Raphael Stevens

U.S. health experts are warning a highly contagious Covid omicron variant, called BA.2, could soon lead to another uptick in domestic coronavirus cases.
Officials such as White House chief medical advisor Dr. Anthony Fauci say BA.2 is about 50% to 60% more transmissible than omicron, but it does not appear to be more severe.
The variant is estimated to account for about 25% or 30% of new cases in the U.S.

Dr. Anthony Fauci, White House Chief Medical Advisor and Director of the NIAID, responds to questions from Sen. Rand Paul (R-KY) at a Senate Health, Education, Labor, and Pensions Committee hearing on Capitol Hill on January 11, 2022 in Washington, D.C.
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U.S. health experts are warning an emerging, highly contagious Covid omicron variant, called BA.2, could soon lead to another uptick in domestic coronavirus cases.
White House chief medical advisor Dr. Anthony Fauci said BA.2 is about 50% to 60% more transmissible than omicron, but it does not appear to be more severe. Health officials continue to stress coronavirus vaccines and boosters remain the best ways to prevent serious illness from the virus.

“It does have increased transmission capability,” Fauci said Sunday on ABC’s “This Week.” “However, when you look at the cases, they do not appear to be any more severe and they do not appear to evade immune responses either from vaccines or prior infections.”
The variant has already caused cases to increase in China and parts of Europe. It is estimated to account for about 25% or 30% of new cases in the U.S., but it could become the country’s most dominant variant, Fauci said.

Fauci said he expects “an uptick in cases” due to BA.2, but not necessarily a massive surge like other variants have caused. That’s despite the Centers for Disease Control and Prevention recently relaxing mask recommendations for most Americans.
U.S. Surgeon General Vivek Murthy and Dr. Scott Gottlieb, a board member of Covid vaccine maker Pfizer and a former head of the Food and Drug Administration, also expressed similar views on Sunday regarding BA.2.
Murthy said the variant could cause a new spike in cases but that the country is in a better position now than it was in the previous two years, when Covid-19 “defined our lives.”

“We should be prepared, Covid hasn’t gone away,” Murthy said during “Fox News Sunday.” “Our focus should be on preparation, not on panic.”
Gottlieb, echoing previous comments days before to CNBC, said he also expects “some uptick” due to BA.2 but “not a big wave of infection.”

“I think we’re going to continue to see low levels of infection through the summer. But before we get there, we’re probably going to see some tick-up of infection like the Europeans are seeing right now, maybe not as pronounced,” Gottlieb said Sunday during CBS’s “Face the Nation.”
The CDC reported more than 31,200 new Covid-19 cases Saturday, including 958 deaths. Both are significantly down from the beginning of the year.
Disclosure: Scott Gottlieb is a CNBC contributor and is a member of the boards of Pfizer, genetic testing start-up Tempus, health-care tech company Aetion and biotech company Illumina. He also serves as co-chair of Norwegian Cruise Line Holdings’ and Royal Caribbean’s “Healthy Sail Panel.”

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Chipotle has begun testing a robot chip maker, but automation in the food industry is also moving down from the biggest fast-food chains to small businesses.
Local restaurants are investing in self-ordering kiosks; robots that track inventory are becoming less expensive, and packaging bots can be hired at a cost lower than temp workers.
The search for cost savings is greater in a market with labor shortages and inflation in many costs, from raw goods to wages.

The Tally 3.0 autonomous mobile robot scans inventory in a grocery store.
Simbe Robotics

Automation and robotics are typically associated with multi-million budgets at multi-billion dollar companies. But as the cost of technology has come down, it’s become more affordable to smaller companies — even small businesses.   
Outside of Atlanta in Jonesboro, Georgia, THAT Burger Spot!, a burger and wings joint with four locations, got tired of being slowed down by phone orders.

There’s beef burgers, turkey, Impossible, black bean, fish, chicken and more. Then there’s the matter of how many patties, sauces and other customizations. Given all the choices, a single phone order took an average of seven to eight minutes. And that’s only if there was staff on hand to take those orders.  
“Our menu is a little complex, there’s a lot of options,” said Cedric Pool, president of THAT Burger Spot Franchising, Inc.
“Staffing . . .it was a problem and continues to be a problem,” Pool said. “We figured we will be able to automate the process of order taking, we wouldn’t have to pay somebody to do it.” 
After a search, they found a solution in Grubbrr, which sells free-standing kiosks that can take in-store orders and integrate those with online orders and a point-of-sale system. Pool started with two kiosks in just one location, costing $14,400, which is about how much the company would pay someone over the course of a year to take orders by phone.
After easing customers into using the kiosk and online ordering, the restaurant’s average ticket order increased from around $19 to over $21. Average sales per labor hour moved up from the high $50 range to $85, Pool said. 

“Restaurants have been notorious laggards when it comes to technology. And they’ve done this predominantly because they’ve had access to extremely low labor costs,” said Sam Zietz, chief executive officer of Grubbrr.
According to a recent report by the National Restaurant Association, seven in 10 restaurant operators said they currently don’t have enough employees to support customer demand. The restaurant industry added 1.7 million jobs in 2021, but many restaurants are still severely understaffed and expect labor shortages will continue to constrain growth. 
In the most recent CNBC|SurveyMonkey Small Business Survey for Q1, 17% of respondents in the accommodation and food services industries cited labor shortage as the biggest risk to their business. 

