOT made in the U.S.A. That should be quite revealing.

Then there’s the U.S. banking industry, which to us, resembles nothing so much as legalized loan sharking. Banks are, on the one hand, paying minuscule interest rates to depositors, with regular savings accounts and interest-bearing checking accounts paying perhaps 1% or so, and in many cases, just a fraction of one percent APR or APY (the switch from quoting interest rates paid as APY, instead of APR is a scam onto itself, but we’re digressing). On the other hand, banks are charging 15% or 20% interest on credit card balances, and in some cases, as much as 35% or 40% APR for their less credit worthy customers. Did you know that federal law places no limit on the interest rate a bank can charge ? And while some states do so, there are states which do not cap interest rates. That’s why it’s likely that when you mail your monthly credit card payment, the address on the envelope is usually in South Dakota or Delaware, where, as far as credit card interest rates are concerned, the sky’s the limit.

Take a look at the off-the-wall late fees and other penalty charges that banks are getting away with, since a 1996 Supreme Court ruling removed limits on such fees. Today, typical credit card late fees are as high as $40, and continuing to go up. In fact, if there’s one thing that amazes us, it’s the way that banks continually come up with new ways of putting the squeeze on credit card holders. That’s why you continually get notices from card issuers, announcing changes in your account terms. It’s surprising to us that none of those notices have yet advised us that a late payment will result in a guy named Guido paying us a visit around midnight, to negotiate a repayment schedule using his Louisville Slugger.

We think most American’s have lost any trust they might have had in that cesspool called Wall Street, where, it seems to us, the average investor doesn’t stand a chance. Maybe Eliot Spitzer was on the right track after all, with his aggressive investigations. The well publicized scandals, insider trading and other illegal activities involving Wall Street firms and the companies that trade their stock there have eroded investor confidence. And while we don’t think it’s fair to single out any one individual, just take a look at the Dick Grasso case. How do you think the average American who is struggling to pay their mortgage or feed their family, feels about a situation like that one ? And yet, despite the current financial crisis in the United States, don’t expect CEO compensation to decrease much, even at companies that have to be bailed out with federal money.

So while the billions of dollars that Washington is throwing at the financial crisis will probably stabilize things in the short term, don’t start singing “Happy Days Are Here Again” just yet. They are not.

If you want to hear what it will sound like if happy days ever do get here again, check this out.

– Routing By Rumor

2 Comments

Filed under Business, China, Consumerism, Employment, Energy, Energy costs, Food, Jobs, Labor, Money, News, Politics, Retail, Retailers, Routing by Rumor, Scams, Shopping, Stock Markets, The Economy, Walmart, Your Money

The Dirty Little Secret That Warehouse Clubs Would Rather You Not Know

We’ve had memberships to several membership-based warehouse clubs over the years. You can save money on many items, but there are often better deals on many items at your local supermarket, Walmart or Target. When you factor in the annual membership fees, which generally range from $50.00 to $100.00 or more, we’re not so sure that you actually save enough to make it worthwhile. That is, unless you own a restaurant, feed a small city, or really need to buy 50 pounds of rice, sugar or detergent at a time. They don’t bag your groceries for you. In fact, they don’t even have any bags (unless you want to buy 500 bags from them at a time).

Interestingly, at a time when other retailers are hurting because of an economy that is in deep recession, the warehouse clubs are enjoying healthy increases in membership and sales volume. Consumers desperate to stretch their dollars are flocking to these retailers in an effort to save some money. Check out this piece from CNBC that says Costco recently reported a 32% increase in quarterly profits, or this Forbes.com article that says BJ’s Wholesale Club saw a larger than 25% increase in profits in the first quarter of this year.

Many warehouse clubs open later and close earlier than supermarkets or other discount chains. In an effort to sell you their more expensive memberships, most of them offer expanded hours to only their premium membership holders, sort of like a caste system. By the time the doors swing open for the hordes of regular members, you just know that all the good stuff will have been snapped up by the privileged few who can afford the $100.00 premium memberships. All that will be left for everyone else will be the dregs. You might as well just drive ’round back and do some dumpster diving.

