Independent Joe #30: February/March 2015 Franchising Out of the Box

February/March 2015

The Magazine for D D

Independent Franchise Owners

Franchising Out of the Box Non-Traditional Locations Worth the Challenge

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HOLLYWOOD’S VERSION OF REALITY In this day and age, no person should be paid less on the basis of their sex. If a woman does the same job as a man – and performs it at the same level – their compensation shouldn’t be determined by their gender. With that said, the actress Patricia Arquette’s comments about equal pay for women, which she gave during her acceptance speech at this year’s Academy Awards, got me thinking about the difference between perceived reality and true reality.

The issue of income inequality has bubbled up during the Obama administration. Unfortunately, focus on this issue has come not as a result of an educated and informed analysis, but rather as an emotional response to a perceived wrong. One only need look at the whole “Fight for $15” initiatives that have taken place around the country.

Even the casual observer realizes that the $15/ hour figure for which activists are protesting bears no relationship to the actual value of the work being performed. Rather, it has become an artificial goal based on what some believe is reality.

As small business operators, Dunkin’ Donuts franchisees acutely feel the pinch of higher employee costs. Traditionally, sound economic theory and the workforce equivalent of supply and demand have dictated the value employees bring to their job and guided business owners to set a wage for a particular set of skills. If the skill was in short supply, it commanded greater value and vice versa. But, the notion now pervading our political discourse that individuals should not be paid for the value of the skills they provide to a business, but, rather, for what society believes that individual needs to live at a certain level of comfort, is exceedingly dangerous to the health of our business community and long-term, to our nation’s economic survival. True reality or perceived reality?

Consider the debates over minimum wage, government mandated sick leave and schedule change penalties. Each of these dictates is being foisted upon the small business community without regard to the relationship they bear to the value of the work being done. Instead, they are based on what the government powers believe to be fair. Therein lies the true danger.

Hiking wages based on a mandate from government – and not based on the intrinsic value of the work an employee performs – leads to an increase in retail prices, which then leads to more pay inequality and more protests for higher wages. It is a cycle we have witnessed throughout the ages.

Notwithstanding the egregious nature of these shifting sands, there also seems to be a certain inevitability to some of them. It’s worth noting that 24 states increased the minimum wage this year; two others began mandating paid sick leave for private businesses; and still others will penalize a business owner who changes an employee’s shift without providing at least two-week’s notice. As we look ahead, the challenge for Dunkin’ Donuts franchisees, and other small business owners, is to earn a profit while adapting to an ever-challenging business environment—and keep up the fight against these kind of job-killing mandates.

The good news is that Dunkin’ franchisees have proven themselves quite adept at facing change head-on and adapting to new realities. The proof lies with the number of franchisees who operate multiple units—and with the number of Dunkin’ Donuts franchisees who have expanded into other brands. We share the stories of some of those operators in this edition of Independent Joe as a way to underscore how those who adhere to best practices and seek out the latest industry information can be most vigilant in protecting their interests and driving profits.

Against a backdrop of governmental mandates, employee activism and franchisor pressure, Dunkin’ franchisees continually prove they are capable of meeting any unforeseen challenges; it’s something we have witnessed during our 25+ years advocating for this group. It demands true vigilance, not the false realities portrayed in some Hollywood films or the hyperbole of some Hollywood actors.

Ed Shanahan DDIFO Executive Director

INDEPENDENT JOE • FEBRUARY/MARCH 2015 1

SUB HEADLINE

CONTENTS

From the Executive Director: Hollywood’s Version of Reality• • • • • • • • • • • • • • • • • 1 What’s Brewing: A Look at State Issues Around the Footprint • • • • • • • • • 5 Franchisee Profile: Former Navy Pilot Pete Turner ����� 8 Franchising Out of the Box • • • • • • • • • • • • • 12

8

12

16 19 Multi-Unit Franchising Conference• • • • • • • • The Business of Snacking• • • • • • • • • • • • • • Keeping Costs Under Control• • • • • • • • • • • • Directory of Sponsors • • • • • • • • • • • • • • • • Legal: Fallout from the NLRB McDonald’s Decision • • • • 2 INDEPENDENT JOE • FEBRUARY/MARCH 2015

16 19 22 24 28

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Independent The Magazine for DD Independent Franchise Owners

•

February/March 2015 Issue #30 Independent Joe® is published

by DD Independent Franchise Owners, Inc. Editors: Edwin Shanahan, Matt Ellis Contributors: Cheryl Alkon, Cindy Atoji-Keene, Cathy Cassata, Peter C. Lagarias, Esq., Dan Schneider, Scott Van Voorhis Business Member Coordinator: Joan Gould Creative Director: Caroline Cohen Direct all inquiries to: DDIFO, Inc. 10 First Avenue, Suite 20, Peabody, MA 01960 978-587-2581 • info@ddifo.org • www.ddifo.org DD Independent Franchise Owners, Inc. is an Association of Member Dunkin’ Donuts Franchise Owners.

INDEPENDENT JOE®, INDY JOE®, and DDIFO® are registered trademarks of DD Independent Franchise Owners, Inc. Any reproduction, in whole or in part, of the contents of this publication is prohibited without prior written consent of DD Independent Franchise Owners, Inc. All Rights Reserved. Copyright © 2014 Printed in the U.S.A.

The experTs OTher experTs Turn TO Tax Deferred Exchange for Income & Investment Property 9 Leominster Connector, Suite 1 P (978) 433-6061 Leominster, MA 01453 F (978) 443-6261 www.exchangeauthority.com 1031@exchangeauthority.com

INDEPENDENT JOE • FEBRUARY/MARCH 2015 3

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SUB HEADLINE

WHAT’S BREWING A LOOK AT STATE ISSUES

AROUND THE FOOTPRINT

By Scott Van Voorhis

D

unkin’ Donuts franchise owners looking for some basic protections for their businesses may soon have legislation to rally around in a number of states across the country.

Lawmakers in Pennsylvania and California, among other states, are poised to take up the fair-franchising cause as spring legislative seasons kick into gear.

While the bills vary in their provisions, a central theme is emerging: to protect franchisees from having their businesses arbitrarily terminated by their franchisors.

Certainly Dunkin’ franchisees could use the break.

The cost of doing business for quick service restaurants is on the rise in many parts of the country as we head into 2015.

A growing number of franchise owners are now on the hook for health care costs related to the Affordable Care Act (ACA).

Meanwhile, the minimum wage will rise in more than two dozen states this year, as well as several major cities, while sick leave mandates shape up as the next hot issue for activists.

If that weren’t enough, franchise owners

"There is a lot of waste in the marketing channels that franchisors build in, waste in terms of over-penetration of restaurants. Those cost pressures are not going to go away." face new labor challenges as a result of two recent and highly controversial decisions by federal regulators which further open the door to unionization of quick service restaurant (QSR) workers.

“The minimum wage issues are a reality and they are not all of a sudden going to be popped back down to zero,” says John Gordon the principal of Pacific Management Consulting Group and DDIFO’s restaurant analyst. “There is a lot of waste in the marketing channels that franchisors build in, waste in terms of over-penetration of restaurants.”

“Those cost pressures are not going to go away,” he says.

Fair franchising on legislative menu Pennsylvania is one of the first states off the blocks with a fair franchising proposal as the new legislative year kicks off in

state capitols across the country.

Rep. Peter Daley, the leading Democrat on the House’s consumer affairs committee, is preparing to refile a fair franchising bill, but with some amendments aimed at giving it more teeth.

The amendments would make franchisors liable to criminal prosecution for fraudulent misrepresentation if they misrepresent the facts to a potential buyer about a franchise’s profit and revenue potential, Daley says.

A champion of fair franchising reform in the Keystone State, Daley is drawing upon his experience as a Quiznos franchise owner at a time when the chain dotted the country with 5,000 sub shops, far more than the market could bear.

The bill would also protect franchise

INDEPENDENT JOE • FEBRUARY/MARCH 2015 5

WHAT’S BREWING

owners from arbitrary terminations, requiring franchisors to show good cause and spelling out a number of steps required beforehand.

Franchise owners would also be given a free hand when buying equipment, supplies or other services, barring franchisors from dictating their vendors.

And Daley’s bill would also make it difficult for franchisors to open up competing restaurant locations in a franchise owner’s territory.

Daley now faces the challenge of working with the Republican majority in the Pennsylvania house. But, he says he has built strong relationships across the aisle that will help push his proposal forward.

