How Family Businesses Are Being Shut Down By Financial Difficulty
Last week Daddy’s Junky Music abruptly closed all their stores throughout New England. For those who live in the North East, the family owned Daddy’s music stores have been a cultural icon for 40 years.
Daddy’s is where millions of Americans bought their first guitar, learned to play the bass, met other musicians, got to visit with touring superstars, and even performed at frequent open mic nights on the in-store stages.
The Daddy’s stores were run by musicians for musicians. They accepted ALL used instruments with generous credit toward a new instrument or cash. This policy, virtually unknown in the music business, was a catalyst behind making New England one of the most exciting music scenes in American history.
In recent years the New England states (Connecticut, Massachusetts, Vermont, New Hampshire, Rhode Island and Maine) have had more local performances, more active online discussion groups for musicians, and far more trading of musical instruments. Just check and Craigslist for a taste.
Daddy’s was clearly behind all this. Yet the music retail business is one of small profits and tough competition. You don’t own a music store to get rich. You do it for the love of music.
Financial Problems Due to Recession
Daddy’s owner Fred Bramante (who started the first location with just a few hundred dollars and some old guitars) continued to put Daddy’s locations in more communities. Just like virtually every other American business, he did this by borrowing expansion capital from a commercial bank. In this case — GE Capital. GE Capital is the bank division of General Electric.
Then in 2008 the Great Recession hit and sales slumped. Daddy’s figured they could work harder, plan smarter, save money where ever they could, and weather the storm.
This year, with the recession dragging on longer than expected, Daddy’s closed several less popular stores and tightly focused their product lines. Bramante reported in many press interviews that they were optimistic their earnings would be back on track after the Holiday Season.
This is the standard scenario for almost all of America’s retail businesses both large and small. As much as half of the year’s sales are earned during the Christmas season.
But a catastrophe was just around the corner. In late October Daddy’s received orders from their bank to pay $3 Million within five days or else lose the entire Daddy’s chain.
Bramante said in newspaper and radio interviews this demand was unexpected. Daddy’s had no choice but to shut down all their stores and layoff more than 100 employees. Thousands of customers were left in the lurch after putting money down on orders, paying for orders that could not be delivered, or stuck with worthless gift cards and credits that could not be redeemed.
Daddy’s explained on their Facebook site EVERYTHING they owned, including bank accounts, were being controlled by the bank. The stores were powerless to help customers.
What This Means For YOU
This is simply another instance where the ongoing recession put a family businesses in trouble. To make the situation even more dangerous, financial suppliers are being encouraged or forced to be extremely conservative.
Here’s what YOU can do:
1. Post your ideas and comments on social media. Financial providers, no matter how insulated, monitor social media. They see what you say.
2. Write an old fashioned letter and mail it. The complaint letter has been proven to work in university studies.
3. Talk to friends, write a letter to your local paper, speak your mind. You’ll be surprised how many people support you.