We’re also surprised they don’t have a little window by the entrance where you have to whisper the secret password before they’ll let you in. And some warehouse clubs limit your payment options. For instance, Costco won’t accept any credit cards except American Express. That’s unfortunate, since we’ve always felt that American Express offers the least consumer-friendly credit cards out there. And AmEx has probably deforested more of the planet than any other credit card provider, so that they can produce all the paper they stuff your mailbox with, trying to convince you to become a cardholder. We can’t believe the volume of crap we get from them. Maybe we should get a wood-burning stove. We could probably heat our home using nothing more than the American Express offers that our poor mail carrier has to keep delivering almost daily.

Then there’s the silly and demeaning entry and exit procedures at many warehouse clubs. You have to show your membership card (at least at Costco) to gain entry. After all, they can never be too careful about who they let in. I mean, God forbid a non-member might sneak in and try to buy something there. Then these places practically strip search you before you can leave with the shopping cart full of stuff you just paid for. If you think we’re overreacting to these policies, which seem to assume that everyone is a criminal, then you probably haven’t read this fellow’s rant on the subject. His discussion is much more eloquent than what the monkeys here at RoutingByRumor produce when they jump up and down on the keyboard to create each of these articles.

Here’s an account from a blogger who got the treatment at a North Carolina Walmart store, where he says he was briefly detained, then threatened by overly aggressive employees for declining to show his receipt.

Maybe we should put the warehouse clubs in charge of the U.S. borders and security at our airports. As an added bonus, they could sell club memberships to all the Mexicans that want to enter the United States, and the proceeds could go to the U.S. Treasury. Before they return to Mexico, they can stock up at Costco, Sam’s Club or BJ’s, thereby decreasing the U.S. trade deficit. Everyone benefits, and the illegal immigrants won’t have to risk their lives crossing deserts or rivers to get into the United States.

So what’s their dirty little little secret? In many states, certain departments in members-only warehouse clubs are required to sell to the general public without requiring membership. It seems to vary by state, but in general, product categories regulated by the state, such as pharmacy, alcohol and gasoline sales, are usually open to the public. Here’s an article at answers.com that lists which states require warehouse clubs to sell alcholic beverages to the public. This article from prnewswire mentions the fact that Sam’s Club pharmacies are open to the public. But don’t expect the warehouse clubs to advertise this fact. They would probably rather sell you a membership. Don’t even expect a straight answer if you walk thru the front door and ask the gatekeeper at a place like Costco. We did, and our opinion is that they like to play dumb. If you press them, they will acknowledge the fact that certain items must be sold to the public. This posting confirms our experience, and even mentions something called a “temporary alcohol shopping pass” available at Costco. Is this country great, or what ?

With all the big chains offering cheap generic prescriptions these days on a wide variety of medications, is it worth trying to get past the pit bull chained to the entrance at your local Costco, just so you can get some cheap medicine at their pharmacy? This New York Times article certainly seems to think so.

Another option is to ask for a “one-day pass”, which most warehouse clubs will provide. You may have to pay a 10% or so surcharge on any purchases you make, but if you don’t plan on being a regular shopper there, it’s probably a lot cheaper than buying a membership. Some clubs will even refund the surcharge or apply it towards their membership fee if you join within a few days. What wonderful people.

Even in places where the law does not require sales to the general public, there are loopholes that people use to save some money. Some people share their membership cards with friends and neighbors. This article explains how non-members can buy gasoline at Costco gas stations that are supposedly members-only.

As much as we hate Walmart, we think you can do better on most items at Walmart than at the warehouse clubs. We’ve never checked out prices at Walmart’s Sam’s Club stores, but somehow, we doubt that there will be much of a differential in prices between the two.

When you figure in the cost of membership, the extra gasoline you’ll probably burn to get there, the generally limited product selection, the inconvenience, the lack of shopping bags, limited payment options, the crowds, the long checkout lines, the often shorter hours and the obligatory strip searches at the exit, are the warehouse clubs really worth it?

– Routing By Rumor

Leave a comment

Filed under 9/11, Business, Consumerism, Energy Conservation, Environment, Food, Life, Money, Personal, Retail, Retailers, Routing by Rumor, Shopping, The Economy, Walmart, Your Money

Another One Bites The Dust – Bennigan’s Restaurants

We’ve been playing a lot of Queen lately, here at Routing By Rumor world headquarters. Especially this tribute to all of the victims of the U.S. economy. It’s too bad that Washington still can’t bring itself to accepting what most Americans already know.