“I will get this legislation passed in the House,” Daley says. “It is going be my top priority.”

All eyes are also on California, where a fair franchising bill passed the Legislature only to get vetoed at the 11th hour by Governor Jerry Brown.

Still, in his veto message, Brown did not completely close the door on future fair franchising legislation; supporters are likely to refile a bill in the new session this year.

“We have learned our lesson and will determine the best way forward,” says Gordon, who was involved in the California campaign.

Obamacare mandate kicks in The Affordable Care Act’s controversial employer mandate kicked in with the start of the New Year. Franchise owners and other businesses with at least 100 employees are now required to provide coverage to most of their workers – 70 percent – or face penalties of $2,000 per worker. Next year the number requiring coverage rises to 95 percent.

In 2017, the threshold for the mandate drops again, catching franchises and small businesses with at least 50 employees in the ACA net.

One of the main flashpoints now is the

6 INDEPENDENT JOE • FEBRUARY/MARCH 2015

Former Quiznos franchise owner, Pennsylvania Representative Peter Daley says “I will get this legislation passed in the House.

It is going be my top priority.” number of hours at which an employee is considered full-time and eligible for health benefits. The ACA puts the threshold at 30, a number that the Republican-controlled Congress is now pushing to peg at 40— which represents the more traditional American work week. The change, GOP leaders say, will relieve some of the burden on small businesses.

The House has voted 252-172 to pass an amendment raising the threshold to 40 hours, despite a veto threat by President Obama, and efforts are underway to secure support in the Senate.

The CFA is now focusing its efforts on the Senate’s labor committee in hopes of moving it forward, according to Misty Chally, executive director of the Coalition of Franchisee Associations.

“We are trying to gin up some more Democratic support,” she says.

Meanwhile, franchise owners are scrambling to cope with the new rules to keep down their health costs.

“I think some employers are trying to juggle that by having more part-time hours or part-time workers,” says Mary Chapman, senior director of product innovation at the restaurant consulting firm Technomic.

But such cost cutting moves are not without risk, especially if more able employees jump ship for competitors willing to offer benefits, she says. “It’s a risk an employer takes by pushing more people to part-time.”

Wage hikes For small business owners, it’s not just

health care costs that threaten already thin margins, wages are pressuring them as well. January 1, 2015 ushered in one of the biggest wage hikes in U.S. history with the minimum wage going up in 20 different states, including Oregon, Washington, New York, Colorado, Ohio and Florida.

Washington led the way with the highest wage boost, to $9.47 an hour, followed by Oregon at $9.25, Vermont at $9.15, and Rhode Island at $9.00. Five major cities also voted in higher minimum wages: Seattle, Washington, D.C., Berkeley, San Francisco and Oakland, with the new rates in the $10.00 to $12.00 an hour range.

For franchisees, the increasingly complex web of wage rules has tipped the competitive playing field in some markets, with franchise owners required to shell out significantly higher pay than competitors just across municipal or state lines.

That’s the situation in Chicago, which recently passed a higher minimum wage than the rest of the state, according to Chapman.

“A business owner is not only competing with those that have a higher wage. If they have one store inside the city limits and one store outside, it can potentially be a morale issue,” she says.

Still, while franchise owners may be increasingly frustrated about the push to raise wages, they are not likely to get much support right now from their customers. A recent Technomic poll found that eighty-three percent of restaurant diners favor hiking the minimum wage and then pegging future increases to inflation.

Labor pains The National Labor Relations Board, in a new ruling poised to take effect midApril, has offered a major boost to labor activists seeking to unionize workers at quick service chains. The regulator’s decision gives franchise owners and other employers just eight days to respond to a filing with the NLRB by workers seeking to form a union local, according to Chally.

photo credit: 7de_c216554-be-happy via photopin cc

It means, organizers can now form a new union chapter at a franchise within a matter of weeks. And, complaints related to the election, unless they deal with procedural issues, won’t be considered until after an election is held.

“It’s going to be a huge issue for employers who are not even aware it was finalized,” Chally says.

Another big concern is the NLRB’s ruling last year that McDonald’s could be considered a joint employer with its franchise owners when it comes to legal complaints over working conditions.

The ruling both undercuts the traditional autonomy of franchise owners while further opening the door to union organizers, industry observers say.

“If they think McDonald’s is a joint employer there is no reason why they wouldn’t say Dunkin’ isn’t and Burger King and all the others,” Chally says. “It’s a direct attack on franchising.” (You can read more about the NLRB McDonald’s decision in this month’s Legal Column on page 28) Big spring ahead State legislatures typically come alive in the spring, and this year will be no exception.

In addition to legislative debates on fair franchising proposals expected in Pennsylvania and California in the coming months, Gordon says, “We hope to have other states in play this year.”

And, there is also the possibility that a national fair franchising bill may be introduced in Congress this spring.

But, industry observers expect activists, coming on the heels of their success fighting for minimum wage hikes, to put their muscle behind more robust sick leave proposals. In 2014, Massachusetts voters passed a sick leave law, following in the footsteps of California, New York and Connecticut.

Now, Maryland is considering following suit, with the nearby city of Philadelphia moving ahead as well. Bills are also pending in Vermont and New Mexico.

Last but not least, the impact of new labor rules will also become more apparent this spring.

DDIFO is keeping an eye on what all the legislators, regulators and activists are up to, so you can focus on your primary job: running your business.

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Navy Pilot Turned Franchisee Says Business Soaring in Carolina

By Cheryl Alkon

P

ete Turner has spent a good portion of his life flying high.

As a Navy pilot and flight instructor who operated SH-60B Seahawk attack helicopters off naval destroyers and the twin-engine Super King Air from shore, Turner logged more than 3,400 hours in the Persian Gulf and Western Pacific. He was also stationed at Whidbey Island Naval Air Station in Washington State, where he flew life-saving rescues of people involved in plane crashes, and snow-bound mountain climbers and hikers lost in the Cascade and Olympic Mountains. He was also a global traveler, visiting 68 countries on five continents, including Tokyo, Japan. It was there, in 1992, where Turner first met Bliss, the woman he would eventually marry, on a blind date; he had been stationed at Atsugi Naval Air Facility and she was working in corporate marketing for Northwest Airlines.

But when it came to a certain point, he was looking to travel less and spend more time at home. The thing that has helped keep him more grounded, both literally and figuratively, is coffee. Specifically, Dunkin’ Donuts coffee.

From the Navy to Dunkin’ Donuts

Turner, now 50, runs thirteen Dunkin’ Donuts stores throughout the Research Triangle area of North Carolina, spanning from Durham to Chapel Hill to Raleigh. Without any restaurant business background, Turner opened his first store in Durham, near Duke University, in 2008, just about a year after he left the Navy. It was a pivotal career change for Turner, the longtime military man. He graduated from the U.S. Naval Academy at Annapolis, Maryland, in 1987, where he

8 INDEPENDENT JOE • FEBRUARY/MARCH 2015

earned All-American honors as a pistol champion, and later earned a master’s degree in national security strategy, with distinction, at the Naval War College, in Newport, Rhode Island.

While Turner had planned to work in commercial aviation after leaving the military, “I didn’t see a lot of upside in airlines at the time,” he says. “You’re a merger, or a strike away from being out of a job. None of that is in your hands. I was

looking for a new career.”

Turner says he first learned about Dunkin’ Donuts while he was in graduate school.

He says he “fell in love with the brand. I saw all these officers walking into class every day with coffee.” He tried it for himself, and became hooked. “I love the taste and the fact that it doesn’t cost six bucks,” he says.

Trading his wings for a Dunkin’ Donuts

"We chose to operate in North Carolina because it’s a great state to do business in. There are a lot of snowbirds—we call them half-backs." shop, however, required some sacrifice on the part of his family. Long hours and new routines required the complete support of Turner’s wife, which he says, she gladly provided. For the children, there was a sense of relief that Turner would be close to home when he went to work—not flying a plane halfway across the world.

Building the Brand

Growing a business from one to 13 locations requires both business and

administrative finesse, and Turner has proven to have plenty of both. He established his company, DDNC LLC, in 2007 and as a family affair. Bliss, is the company’s comptroller; she handles all accounting, purchase and loan paperwork. The Turner children, Shane, 19, Julianne, 17, and Serafina, 15, help with bookkeeping, filing, and mystery shopping. They will drive through one of the family shops and place an order without giving up their identity. Then they report

to Dad whether the service was excellent, whether the cashier was friendly and whether they were offered a receipt, as Dunkin’ requires.

