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Vol. 31, No. 6
Study: NE Ohio’s logistics off course Local trade advocate reveals shortcomings within area’s distribution hub; other cities steam ahead By JAY MILLER jmiller@crain.com
A study due out this month from a local economic development cooperative says Northeast Ohio has fallen far behind Columbus and
the Toledo area as a center for the transportation and distribution of cargo from around the world. It lays the blame for that lag on a lack of coordinated regional planning for logistics and freight-related transportation improvements.
“(The study) points out a deficiency we have” in Northeast Ohio, said Ron DeBarr, president of the study’s sponsor, the Northeast Ohio Trade & Economic Consortium, or NEOTEC, in Kent. “It seems like Northeast Ohio is coming up short.” NEOTEC was created in 1996 to coordinate and bolster the economic development efforts of six counties in the southern tier of Northeast Ohio. Since then, it has expanded its scope
by operating a foreign trade zone and by doing research on economic development issues for the broader region. Its report says the Columbus and Toledo regions have done a good job developing their logistics infrastructures by securing state and federal money for highway and rail improvements and by linking with freight railroads. These planning efforts have spurred investments in
freight transit terminals by the railroads, and have attracted new businesses, notably distribution centers for retailers, and new jobs. “By comparison, Northeast Ohio has no such ambitious projects,” the report’s executive summary says. “Nor does it have equivalent governmental, industry and university support for planning, defining niche markets and developing new business See LOGISTICS Page 4
Recall creates inventory log jam for Toyota dealers Vehicles awaiting fix languish on sellers’ lots By DAN SHINGLER dshingler@crain.com
JASON MILLER
Michael Matoney, executive director of New Directions, a nonprofit that provides substance abuse treatment for teens, is encouraged by local foundations’ efforts to foster collaboration among nonprofits.
STRENGTH IN NUMBERS Foundations spearhead collaboration among nonprofits as demand for services rises, and funds become scant By SHANNON MORTLAND smortland@crain.com
N
See NONPROFITS Page 6
– Ken Schneider, co-owner, Metro Toyota in Brook Park Mr. Gile said. Fixing customer cars first, though, means his own inventory will wait to be repaired and sold. And that’s a costly proposition. Mr. Gile said about 75% of his inventory of roughly 200 cars is affected by a recall of the problem accelerators, which have been blamed for causing vehicles to speed up unexpectedly. He estimated the average dealer cost of those vehicles at about $25,000 each — leaving him with about $3.75 million in inventory he could not yet sell. Other Toyota dealers are in the same position when it comes to See TOYOTA Page 18
INSIDE Franchisors entering new territories It is estimated that there will be more than 900,000 business-format franchise establishments in the U.S. in 2010, a 2% increase from the previous year. Indeed, some local entrepreneurs are finding that the business model pays off, allowing them to grow faster than they might have been able to on their own. Read Amy Stoessel’s story on Page 13.
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onprofits in Northeast Ohio face two challenging certainties: Money is tight and the need for the services they provide has climbed. To help address those challenges, a cluster of local foundations has established the Cuyahoga County Human Services Strategic Restructuring Pilot Project.
The project is an effort led by 15 foundations that aims to determine ways for local nonprofits to work together to reduce overhead expenses and, therefore, provide more services to the needy, said Denise San Antonio Zeman, executive director of Saint Luke’s Foundation and co-chair of the project. Under the initiative, the foundations involved pooled $400,000 and hired three consultants to take nonprofits
In an era where companies have worked to keep inventory levels low, Cleveland-area Toyota dealers such as Chuck Gile face a pricey dilemma they don’t prepare students for in business school — what to do with inventory that can’t be sold at all. Mr. Gile, co-owner of Motorcars Toyota in Cleveland Heights, was among the dealers who spent much of last week awaiting parts and instructions to fix problem accelerators in many Toyota vehicles. They also watched hundreds of cars sit idle on their lots, awaiting fixes and the chance to be turned from ongoing expenses into revenues the dealers need. Mr. Gile already had determined that the first repair kits he receives would go into cars already owned by customers. “They had confidence in us when they bought the vehicle, and we have to restore that confidence,”
“You can’t tell someone who’s had five Toyotas not to buy another Toyota, because they have faith in the product.”
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CRAIN’S CLEVELAND BUSINESS
CRAIN’S HEALTH CARE HEROES Crain’s Cleveland Business will honor Northeast Ohio’s Health Care Heroes in a special section and at an event scheduled for May. Honorees will be selected in the following categories: health care advocate; volunteer; allied health; nurse; employer achievement for wellness program; advancements in health care; and physician.
Nomination forms, as well as a full explanation of all seven categories, can be found on our web site at www.Crains Cleveland.com/marketing /hcheroes.html. Nominations must be received by or postmarked March 8. Please contact Christian Hendricks at 216-771-5182, or by e-mail, chendricks@crain.com, with questions.
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NOTHING VENTURED, NOTHING GAINED The Great Lakes region generally had seen a buildup of venture capital investments until the recession hit, according to a new Brookings Institution report. Nonetheless, the public policy think tank used the report, “Turning up the Heat: How Venture Capital Can Help Fuel the Economic Transformation of the Great Lakes Region,” to call for the creation of a massive venture capital fund that would pump money into Great Lakes businesses to help the region move forward. The report calls for the creation of a $1 billion to $2 billion venture capital fund that would feed smaller funds investing in businesses and startups across the Great Lakes states. Venture capital investments in the 12-state Great Lakes region, 2004 through the 2009 second quarter
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REGULAR FEATURES 30 Years and Counting...8 Best of the Blogs .........19 Classified ....................18 Editorial ........................8 Going Places ...............11
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Crain Communications Inc. Keith E. Crain: Chairman Rance Crain: President Merrilee Crain: Secretary Mary Kay Crain: Treasurer William A. Morrow: Executive vice president/operations Brian D. Tucker: Vice president Robert C. Adams: Group vice president technology, circulation, manufacturing Paul Dalpiaz: Chief Information Officer Dave Kamis: Vice president/production & manufacturing Kathy Henry: Corporate circulation/audience development director G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Subscriptions: In Ohio: 1 year, $59; 2 years, $102. Outside of Ohio: 1 year, $102; 2 years, $180. Single copy, $1.50. Allow 4 weeks for change of address. Send all subscription correspondence to Circulation Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-888-909-9111 or FAX (313) 446-6777. Reprints: Call 1-800-290-5460 Ext. 136 Audit Bureau of Circulation
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‘Flexible electronics’ offer area tech muscle
INSIGHT
PR OUTFITS SEE RAPID CHANGE As clients demand more, companies pitch themselves with emphasis on versatility
NorTech sees bright future thanks to region’s polymer, liquid crystal bases
By KATHY AMES CARR kcarr@crain.com
By CHUCK SODER csoder@crain.com
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If technology advocacy group NorTech has its way, the Boogie Board won’t be the coolest product to come out of Northeast Ohio’s flexible electronics industry. That’s not to say the liquid crystal-based electronic message pad that Kent Displays Inc. released last month isn’t cool. It’s just that NorTech president Rebecca Bagley believes Northeast Ohio is in a position to exploit many opportunities related to flexible electronics, which companies are using to develop cheaper solar panels, smarter medical devices and computer screens that can be rolled up like newspapers. That’s why NorTech in October 2008 chose to start working on growing the region’s flexible electronics sector after narrowing its focus to two industry sectors from five. The other sector it is focusing on is advanced energy. NorTech likely will spend more of its time on advanced energy, given the number of different technologies in that field, Ms. Bagley said. In the long run, however, flexible electronics could present an opportunity just as big PHOTO PROVIDED Kent Displays Inc.’s for Northeast Ohio. Boogie Board allows users “I think the outcomes to write notes or draw and the could be similar,” Ms. n erase their work with a sim Bagley said. ple push of a button. NorTech in November received a $25,000 grant from the GAR Foundation of Akron to draft a strategy for creating a viable flexible electronics cluster in Northeast Ohio, and three weeks ago it hired Byron Clayton, a former division president for window manufacturing technology company GED Integrated Solutions of Twinsburg, to lead that effort. NorTech believes the region has what it takes to make it big in flexible electronics, and hopes its efforts will help make that happen. Buoying that belief is the presence of Kent Displays and AlphaMicron, two Kent State University spinoffs that already sell flexible electronic products, Ms. Bagley said. She also noted that Northeast Ohio is strong in research related to polymers and liquid crystals, which
ublic relations firms say they are not going to let the recession get the last word, but the feeble economy, coupled with the increasing dominance of digital communication, nonetheless have forced them to rethink the way they get the word out about clients. Indeed, change has been a recurring theme in the PR field over the last decade, though the last 12 months in particular have mobilized a transformation within the business, said Joel Goldstein, president of the Greater Cleveland chapter of the Public Relations Society of America. “There are dramatic shifts going on in the industry,” Mr. Goldstein said. “We’ve been talking about it for the See CHANGE Page7
JANET CENTURY
Joel Goldstein, president of the Greater Cleveland chapter of the Public Relations Society of America and Goldstein Group Communications, said the industry is undergoing “dramatic shifts,” about which industry leaders have been talking for a number of years.
