Monday Business Briefing: retailers applaud OT rule injunction; Melting Pot seeks franchisees; trial season begins for insurers; Portage House opens in Jeff; and more
Welcome to the Nov. 28 Monday Business Briefing, your private business intelligence digest from Insider Louisville.
Retail, restaurant associations applaud judge’s ruling regarding federal overtime rule
“Our members are relieved, as they have been scrambling to meet the December 1 deadline and having difficult conversations with managers who were going back to hourly pay,” Stacy Roof, president and CEO for the Kentucky Restaurant Association, said in an email to Insider Louisville.
Tod Griffin, president of the Kentucky Retail Federation, emailed the organization’s members following the judge’s decision to state that the group was pleased and note that it is unclear what steps will be taken next, either by Congress, the incoming Trump administration or the federal courts.
On Dec. 1, a new federal rule regarding who qualifies for overtime pay was supposed to take effect. However, an injunction issued by a federal judge in Texas last week has postponed it.
The new federal rule, enacted under the Obama administration, would have increased the threshold for overtime pay for salaried employees who perform executive, administrative or professional duties. Currently, any employee who earns $23,660 or more annually was exempt from receiving overtime pay, but the new rule would raise that to $47,476 yearly.
Twenty-one states, including Kentucky and Indiana, and several business organizations filed separate lawsuits aimed at preventing the change from taking place.
The National Restaurant Association and National Retail Federation came out strongly against the new rule, saying it would place a burden on restaurants and small businesses who would need to pay managers overtime or change the way they pay their management staff.
“The Labor Department’s overtime changes are a reckless and aggressive overreach of executive power, and retailers are pleased with the judge’s decision,” David French, senior vice president for government relations at the National Retail Federation, said in a news release. “We hope the judge ultimately finds in our favor, and in the meantime, this timeout gives Congress a chance to take another look at the impact of these rules.”
The injunction prohibits the rule from taking effect until the court decides whether the federal government has the power to change the overtime rules. In a statement, the National Restaurant Association reminded members that pending the outcome they may still need to be ready to implement the new rules.
If implemented, an additional 3.9 million workers would become eligible for overtime pay, according to a report from the nonpartisan Congressional Budget Office. The report also that the change could harm consumers as companies raise prices in order to cover the increased cost.
While the injunction provides at least temporary relief for some business owners, Louisville-based steakhouse chain Texas Roadhouse has decided to go ahead and push forward with its planned “salary adjustments,” according to Travis Doster, the company’s senior director of public relations.
Health insurance trial season has begun
One high-stakes battle in the health insurance industry has begun: Anthem and Cigna have completed the first week of their trial to defend their proposed merger — just days before Aetna and Humana are scheduled to do the same on Dec. 5.
Indianapolis-based Anthem wants to buy Bloomfield, Conn.-based Cigna for $48 billion. Aetna, based in Hartford, Conn., wants to buy rival Humana, based in Louisville, for $37 billion. The U.S. Department of Justice filed a lawsuit July 21 to block the deals.
Though the four companies cover slightly different markets, the insurers’ arguments for — and the government’s argument against — the mergers are very similar.
The companies say that their mergers would allow them to offer better health care to more people at lower costs, but regulators say the deals would reduce competition and increase costs, in the Aetna-Humana case especially for older Americans.
CNBC said the Anthem-Cigna trial marks the Obama administration’s “final push to leave a lasting impact on the nation’s health care market,” while for Anthem, the case presents a last opportunity to salvage a contentious union — and to avoid paying Cigna a $1.85 billion breakup fee.
According to Bloomberg, A DOJ lawyer said at the start of the Anthem-Cigna trial that the merger, the largest in history of the health industry, would bolster the insurers’ dominance and reduce choices for consumers.
Meanwhile, the companies’ lawyers and leaders said that their combined power would allow them to lower the costs they have to pay to health care providers and that the savings would be passed to employers. —Boris Ladwig
Fondue restaurant closed Louisville location last week
The Melting Pot no longer has a presence in Louisville.
The fondue restaurant announced on Facebook and on its website that it had closed its location at 2045 S. Hurstbourne Parkway:
We regret to announce that The Melting Pot of Louisville, KY has closed for business indefinitely as of Sunday, November 20.
We appreciate the opportunity to have served the Louisville community for over 12 years at this location. While there are no confirmed plans to re-open this location, The Melting Pot Restaurants Inc., hopes to open a new location in the Louisville area in the future.
In the note to customers, the company asked for franchise applications from people interested in opening a Melting Pot in Louisville or Lexington. Potential franchisees are encouraged to contact Christina Hobbs, director of franchise development, at 813-425-6209 or [email protected].
According to its website, the estimated initial investment ranges from $996,000 to $1.54 million (depending on real estate). Applicants need a minimum liquidity of $325,000 and a minimum net worth of $750,000, which may be combined among partners. The initial franchise is $45,000 per unit.
Analysts favor ‘hold’ rating for Yum Brands stock following China split
A majority of analysts watching Louisville-based Yum Brands’ stock are cautious about its potential performance and are recommending shareholders wait to see what happens.
Just after the China spinoff on Nov. 1, Yum Brands stock dropped to $62.29 a share from $86.28 per share. Its stock closed at $63.14 on the Wednesday before Thanksgiving.
This month, 11 of 24 analysts have issued a “hold” rating for the stock, while seven issued a “buy” rating.
Andy Barish, an analyst with Jefferies, wrote in a recent report that he was cautiously optimistic about Yum Brands. Yum Brands efforts to become a 98 percent franchised business could be a catalyst for the company, he noted, but the company did not factor that into its modeling just yet.
