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By Kevin Nunley
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 Daddys music stores have been a cultural icon for 40 years.
Daddys 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 Daddys 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, and Maine) have had more local performances, more active online discussion groups for musicians, and far more trading of musical instruments. Just check OpenMics.org and Craigslist for a taste.
Daddys 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.
Enter GE Captial
Daddys owner Fred Bramante (who started the first location with just a few hundred dollars and some old guitars) continued to put Daddys 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 divison of General Electric.
Then in 2008 the Great Recession hit and sales slumped. Daddys 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, Daddys 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 Daddys received orders from GE Capital to pay $3 Million within five days or else lose the entire Daddy’s chain.
Press accounts show this demand came completely out of the blue. Daddys 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.
Daddys explained over and over on their Facebook site EVERYTHING they owned, including bank accounts, were being controlled by GE Capital. The stores were powerless to help customers.
Additionally, GE Capital refused to respond to Daddys when asked what would happed to customer credits, orders, and payments.
What This Means For YOU
This is simply another instance where big city bankers made a cold decision to shutter a struggling family business. Unfortunately in this case the sudden closing of Daddy’s left a huge hole in the lives of millions of Americans.
Could GE have worked with Daddy’s just a few more weeks to let Holiday sales come in?
Could GE have communicated better with the family business so they could have averted the ridiculous “pay $3 Million this week or we own you” demand?
Is this move entirely justified by GE’s circumstances and business plan, or is it simply a callous action meant to insure its executives’ year-end bonuses.
A difficult economy demands a different kind of management and better decision making. Especially banks need to realize they have inordinate power in American society and must act responsibly before shuttering key institutions and sectors.
Anything less is reprehensible. No wonder so many Americans oppose Wall Street. No wonder increasing millions feel new financial regulation (or re-regulation) is in order.
Here’s what YOU can do:
1. Post your ideas and comments on social media. Big corporations, 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.
About the Author: Kevin Nunley is a small business owner who has worked for decades to help others start and grow family businesses. email@example.com