Crain's Cleveland Business

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VOL. 37, NO. 10

MARCH 7 - 13, 2016

CLEVELAND BUSINESS

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z MARCH 7 - 13, 2016 z CRAIN’S CLEVELAND BUSINESS

Health systems are checking in digitally Hospitals stress that human element is still critical piece

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After discharge from University Hospitals, a patient with Chronic Obstructive Pulmonary Disease receives a call checking in: How many times have you used your rescue inhaler in the past 24 hours? Are you feeling better or worse than yesterday?

The automated call lasts just a couple of minutes, provides the patient with some information about inhalers and ends with this message: “All right. Thanks for listening. I’ll check in on you again in a few days.

Goodbye.”

And the computer will.

This transition of care program at UH Geauga Medical Center sends a series of calls to recently discharged patients with COPD for about two weeks. If a patient’s responses are concerning, providers will be notified so they can follow up. The automation is an offering of Emmi, which designs technology-based systems that deliver patient engagement.

As technology offers growing ways to interact with patients, hospitals are working to increase efficiencies without losing the personal touch of a patient-physician relationship.

It can be done, but it takes work to walk that line between added efficiencies and empathy, said Carol Santalucia, president of Santalucia Group, a Cleveland consultancy focused on patient experience.

UH uses Emmi for this automation service as well as for educational videos and population health campaigns.

MetroHealth plans to start using Emmi’s automated calls this summer, in addition to the other Emmi features it already uses. After a sixmonth pilot, the Cleveland Clinic is using HealthLoop — which sends automated emails to patients — on an ongoing basis in orthopedics. It’s open to expanding that service to other departments.

“I think technology can help us become much more efficient, and I also think you have to be very, very careful with it,” said Santalucia, who spent almost 30 years at the Clinic working in patient experience before starting her consulting firm.

“The thing that I encourage health care leaders to do and to recognize is that it’s all about that emotional connection,” she said. “And it’s harder to achieve the emotional connection when you rely too heavily on technology.”

Nate Hunt, director of UH’s accountable care organization, stresses that the automated system’s economy of scale doesn’t come at the cost of individual needs, empathy and personalization.

“We’re never trying to over-automate or take away that personal touch, especially in a space like health care,” he said.

Personalizing automation At UH, a discharge team evaluates a patient’s needs and then tweaks the generic follow-up call plan for whatever procedure they had.

A patient may need fewer calls or more, or perhaps should be called manually.

And patients can always access a live person if they’d prefer. Before Emmi, those post-discharge calls would have been manual — and therefore far less frequent.

Matt Stanton, who leads the HealthLoop pilot at the Clinic, said the automated emails definitely offer more communication.

“There’s just no way that a surgical team could call every single patient every single day to check in on them,” he said. “But this is one way in which we can, in some way, check in on every single patient every single day.”

The added volume of check-ins gives hospitals more opportunities to detect potential problems. Certain concerning responses from a patient would trigger an alert, letting providers know they should reach out.

For instance, if a patient reports on HealthLoop they have some swelling and redness at a surgical site, someone at the Clinic could follow up and ask them to upload a picture.

Santalucia, who has seen more and more technology in patient engagement, said this follow-up step is key.

Automated emails and calls have a critical role, and it’s where things are headed, she said, but it’s important that people still understand empathetic communication.

“I think you have to be careful not to see it as an empathetic interaction.

“It’s an automated interaction that maybe can help us understand where we need to respond in a more empathetic way,” she said.

Dr. Adrienne Boissy, chief patient experience officer at the Clinic, said too often, engagement is looked at from only the patient viewpoint, but she argues that the goal should be to have both the patient and the physician engaged.

“If you have highly engaged patients but providers who are half engaged, I don’t think we’ve achieved what we were hoping for,” she said.

Technology can be a way to extend the relationship between the two, but it needs to be implemented in a way that maintains meaning and keeps in mind the fact that one technology solution won’t meet everyone’s needs.

Education and outreach Beyond automation, engagement through these systems and others offers a lot of chances to educate patients.

MetroHealth recently began using the Emmi system to send educational multimedia to patients. The Emmi presentations cover everything from how a procedure works to what to expect in the hospital to details about a condition. It allows patients to rewatch parts they want to understand better or pass the videos and presentations along to caregivers and family members. UH has been using this service as well and helps Emmi build its library with content from experts at Case Medical Center.

It’s important to reach patients where they are, said Dr. Sara Laskey, head of patient experience department at MetroHealth. That may be on their smartphone through an educational video, or it may be over the phone.

Some Clinic doctors have started using HealthLoop to parse out preprocedure information. In the past, providers would hand patients a large binder that can be intimidating, difficult to digest and probably doesn’t get read all that much, Stanton said.

Now, HealthLoop sends a series of emails spreading out that information.

“It’s not necessarily clear to us whether this is a better way necessarily, or more effective, or if it has a measurable impact on outcomes, but parsing out the information and providing it at the right times intuitively seems like a better way to do this rather than just handing them the binder,” Stanton said.

How to measure patient engagement through technology is one of the next steps. Boissy said it’s important to distinguish between engaging in technology and engaging in your health care.

“Just because you monitor your numbers on your iPhone or you check in every once in a while, does that mean your outcomes are going to be different?” she said. “I don’t know that we know the answer to that yet.”

The challenge remains finding the best way to connect with patients.

Technology can be a tool in that, but Boissy said she never wants to see a day when heavy, important, dense information is shared in an email.

“Connection is universal. How you achieve it and what that looks like in different people’s eyes is different,” Boissy said. “It boils down in some sense to effective communication, which may sound like a lesssexy answer but actually may be the most innovative thing we can do, which is keep honing our ability to communicate empathy and compassion effectively.”

Volume 37, Number 10 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230.

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Simbionix shuts local office; firm still has presence

BY CHUCK SODER csoder@crain.com @ChuckSoder

The company that bought Simbionix has closed its Cleveland headquarters as part of a broader restructuring effort.

Simbionix, which makes surgery simulation machines, still employs an undisclosed number of local people who now work from home, said Tim Miller, spokesman for the parent company, 3D Systems.

That South Carolina-based 3Dprinting company bought Simbionix for $120 million in mid-2014, just as 3D Systems’ booming stock price started to roll downhill.

The decision to close the Cleveland office is part of 3D Systems’ effort “to consolidate certain facilities,” Miller said.

“In this case, operations from the Cleveland office are being relocated to our new, state-of-the-art Healthcare Technology Center in Denver, while many of the staff in Cleveland were moved to home offices,” he stated via email.

Just before 3D Systems bought Simbionix, it employed about 30 people at its headquarters in the Baker Electric Building on Euclid Avenue.

Most of them were focused on sales and marketing.

3D Systems has been struggling lately. It lost about $59 million during the first nine months of 2015, and the company’s CEO stepped down in October as part of a “mutual agreement” with the company’s board.

The company’s share price exploded in 2012 amid growing interest in 3D printing, and at the end of 2013 shares briefly traded for more than $96 each.

Now prices are right back to where they were in 2011. Shares were trading for $13.42 just after noon on Friday, March 4.

Simbionix has long been held up as an example of successful local economic development.

Officials from the Cleveland Clinic and Early Stage Partners, a local

venture capital firm, recruited Simbionix to Cleveland in 2002, with the help of government incentives.

Now Simbionix is once again based in Israel, where it was founded in 1997.

Though it will no longer have a local office, the company will continue to impact Northeast Ohio in other ways.

For instance, its surgical simulation machines are still being built at Astro Manufacturing & Design in Eastlake.

That company hasn’t seen a slowdown in orders since the local office closed at the end of 2015, according to Dave Powell, director of sales at Astro.

“We’re actually doing a little bit more work (this year) than we were doing before,” he said.

The sale also generated wealth in Northeast Ohio. Early Stage Partners invested in the company, which proved to be a good move.

The profits it received from the sale could help the firm in its ongoing effort to raise a new investment fund and finance more local companies.

The company also offered stock options to its employees.

Among those employees was Gary Zamler, who was hired as Simbionix’s CEO in 2006 and briefly serving as a vice president at 3D Systems.

He may eventually start a new company, perhaps in the biomedical space. If he does, it will be based here, he said, noting that he turned down a few “very attractive offers” to run out-of-state businesses because he “did not want to leave Ohio.”

For now, however, he’s mentoring a few other local entrepreneurs, teaching classes at Cuyahoga Community College “and doing all the things I never had time to do.”

From what he’s heard, it sounds like 3D Systems has indeed kept many of its Cleveland employees, so he thinks the company will continue contributing to Northeast Ohio’s economy.

“All in all, I think it’s been a net positive,” he said.

Tucker Ellis opens Chicago location Cleveland’s Tucker Ellis LLP announced the opening of an office in Chicago that’s expected to grow steadily throughout the year.

Located on the 69th floor in the Willis Tower, the Chicago office will be anchored by newly hired partners Sherry Knutson and James Mizgala.

The new location and attorneys bring Tucker Ellis’ total footprint to 200 attorneys in seven offices.

Tucker Ellis managing partner Joe Morford said the Chicago location

offers a “perfect forum” for the firm’s core work in national pharmaceutical and commercial litigation.

Without sharing specific figures, Morford said the goal is to build the office out continuously through the year.

“We see, in very short term, big opportunities for us there,” he said.

Tucker Ellis was founded 13 years ago with about 65 lawyers.

— Jeremy Nobile

Reprints: Krista Bora

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Shiloh Industries Inc. continues to turn itself around, with rebounding sales and a slew of new products coming to market. Now it’s hoping that, with many product development costs behind it, it can also get its earnings up to speed.

The Valley City-based company’s positive results are evident, so far, in the company’s revenue growth.

Sales of Shiloh’s automotive products jumped to $1.1 billion in fiscal 2015, ended Oct. 31, 2015, up 26.2% from fiscal 2014.