The latest victims are the restaurants owned by S&A Restaurant Corp., which is part of Texas-based Metromedia Restaurant Group, which is part of the privately held Metromedia Company, owned by the 93-year-old billionaire philanthropist John Werner Kluge.

About John Kluge…

Columbia University in New York City announced last year that Mr. Kluge had pledged $400 million to the University, the largest gift in it’s history. With a little less than $10 billion to his name, poor Mr. Kluge is all the way down at #31 on Forbes magazine’s list of the 400 richest Americans, just below Nike’s Philip Knight, but ahead of eBay’s Pierre Omidyar.

Apparently, all of their company owned locations in the United States have closed, and they have filed for Chapter 7 bankruptcy. This past June, Metromedia disputed the accuracy of this report in the Wall Street Journal, that claimed they had already prepared a bankruptcy filing. There were about 150 company owned Bennigan’s restaurants, and 58 Steak and Ale restaurants. Apparently, a smaller number of franchised Bennigan’s locations in the United States and elsewhere are remaining open for now. Restaurants operating under the Ponderosa Steakhouse and Bonanza Steakhouse brands, also owned by Metromedia Restaurant Group, appear to be staying open for now.

columbia.edu)

John Werner Kluge (photo credit: columbia.edu)

As has been the case at many other companies that have crashed and burned, many Bennigan’s employees were unaware of the closings until they showed up for work last Tuesday, and were greeted by a sign on the locked front door giving them the good news (If you look closely at the photos in this article from the Fort Worth Star-Telegram about the closings, we believe you’ll see a locksmith changing the lock on the front door at a Fort Worth, Texas Bennigan’s …yup, good call, since this article identifies the locksmith!). What ever happened to the good old two weeks notice when your job is about to self-destruct ? OK, maybe two weeks is asking too much… how about 24 hours notice. Maybe it’s just us, but we don’t think that any employer worth working for would treat their employees that way. We think it shows a complete lack of class. We understand that S&A Restaurant Corp. was probably in dire financial straits, but couldn’t they have done better by their employees ?

These days, it is standard procedure for employers to state right there on the job application that it is “employment at will”, and they can terminate you at any time, for any reason, or for no reason at all. For certain, this is driven by the fear of lawsuits, but how the hell can they expect to hire employees who will be committed to the company, if the company won’t make any commitment to their employees ? To us, this is a prime example of the sorry state of American business in the 21st century. And employers wonder why they can’t find loyal, dedicated employees. They wonder why people quit without giving them fair notice. How much notice did Metromedia give their employees about the fact that they would be closing their doors? None. Yet there were published reports a month or two earlier that Metromedia had already prepared a bankruptcy filing.  Shame on you, Mr. Kluge. Those were some of your hardest working and lowest paid employees, who helped you get to #31 on the Forbes list. Welcome to the era of the disposable employee.

In our mind, employees of other Metromedia businesses have every right to simply pick up the phone one day, and tell their boss they won’t be coming to work any more.  If management at any company has a problem with loyalty like that, just remind them that it was their decision to classify you as an “at will” employee, and that you are simply exercising the freedom that being “at will” gives you.

The asymptotically decreasing tenures of the last few CEO’s at Metromedia Restaurant Group (MRG) may shed some light on the troubles at the company. Clay Dover resigned as CEO in late May after holding that position for about six months. Mr. Dover had previously held other positions at MRG, and had replaced Vince Runco, who had been MRG’s CEO for less than a year. Mr. Runco replaced Jeff Moody, who was CEO for about 18 months. Mr. Moody had replaced John Todd, who held the CEO title at MRG for just shy of two years.

Published reports have questioned whether the affected employees will be receiving their paychecks for hours worked up until the restaurant closures, and whether consumers who hold gift cards from the two chains will receive refunds. Our advice… don’t hold your breath. Of course, if Metromedia Restaurant Group wanted to show it’s loyal customers some goodwill, they could announce that gift cards from their Bennigan’s and Steak and Ale restaurants will be honored at their Ponderosa and Bonanza Steakhouse locations. But again, don’t hold your breath.

The minimally carnivorous, quasi-vegetarian staff at Routing by Rumor has never set foot in either a Bennigan’s or a Steak and Ale, so we don’t know if we missed much, but for thousands of their employees now out of work, it’s a disaster. Restaurant workers are among the lowest paid workers, and in the very tough economic times we are experiencing now, they will have a difficult time finding employment.