THE WEEK IN QUOTES “We are a community that offers wonderful services, but ... more money is going to pay for a variety of infrastructures than there needs to be.” — Debora Rodriguez, CEO of Recovery Resources. Page One
“We can promote safety as an insurance carrier and demonstrate that it’s not really as scary as it seems.” — Drew Tewksbury, vice president and program manager of Allegiant Programs Group and Amusement Insurance Resources. Page 10
“It’s a great business model for the right person in the right area at the right time of their lives.” — Joel Libava, Franchise Selection Specialists. Page 13
“The repossession business is based on credit. … The whole downturn revolved around easy credit. If you want to dry up our industry, cut credit.” — Robert “Skip” Blowers, owner of Skipco Auto Auction. Page 15
See FLEXIBLE Page 6
Medicaid numbers still climbing, with a twist: help from hospitals By SHANNON MORTLAND smortland@crain.com
They’re aiding recession victims in signing up to limit charity care amount
The Medicaid rolls continue to swell in Ohio, but several area hospitals say that’s not necessarily problematic for them — with some even helping fuel the trend. The recession has caused thousands of Ohioans to lose their jobs and health insurance. As a result, a number of local hospitals are looking for ways to streamline operations to offset lost revenue, while others have beefed up their staffs to help people
sign up for Medicaid or other forms of coverage to avoid further increases in the amount of uncompensated care they provide. “The more people we can get on Medicaid, the better off we are,” said Sharon Dougherty, chief financial officer for MetroHealth Medical Center in Cleveland. In December 2009, there were more than 2 million Ohioans on Medicaid, compared with 1.8
million in December 2008 and 1.7 million in December 2007, according to the Ohio Department of Job and Family Services, which oversees Medicaid in Ohio. MetroHealth still contracts with a company that helps uninsured patients sign up for Medicaid, but last fall the county-subsidized hospital hired five people to help screen all self-pay patients for Medicaid eligibility. Ms. Dougherty said
five more employees soon will be added in MetroHealth’s outpatient centers to determine if those patients qualify for Medicaid and to help sign up those that do. In May, the county hospital also will begin reaching out to local churches, homeless shelters and minority groups to sign more people up for Medicaid who already qualify but don’t know how to navigate the system.
“We are going to go after the populations we haven’t aggressively done,” Ms. Dougherty said. “We’re trying to bring resources to our (community) facilities.” Community Health Partners in Lorain has eight patient advocates helping people sign up for health care coverage programs such as disability and Medicaid, said Samantha Platzke, chief financial officer and senior vice president of finance for Community Health Partners. “We’re not just giving them a See MEDICAID Page 10
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opportunities.” Transportation and distribution have become increasingly important as India, China and other parts of Asia become key trading partners. “Unfortunately, we are becoming much less of a manufacturing country and much more of a distributor and consumer,” said Lou Cerny, vice president of Sedlak Management Consultants Inc., a local warehousing and distribution consultancy. “So those areas that specialize in and take advantage of the fact that change is occurring and will continue to occur will find themselves ahead of the curve, and those that don’t will try to play catch-up.” Mr. DeBarr agrees that efficient
transportation access to distant markets has become a more important factor to site selectors who choose locations for new business operations, especially for manufacturers who must bring in raw materials and send out finished products. That’s partly because transportation costs are now 9% to 10% of the cost of goods sold, he said. The study was led by Bradley Hull, associate professor of management and business logistics at John Carroll University’s Boler School of Business. Mr. DeBarr said it is phase one of NEOTEC’s effort to involve public transportation agencies, private shippers and freight handlers in identifying strengths and weaknesses of Northeast Ohio’s transportation infrastruc-
ture and then figuring out ways to boost the region’s competitiveness in world markets. The research describes how Columbus is becoming a busy inland extension of ports in Virginia because of Norfolk Southern Railway’s Heartland Corridor project, a $150 million plan to improve freight-handling capacity along a rail route from Norfolk, Va., to Chicago, passing through Columbus. Columbus is developing the 1,500acre Rickenbacker Global Logistics Park around Norfolk Southern’s $68 million intermodal terminal, which opened in 2008. At the time, the president of the Columbus Regional Airport Authority said she expected the logistics hub to create 20,000 jobs over the next 30 years. In Northwest Ohio, CSX Transportation last year broke ground for the $175 million Northwest Ohio Trans-Shipment Terminal in North Baltimore near Toledo along a CSX rail line that runs to Chicago. CSX will use the new terminal to break down shipments from either coast and sort them onto trains or trucks to Midwest destinations. That work is done in and near Chicago, but CSX wants to move it away from that city’s congestion. The new terminal is expected to employ 200 and could create as many as 2,600 more jobs in ancillary operations in its first decade of operation.
Getting back on track The study finds Northeast Ohio has the potential to strengthen its logistics prospects, particularly because of its position on water, which gives it connections across Lake Erie to Canada, the largest U.S. trading partner, and to seaports via the St. Lawrence Seaway. The authors believe local ports could develop niches as hubs for refrigerated products that can’t travel by rail and for oversize cargoes that are cumbersome and expensive to ship by rail or truck. However, Dr. Hull writes, “embarking on such opportunities requires coordination, with organized and sustained efforts, such as those displayed by Columbus and Toledo.” In phase two of NEOTEC’s effort, Mr. DeBarr hopes to develop a marketing message to promote Northeast Ohio as a logistics hub and to identify potential bottlenecks in the system. Edward Hill, dean of the Maxine Goodman Levin College of Urban Affairs at Cleveland State University, said the region needs to embark on a strategic review of the logistics and transportation network in the northern part of the state. But Dr. Hill cautioned that Northeast Ohio may not be able to play the same kind of logistics role as Columbus and the Toledo area. Dr. Hill said Northeast Ohio lacks the greenfield space that exists along rail lines in those regions. He also said warehouse and distribution center operators prefer to stay south of the Ohio Turnpike, a reference to the strength of organized labor in Northeast Ohio and even the Toledo area. North Baltimore is 30 miles south of Toledo and the turnpike. ■
Volume 31, Number 6 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of May and fifth week of May, the fourth week of June and first week of July, the third week of December and fourth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2010 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $1.50. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. (888)909-9111. REPRINT INFORMATION: 800-290-5460 Ext. 136
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Nonprofits: Workshops offer connections continued from PAGE 1
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through a three-step process to operate more efficiently through collaboration. “In order to serve a growing need in an environment where funds have diminished because of the economy, (nonprofits) needed to figure out how to coordinate their efforts,” Ms. San Antonio Zeman said. The conversation began about a year ago when Ms. San Antonio Zeman and Deborah Vesy, president and CEO of Deaconess Community Foundation, asked the nonprofits they support how their foundations could be of more assistance. Nonprofits, it turned out, wanted to learn how to collaborate better, Ms. San Antonio Zeman said. So, Ms. San Antonio Zeman and Ms. Vesy began assembling a group of foundations to create the pilot project, which included two workshops in December that were attended by 76 nonprofits. Foundation representatives were not included in the workshops because they wanted nonprofits to speak freely without feeling like they might be judged, Ms. San Antonio Zeman said. The results were promising, said Michael Matoney, executive director of New Directions, a nonprofit that provides substance abuse treatment for teens. Mr. Matoney said he had been considering collaboration with other nonprofits that would enable his group to provide more services. Though he was making cold calls to other nonprofits to see if they would consider working together, he felt as though he was on an expedition without a map. “You always feel like you’re chasing the wave,” Mr. Matoney said. “You don’t even know if you’re making any headway.” The workshops enabled him to interact with executives and board leaders of like-minded nonprofits,
Mr. Matoney said. The nonprofit groups could send only their leaders to the workshops because they are the ones who can institute change within the organizations, Ms. San Antonio Zeman said.
Eliminating the overlap Change has been in the works at Recovery Resources since the nonprofit in January 2008 merged with Community Challenge, which provides substance abuse programs to people in the western suburbs. By combining back-office operations, Recovery Resources and Community Challenge were able to provide more services to those in need, said Debora Rodriguez, CEO of Recovery Resources. And Recovery Resources wants to stay on that collaborative path, she said. “We are a community that offers wonderful services, but I do believe there is overlap and more money is going to pay for a variety of infrastructures than there needs to be,” Ms. Rodriguez said. In the December workshops, the nonprofits considered the pitfalls and advantages of collaboration, restructuring and integration, Ms. Rodriguez said. The consultants provided examples of partnerships, which could include integrating management, staff and volunteers; sharing communications and marketing; and merging systems such as finance, fundraising and technology. However, collaboration is not necessarily limited to joint efforts with other nonprofits, said Patricia Nobili, executive director of the Achievement Centers for Children, which provides help for disabled children. Achievement Centers has been talking with a for-profit entity about partnering to save money on marketing, to expand its geographic footprint and to provide complementary services and training, Ms. Nobili said. She wouldn’t identify
the for-profit group with which Achievement Centers has been in discussions. Though Ms. Nobili said she isn’t sure if nonprofit/for-profit partnerships are what the foundations are looking for in the way of collaborations, Achievement Centers was told the idea wouldn’t be ruled out, so the organization has moved on to phase two of the pilot project.
Pilot takes off Nonprofits interested in moving on to phase two of the pilot project had to submit their letters of intent by last Monday, Feb. 1. Once the consultants tally up the number of nonprofits interested in phase two, they will review the collaboration project proposals and recommend a yet-unspecified number of nonprofits to move on to phase three, which includes receiving financial support to implement the ideas by the end of the year, Ms. San Antonio Zeman said. Ms. Nobili said Achievement Centers chose to enter phase two because the nonprofit has nothing to lose. “There’s absolutely no downside to this offer of assistance … so that we can be more efficient with the use of our resources, which also helps us deliver our mission,” she said. Recovery Resources and New Directions also decided to move on to the second phase, but the Cleveland Rape Crisis Center opted out of the process, said Megan O’Bryan, executive director of the center. Though the pilot project is a good idea, she said her organization received a grant last year that it’s using, in part, to work with a consultant to map out possible collaborative efforts across Northeast Ohio. “We’re really interested in opportunities of how we can collaborate on a regional basis with other counties,” Ms. O’Bryan said. “There’s a significant demand for rape crisis services, especially outside the city.” ■
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Flexible: Technology becoming popular here, abroad continued from PAGE 3
are used in flexible electronics, and that the region has a large base of potential parts manufacturers that are ready to move away from the auto industry. NorTech aims to capitalize on those advantages in part by convening companies and colleges with expertise related to the technology and by securing public money for research and development. While individual companies and researchers often have technical expertise in the technology, they often are so focused on their own work that they miss broader opportunities to work with others, according to Ms. Bagley. “We can be thinking three steps ahead,” she said.
