Newspapers Gone Charitable; Not All is Golden in Europe for McDonald’s; Starbucks Not Letting an Itty Bitty Downturn Get in its Way

Read all about it…

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Not-for-profit has been taking on a whole new meaning lately for some unlikely reasons: newspapers. The Philadelphia Inquirer, the Philadelphia Daily News and Philly.com have gone tax-exempt. It’s probably not the first place you think of when you want to make a charitable contribution, but it’ll gladly take one now. Along with an additional $20 million donation, billionaire H.F. “Gerry” Lenfest, who controlled these publications, took the Philadelphia Media Network, tweaked things around a bit and morphed the newspapers into a public benefit corporation (PBC) that will be called The Institute for Journalism in New Media.  A little wordy, maybe, but the entity itself is dedicated to “independent public service journalism and investigative reporting that positively impacts the community, while also creating innovative multimedia content.” Got that?  The paper will still be run as a “for-profit” biz while getting you a tax deduction in the process.  In case you didn’t know, Kickstarter is also a PBC. Just saying. It’s an interesting idea just not an original one for a newspaper as there are a few other newspapers in Florida and Connecticut that have taken this approach. It’s a way to try and make newspapers relevant and successful in a digital era, not to mention, a last-ditch attempt to try and keep a publication from going bust

Hamburglar?

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So what are the Golden Arches accused of doing this time? Three Italian consumer organizations are charging that the fast-food chain is causing franchises in Italy to inflate the cost of menu items. You see, in order to snag a European franchise lease, a lessee must sign a twenty year contract – a contract that is twice as long as what other franchises require. But then, McDonald’s is also accused of licensing the premises for above market rates – by about ten times –  making it nothing short of a big pain in the but to switch competitors. So, in order to defray the costs of these above-market lease rates, European McDonald’s franchises jack up the prices on menu items with consumers bearing the brunt of the cost. At least that’s according to a survey cited by the coalition filing the complaint. Apparently, a whopping 68% – 97% of McDonald’s menu items in various Italian cities are more expensive in franchises than in company stores. Franchises make up 75% of McDonald’s European revenue and worldwide McDonald’s has made $9.27 billion in revenue from these franchises. But before the EU even considers launching a formal investigation into these alleged shifty practices, authorities will first send out a formal questionnaire. Depending on how well those questions are addressed will determine if there is sufficient cause to even open an investigation. Besides, those same EU authorities are already busy investigating McDonald’s in Luxembourg over allegations that it managed to evade paying $1 billion in taxes on its European operations.

Slowdown? What slowdown?

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There might be an economic downturn in China, but that’s not stopping Starbuck’s from expanding its empire there. Sure there are already 2,000 Starbucks stores caffeinating the world’s second largest economy. However, Starbucks feels that the country could use at least 1,400 more stores and plans to have them all serving up lattes by 2019. Starbucks CEO Howard Schultz feels that China has the potential to become the company’s biggest market. And that’s not so crazy considering that China is already Starbucks’ second largest market and is the fastest growing one too. At a recent Starbucks event in China called the “Starbucks China Partner-Family Forum” (Alibaba’s Jack Ma was at the event so you know it was a big deal), Schultz wanted to reassure the Chinese that he totally gets their culture and has tremendous admiration for it. Hence, he made sure to acknowledge and give major props to the parents of its baristas. In fact, Starbucks wants so badly play nice with China and shower the country with oodles of corporate respect that he is offering to cover 50% of monthly housing expenses for Starbucks employees in China. For baristas there who so valiantly served up drinks for ten years, Starbucks is offering them a “career coffee break” – a year long paid sabbatical. Hěn hǎo!

 

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McDonald’s European Tax McMess; OPEC Member Smackdown; Unemployment Ups and Downs

Did the Hamburglar do it?

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Hold on to your McMuffins because the Golden Arches are under investigation by European regulators. Apparently McDonald’s neglected to pay taxes on its franchise profits earned in Europe and Russia since 2009. The EU says that 250 million euros made just in 2013 wasn’t  even taxed and McDonald’s had an unfair advantage over its competitors. Gasp. McDonald’s European franchise office is based in the teeny tiny country of Luxembourg. The trouble seems to have started when authorities in Luxembourg decided that McD’s was exempt from paying taxes on its profits because the U.S. was also taxing them on those profits.  McDonald’s, however, says the allegations are false and that it paid over $2 billion in corporate in taxes, besides other taxes, between 2010 and 2014. Starbucks, Fiat and Apple also faced similar investigations and Starbucks and Fiat ultimately found themselves forking over $34 million each in back taxes and penalties.

Can’t we all just get along?

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OPEC members just can’t seem to get along these days which is a bit unsettling considering they control a trillion dollar oil supply. Because of the oil glut and the fact that oil prices are so low –   a barrel closed at $42.49, the lowest price since 2009 – Venezuela is finding itself cash-strapped as oil is a big chunk of the country’s bread and butter. Together with a few other cash-strapped countries, including Ecuador and Algeria (don’t laugh), they want Saudi Arabia to cut back on its oil production output to help bring prices back up and make them less cash-strapped. Saudi Arabia doesn’t want to, but might consider doing so if Russia and Mexico do the same. Saudia Arabia, by the way, is the world’s largest oil exporter and is not cash-strapped so they don’t really feel the need to cut back. Saudi Arabia also said it would listen to what the other countries have to say. Which is nice and all. But it still intends to do what it wants. Like it always does. Russia also has no plans to cut back since it does not see a point in doing so. And besides, who tells Russia what to do? Iran wants OPEC to reduce output just so that it can make room for its re-entry into the wonderful lucrative world of petroleum production. But to be clear, Iran has no intention of capping its own output to help out with the current oil glut. Maybe, just maybe, Iran will agree to cap its oil production once it reaches its pre-sanction levels. After all, its gotta make up for lost times, you know?  OPEC pumped over 32 million barrels a day in November. Once Iran and Indonesia (yes, that country’s back, too) return, expect that number to be much much higher. While annual revenue for OPEC was $550 billion last year, in the five years prior, the organization was pulling down $1 trillion annually.

You say that’s a good thing?

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Applications for unemployment benefits rose to 269,000 applicants, gaining 9,000 newbies from last week and apparently that’s good news. Well, maybe not to the 269,000 applicants, but we won’t go there just yet. And even though that means that there are now approximately 2.16 million Americans right now collecting unemployment benefits – is that term an oxymoron? – unemployment is still considered to be at historically low levels. Believe it or not, this report actually points to a healthy job market. And why shouldn’t it? The number of unemployment benefit recipients is 9.3% less than it was a year ago. An average of 206,000 jobs have been added per month in the last year with a whopping 270,000 jobs added just in October. Even average hourly earnings are up 2.5% in the last twelve months. You can be sure the Fed will be considering this latest report as it mulls its decision to raise interest rates, which by the way, is more than likely to happen in about two weeks.