Sales continued to rise, albeit more slowly, in the first quarter of fiscal 2016, when they were up 3.9% to $251.1 million.

Profits, though, have not kept pace.

The company earned $87.1 million in 2015, up 9.4% from $79.6 million in 2014. That’s a nice increase that most companies would be glad to have, but most companies also would like to see their earnings grow as fast as their sales, if not faster.

And in the first quarter, Shiloh lost $5 million after posting earnings of $2.4 million in the first quarter of fiscal 2015.

The first-quarter loss was attributed primarily to a decrease in the value of Shiloh’s scrap metal and one-time professional service fees.

But the company might now be entering a period in which it has far fewer costs than it did last year, while the outlook for sales of its products — many of which are used to make cars lighter, more efficient and less noisy — remains strong, said Jay Potter, Shiloh’s chief financial officer.

“We had a record year for new business,” said Potter, who noted that the company has been adding both new customers and new products at a rapid rate, as it transforms itself from a blank stamping company into a product development company more integrated with its customers and their vehicle designs.

As recently as 2012, half of Shiloh’s sales came from just two customers — General Motors and Chrysler.

Today, it has half of its business spread over five customers, Potter said. That has allowed it to capture growth not only from GM and Chrysler, which have increased their spending with Shiloh by 40% since 2012, but also to participate in the growth of other car makers and tierone suppliers, he said.

As U.S. auto sales have rebounded, reaching a record 17.5 million in 2015, Shiloh’s business with nearly all of its customers has increased as well, Potter said.

By working more closely with customers and expanding its own manufacturing capabilities, Shiloh also has been able to take advantage of new trends in the auto industry, Potter said, including “lightweighting,” as virtually every automaker seeks to make their vehicles lighter and more efficient.

“We’re seeing more and more customers seeking lightweighting solutions today,” Potter said.

Costs in the rearview Ironically, however, some of the same trends driving Shiloh’s sales also have been driving its costs.

Making more light weight products means working with products other than steel, such as aluminum and magnesium, and that incurs substantial costs.

The company launched 527 new products in 2015 — three times as many as 2014, when Shiloh brought about 175 new products to market, Potter said. It also meant hiring more people; employment at Shiloh jumped, from 2,000 people in 2013 to about 3,400 currently. “What that does is create a significant amount of startup costs and inefficiencies that we faced in 2015,” Potter said.

But, today, the scenario is turning around.

Now, Shiloh has all those new products incorporated into automaker designs. So the sales payoff is ahead, while the startup costs are mostly in the company’s rearview mirror.

The new products and sales contracts that Shiloh secured in 2015 represent $1.3 billion over the life of the vehicles it is supporting, Potter said, or about $230 million in annual sales.

That’s on top of existing sales to existing customers and vehicle platforms and 60% of those new sales represented the sale of lightweighting technology the company has invested in, Potter said.

Now the company needs to stay focused and hope that the U.S. auto market does not lose strength.

Potter, at least, seems optimistic.

“Based on what we’re feeling about our first quarter and the fourth quarter of last year — when the challenges hit us the heaviest in terms of these launch volumes and getting some of these startups going — we think it’s going to be a pretty decent market,” Potter said.

The value of diversity Others seem to think the winds will blow in Shiloh’s favor as well, at least in terms of the U.S. auto market.

The Wall Street Journal recently reported that 2016 auto sales could hit 18 million vehicles, driven by low interest rates, low gasoline prices and an improving labor market. If that holds true, Shiloh stands to benefit with further increases in sales. Plus, with a more diverse customer base, it no longer will matter much which car company fares the best, because Shiloh is selling to many of them.

J.B. Maverick, a former commodity futures broker and stock market analyst who writes on the website Investopedia, wrote Feb. 16 that he expects Shiloh to have a solid year.

“Shiloh moved strongly in 2015 to position itself well for the future, even though this meant making some substantial capital expenditures such as those required for a new plant in Tennessee,” Maverick wrote.

“The upfront expenses required for new product launches should eventually show a return in additional revenue generation. Realizing it needs to improve its profit margins, the company is shifting its product portfolio to higher-margin and value-added products.”

Maverick also predicted Shiloh’s recent efforts to expand in China, where auto sales are also on the rise, would boost the company’s revenues this year.

Amazon to open pickup location near UA Amazon.com is about to make things a little easier for its customers in Akron.

The Seattle-based e-commerce giant announced it plans to open Amazon@Akron, a staffed pickup location near the University of Akron campus.

It will be the second Amazon pickup location in Ohio, following one at the University of Cincinnati.

Amazon Student and Amazon Prime members will get free oneday pickup on items shipped to the Amazon@Akron location, the company said in a news release.

The nearly 2,000-square-foot

space will open this summer at 290 E. Exchange St., Amazon said.

The site was chosen because it is “centrally located near the university and easily accessible to students and the Akron community.”

Since 2015, Amazon said, it has opened staffed pickup locations at Cincinnati; Purdue University; the University of Massachusetts Amherst; the University of California, Berkeley; and the University of California, Santa Barbara.

Amazon said it has agreements in place to open three more locations in 2016, at the University of Pennsylvania, the University of California,

Davis, and the University of Texas at Austin.

The Seattle Times characterized the campus initiative as the key part of a strategy to “get shoppers while they’re young.”

Amazon is “hiring dozens of business managers, project managers and software engineers for the effort,” the hometown newspaper reported. Amazon also has a “pitch page” on its website for universities, in which “it describes how students can save money and time by having pickup locations nearby from which to buy and send back books.”

— Scott Suttell

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Chief academic officer David Wintrich talks to students gathered in Tech Elevator’s lobby at the Baker Electric Building in Midtown Cleveland. (Contributed photos)

Tech Elevator hits the ‘up’ button New software bootcamp gets more capital, more students, more space

BY CHUCK SODER csoder@crain.com @ChuckSoder

Dick Pace knows that Tech Elevator’s ambitions are too big for the Baker Electric Building.

The software development bootcamp has quickly become his largest tenant, and it just raised capital that should help the company grow even faster.

So it probably won’t be long before Tech Elevator moves out of his building in Midtown Cleveland. But he’s OK with that.

After all, local companies are desperate to find more coders. So the entire region will benefit if Tech Elevator can produce more of them, Pace said.

“They’re meeting this need that will make our other industries stronger,” he said.

Five of Tech Elevator’s first six graduates have already landed jobs that involve writing code, even though most of them had only experimented with programming before joining Tech Elevator. The sixth wasn’t looking to change careers, but he ended up becoming one of the company’s investors.

Now the bootcamp is trying to scale up.

Today, 22 students are going through the full-time, 14-week-long program. And CEO Anthony Hughes expects that number to rise quickly as Tech Elevator adds more teachers and classes. He aims to enroll a combined 90 students during the summer and fall programs.

Then he wants to put those num-

bers to shame: Tech Elevator aspires to produce 1,500 graduates by 2020.

Hughes — who previously served as CEO of a bootcamp in Akron called the Software Guild — promises not to sacrifice quality for quantity. After all, if he did, Tech Elevator might have to make good on its money-back guarantee: If a student can’t get a job in 120 days, the company has promised to refund their $12,000 tuition.

That promise sets Tech Elevator apart from other bootcamps, Hughes said.

“Our students need to know that we’re in it together,” he said.

To achieve its lofty goals, the company will have to operate in the red for a while, he added. Hence the need for capital.

Tech Elevator raised an undisclosed amount of cash from LeanDog — a software consulting firm based on an old barge next to Burke Lakefront Airport — and individual investors. Among them are Doug Weintraub, who previously founded a tech consulting firm called Socius, which has an office in Brecksville; Jim Zedella, the CEO of Innovative Student Loan Solutions in Cincinnati; and LeanDog CEO Jon Stahl.

Stahl said he understands why software development bootcamps have been popping up across the country. His customers “are dying for talent,” and bootcamps are a cheap way of creating it, compared to the cost of a bachelor’s degree, he said.

Hughes made similar comments.

“Higher education is going to go the way of cable. It’s being unbundled right now,” he said.

Today, Tech Elevator offers courses in Java and .NET. But LeanDog could help the company add courses on other coding languages and tech skills, such as test automation and user-center design. LeanDog also could help Tech Elevator break into new geographies, Stahl said.

“The markets they’re planning to go into are markets we’re already in,” he said, adding that 80% of LeanDog’s business comes from outside of the Cleveland area.

For now, however, Hughes is focused on expanding in Cleveland.

When Tech Elevator’s first class began in September, the company wedged its students and employees into a 900-square-foot office suite on the second floor of the Baker Building. Now it leases 7,000 square feet on the first floor, and it’s looking at taking another 1,000 square feet of adjacent space.

While giving Crain’s a tour, Hughes stopped in front of a giant window and looked into his “favorite fish tank” — Tech Elevator’s Java class.

He described how the students inside came from all kinds of backgrounds. One was a machinist. Another spent eight years playing online poker. There’s a biomedical researcher. A statistician. A guy who was a Royal Marine, which is the British version of a Navy Seal.

“Each of these folks offers something very different,” he said.

Many of them have taken online coding classes through websites like Codecademy or Coursera. Others have “literally not touched a line of code,” Hughes said. Thus, students put in lots of extra hours at night and on weekends.

“We’re all on a journey to mastery, so you’ve got to get your 10,000 hours in,” he said, referencing a rule of thumb for how long it takes to learn a complex skill.

Top, Mary Prevel makes a pensive pose during Tech Elevator’s new .NET course. The other photos feature the Java class. (Contributed)

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Real Alloy switching Beachwood spots

BY STAN BULLARD sbullard@crain.com @CrainRltywriter

Real Alloy, a global aluminum recycling business, has found a new home to call its own that allows it to vacate part of Aleris International Inc.’s Beachwood headquarters.

