Thursday, July 17, 2014

The Catch-22 of mass transit (Metrolink, SanBAG, and San Bernardino line service)

When I moved from Portland, Oregon to Upland, California in 1983, one thing that I clearly lost was an excellent mass transportation system.

When I lived in Portland, I was able to use Tri-Met's bus service (this was when Tri-Met only had buses) to get from my apartment (and previously my college) to downtown, and from there to anywhere in Portland that I needed to go. The buses ran frequently, people used them, and the Portland metropolitan area was (relatively) compact enough to support a unified mass transit service.

By the time I arrived in Upland, I found myself on the fringes of the Los Angeles metropolitan area. The Omnitrans bus service covered southwestern San Bernardino County, but in car-loving El-Lay it wasn't used all that frequently, and you had to figure out a maze of other services if you wanted to get to downtown Los Angeles.

Metrolink has emerged as a way to get from the outer suburbs to downtown, but it covers six counties and is governed by five of them. (I had thought that Metrolink was governed by six counties, but David Allen is not one to get his facts wrong; it turns out that San Diego County is an ex-officio member - see PDF.)

Regardless of how many counties govern the system, Metrolink serves a lot of counties, as the aforementioned Allen notes:

Metrolink sent bills for the fiscal year that began this month to those five counties’ transportation agencies. Four counties agreed to their share, paying 7.3 to 14 percent more than last year, but San Bernardino refused.

SanBAG, the San Bernardino County agency in charge of mass transit, rejected the 8.8 percent increase and provided a 3 percent increase instead. As a result, Metrolink has removed from trains from the San Bernardino line (the one I talked about recently), including midday and late evening weekday trains. (Late evening weekend trains are unaffected.)

While some may wish that mass transit agencies were solely driven by market conditions, the truth is that money spent on mass transit is money that does not have to be spent on other things, such as road repair. Therefore, there is some incentive for local governments to subsidize mass transit.

But by how much? Allen discussed this with Larry McCallon, Highland councilman, SanBAG board member, and Metrolink board member.

“I do believe we’ve reached a tipping point on fares,” McCallon said, “and we should look at reducing them.” He added with a chuckle: “But that would take a greater subsidy from member agencies. It’s a Catch-22.”

Now perhaps we'll have a complete and total world war in the Middle East AND South America, driving oil prices sky high. Then I KNOW that Metrolink will be able to get funding.

Wednesday, July 9, 2014

Forbes, Crumbs...and My Delight Cupcakery?

Yesterday, Forbes ran a piece discussing the demise of a cupcake chain known as Crumbs - and the claim that Crumbs' problem was that it had an expensive product of limited interest.

In 2013, when we wrote of the cupcake’s imminent death, Crumbs’ stock had sunk to $1.27 from a 2011 peak of $13. The day the company gave notice of its delisting, shares closed at 23 cents.

At the time, Wedbush Securities restaurant analyst Nick Setyan notes that that Crumbs’ $3.50-plus-per-cupcake price tag made it an unappetizing prospect versus some of its cheaper regional counterparts — not to mention Krispy Kreme and Dunkin Donuts.

So, does that mean that all stores that sell gourmet cupcakes will shutter their doors?

Or, more specifically for me, does it mean that Ontario's My Delight Cupcakery may disappear one day?

Well, My Delight has one thing going for it that Crumbs doesn't have. Let's return to Nick Setyan's analysis.

On Tuesday, Setyan said he wasn’t surprised to see Crumbs close up shop. “They expanded too quickly with a product that simply was not differentiated or compelling enough,” he said. “When the returns are not there, it’s impossible to continue to operate.”

According to Forbes, Crumbs had expanded to 50 locations. My Delight has obviously not expanded that much.

In addition, My Delight aggressively maintains a local presence in their market.

Now perhaps My Delight may choose to expand its product offerings at some point, but that doesn't necessarily guarantee success. I used to work for Motorola, and during my time at the company, it sold everything from automated fingerprint identification systems to police radios to cellular telephones to cable set-top boxes. Motorola was not especially helped by this diversification.

So, rather than the demise of an industry, Forbes may instead be looking at a shakeout of the bad companies in the industry, leaving the good ones to prosper.

Or so I hope.