Working in a Hot Dog + small-business sentiment

 

Working in a Hot Dog

Co-owner Bobby Green at Tail o’ the Pup restaurant in Los Angeles. Photographer: Stella Kalinina for Bloomberg Businessweek What’s it like to work in a shoe? Or how about a bottle? A barrel? A hot dog? In the 1920s across America mimetic architecture—structures that look like the thing they sell—took off. Today those very structures can be both a joy and burden for the people who work in them or rent the buildings. While the structures are undeniably good publicity—“Everybody here in the town knows the shoe,” says Felipe Torres who runs a shoe repair business from a building shaped like a shoe—they can be a burden for owners and renters. Torres counts himself lucky that his shop, though it dates to 1947, doesn’t have official landmark status. Bobby Green had more trouble with the Idle Hour, a barrel-shaped cocktail bar in Los Angeles that was built in 1941. Green bought the place, which had been vacant for decades, for about $400,000 at an auction in 2011. Its status as a designated architectural landmark barred radical changes during a $2 million, two-year renovation that required professional barrel makers to replace the rotting wooden siding. “You’re not just slapping up a straight piece of wood,” he says. “It’s a complicated process.” Here’s the inside story of the small businesses housed inside these quirky buildings. Read Anna-Louise Jackson’s story here. Idle Hour in Los Angeles. Photographer: Stella Kalinina for Bloomberg Businessweek

Economists and investors typically look to big business and financial markets for signals on where the US economy is headed. But for a real temperature check, talk to small businesses.

A pet equipment vendor in California. An outdoor clothing outlet in Virginia. A garden center in New Jersey. An auctioneer in Alaska. All say their customers are still spending and it’s too soon to talk recession. But they’re seeing more reasons for caution as high borrowing costs take a toll.

If the economy falters, it will be the country’s 33 million small businesses that send the warning flares. Government data show those companies account for two of every three jobs added in the past 25 years.

The November survey of the National Federation of Independent Business, released today, shows owners remain pessimistic about future business conditions, citing concerns about inflation, softening sales and worker shortages. More small companies are decreasing jobs than adding them, and small-business optimism fell to a six-month low. Almost a third reported a drop in earnings in the past three months.

Surging interest rates have amped up anxiety among businesses and consumers alike. Drew Tiner, owner of Calgo Gardens, a nursery and landscaping center in Freehold, New Jersey, says customers are increasingly shopping around in search of a better deal, “getting more cautious about how they spend their money.” And staffers who decamped for opportunities elsewhere after the pandemic have been knocking on his door—which he takes as a sign of an impending slowdown. “A lot of those guys broke off to try to do their own thing,” Tiner says. “They’re coming back to look for something more steady.”

Dan Newman, who runs an auctioneering business in Anchorage, says a shortage of workers remains his greatest concern, but more buyers are bidding on goods they think are bargains. “We’ve seen a big uptake in furniture, tools and hardware,” says Newman, head of Alaska Premier Auctions & Appraisals LLC. “Maybe somebody doesn’t want to go and buy a brand-new chainsaw, because one that’s a year or two old is still a perfectly suitable option.”

Other headwinds are coming from the rising cost of borrowing after the Federal Reserve’s rate hikes. Analysts at Goldman Sachs Group Inc. say small businesses spend a larger share of revenue on interest payments than their bigger peers and reckon that higher rates will increase the interest burden for such companies to about 7% of sales next year, from 5.8% in 2021. “Small businesses are under a fair amount of stress and have been for some time now,” says Cory Kampfer, co-president of small-business lending at Enova International Inc., one of the largest licensed online lenders. “Across the board, they’re feeling pain.”

For Enda Curran’s full look at small-business sentiment right now—and into 2024—go here.