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Kent Displays and AlphaMicron show where the industry might be headed. For instance, Kent Displays already has sold out of its new Boogie Board message pad, which is sort of like a high-tech EtchA-Sketch. With a finger or a stylus, users can write or draw pictures on the plastic liquid crystal display of the $30 product, then erase them by touching a button. That’s just the first product Kent
Displays plans to produce on the roll-to-roll manufacturing line it installed in late 2008. It also is developing a liquid crystal film that would allow mobile phones and portable music players to change color with the touch of a button, as well as a clear plastic display for credit cards that would provide a different confirmation number with each use to prevent thieves from reusing stolen card numbers. Kent Displays CEO Albert Green said he believes Northeast Ohio can become a player in the still-young flexible electronics industry, because it has a wealth of people with expertise in material science and manufacturing. It’s an opportunity the region should not miss, Dr. Green said. “It is a multibillion-dollar industry encompassing many current and future products,” he said via e-mail. Likewise, AlphaMicron, which last July doubled the size of its headquarters when it moved into 30,000 square feet at Kent State University’s Centennial Research Park, already makes ski goggles and motorcycle visors that dim with the push of a button. It’s also developing sunglasses that do the same thing, in addition to other products. The presence in the region of two
companies focused on flexible electronics is impressive, said AlphaMicron chief operating officer Tamas Kosa. “It’s hard to find another concentration in the (industry) like Kent Displays and AlphaMicron,” Dr. Kosa said.
Huge market potential The flexible electronics sector is starting to gain momentum, according to information from San Jose-based Semi, a global association serving suppliers for the microelectronic, display and solar industries. Among the countries with significant investments in related research and development are Japan, Korea, China, Germany and other countries in the European Union, according to the association. The group cited statistics from another organization predicting that the global market for flexible electronics would be in the range of $126 billion by 2020. And there’s no reason why Northeast Ohio can’t get a big piece of that market, said Kirstin Toth, senior program officer with the GAR Foundation, which helped NorTech pay for its strategic plan. “I think it just makes a lot of sense,” Ms. Toth said. ■
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last eight years, but there’s been an acceleration and urgency to move from traditional to online.” As such, leaders of public relations agencies say they’re making sure clients know they can deliver multiple services, from social media campaigns to interactive digital press releases. “It’s no longer just about getting your client’s name out in the paper,” said Howard Landau, president of Landau Public Relations in Cleveland. “Like any other industry that creates content, there’s been an evolutionary change, but the recession put those changes on steroids.” Mr. Goldstein said the recession also has heightened agencies’ accountability for each dollar their customers spend. “Clients more than ever have slimmer budgets and higher demands for ROI,” said Mr. Goldstein, who also is president of Goldstein Group Communications in Solon. “Everything we do for our clients has a number attached to it.”
Electronic measuring stick Mr. Landau said his company last year launched the Landau Impact Report in response to the increasing need to measure return on investment for clients. The report is an electronic summary of media coverage, filled with interactive charts and graphs, that monitors and analyzes what is said about clients and their competitors through a myriad of platforms, including social media, blogs, TV and print. The electronic version evolved from a binder about as thick as a dictionary that was filled with articles containing coverage about the client, Mr. Landau said. Jan Gusich, president of Akhia Public Relations and Marketing Communications in Hudson, said her firm about a year ago began automatically incorporating social media and highlighting sustainable business practices in its clients’ public relations campaigns. “We’re not waiting to be asked,” she said. Robert Falls, president and CEO of the Falls Communications in Cleveland, said long-term relationships with reporters and editors used to drive business, but those relationships have been sacrificed as traditional media companies shed jobs amid the digital revolution. “Because the media are changing, we’ve had to change how we communicate to the media,” Mr. Falls said. “How we present information is more important than ever because there is so much information out
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there, and it’s instantaneous.” Mr. Falls said the firm is ensuring that story pitches are succinct and relevant, and that staff members have a depth of knowledge about the subject matter. “It comes down to quick delivery of good content,” Mr. Falls said. Scott Chaikin, chairman and CEO of Dix & Eaton in Cleveland, said many of his firm’s clients — several of which are large public companies — have been sticking to basic services, such as a news event that announces a new store or product, in order to communicate with investors. “There’s not a lot being invested in experimentation,” he said. Still, the integrated communica-
tions company is working closely with its clients on deciphering social media, and whether the medium benefits a company’s communications strategy. “We’re helping separate rhetoric from reality,” Mr. Chaikin said. “On the b-to-b side, we’re doing a lot more monitoring for our clients” of discussions about their companies and products on social media sites.
It’s a deal The recent acquisition of Edward Howard & Co. by Columbus-based Fahlgren Inc., one of the nation’s largest marketing communications companies, is another example that represents industry changes. The deal, expected to close Feb.
28, combines the nation’s oldest independent PR agency with Fahlgren Inc., and is expected to create Ohio’s largest independent public relations firm. Financial terms were not disclosed. Kathy Obert, chairman and CEO of Edward Howard, dismissed suggestions that the bad economy influenced the deal, and said the firm had been in talks about partnering with Fahlgren for years. “We actually saw this as the perfect time to partner, because companies’ budgets are coming back,” she said. Ms. Obert said that in the last year she’s seen an increasing number of clients seeking multiple services from one agency. “They want an alternative to the multinational
agency, but are still looking for a national reach and a provider with the resources and expertise in a variety of disciplines,” she said. Under the deal, Edward Howard will retain its name as a subsidiary of Fahlgren Inc. As public relations companies look to expand their market shares and offerings, more deals like the Edward Howard-Fahlgren marriage are possibilities here, Mr. Goldstein said. But, he added, “Many local firms already have or are growing national market share because they can offer quality services without New York price tags.” Dix & Eaton, for one, which is Northeast Ohio’s largest PR agency, is not actively pursuing partnerships, or “tuck-ins” of other smaller agencies, according to Mr. Chaikin. But, he added, “we’re open to the possibility.” ■
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PUBLISHER/EDITORIAL DIRECTOR:
Brian D. Tucker (btucker@crain.com) EDITOR:
Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:
Scott Suttell (ssuttell@crain.com)
OPINION
Keep it goin’
B
ob Taft’s approval rating stood at 15% by the end of the scandal-plagued second term of his administration. However, Ohio owes the former governor a big debt of gratitude for creating in his first term the Third Frontier program, which has been a rousing success in spurring investment in technology research and commercialization efforts across the state. The best way Ohioans could repay Mr. Taft would be to approve a $700 million bond issue this May that would provide the money to continue the Third Frontier beyond next year. The numbers alone argue in favor of keeping the program going. According to a study released last September by independent research institute SRI International in Menlo Park, Calif., the state’s investment from 2003 to 2008 of $681 million in Third Frontier money yielded $6.6 billion in economic activity, 41,300 jobs and $2.4 billion in employee wages and benefits. The passage in 2005 of a $500 million bond issue to finance the Third Frontier made a huge statement to venture capital and angel investors that Ohio was serious about providing seed money for investments in technology segments where the state has perceived strengths. Private investors have responded by putting hundreds of millions of their own dollars into technology commercialization efforts at companies throughout the Buckeye State. People in Northeast Ohio should be particularly fond of the Third Frontier, because a healthy chunk of the money has gone into companies and research initiatives here. State dollars that go toward groundbreaking medical research at the Cleveland Clinic and Case Western Reserve University tend to attract the most publicity. However, Third Frontier money also helps propel small companies such as Technology Management Inc. in Highland Heights, which along with Lockheed Martin won a $1 million grant last month to develop jointly a fuel cell system that could be used by military units in the field. The Ohio Venture Association, a group that encourages entrepreneurship and venture capital investment, last month issued a position paper that strongly supports continuation of the Third Frontier. “This program has been very valuable in creating technology in the state’s research institutions, supporting the commercialization of that technology in companies, and supporting company formation and capital formation throughout Ohio,” association president Jonathan Murray said. “As I travel to other states, particularly in the Midwest, the Third Frontier program is held up as an example to follow.” Ohio has a winner on its hands with the Third Frontier. That’s why business groups that include the Greater Cleveland Partnership and Greater Akron Chamber of Commerce plan to support a coming campaign that will promote passage of the bond issue. It should be money well-spent, because we believe informed voters will say “yes” to a program that should continue to yield economic dividends to Ohio for years to come.
FROM THE PUBLISHER
Toyota, like Tiger, soils its reputation
I
been so good? wrote in a blog item last week that Now, like everyone, I am questioning perhaps Tiger Woods and Toyota the wisdom of my decision. I worry could join up and get a frequentabout my long drive to and from the buyer discount with a crisisoffice, but more importantly I worry management consultant. Just that about my kids. I’m angry at Toyota simple sentence led me to think about because I feel the company cut corners an amorphous word: “quality.” on its way to becoming the leading Of course, I’m thinking about Toyota seller of cars in the lucrative on a number of fronts. I own a American market. Greed, it Toyota — in fact, I own two — BRIAN appears, honors no borders. one of which takes my precious TUCKER The company awaits decison and daughter to and from sions from an American high school each day. Until the government considering multipast week or so, I never thought million-dollar fines for failing twice about the quality of the to disclose these accelerationproducts, even after I got the related problems in a timely letter about the floor mat recall. fashion. Automotive News, Floor mat? I should take another Crain publication, last time away to bring it in for a week quoted Transportation floor mat? I will eventually, I Secretary Ray LaHood as saying that said to myself. National Highway Traffic Safety AdminA year ago, I bought a Toyota Avalon istration officials flew to Japan in after a very short exploration of the December to remind Toyota of its “legal competing products. It was, after all, obligations” and then followed up in a replacing another Avalon that was still meeting last month “to insist that they humming along nicely way past 100,000 address the accelerator-pedal issue.” miles. Why tempt fate, I thought, and “While Toyota is taking responsible change models when my experience had
action now,” the secretary said in a statement quoted by Automotive News, “it unfortunately took an enormous effort to get to this point.” Our sister publication reported that news in a package of online stories on Wednesday of last week. Of course, the news kept coming, with Toyota then admitting it had problems (which it claims now have been fixed) with the brake pedals on its popular Prius hybrid. I will have our cars repaired as quickly as possible, though now I am nervously awaiting the recall letter so I can get the process started. But for the time being, I find myself wondering about just how Toyota will dig itself out of this mess. Now that the automaker’s oncelegendary reputation for quality has been put into question, it will remain that way for untold thousands, and perhaps millions, of American customers. Was it really that important for Toyota to surpass General Motors as the leading seller of vehicles in America? In hindsight, it sure wasn’t to this customer. To me, the Toyota brand will be a question mark for a very long time. ■
AND COUNTING ... What’s your favorite Northeast Ohio building that was constructed in the last 30 years?