Because they all attend school close to one of the family’s locations, each will also work the counter during summer vacations or other school breaks. Shane is a freshman at Elon University, in Elon, NC, and thinking about focusing his studies on economics or pre-medicine. Julianne

INDEPENDENT JOE • FEBRUARY/MARCH 2015 9

FRANCHISEE PROFILE: PETE TURNER and Serafina both attend Durham Academy, an area private school.

Opening the first shop in Durham was a strategic move for the company. “It’s walking distance to Duke University and Duke Hospital, and it’s a combination store with Baskin-Robbins,” says Turner. “It’s one of our best locations. We chose to operate in North Carolina because it’s a great state to do business in. There are a lot of snowbirds—we call them half-backs. They’re from New England and it’s too far and too hot in Florida, so they bounce half-way back and live in North Carolina.”

Turner’s business benefits from those transplanted northerners who have history with and “great loyalty” to the brand, he says, as well as from local residents who become fans of Dunkin’s beverages and snacks.

The DDNC network includes eight shops in Raleigh – the state capital, – two shops in Wake Forest, two in Chapel Hill and two in Durham. Turner has built an

10 INDEPENDENT JOE • FEBRUARY/MARCH 2015

operations team with two area managers and a general manager and assistant manager for each store. Overall, the company employs 170 people. Turner has twice been nominated as Dunkin’ Brands Developer of the Year. He serves on both the Dunkin’ Donuts and Baskin Robbins’ Brand Advisory Councils.

Advice for Others

Turner has learned a great deal about franchising – and about Dunkin’– during his time with the brand. A franchisee, he says, should always carefully examine the business climate in the location where he/she is considering opening a new Dunkin’ shop. “Choose a city and state that offer a fair regulatory environment,” he says. “Commodities, competition, encroachment, and debt present considerable risk. A new business doesn’t need added uncertainty from an unreasonable inspector while trying to grow.”

He also strongly recommends talking to franchisees who recently sold their business as a way of getting a broader perspective on the business.

Turner acknowledges the help he received from an experienced franchisee who served as his trusted mentor. Tom Sottile was an operator based in Charleston, South Carolina who also owned Dunkin’ Donuts shops in Georgia. Sadly, cancer claimed Sottile’s life in 2013. “He was a tremendous help,” says Turner. “All staffing and operational systems, I learned from him. Tom was a walking encyclopedia when it came to operating restaurants. He would always say, ‘Don’t underestimate the administration. Every new store is an additional paperwork load.’”

Like many Dunkin’ franchisees, Turner faces the challenge of finding promising locations for new stores. “As you continue to develop, great locations are harder to come by,” he says.

Off Hours Pursuits

With his network and his team in place, Turner says he has the opportunity to enjoy his life. “The expansion and growth of the business has been the biggest reward,” he says. “I’m also home a lot more

than I used to be,” which means attending school sporting events. His oldest was the captain of the basketball team at Chapel Hill High School and his middle child is involved in cross-country while his youngest plays field hockey. “We go to a lot of games,” he says.

Turner also goes kite-boarding in the Outer Banks area of Cape Hatteras, North Carolina. “I learned how to kite when I was stationed in Hawaii,” he says.

Being based in one location is certainly different than traveling the world, and being retired as a Navy pilot is certainly a different feeling than being on active duty.

But it’s worth it.

“I miss flying in the Navy every day,” he says. “The camaraderie and excitement are unparalleled in civilian life. But on the flipside, I can now buy life insurance for the first time and plan to walk my daughters down the aisle.”

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Non-Traditional Locations Worth the Challenge

By Cindy Atoji-Keene

T

he days of Dunkin' Donuts existing solely in a strip mall or as a standalone store are gone. In 2014, franchisees developed 70 new restaurants in non-traditional locations like airports, military bases and supermarkets, bringing to more than 600 the number of non-traditional locations across the U.S. There are 65 campus locations as well. Last December, Dunkin’ Brands announced the opening of 10 new restaurants at nine universities – including Northwestern University, Edison State College, and New Jersey City University.

"We are proud that so many universities around the country are turning to Dunkin', and campuses such as Bowling Green, Boston University and James Madison University have even opened multiple locations to serve more students, faculty and visitors," Grant Benson, vice president of global franchising and business development for Dunkin' Brands, said in a press release. "This niche continues to be an important area of growth for the brand.”

12 INDEPENDENT JOE • FEBRUARY/MARCH 2015

But what’s the appeal of a Dunkin' in a turnpike plaza, hotel, theme park, train or bus station? “An unconventional location, or what is more typically called a non-traditional location, is an opportunity to take a location that has an amazing amount of foot traffic and limited hours of operation, allowing for excellent margins on both labor and cost of goods,” says Brent Dowling, chief operating officer of RainTree, a franchise sales and marketing firm.

Being in such a location requires a different mindset, different business model, and a very limited menu with speed of service, says Dowling. Franchisers must be willing to adapt hours of operation and changes to restaurant design; sometimes the rent is based on a percentage of sales.

Longtime franchisee Ken Baer owns a Dunkin’ Donuts on the Fort Bragg military base, near Fayetteville, N.C. His shop is located at a post exchange – or PX. It is essentially a mall that also houses a barber shop, cleaners and food court. In the mornings, a long line of paratroopers queues up, ready to order coffee,

Photo from prestigefoodtrucks.com

Franchising

Photos by Gary Goodman

Out of the Box sandwiches and treats. There are approximately 20 Dunkin' Donuts restaurants on military bases throughout the country, including Camp Lejeune, N.C., and Camp Pendleton in San Diego County, Calif.

Baer’s Dunkin' shop is the only independent unit in the Fort Bragg food court, all the others are run through a private-public partnership. Baer says running a foodservice operation on a U.S. Army installation is significantly different from the other civilian locations that he operates. There are logistical issues like security clearance for employees and different health regulations

specific to the U.S. Army. And, because he leases the space, he is subject to operational interference over which he has no control.

Case in point: for the last year, Baer’s Dunkin’ has shifted from a more traditional non-traditional location to a food truck parked outside the PX because of construction inside the food court.

Baer says even though the construction may run another two or three years, this is still a profitable venture. There are 150,000 soldiers living on base, and Baer says his customers are a hungry clientele. “There are a lot of young, energetic soldiers that are eager to get a coffee or sandwich. Donuts take a back seat here.”

Michael Cho, an attorney specializing in franchising and

INDEPENDENT JOE • FEBRUARY/MARCH 2015 13

Photo by Caroline Cohen

COVER STORY: NON-TRADITIONAL LOCATIONS

foodservice at the California firm Palmieri Tyler, says non-traditional locations, like Baer’s military base, give franchisors the opportunity to achieve greater brand awareness and potentially create interest in opening franchise locations in new areas. He believes more and more quick service restaurants (QSRs) will look to such locations as markets becomes more saturated and competitive. But there are significant challenges for franchisors and franchisees.

“This is especially true with airports or other facilities that require unionized labor or have work rules that change the operational dynamics of the restaurant,” says Cho. “These operational issues can have a negative effect on the brand if the customer faces delays in service or employees do not share the enthusiasm for the brand that employees at a franchise unit have.”

Luis Ribeiro, a franchisee in Rochester, N.Y., runs two Dunkin’ Donuts locations at the Greater Rochester International Airport. One location sits outside the security zone; the other is inside the zone—or “post-security.” He says there is definitely a learning curve and added layer of challenge, especially with the post-security location: dealing with “badging” the employees and obtaining their airport clearances; receiving deliveries through the checkpoint; and even the “competition” for badged employees. He says other restaurants often try to lure away a credentialed employee for their venue. Despite all this, sales are good at this commuter airport, even though they are tucked away in a less trafficked location. “Customers always find us,” Riberio says.

In many ways, the expansion of non-traditional locations illustrates how Dunkin’ Donuts continues to grow and innovate

Photo from travelupdate.boardingarea.com

Other issues can include premium rents and sales downturns when economic changes impact buying patterns – if consumers don’t have enough discretionary income to shop or travel, for example, they may not be at the airport, casino or other location where the business is set up. It’s important to understand

discretionary income habits and demographics such as these as well as foot traffic and location patterns. When is it busiest?

Is your restaurant visible and easily accessible? What are the competing businesses around you?

