Independent Joe #31 April/May by Dunkin' Donuts Independent Franchise Owners

April/May 2015

The Magazine for D D

Independent Franchise Owners

Sports Give Athletes FRANCHISING Playbook

FRANCHISEES CELEBRATE K-CUP DEAL

FLAWED THINKING BEHIND

THE FIGHT FOR $15

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FLAWED THINKING BEHIND THE FIGHT FOR $15 I was glad to see that most of our Dunkin’ franchise owners made it through another round of “Fight for 15” protests a few weeks ago. We have seen quite the orchestration over the past year by SEIU and their activist friends. Of course, protests are nothing new in our democracy, nor is the willingness of the media to publicize the cause. We’ve all seen the press present the Fight for $15 as a just cause—one the American public agrees is a fair and equitable resolve. They’ve successfully steered the dialogue into a question of whether we “feel” that American workers should be making at least $15 per hour regardless of the work they do. The flaw in that thinking, of course, is that the pay a person receives for their work should bear a relationship to the value of the work they provide. The reality is employers should not pay their workers more than the productive value of the work they perform. When a staffer for the Heritage Foundation, a Washington think-tank, testified before a Congressional hearing on the impact of mandating a minimum wage in 2013, he presented the case study of American Samoa, a U.S. territory in the South Pacific Ocean. Between 2007 and 2009, Congress mandated businesses in the territory increase the minimum wage from $3.56 to $7.25, to match the federal minimum. The plan was to raise the rate in annual increments of fifty cents. Within two years the impact was clear. The unemployment rate on American Samoa soared from 5 percent to 35 percent; one of the two tuna canneries (the main industry on the island) closed, while the other dramatically cut hours and jobs. Overall employment fell 14 percent; employment in the tuna canning industry dropped 55 percent and real wages plummeted 11 percent. Congress ultimately agreed with the governor of American Samoa and ceased future minimum wage increases on the islands. Back here on the mainland, Congress isn’t quite repeating that mistake, but state legislatures and city councils absolutely are. In the hope of winning favor from organized labor and its activist allies, state and local (as well as some national) elected officials are kowtowing to the demands of SEIU and their minions, at the ultimate expense of the very people they purport to want to help.

Madison and Monroe. (And, it was an outstanding meeting, too!) It reminded me that our Founding Fathers clearly understood how demand would drive the market and establish the value of individual products. The reason many of them planted and harvested tobacco is because it was among the most valuable crops of their time. They could have just as easily planted and harvested kale or Belgian endive, but the market dictated the greatest return was on tobacco. Today, markets still determine the value of a product and service. Hamburgers are less valuable than microchips and employees who work in high tech have a higher level of skill than their burger-flipping compatriots. We all understand that as workers develop valuable employment skills, they move up from the bottom rung of the economic ladder. Some are able to achieve that in traditionally low-wage jobs by moving into management; others move into more specialized jobs, like high-tech. In either case, they are compensated based on the value they bring to an organization. What the Fight for $15 advocates are pushing however, is to just leave that employee in a low-skill and low-value job, but compensate them at a level commensurate with higher skills. Throughout our history, parents have advised/instructed/ mandated that their children get an education so that they can get a good job and earn a wage that provides them with the resources they need to live their lives as they wished. The unspoken message in that exhortation is to “make something of yourself,” develop job skills and work experiences that are in demand so that you can maximize your income. Conversely, if a person is satisfied with a low-income (read: low-value) job and either doesn’t want to take on more responsibility or work harder, then he/she is compensated at their value and will have to adjust their lifestyle accordingly.

Our capitalist system is predicated on supply and demand – what a willing buyer will pay a willing seller for a particular good or service. It is not now, never has been, nor ever shall be dictated by what people feel another individual needs to live at a “minimum level of comfort.” And therein, lies the rub as far as I am concerned.

Even as George Washington was planting his tobacco crops, our system of capitalism was already rewarding innovation and hard work while placing a higher value on certain products and services. Even though the market value of some products has changed with the decades, it doesn’t mean the value associated with higher skill or harder work should be diminished by paying more for those who produce less.