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Dirk Izzo, senior vice president and general manager of NCR Hospitality, a technology provider for restaurants, said in cities including Denver and Jacksonville, Florida, customers cite costs for kitchen and front-of-house staff that are running 20%-40% higher than a year ago.
“If you’re taking on those costs, anything you can do to automate things is a big saving,” Izzo said. 
One example of technology that’s become common and affordable for restaurants is contactless ordering and paying. More restaurants use QR codes at the table that push customers to order and pay from their phones. This is a time saver for staff, who would otherwise need to take the order and then enter it manually into the point-of-sale system.  

Technology is getting cheaper 

The cost of robotics is being driven down by broader investments from the global smartphone industry and the self-driving car industry.
“The cost of this technology has come down quite drastically,” said Brad Bogolea, co-founder and chief executive of Simbe, which provides an autonomous robot that uses computer vision to track inventory in a grocery store, drug store or hypermarket. 
For now, Simbe primarily works with large retailers, but Bogolea said the company also works with smaller retailers with 50 to 100 stores. Simbe’s robotic inventory taker can check an entire store’s inventory three to four times a day and place orders directly when items start to run low. “It’s not humanly possible to scan at that frequency or fidelity with human labor in these environments,” Bogolea said. Retailers traditionally spend anywhere from 30 to 100 hours per store per week on inventory.  
In many cases, technology providers are offering automation as a service. Instead of being saddled with large upfront costs for equipment, companies pay a monthly fee. GreenSeed Contract Packaging, located outside of Chicago, implemented robotics to automate some particularly repetitive packaging functions, such as packing baby snacks into a box or moving packed boxes off the line onto a pallet. The company is billed monthly based on the number of hours the robot is working.  
“Instead of using an agency to get a temp worker, you can get a robot in,” said David Gray, chief executive of GreenSeed. Depending on the structure of the contract, the cost of the robotics is 40% to 50% of what he would pay to hire a person, which costs at least $17 or $18 an hour, not including benefits or the costs to a temp agency. “So you can really reduce your costs and get better consistency,” Gray said.   
While the cost of technology has come down, smaller companies — lacking economies of scale — still need to spend more as a percentage of their revenue than their larger counterparts. Outside of the food sector, one telling example comes from the world of accounting. According to a recent survey by Ernst & Young, 70% of large companies with $30 billion or more in revenue plan to spend between $2 million to $6 million on tax automation technology. By comparison, 81% of smaller companies with less than $1 billion in revenue plan to spend between $1 million to $3.99 million — less, but not that much less. 
“That’s a pressure on the smaller companies where they’re almost spending as much,” said David Helmer, global tax and finance operate leader at Ernst & Young.  

Inflation and small business economics

Inflation is impacting how small businesses look at the cost of automation relative to rising costs in other core areas of their business.
San Francisco-based Nana Joes Granola has been facing higher costs of raw goods and labor and is trying to figure out how to bring the costs of its premium granola down as consumers look more closely at pocketbook decisions. Michelle Pusateri, owner of Nana Joes Granola, said options include reducing the volume in bags by a few ounces, or reformulating the recipe to cut down on ingredients costs, or figuring out how to use automation for its production process and equipment that can make it easier to pump out more volume.
The company, which has Whole Foods among its retail partners, is facing a highly competitive market and while it was able to pass along some costs to customers in 2021 as sale boomed, being a higher-cost granola during inflation is more challenging, Pusateri said.
The company received a Covid EIDL loan, which mostly went to stocking up on ingredients which have risen in price, an inflationary factor that required it to buy in higher volumes to secure better deals. But Nana Joes Granola has also set a small portion of that loan aside for automation on the packaging side of production, and it might also need to take out business loans for equipment.
“I don’t think inflation is going away any time soon. We will be stuck in this and having more volume to pump out with same staff and same overhead is what we are looking at now,” Pusateri said.
Pusateri, who said she supports the higher wages workers are receiving across the economy, adds that investing in automation wouldn’t mean downsizing staff. “The women working for us since 2016 are doing the same things over and over again and there is fatigue in that,” she said.

Arrows pointing outwards

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Bob Iger, left, and Bob Chapek of Disney
Charley Gallay | Getty Images; Patrick T. Fallon | Bloomberg | Getty Images

April 12, 2020. That’s the day former Disney CEO Bob Iger’s relationship with his handpicked successor, current Disney CEO Bob Chapek, began to fall apart.
Iger had stunned the world in February of that year by resigning as Disney’s chief executive, effective immediately. He elevated Chapek, whom Iger and the board had long seen internally as the front-runner for the position given his operational experience and decades at the company. Iger would stick around as executive chairman and direct the company’s “creative endeavors” to help with the transition.

The timing of a CEO change at arguably the world’s most famous entertainment company couldn’t have been worse. Just weeks after Iger stepped down, Disney began closing its theme parks around the world during the initial stages of the Covid-19 quarantine.
Iger and Chapek seemed to be ready for the pandemic challenge together.
“I can’t think of a better person to succeed me in this role,” Iger said March 11, 2020, during the company’s annual shareholder meeting, a day before the company closed its parks.
Chapek returned the optimism.