Real Alloy is planning the move following its sale a year ago to Sherman Oaks, Calif.-based Real Industry Inc. But it’s not going far or leaving Beachwood as Real Alloy is bound for the third floor of the 3600 Park East Building, better known as the Brulant Building. Terry Hogan, Real Alloy president, said Real Alloy “can’t get in there soon enough” to continue its operations.

Real Alloy has signed a lease for 20,000 square feet at 3600 Park East with an affiliate of building owner ORG Portfolio Management Group of Beachwood. Real Alloy will move 77 headquarters staffers to the new office, Hogan said.

“We looked at a lot of locations around Northeast Ohio and considered consolidating elsewhere, but staying where we are in Beachwood made the most sense,” Hogan said.

Finding space close to current offices helped because it will not disrupt commutes of employees, he said, and the city of Beachwood provided income tax incentives to help retain the firm in the suburb.

Building owner ORG did some heavy lifting to land the company, which operates a total of 24 produc-

tion facilities in North America and Europe. ORG built out space on the building’s fourth floor to accommodate Candescent, a medical radiology technology firm, and move it from the third floor to create an office large enough for Real Alloy, said Jon Berns, an ORG principal.

“It’s a substantial remodel,” Berns said. “We pushed to get Candescent’s new office ready in six weeks and make room for Real Alloy.” Candescent also said he went from subleasing 10,000 square feet in the building to being a direct tenant of the ownership.

The new Real Alloy office will be designed by Cleveland architect Kevin Hengst to give the firm a combination of open office space and enclosed offices, Hogan said. The of-

fice will house treasury, payroll, corporate health and safety, environmental, legal and customer service staff, as well as the firm’s leadership, he said. Hogan said he was surprised the Cleveland suburban office market is as tight as it is, especially as he had planned to get the company on a single floor. Patrick Reardon, a senior vice president at Independence-based Cushman & Wakefield Cresco realty brokerage, said Real Alloy had just five suites in its size range in the Beachwood corridor.

Several were not at the corporate quality level the firm sought, a result of the long lull in construction of office buildings in the suburbs.

In Candescent’s case, the Bostonbased firm needed room to expand as it will double its staff to 50 by the

end of 2016, according to Andrew Webb, Candescent chief financial officer. The firm provides productivity software for radiology units. The Beachwood operations center supports its network operations team and business data analytics for clients such as the Cleveland Clinic.

Although large rental east suburban space is now growing scarce, the transactions helped fill long-vacant space in 3600 Park East, often referred to as the Brulant Building because of the digital marketing firm’s name on a sign outside it. The space was vacated in 2012 by Rosetta Group LLC, which had acquired Brulant, as it consolidated several suburban offices at 629 Euclid Ave. in downtown Cleveland, which was renamed the Rosetta Building.

IBM will make itself at home atop 1111 Superior Building

BY STAN BULLARD sbullard@crain.com @CrainRltywriter

Taking three floors of offices with a view of downtown Cleveland, IBM Corp. has leased the former Eaton Corp. executive offices atop the 28story 1111 Superior Building.

Myrna Previte, the Kowit & Co. broker who represents the office tower, said the just-executed lease reflects stepped-up office action in the city and building.

“It’s very exciting for downtown,” she said. “It’s not musical chairs but a blue-chip tenant that is expanding.”

IBM spokesman Clint Roswell confirmed the company has leased

space in the structure. He said IBM will station an operation currently in the region in the property but was unable to provide more details.

The space in the multitenant property has been empty since Eaton moved to Beachwood for its own headquarters building in 2013. Due to its former tenancy, the suites are not your typical offices. Previte said the 43,000 square feet that IBM has leased has its own internal stairway and elevator service for floors 26 through 28. The general building elevators stop at the 26th floor — a relic of Eaton’s anchor tenancy in the property from the time the building opened in 1983 until its exit.

IBM has several regional operations that might populate the space, but office leasing insiders say IBM’s

Explorys is bound for the building because the medical technology firm has been searching for space and is aggressively adding staff at offices in the former Cleveland Play House controlled by Cleveland Clinic near its main campus.

David Browning, managing director of CBRE Inc.’s Cleveland office, confirmed CBRE represented IBM in a “significant transaction for the top three floors of 1111,” but said he could not disclose specifics of the company’s operations. CBRE represents Big Blue nationally.

“This is good for the market because it is a tenant that’s not currently counted as part of the downtown office market,” Browning said. “Statistically, it’s a 100% (expansion.)”

Explorys CEO Stephen McHale de-

clined comment. IBM bought the health care data analytics company in 2015; its staff now numbers about 220. Rico Pietro, a principal at the Independence-based Cushman & Wakefield Cresco realty brokerage, said the former Eaton executive suite would attract such a technology-oriented company because they offer flexible space with lots of opportunities for workers to collaborate, such as passing on an internal stairway for the suites. Moreover, the building’s location on East 12th Street is surrounded by substantial nearby parking in several garages as well as the 1111 Superior-controlled garage.

That suits flexible working hours that technology types prefer.

For building owner Skokie, Ill.based American Landmark Proper-

ties, the three-floor deal caps a busy leasing period at the building. Previte said more than 75,000 square feet has been leased by other companies this past year, including 38,000 square feet by Asurint, the trade name of One Source Technology LLC. “We’re getting a lot of looks,” Previte said, as the Chicago company’s investment in updating the building is helping attract tenants, including a new fitness center and first-floor conference room for tenants, as well as preening perquisites of the property such as its lobby.

However, there’s still more than 100,000 square feet of office space in the office tower to fill.

Crain’s reporter Chuck Soder contributed to this story.

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ViewRay orders skyrocket; will revenue follow?

Oakwood Village company is still losing money, but ‘traction is good’

BY CHUCK SODER csoder@crain.com @ChuckSoder

Orders are piling up at ViewRay. Medical researchers are saying good things about the company’s machines — which let doctors watch live MRI images of cancerous tumors as they shoot them with radiation.

And their patients seem to grasp why the MRIdian system exists, according to CEO Chris Raanes.

“They get the idea: If a doctor can watch my tumor, he or she is going to do a better job,” he said.

Granted, the company is still losing money.

Though ViewRay’s backlog of orders more than doubled last year — hitting $78 million at the end of September — the company has installed only a handful of machines. It generated just $5.3 million in sales during the quarter that ended in Sep-

tember, the most recent figure available, and it lost $10.3 million.

It will take time to turn those orders into revenue. After all, the MRIdian system is a large, complex machine that often requires hospitals to reconfigure an entire room. It takes roughly 12 to 18 months to deliver and install an order, though Raanes said he expects the process to speed up over time.

And even as the Oakwood Village company starts to install more of those machines, its sales will move up and down by huge percentages for quite a while, given that each machine sells for an average of about $5.5 million, he said.

But Raanes added that when he takes a step back to look at the big picture, it looks great.

“The traction is good. The clinical results are good. We’re getting the orders we want. We’re getting them from the names and people we want,” he said.

They’ve also raised $60 million

from investors since Dec. 26, 2014.

ViewRay raised half of the money last July, when it went public on the NASDAQ stock exchange through a reverse merger with a shell company. And just before it went public, ViewRay struck a deal that will allow it to borrow up to $50 million from CRG, a Houston-based lender that focuses on health care companies. It has borrowed $30 million so far.

The company has raised a total of $189 million since 2004, when chief scientific officer James Dempsey founded the company.

The new capital is helping the company ramp up its sales effort and improve future versions of the technology, Raanes said.

He says he’s confident that once doctors try the MRIdian, they will never go back.

So how can ViewRay get them to try it? One way is to get the machines into the hands of researchers who want to test it out and publicize the results.

That is happening. The technology has been referenced in 32 different papers over the years.

In October, a researcher from the Washington University School of Medicine in St. Louis lauded the MRIdian’s benefits at a conference

held by the American Society for Radiation Oncology.

By that point, Dr. Maria Thomas had tested the system on 30 women who had recently had cancerous tumors surgically removed from a breast. Being able to see MRI images of the cavity made it possible to hit the edges with larger doses while avoiding hitting healthy tissue, Thomas told the audience. Most patients showed no skin damage at all.

“We are able to actually deliver the dose to the exact area where it was intended,” said Thomas, an assistant professor of radiation oncology at the university.

Researchers from University of California, Los Angeles sing the system’s praises in a series of YouTube videos created by UCLA. One video notes that MRI images show soft tissue better than the X-ray images doctors often rely on as they plan a treatment. The video also notes that the MRIdian system will automatically turn off the radiation beam if the tumor moves out of beam’s path.

A few UCLA patients chime in, too, including Margaret Vandenbree.

“It’s very comforting to know they’re getting right on the spot

they’re supposed to get,” she said in the video.

Today, ViewRay employs about 100 people, about half of whom work in Oakwood Village. That’s up from five employees and five contractors in February 2008, just before the company moved to Ohio from Gainesville, Fla. The company moved to take advantage of state and local incentives and to be closer to the region’s major health care institutions, former CEO William Wells said at the time.

Since then, a few other organizations have worked to develop competing systems that combine live MRI imaging with radiation therapy.

The one that’s furthest along is a Swedish company called Elekta, which developed a system with Royal Philips. So far, two of Elekta’s machines have been installed at academic medical centers, but they can only be used for research purposes.

ViewRay’s machine — which was developed with help from Siemens — is still the only combined system that can be used to treat patients, Raanes said.

“Nobody’s got a clearance. Nobody has treated a patient. I’m very, very comfortable that we have a game-changer here,” he said.

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z MARCH 7 - 13, 2016 z CRAIN’S CLEVELAND BUSINESS

Opinion From the Editor

City ambassador always on move

Editorial

A new day The charm of the West Side Market has always been that it’s not just a throwback to a bygone era. Rather, the venerable institution — now more than a century in the making — is still a living, breathing area of commerce.