A few weeks back, DDIFO hosted its first members’ meeting in Virginia, the home state of Washington, Jefferson,

Ed Shanahan DDIFO Executive Director

INDEPENDENT JOE • APRIL/MAY 2015 1

SUB HEADLINE

CONTENTS

From the Executive Director: Flawed Thinking Behind the Fight for $15• • • • • • • • • • • 1 What’s Brewing: A Look at State Issues Around the Footprint • • • • • • • • • 5

Franchisee Profile: Former Cake Maker Gets Hands-on as a Dunkin’ Franchise Owner• • • • • • • • • • 10 National Conference Announcement • • • • • • 14 Sports Give Athletes Franchising Playbook �� 16 Franchisees Celebrate K-Cup Deal • • • • • • • • 22 Captive Insurance Program Opportunity• • • • 26 Directory of Sponsors • • • • • • • • • • • • • • • • 24 Legal: Healthcare Law Requirements• • • • • • • • • • • 32 2 INDEPENDENT JOE • APRIL/MAY 2015

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INDEPENDENT JOE • APRIL/MAY 2015 3

Independent The Magazine for DD Independent Franchise Owners

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April/May 2015 Issue #31 Independent Joe® is published by DD Independent Franchise Owners, Inc. Editors: Edwin Shanahan, Matt Ellis Contributors: Cristin Mitchell, Cathy Cassata, Everett Newman Jr., Rachel E. Muñoz, Esq., 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.

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SUB HEADLINE

WHAT’S BREWING A LOOK AT STATE ISSUES

AROUND THE FOOTPRINT By Scott Van Voorhis

here’s trouble brewing out there for Dunkin’ and other quick service franchise owners as we head deeper into 2015. Labor unions are leading the pack of politicians, activists and regulators taking aim at your businesses. Beyond the expensive new rules and mandates that raise your costs of doing business, unions are aggressively looking for opportunities to organize shops like yours. The landmark NLRB “joint employer” ruling has now opened the door for a possible labor push within the McDonald’s system and experts warn other quick service restaurant chains will be next. What’s more, a coalition of national labor organizations is backing the “Fight for $15” campaign to push for ever bigger minimum wage hikes across the country. Pressure on the bottom line will also be felt from a growing number of proposals forcing franchise owners to give their workers two-week’s notice before a shift change. One bright spot comes out of California. Top legislators are backing a bill that would protect quick service and other franchise owners from having their businesses arbitrarily confiscated by the big chains.

"This is an existential threat to the franchise business model. The labor unions don’t like the franchise model – it’s retail unionization rather than wholesale." “We have our hands full right now,” says Matthew Haller, senior vice present, communications and public affairs, for the International Franchise Association.

its restaurants are run by independent franchise owners, who decide what their workers get paid and their workplace conditions.

New rules give edge to unions The Service Employees International Union (SEIU) and other labor groups have targeted McDonald’s in a long running bid to organize workers at the giant restaurant chain.

But the NLRB’s lawyer contends it is McDonald’s corporate, not franchise owners, who ultimately call the shots and needs to step up to the plate to negotiate pay and working conditions.

The unions hit pay dirt last July, when the general counsel of the National Labor Relations Board issued an opinion that has the potential to open the door to unionization of McDonald’s workers. The labor board’s lawyer argued that McDonald’s should be considered a “joint employer” with its franchise owners. McDonald’s argues that 90 percent of

That, in turn, gives a crucial boost to union activists with ambitions of recruiting workers across the entire McDonald’s fast foot empire, instead of having to target one restaurant at a time. “This is an existential threat to the franchise business model,” the IFA’s Haller says. “The labor unions don’t like the franchise model – it’s retail unionization rather than wholesale.”

INDEPENDENT JOE • APRIL/MAY 2015 5

WHAT’S BREWING

Still, while there’s no suggestion the NLRB is backing down, it’s not quite a done deal yet. An NLRB administrative judge is now overseeing a series of public hearings as he considers the general counsel’s argument, as well as appeals by McDonald’s and other business groups. So why care? Well some fear that as McDonald’s goes, so goes the rest of the franchise world. Critics say the ruling undermines the whole franchise system, effectively stripping away the independence of individual franchise owners. And, if successful, unions are not likely to stop at McDonald’s, but will instead expand their campaign to Dunkin’ and other brands. Concerned about the aggressive union campaigns, business groups and franchise owners are pushing back, working with Congress to put pressure on the NLRB to reconsider finalizing the joint-employer ruling.