This brings up another hardship that restaurant workers in the United States are subject to. Many employees allege that they are forced to share their tips with managers and other employees. By law, employers can’t require employees to share their tips with management. To make matters worse, restaurant workers are not subject to the same minimum wage standards that other workers are protected by. As long as their salary plus their tips equal the mandated minimum wage, their employers are within the law. This means that in many cases, they are paid virtually nothing by their employers. Here’s an article from Nation’s Restaurant News, that describes many of the abuses that restaurant employees allege, and some of the litigation that has resulted, involving some of the largest and best known restaurant chains in the country, including names like Applebee’s, which is owned by IHOP.

As of this morning, it appeared that the websites for Bennigan’s (www.bennigans.com), Steak and Ale (www.steakandale.com), and Metromedia Restaurant Group (www.metromediarestaurants.com) had all been taken down. And the vultures are already starting to swoop down and pick through Bennigan’s remains. Check out this article about a locksmith that was hired to change the locks at a Florida Bennigan’s location, and decided to load up his van with liquor and food that remained in the restaurant. He got caught.

– Routing By Rumor

1 Comment

Filed under Business, Consumerism, Employment, Food, Jobs, Labor, Life, Money, News, Politics, Queen, Retail, Retailers, Routing by Rumor, Scams, Shopping, The Economy, Your Money

Need More Proof That The U.S. Economy Is In Trouble? How About Talk Of General Motors Seeking Bankruptcy Protection!

Things are tough in Detroit. For the first time since 1922, General Motors will not pay it’s shareholders a dividend. Even more omnious is speculation that GM may have to seek bankruptcy protection (see NY Times / Associated Press article). There are even calls for dropping GM from the Dow Jones Industrial Average.

While much of what ails GM is related to the sad state of the U.S. economy, not all automobile manufacturers are suffering the way GM currently is. There are many reasons for this, including GM’s reliance on large, gas-guzzling vehicles which have become white elephants, thanks to fuel that is selling between $4 and $5 a gallon.

For us however, GM lost it’s appeal long ago. Not because of the quality of their products, which by and large we’ve been quite satisfied with, but rather because of what we believe is their total lack of respect for their customers. As we have written previously, we are a strong believer in buying products made in the USA, and indeed we’ve owned only US-assembled GM vehicles for the past thirty years.

We’ve never had a good experience with repairs covered under GM’s new vehicle warranties. We have always experienced dealer service that was inept, shoddy, defective, or incomplete, and which in many cases took days or weeks longer than it should have, while our vehicle languished in some dealer’s lot. Almost all warranty repairs we’ve ever taken our vehicles to GM dealerships for have required one or more return visits to the dealer, either because repairs were done incorrectly or not at all. We believe that GM dealerships prefer to not do warranty repairs, and will try to avoid doing them whenever possible. There never seemed to be any incentive to do things correctly. The experiences we’ve had over the years at GM dealerships convinced us to never ever allow them to do non-warranty repairs on our vehicles where we would be paying for the work out-of-pocket.

We’ve dealt with dealership personnel from salespeople to service managers to owners, who have been rude, indifferent and downright obnoxious. In our opinion, it’s not so much a lack of caring or pervasive incompetence (although there’s plenty of that), as it is a culture of contempt for the customer. We feel that GM and it’s dealerships view customers as little more than an annoyance. As if they were saying “we don’t value you as a customer, and we couldn’t care less about your future business”. GM’s “customer care” has proven to be a worthless farce every time we’ve ever turned to them in an attempt to resolve problems with our vehicles. We decided years ago that our current GM vehicle will be our last one. It’s a bit ironic then, that GM may not be around much longer to sell us, or anyone else, their next vehicle. We think that in large measure, they can blame their current plight on the way they’ve treated their customers. Forget about Harry Gordon Selfridge’s old adage “the customer is always right”. At GM, it has always seemed to us to be more like “the customer is never right”.

This fellow doesn’t think The General has much better regard for it’s current workers or retirees.

We won’t shed a single tear if GM goes belly up tomorrow.

Where was I ? …Oh yeah, the dismal state of the U.S. economy. See what happens when someone mentions GM to me ?