The market has never been relegated as a mere tourist attraction, but continues to be a source of sustenance for residents living both near and far from the Ohio City neighborhood it calls home.

Still, while it might be a break from tradition, that’s all the reason why the city of Cleveland’s recent decision to open the market on Sundays (starting April 3) makes sense. Currently, the market is open on Mondays, Wednesdays, Fridays and Saturdays, and by all accounts that seems to be working for the market’s vendors.

Many would argue that’s reason enough to leave the market’s schedule alone.

But what works best for the vendors doesn’t always work for the customers. Bob Holcepl of City Roast coffee and Crepes de Luxe, perhaps, puts it best.

“Here’s the bottom line,” Holcepl told The Plain Dealer. “I am in retail. I’m here to serve my customers when they want to shop, not when I want to work.”

And quite frankly, many of those customers — particularly those who work standard business hours — have been dumbfounded for years as to why Cleveland’s most rewarding shopping experience can’t be had on Sundays. Moreover, it’s not as if the city, at least for the time being, is ramming the change down vendors’ throats. It will be optional for vendors to open on Sundays.

The challenges of opening an additional day of the week, of course, aren’t lost on us. The shift could require many of

these small businesses to bring on additional staff — something that could initially cut into a vendor’s bottom line. And for the vendors not selling prepared foods and instead selling items requiring a significant amount of prep — butchers, namely — the added day could extend an already-grueling work week.

However, the opportunity for added foot traffic, and thus more paying customers, can’t be ignored. The West 25th Street corridor is hardly a ghost town on Sundays. The brunch boom alone brings in hordes of mostly young professionals.

One of the biggest challenges to the continued rebirth of the West 25th neighborhood has always been about capacity. The availability of parking has always been the biggest concern, and a redo and expansion of the rear lots could help alleviate that pain point despite any temporary inconvenience.

Moreover, Northeast Ohio’s growing thirst for fresh and locally sourced goods was not being quenched by the market’s limited schedule.

Ohio City is much different than it was in 1912 when the West Side Market opened its doors — much like people’s shopping habits. Doing business inside a building on the National Register for Historic Places should not be used as an excuse for ignoring simple demographic trends.

Walking into the West Side Market is a one-of-a-kind experience.

The smells, the tastes, the sounds, the colorful characters — none of that is expected to change by opening on Sunday.

We appreciate tradition, but it’s not as if the city is bulldozing the market and building a Walmart.

That said, there’s a reason Walmart is open on Sunday.

ACTING PUBLISHER AND EDITOR: Elizabeth McIntyre (emcintyre@crain.com)

CLEVELAND BUSINESS

MANAGING EDITOR: Scott Suttell (ssuttell@crain.com)

I met Joe Cimperman recently on an overcast Wednesday morning at a downtown coffee shop. The Cleveland councilman is in his final weeks serving constituents in the central business district downtown as well as neighborhoods such as Tremont, Ohio City and St. Clair-Superior. I thought of it as an exit interview of sorts as Cimperman prepares to leave city council after 18 years. Later this spring, he’ll take over leadership of Global Cleveland, the local nonprofit that aims to attract immigrants, refugees and others to Northeast Ohio.

About 10 minutes after settling in with our cups of coffee — mine decaf, Cimperman’s espresso (as if he needs it) — I realized my tape recorder wasn’t working. If you know the loquacious councilman, you know this was a bad development. A seriously bad development. So, I kicked my note-taking skills into high gear and let Joe go.

I wanted to hear what accomplishments the Cleveland native was most proud of during his nearly two-decade tenure on city council. He rattled off a list that was topped Elizabeth by the formation of Downtown Cleveland AlMcIntyre liance, the nonprofit funded by business owners that oversees marketing, maintenance and safety downtown.

He also mentioned the increasing number of people choosing to live in the central city. When Cimperman was first elected in 1997, 2,000 people lived downtown. Today, 16,000 call the area home, he said.

“The biggest challenge I saw in 18 years was the perception of safety and cleanliness in downtown,” he said. “Thanks to DCA, people feel safer here. It’s cleaner. … DCA created an avalanche of goodness. It changed a lot of hearts and minds.”

He’s proud of the money the city has invested and how it spurred private investment. “You wouldn’t have what you have now if people hadn’t invested,” he said.

Cimperman also pointed to work he’s done with urban agriculture and the fresh food movement.

He’s particularly passionate about the progress made for the lesbian, gay and transgender community, starting with legislation he introduced in 2008 that created the city’s domestic partner registry. But the topic Cimperman returned to repeatedly was Cleveland’s hosting of the Gay Games in 2014.

“The basketball games were being played at Woodling Gym (at Cleveland State University),” he said. “I met a woman from Oakland who was competing. She said, ‘Let me tell you about the cops and bus drivers there. People are so rude to me. Your police and bus drivers here are so kind to me.’ ” Moments like that resonate with Cimperman because they underscore the value of kindness, and of sitting and listening to one another. Those are skills Cimperman has tried to use as a councilman, and they are ones he plans to employ at Global Cleveland. He knows well the importance of welcoming people from all walks of life and from all corners of the globe, and he knows that Clevelanders’ welcoming nature will be on display again this summer during the Republican National Convention.

“We have to remember we are all ambassadors,” he said.

As we wrapped up our conversation, said our goodbyes and headed toward different doors to leave, I noticed Cimperman stopping to talk to two real-life ambassadors. They were Downtown Cleveland Alliance workers, known as Clean and Safe Ambassadors, and they had stopped in for a coffee break.

“How are things going? You guys are doing a great job,” I heard him say as I walked out the door.

Cimperman’s mission now will be to bring the world through Cleveland’s door to see the product of this hard work.

And in him, we have a passionate — and highly caffeinated — ambassador.

WRITE US: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing letters@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.

SOUND OFF: Send a Personal View for the opinion page to emcintyre@crain.com. Please include a telephone number for verification purposes.

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CRAIN’S CLEVELAND BUSINESS z MARCH 7 - 13, 2016 z PAGE 11

You worked hard.

You saved.

Web Talk

You planned for retirement.

Re: Dredging debate, continued

Re: Donald Trump as GOP nominee?

The quality of Cleveland’s main source of drinking water is priceless. The U.S. Environmental Protection Agency should back up the Ohio EPA. The U.S. Army Corps of Engineers claims that sediment from the bottom of the Cuyahoga River is clean enough to dump into Lake Erie. A “little dirty” vs. “really dirty” is a ridiculous debate. Officials in Flint, Mich., wish they had thought out their actions before a point of contamination. The solution to pollution is not dilution.

I’d bid/rebid the cost of moving 226,000 tons of sediment.

Also, with a population in Northeast Ohio of roughly 3.5 million, evoke a $1-per-year, per-person tax and add it to the water bill. It’s a small price to pay to protect our drinking source, recreation foundation, fish and wildlife habitat and vital natural resource. Let’s not act without thinking of the consequences.

— Edward Schnell

Trump is no more than the logical result of what Republican politics has been about for the past 20 years: hiding attempts to inflame those who Trump so accurately called “the uneducated” behind fancy rhetoric, which Trump dispenses with. At least Trump doesn’t try to hide what he is up to.

— Mark Wallach

Green city, blue lake. Do the right thing — no open water dumping!

— Shawn I agree with E. Schnell and Shawn I’m up for the $1 water bill surcharge. It’s a no-brainer.

Or how about a Go Fund Me drive?!

— Gregory Hubbell

Re: Closing of Hawthorne Valley Golf Club Golf is a slow and dying game. I hope all these courses (that will close) are turned into parks, not shopping centers and housing.

— James Shellenburger I worked the Hawthorne Valley grounds crew during the summers of ’98 and ’99 while home from college and would go on to work at Pepper Pike and Canterbury as well. Hawthorne Valley was not far off from those tracks, so it’s sad to see what’s happening. As someone who only gets out one or two times a summer now, I’d easily make Hawthorne Valley one (if not both) of those trips at $50-plus. Unfortunately, my infrequent golfing is indicative of the “dying” comment from James Shellenburger.

— Robert Holub

Re: Cavs’ troubles defending point guards It seems this has become a problem since Blatt was fired. Hmmm?

— 174018 This is why it doesn’t matter that the Cavs’ Big 3 are healthy. …

The Cavs have issues to solve if they think they can beat Steph Curry and the Warriors, which seems very unlikely.

— DPY

Re: State of the University of Akron I realize there is some animus between business and higher education — although there never should be. Education is NOT a business. However, what is good for higher education always would be good for business, especially in the long run. … UA has not been competing for top faculty for several years now, because UA just isn’t hiring. No tenure-line, well-trained educator is going to come to UA, even if the jobs were available, because the environment is toxic, with the toxins provided by the current administration and the board of trustees. Rather than cutting administration lines and all the fat that comes with increased non-instructional functions, what we see is unprecedented losses in faculty lines. Just one small department, like the School of Family and Consumer Sciences, was bringing in over 6 million dollars a year in tuition revenues with a faculty of fewer than 18 full-timers. Today, out of sheer exhaustion, that enrollment has been cut in half as the faculty has been equally sliced. Simple arithmetic — I mean adding and subtracting — tells us that this is not a sound business practice.

Let’s see what Crain’s thinks of UA becoming a completely online training facility with nothing but itinerant part-time faculty doing the teaching. ... The previous administration spent millions, true enough. But that is no reason to punish faculty, watch enrollment drain away, and defund all the functions of the university that historically made it a showplace. You just don’t see the big picture, and for business people, that is a real shame.