A Mouse House divided

The pressure is on Disney CEO Bob Chapek, whose contract is up early next year. Some key takeaways:

Chapek effectively froze out former CEO Bob Iger after Iger gave comments to The New York Times that Chapek felt undermined his authority.
Several employees have called Iger to express their dissatisfaction with Chapek over his response to Florida’s “Don’t Say Gay” bill.
Chapek centralized budget power under his right-hand man, Kareem Daniel, a move that irritated several Disney veterans – as well as Iger.
Chapek and Daniel want to speed up the pace of Disney’s digital transformation.

“I’ve watched Bob [Iger] lead this company to amazing new heights, and I’ve learned an enormous amount from that experience,” Chapek said.

One month after those comments, with everyone stuck at home, then-New York Times media columnist Ben Smith published a story after reaching Iger by email. He reported Iger wasn’t going to turn Chapek to the wolves as a brand-new CEO while the world was falling apart. Iger told Smith he would stick around to help run the company.
“A crisis of this magnitude, and its impact on Disney, would necessarily result in my actively helping Bob [Chapek] and the company contend with it, particularly since I ran the company for 15 years!” Iger said in his email.
Chapek was furious when he saw the story, according to three people familiar with the matter. He had not expressed a need or desire for extra help. Iger had postponed his retirement as CEO three times already. Chapek felt he was essentially doing it again, leaving him as a hapless second banana, according to people familiar with his thoughts. Chapek was already reporting to Iger, the board’s chairman, anyway.
The Disney board had little interest in starting a brawl, especially given the state of the company and the world, the people said. Three days after Smith’s story was published, Disney accelerated its timeline and named Chapek to its board.

Bob Iger poses with Mickey Mouse attends Mickey’s 90th Spectacular at The Shrine Auditorium on October 6, 2018 in Los Angeles.
Valerie Macon | AFP | Getty Images

“It was a turning-point moment,” said one of the people familiar with Chapek’s reaction to Iger’s interview with Smith.
Since that incident, Iger and Chapek haven’t been able to mend their relationship, according to about a dozen people familiar with the matter who spoke with CNBC for this story. The people asked to remain anonymous because the relationship and discussions about it are private.
In the months that followed, Chapek began making key decisions about Disney’s future — including a dramatic reorganization of the company and outing actress Scarlett Johansson’s salary following a dispute over her Marvel movie “Black Widow” — without Iger’s input. Internal messages about business strategy from both men would sometimes conflict, as it became clear the executives weren’t speaking with one voice, several people noted.
While much of the public narrative has centered around Iger’s “long goodbye” — he departed as chairman in January — Chapek, 61, has actually been firmly in control of Disney for more than 18 months.
Normal times would have allowed Iger and Chapek to work more closely. Instead, the two executives barely spoke to each other. Chapek has a small circle of close confidants with whom he makes major decisions — longtime right-hand man Kareem Daniel, chief of staff Arthur Bochner, and, to some degree, Chief Financial Officer Christine McCarthy, whom Iger promoted to the role in 2015, according to people familiar with the matter.
Iger hasn’t been part of that circle.
In December, just days before his departure as executive chairman, Iger threw himself a going-away party, inviting more than 50 people at his house in Brentwood, a suburban Los Angeles neighborhood. He spoke at length about his time at Disney in front of the crowd. Chapek attended, but there was little interaction between the two men, according to people who attended the party. Guests — including veteran Disney executives and on-camera talent, such as broadcasters Robin Roberts, David Muir and Al Michaels — sat at two long tables at Iger’s house.
Iger and Chapek sat at opposite tables. Chapek sat near several of his direct reports, including Daniel. Iger sat next to film director and mogul Steven Spielberg. While Iger spent about 10 minutes publicly praising former colleagues, he barely mentioned Chapek, said the people.
“It was extremely awkward,” said one of the guests, who asked to remain anonymous because the party was private. “The tension was palpable.”
Both Iger and Chapek declined to comment on their relationship with each other.

Iger’s shadow

Chapek’s decision to move away from Iger showed chutzpah, but it also put him on an island against a Disney icon, who also happened to be the chairman of his company and a large shareholder. He also hasn’t been able to benefit from the myriad relationships Iger developed from decades at Disney.
Anyone succeeding Iger, who had been Disney’s CEO since 2005, was going to have a difficult time filling his shoes. Iger was generally beloved by Hollywood and highly respected as a CEO, particularly after orchestrating a series of intellectual property acquisitions — of Pixar, Marvel and Lucasfilm — which will likely go down in media history as three of the smartest deals ever. Iger, 71, has even flirted with running for president of the United States.
Chapek, meanwhile, has a harder exterior and at times, according to colleagues, struggles with emotional intelligence — which happens to be Iger’s strength.

Bob Chapek, left, and Bob Iger.
Source: CNBC

The differences between the executives’ leadership styles have come to light quickly in Chapek’s tenure.
Disney’s public spat last year with Johansson over compensation after “Black Widow” streamed on Disney+ at the same time it hit theaters during the pandemic embarrassed Iger, who prided himself on smooth relationships with A-list talent.
This month, Chapek’s public acknowledgement that he let Disney employees down by not fighting harder against Florida’s “Don’t Say Gay” legislation has been another reminder to Iger loyalists that Disney’s brand may be at risk with Chapek at the helm. Weeks before, Iger took a public stance against the legislation.
The messy execution has angered Disney employees. Deadline reported it spoke with several longtime Disney employees who said Chapek’s handling of the situation led to “the worst week they’ve ever had working at the company.” Several Disney employees have called Iger in recent weeks to express their disappointment in Chapek, according to two people familiar with the matter. Chapek met with creative leaders at Disney earlier this month to hear their concerns about his response to the bill, CNBC previously reported.
Perhaps the biggest division between Chapek and Iger was a more mundane one — Chapek’s decision to remove so-called profit-and-loss, or P&L, power from many of Disney’s veteran division leaders and consolidate all of that control under Daniel.
While public controversies generate headlines, it’s likely to be Chapek’s internal changes, and how successful they become, that will determine his future as Disney’s CEO.