Crain’s Cleveland Business is celebrating its 30th year as Northeast Ohio’s premier source for business news with a special May 24 double issue, which will feature profiles of 30 of the most influential Clevelanders. As part of the celebration, we also are reflecting on the most memorable events of the past three decades with weekly polls — some of which can be found in this space — trivia questions, online content and video interviews. You can get in on the fun by visiting www.CrainsCleveland .com/30thAnniversary.
LAURA MCCARTHY
TED MANN
KENT SMITH
Cleveland
Solon
Euclid
I liked when they built the BP building. … It was nice that it was at Public Square.
I would say probably the BP building because of … what it’s done for Public Square. But it’s not my favorite building (ever built in Northeast Ohio). I’d say my favorite building is the Huntington Building.”
For both a tourist destination and architectural quality, I’m going to go with the Rock and Roll Hall of Fame.
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PERSONAL VIEW
Mission Night Light! Let’s re-evaluate buying decisions What are the business issues By DAN SHINGLER
T
he people can spend their money more wisely than the government can. That’s been a mantra of many for the last 30 years, but what if it’s wrong? The very notion will no doubt draw gasps from a few readers, maybe more. But let’s explain and also clarify the message here before any breaths are released behind angry words. America has, and is generally proud of, the most consumer-driven economy in the world — and, so far, it’s still the largest. In the decades any of us can remember, this has become even more prevalent as our economy shifted to rely more on consumer spending and less on government’s buying decisions. That reduced the bulk of spending in the United States to trillions and trillions of tiny, lowest-price buying decisions made by millions of individuals who, as any economist would have predicted, sought and found the best deals for themselves.
Mr. Shingler covers manufacturing for Crain’s Cleveland Business.
This is how markets work. But what happened? As individuals, we chose to buy our shoes from India, our clothes from Bangladesh and almost everything from China. No one meant any harm, but the result is that almost nothing that any of us uses on a day-to-day basis is made in this country any longer. Sure, a few of us can afford to buy the few remaining clothes made in America, but not most. Most of us can’t even find them. The odd thing is, we generally don’t let our government do this. We would rail against our government if it made huge purchases of overseas goods that could have been bought from American factories. Often, we prohibit our government from even considering such an economically traitorous act. Collectively, we not only have good intentions, but we enforce them. We protect what we know deep down is good for us all. Individually, it’s more like every man for
himself — and women, too. So, what is the solution? Some would say it is simply to put more buying power back into the hands of government — and this has been done, voluntarily or not, as part of efforts to fight the economic downturn. When you hear that the government spent $3 million on signs, that money went into an American company, which paid an American worker — regardless of whether a specific new job can be traced to the spending. But there is no push for a long-term change in philosophy or policy to put more spending in government’s hands, nor are we arguing that there should be. A better question might be how we get ourselves, each one, to act the way we would demand that our government act. Otherwise, we might find ourselves in straits so dire that more than half us just decide to let our government do all or most of the spending for us. And you know what that means — more American-made goods, perhaps, but maybe no more of those cool Asian electronics, either. ■
LETTER
Sanders’ transformation plan a farce ■ Nothing illustrates the disconnect between suburban/exurban Northeast Ohio and the city of Cleveland more than the letter to the editor submitted to Crain’s by Jim Rundo of Chesterland in your Jan. 25 issue. Mr. Rundo rhapsodizes about the foundation-funded Boston Consulting Group/Eugene Sanders Transformation Plan for the Cleveland schools, and admits that he lives nowhere near Cleveland — but only has Cleveland’s best interests at heart — when he steps up to proudly endorse the plan that he acknowledges will be painful. Well, it is time that those of you living outside the city of Cleveland realize that we, who do live here and who do pay taxes in the city of Cleveland, are tired of being your blood meal.
It is time that you acknowledge that Eugene Sanders and Daniel Burns were recruited to destroy and corporatize the unionized Cleveland public school system. Outside corporations and contractors have had their field day at the taxpayers’ and at our children’s expense. Corporate interests have intentionally undermined our schools and communities to line their pockets. This Cleveland Metropolitan School District school board can either recognize the fraud and vote against the Sanders’ Transformation Plan on Feb. 23 or they can continue to bleed away our future. It’s that simple. Eugene Sanders and his administration are under investigation in Toledo for fiscal
malfeasance. It’s only a matter of time before the full extent of fraud and corruption is uncovered here in Cleveland as well. I respect Crain’s Cleveland Business and the business community in Northeast Ohio. I ask you to not endorse this plan and to hold our school administrators accountable to every child and to the taxpayers supporting our schools. Laura A. McShane Cleveland
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bunch of forms,” Ms. Platzke said. “We physically go to the patients’ homes and help them learn how to fill out the forms and we accompany them to the Ohio Department of Job and Family Services office, if they need that.” Likewise, Lake Health has employees dedicated to helping uninsured patients begin the Medicaid enrollment process, said Julieann Strogin, a spokeswoman for Lake Health. “With high unemployment in the state, you’re going to see some obvious upticks in the Medicaid population and self-paying patients,” Ms. Strogin said. Though Medicaid pays less than private insurers, it’s still better than not receiving any payment for services rendered to the uninsured, Ms. Strogin said. Statewide, Medicaid pays an average of 84 cents on the dollar for the care provided, according to the Ohio Hospital Association.
Starting young Akron Children’s Hospital and University Hospitals Rainbow Babies & Children’s Hospital in Cleveland also have seen increases in the number of children on Medicaid or who qualify for the public
subsidy. In response, they have boosted their efforts to sign children up for Medicaid and are looking for ways to trim overhead costs. Medicaid reimbursements typically cover only about 75% of the cost of providing care at Akron Children’s, said Shawn Lyden, executive vice president of Akron Children’s. Rainbow has seen its number of Medicaid patients rise 4% over the last 12 to 16 months, and 57% of its patients now are on Medicaid, said Mike Farrell, president of Rainbow as well as UH MacDonald Women’s Hospital. While Rainbow constantly raises private dollars to help fund some patient care, the hospital also is trying to expand its share of the pediatric market to offset the losses it absorbs from serving more children on Medicaid, Mr. Farrell said. Rainbow launched multidisciplinary clinics on its main campus about 18 months ago to allow patients to see several specialists at once. Mr. Farrell said their popularity has prompted Rainbow to try to offer more clinics and to open on Saturdays by mid-spring. The children’s hospital in March will add pediatric sub-specialty services to its Twinsburg location,
which opened last year. And a new University Hospital satellite opening in Medina in April will include pediatric services, while other neighborhood clinics also could see an expanded range of pediatric services to boost access, Mr. Farrell said. Akron Children’s entered the Mahoning Valley in 2008 when it partnered with Forum Health and Humility of Mary Health Partners to open a children’s hospital on one floor of the new St. Elizabeth Boardman Health Center. But, with 60% of the child population it serves there on Medicaid, the move “had a serious adverse affect on our overall payer mix,” Mr. Lyden said. To compensate, Akron Children’s is expanding geographically beyond its Summit County roots. The hospital will open a primary care office in Brecksville in March, is planning an office in Medina and hopes to collaborate with independent hospitals in western Pennsylvania, where there’s a shortage of sub-specialists, he said. While such measures of dealing with an expanding Medicaid population help, a healthier economy is needed to remedy the problem, Mr. Farrell said. “Until we change the employment base, I don’t know that we will hit a plateau,” he said. ■
FEBRUARY 8-14, 2010
Solon insurer finds fun in amusement industry By ARIELLE KASS akass@crain.com
ment device rentals and inflatables, Mr. Tewksbury said. He said there are probably a dozen programs for such insurance, but that since it began to dabble in the field five years ago, Amusement Insurance Resources has become one of the top three providers with about 300 clients. Together with the pyrotechnic group, it has collected roughly $2 million in premiums. With plans to expand into Canada and its eye on three possible acquisition targets this year, Mr. Tewksbury said he expects the program to continue its growth. “I anticipate in 2010, we’ll be the 800-pound gorilla,” he said. “Our strength as an insurance firm is in identifying underserved markets with relatively high liability and a high need for expertise. … Few people like to entertain those risks.” Because of the risks, Mr. Tewksbury said, there’s a “considerable premium” to be made.
A Solon insurance broker’s entrée into the world of bouncy houses, mechanical bulls and parking lot roller coasters came about through a fireworks connection. Drew Tewksbury, vice president and program manager of Allegiant Programs Group and Amusement Insurance Resources in Solon, said the broker started an amusementspecific offering after a client that focused on pyrotechnics lamented the lack of options for other forms of entertainment insurance. So Allegiant employees rolled up their sleeves, Mr. Tewksbury said, and started to talk to companies that use amusement insurance about the difficulties and restrictions they face. Eight years ago, he said, pyrotechnics companies faced the same problems — insurance was expensive because the work was viewed as particularly dangerous. But Mr. Tewksbury said while there are certain risks in both fields, the frequency of payout is lower than might be expected. He called the amusement industry “misrepresented and misunderstood.” “We can promote safety as an insurance carrier and demonstrate that it’s not really as scary as it seems,” he said. Jim Oremus, the South Carolina owner of Let’s Play Entertainment, which operates four Monkey Joe’s franchises, said he switched to Amusement Insurance Resources nearly a year ago. He has found Mr. Tewksbury to be more interested in safety than his previous agent, he said, as well as more responsive to potential claims calls. “They’re making sure we’re doing everything correctly,” Mr. Oremus said. “Drew just seems to be more in tune with my industry.” Mr. Oremus said while he may have saved some money on the premiums by making the switch, it wasn’t his primary motivation. “It’s really not a dollars-and-cents move,” he said. “It’s a personality move.” The insurance is written by CNA Financial Corp. and is a branded nationwide program for amuse-
THE “INVISIBLEE
Spark of an idea Mitch Wilson, spokesman for the Ohio Insurance Institute, said the group’s members tend not to be involved with such specialized lines of business, but that it works well with what brokers often try to accomplish. “Brokers will create a program based on the needs of their clients,” he said. “If there’s a specialty need, they’ll see if they can pull something together with the exposure coverage, risk coverage they need.” While Mr. Tewksbury said broker Britton-Gallagher, of which Allegiant and Amusement Insurance Resources are subsidiaries, started writing the business five years ago internally, retail offerings began three years ago and the insurance wasn’t sold wholesale until the fall of 2009. Linda Dixon, CNA’s assistant vice president of the select risk program, said Britton-Gallagher’s staff approached her about putting something together for amusement clients. In the past, she said, the insurance marketplace had “pretty much abandoned” the industry because safety standards had not yet been established, leading to a number of injuries. In subsequent years, standards improved. ■