— Dave Witt (professor emeritus and part-time instructor)

Re: Traffic up at Hopkins The #1 want for people traveling to and from Cleveland is direct flights. Second, the capital improvements have been a nightmare for all passengers who come in and out of CLE. — Tim Kloos

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z MARCH 7 - 13, 2016 z CRAIN’S CLEVELAND BUSINESS

Focus FOOD INDUSTRY

BY LEE CHILCOTE Nighttown owner Brendan Ring started looking around at the restaurant industry in Cleveland a few years ago, and what he saw made him nervous.

“I noticed a falloff right after the recession hit, but at the same time I saw restaurants opening,” he said.

“There are some damn good restaurants in Cleveland now. But if you go on a Tuesday night, there’s no one in the place.”

Nighttown is one of Cleveland’s most venerable dining institutions, but to respond to increased competition, Ring made some bold changes. He added a few hundred more seats to accommodate more weddings and special events, switched up the menu to adapt to foodie trends and brought in more musical acts on Tuesday and Wednesday nights to bolster his mid-week business.

Today, business is stronger than ever at Nighttown, which last year crossed the $4 million sales mark for the first time.

Although the venue still attracts jazz aficionados and people who eat there before seeing the orchestra at Severance Hall, it also has brought in new crowds by adding more craft beers on tap and menu items like the Brussels sprouts salad and halloumi cheese kebobs.

“I’ve been saying for three years that this is a bubble we’re in and it’s going to burst badly,” said Ring, adding that he regularly sees his customers when he goes out to restaurants in Tremont. “The increase in out-oftowners, the suburbanites coming into the city, people going out more, it’s not enough to make up for the plethora of restaurants we have divided by the number of people.”

While not every chef-owner agrees that Cleveland’s growing food scene is reaching the point of restaurant saturation, most say that they’ve upped their game in response to increased competition. Many also say that a shakeout is inevitable, with undercapitalized new restaurants and older restaurants that do not change with the times at risk of falling by the wayside as customer growth levels off.

Yet the big question remains: is the explosive growth in Cleveland’s dining scene — widely heralded by national media outlets from the Los Angeles Times to Food & Wine Magazine — sustainable over time?

When the media shine of the Republican national convention fades away and the battalions of journalists leave town, will the spate of grand openings be followed by a series of closings?

Staying fresh With 13 new restaurants slated to open downtown this year alone — including Michael Symon’s Mabel’s BBQ on East 4th and new venues at the Hilton hotel — it’s a question just about every chef in Cleveland is asking right now.

“I think it makes everybody sharpen their knives a little bit,” said Rocco Whalen, chefowner of two Fahrenheit locations in Tremont and Charlotte, N.C.; Rosie Rocco’s at the Horseshoe Casino; and the ShortRib1 food truck.

“We’ve actually had good increases in volume based on the growth of the city. The more people come in, the more people there are to feed and they gravitate to good food.”

“I definitely think there are enough people to support it,” he added.

Yet Karen Small, who has helmed the Flying Fig in Ohio City for the past 17 years, said her growth has leveled off in the past two years after expanding in the wake of the recession.

“It’s definitely a double-edged sword,” she said. “I love all the activity and new ideas, but there are only so many butts to go in seats on a given weekend.”

To keep current, Small is significantly revamping her menu, working with the online delivery service Mod Meals, and growing business at the Market at the Fig. Whalen also recently renovated the Fahrenheit dining room to keep his 14-year-old venue fresh and exciting.

Steve Schimoler of Crop Restaurant Group,

which includes Crop Bistro in Ohio City, Crop Kitchen in University Circle, and Crop Air, Crop Rocks and Crop Stix in the Flats East Bank, has made huge investments in staff and focused on stoking repeat business clients.

Although staffing remains a challenge, the growth of University Circle, the Flats and other neighborhoods, as well as the steady growth of out-of-town visitors, bode well for future business, he said.

“I look at the reservations every day that come in through Open Table, and it’s interesting to see the diversity of area codes,” he said, citing visitors coming from New York, L.A., Atlanta and Washington D.C. “For the greater good of Cleveland being a destination city with a great reputation, the more options we have for people the better.”

Challenges remain Zack Bruell is one Cleveland chef who has effectively capitalized on the city’s restaurant boom. He has opened at least one venue every year since the recession ended, targeting hot neighborhoods like Tremont and East 4th. He said his biggest challenge is staffing, not customers.

“With this surge, there’s not enough labor to fuel all these restaurants,” he said. “As a chef, it’s really important to spend the time — or have somebody spend the time — to train, because there are just not enough people.”

Although Bruell said a market correction is inevitable, that’s the nature of the business and the Republican convention, which takes place this July, could be a game-changer.

“Forget that week, it’s what happens after the RNC,” he said. “It could change everything, in terms of people moving to town because it’s easier to do business here.”

For restaurants to thrive, chef-owners must be consistent, charge reasonable prices and have sufficient resources to weather down times. When Schimoler opened Crop’s three locations in the Flats, he knew that his business would be slow during the winter, so he set aside extra capital to get through it. Small,

newer restaurants without much of a reserve fund may have a harder time, he said. They’ll also have a harder time competing for skilled workers, who may not want to take a chance jumping to a new venue.

John and Shelley Pippin, the owners of Brewnuts, can attest to the difficulties of opening a new venue.

“From a funding perspective, it’s a beast getting it done,” said Shelley Pippin, adding that Brewnuts is using bank financing, equity and $30,000 raised on Kickstarter to open Cleveland’s first “donut bar” in the Gordon Square Arts District. “It’s beg, borrow or steal to get the capital you need. We’re first-timers, so there’s this constant question, ‘Do we have the right amount of capital?’ It’s sort of an unknown. I’d be lying if I said it wasn’t something that keeps me up at night.”

Schimoler said there is still room for growth in the restaurant industry, and that he sees new faces every week at his restaurants.

“On Valentine’s Day, Crop Bistro had 250 diners, and I didn’t recognize any of them,” he said. “People would say, ‘This is our first time here, we’ve heard so much about it.’

That was good news because it means there are still customers who haven’t been here.”

“You have to maintain your piece of the pie, and hopefully you grow your piece of the pie over time with new customers,” he added.

In an industry with tight margins, consistency is key. Given that commodities prices and labor costs continue to rise, and yet restaurants cannot charge as much for a rack of lamb in Cleveland as they do in New York City, chefs need to generate volume in order to be successful.

Ring repeated the old real estate maxim — location, location, location — and predicted that restaurants in successful entertainment districts will have a higher survival rate. About 60,000 cars stream past Nightttown’s doors every day, and that definitely helps business.

“I think the game right now is that you’ve got to be changing your game all the time,” he said. “You’ve got to stay one step ahead of the guy down the street.”

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“I think the game right now is that you’ve got to be changing your game all the time.

You’ve got to stay one step ahead of the guy down the street.”

— Brendan Ring owner, Nighttown

LETTERING: LISA LOREK PHOTOGRAPHY: BURKLEHAGEN

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MICHELLE PARK LAZETTE

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Randy’s Pickles relishes its new success

BY MICHELLE PARK LAZETTE clbfreelancer@crain.com

A year after Andrew Rainey found himself staring down his first successful batch of pickles, he quit his full-time job to become an entrepreneur. He didn’t know what his company could become. Now, he quips, “we’re kind of a big dill.”

Randy’s Pickles, named after Rainey’s nickname, sold its first jar in June 2014. It struck profitability in six months, and he said gross sales in his second six months of professional pickling were 160% higher than those in the first six.

The company’s spears run the gamut, from traditional deli dill and bread and butter to the Cleveland Magazine Best of Cleveland 2014winning Mustache on Fire pickles, punched up with jalapeno and ha-

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banero peppers. The newest member of the pickle pride is the Sideburns, for which cucumbers are grilled before they are pickled for a sweet, savory and bitter char.

Culinary school didn’t lay Rainey’s road to pickling; a breakup did. Hankering for his go-to comfort food, he struck out in the grocery store aisle. Nothing appealed. So, he experimented and made some from scratch.

“I came into the company not knowing anything about the pickling process,” said Rainey, 27.

“You’re learning every single day. It takes a lot of trial and error and waiting. When you make a recipe, you have to set it aside for a few weeks before you know if it’s good or not.”

Now, it’s his pickles on the grocery store shelves inside 50 to 60 retail locations in Northeast Ohio, Columbus and Chicago, including

Heinen’s, Giant Eagle Market District, and mom-and-pop shops.

One such retailer, K&K Portage Market in Cleveland, sells other lines of pickles, too, but Randy’s Pickles out-sells the others by far, owner Jerry Kolar said.

Rainey’s shelf space inside larger grocers is impressive, Kolar added, as most niche product salesman don’t score that mainstream opportunity.

“I’ve had many, many instances where I’ve had a customer looking at a jar of pickles and I have another customer come up and say, ‘Those are the best pickles you’re ever going to eat,’“ Kolar said. “One customer tried the pickles, and he came back and ordered a case and was giving them out as Christmas gifts. That’s how much he liked the pickles.”

Others make special trips to the retail meat market just for the prod-

uct. “It’s very visual,” Kolar added.

“Each jar of pickles is hand-packed.

You’re going to see large cloves of garlic, fresh dill, spices and peppers — things you’re not going to see in a jar of Vlasic pickles. You can see the quality. That’s 90% of it.”

When he can, Rainey sources those ingredients locally. His company, which includes two partners, a general manager and Rainey, makes the pickles alongside other food startups at the Cleveland Culinary Launch.

“I want to sell a million dollars worth of pickles,” Rainey said. “We’re a good percentage of the way there. I want to (get to the point) where if you’re eating a pickle in Ohio, you’re eating a Randy’s Pickle.”

K&K Portage Market’s Kolar expects Rainey will achieve success.

“Very seldom do you see a product that you say to yourself, ‘This is

a homerun, this is a no-brainer, this is going to sell, and people are going to love it,’” he said. “I said to him one time, ‘Randy, when you become rich and famous making pickles, I hope you don’t forget us little guys who got you where you’re going.’”