14 INDEPENDENT JOE • FEBRUARY/MARCH 2015

in order to keep pace with changing trends. Dunkin' Brands offers franchisees a variety of restaurant models to suit almost any situation—from full retail shops and simple kiosks. Airports, train stations, colleges and military bases offer a captive audience that is often hungry, thirsty or just in need of a pick-me-up. As one customer at the Fort Bragg Dunkin’ told Baer, “This Dunkin' Donuts has been a lifesaver. This is built for survival. I am glad I have a Dunkin' Donuts right around the corner and will continue to patronize it because it’s so convenient!”

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Learn more at watchfiresigns.com/donuts

INDEPENDENT JOE • FEBRUARY/MARCH 2015 15

Multi-Unit Franchising Conference Lets Franchisees Explore New Expansion Opportunities Great Resource for Franchisees of All Brands

By Cathy Cassata

W

hile working as a loan broker in New Jersey, Vik Patel became intrigued by the franchising world. “We were helping Dunkin’ Donuts franchisees secure financing for new construction and other endeavors. As I learned more about the business model and brand, I began to like it,” says Patel. “I decided it was something I’d like to try for myself.”

So began Patel’s franchising pursuit. After spending a year attempting to purchase Dunkin’ Donuts stores in the Northeast, he began to look for opportunities in a less mature market. He

How to register

Dunkin’ Donuts franchisees are eligible for a discounted rate of $495 with the code BRANCADD15. You can use this code when registering onsite or ahead of time in any of the following ways.

Online registration www.multiunitfranchisingconference.com/register.html Phone registration 408-402-5681 Mail registration Mail your registration form (found online) with check made payable to Franchise Update to: Franchise Update 6489 Camden Avenue Suite 204, San Jose, CA 95120 Fax registration Fax your registration form (found online) with credit card information to 408-402-5738.

Book your hotel Call 866-227-5944 and inform the operator you are attending the Multi-unit Franchising Conference, then provide the special group code SCMUL5 to receive the $189 rate. After March 16, 2015, the group rate will be offered based on hotel availability only.

16 INDEPENDENT JOE • FEBRUARY/MARCH 2015

reached out to a franchisee in Florida for whom he had helped secure financing to ask if he knew of any stores for sale in the area.

“It just so happened that he was also a big franchisee in the Bahamas, but had stores in Tampa that he was willing to sell.

Soon after our conversation, my wife and I flew out from New York on a 10 degree day and landed in Tampa, where it was about 85 degrees. We just looked at each other and said ‘let’s do this,’” Patel recalls.

In 2006, Patel began his Florida operation with four Dunkin’ Donuts shops. Over the following two years, he acquired and developed more stores until the economy crashed. From 2008 to 2010, he froze expansions, and waited for the rebound. When signs of recovery appeared, Patel pressed ahead. Today, he owns 23 Dunkin’ Donuts in the Tampa market, a few up in the Florida Panhandle and one in Alabama with another in the pipeline. His goal is to expand his network – through acquisitions and new developments – to a total of 40 stores by the end of 2015.

Having found success with his Dunkin’ franchises, Patel opened his first Brass Tap bar and grill in Florida in April 2014; he opened a second just a few months later. Patel says the business – an upscale craft beer and wine emporium with a bistro menu – is taking off. He has another under construction in Florida with more in the pipeline for North Carolina and South Carolina. By the end of this year, he is expecting to have seven Brass Taps up and running.

“I wanted to grow and expand outside of Dunkin’. I was born and raised in England, and it’s definitely a beer culture there. I love beer. We were looking for something that wouldn’t compete with Dunkin’ and that would be a nice complement to it in the area that we had infrastructure so we researched brands,” says Patel.

The Brass Tap concept seems well-timed to America’s growing interest in craft beer. According to the Brewers Association, craft beer accounted for 7.8 percent of total U.S. beer sales in 2013, up 17 percent from the prior year. “Beer has been around for hundreds of years and this is the next evolution of beer. Even bigger domestic breweries are coming up with their own craft beer since people are looking for more than Miller Lite and Bud Light,” says Patel.

Before delving into The Brass Tap, Patel took his management team to one of the bars. “I’m a big team player. My team is

tremendous and they’re the reason we’ve been able to be as successful as we have. When I saw that they were on board with The Brass Tap and excited about helping to grow the brand to more than a few bars, it really solidified that we made the right choice,” Patel says.

New business, new challenges

Patel says while operating more than 20 Dunkin’ Donuts shops has taught him how to run a quick service restaurant and understand the nuances of food costs, moving into a business with a full kitchen, alcohol and food purchasing and a wait staff that earns tips has presented new challenges. He says he is relying on his team to make it successful.

“Dunkin’ customers drive by or stop quick to get a coffee and move on. That’s not the case with The Brass Tap. There was definitely a learning curve with operational differences and location differences,” Patel says. “I’m a big believer in people and if you have the right people in place, it doesn’t matter what you pursue.”

Patel has some employees who focus only Dunkin’ or Brass Tap; there are a few who work on both. Those are brand managers, marketing managers, and development experts. “It’s all about being able to leverage your people. I look around and think, wow we have a lot of great and up-and-coming people on our team who we can expand into other brands,” he says. “You can always open other locations and brands, but do you have the right people to run them and help make them successful? That’s the key question I always ask.”

All the resources in one place

There can be significant challenges for any franchisee who ventures into a new brand. That’s why Franchise Update Media created the annual Multi-Unit Franchising Conference. On

April 8, 2015, the 15th annual conference will kick off at Caesar’s Palace in Las Vegas.

“The people who develop the content for the conference are multi-unit franchise owners themselves, so we on the conference board know what multi-unit franchisees are interested in and concerned about, and we make sure the sessions are about things that are most important to us. Plus, we get the brightest and most knowledgeable speakers to talk about these issues,” according to Rob Branca, who is chairman of the Multi-unit Franchising Conference and also owns and operates 80 Dunkin’ Donuts shops – and several other businesses – in three states.

The three-day conference not only features general sessions with keynote speakers; it also has numerous breakout sessions focused on marketing, operations and growth. Branca says because the sessions are organized based on the number of units a franchisee owns, there’s something for every franchisee. For instance, some seminars are targeted toward franchisees with under 10 units or 10 to 20 units while others are for those with 25 to 50 units or 50 units and more.

“If you have more than 50 units, you already know the basics of growing your organization and are probably more interested in alternative financing, private equity investments, or better ways to build and support your teams, but if you have three units and are trying to get to 10, you might want to know, for example, how to leverage your retirement account for growth capital,” says Branca.

Meet the speakers

Something new at this year’s conference is the opportunity to meet some of the speakers during a roundtable discussion. “This will allow franchisees to interact directly with the speakers, so if they weren’t able to get their questions answered during or right

INDEPENDENT JOE • FEBRUARY/MARCH 2015 17

MULTI-UNIT FRANCHISING CONFERENCE after a session, or missed them at a cocktail hour, they can take this time to personally connect with the speakers,” says Branca.

“The networking opportunities of the conference were already outstanding. This will only enhance that.”

Perk of peer-to-peer networking

A top benefit of attending the conference is networking with other franchisees, adds Gary Robins, who owns and operates 44 Supercuts hair salons throughout Pennsylvania, New Jersey and Maryland. Robins has attended the conference for nearly 10 years.

“The first time I went, I had a few stores. It was so helpful to talk with people who had more units than me. As I grew to five, ten, twenty franchises, I’d still go to the conference, and each time I’d come home with knowledge relevant to my business and how I wanted to grow my business,” Robins says. “There is simply no other conference that you can go to with 400 to 500 multi-unit franchisees ranging from those who have two units to 200 units. The friendships and networking that I’ve gained over the years has allowed me to take input from others and leverage it in my business.”

Learn from franchisors and franchisees

Make the most of your attendance Rob Branca, chairman of 2015 Multi-unit Franchising Conference, offers these suggestions to make the most of your attendance:

•B efore you arrive, look at the agenda to decide which sessions you want to attend and which ones you don’t.

That gives you as much free time as possible to mingle and network while you’re there; •D ecide which vendors you want to make an appointment with at the conference; •R eview the marketing materials of the brands you’re interested in and schedule time to talk with their reps and with some of their franchisees at the conference; •A ttend all of the franchisee-only events, and don’t be afraid to introduce yourself to anyone.offered based on hotel availability only.