So, GM is hurting big time, banking institutions are in trouble, home foreclosures are at record levels, soup kitchens and food pantries are reporting big increases in families seeking assistance (while at the same time finding it harder to get food donations), and the cost of living is skyrocketing, despite what government inflation figures claim.

IndyMac Bank customers in Burbank, California

Associated Press photo / Kevork Djansezian

The FDIC has compiled a list of 90 banks it says are in danger of failing, victims of the U.S. mortgage crisis.

Consumers are seeing utility bills increase 20, 30, even 50 percent. In New York City, the local electric utility, Consolidated Edison, recently hiked electric rates between 22% and 25%. Because of steep increases in fuel prices, there’s sure to be more double-digit increases in store. In New Jersey, Verizon, a regional U.S. phone company, has gotten permission to raise basic telephone charges 50% over the next three years, and cut the number of free directory assistance calls a subscriber gets in half, while tripling the price. This will no doubt accelerate the trend of consumers dropping traditional phone lines and making their cellphone their only phone. This is not only because of the cost, but also because traditional phone companies like Verizon still don’t know how to be competitive in today’s telecom market where Cable TV, Internet and cellular telecom providers offer highly competitive or all-you-can-eat calling plans that include a smorgasbord of features at no extra charge, and companies like Google are providing FREE directory assistance services. Isn’t Verizon still charging extra every month if you have a Touch-Tone phone? They are clueless.

Healthcare costs are increasing so rapidly that many employers can’t afford to continue providing coverage for their employees, and an increasing number of individuals and families have no health insurance.

Trips to the supermarket induce shock, while a trip to the gas station produces gas pains.

We’re starting to see panicked Americans creating a run on the bank, such as these customers of IndyMac Bank this week.

And, of course, we are still at war.

America is the land of plenty, where we are enjoying a bumper crop of bad news on the economic, political and employment fronts. There seems to be very little good news these days.

– Routing By Rumor

Leave a comment

Filed under Automobile Manufacturers, Business, Cars, Cellphones, Employment, Energy costs, Food, Iraq, Jobs, Life, Military, Money, News, Politics, Routing by Rumor, Shopping, Stock Markets, Telephone Companies, The Economy, War

Newspapers Are Now Obsolete. Introducing News Headlines Mad Libs !

With apologies to Andy Rooney

Ya ever notice how the same news keeps showing up in your newspaper day after day ?

…and how it always seems to get worse ?

Well, the newshounds at RoutingByRumor have figured out how to save you some money, and save some trees at the same time. Instead of buying a newspaper every day, why not try this update of the word game “Mad Libs” to get your latest news.

If you’re one of the few people on the planet who have never heard of Mad Libs, read this before you continue. And yes, the Web does indeed have everything, including the kitchen sink. There is even an official Mad Libs website.

And remember… “no news is good news”.

THE “MAD LIBS” U.S. NEWS HEADLINES

CONSUMER NEWS

The __________________ Corporation (fill in the name of a food or consumer goods company that has shipped all of it’s manufacturing to China) has announced the recall of ____________________ (fill in the name of a food product or child’s toy) due to possible __________________ contamination (fill in the name of a poison or carcinogen) or choking hazard. Consumers are advised to return the product to the store where they bought it.

ENVIRONMENTAL NEWS

Scientists monitoring the effects of global warming today observed the breakup of a ____________________ (fill in a really big number) square mile section of the Arctic ice pack. This is the largest loss of Arctic ice ever observed in a single day, and is further evidence of global warming.

HEALTH NEWS

The U.S. Department of Agriculture has announced the recall of ____________________ (fill in an agricultural product) which is suspected in a recent outbreak of ____________________ (fill in a food-borne illness). There have been ____________________ (fill in a number) suspected cases reported in ____________________ (fill in a number) states.

In an unrelated case, the ____________________ (fill in the name of a meat processor) corporation has announced the recall of ____________________ (fill in a very large number) pounds of ground beef, after tests have indicated possible contamination with e-coli bacteria.

ENERGY NEWS

Crude oil prices have hit another record high, closing yesterday at ____________________ (fill in a very large number) dollars a barrel. Regular grade gasoline is now an average of ____________________ (fill in a very large number) dollars a gallon nationally, and diesel fuel is now averaging ____________________ (fill in a very large number) dollars, across the nation.