“We are taking a conservative approach and not modeling any benefits from further re-franchising given the uncertainty around timing,” he wrote.
Jefferies’ assumptions are based on 2 percent same-store sales growth for each brand — KFC, Taco Bell and Pizza Hut. The company has estimated that Yum Brands’ earnings per share will hit $3.15 in 2018, which would make it difficult for Yum Brands to hit its internal target of $3.75 earnings per share in 2019, Barish wrote. —Caitlin Bowling
New restaurant open on riverfront in Indiana
Portage House, an upscale eatery, is open for business on Jeffersonville’s riverfront.
The restaurant is in a former home, located at 117 E. Riverside Drive, that was renovated and expanded to accommodate its new use. It employs 15 people and can seat 100 people inside, as well as 25 people on the outdoor patio.
Portage House has a menu with about 15 dishes, including duck pâté, whole roasted cauliflower, bacon and fried oyster loaf, whole grilled trout and bucatini. Skulas said he wanted to keep the menu compact and that it would change some each week.
“I’d much rather do 15 things highly executed,” he said. “I feel confident and proud of everything on the menu.”
Prices range from $4 for a side of tomato-smothered beans up to $23 for a boneless half-chicken, with kale stewed farro, horeseradish and pickled cucumbers. Portage House also has a full cocktail menu.
“We obviously don’t want to be fine dining, and try to keep the price points low,” Skulas said. “We are very competitive.”
Portage House is the second restaurant from the relatively new restaurant group Doers L.L.C., whose principals are Paul Blackburn and Alex Tinker. They also own Citizen 7, a South American street food restaurant; Tinker separately owns Commonwealth Tap.
The group is working on its third restaurant, a pizzeria called Parlour, which also will be in Jeffersonville. Parlour will open sometime next year at the former Old Bridge Inn bed and breakfast, 131 W. Chestnut St. —Caitlin Bowling
SCENE at the Center names chef, opens Tuesday
Anyone attending the opening night show of PNC Broadway in Louisville‘s “Book of Mormon” on Tuesday, Nov. 29, will be among the first to experience the Kentucky Center‘s new small-plates eatery and bar, SCENE at the Center.
SCENE will offer a limited menu of soups, salads and six small-plate dishes like butternut and black bean tostadas, cast-iron-seared crab cakes, locally sourced cheeseburgers and more. Chef Scott Darnell, who has worked at various notable restaurants around town like Le Relais, La Peche and most recently Somewhere, has been tapped to lead the kitchen at SCENE. He will bring his more than 25 years experience to the menu.
“We’ve made every effort to enhance the visitor experience, and that includes bringing a seasoned chef on board to help create the atmosphere for a wonderful time,” said Kim Baker, president of the Kentucky Center, in a press release.
GE Appliances workers rejected proposal by clear margin
Nearly three out of every four GE Appliances workers who voted on a contract proposal last week rejected the deal.
Union members told IL that they voted against the new four-year contract over concerns about frozen wages, lower starting pay for incoming employers and changing work practices that disadvantage older workers.
About 4,000 members of the IUE-CWA 83761 were eligible to vote. About 3,600 voted, and about 2,600 or more than 72 percent, rejected the proposal.
The proposal called for current employees to retain their wages, seniority and vacation benefits. They also would have received $5,500 combined in January of each of the next three years. Starting wages for new employees would drop to $12, from $15.52. Employees also would see higher shares of health care costs.
The 4,000 hourly workers and about 2,000 salaried employees make dishwashers, air conditioners and other appliances in Appliance Park. General Electric sold the park to China-based appliance maker Qingdao Haier in June for $5.4 billion.
Company leaders have said that Appliance Park is the only one of GEA’s four locations that does not produce a profit. And without the support of GE’s higher margin businesses, the appliances unit has to align its cost structure — including wages — with the rest of the appliance industry.
However, union members have said that they have not seen a raise in years and that a lot of the problems that make production at Appliance Park inefficient have nothing to do with the performance of the hourly workers.
Local engineering company lauded
Louisville-based engineering company iGear got a big shoutout for its new Squeaks software, which enables communication between machines and humans.
Industrial Equipment News magazine named the local product among its Top 10 technological innovations at a recent industry show, with more than 200 exhibitors.
David Mantey, the editorial director of digital media, described Squeaks as “Twitter for machines,” which allows for easy communication among industrial equipment and operators to “make it easier to keep machines up and running.”
“Komatsu VP Jim Landowski said Squeaks not only helps you make intelligent decisions on your processes, but it enables remote diagnostics, which can help many of you out there prevent those late night service calls,” Mantey said.
Industrial Equipment News provides information for plant managers and engineers across the country.
Kiva Louisville celebrates two years, posts solid stats
Kiva Louisville is celebrating its second anniversary. The organization helps entrepreneurs crowdsource philanthropical loans for zero percent interest. These are micro-loans of $5,000 to $10,000, and investors are paid back over time by the borrowers.
The Louisville chapter of the international organization is boasting some impressive stats.
According to Kiva: “Over $518,000 in loans have been funded and 117 small business owners have applied on the site. Of those 117 applicants, 48 percent were female entrepreneurs. A survey of funded borrowers conducted in February of 2016 revealed that respondents were paying an average of $11.31 per hour versus the minimum required wage of $7.75 per hour. Many of the businesses have been able to hire additional employees, and Kentucky has been ranked as high as 4th in the country for number of Kiva loans per capita.”
Currently, there are no Louisville businesses that are seeking funding via Kiva. Speculation: it’s probably a bad time for looking for a loan. But check back after the new year to support local small businesses. As the video from Kertis Creative of Louisville, above, points out, you can do as little as $5. —Melissa Chipman