More than 200 franchise brands are represented at the conference. Branca says it’s a great opportunity for a franchisee to learn about a brand he/she might interested in developing. “Most brands are looking for multi-unit franchisees, which is different than the past since they are developing more quickly and need to sell more quickly. A brand can do all that with a franchisee who already is well capitalized and knows how to develop and staff an entire network of units because they’ve already done it successfully,” says Branca.

then turn around and talk to a franchisee who is already in that brand. “You’re most likely to get the truth from that franchisee.

It’s one stop shopping for some of your due diligence.”

What’s especially unique about the conference, adds Branca, is that after a franchisee listens to one brand make the pitch for why that brand is the right one to invest in, the franchisee can

Vendors to the industry are also on hand to demonstrate products and services that are beneficial to franchise owners, whether your business is coffee, beer, haircuts or something else.

18 INDEPENDENT JOE • FEBRUARY/MARCH 2015

Branca says the conference is also a place to fish for investment opportunities. “I invested in a Papa John’s network down in Florida that’s owned by one of the friends I made as a conference board member and I also invested in a private equity fund started by Aziz Hashim, who I also met through the conference.”

•

The Business of Snacking

By Matt Ellis

T

he American Heritage Dictionary of the English Language defines a snack as: 1. a hurried or light meal; 2. food eaten between meals. If there was a number three it might say, “Any of the food items at any Dunkin’ Donuts.” In a business where beverages drive business, snacks are a must, and Dunkin’ has staked a strong claim in the snack category, even as the category itself is growing.

Photos by Gary Goodman

According to the research firm Technomic, 51 percent of consumers said that they eat snacks at least twice a day, a three percent increase from 2012. Another recent report, this one from the market research publisher Packaged Facts, further proves snacking is a mainstream trend that has gathered over time. It found 27 percent of adults, age 18 and older, say they often snack between meals— nearly a five percent increase from 2004.

“It’s been a continuous evolution over the last five or so years,” Anne Mills, manager of

INDEPENDENT JOE • FEBRUARY/MARCH 2015 19

THE BUSINESS OF SNACKING

The Packaged Facts report, “What America Eats,” finds more than three in ten visits to a coffee/donut shop in the past month were for a snack—as opposed to breakfast, lunch or dinner. And, as you might imagine, snackers tend to be younger customers.

“Millennials and younger people live a more on-the-go lifestyle.

They grew up with technology and that contributes to living that lifestyle, multi-tasking and using social media while eating,” says Mills.

DDIFO Restaurant Analyst John Gordon, principal of Pacific Management Consulting Group agrees the snacking trend is real and says it is “all about time, sampling smaller portions, a variety of flavor profiles and price/cost per serving,” which all tend to favor younger, millennial-age consumers.

A changing definition So what actually constitutes a snack? The definition appears to be changing. Every two years, Technomic interviews consumers and uses the data to update its Consumer Trends Report.

In 2012, respondents to their survey identified traditional and non-traditional foods as snacks. That trend, Mills says, continued in the data they compiled in 2014. “People are increasingly open to more and more foods as snacks. It can be an apple or an egg white breakfast sandwich.”

Or, according to Dunkin’ Brands CEO Nigel Travis, it could also be a Grilled Chicken Flatbread. Last summer, Travis told the

Associated Press the chain’s bakery sandwiches absolutely fall into the snack category—as opposed to, say, lunch. The comment led some media outlets to conclude Dunkin’ was becoming a fullservice restaurant, to which Travis responded, “We’re not moving into lunch. We’re in snacking. We never talk about lunch.”

The distinction is important because Dunkin’ wants to provide consumers a myriad of choices for their daily snacks—donuts, bagels, muffins, flatbreads or bakery sandwiches.

“Classifying the sandwich choices as meals instead of snacks limits Dunkin’s ability to appeal to that generation of snackers,” says Gordon. “And once you say, ‘We are the place for meals,’ you completely change customers’ expectations.”

Plus, every pizza shop, burger joint and sit-down restaurant is competing for the money people are spending on meals. Gordon says, because the snack category is broad – and growing – it makes sense to position Dunkin’s offerings as snacks as opposed to meals.

The six foot restaurant Victor Carvalho, a long-time Massachusetts franchisee, has noticed the impact the snacking generation has had on his shops.

Recently he began scheduling two team members to work at each of his restaurants’ sandwich stations to accommodate the increased business.

“We call our sandwich station the six foot restaurant because we generate more sales in half a day than some mom and pop pizza shops do in an 11 [a.m.] to 11 [p.m.] shift,” he says, noting that sales for sandwiches peak in the morning and early afternoon.

" Classifying the sandwich choices as meals instead of snacks limits Dunkin’s ability to appeal to that generation of snackers"

20 INDEPENDENT JOE • FEBRUARY/MARCH 2015

Photos by Gary Goodman

consumer insights at Technomic, says about the snacking trend.

“Part of it has to do with our busy lifestyle, fitting in meals when we can,” opting for grazing over three-squares a day, she says.

MENU BALANCE “We keep the holding units on into the afternoon because our morning peak period is stretching to 1:00 and beyond,” Carvalho says about the machines that keep eggs and meat at the right temperature and texture. He would love to see the peak sales period last later into the afternoon, but he can’t complain about the additional revenue he gets from the six foot restaurant.

If he has any concerns it’s that there are too many choices offered on the menu. “How much can we handle in the six foot restaurant?” he asks, rhetorically. “It’s really about finding the right balance.”

Sit down or take out Snackers don’t like to wait. Whether they are stepping up to the counter or rolling up to the drive-thru, they want something quick.

bite-sized items and small plates as these items allow operators to focus on snacks as the fourth meal as well as a sharable dining experience.”

According to Mills, “Many are snacking when they can—fitting it in between meals.”

So will snacking overtake regular meal consumption? Anne Mills at Technomic doesn’t think so. She says millennials still distinguish between snacks and meals, even while they will use a snack as a meal replacement.

Dunkin’ Donuts is well positioned to appeal to snackers thanks to consistently quick drive-thrus, free Wi-Fi and an evolution of seating options that allow snacking to complement time people spend working remotely as well as time spent keeping up with friends on social media.

In Atlanta, franchisee Mike White says, “We have experienced both an increase in customer count and snack sales.” He notes snackers visiting his shops tend to be in their 20s and 30s.

“They realize they can work and snack at the same time,” says White, whose patio seating offers patrons an opportunity to get some fresh air while taking a break from the car or the office.

“There is still a cultural value to family meal time or sitting down with friends to share a meal at a restaurant,” she says. “It’s an important aspect of being able to connect,” in an ever connected world.

Regardless of how the dictionary defines “snacking,” the phenomenon is continuing to change how Dunkin’ Donuts – and quick services restaurants – approach menu innovation.

•

Carvalho, whose shops don’t all have soft seating because of their size, still notices an increase in the number of people coming in with laptops or iPads to enjoy some online time with their coffee and snack.

“The seating concept gives us a warmer, homier feel so people want to hang out a bit. Years ago, it felt like we were pushing them in and out and didn’t have the homey feeling. We’ve changed that a lot.”

A healthy alternative?

Experts watching the snacking evolution say there is a healthyliving aspect to it.

“Some people see the idea of smaller meals being healthier than eating three large meals a day,” says Mills. “While these perceptions differ from consumer to consumer, we see that health can play a role in snacking.”

Of course, choices matter. People choosing a couple of donuts in between meals are probably not adhering to a healthy diet, but those who order an egg white flatbread or deli sandwich can reduce their need for a large meal later in the day.

According to the Packaged Facts report, restaurants will continue to innovate their menus to come up with “mini or

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INDEPENDENT JOE • FEBRUARY/MARCH 2015 21

Keeping

Costs

Under

By Dan Schneider

Control

W

hen is the last time you took a long, detailed look at your monthly bills? Do you know exactly what products and services your vendors are charging you for? Are you sure these charges are accurate?

The simple truth is that senior managers rarely have the time to give these expenses the attention they deserve. “Small” expenses like maintenance contracts or phone bills can seem like minor concerns compared to operational efficiency, new marketing initiatives or expansions. But any mistake, if unnoticed, can add up to a big financial loss in the long term.

Overpayments to vendors are a widespread problem for any QSR franchisee, especially those with multiple locations and multitudes of vendors. The sheer volume of bills can make it hard to tell when expenses are too high. Owners and managers expect the accounts payable staff to catch mistakes, but usually they can only prevent overpayments or duplicate payments. Combing the line items on various vendor invoices is time consuming and, often times, bookkeepers won’t know if the fees are accurate or excessive, especially if they don’t have the vendor contracts.