Centralizing Disney leadership

In October 2020, about eight months after he took over as CEO, Chapek announced Disney was strategically reorganizing its media and entertainment businesses. This was Disney’s second major reorganization in less than three years. The key part of the announcement was the following:
“The new Media and Entertainment Distribution group will be responsible for all monetization of content —both distribution and ad sales — and will oversee operations of the Company’s streaming services. It will also have sole P&L accountability for Disney’s media and entertainment businesses.”
Those two sentences upended how Disney has done business for decades. The change gave Daniel, the leader of the new Media and Entertainment Distribution group, called DMED internally, one of the most important jobs in the history of media. The decision was instantly polarizing, leading to a burst of internal frustration among some veteran Disney employees who no longer controlled the budgets of their divisions, according to people familiar with the matter.
Chapek wants to streamline Disney so content decisions across distribution platforms can be made in synchrony. Instead of division heads running their own fiefdoms, Chapek and Daniel can steer Disney by controlling the budgets of each group and deciding where content ends up — streaming or cable or broadcast or movie theaters. Executives can then focus on making content, or selling ads, or building streaming technology, with direction from Chapek and Daniel. Historically, the heads of Disney TV or ESPN or Hulu or film would run their entire businesses.
Conceptually, Chapek’s idea actually isn’t all that different from what Iger had begun to put in place with the organization of Disney+. In early 2018, Iger met with Robert Kyncl, chief business officer at Google’s YouTube, according to people familiar with the meeting. Before Google, Kyncl had worked for seven years at Netflix, overseeing content partnerships.

Robert Kyncl, global head of content at YouTube Inc.
Patrick T. Fallon | Bloomberg | Getty Images

Kyncl told Iger if he wanted Disney to start trading at Netflix-like multiples — which were, at the time, orders of magnitude higher than Disney’s — Iger needed to run operations like a technology company. Google separated its content and distribution divisions. The same roles didn’t live within smaller groups, the way Disney had been structured for years.
Kyncl declined to comment to CNBC about the meeting.
If Disney wanted investors to see its burgeoning streaming service as the growth engine in a digital-first world, Iger realized he needed to centralize power around Disney+. According to two people familiar with the meeting, Iger urgently asked then-Disney head of strategy Kevin Mayer to return from the Consumer Electronics Show in Las Vegas so Iger could show him a new organizational structure, which he drew on a whiteboard in front of Mayer. Mayer would become the head of Disney’s new direct-to-consumer unit, in charge of the company’s streaming platforms: Disney+, Hulu and ESPN+. Disney officially reorganized in March 2018.
Power struggles followed. Mayer and Disney TV studio head Peter Rice fought about who had the authority to decide which shows aired on Disney+. Rice’s principal issue was that content executives could no longer have direct conversations with Hollywood talent and tell them whether Disney would make their show or not. Rice feared losing greenlight power would affect Disney’s relationship with Hollywood. If studio executives didn’t have the power to approve projects, they’d quickly lose credibility with creators, who would want to speak with the people at Disney who possessed that authority.

Close-up detail of the Disney+ app icon on an Apple iPhone 12 Pro smartphone screen.
Phil Barker | Future Publishing | Getty Images

