Trickling Springs Creamery Business Collapse

[mike]

That is sad.

My employer had customers that close up shop seemingly overnight. They place orders with their distributors and vendors so the employees wouldn't figure out what's happening. Then at the end of their last day, they tell their employees its over, and those orders get cancelled. That kind of decision weighs on everyone.

That seems unethical and exploitative on so many levels. And illegal in some states to lay people off with zero notice or no severance.

Generally speaking, America is an at-will employment environment.

In the event people are owed notice or severance, the employer’s lawyer and accountants simply tell them how much longer to keep running payroll.

Yes, it's not illegal in my state. I am not sure whether it is unethical or not. Employees who have advance notice that the business is closing or that they are being dismissed might have incentive to sabotage the business. I am familiar with various businesses who give no advance notice of dismissal and who even lock the laid off/fired employee's computers or offices and have security escort them to collect personal belongings. In some of these cases it is probably required for security reasons related to government contracts.

In my state, employees can legally be terminated at any time with no notice and no reason given as long as it is not out of illegal discrimination.

According to the state:

An employer may terminate the services of an “at will” employee, with or without cause, at any time — as long as an employee is not let go for an unlawful purpose, such as age or racial discrimination.

And the reverse is of course true:

Conversely, “at will” employees have a similar right to resign their employment, for any reason (or no reason at all), at any time.

This happens to me as an employer all the time. When an employee shows up to work to return their uniforms saying that they are taking a new job that requires them to start that day, is that ethical? It is certainly legal, and I think it should be. It doesn't violate any terms of employment, either, so it may not really be unethical. The whole two-week notice thing is just a courtesy. That said, there is a certain rudeness about giving no notice, and it basically makes one ineligible for rehire. And there is a certain rudeness about a business closing or laying off its employees without notice as well, which will make it more difficult for it to find employees going forward if it remains in business or re-opens. It's not illegal, and I don't know that it is unethical, but it is rude and inconvenient. There are often probably valid reasons, but it still causes people difficulty and I would want to avoid that if possible.

[RZehr]

In many cases the real estate can be more valuable than the business. Put another way, it is more valuable closed than open. Plus it is much easier to sell real estate than a business. Your universe of potential buyers is vastly larger.

I think this is generally true. However I think restaurants are uniquely suited for that sort of business and are probably harder to repurpose than, say, a warehouse or office building.

It might just be the land that is valuable not the building. Someone might bulldoze it and put up a tire shop or 7-11 or something else.

Yes. Another reason is often that a private business is wildly over valued by the owner.

[Ken]

That seems unethical and exploitative on so many levels. And illegal in some states to lay people off with zero notice or no severance.

Generally speaking, America is an at-will employment environment.

In the event people are owed notice or severance, the employer’s lawyer and accountants simply tell them how much longer to keep running payroll.

Yes, it's not illegal in my state. I am not sure whether it is unethical or not. Employees who have advance notice that the business is closing or that they are being dismissed might have incentive to sabotage the business. I am familiar with various businesses who give no advance notice of dismissal and who even lock the laid off/fired employee's computers or offices and have security escort them to collect personal belongings. In some of these cases it is probably required for security reasons related to government contracts.

In my state, employees can legally be terminated at any time with no notice and no reason given as long as it is not out of illegal discrimination.

According to the state:

An employer may terminate the services of an “at will” employee, with or without cause, at any time — as long as an employee is not let go for an unlawful purpose, such as age or racial discrimination.

And the reverse is of course true:

Conversely, “at will” employees have a similar right to resign their employment, for any reason (or no reason at all), at any time.

This happens to me as an employer all the time. When an employee shows up to work to return their uniforms saying that they are taking a new job that requires them to start that day, is that ethical? It is certainly legal, and I think it should be. It doesn't violate any terms of employment, either, so it may not really be unethical. The whole two-week notice thing is just a courtesy. That said, there is a certain rudeness about giving no notice, and it basically makes one ineligible for rehire. And there is a certain rudeness about a business closing or laying off its employees without notice as well, which will make it more difficult for it to find employees going forward if it remains in business or re-opens. It's not illegal, and I don't know that it is unethical, but it is rude and inconvenient. There are often probably valid reasons, but it still causes people difficulty and I would want to avoid that if possible.

I guess every state is different. I was under the impression in my state that employers were required to provide a certain amount of notice or severance depending on the employee's length of tenure. But that might only apply to certain types of large employers and certain circumstances.

[mike]

I guess every state is different. I was under the impression in my state that employers were required to provide a certain amount of notice or severance depending on the employee's length of tenure. But that might only apply to certain types of large employers and certain circumstances.

Yes, that is the case in PA for certain employers. It's called the WARN Act.

In general, employers are covered by WARN if they have 100 or more employees, not counting employees who have worked less than 6 months in the last 12 months and not counting employees who work an average of less than 20 hours a week...

Plant Closing: A covered employer must give notice if an employment site (or one or more facilities or operating units within an employment site) will be shut down, and the shutdown will result in an employment loss (as defined later) for 50 or more employees during any 30 day period. This does not count employees who have worked less than 6 months in the last 12 months or employees who work an average of less than 20 hours a week for that employer. These latter groups, however, are entitled to notice (discussed later).