According to the Association of Certified Fraud Examiners (AFCE), the typical organization loses an amount equivalent to five percent of its annual revenue to fraud every year. This amounts to over two-and-a-half weeks’ worth of sales down the drain. Fraud can take on a variety of forms, but vendor fraud is one of the most common.

Sometimes these are honest mistakes. But, because we frequently uncover overcharges, it suggests some vendors engage

22 INDEPENDENT JOE • FEBRUARY/MARCH 2015

in a systematic effort to overcharge their customers. Recurring billing errors add up fast, and if you aren’t regularly negotiating for better pricing with your vendors, your monthly bills may be eating too much into your bottom line.

Vendors rely on a variety of methods to overcharge their customers, such as vague contract terms, minimal billing statements, and opaque pricing policies. Therefore, these losses are widespread throughout the industry and hard to avoid, and do not reflect a failure of management. However, it is incumbent upon companies to take proactive measures to examine costs with a critical eye and do whatever possible to minimize unnecessary expenses.

In our analysis of expenses for thousands of franchisees, primarily in the QSR industry, we see a handful of issues pop up over and over again. Here are our four tips that will help you avoid overpaying:

Restrictive Contract TIP #1: Avoid Terms

Unfavorable contract terms can leave you stuck with a vendor even if their service goes downhill. Keep an eye out for excessive term lengths and automatic renewal clauses. Try to sign for a 3-to-5 year initial term with month-to-month renewal thereafter.

This will lock in good pricing, while giving you flexibility to change or cancel service after the initial term if you need to.

for Contract TIP #2: Check Compliance

Make sure you always have all your vendor contracts on file and readily accessible. Reference them on a regular basis and make

sure your vendor is in compliance with their original agreement.

Most contracts specify pricing and limit price increases—for example, a three percent annual increase, or an increase based on the Consumer Price Index (CPI). However, it is extremely common for vendors to disregard these limits and increase rates by much more. They may also be charging fees that aren’t referenced anywhere in the contract. If you never agreed to pay extra fees, don’t pay them. Hold vendors to their word and insist that they stick to the contract. If you catch any mistakes, you won’t just prevent future losses; you may be able to go back and get credit for overpayments against future costs.

Your TIP #3: Optimize Services

Operational needs can change over time. Just because you signed up for certain services at a specific location years ago, doesn’t mean that the same location needs the same level of service today. Many people don’t realize they are being over-serviced and few vendors will make mention of it.

Excessive services come in a variety of forms. You might be paying for 10 phone lines per store, when you may only need two or three. Or, your trash might be getting picked up more frequently than it has to.

Regardless of the reason, over-service mean excessive costs, many of which can be cut without disrupting operations.

a Hard Bargain on TIP #4: Drive Pricing

There’s an old adage that you don’t get what you deserve; you get what you negotiate. This is especially true for vendor services, for which cost and competition can vary significantly from market to market. By reviewing data from our past projects, we know the vendors’ profit margins and the best rates available in any given area. For an individual company, it can be harder to determine. It can never hurt to shop around, and you may be surprised at how much your vendor is willing to come down on their rates.

Conclusion

How should you begin implementing these ideas? The first step is to conduct a thorough, internal audit. Whether you assign the task to members of your staff or an outside firm, be sure they have the time and resources to do it right. It can be tremendously helpful to get another set of eyes on your expenses.

And of course, the best way to recover losses and overpayments is to never allow them to happen in the first place. Be vigilant and question anything new that pops up on your bills. View each contract expiration as an opportunity to negotiate, or shop around for a better deal. Take time to periodically review the services you’re paying for, and re-evaluate whether you need everything you’re getting. By adopting these habits, you’ll avoid one of the silent killers of your annual budget: small, recurring monthly expenses.

•

Dan Schneider is CEO of SIB Fixed Cost Reduction

INDEPENDENT JOE • FEBRUARY/MARCH 2015 23

2015

BUSINESS MEMBER

Directory of Business Members Please Visit The DDIFO Business Member Directory online at www.DDIFO.org

ACCOUNTING

Adrian A. Gaspar & Company, LLP, CPAs

Robert Costello 617-621-0500 • cpas@gasparco.com 1035 Cambridge Street, Ste. 14, Cambridge, MA 02141 www.gasparco.com

Analytix Solutions

Jessica Shaheen 781-503-9000 • ashaheen@aixsol.com 80 West Cummings Park Ste. 2000, Woburn, MA 01801 http://insight360.aixsol.com

Bederson LLP - CPAs and Consultants

Steven Bortnick, CPA 973-530-9113 • SBortnick @bederson.com 100 Passaic Avenue, Fairfield, NJ 07004 www.bederson.com

Cynthia A. Capobianco, CPA

Cynthia Capobianco 401-822-1990 • cynthia@capobianco.necoxmail.com 60 Quaker Lane, Ste. 61, Warwick, RI 02886-0114

Honkamp Krueger & Co., P.C.

Ryan Hauber 608-620-4794 • rhauber@honkamp.com 251 Progress Way, Ste. 200, Madison, WI 53597 www.honkamp.com

Marcovich, Mansour & Assoc. Inc.

BUILDING

Neovision Consulting Inc.

Bill Gavigan 125 Samuel Barnet Blvd, New Bedford, MA 02745 508-717-4930 • bgavigan@poyantsigns.com www.poyantsigns.com

Sansiveri, Kimball & Co., LLP

Jonathan Ralys 225 Woldwood Avenue, Woburn, MA 01801 781-305-1335 • Jonathan.Ralys@Trane.com www.Trane.com/commercial

Joseph Mansour 401-334-9099 • jmansour@mm-cps.net 640 George Washington Hwy., Lincoln, RI 02865

Nish Parekh 609-531-4444 • info@neovisioncpa.com 1246 South River Road, Ste. 101 Cranbury, NJ 08512 www.neovisioninc.com Michael A. DeCataldo 401-331-0500 • mdeca@sansiveri.com 55 Dorrance Street, Providence, RI 02903 www.sansiveri.com

Thomas Colitsas and Associates, CPA

Tom Colitsas 609-452-0889 • tcolitsas@tcacpa.com 103 Carnegie Center, Ste. 309, Princeton, NJ 08540

BACK OFFICE

Jera Concepts

Wynne Barrett 508-686-8786 • wynne@jeraconcepts.com 17 Fruit Street, Hopkinton, MA 01748 www.jeraconcepts.com

Poyant Signs

Trane HVAC

WatchFire Signs

Devon Mourer 217-442-0611 • devon.mourer@watchfiresigns.com 1015 Maple Street, Danville, IL wwwwatchfiresigns.com

BUSINESS BROKER National Franchise Sales

Ellen Hui 949-428-0498 • eh@Nationalfranchisesales.com 1601 Dove Street, Ste. 150, Newport Beach CA 92660 www.nationalfranchisesales.com

COMMUNICATIONS

AT&T Corporate Business Solutions

Sophy Englund 954 383-8133 • SE1885@ATT.COM 13450 W Sunrise Blvd, Ste. 602, Sunrise FL 33323 http://att.com/wireless/dunkindonuts

Comcast Business Services

Comcast National Sales • 866-407-6338 Dunkin_National_Sales@comcast.com 500 South Gravers Road, Plymouth Meeting, PA 19462 www.business.comcast.com/internet

Sonu Satellite

Neil Doshi 1-877-999-7668 • neil@sonusatellite.com 430 Commerce Lane, Ste. F, West Berlin, NJ 08091 www.sonusatellite.com

Sprint

Heath Stone 603-793-2129 • heath.h.stone@sprint.com 3 Van De Graaff Drive, Burlington, MA 01803 www.sprint.com/ddifomembers

Time Warner Cable Business Class

Tricia Petway 919-654-4115 • tricia.petway@twcable.com 4200 Paramount Parkway, Morrisville, NC 27560 www.twc.com/business

DDIFO® does not endorse or recommend commercial products, processes, or services. A DDIFO® Business Member is paying to advertise, and it is not to be considered a product or service endorsement by DDIFO®. Furthermore DDIFO® does not control or guarantee the currency, accuracy, relevance or completeness of information provided by sponsors in their advertising.