Iger had to solve the disputes by making control decisions on the fly. Mayer won the main argument — he would have greenlight power for Disney+. Mayer left Disney in 2020 to become TikTok’s CEO, months after Iger chose Chapek as CEO.
Mayer and Rice declined to comment for this story.
While Chapek didn’t consult Iger about his October 2020 reorganization, he did cite many of the same principles that Kyncl and Iger discussed in 2018.
“Managing content creation distinct from distribution will allow us to be more effective and nimble in making the content consumers want most, delivered in the way they prefer to consume it,” Chapek said in a statement announcing the changes.
When he became CEO, Chapek went on a listening tour of executives to find out what was working and what wasn’t. He heard from both distribution and content executives that the current arrangement had become dysfunctional.
Chapek decided to reverse Iger’s decision to have greenlighting authority rest with the head of the streaming services. He gave that power back to content heads, who have more money than ever before to make programming — Disney plans to spend a record $33 billion on content for fiscal 2022. That’s largely pleased Disney’s content leaders, who can now tell creators directly whether Disney will work with them, according to people familiar with the matter.
But with Daniel getting P&L control, long-term Disney executives also lost the ability to run the businesses of their own divisions. Some creative leaders didn’t mind, preferring to focus on making content rather than selling advertising or working on wholesale distribution agreements with pay-TV providers. Others didn’t appreciate their loss of control over budgets.
Kelly Campbell’s decision to leave her job running Hulu to lead NBCUniversal’s Peacock in October was at least partially motivated by her desire to have more control over a business than what Disney allowed her, according to a person familiar with her thinking.
Campbell declined to comment for this story.
One film executive told CNBC that Disney operated smoothly when Alan Bergman, chairman of Disney Studios, and Alan Horn, former chief creative officer of Disney Studios, were in charge of the studio’s P&L. Film producers knew standard facts, such as a movie’s marketing budget or a film’s release date. In the new world, with Daniel in charge, it’s much harder to find out answers because the creative point people simply don’t know, the person said.
Others saw Chapek’s restructuring as simply pushing the envelope on a trend Iger already started —making it clear to Wall Street that streaming was the company’s new priority. By putting Daniel in charge of a variety of different budgets, Chapek could more easily steer all of Disney in the same direction. Decisions could be made more quickly.
This month, Disney put its new Pixar movie “Turning Red” directly on Disney+ instead of in theaters first. That decision would have taken “months” under Iger’s structure, with division heads flexing their power and knowledge of the market, according to three people who participated in the discussions. Instead, the debate took weeks, with Pixar executives ultimately agreeing that the movie should go to Disney+ first, the people said. “Turning Red” is the No. 1 film premiere on Disney+ globally to date, based on number of hours watched in the first three days.
As with any corporate reorganization, the proof will be in the results. Disney has a target of 230 million to 260 million global Disney+ subscribers by the end of 2024, compared with about 130 million Disney+ subscribers today. If Disney can get there, Chapek and Daniel can claim success — assuming they also revive the company’s shares, which have fallen about 30% in the past 52 weeks, even as crowds have returned to Disney’s theme parks around the world.

Kareem Daniel

Daniel’s P&L oversight for all movie, TV and film distribution, advertising, sales, technology and other divisions — jobs that used to be done by a cadre of Disney employees with 20 or 30 years experience each — gives him one of the most powerful jobs ever created in media. Disney’s fiscal 2021 revenue topped $67 billion and has a market capitalization of about $240 billion. Disney routinely outspends all other global companies by billions of dollars a year on entertainment content.

Kareem Daniel
Source: Business Wire

Iger never agreed with giving Daniel so much control. The former CEO felt stripping division heads of their budget control wasn’t the right structure for Disney because the company was too diverse and complex.
Daniel is a polarizing figure among colleagues who have worked with him.
He’s described by five former and current co-workers as smart, hard-working and gregarious. He studied electrical engineering and got an MBA from Stanford. He’ll slap people’s backs and is fun to engage with outside of work, three of the people said. He’s demanding of his direct reports and holds them accountable, the people said.
Daniel is Black, an extreme rarity among the primary leaders of global media companies. He’s the first Black senior executive ever to report directly to the Disney CEO in the history of the company. That carries weight with certain employees, who respect the symbolism of a minority leader in such a high-profile role.
Like Chapek, Daniel has worked in a variety of Disney units, including studio distribution, consumer products, games and publishing, Walt Disney Imagineering, and corporate strategy. He’s been close to Chapek for two decades, first working for him as an MBA intern in 2002. When Daniel moved to corporate strategy, he again worked with Chapek on a variety of projects in 2007 and 2008. He worked under Chapek in distribution for Walt Disney Studios in 2009, when he was part of the M&A team that bought Marvel Entertainment, before following him to consumer products in 2011.
Chapek was particularly impressed with Daniel’s consumer focus when the two worked together to shorten the theatrical window from four months to three months at the end of 2009, according to a person familiar with the matter.
But some of the same people who note Daniel’s strengths also told CNBC the job may be too big for him — or almost anyone.
“He arguably has the most important job at Walt Disney, outside of CEO, and he has almost no experience running any of these businesses that were previously run by people that had decades of experience,” said one former coworker.
Chapek disagrees with that assessment, according to a person familiar with his thinking. He understands the job is massive in scope but feels that Daniel is suited to handle it given his varied experiences at Disney, including as president of consumer products, games and publishing, and president of operations at Walt Disney Imagineering.
Since his promotion announcement in October 2020, Daniel hasn’t done any published or televised interviews. He declined to comment for this story.

‘One Disney’

Ideally, Chapek would like consumers to experience a more unified digital Disney experience, whether it’s logging into Disney+ or buying merchandise from the online Disney store or managing theme park experiences with Disney’s Genie service, which is a kind of digital concierge. Internally, some employees informally speak of this grand challenge of unifying Disney technology and experiences as “One Disney.”