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CRAIN’S CLEVELAND BUSINESS
FEBRUARY 8-14, 2010
INSIDE
15 WITH FEWER CAR LOANS, DEFAULTS, THE REPO MAN IS LESS BUSY.
13
SMALL BUSINESS FRANCHISORS BRANCH OUT Model helps a business grow, but starting one and succeeding can be a challenge By AMY ANN STOESSEL astoessel@crain.com
J
aime Brenkus may be best known for the fitness video series “8 Minute Abs,” but these days he’s flexing his muscles to make his mark as a franchisor. Mr. Brenkus, a native Northeast Ohioan, in 2008 opened his first Slim & FIT facility in Concord, and late last year he began to franchise the concept, which incorporates fitness training and nutrition consultations into a single location. In just one week last month, Mr. Brenkus sold seven Slim & FIT franchises. In addition to the Concord location, there now are 10 See BRANCH Page 16
Proforma’s move stems in part from wanting more efficiency
I
t wasn’t just a desire to grow that drove Proforma founder Gregory P. Muzzillo to franchise his printing and promotional products company — it was the realization that his entire industry was incredibly inefficient. “We all had to invent our complete back offices,” he said. Mr. Muzzillo formed his company in 1978 after graduating from Baldwin-Wallace College. By 1982, sales reached $1 million, and Proforma was named in successive years to Inc. magazine’s 500 Fastest Growing Companies. But the push Mr. Muzzillo needed to franchise came as the company was looking to expand into Columbus. The candidate who had been identified as a potential branch manager decided it was more desirable to own a business rather than work for one. Mr. Muzzillo began to research different business and franchise models, ultimately deciding on “conversion franchising.” In such an arrangement, existing businesses join the franchise, thereby benefiting from purchasing power, marketing dollars and back-office support. “My model was looking to empower and align current industry participants,” Mr. Muzzillo said. Today, Proforma does about $350 million in sales. “It’s almost impossible to build a large organization on your own,” he said. “There were some days I thought I was insane. … It was a far larger shift than I thought.”
Today, there are more than 720 Proforma franchises. The economy has been a boon to Proforma in terms of franchises. A record 150 were added in 2009, and this year there are hopes to add another 200. — Amy Ann Stoessel
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14 CRAIN’S CLEVELAND BUSINESS
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FEBRUARY 8-14, 2010
SMALL BUSINESS ERIC KOGELSCHATZ/HALLIE BRAM
Mr. Kogelschatz and Ms. Bram answered a few questions about the event and their motivation for organizing it in Cleveland.
Organizers TEDxCLE
Q: Explain a little about the TEDx program.
T
A: TED is an annual event where some of the world’s leading thinkers and doers are invited to share what they are most passionate about. TED stands for technology, entertainment, design — three broad subject areas that are, collectively, shaping our future. And in fact, the event is broader still, showcasing ideas that matter in any discipline. Attendees have called it “the ultimate brain spa” and “a four-day journey into the future.” The diverse audience — CEOs, scientists, creatives, philanthropists — is almost as extraordinary as the speakers, who have included Bill Clinton, Bill Gates, Jane Goodall, Frank Gehry, Paul Simon, Sir Richard Branson, Philippe Starck and Bono. TED was first held in Monterey, Calif., in 1984. In 2001, Chris Anderson’s Sapling Foundation acquired TED from its founder, Richard Saul Wurman. In recent years, TED has expanded to include an international conference,
THEINTERVIEW wo native Midwesterners are hoping to get the creative juices flowing with an event they have organized for later this month. Eric Kogelschatz, senior account executive for Marcus Thomas, and Hallie Bram, studio manager at Adcom Communications, have joined forced to organize TEDxCLE, a local event dedicated to the sharing of ideas that’s modeled after similar programs held worldwide. The Cleveland event, which is sold out, is slated for 9 a.m. to 1 p.m. on Feb. 26. It will be held at The Capitol Theatre and will include presentations by the following: ■ Terry Schwarz of Pop Up City /Kent State University: “Fixing broken cities.” ■ Chris Yanc of cyancdesign: “Open source technology and multi-touch exploration.” ■ Danielle DeBoe of Room Service/Made in the 216: “Turning a desire into a reality ... it’s not so hard, really.”
Kogelschatz
Bram
■ Benson Lee of Technology Management Inc.: “Solving global social problems with fuel cell technology.” ■ Aaron LeMieux of Tremont Electric: “Alternative energy: Kinetic energy generation with nPower.” ■ Sean Bilovecky and Brian O’neill of Wrath Arcane: “Drawing from the past, thinking fashionforward.” ■ Dana Myers of Myers Motors: “The future of transportation and the electric vehicle.” ■ Patrick Perotti: “Class action lawsuits help Cleveland ... $21 million so far.” ■ Michael Ruhlman, food writer: “The Cooking Animal.” ■ Dr. C. Martin Harris of The Cleveland Clinic: “Health care 2.0.”
TEDGlobal; media initiatives, including TED Talks and TED.com; and the TED Prize. In the spirit of ideas worth spreading, TEDx is a program of local, self-organized events that bring people together to share a TED-like experience. At a TEDx event, TEDTalks video and live speakers combine to spark deep discussion and connection. These local, self-organized events are branded TEDx, where “x” equals an independently organized TED event.
Q: What will occur during the event?
Q: How did each of you get involved in TEDx?
Q: What results are you hoping to see from TEDxCLE?
A: While both of us are native Midwesterners, we met while living in Boston, Mass. Upon meeting we quickly realized that we shared a passion for being a part of the urban revitalization efforts happening in the Rust Belt. We decided to move back to the area in order to be an active part of these efforts. Upon moving back to Cleveland, we were excited to find so many creative, innovative thinkers living here. We began brainstorming ways to highlight these positive “thinkers and doers” both within our city and to an audience outside of Cleveland. We realized that the city had never had a TEDx event, but that surrounding cities like Columbus and Detroit had. We submitted our TEDx curator application and TEDx quickly granted us approval to found TEDxCLE, Cleveland’s first official TEDx event.
A: We’re hoping to share positive thinking from Cleveland with those in the TED community and the world. Videos of all speeches will appear on TED.com and content will be seeded in blogs as appropriate. We want to change the way that Clevelanders feel about the city and take an active role in revitalizing the community. Further, to share innovative thinking happening in Cleveland with people around the country and world.
A: The event will feature 10 speakers as well as several speeches in video form from other TED and TEDx events. Attendees will be exposed to innovative, positive thinking from some of Cleveland’s most dynamic thinkers. At TEDxCLE, TEDTalks video and live speakers spanning topics such as health care, urban revitalization, art and product development will combine to spark deep discussion and connection amongst speakers and attendees alike.
Q: What mix of attendees are you looking for? A: Our hope is to have a diverse audience made up of Northeast Ohioans that share one central trait: curiosity. This passion for life certainly spans across age groups, race, income level and occupation. More information can be found at www.tedxcle.com/.
IN BRIEF ■ HELPING HANDS: Sisters Tiffany Croucher and Teri L. Anderson have opened a nonmedical, in-home health care service that helps the homebound and elderly. The Painesvillebased company, Heritage Home Healthcare of Lake & Geauga Counties, is the sixth Heritage Home Healthcare franchise in Northeast Ohio. Heritage Home Healthcare also provides relief respite care, and a broad range of services for both temporary and long-term needs. ■ FULL RANGE: The owner of a
South Florida radiology center has purchased the assets of Spectrum Diagnostic Imaging LLC, which has six locations in the Cleveland area. Dr. Mark Zhuk is the owner of the newly named Spectrum Diagnostic Imaging of Ohio LLC, which has locations in Mentor, Willoughby, Lyndhurst, Warrensville, Brooklyn and Middleburg Heights and employs more than 70 people. Spectrum offers a wide range of diagnostic testing devices and provides competitive pricing for consumers. Terms of the deal were not disclosed.