Rainey seems committed to not forgetting.

“The truth is the success lies in the customer 100% all day, every day,” Rainey said. “The only reason we are where we are is because of our customers. Did we have to work really hard to get to that point? Of course.

We had to pound pavement. We had to work nonstop. (The customers) are the reason we’re in business. As a business owner, you’ve got to remember that.

“You can’t get a big head because you saw a little success. You need to remember what made you great in the first place.”

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Restaurants take a chance on tech-based food delivery clbfreelancer@crain.com

Back in the proto-Internet days of the mid-90s, Tommy’s Restaurant owner Tom Fello used a third-party food delivery service that carried his full menu on its website. Inflated service charges for both himself and his customers led Fello to dissociate himself from the enterprise after only a couple of years.

Eschewing outside delivery may have been acceptable two decades ago, but it’s not so easy to ignore in a plugged-in, instant gratification society where online-driven food delivery gives consumers access to the world’s largest virtual drive-thru.

Recognizing a hot trend, Fello now offers boxed lunches through Cleveland-based Deliver Me Food (delivermefood.com).

“It’s a convenience that’s important in a fast-paced industry where customers want their order immediately,” Fello said.

High-speed food distribution allows the average smartphone user to order meals through a range of apps and websites without ever having to speak to another person.

Companies like Deliver Me Food, Grub Hub and Eat216 act as a go-between connecting restaurants and consumers, with the promise of swift transport at a minimal delivery charge.

While these ventures are not as prominent in Cleveland as they are in more crowded metropolises like Chicago or New York City, local restaurant owners are dipping into a market they said comes with a delicate balance of risk and reward. In using outside courier companies, area restaurateurs are also taking

steps to protect themselves from delivery -related headaches like expensive fees, rude drivers and inaccurate menus.

Fello partnered with Deliver Me Food on boxed lunches beginning in fall 2014. With a minimum $30 order, the boxed lunches include a whole or half-sandwich with a side salad and dessert. In addition to a $5 delivery charge, a gratuity of 15% is included for all orders.

Cleveland-area companies are Tommy’s most prominent customers, requesting as many as 25 boxed lunches per order. The online service will send the eatery an email or fax with the order, including pickup time. Though larger requests can place a burden on Fello’s cook line, Tommy’s pays no service fee, with that charge going instead to the restaurant’s corporate clients.

“There’s a huge market out there with lots of potential for growth,” Fello said. “This (service) is a type of advertising promoting our food.”

Boxed lunches represent only 2% of Fello’s bottom line, though he hopes to grow that figure to 10% over time.

However, he has no plans to introduce his regular menu onto DeliverMeFood.com or another site.

Fello’s boxed product has a set price and a repeat clientele that makes it easy to deliver. Expanded offerings would increase the challenge of getting the customer the right food in a timely manner, as well as bring back the service fees he ditched 20 years ago.

“A delivery company is extension of the restaurant,” Fello said. “If a company misrepresents your food, or if their delivery people are unkempt, customers are going to be mad at you, not the company.”

“We’re needed because there’s people who want to eat out but don’t just want pizza or Chinese,” Umina said. “When we get it right, word-of-mouth spreads.”

A matter of trust

GETTY IMAGES

BY DOUGLAS J. GUTH

Driving new business What many refer to as the “Uberization” of food conveyance — after, of course, the popular ride-sharing service Uber — has been a boon for Tea House Noodles, a fast-casual Asian establishment on East 6th Street in downtown Cleveland.

Owner Bob Lynch harnesses several services, including Grub Hub and Yelp-owned Eat 24. Each company takes a 12% cut of a food order, but considering 20% of the restaurant’s profits come from online ordering, the expense is worth it, Lynch said.

“At night we’ll get hotel orders, or businessmen saying they saw us on Yelp,” he said. “It’s extra business being driven our way.”

With the menu on Grub Hub’s site

a replica of the one found on the restaurant’s home page, Lynch doesn’t have to worry about missing food items.

“If you want something taken off, you can call them and tell them,” he said. “If we’re too busy and can’t take deliveries, I call (the service) and tell them to take us down for the day.”

Deliver Me Food, locally owned and operated by Dave Umina and his wife, Lisa, services 100 communities regionally. Last year, the company took 55,000 orders — a slight increase from its typical year of about 50,000. Umina attributes the increase to the variety of restaurants willing to take a chance on a budding online opportunity.

The market for tech-based food delivery is active even for restaurants that don’t customarily offer their wares to-go. Ben Bebenroth of Spice is chief culinary officer of Mod Meals (mod-meals.com), a local startup that brings chef-made goodies to hungry customers.

Mod Meals differs from the typical delivery service, said Bebenroth, as dishes are prepared the evening before pick-up by chef-partners such as Eric Williams (Momocho, El Carnicero) and Karen Small (Flying Fig), then packaged and stored in a temperature-controlled warehouse.

After an order is placed through the Mod Meals website, the food arrives with precise heating instructions, meaning the end experience should be the same in a patron’s kitchen as it would be at a restaurant table.

The service has given Spice a bit of additional cash flow during the slower winter months, he said.

Bebenroth also appreciates the endeavor’s hands-on nature, which he takes to literal lengths by physically shaking packages of food to ensure their integrity upon delivery.

Bebenroth doesn’t believe that same level of care could be found with a traditional third-party delivery company like DoorDash or BiteSquad.

“It’s not personal enough; most of these services just pick up hot food and take it places,” he said. “I’m not turning over this product to anyone I don’t know on a first-name basis.”

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THE DISH

Vitamix cooks up recipes for the global market This 95-year-old family-owned company tucked away off of Bagley Road in Olmsted Township has a vision that would make Bernie Sanders proud.

Vitamix’s lofty goal is “improving the vitality of people’s lives and liberating the world from conventional food and beverage preparation boundaries,” according to its website.

Lee Chilcote Chilcote is a freelance writer and editor who has written for Vanity Fair, Next City, Belt and other publications. He is the founder of Lit Cleveland.

They really mean it, too. Although the privately held company won’t release specific information about sales or profits, leaders here say it continues to grow, propelled by health food trends, the chef-driven restaurant phenomenon, and increasing popularity in international markets.

In the 1990s, Vitamix began exclusively focusing on blenders, and it has developed a reputation for making some of the most durable, efficient machines on the planet. Sure, the product is expensive (they start at around $400 for a basic consumer model) and there are cheaper models. Yet not every blender makes a perfect cup of hot soup in minutes, boasts a lifespan longer than a Honda Civic, and makes regular celebrity appearances on “Iron Chef” and

“The Today Show.”

“We’re a 95-year-old company, but I hear it referred to as a 95-yearold startup, and that’s true,” said Scott Tennant, director of marketing and communications for Vitamix, stressing the focus on innovation.

“One of our corporate goals is to become an iconic brand. We’re thinking big – like Harley-Davidson.

We’ve sort of become the ‘it’ kitchen appliance in recent years.”

Crain’s recently stopped by Vitamix’s new test kitchen to find out how its chefs develop new recipes for the domestic and international market.

Senior culinary manager Adam Wilson and recipe development manager Matt Dugan were busy testing a seaweed-based recipe for the Japanese market when this reporter arrived, a testament to the fact that Vitamix is now in 141 countries.

The sleek, contemporary test kitchen, lined with metal cabinets and with vast counter space that would make any home cook jealous, was recently used to test recipes aimed at Germany, France and the United Kingdom.

The company, which recently came out with “The Vitamix Cookbook: 250 Delicious Whole Food Recipes to Make in Your Blender,” also has used its test kitchen to develop recipes for Latin America, Asia and the Middle East. For example, a lassi is a sweet or savory Indian drink made with a buttermilk base or water, and Vitamix developed a mango and papaya lassi. They’ve also tested a recipe with labne, a kind of strained yogurt eaten in Turkey and other countries.

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Senior culinary manager Adam Wilson and recipe development manager Matt Dugan test recipes in the Vitamix kitchen. (Lee Chilcote) While blending carrot citrus juice, Wilson explained whole foods nutrition. “You don’t lose the benefits of the pulp,” he said. “This helps you digest it, but also gets you more nutrients. Through eating whole foods, you can keep your energy up during the day. This is 60 calories.”

He also explained why Vitamix develops cookbooks to go with its blenders. “We’re working on developing a better, more efficient product for our customers,” he said. “You’ve purchased the machine – so now how do you get the most out of it? We want to teach people not just how to make a smoothie, but how to feed the kids in six minutes with a soup.”

Vitamix founder William G. “Papa” Barnard was ahead of his time in promoting whole foods nutrition. He first started selling appliances door to door in the 1930s and

is also credited with developing the first infomercial in 1949. Vitamix’s healthy vision is now favored by foodies, proving that everything old is new again, The company’s current CEO, Barnard’s great-granddaughter Jodi Berg, is credited with leading the company’s expansion into international markets.

Today, Vitamix may be everywhere, yet 90% of its blenders are still made at the company’s Strongsville production headquarters. The “log cabin” where Barnard and his family once lived in Olmsted Township is still standing (it’s more of an old house, but over the years it’s developed this cheeky nickname) while the company continues to expand around it.

Vitamix knows that its value proposition is strongest when cus-

tomers understand it’s a kitchen workhorse that can be used to prepare every single meal, not just smoothies after a workout, Tennant said.

That’s why Vitamix staff regularly gives demonstrations at Costco and food shows. “People are engaged and you can see the wheels turn,” he said. “They realize it’s not just a blender you use once a year to do your margaritas. When the blade heats the soup to a steam, everyone goes ‘Ah!’” Vitamix makes dozens of blenders, with commercial models ranging from the Quiet One (used at Starbucks and other front-of-house operations) to the Vita-Prep (used in back-of-house operations to make larger batch).