Handout | Getty Images Entertainment | Getty Images

Chapek and Daniel want to hasten the pace of Disney’s digital transformation. In January, Chapek established company goals to “set the stage for our second century, and ensure Disney’s next 100 years are as successful as our first.” Two of the main themes were breaking down silos and innovation.
Disney, by nature and history, isn’t a technology company, even though it’s trying to restructure itself to be like one. In general, its employees don’t have the same type of technological know-how that you’d find at Apple and Google.
That’s problematic for a company that wants to trade at a technology-like multiple. According to a person familiar with the matter, Disney has struggled to build back-end technology to sell advertising on all of its streaming services — Hulu, Disney+ and ESPN+ — and traditional distribution channels. Disney+ and ESPN+ run on streaming infrastructure from BAMTech, a spin-off of MLB Advanced Media that Disney bought in 2017. Hulu has its own separate infrastructure.
Chapek and Daniel are still trying to streamline the organizational structure. Disney hires people dedicated to marketing or selling ads for its streaming services, ESPN, ABC and Disney’s entertainment cable networks, including some from its acquisition of 21st Century Fox. Those jobs can be duplicative and work against a “One Disney” experience.
Chapek has several times mentioned Disney building its own metaverse, although he hasn’t gone into detail about what exactly that means. Last month, Chapek promoted veteran executive Mike White to be Disney’s senior vice president in charge of “next generation storytelling.” In a memo seen by CNBC last month, Chapek said White’s goal will be “connecting the physical and digital worlds” around Disney entertainment.
Chapek will also have to decide what to do with Disney’s current assets. Some media analysts, such as LightShed’s Rich Greenfield, have argued Disney would be best off spinning out ESPN and combining it with a digital sportsbook. But that hasn’t been Chapek’s priority. ESPN relies on traditional TV affiliate fees, and it may not be strategically aligned with Disney’s direct-to-consumer ambitions, but the company has no plans to spin off or sell the sports network, said people familiar with the matter. ESPN has considered licensing its name to sports betting companies, but Disney isn’t interested in buying one, the people said.
Chapek will need time to show his own employees and shareholders that he can be trusted to accomplish goals he lays out. Nearly everyone interviewed for this story said that while Chapek may not be a “people person,” he’s a skilled and determined operator. Disney’s fiscal first-quarter results blew away analyst estimates on earnings per share, revenue and total Disney+ subscribers.
Several current Disney executives noted that Chapek’s No. 1 priority — setting up Disney for a digital world where streaming dominates and legacy distribution models fade away — is exactly what Iger believed in. That adds an element of sorrow to the men’s failed relationship. Their end goals are the same.
It’s possible Disney employees and the broader media and entertainment world simply get used to Chapek’s method of leadership with time. Chapek clearly isn’t Iger, but perhaps his biggest challenge will be convincing everyone it’s OK not to be.
Chapek’s contract is up at the end of February 2023.
Iger regrets how the change of control has transpired, one person said. But he’s also not returning to Disney, he told Kara Swisher in a January interview.
“I was CEO for a long time,” Iger said. “You can’t go home again. I’m gone.”
Disclosure: NBCUniversal is the parent company of CNBC.
WATCH: Disney CEO Bob Chapek addresses Florida’s ‘Don’t Say Gay’ bill

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Wendy’s launched its breakfast menu nationwide in early March 2020, just before pandemic lockdowns shuttered dining rooms.
But the burger chain stuck to its plan, and it’s now preparing to overtake Burger King as the number two burger chain in the breakfast category.
In 2022, Wendy’s expects its breakfast sales to climb 10% to 20%.

The Breakfast Baconator and Seasoned Potatoes are part of the breakfast menu at Wendy’s restaurants on March 2, 2020 in New York City.
David Dee Delgado | Getty Images

Two years ago, Wendy’s launched its breakfast menu nationwide, finally crossing the finish line for a goal it tried and failed at for nearly four decades. Then came Covid lockdowns.
Before the pandemic, breakfast was the only meal that drew a growing number of customers to fast-food chains. Lunch and dinner traffic was shrinking as consumers chose healthier options or made their meals at home. For Wendy’s, entering breakfast would allow the burger chain to attract new sales without cannibalizing its lunch, snack or dinner traffic.

Wendy’s stuck to its plan even as Covid took hold, serving up egg sandwiches and breakfast burgers as rival restaurant chains opened later or trimmed their early morning offerings. It now holds the third-largest market share of any burger chain in the competitive breakfast category, behind Restaurant Brands International’s Burger King and a dominant McDonald’s.
By the fourth quarter of 2021, breakfast sales accounted for roughly 8% of Wendy’s U.S. sales, still shy of the chain’s goal of 10% of total U.S. sales. Last year, the company grew its breakfast sales by about 25%, and Wendy’s thinks the daypart has more room to grow. In 2022, the burger chain expects its breakfast sales to climb an additional 10% to 20%.
“For us, right now, we’re very solidly and very quickly established as the number three, but we’re only about a share point behind Burger King,” Wendy’s U.S. President Kurt Kane said in an interview. “Our first job is to leave them behind, which we’re very confident that we’re going to be able to do here in the not-too-distant future.”
Burger King’s U.S. business has struggled in recent years, and its weak breakfast performance hasn’t helped. In the fourth quarter, Burger King’s U.S. same-store sales rose just 1.8%, trailing both McDonald’s and Wendy’s metrics for their home markets.
And even though McDonald’s is still the dominant player in the early-morning daypart, Kane said he thinks Wendy’s could eventually become number one.

“We think the Frozen Arches have had plenty of time at the top of the breakfast category, but I think we’ll obviously keep nipping away at that and gobbling up share across the rest of the category,” he said.
In late February, Wendy’s announced it would be taking its breakfast menu to all of its Canadian restaurants this spring.
Shares of the company have risen 7.6% over the last 12 months, bringing its market value to $4.76 billion. The stock has underperformed the S&P 500, but it’s doing better than shares of McDonald’s and Restaurant Brands International.