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CRAIN’S CLEVELAND BUSINESS 15
WWW.CRAINSCLEVELAND.COM
SMALL BUSINESS
Meet IRS guidelines to keep Fewer car loans, defaults limit repos life insurance benefit tax free Borrowers get a little
L
ife insurance can serve several critical needs for businesses. For example, life insurance can provide cash flow to help a business deal with the death of a key employee, or funding for buy-sell arrangements between the business and its owners. Historically, a key benefit of life insurance was that the proceeds paid upon the insured’s death generally were received tax free. In response to a concern that life insurance policies were being taken out by businesses on rank-and-file employees, Congress in 2006 introduced new rules that require businesses to include certain life insurance proceeds in income. Exceptions were provided for several common arrangements, assuming compliance by the business with certain notice and consent requirements. In a recent notice, the IRS has provided significant additional guidance on these rules, including guidance on what types of contracts are covered, how the exceptions apply and details on the notice and consent requirements. Under current law, the general rule is that life insurance proceeds from employer-owned life insurance contracts are taxable to the extent they exceed the excess of premiums or other amounts paid. Several exceptions are provided, including whether the insured was a highly compensated employee at the time the contract was issued; the proceeds are paid to a family member; or the proceeds are used to buy an equity interest in the employer from a family member or the employee’s estate. These exceptions only are available if the employer follows certain notice and consent procedures. Generally, the employee must be notified in writing that the business intends to insure the employee’s life and in what amount, and that the business will be a beneficiary of any proceeds. Importantly, the employee must provide written consent to the arrangement and an acknowledgement that coverage may continue after the insured terminates employment. The recent IRS guidance provides several important clarifications to the definition of employer-owned life insurance contracts (EOLI). First, an insurance contract owned by a person related to the employer is not an EOLI. This would be a common situation where one shareholder owns a policy on the life of another shareholder for purposes of financing a buy-sell arrangement. On the other hand, the notice provides that an insurance contract can be EOLI if owned by a sole proprietorship and that there is no exception to the rules for an owner-employee of a wholly owned corporation. Finally, the recent notice makes it clear that a life insurance policy that is part of a split-dollar arrangement could be considered EOLI, although the death benefits would not be included in the employer’s gross income to the extent of any amounts paid to a family member or certain other beneficiaries of the employee. These rules are effective only on
CARLGRASSI
more leeway; drop in auto sales plays role By KATHY AMES CARR kcarr@crain.com
TAX TIPS policies issued or materially changed after Aug. 17, 2006. The recent guidance provided some important information on when changes to a policy issued prior to this date will be considered “material,” causing a grandfathered policy to be subject to these rules. For instance, the notice makes it clear that increases in the death benefit that occur pursuant to the terms of the existing contract are not material changes, nor are changes resulting from the exercise of an option or right granted under the original contract considered to be material. As discussed above, even if one of the exceptions to the rule applies, insurance proceeds only will be excluded if detailed notice and consent requirements are met. The notice provides that these requirements can be satisfied electronically as long as the system allows for some means of formally recording the employee’s consent and a hard copy of the notice and consent can be produced if requested by the IRS. The notice also discusses in detail the timing requirements of the notice and consent relative to the issuance of the policy. Most insurance planning is done assuming that proceeds will be received tax free. Businesses need to make sure that they meet the requirements of the applicable exceptions, and that the rules relating to notice and consent are followed. The recent guidance from the IRS will serve to help in this type of planning. ■ Mr. Grassi is a member and president of McDonald Hopkins LLC.
A
bad economy does not necessarily mean that business is taking off for the repossession companies that take away vehicles from borrowers in default of their vehicle loans. According to some who work in the vehicle repossession business, the industry’s performance is tied more closely with the lending environment, which has been in a virtual lockdown since 2008, when the economy turned sour. Since lending has been tight, fewer vehicles are being sold, which translates into fewer repossession orders, said Jim Hall, president of the American Recovery Association, an organization of collateral recovery specialists. “There’s a misconception with our industry,” he said. “People think if the economy is doing bad, we’re doing well. That’s not the case.” Meanwhile, David Skinner, president of Bancers Recovery Services in Cleveland, said business has been flat — the company averages “a couple thousand” repossessions annually — over the last couple of years for the company that recovers vehicles in Northeast Ohio and throughout the state. “Lenders are doing more workouts and loan modifications with borrowers,” said Mr. Skinner, who also said he has noticed more repossessions from middle-income families. “Usually my larger clients give the debtors between 60 and 90 days to pay the loan. Once it reaches 120 days late, though, they have to write it off, and that’s a liability for the lender.” Mr. Skinner said business may pick up about mid-year once some borrowers who took advantage of the Cash for Clunkers program begin to default on their loans. The
federal program ran July 1, 2009, through Nov. 1, 2009, and encouraged people to trade in their clunkers for new cars. “It’s a terrible way to make a living, but someone has to service these clients,” he said. But unlike Mr. Skinner, Mr. Hall said he is not expecting the repossession industry overall to benefit from the Cash for Clunkers program. “That program wasn’t aimed at subprime borrowers,” Mr. Hall said. “People who bought cars then would not have had trouble buying a car beforehand.”
Business stalls Mr. Hall said it’s difficult to quantify the industry’s performance as a whole, but he said overall he expects fewer repossessions in 2010 compared with 2009, which was an abnormal year for the industry. Typically, the repossession business is cyclical. Until 2009, the industry experienced a lull in assignments during the first half of each year, because lenders often held out on ordering repossessions since many borrowers paid on or brought their loans current once they received their income tax returns. However, 2009 remained fairly flat because the credit crunch stymied new car sales in 2008, which meant there were fewer loan defaults — and less business for repossession companies.
Robert “Skip” Blowers, owner of Skipco Auto Auction, said while business has remained fairly steady over the past couple of years, he said 2010 is a large question mark because of the fallout from the more stringent lending environment and rising unemployment. The auto auction business has locations in Cleveland, Dayton, Columbus, Mansfield, Youngstown and Akron-Canton, all areas that have suffered economically because of their close ties to the auto manufacturing industry. The company auctions repossessed cars, so Mr. Blowers said he has a pulse on how business is faring within the repossession industry. “We’ve had a steady work flow of cars over the past three years, but our business is about a year behind” how the economy trends, Mr. Blowers said. “A year or so out we may be busy, but it hasn’t hit yet. Will we be busy in 2010? 2011? I don’t know.” Mr. Blowers said until credit flows more freely and more people begin buying vehicles, the repossession industry will remain sluggish. “The whole story of the repossession business is based on credit,” he said. “The whole downturn revolved around easy credit. If you want to dry up our industry, cut credit. “If credit is tight, we slow down. If it’s available, we’re busy,” he said. ■
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16 CRAIN’S CLEVELAND BUSINESS
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SMALL BUSINESS
Branch: Franchisor must shift into mindset of business owner GRANDOPENINGS continued from PAGE 13
franchises: five in the Scottsdale, Ariz., area; one in Nashville; one in Philadelphia; two in Birmingham, Ala.; and one in Westlake (owneroperated). And, the fitness guru says it’s just the beginning — he said he’s confident there will be more than 100 Slim & FITs by the end of the year. Mr. Brenkus is far from alone in having lofty ambitions for his business concept. According to estimates included in the “2010 Franchise Business Economic Outlook” prepared for the International Franchise Association Educational Foundation, it is expected that there will be more than 900,000 businessformat franchise establishments in the United States in 2010, a 2% increase from the previous year. “Our belief was always to focus on the franchise aspect of it,” Mr. Brenkus said. “We felt we could grow much quicker that way.” Joel Libava, self-proclaimed “Franchise King” and owner of consulting firm Franchise Selection Specialists of University Heights, said he looks for a business that’s been up and running for a period
of time when considering what might make a successful franchise. “I like to see something that has been around,” he said, noting that it’s even better if that business owner has been documenting operations along the way. “I’m looking for someone that has the right thought process in mind.” But it takes more than procedures and staying power to be a strong franchise candidate: “It’s got to be cutting edge … something that’s easy to replicate,” he said. For Mr. Brenkus’ part, he believes his business has that point of differentiation, and he said that from a financial standpoint, franchising makes the most sense. “Our idea was to hit the ground running,” he said.
More than just money With $35,000 being the average initial franchise fee, access to capital — or as Mr. Libava puts it “OPM,” or “other people’s money” — can be a key motivator for an entrepreneur to decide to franchise their business. Of course, it’s not all about money. “Franchisors who realize the franchisee is the most important cog in the wheel are the ones that are
really successful,” Mr. Libava said. Fred Peters, for example, opened his first Original Pizza Pan store in 1985 at West 117th Street and Lorain Avenue in Cleveland, and today there are about 75 stores. The relationship between franchisor and franchisee is an important one to Mr. Peters. “For me to pick a franchisee, they not only have to like me, but I have to like them,” he said. The Original Pizza Pan charges a $25,000 franchise fee and a flat monthly royalty fee to its franchisees. Mr. Peters said the reasoning behind the flat fee — which is $1,500 for new locations — is that he wanted to encourage honesty among franchisees and give them a better gauge of overhead each month. Surrounding himself with good people is critical for Mr. Peters, who said there’s been a learning curve in the franchising process. “At first I had to realize I was no longer a pizza shop operator. … I was in the business of selling franchises,” he said. As for potential Slim & FIT franchisees, Mr. Brenkus is focused on
investment teams, which then hire an on-site manager. But, Mr. Brenkus said, he’s not accepting just any franchisee. “We’re looking for people who literally have a passion to help people,” he said. In fact, Mr. Brenkus likened franchising to parenthood: “You’re in control for all those years and all of sudden your baby’s gone to college.”
Not as easy as it looks Stanley Dub, a Beachwood attorney, has been in practice for 30 years, much of it working with franchisees and franchisors, and he said the decision to franchise a business is one that is document-intensive. The Franchise Disclosure Document — which must be prepared in compliance with Federal Trade Commission rules and registered in states where it is required (Ohio is a nonregistration state) — includes a complex set of information, including the business background of the owner, franchisee obligations as well initial and other fees. The franchise agreement, which spells out the relationship between the franchisor and franchisee, also is included as part of the document. “From the franchisor point of view, it’s a device that has a lot of advantages,” Mr. Dub said of franchising. “It lets somebody else provide capital for a piece of the business.” Ultimately, it means that a business is able to grow faster than it might have been able to on its own. But, Mr. Dub cautioned, the arrangements don’t always work. “It puts your business at risk,” Mr. Dub said. “If someone gets sued … it’s the franchise name.” In the grand scheme of things, however, the advantage goes to the franchisor, who can build in a lot of control into the franchise agreement. Mr. Libava agreed that there are some downfalls to the franchise model. For one, there are definite expenses up front to franchising the right way, and it can be a complicated and many-faceted process. It’s also not the right method for someone too entrepreneurial in spirit. “It’s a great business model for the right person in the right area at the right time of their lives,”he said. ■
OOH LA LA BRIDAL BOUTIQUE 107 Water St. Chardon 44024 www.oohlalabridal.com Ooh La La Bridal — founded by Amy Hissa and Angie May — aims to offer affordable prices while featuring a full collection of attire and accessories for the bride and bridal party. The boutique specializes in wedding gowns, bridesmaid, flower girl and mother of the occasion dresses, and offers customers the option of designing a gown. Prom gowns also will be available in the coming months. 440-286-5085 info@oohlalabridal.com
THE CHOCOLATE BAR CLEVELAND 347 Euclid Ave. Cleveland 44114 www.chocolatebarcleveland.com The Chocolate Bar Cleveland is in the center of the entertainment district at East Fourth Street and Euclid Avenue. The restaurant, which serves martinis, food and desserts among other specialties, also offers a private party room, a chocolate novelty shop and an outside patio, which is coming this spring. This newly franchised operation is the first outside of Buffalo, and it is co-owned by Tammy Gunya-Novak and Dominic Fanelli. Phone 216-622-COCO (2626) Fax 216-622-6265 tammy@chocolatebarcleveland.com
FERROTRADE CORP. 1691 Georgetown Road, Suite K Hudson 44236 Gerald Mink, a veteran scrap trader, has formed a new company called FerroTrade Corp. The company specializes in the management and marketing of scrap metal generated at industrial plants, such as stampers and fabricators, in addition to scrap metal brokerage. Phone 234-380-1720 Fax 234-380-1725 ferrotrade@ferrotradecorp.com To submit a new business, contact Amy Ann Stoessel at astoessel@ crain.com or call 216-771-5155.