24 INDEPENDENT JOE • FEBRUARY/MARCH 2015

2015

Directory of Business Members

Verizon

Kevin Tatten 508-380-1807 • kevin.tatten@verizonwireless.com 77 Boston Turnpike, Shewsbury, MA 01545 www.verizonwireless.com

COST RECOVERY

Performance Business Solutions, LLC

Jeff Hiatt 508-878-4846 • jdh@revenuebanking.com 87 Lafayette Road, Ste. 11, Hampton Falls, NH 03844 www.revenuebanking.com

ENERGY

Plotwatt, Inc.

Scott Vautrin 919-883-5679 • scottvautrin@plotwatt.com 1715 Six Gables Road, Durham, NC 27712 www.plotwatt.com

FINANCE Bank RI

Tom Fitzgerald 401-574-1119 • tfitzgerald@bankri.com One Turks Head, Providence, RI 02903 www.bankri.com

BMO Harris Bank N.A.

Angelo Maragos 949-293-0152 • angelo.maragos@bmo.com 7700 Irvine Center Drive, Ste. 510, Irvine, CA 92618 www.bmoharris.com/franchisefinance

Business Financial Services

Scott Kantor • 954-509-8019 skantor@businessfinancialsservices.com 3111 N. University Dr, Ste. 800 Coral Springs, FL 33065 www.businessfinancialservices.com

Direct Capital Franchise Group

Robyn Gault 603-433-9476 • rgault@directcapital.com 155 Commerce Way, Portsmouth, NH 03823 www.franchise.lendedge.com

Eastern Bank

Deborah Blondin 603-606-4724 • D.Blondin@Easternbank.com 11 Trafalgar Square, Suite 105, Nashua, NH 03063 www.easternbank.com

Fidelity Bank

Sally Buffum 508-762-3604 • sbuffum@fidelitybankonline.com 465 Shrewsbury Street, Worcester, MA 01604 www.fidelitybankonline.com

First Franchise Capital

BUSINESS MEMBER

Joyal Capital Management Franchise Development Daniel Connelly 508-747-2237 • dconnelly@joycapmgt.com 50 Resnik Road, Plymouth, MA 02360 www.jcmfranchise.com

Marlin Franchise Finance Group

Josh Rouswell 856-505-4450 • jrouswell@marlinfinance.com 300 Fellowship Rd, Mount Laurel, NJ 08054 www.marlinfinance.com

Pacific Premier Franchise Capital

Sharon Soltero 402-562-1801 • ssoltero@ppbifranchise.com 3154 18th Avenue, Ste. 3, Columbus, NE 68601 www.ppbifranchise.com

Santander Bank

Paul Sousa 508-821-6122 • psousa1@santander.us 446 Main St., Worcester, MA 01608 www.santanderbank.com

Susquehanna Commercial Finance Inc.

Richard Riecker 201-326-4021 • Richard.riecker@firstfcc.com 2715 13th Street, Columbus, NE 68601 www.firstfranchisecapital.com

Josh Rouswell Brian Colburn • brian.colburn@susquehanna.net 2 Country View Road, Ste. 300, Malvern, PA 19355 www.susquehanna.net

GE Capital, Franchise Finance

TCF Franchise Finance

Christine Keating 203-229-1804 • christine.keating@ge.com 201 Merritt 7, 2nd Floor, Norwalk, CT 06851 www.gefranchisefinance.com

Bill Johnson & Brittney Weber 952-656-3268 • bjohnson@tcfef.com 11100 Wayzata Blvd., Ste. 801, Minnetonka, MN 55305 www.tcfef.com

INDEPENDENT JOE • FEBRUARY/MARCH 2015 25

2015

BUSINESS MEMBER

Directory of Business Members Please Visit The DDIFO Business Members Directory online at www.DDIFO.org HK Payroll Services, Inc.

Laurie Fleming 732-968-2700 Ext: 41916 • lfleming@honkamp.com 2345 JFK Rd, PO Box 3310,Dubuque, IA 52004 www.hkpayroll.com

Snagajob

Chris Wirt 804-433-2761 • chris.wirt@snagajob.com 4851 Lake Brook Drive, Glen Allen, VA 23060 www.snagajob.com/employers

INSURANCE

Insurance World Agency Inc.

Anil K. Sharma 630-654-6067 • info@iwainsurance.com 100 E Ogden Avenue Ste. 203, Westmont, IL 60559 www.iwainsurance.com

Leavitt Group

Angela Newman • 951-202-9086 lori.ross@restaurantfranchisecaptiveprogram.com 1820 East First Street, Ste. 500, Santa Ana, CA 92705 www.leavitt.com

Starkweather & Shepley Insurance Brokerage, Inc.

Sabrina San Martino 800-854-4625 ext. 1121 • ssanmartino@starshep.com 60 Catamore Boulevard, East Providence, RI 02914 www.starkweathershepley.com

Wells Fargo Insurance Services

TD Bank

CareerBuilder

Brian Frank 203-761-3818 • brian.frank@td.com 40 Danbury Road, Wilton, CT 06857 www.tdbank.com

Kylie Cox 781-343-4351 • Kylie.Cox@CareerBuilder.com 400 Crown Colony Dr., Ste. 301, Quincy, MA www.careerbuilder.com

United Bank

First Advantage

Mark McGwin 508-793-8342 • mmcgwin@bankatunited.com 33 Waldo St., Worcester, MA 01642 www.bankatunited.com

Suzanne Cormier 317-245-1665 • Suzanne.Cormier@fadv.com 9800 Crosspoint Blvd., Ste. 300 Indianapolis, IN www.fadv.com

United Capital Business Lending

Marco Schiappa 401-263-7921 • marco@granitepayroll.com 176 Granite Street, Qunicy, MA 02169 www.granitepayroll.com

Trey Grimm 410-771-9600 • tgrimm@ucbl-inc.com 215 Schilling Circle Ste. 100, Hunt Valley, MD 21031 www.unitedcapitalbusinesslending.com

FOOD PRODUCTS

Quaker Oats A Division of PepsiCo

Ed Bowes 610-948-8309 • Ed.bowes@pepsico.com 402 Kilarney Way, Royersford, PA 19468 www.pepsico.com

HUMAN RESOURCES ADP

Granite Payroll Associates

Heartland Ovation Payroll

Jim Ferreira 203-530-3512 • jferreira@ovationpayroll.com 90 Linden Oaks Ste. 110, Rochester, NY 14625 www.ovationpayroll.com

Paychex

Tina Maxwell (585) 218-6781 • franchisesolutions@paychex.com 1551 S. Washington Ave., Ste. 200 Piscataway, NJ 08854 www.paychex.com

Mark Stokes 813-636-5301 • mark.stokes1@wellsfargo.com 2502 North Rocky Point Drive, #400, Tampa, FL 33607 wfis.wellsfargo.com

LEGAL

Lisa & Sousa Attorneys at Law Ltd.

Carl Lisa, Sr. 401-274-0600 • clisa@lisasousa.com 5 Benefit Street, Providence, RI 02904 www.lisasousa.com

Paris Ackerman & Schmierer LLP

David Paris 973-228-6667 • david@paslawfirm.com 101 Eisenhower Parkway, Roseland, NJ 07068 www.paslawfirm.com

OPERATIONS

3M Company

Bill Muenkel 952-484-4875 • wemuenkel@mmm.com 3M Center, 220-12E-04, St. Paul, MN 55144 www.3M.com/communications

Bunn-O-Matic Corporation

Todd Rouse 800-637-8606 • Todd.Rouse@bunn.com 1400 Stevenson Drive, Springfield, IL 62703 www.bunn.com

John Stefko 908-625-7966 • john.stefko@adp.com 99 Jefferson Rd. MS 322, Parsippany, NJ 07054 www.adp.com DDIFO® does not endorse or recommend commercial products, processes, or services. A DDIFO® Business Member is paying to advertise, and it is not to be considered a product or service endorsement by DDIFO®. Furthermore DDIFO® does not control or guarantee the currency, accuracy, relevance or completeness of information provided by sponsors in their advertising.

26 INDEPENDENT JOE • FEBRUARY/MARCH 2015

2015

Directory of Business Members Cardtronics

BUSINESS MEMBER

Thank You to Our Busin ess M emb ers!