Becoming a pandemic winner

Wendy’s breakfast was available nationwide for only about two weeks before states and localities ordered restaurants to shutter their dining rooms and switch to serving their food through delivery, takeout and drive-thru lanes.
According to Kane, the company discussed the option to modify its breakfast plans with franchisees once lockdowns went into effect, but their operators committed to keeping the momentum going.
“We were off to a fantastic start, well ahead of any projections that any of us could have hoped for in those first two weeks,” Kane said. “We knew if we could keep it going, we could build new habits and create a lot of fans through the process.”
Wendy’s had a leg up on the competition anyway since it had already designed the first two-and-half hours of its breakfast service to be drive-thru only.
On top of that, Wall Street analysts had anticipated that its fast-food rivals would step up their own breakfast deals and advertising to maintain customers’ loyalty. Instead, many restaurants found themselves hoarding cash, cutting advertising and eliminating promotions as their sales took a nosedive.
Wendy’s took the opportunity to spend more on marketing and spread awareness.
The pandemic didn’t just impact the competition’s marketing plans. Some fast-food restaurants even stopped selling the early-morning meal because of staffing issues and to preserve their profitability. Many Taco Bell locations began opening after breakfast hours and only resumed their prior schedule this September.
Still, Wendy’s hasn’t been immune to some of the pandemic’s pressure points. Like the rest of the broader restaurant industry, its franchisees struggled at times with staffing shortages, although Kane said efforts to recruit more workers ahead of the breakfast launch helped.

Changing routines

The timing of Wendy’s breakfast launch gave consumers the opportunity to start a new morning habit just as the rest of their daily routines were turned upside down.
“Even though it wasn’t the way that we would’ve drawn up the playbook, it may have actually helped us because it gave us the opportunity to really build it in a steady way,” Kane said.
Many consumers stopped commuting to offices or schools, so they changed up their breakfast routines. Cereal and orange juice sales came roaring back after declining for years, but restaurants saw demand for their breakfast drop sharply. Starbucks, for example, saw many of its customers delay their visits, opting for an after-lunch coffee instead of a morning cup.
Before the pandemic, Wendy’s anticipated that its busiest times would be from 7 a.m. to 9 a.m. as consumers went to work. Instead, the company saw its longest breakfast lines in the last half hour of service.
Of course, that pattern is shifting again as more consumers return to offices and schools.
“Even though the pattern is different, breakfast mobility is pretty much back to where it was prepandemic,” he said.
From September to November, online and in-person traffic to restaurants during breakfast hours rose 11%, compared with a 10% decline in the year-ago period, according to The NPD Group.
As early-bird customers return, Wendy’s has used aggressive promotions to drive traffic to its restaurants and build awareness for its breakfast offerings. From November to mid-December, it sold its egg and cheese biscuit sandwiches — with a choice of sausage or bacon — for just $1. Kane said to expect similar deals in the coming months.
The chain also recently launched its first addition to the breakfast menu since its debut: the Hot Honey Chicken Biscuit. It’s a play on the Honey Chicken Biscuit, which is tied with the Breakfast Baconator as Wendy’s top-selling breakfast items.
Between the two crowd favorites, though, Kane has a clear favorite: He claims to have eaten 720 Breakfast Baconators since the official launch — just about one a day.
“Some days you get two, some days you don’t get any, but you have to balance it out,” Kane said.

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Volkswagen recalled 246,000 Atlas and Atlas Cross Sport SUVs in the U.S. and Canada due to a wiring issue could impact the airbags, windows and brakes of the cars.
The recall includes the 2019 through 2023 Volkswagen Atlas, as well as the 2020 through 2023 Volkswagen Atlas Cross Sport.
Volkswagen will notify owners and dealers by mail on May 10, 2022, if their vehicles are included in the recall and send a second letter when there’s a fix for the issue.

David Gray | Reuters

Volkswagen recalled 246,000 Atlas and Atlas Cross Sport SUVs in the U.S. and Canada because of a wiring issue that could cause problems with the airbags, windows and brakes of the cars.
Damage to the wiring of the cars could result in airbags deploying “later than designed,” which could lead to injury of people in the vehicle, according to a report from the National Highway Traffic Safety Administration.

The wiring issue could also cause other problems in the cars, including the vehicle’s windows rolling down on their own and its electronic parking brake inadvertently engaging at low speeds.
Currently, the company does not have a fix for the issue, according to the report, however Volkswagen will offer a reimbursement program for recalled vehicles.
The recall includes the 2019 through 2023 Volkswagen Atlas, as well as the 2020 through 2023 Volkswagen Atlas Cross Sport.
Volkswagen will notify owners and dealers by mail on May 10, 2022, if their vehicles are included in the recall. The company will also reach out again when a fix is developed so owners can bring in their SUVs for repair.
In the meantime, owners can check the National Highway Traffic Safety Administration’s website to see if their cars are included in the recall by searching their vehicle identification number, or VIN.

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Smart Tax Planning

CNBC spoke with Erin Collins, the national taxpayer advocate, who leads an independent organization within the IRS, fighting for systemic changes.
As “voice of the taxpayer,” she oversees about 80 nationwide offices providing one-on-one assistance, consults within the agency and presents legislative proposals to Congress.  
“It was the only job I would have considered for coming out of retirement,” said Collins, who has more than 35 years of tax law experience tackling IRS controversies.

Erin M. Collins
Source: Erin M. Collins

If you’re one of the millions of Americans grappling with IRS issues, you may not realize there’s another option for your unresolved problems.
The Taxpayer Advocate Service, known as TAS, is an independent organization within the agency, providing one-on-one guidance and fighting for systemic changes.