FOOD PRICES

Food prices have taken another steep jump in the past month, with a seasonally-adjusted increase of ____________________ (fill in a number) percent. Spurred by steep increases in energy and commodity prices, this is the ____________________th (fill in a number) straight monthly increase in food prices. Recent ____________________ (fill in a weather-related disaster, such as flooding, drought, forest fires, locusts, hail, etc.) in key ____________________ (fill in a food commodity) producing areas has increased the likelihood of further price increases and tight supplies of ____________________ (fill in a commodity) for the foreseeable future.
EMPLOYMENT NEWS

The ____________________ (fill in a major corporation’s name) company today announced plans to lay off another ____________________ (fill in a large number) thousand employees in coming months. Blaming the decision on the sluggish economy and increased foreign competition, they said further workforce reductions might be necessary.

Also, the ____________________ (fill in a major retailer) corporation today announced plans to file for chapter 11 bankruptcy protection. In the latest quarter, they posted losses totaling ____________________ (fill in a really big number) dollars. They also announced plans to close ____________________ (fill in a big number) of their least profitable stores, and lay off ____________________ (fill in a big number) thousand employees.
MILITARY NEWS

The Pentagon has announced that another ____________________ (fill in a number) servicemen have died in fighting in ____________________ (fill in either “Iraq” or “Afgahnistan”). This brings the total death count to ____________________ (fill in a very large number) since the war began. The Pentagon has also announced that the tours of duty for ____________________ (fill in a branch of service) in ______________________ (fill in “Iraq” or “Afghanistan”) will be extended by ____________________ (fill in a number) months.

In a related story, suicide bombers have killed another ____________________ (fill in a number) people in the Iraqi city of ____________________ (fill in the name of a city in Iraq), after detonating ______________________ (fill in “a car bomb” or “explosives strapped to their body”) in a crowd of people gathered for ____________________ (fill in any reason people might gather in a group), and another ____________________ (fill in number) U.S. servicemen have been ____________________ (fill in “killed” or “wounded”) by a roadside bomb in ____________________ (fill in the name of an Iraqi city).

9/11 ATTACKS

The New York City Medical Examiner’s office announced today, that another victim of the September 11th attacks has been positively identified thru the use of DNA testing. Bone fragments belonging to ____________________ (fill in yet another victim’s name), which were recovered from ground zero in the weeks after the attacks, were re-tested using new technologies which were unavailable until now. This brings the confirmed number of victims of the 9/11 attacks to ____________________ (fill in a very large number that should wake up every American to the evil we are up against), making 9/11 the single deadliest enemy attack on U.S. soil in the nation’s history.

In a related story, redevelopment of the former World Trade Center site in lower Manhattan has again suffered a setback, after ______________________ (fill in just about any reason imaginable ) has caused yet another delay in construction activity at the site. The reconstruction plans for ground zero have been mired in controversy, cost overruns, ____________________ (fill in another of the hundreds of reasons for the delays), and complaints from families of 9/11 victims, unhappy with plans for a memorial at the site.

NEWS FROM THE CAMPAIGN TRAIL

____________________ (fill in the name of a U.S. presidential candidate) has declared his intention to ____________________ (fill in either “end the war” or “win the war” or “increase the number of troops in Iraq and Afghanistan”) within ____________________ (fill in a number) days of being sworn in as President. Speaking from the campaign trail, he spoke to reporters about the growing dissatisfaction among Americans about how the war is going, and promised quick and decisive action to change the course of the war.

Also, in responding to reporter’s questions about ____________________ (fill in an embarrassing or troubling incident that has been dredged up from his past), he denied _____________________ (fill in “ever making the statement” or “ever meeting with the person” or “ever belonging to the group” or “ever voicing support for the group” or “ever practicing that religion” or “ever losing his temper”), blaming those rumors on ____________________ (fill in a political party) supporters trying to derail his campaign.
So there you have it… All the news that’s fit to print, and no need to buy a single newspaper.

– Routing By Rumor

Leave a comment

Filed under 9/11, Business, China, Consumerism, Employment, Energy, Energy costs, Environment, Food, Health, Home, Iraq, Jobs, Journalism, Labor, Life, Military, Money, News, Politics, Retail, Retailers, Routing by Rumor, Shopping, Stock Markets, Terrorism, The Economy, The Planet, War, Your Health, Your Money