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WWW.CRAINSCLEVELAND.COM
17
LARGEST AIRLINES SERVING CLEVELAND RANKED BY NUMBER OF ENPLANED PASSENGERS
Enplaned air freight (in pounds)
Enplaned passengers Airline Rank Web site
Enplaned air mail (in pounds)
2009
2008
Percent change
2009
2008
Percent change
2009
2008
Percent change Landings
1
Continental Airlines www.continental.com
1,540,618
1,760,602
-12.5%
4,809,484
6,150,485
-21.8%
1,587,723
2,142,953
-25.9%
12,844
(800) 523-3273
2
Continental Express www.continental.com
871,493
1,046,544
-16.7%
243,151
306,701
-20.7%
1,228
2,585
-52.5%
23,261
(800) 523-3273
3
Southwest Airlines www.southwest.com
511,950
563,281
-9.1%
656,450
852,677
-23.0%
0
0
NA
5,451
(800) 435-9792
4
Chautauqua-Continental www.flychautauqua.com
505,674
587,090
-13.9%
1,156
768
50.5%
650
1
NM
13,430
(800) 523-3273
5
Continental Connection www.continental.com
229,764
303,527
-24.3%
0
0
NA
0
0
NA
9,932
(800) 523-3273
6
American Eagle www.aa.com
208,576
187,911
11.0%
13,954
15,431
-9.6%
0
57
-100.0%
4,430
(800) 433-7300
7
Republic-US Airways www.usairways.com
117,064
97,871
19.6%
3,926
2,492
57.5%
4
0
NA
1,871
(800) 428-4322
8
United Airlines www.united.com
107,092
152,480
-29.8%
199,801
239,318
-16.5%
0
0
NA
1,171
(800) 241-6522
9
Atlantic Southeast-Delta www.flyasa.com
104,937
82,415
27.3%
21,235
15,787
34.5%
4
5
-20.0%
2,101
(800) 221-1212
10
Pinnacle-Northwest Airlink www.delta.com
91,168
89,040
2.4%
13,705
49,773
-72.5%
0
0
NA
2,332
(800) 221-1212
11
Mesaba-Northwest Airlink www.mesaba.com
67,308
44,519
51.2%
4,234
13,103
-67.7%
0
30
-100.0%
1,667
(800) 221-1212
12
SkyWest-United www.united.com
59,248
41,228
43.7%
0
0
NA
0
0
NA
1,006
(800) 241-6522
13
USA 3000 www.usa3000.com
54,183
81,273
-33.3%
0
0
NA
0
0
NA
560
(877) 872-3000
14
Mesa-US Airways www.mesa-air.com
47,286
25,087
88.5%
853
1,767
-51.7%
0
16
-100.0%
726
(800) 428-4322
15
Mesa-United www.united.com
45,817
59,961
-23.6%
0
0
NA
0
0
NA
1,022
(800) 637-2247
16
US Airways www.usairways.com
40,169
90,919
-55.8%
11,779
66,710
-82.3%
0
251,455
-100.0%
486
(800) 428-4322
17
Comair-Delta Connection www.delta.com
31,946
52,283
-38.9%
0
1,372
-100.0%
0
0
NA
992
(800) 221-1212
18
Air Wisconsin www.airwis.com
27,283
38,674
-29.5%
320
1,778
-82.0%
45
1
NM
795
(800) 241-6522
19
Express Jet - United www.expressjet.com
26,051
0
NA
0
0
NA
0
0
NA
667
(800) 241-6522
20
Freedom-Delta www.mesa-air.com
19,347
1,602
1,107.7%
0
0
NA
0
0
NA
467
(800) 221-1212
21
Trans States-United www.transstates.net
19,006
4,827
293.7%
0
0
NA
0
0
NA
545
(800) 241-6522
22
Gulfstream-Continental www.gulfstreamair.com
17,199
4,778
260.0%
0
0
NA
0
0
NA
2,716
(800) 523-3273
23
Midwest Connect www.midwestairlines.com
14,550
22,273
-34.7%
0
2,026
-100.0%
0
2
-100.0%
698
(800) 452-2022
24
Chautauqua-Delta www.flychautauqua.com
14,173
30,996
-54.3%
0
0
NA
0
0
NA
368
(800) 221-1212
25
Skywest-Delta www.skywest.com
14,069
14,515
-3.1%
0
1,164
-100.0%
0
0
NA
311
(800) 221-1212
26
Pinnacle-Delta www.delta.com
14,018
3,608
288.5%
0
0
NA
0
0
NA
230
(800) 221-1212
27
Air Canada/Jazz Air www.flyjazz.ca
11,638
14,242
-18.3%
0
0
NA
0
0
NA
834
(800) 247-2262
28
Delta www.delta.com
11,281
60,093
-81.2%
0
69,354
-100.0%
0
0
NA
80
(800) 221-1212
29
Northwest Airlines www.delta.com
10,756
46,581
-76.9%
21,143
76,506
-72.4%
0
0
NA
217
(800) 221-1212
Information is from the Cleveland Airport System Statistical Report, December 2009. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. Individual lists and The Book of Lists are available to purchase at www.crainscleveland.com.
Reservations number
RESEARCHED BY Deborah W. Hillyer
LARGEST AIRLINES SERVING AKRON-CANTON RANKED BY NUMBER OF ENPLANED PASSENGERS
Airline Rank Web site
Enplaned passengers 2009
2008
Percent change
Most frequent destinations
Reservations number
Station manager
1
AirTran Airways www.airtran.com
337,605
335,372
0.7%
Atlanta, Boston, New York City, Orlando, Tampa, Ft. Lauderdale (seasonal), Ft. Myers (seasonal), Milwaukee
(800) 247-8726
Lin Alida
2
Delta Connection(1) www.delta.com
169,137
137,730
22.8%
Atlanta, Detroit
(800) 354-9822
Paul Kaparoff
3
US Airways Express www.usairways.com
93,613
91,507
2.3%
Washington, D.C., Charlotte, Philadelphia
(800) 428-4322
Dave Wyatt
4
Frontier Airlines www.frontierairlines.com
76,769
83,633
-8.2%
Denver
(800) 432-1359
Cass Tyson
5
United Express www.united.com
40,826
37,168
9.8%
Chicago (O' Hare)
(800) 241-6522
Paul Kaparoff
Source: Information is from the Akron-Canton Airport. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. The Book of Lists and enhanced versions of most lists, with more companies, are available to purchase at www.crainscleveland.com. Originally published Feb. 9, 2009. (1) Delta and Northwest merged during the year, Akron-Canton Airport is reporting the number of enplaned passengers for Northwest and Delta under the Delta name for 2009. The 2008 number is for Delta only.
RESEARCHED BY Deborah W. Hillyer
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FEBRUARY 8-14, 2010
Toyota: Customers remain patient
the product and in the company,” Mr. Schneider said.
continued from PAGE 1
All the Toyota dealers who spoke with Crain’s for this story said their sales either have been largely unaffected by the crisis, or that it’s just too hard to tell the effect on sales in what is a still-weak environment for auto sales generally. But Mr. Spitzer, for one, noted Toyota’s sales nationwide are down. “Our sales for January were very close to (sales levels for) 2009, but, nationally, Toyota sales were off 16%,” Mr. Spitzer said. “Toyota estimates it cost them 20,000 (vehicle) sales last month.” Some sellers of American-made autos are thrilled to pick up market share from Toyota’s woes. “I couldn’t be happier. It’s a great time to be a Ford dealer,” said Eric Walker, general manager of Marshall Ford in Mayfield Heights. Mr. Walker said he already was seeing an uptick in business over the last eight months, with many customers saying they not only wanted an American-made car, but
about protecting their long-term image and Toyota’s reputation for producing quality cars than they are with moving their existing inventory. And they say they still can sell Toyotas, either models not affected by the recall or vehicles built in Japan that also are not subject to recall. The number of available or Japanese-built cars varies from dealer to dealer. Mr. Gile said about 25% of his inventory is unaffected, and he had at least a couple Japanesebuilt versions of every Toyota model available for sale last week. “We’re still in business and still selling cars,” Mr. Gile said. “On pretty much everything (model) we have, we could probably sell you something. We’d have one or two anyway and sometimes as many as 20.” At Montrose Toyota, general manager Brad Wolkov said about 40% of the dealership’s 150 or so new cars still are ready to sell. That’s largely because they are U.S.-built models that are not affected by
dealing with their inventories, said Alan Spitzer, owner of Spitzer Management in Elyria and its dealerships in Ohio, Florida and Pennsylvania that represent 15 manufacturers. “It’s the dealer’s car” once it buys it from the manufacturer, Mr. Spitzer said; there is no option for the dealer to sell the car back to Toyota. For Mr. Spitzer, that means sitting on about 150 vehicles and awaiting the fix, while he pays interest on the financing he used to buy the vehicles — a process followed by nearly all dealers. In the end, some less-capitalized dealers might be pinched hard and some could even go out of business, but most will survive, Mr. Spitzer predicted. Toyota is helping by paying dealers up to $75,000 apiece to cover the expense of adding hours in service departments and carrying inventory, Mr. Spitzer said.