Mass Layoff: A covered employer must give notice if there is to be a mass layoff which does not result from a plant closing, but which will result in an employment loss at the employment site during any 30 day period for 500 or more employees, or for 50-499 employees if they make up at least 33% of the employer's active workforce. Again, this does not count employees who have worked less than 6 months in the last 12 months or employees who work an average of less than 20 hours a week for that employer. These latter groups, however, are entitled to notice (discussed later).

There are also other provisions such as Sale of Business.

[ohio jones]

The question i can’t shake is: Were there no buyers interested in taking over these popular+long-established businesses?
Is there some tax benefit in just abruptly closing?

What’s going on?

Part of the problem is that a long-established business may have no or very little debt. The profit margin may be barely adequate to keep the business open under the current ownership, so it's offered for sale. But a potential buyer is likely to have to borrow to buy the business, and revenue would have to increase to cover the debt service. However, costs are also increasing due to inflation, and interest rates have jumped in recent months. Can prices be raised enough to be profitable without harming sales? If not, either it won't sell, or the new owner will soon be forced to close it.

[Josh]

In essence, rising interest rates make any capital intensive business suddenly not worth as much in terms of market value. The buyer would could just go get a safe 4.10% (or bigger) return elsewhere.

[Ken]

In essence, rising interest rates make any capital intensive business suddenly not worth as much in terms of market value. The buyer would could just go get a safe 4.10% (or bigger) return elsewhere.

And without actually doing any work.

Running a restaurant is endless work.

[Ken]

The question i can’t shake is: Were there no buyers interested in taking over these popular+long-established businesses?
Is there some tax benefit in just abruptly closing?

What’s going on?

Part of the problem is that a long-established business may have no or very little debt. The profit margin may be barely adequate to keep the business open under the current ownership, so it's offered for sale. But a potential buyer is likely to have to borrow to buy the business, and revenue would have to increase to cover the debt service. However, costs are also increasing due to inflation, and interest rates have jumped in recent months. Can prices be raised enough to be profitable without harming sales? If not, either it won't sell, or the new owner will soon be forced to close it.

Restaurants also aren't very scalable. If you own a factory that makes widgets you can potentially double or quadruple your production by adding new machinery, etc. Or increase it 10-fold. You can't do that with a restaurant with a limited size kitchen and number of tables. And there are only a fixed number of dining hours per week. The only way to really grow is to do something like franchise or open new locations.

[mike]

The question i can’t shake is: Were there no buyers interested in taking over these popular+long-established businesses?
Is there some tax benefit in just abruptly closing?

What’s going on?

Part of the problem is that a long-established business may have no or very little debt. The profit margin may be barely adequate to keep the business open under the current ownership, so it's offered for sale. But a potential buyer is likely to have to borrow to buy the business, and revenue would have to increase to cover the debt service. However, costs are also increasing due to inflation, and interest rates have jumped in recent months. Can prices be raised enough to be profitable without harming sales? If not, either it won't sell, or the new owner will soon be forced to close it.

Restaurants also aren't very scalable. If you own a factory that makes widgets you can potentially double or quadruple your production by adding new machinery, etc. Or increase it 10-fold. You can't do that with a restaurant with a limited size kitchen and number of tables. And there are only a fixed number of dining hours per week. The only way to really grow is to do something like franchise or open new locations.

Independent restaurants have it tough. Startups have no brand or image to speak of, where a chain can pop up a new location and have instant recognition. A one-off restaurant takes years to build up a solid customer base, brand, and reputation. And here's the other thing that's uniquely bad about restaurants and bakeries. The hours required to run one are just not attractive. Most people don't want to work early mornings (bakeries) or evenings, and evenings is when restaurants really need to be open if they want to make money. A lot of people don't want to work till 9, 10, or 11 o'clock at night. I can't blame them.

[Ken]

Part of the problem is that a long-established business may have no or very little debt. The profit margin may be barely adequate to keep the business open under the current ownership, so it's offered for sale. But a potential buyer is likely to have to borrow to buy the business, and revenue would have to increase to cover the debt service. However, costs are also increasing due to inflation, and interest rates have jumped in recent months. Can prices be raised enough to be profitable without harming sales? If not, either it won't sell, or the new owner will soon be forced to close it.

Restaurants also aren't very scalable. If you own a factory that makes widgets you can potentially double or quadruple your production by adding new machinery, etc. Or increase it 10-fold. You can't do that with a restaurant with a limited size kitchen and number of tables. And there are only a fixed number of dining hours per week. The only way to really grow is to do something like franchise or open new locations.

Independent restaurants have it tough. Startups have no brand or image to speak of, where a chain can pop up a new location and have instant recognition. A one-off restaurant takes years to build up a solid customer base, brand, and reputation. And here's the other thing that's uniquely bad about restaurants and bakeries. The hours required to run one are just not attractive. Most people don't want to work early mornings (bakeries) or evenings, and evenings is when restaurants really need to be open if they want to make money. A lot of people don't want to work till 9, 10, or 11 o'clock at night. I can't blame them.

Exactly. I have worked every sort of shift in my life, regular daytime shifts, evening swing shifts, and graveyard shifts. By far the worst are evening swing shifts because you are working when everyone else is off and doing things so basically no social life. I'd rather work graveyard shifts and sleep during the day than work from say 4 to midnight and have my mornings free when everyone else I know is working. And if you are married and with kids it means you never see them during the week. You can't coach your kid's soccer team, go to their events, etc.