Erin Collins, the national taxpayer advocate, leads about 80 nationwide offices for struggling filers, consults within the IRS, reports annually to Congress on the agency’s biggest problems and presents legislative proposals.
Taking the reins in March 2020, she’s had a front-row seat for the pandemic’s devastating effects, contributing to “the most challenging year taxpayers and tax professionals have ever experienced,” as described in her 2021 annual report to Congress. 

More from Smart Tax Planning:

Here’s a look at more tax-planning news.

The National Taxpayer Advocate hotline fielded nearly 3 million calls between Oct. 1, 2020 and Sept. 30, 2021, a 990% increase from the previous 12 months, and received 264,343 new cases.
And currently, the IRS is buried by a backlog of tens of millions of unprocessed returns, which Commissioner Charles Rettig expects to clear by the end of 2022.
CNBC spoke with Collins about her key role during an unprecedented time for the IRS. The interview has been condensed and edited for clarity.

Kate Dore: I’d love to hear about your career path to becoming the national taxpayer advocate.
Erin Collins: You make me smile when you ask like I really planned this. When I was in law school, one of my professors, who I think always wanted to work for the IRS Chief Counsel, pointed me in that direction.   
I wasn’t really sure what I was doing, but in hindsight, it was a great choice. So I went right from law school to the IRS Chief Counsel. I worked there for about 15 years and wore multiple hats that were very helpful for my current role.
And then I joined [accounting firm] KPMG in their IRS controversy practice, which was interesting because it’s changing from one side of the table to the other. They look at tax completely differently than the IRS.
KD: You joined the Taxpayer Advocate Service in March, 2020. What made you most interested in this role?
EC: So I had just announced my retirement with KPMG, and I really was thinking of retiring. I had no intention of going back into the tax field. And when the position came up, it was the only job I would have considered for coming out of retirement.
I think it’s a fascinating position, and I’m very privileged to be serving as the national taxpayer advocate. We can be independent, step back and look at things a little bit differently than our IRS colleagues.
KD: Your 2021 annual report to Congress outlined a number of IRS recommendations. Which of the suggested changes are we most likely to see in the near term?
EC: Boy, that’s a tough one. There are an awful lot of recommendations, and some they have already implemented. 
One was for automated collection notices. We recommended that the IRS postpone or suspend those until clearing the correspondence backlog. They recently agreed to suspend a lot of those notices, which I think has been a big help for taxpayers.
One of the things I am a firm believer in — and I think the pandemic really highlighted the need for — is a robust online account for individual taxpayers and businesses.
I think it’s the IRS’ intention to continue increasing online account functionality. It’s just going a little bit slower than I would like.
KD: What are the biggest obstacles to achieving all the improvements you’ve suggested?
EC: The biggest challenge for technology is sustained funding. It’s very difficult to take on a large IT project if you don’t know what your budget will be year to year. It’s the biggest challenge the IRS faces on truly modernizing and getting to where I believe they want to be.
I think they want those with a smartphone or computer to have access to IRS representatives or chatbots for answers to basic questions.
Whether it’s uploading documents or filing returns, if a large percentage of taxpayers can do that online, that’d free up the phones for those who truly need it.

KD: Is there a specific section of your website that you’d recommend as a starting point for someone with an IRS issue?
EC: We have a qualification section of the website that I would recommend. We have what I would call two buckets: those with financial hardship and those with systemic issues. 
For example, let’s say the IRS said they would process your correspondence within 60 days, and now it’s 90 or 120 days past that period of time. You would qualify for TAS’ services. 
Unfortunately, this past year or two, that is a very large number of taxpayers. There are millions who qualify for our service.

Who may qualify for TAS assistance:

Financial hardship
IRS system issue
Fair and equitable treatment

See if you’re eligible with the TAS qualifier tool.

KD: Is there anything else that’s important for readers to know about the Taxpayer Advocate Service?
The last two years have been incredibly difficult for taxpayers and tax professionals because of the inventory backlog challenges, and a lot of taxpayers are still waiting for their refunds.
One of the misconceptions is not understanding our authority. For example, if there’s an error on your return and the IRS is incorrect, we will work with you. But we do not have the authority to fix the issue. We refer it over to our colleagues at the IRS and advocate on your behalf.

Taxpayer Advocate Service resources: More

A car buyer may never see crash test dummies, but they are a crucial piece of what keeps pushing automotive safety forward.
The latest crash test dummies are loaded with sensors and new tech, and they can cost $1 million. Major automakers and suppliers can have fleets of dozens of dummies. New dummies are also made to be more biofidelic, which means true to the actual shape and features of the human body.

Humanetics, the world’s leading maker of crash test dummies, has paid specific attention to making its latest generation female dummy more true to the shape of actual women. The female dummy most commonly in use today, called the Hybrid III 5F, is basically a shrunken version of the male Hybrid III dummy, with male proportions and weight distribution.
The latest generation frontal impact dummies have a greater array of sensors, onboard computers and designs that are meant to better resemble the heftier people of today. The average American has gained a few pounds since the early 1980s, when the previous generation was made.
Automakers and some vehicle testing groups around the world have already adopted the latest dummies, but some have held back, including the U.S. government.
To learn more, watch the video.

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