Image is everything Dealers say they are more worried
Contact: Phone: Fax: E-mail:
the recall. So far, dealerships say their customers have been patient and loyal — sometimes even willing to wait to buy a new Toyota. Ken Schneider, co-owner of Metro Toyota in Brook Park, said he has had several customers tell him they want their cars, defect or not, as long as they’re fixed before they get them. He has about 600 Toyotas in stock, about 350 of which need the recall fix. “Surprisingly enough, last Saturday was a busy day for all the dealers,” Mr. Schneider said. “We had people buying cars we can’t deliver and say, ‘Let me know when I can pick it up.’” He and other dealers are relying on just that sort of brand loyalty — as well as upon Toyota handling the recall in a way agreeable to customers. “You can’t tell someone who’s had five Toyotas not to buy another Toyota, because they have faith in
Driven a Ford lately?
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also wanted to support a car company not on the government dole. The Toyota situation has further accelerated that trend, Mr. Walker said. The situation also is likely to reduce prices for used Toyotas, but that likely won’t be dramatic or longlasting, the dealers said. “The Toyota product will be down in value over the next 45 days or so,” Montrose Toyota’s Mr. Wolkov said. “But I think it will spike right back up.” If Toyota handles the situation right, it could come out an even stronger brand than when the crisis began, Mr. Schneider of Metro Toyota predicted. He’s not alone. Commentators on the CNBC financial cable network last week suggested Toyota could emerge from this period stronger than before — much the way crisis management experts believe Tylenol strengthened its brand by reacting well to a crisis involving poisoned pills in the 1980s. “You’re not judged by your mistakes, but by how well you deal with your mistakes, and we think Toyota is handling this the right way,” Mr. Schneider said. ■
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19
THEINSIDER
THEWEEK FEBRUARY 1 – 7 The big story: There will be a Third Frontier bond issue on the May ballot after all. By overwhelming votes in both houses, the General Assembly approved a $700 million bond issue, which represents a compromise between the $950 million passed by the Ohio House and the $500 million approved by the state Senate. Proceeds of the bond issue would finance Ohio’s Third Frontier program, which provides state money for technology research and commercialization initiatives statewide. See editorial, Page 8.
Flight plan: The city of Cleveland would like Cuyahoga County to close Cuyahoga County Airport in Richmond Heights so that general aviation traffic can be consolidated at cityowned Burke Lakefront Airport. Ricky Smith, director of the city’s Department of Port Control, brought that idea to Cleveland City Council’s aviation committee Feb. 3. Burke has enough capacity to accommodate small aircraft traffic now handled by the two small airports, Mr. Smith said. He said the county is faced at the airport in Richmond Heights with problems meeting new federal safety requirements, including neighborhood opposition to its plan to extend the runway.
D.C.-bound: NASA Glenn Research Center soon will have a new leader — one who may end up overseeing the center’s transition away from the Constellation space exploration program. The National Aeronautics and Space Administration named NASA Glenn director Woodrow Whitlow Jr. as associate administrator for Mission Support at NASA’s headquarters in Washington, D.C. He will remain director of NASA Glenn until a replacement is found. The announcement came just two days after the White House issued a budget proposal for NASA that could eliminate the Constellation program, the goal of which is to return astronauts to the moon and eventually send a manned flight to Mars.
REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
Progressive searches for someone to go with the Flo
who spoke with Crain’s didn’t take much issue with how the state runs the program, which features an independent commission of business leaders who, based on merit, give grants ■ Flo, Progressive Corp.’s perky spokesto product-focused technology projects. woman, is looking for a sidekick. Most were more concerned about the state The company already has held auditions in taking on more debt, especially so soon after New York, and insurance-selling wannabes the Legislature struggled to balance the biencan try out later this month in Miami and next nial budget this past summer. month in Los Angeles. Two also had problems with the In Cleveland and elsewhere, state investing in private compavideo tryouts can be submitted nies at all, saying private investors at www.helpflo.com through would be supporting such proMarch 21. Already, more than jects if they were any good. 500 videos have been uploaded In the Senate, everyone seems to the web site — though only to like the Third Frontier — even three from Ohio. The mostthe two guys who voted against viewed entry has been watched it. Sen. Keith Faber, R-Celina, more than 307,000 times. said he would have supported Online voters will narrow the PHOTO PROVIDED top 10 finalists to three people Progressive Corp.’s Flo the $500 million bond issue originally proposed by the Senate. who will be flown to Los Angeles to audition with Flo, who is Sen. Bill Seitz, R-Cincinnati, known for her “tricked-out name tag” and said he voted against the bill because he thinks “I ❤ Insurance” button. Finalists will be anit will fail without being coupled with bonds nounced in May and the new sidekick in June. for infrastructure projects across the state. He — Arielle Kass noted how voters supported the $500 million Third Frontier ballot issue in 2005 only after it was coupled with $1.5 billion in bonds for infrastructure projects. When the bond issue stood alone in 2003, ■ Debate about the Ohio Third Frontier they rejected it. Project these days seems to center around So, will there be a vocal opposition? The whether it’s great or really, really great. small government fans at the Buckeye InstiHowever, a few Ohio lawmakers — 15, to be tute think tank in Columbus aren’t speaking exact — did vote against putting a $700 up just yet. However, institute executive billion bond issue to continue the technologydirector Matt Mayer remains suspicious of focused economic development program the rosy job creation figures touted by Third on the May ballot. Frontier supporters. Four of those legislators, all Republicans, “They can’t seem to pick a loser. It seems
Almost everyone loves the Third Frontier
WHAT’S NEW
Even as it posted higher fourth-quarter earnings, Diebold Inc. also said it would be eliminating 350 jobs in North America, with about two-thirds of the cuts coming at its headquarters in Green. Diebold CEO Thomas Swidarski said the company’s business related to bank branch construction in North America “remains especially challenging and will likely not return to historical norms in the near future.” Diebold makes automated teller machines and bank security equipment.
Can’t we all just get along, at least at the dinner table?
Thanks for the money:
PNC Financial Services Group said it’s paying back all $7.6 billion of government bailout money it received in 2008. The Pittsburgh company, which bought National City Corp. about a year ago, reached an agreement to redeem the preferred shares held by the U.S. Treasury under the Troubled Asset Relief Program, or TARP. Those shares were issued to the government in exchange for the federal money.
Stay up on the news at www.CrainsCleveland.com.
COMPANY: Jakprints, Cleveland PRODUCT: EcoGreen Sticker Jakprints, a full-color, apparel and sticker printer, bills its new product as a “green alternative to traditional sticker stocks.” The EcoGreen Sticker was born of the company’s realization that while it had many options for paper stocks of recyclable content or organic apparel, an earth-friendly sticker wasn’t available, according to Jakprints cofounder Dameon Guess. EcoGreen Stickers are printed on Jakprints’ TruStick stock, which is made without using water or toxic agents and has a face stock made entirely from inorganic stone (limestone or calcium carbonate) and inorganic mineral powders, the company says. For information, visit www.Jakprints.com.
All is not happy in TV Land ■ After nine months of tug-of-war over contract negotiations, union employees at WKYC-TV, Channel 3, say they are at the end of their rope after the station and its owner, Gannett, unilaterally instituted on Jan. 29 salary reductions of 8% to 18% for 54 of the station’s unionized employees. The employees, who are members of the National Association of Broadcast Employees and Technicians, Communication Workers of America-Local 42 in Cleveland, said the station also imposed a reduction in paid sick days and changes in the work week. Lou Fallot, the NABET-CWA staff representative, said the union is meeting Feb. 13 with members to discuss the next steps. According to the union, non-union employees at WKYC in June 2009 received a 4% to 6% pay cut and a one-week furlough, although Brooke Spectorsky, WKYC president and general manager, said that was inaccurate. Nonunion employees did receive a salary reduction and pay freeze, though. Mr. Fallot said the union offered a compromise that included a salary reduction and a furlough, but that the station and Gannett declined. “Gannett and WKYC are the most arrogant and cheapest companies I’ve had the misfortune of dealing with,” he said. Mr. Spectorsky’s reply: “When the union gets realistic about changes in the broadcast business, maybe we can reach terms for a new contract.” — Kathy Ames Carr
BEST OF THE BLOGS Excerpts from blog entries on CrainsCleveland.com.
Downside at Diebold:
too good to be true,” Mr. Mayer said. — Chuck Soder
■ The dinner party will never be the same. So wrote Jim Sollisch, creative director at Marcus Thomas, in a funny, somewhat tongue-in-cheek Christian Science Monitor commentary. In the good old days, he wrote, when you threw a dinner party “all you had to worry about was finding a topic everyone could talk about.” Now, the task is harder: Find a dish everyone can eat. Two culprits bear the blame, according to Mr. Sollisch: the rise of food allergies in America, and food writer Michael Pollan, whose books “Omnivore’s Dilemma” and “In Defense of Food” have raised Americans’ awareness about what they’re eating but also have led more of them to have, shall we say, lots of issues at the dinner table. “I see a time when the dinner party will simply go extinct,” Mr. Sollisch wrote. “It will just be too much bother to try to cook for a
group of people with so many food tics. Easier to dine alone. Or find a restaurant to go to. (Good luck finding one everyone agrees on.)”
Ivy Leaguer makes the grade in listening to constituents ■ Connor Diemand-Yauman, a Princeton University senior from Chesterland, spoke up in a Feb. 1 New York Times piece about grade deflation at the Ivy League school. In response to a long period of grade inflation, Princeton has made it much harder to get an A. “The percentage of Princeton grades in the A range dipped below 40 percent last year, down from nearly 50 percent when the policy was adopted in 2004,” The Times said. “The class of 2009 had a mean grade-point average of 3.39, compared with 3.46 for the class of 2003.” Mr. Diemand-Yauman, from his perch as undergraduate student body president, told The Times, “I had complaints from students who said that their professors handed back exams and told them, ‘I wanted to give 10 of you A’s, but because of the policy, I could only give five A’s.’ When students hear that, an alarm goes off.”
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