The S, C and G series are the household models. Among their many attributes is the fact that they’re self-cleaning – all you do is put dish soap and water in the blender and turn it on.

Wilson demonstrated four recipes that a Vitamix blender makes easy – a mango ginger smoothie, carrot citrus juice, broccoli soup, and frozen strawberry dessert.

The ingredients and process are simple and the healthy food is ready in minutes, he said.

Despite Vitamix’s global reach, the company is not high-profile in its hometown. “This is one of the strangest little well-keep secrets in Cleveland,” said Tennant with a laugh. “Now it’s a global brand.”

To contact Chilcote, send an email to clbfreelancer@crain.com. You also can follow him on Twitter @leechilcote.

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Q & A: Lara Mielcarek, bartender, Velvet Tango Room Lara Mielcarek, 36, is an actress, teacher and bartender at the Velvet Tango Room. When she’s not crafting cocktails or warmly greeting regulars at what’s often considered the best cocktail bar in Cleveland, she acts in productions at the Beck Center, Dobama Theatre and with the Ohio Shakespeare Festival.

Mielcarek also teaches at Cleveland State University, Hathaway Brown and Grafton Prison, where she is helping 17 inmates learn Shakespeare. “I do a bunch of things,” she said. “It’s an awfully fun patchwork life.” Crain’s recently sat down with Mielcarek to discuss what makes a good bartender and how the craft has changed over the years.

— Lee Chilcote What’s the difference between a mixologist and a bartender?

How did you get into bartending?

How do you balance working here with being an actress?

I think that mixologist implies that you have more of a hands-on relationship with your liquor and your recipes. Like when you are infusing liquors, or making elderberry gin that’s infused with hints of rosemary, or maybe even getting into some molecular gastronomy, which is what’s going on right now. It’s not that I don’t have respect for that, but I have just as much respect for the dwindling bartender who knows how to put together a good cocktail with the basic elements.

Your base liquor, your sugar, your citrus element, your bitter element.

I’ve always been an actress. I got my undergrad degree from Kent State in 2003 and naturally moved to New York City straight away.

My first bar was on 3rd Avenue and 23rd Street, the Bulls Head Tavern.

I was trained by a really good bartender who would just sling shots and beers — this was before the age of the cocktail really came back, like what we’re doing now.

She was laying out these drinks, just no sweat, not a muscle being engaged that didn’t need to be, and still yelling ‘Do you need another one, Fred?’ or whatever.

The VTR is thanked in every single playbill. The owner (Paulius Nasvytis) is very supportive of my work. I just notify everybody when there’s a show coming up.

Whatever theatre I’m working for knows they can’t schedule me to rehearse on a Friday or Saturday night when I’m needed and when I need the money until we get into things like tech week and performances. I think it keeps me loving bartending.

I don’t think mixologists particularly need to be personality-driven, but bartenders have got to be personality-driven. To make a regular out of a customer, you have to be engaging and be a little bit of a therapist sometimes, to have a decent memory for what they like, their little peculiarities, whether they want a twist instead of a cherry. That’s what brings people back. The difference with a mixologist is they might be so involved with their creation, doing something like shaving ice — which is totally awesome, they’re like a chef, like a bar chef — they might not need to have the interpersonal skills of a bartender.

I remember hearing about this place from before I was even legal to drink: how hard it was to get in, how tiny it was, how exclusive it was. I came in when a bartender had just left and took her spot. I had to basically relearn how to be a bartender because they do things completely differently here.

We have around 85 cocktails on the menu, and you just memorize these recipes. We make all of our drinks on a scale to the gram. I have a little predilection for memorization because of the theatre, but it’s a totally different way of working. Cracking eggs, shaking drinks for two minutes until the egg white emulsifies — I’d never done anything like it.

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A hell of a lot more competition.

VTR has been around for 20 years.

Now you have Society on East 4th, the Spotted Owl down in Tremont.

I think palettes are getting more sophisticated — it’s not too far off track from what’s happening in the culinary world. I think everybody is coming up to Paulius’ level.

LEE CHILCOTE

What are the basic skills of a good bartender?

How did you land the job at the Velvet Tango Room?

How has bartending changed ?

Is there a bar etiquette here?

There’s so much! I had to get out of the habit of calling people guys. The owner doesn’t like it, and now I can’t imagine saying it.

We say ‘hello ladies,’ we say ‘hello gentlemen.’ Gentlemen who come into the bar have to take their hats off — that’s always been the policy. There definitely is an old-fashioned courtesy that happens here, and people get excited about it.

Do you have a favorite drink?

My favorite drink is a Rob Roy, which is a Scotch Manhattan. Because of the nature of our work, we get very specific with how we like our drinks made. So I like a bit of a dry, perfect Rob Roy, almost like one quarter sweet vermouth to three quarters dry vermouth. One of my cocktails on the menu is a take on that, the Youngstown Johnny, which is a cool drink. We all get to create drinks on the menu. They go through a process — we have a meeting here where you take Uber because you’re not getting home.

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Business of Life OFF THE CLOCK: Hobbies and interests Crain’s occasional look at unique and interesting activities happening in Northeast Ohio. Tell us what you do in your spare time: clevedit@crain.com

Make on the Lake draws diverse crew RACHEL ABBEY MCCAFFERTY

Above, Carl Shotwell and Will Yaworsky, two of the organizers of the Make on the Lake events. Below, Sam Beisel-Linn (far right) and a friend get pointers from Make on the Lake member and LeanDog employee Bill Holmes (center) on how to use their Raspberry Pi computer. (Rebecca R. Markovitz photos)

It was after regular business hours, but LeanDog’s office was full of activity the evening of Feb. 25 for one of Make on the Lake’s regular hack nights.

The informal meetings give people the chance to play around with projects they’ve been working on in a setting rich with technology and like-minded individuals of all ages.

Two of the attendees were Lisa Beisel-Linn and her son, Sam Beisel-Linn, who were working with their Raspberry Pi computers.

The 13-year-old had brought his mom to a 3D printing event run by the Make on the Lake group after learning about it at school.

The project night on 3D printing covered everything from the history of the process to how to use CAD to design products to print.

Carl Shotwell, one of the Make on the Lake group organizers and a developer at LeanDog, said the project nights bring in a lot of parents and their children “to learn as much as they can.”

It’s one of his favorite parts of the program.

Make on the Lake grew out of LeanDog’s employees’ desire to work on their own projects.

Shotwell said employees started to ask other people to join them after work and, eventually, the group decided to put it on Meetup for anyone to attend.

Gary Johnson, another group organizer and a software developer at LeanDog, said promoting the group was a way to get like-minded people together.

The space for LeanDog — a software development consulting firm located on a boat — has a lot of “fun toys” that many people don’t have access to, he said.

Organizer Will Yaworsky, a consultant at LeanDog, said the group’s first official meeting was on Valentine’s Day last year.

Make on the Lake invited people to create their own Valentine’s Day cards, complete with pre-built circuits and LED lights, Shotwell said. About 25 to 30 people showed up, and the group realized it was on to something.

“That was an absolute blast,” Shotwell said.

Since then, the group has hosted informal monthly hack nights, as well as the more structured project-based events that show participants how to make everything from an animatronic teddy bear to a remote-controlled “Sumobot.”

Johnson said he thinks the reception to the group has been strong. The workshops are especially well-attended, he said. He thinks tech-minded people who aren’t professionally trained are really looking for that kind of content.

Sam Beisel-Linn said he thought the group’s event on 3D printing would be interesting to try (and he ended up printing a character from Pokémon).

Lisa Beisel-Linn said she likes that people at the events are willing to help each other out.

She’s a teacher in the Lakewood City School District who leads the coding club for the third, fourth and fifth grades, and so on Feb. 25, she was trying to figure out how to work the small Raspberry Pi computer.

Another attendee at February’s hack night was Brian Li. Li graduated from Ohio State University with a degree in engineering physics last year, but he didn’t do a lot of hands-on work at school.

That’s why he wanted to attend the hack night.

At the event, he was working on an LED cube that can be programmed to light up in various designs that he had soldered at home.

The maker movement has been gaining in popularity in recent years.

For Yaworsky, he likes the chance to build something that’s not abstract. He’s a computer programmer by trade but, he said, you can’t touch a website.

He thinks the maker movement is becoming more visible because there’s more access to fabrication now than there was 10 years ago. Shotwell agreed. There are a lot of resources available at locations like the library or local colleges.

“It’s people learning that it doesn’t take a master’s in electrical engineering to build things that are useful,” Shotwell said.

We don’t just see people for who they are; we see

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In the past year,

84% of people engaged in United Way-funded workforce development programs have obtained employment.

The car at the top was built at a previous Make on the Lake event.

It’s controlled by an app on a smartphone.

Above, Erick Rodgers captures a 3D scan of a custom gaming controller, which can later be replicated on a 3D printer.

At right, Adam Gall works with a soldering iron.

them for who they can become.

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BUSINESS OF LIFE

Source Lunch Larry Williams hadn’t even been in his new job at Equity Management Inc. for a year when he decided to return to collegiate sports.

After six months at the California company, which focuses on corporate trademark licensing, Williams said he realized, “There’s something special about college athletics. I want back in.”

His choice — being the director of athletics at the University of Akron — certainly doesn’t come without its challenges. But the 6-foot-5 former offensive lineman (Williams was a 10thround choice by the Cleveland Browns in 1985) said he couldn’t be happier in the role for which he was selected in August 2015.

Williams was well aware of Akron’s financial problems when he was pondering his next move, but he said he operates “not from a fear of failure but a quest for opportunity.”

Larry Williams COLLEGE ATHLETICS

— Kevin Kleps

How difficult is the collegiate athletic environment right now, and does it change so rapidly that it makes it even more difficult?

