The closure of the Peanut Shop on Market Square has been reported elsewhere, but not mentioned here, as it happened over the holidays. Hopefully it will be the final closure on Market Square for the foreseeable future and we’ll have good news to report soon. There are many reasons businesses fail and they certainly fail everywhere, but when so many fail in such a short time in the heart of Knoxville, it’s somewhat startling.
I thought we might take a look at some of the reasons these businesses ended. I had the opportunity to talk at some length with a former manager of the Peanut Shop (who asked that her name not be used). I’ll also address a rumor that has floated around downtown recently.
There is really very little in the way of a thread that runs through the various businesses which have closed. I’ve mentioned that owner Willy Rosenberg has health issues and didn’t have a great last part of the year. Latitude 35 had a number of issues, among them the fact that they lost their alcohol license. Steamboat is returning to a previous location where they own the building and won’t have to pay rent. Those are all local businesses.
There are two franchise businesses which have closed: Orange Leaf and the Peanut Shop. As I mentioned in the update to the triple closing article, Orange Leaf has problems which have nothing to do with Market Square. All the stores in Knox County closed at the same time. There is also a 33 million dollar lawsuit against the chain. The one on Market Square seemed popular enough to me, but how many cups of yogurt would you have to sell every day to keep the lights on, pay the rent and the employees? It’s hard to imagine selling enough.
The Peanut Shop is a bit more confounding to many downtown residents. It seemed really popular. Urban Woman and I took all out-of-town guests there as did many people we know – and they usually bought nuts and other items. We also bought a significant number of gifts, host/hostess presents and nuts for parties. It was often crowded and not unusual to see people with arms-full of of items. Urban Woman single-handedly bought most of their root beer, which she loved. So what went wrong?
The former manager said there were a number of issues, some related to Market Square and downtown and others not so much. First, she felt the store was doomed from the beginning due to unrealistic expectations from the Smithfield corporation which owned it. She indicated that the corporate model involved passing on a share of corporate costs to each franchise, including book-keeping and other costs. They also had to provide extensive benefits due to the fact that they were part of a larger corporation. The company essentially expected $25,000 worth of business each month from the beginning. They didn’t make that.
Strangely, a visit from the corporate office in late summer/early fall ended with accolades to the local franchise, indicating the team and the store were doing very well. That was about three months from the decision to close it for good. Interestingly, it outlasted the Gatlinburg store which opened about the same time two years ago and closed last March. That sort of shoots down the idea that the store needed to be in more of a tourist area.
She did cite some specific issues with downtown. First, she feels the daily foot-traffic just isn’t sufficient for a store like that to survive. There are enough people when the weather is good and a lot is happening downtown, but take, for example, January and February with the kind of weather we are slated to have this week and the store cannot keep up the sales pace required.
A larger issue, she felt, was the homeless issue on the square. Daily issues arose with homeless people coming through the store to eat the samples and wanting to linger until they were full. Additionally, the groups of homeless people who are increasingly camping out on the square each day became a problem. The stage has varying numbers of homeless people any given day who often spend the day there – doing what? Customers were often panhandled.
The group of young homeless people who travel in a pack with their animals were a particular problem. Their aggressiveness with panhandling and the fact that they camped in front of the store – to charge their cell phone, no less – she felt, made customers uncomfortable. The sight of this group eating food from the garbage cans on the square isn’t exactly good for a food business.
She also mentioned parking, feeling that it costs too much at $7, if you just want to spend a couple of hours downtown. I pointed out that $7 is the maximum for a day in the garage. It’s actually a dollar an hour, so a couple of hours costs a couple of dollars. Pretty cheap compared to most cities I’ve ever visited, but I’ve said that so many times on this blog, I don’t know a new way to say it. She mentioned that street parking could be brought back to Market Square so people could park in front of the stores they want to visit.
Sounds like she’s down on downtown, right? Actually, she said she feels downtown is still ascendant saying, “it hasn’t reached its zenith.” She even indicated she will consider opening a business downtown at some point. To her, the best scenario is a local business with money to cover six months of expenses or more. She pointed out that, often, chains care only about the bottom line and will quickly leave if they don’t see the desired profit, but also that often local business owners open their doors with the expectation that the business will support itself from the beginning.
She didn’t name a specific business that she felt would be good for downtown, but she mentioned businesses that, “are a draw,” and immediately named a chain: Apple. She’s not the first person to wish we had an Apple store downtown and she feels they have a different corporate approach that would work in the city. She also felt that the Chamber and other groups downtown like CBID and the Market Square Merchants Association need to become more aggressive in identifying the impediments to downtown businesses and then they need to work to find solutions.
But that’s an article or articles for another day, as are the increasing rents on Market Square and the grease interceptor issues. We have plenty of obstacles with which we must contend, but I’m still very optimistic. I’ve lived downtown five years and written this blog for nearly that long and this is the first time I remember hitting such a significant downturn. Taken together, the last five years have been an amazing time of growth. Clearly that doesn’t mean we can become complacent going forward.
Oh, and the rumor? The rumor has persisted for the last week or so that Bluetique would join the list of closed businesses. Not true according to the manager to whom I spoke yesterday. She said the business is doing very well and they are holding a big January sale in order to make room for spring fashions. So, rumor killed.