Doug Falcone 973-599-0600 • dougf@cardtronics.com 628 Route 10 - Ste. 8, Whippany, NJ 07981 www.cardtronics.com

Delphi/Fast Track 2+2 Drive-Thru Timer

Mike Pierce 714-850-1320 • mike@phaseresearch.com 3500 West Moore Ave., Ste. M, Santa Ana, CA 92704 www.fasttracktimer.com

DTT Surveillance

Mira Diza 800-933-8388 • mdiza@dttusa.com 1755 North Main Street, Los Angeles, CA 90031 www.dttusa.com

Dunbar Security Products

Dustin Gosewisch • 800-766-9145 dustin.gosewisch@dunbararmored.com 8525 Kelso Drive, #L, Baltimore, MD 21221 www.dunbarsecurityproducts.com

Ecolab

Arliene Bird arliene.bird@ecolab.com 8300 Capital Drive, Greensboro, NC 27409 www.ecolab.com/Businesses

Green Turtle Americas

Eric Hancock 704-295-1733 • ehancock@greenturtletech.com 2709 Water Ridge Pkwy Charlotte NC 28217 www.greenturtletech.com

Hi-Tech Sound

Gary Hanna 508-624-7479 • gary@hitechsound.com 19 Brigham Street, Unit 10, Marlboro, MA 01752 www.hitechsound.com

HME Drive-Thru Headsets

Brady Campbell 858-535-6034 • bcampbell@hme.com 14110 Stowe Drive, Poway, CA 92064 www.hme.com

Hockenbergs

Tom Schrack Jr. 402-609-5111 • tomjr@hockenbergs.com 7002 F St., Omaha, NE 68117 www.hockenbergs.com

Magna Industries, Inc.

Jeff Simmons 914-388-1949 • jeff.simmons@magnaindustries.com 1825 Swarthmore Ave., Lakewood, NJ 08701 www.magnaindustries.com

New England Drive-Thru Communications

Angela Bechard 888-966-6337 • angela@nedrivethru.com 12 Wildwood Road, Auburn, NH 03032 www.nedrivethru.com

Pentair Filtration & Process

ServSafe/NRA Solutions, LLC

Kevin Scott 540-868-8292 • kscott@restaurant.org 175 W Jackson Blvd. Ste 1500, Chicago, IL 60604 www.servsafe.com

Shoes For Crews

Paola Kerns 561-683-5090 • stephanieh@shoesforcrews.com 250 S. Australian Ave. West Palm Beach FL 33401 www.shoesforcrews.com

SKAL East, Inc

Jeannine Gaine 630-240-1298 • jeannine.gaine@pentair.com 1040 Muirfield Dr., Hanover Park, IL 60133 www.everpure.com

Kevin Huerth 508-238-0106 • kevin@skaleast.com PO Box 303, 31 Eastman Street, Easton, MA 02334 www.skaleast.com/index.cfm?keyword=dunkin

R.F. Technologies

Tryad Solutions

Jennifer Morales 618-377-4063 ext. 121 • jenm@rftechno.com 542 South Prairie Street, Bethalto, IL 62010 www.rftechno.com

QualServ

Nick Restivo 630-549-0079 • nick@tryadsolutions.com 2015 Dean St. Ste. 6A, St. Charles, IL 60174 www.tryadsolutions.com

UAS Security Systems

Jarrett Services ATM, Inc.

Becky Dubose 800-643-2980 • bdubose@qualservsolutions.com 7400 28th Street, Fort Smith, Arkansas, 72906 www.qualservsolutions.com

Walter Bass 610-5875-2796 • walter.bass@uas.com 700 Abbott Drive, Broomall, PA 19008 www.uas.com

SensoScientific

York Risk Services Group

KD Kanopy

Zary Lahouti 800-279-3101 ext. 475 • ZaryL@sensoscientific.com 685 Cochran St, #200, Simi Valley, Ca 93065 www.sensoscientific.com

Eric Johnston 732-572-0706 • ej@jarrettforcash.com 1315 Stelton Road, Piscataway, NJ 08832 www.jarrettforcash.com John Behrens 303-650-4707 • john@kdkanopy.com 1921 E. 68th Ave. Denver, CO 80229 www.kdkanopy.com

Lori Ross • 310-489-2443 Lori.Ross@restaurantfranchisecaptiveprogram.com 3130 Stony Run Lane, Cresco, PA 18326 www.restaurantfranchisecaptiveprogram.com

INDEPENDENT JOE • FEBRUARY/MARCH 2015 27

A LOOK ON THE LAW

Fallout from the NLRB McDonald’s Decision

BY PETER C. LAGARIAS, ESQ.

What does it mean for franchisees?

R

ecent rulings by the National Labor Relations Board (NLRB) raise important questions about labor law. In the actions involving McDonald’s, the NLRB prosecutor is contending that McDonald’s and its franchisees should be considered the “joint employers” of the employees who work at McDonald’s franchise restaurants. On the surface, franchisees might expect their interests to align with those of their franchisors on NLRB issues, but broader concerns of a franchisee/franchisor relationship must be considered as well.

Labor laws often directly impact employee wages and benefits and such bottom line payments constitute expenses for franchisees. As employers, franchisees often do not want the increased costs that may result when employees seek higher wages and benefits through collective efforts.

The labor law issues involved in the McDonald’s NLRB cases relate to the fundamental purpose behind the creation of the NLRB. In the wake of the Great Depression, Congress passed the National Labor Relations Act (the NLRA), and established the NLRB to enforce the statutory rights it created for employees to organize and bargain collectively. Prior to the creation of the NLRB, individual employees often had little or no bargaining power against their larger, and sometimes national, corporate employers. In those years, employees worked long hours at low pay with no vacations or sick leave.

And even worse, many employees endured unfair labor practices and, often worked under dangerous and unsafe conditions.

The NLRA sought to rectify the imbalance of power by allowing employees to organize and bargain collectively. In addition, the law provided for an administrative agency (the NLRB) to oversee employees’ rights and to enforce the NLRA.

28 INDEPENDENT JOE • FEBRUARY/MARCH 2015

Franchising came of age decades later, and has since been dominated by franchise agreements and relationships dictated by franchisors. As in the employment relationship, there is often great disparity in resources and knowledge, as well as bargaining power, between franchisors and franchisees. This has permitted the imposition of one-sided franchise agreements, through which franchisors have sought to construct an impenetrable wall in order to avoid any franchisor responsibility for their franchisees’ actions or to franchisees’ employees. Moreover, franchisors have also drafted franchise agreements which provide them with complete, or nearly complete, control over the conduct of their franchisees—typically culminating with a final provision that the franchisee must comply with the franchisor’s operating manual which can be changed at the franchisor’s will.

If McDonald’s operated solely through company-owned stores (it has many although most McDonald’s outlets are franchised), the NLRA and the NLRB’s rules would unquestionably apply to McDonald’s with regard to all of its stores. If McDonald’s took punitive action against employees for trying to organize – like firing them, cutting their hours or threatening them – an NLRB complaint against McDonald’s could follow. But, if an individual franchisee engaged in the same behavior, McDonald’s would likely argue that the franchisee is an “independent contractor,” and that McDonald’s is not responsible for the franchisee’s labor practices.

But this is where control may play a key role. While almost all franchisors label their franchise relationship as an independent contractor relationship, when franchisors retain control over the particular franchisee conduct regulated

by a statute or law, they may face liability due to that control, despite their attempt to insulate themselves using the franchise structure. Many cases refer to such liability for the immediate acts of another as “vicarious liability.” In NLRB actions, the issue is framed in terms of joint employers. The public policy issue which some raise is whether a large international company should be able to avoid coverage under employment and other laws by use of the franchise vehicle.

A bigger problem franchisees may face could arise if McDonald’s and other franchisors are held liable for the actions of franchisees. Franchisors write the franchise agreements and almost universally provide for indemnification (and like many provisions in franchise agreements, the indemnification provisions are usually one way only, i.e., the franchisee indemnifies the franchisor and not vice versa). Such indemnification clauses provide that if the franchisor has to pay anything, the franchisee must indemnify the franchisor by paying those amounts.

This is but another aspect of pervasive control of franchisees in franchise agreements.

Just like employees who sought the right to unionize and bargain collectively, so too do franchisees. A handful of states prohibit franchisors from interfering with franchisees who associate or attempt to associate. No states, however, require franchisors to collectively bargain with franchisee associations, yet.

•

Peter C. Lagarias is the founder of Lagarias Law Offices, a law firm in San Rafael, California representing franchisees and franchisee associations. He is a certified specialist in franchise and distribution law by the Office of Legal Specialization of the State Bar of California.

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