It just depends on what chair you have. If you have a chair that is attached to a football stadium that has 100,000 seats in it in a great TV market, then life’s pretty good. For the rest of us, it’s a real challenge. I don’t disagree with the autonomous model that gives the Big Five (the Atlantic Coast, Big Ten, Big 12, Pac-12 and Southeastern conferences) the opportunity to create rules that allow resources to flow to the student-athletes. I don’t mind that at all. It’s just difficult from a competitive standpoint to keep up with that if you don’t have that 100,000-seat stadium.

A new basketball arena: Is that realistic with the university’s current financial situation?

To be quite candid, it’s probably not in the cards for the next five years. Down the road, we’d love to be able to talk about that. But in the current reality, we’ve got to fix up the (James A.) Rhodes Arena. We’ve got one person on our staff who’s going to be directly charged with creating the momentum to make that happen. We can make Rhodes Arena really cool and have an advantage, but we’ve got a lot of work to do relative to the fan amenities to make it a much more comfortable location to watch the game.

When you were first hired at Akron, you said improving football attendance was one of your top priorities. How do you assess where it is and where it needs to be?

It’s more important than No. 1.

It’s absolutely imperative that we get that thing going, for all different reasons. It will gain a lion’s share of my attention here starting in a couple weeks when the basketball season is over.

We’ll really, really be focusing on it.

Are there any other uses for InfoCision Stadium that you’ve looked at?

We’ve looked at hosting concerts there. We’ve had many discussions with the Civic (Akron Civic Theatre) down here. Howard Parr (the theater’s executive director) does a great job in programming the Civic. So how can we use his expertise and that of others in town to utilize it for more than just football?

We’ve had a couple conversations with a minor league football operation that is trying to get off the crowd. It’s not off the ground yet, but it’s a spring football minor league opportunity, and we’d love to do that. We already host a bunch of high school football games on weeknights during the season. It’s a wonderful facility. We just gotta figure out how to use it for more than six weekends a year of Akron football.

You played in both the Fumble and Drive games during your time with the Browns. Were they as devastating as we would think?

I think I find this with our kids now. We lost to Kent State (in men’s basketball) Friday night (Feb. 19). We’re one of the best teams, Kent’s got some injuries and they were struggling. I saw some kids afterward and said, “How ya doing?” And sure enough, they bounce back like that. I think I was at a time in my life where it was just another challenge. We’ll get back the next year. So it wasn’t as devastating then as it is now. I do remember, though, after The Drive telling my dad, who had come to the game, “Dad, I honestly don’t know if I’m ever going to be back in this position again. That was my chance to make the Super Bowl.”

Lo and behold, it was. But my life’s no less for it. I’m not devastated by it. I just appreciated the opportunity to be there.

FIVE THINGS: HOBBIES

Olympic weightlifting, fly fishing, reading and golf

BAD WING

Williams has a shoulder that needs replaced, but says he still does heavy lifting five days per week.

“I don’t like running,” he said with a laugh.

READING LIST

Williams just finished “The Boys in the Boat” and is reading “13 Hours.”

MAC CONNECTION

Williams and his wife, Laura Lee, have five kids.

His lone daughter, Kristin Williams, is the Mid-American Conference’s associate commissioner/institutional services and senior woman administrator.

NICE WORK

During his tenure with the Browns, Williams took law classes at Cleveland State. He completed his law degree in 1992 at the University of San Diego School of Law.

LUNCH SPOT Bricco 1 West Exchange Street Akron www.briccoakron.com 330-475-1600

The meal The steak quesadilla lunch special, with a side salad and soft drinks

The vibe The restaurant, which is next door to Canal Park, was remodeled in the fall of 2014 and draws a pretty sizable, but comfortable, lunch-time crowd. It’s a laid-back, casual atmosphere, with reasonable prices. (And if the steak quesadillas are available, we highly recommend that choice.)

The bill $33.95, plus tip

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CLEVELAND BUSINESS

E vents

2016 AWARD PROGRAMS’ NOMINATION DEADLINES We are currently accepting nominations for the following Crain’s Awards Programs: ARCHER AWARDS

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z MARCH 7 - 13, 2016 z CRAIN’S CLEVELAND BUSINESS

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CRAIN’S CLEVELAND BUSINESS z MARCH 7 - 13, 2016 z PAGE 23

State bill is concern for banks Measure is intended to protect borrowers in commercial transactions, but lenders voice opposition

BY JEREMY NOBILE jnobile@crain.com @JeremyNobile

A bill in the Ohio Legislature that, according to its sponsors, is intended to create fairness in commercial lending contracts also could affect a bank’s abilities to lend and to recoup losses after a deal sours.

That’s what Ohio lenders fear, anyway.

House Bill 291 is designed to alter state law allowing “confession of judgment provisions” clauses — otherwise known as cognovits — that currently are embedded in every commercial loan made in Ohio.

The conspicuously placed clauses warn borrowers in bold, all-caps language that if they sign the loan, the lender can seize assets through a court judgment “without your prior knowledge” should the borrowing party fail to make timely payments.

Those clauses only apply to commercial loans and are inserted automatically.

It’s illegal to insert cognovits into consumer loan contracts today.

HB 291 wouldn’t eliminate cognovits entirely. Rather, it would add a stipulation requiring that a hearing be held within 30 days of the borrower being notified of the lender’s intent to file a declaratory judgment.

“In the commercial banking area, this would be a big change on the way lenders make judgment on loans,” said Steven Shandor, chair of

Akron law firm Day Ketterer’s banking law practice group.

The change almost certainly would drive up legal fees for lenders in addition to drawing out the timeline for a bank to recoup losses, Shandor said. In a scenario involving commercial real estate, for example, it would draw out the timeline of a foreclosure.

While lenders rarely act on cognovits, which generally are considered a last-ditch effort to recover losses, banks argue this proposed change puts them at a disadvantage.

But Rep. Ron Young (R-Leroy Twp.), who is the bill’s primary sponsor along with Rep. Jonathan Dever (R-Cincinnati), argues the change helps protect borrowers by ensuring cognovits are only filed “for legitimate reasons.”

Specifically, the proposed reforms would require a lender to notify a borrower 30 days in advance that they plan to confess judgment, and allow the debtor the opportunity to request a hearing to respond.

It also would ban the use of a cognovit note when a lender alleges non-monetary default, such as a failure to file a report on time— something that’s been upheld by several Ohio Appellate Courts.

Those changes combined create a fairer system that would encourage economic growth and jobs, according to a testimony by Young.

Young said he was motivated to sponsor the bill after being approached by business people in Lake County who “wanted this done.” Dever, an attorney, has tried

cases where businesspeople lost homes and businesses as a result of cognovits even in situations where they allegedly made payments on time, every time.

“The agreement itself is simply un-American,” Young said. “In a sense, we’re taking away people’s constitutional rights and due process, specifically. It’s something that shouldn’t be practiced in Ohio.”

Lenders voice opposition Ohio’s bank associations are generally against the proposal.

“We think from all angles, it’s a bad idea,” said James Thurston, a spokesman for the Ohio Bankers League trade organization.

Cognovits, as they stand now, shift risk away from lenders, which in turn benefits borrowers in their loan agreements. And while Ohio is among a minority of states that permit them, opponents maintain it’s an important and beneficial tool.

“It is accurate to say we are in a minority of states that do this,” Thurston said. “But that means we get an advantage. The borrowers can potentially get better terms in Ohio than they would in other states.”

Credit unions are paying attention, though they seem to take a more neutral stance.

“We are in the business of protecting credit unions, and our member credit unions who are involved in business lending had concerns over the proposed notification process,” said Patrick Harris, vice

president of government affairs at the Ohio Credit Union League, in a statement.

“We continue to have discussions with the bill sponsors, with the hope of getting to a place that protects credit unions while allowing them to continue to offer affordable small business lending.”

Middlefield Banc Corp. president and CEO Thomas Caldwell, an Ohio delegate for The Independent Community Bankers of America and a member of the legislative committee for the Community Bankers Association of Ohio, said it is, in fact, rare for a bank to use cognovits.

“But part of the concern is you’re giving the customer 30 days prior to the judgment being placed, and all of a sudden, the assets we have a secured interest in disappear,” he said.

“This has happened before.”

Caldwell said his bank has witnessed borrowers literally hide money or equipment the bank has a claim on ahead of the assets being seized.

“In the past, where we attempt to collect on a debt, equipment has disappeared and we have to track it down if the borrower is not being cooperative,” he said. “We find it’s gone. Sometimes it’s already been sold. In some cases it’s being hid.”

Shifting risk While “most borrowers” are honest, Caldwell said, that extended period gives the borrower increased opportunity to act surreptitiously.

That results in more risk for the

bank, which in turn could result in higher interest rates and fees for commercial customers.

“I think you’ll find, if they removed this clause, it could make it more difficult for some borrowers to obtain credit, and more than likely it will make it more costly for borrowers to obtain credit,” Caldwell said.

However, Young isn’t sold by the claims that the proposed changes to cognovits would interfere with a bank’s ability to loan money, or that it would drive up legal costs, He said that hasn’t been the case in other states where similar changes to cognovits have occurred.

“That argument is based more in fears and concerns banks might have than any reliable data that can be confirmed statistically,” Young said.

One tweak to the bill, Young said, would permit lenders to declare judgments immediately, as they do now, with the significant caveat that a hearing must still happen within 30 days, and if a borrower can prove they made all their payments on time, the bank would be held responsible. If the bank, indeed, made an error and seized a borrower’s assets — which could include an individual’s business, banks accounts and even their home and car — the bank would be responsible for court costs, attorney fees and “extensive” damages.

The bill was introduced last July and is currently in committee.

Young said he expects to see it moved out of committee in midApril or sooner.

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SAVE THE DATE [M]

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