If that weren’t enough, franchise owners face another threat emanating from the NLRB – so called “ambush rules” aimed at speeding union elections. The new rules, which took effect in mid-April, eliminate a traditional, 25-day waiting period between the time when the labor board orders a union election and when the vote is actually held. That gives franchise owners and other employers less time to make their case, with further restrictions imposed on what business owners can say as well. A bill passed by Congress that would have nixed the new rules was recently vetoed by President Obama. “The Obama Administration is taking every step possible to tip the scales in the unions’ favor,” says Kevin Glass, director of policy and outreach at the Franklin Center. Payroll pressures ahead Even as unions focus their recruiting efforts on McDonald’s workers, the labor movement is targeting the entire quick

"We believe the Fight for 15 campaign is more about growing union membership and less about raising the minimum wage for low-wage workers" service field with an increasingly relentless drive to boost the minimum wage in cities and states across the country. In fact, the SEIU, which is the nation’s fastest-growing labor union and has been targeting McDonald’s in the jointemployer case, is squarely behind the Fight for $15, an effort to raise federal

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minimum wage. Symbolically, the SEIU has reportedly pumped tens of millions of dollars into the effort. “We believe the Fight for $15 campaign is more about growing union membership and less about raising the minimum wage for low-wage workers,” Haller says. Maybe, but a growing number of cities and states are responding by boosting the minimum wage. The proposals are popping up around the country, from Berkeley – which is looking to boost the minimum past $16 an hour – to Bangor, Maine where a proposal would gradually raise the minimum to $9.75 by 2018. It comes on the heels of one of the biggest wage hikes in U.S. history, with the minimum wage having gone up Jan. 1 in 20 different states, including Oregon, Washington, New York, Colorado, Ohio and Florida.

Administration. The Associated Press reports the union promoted the campaign in order to pressure McDonald’s to support unionization and a $15 minimum wage.

The SEIU was also behind the recent wave of complaints about workplace hazards fast food workers in 19 cities filed with the Occupational Health and Safety

Eroding authority Franchises and other business owners are also finding their authority challenged in other key areas.

Union and social activists have kicked off a campaign to require companies to give up to two-week’s notice when changing work schedules, and to pay for on-call work as well. Other proposals in San Francisco, Vermont and New York City would give employees the right to request flexible shifts.

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WHAT’S Photo Credit: Nicole Raz by theGPSnews.com

BREWING

At the same time, employers have fewer rights to learn all they can about who they’re hiring to serve their customers thanks to the “ban the box” campaign, which calls for restricting what franchise owners can ask on job applications—specifically, whether the job candidate has a criminal record.

could effectively scrap the ACA in 32 states.

In fact, “ban the box” is now in effect in Virginia where Gov. Terrence McAuliffe recently ordered state agencies to ban the box on applications for state jobs. And, dozens of other cities and states have implemented ban the box rules regarding public employees. Some jurisdictions now want to expand ban the box to private employers.

If nothing else, the latest ACA challenge simply adds to the already deep confusion about the law and its various requirements on the part of business owners.

Health care chaos Dunkin and other franchise owners have spent years scrambling to meet a series of mandates from the Affordable Care Act (ACA). Franchise owners with 100 employees are now on the hook for covering at least 70 percent of their employees. Next year, it rises to 95 percent. The threshold then drops to 50 employees in 2017 – that is if the whole law is not scuttled before then by the latest legal challenge. The Supreme Court has agreed to hear a case – King v. Burwell – that, if successful,

8 INDEPENDENT JOE • APRIL/MAY 2015

If successful, the challenge to the law would bar subsidies being given to states that have yet to set up their own health care exchanges, a wide-ranging group that includes Illinois and Arkansas.

“That is one of the challenges – the law seems to be constantly changing and changing at the last minute, which creates hurdles for business owners,” Haller says. (Read more about your legal requirements under the ACA on page 32) Fair franchising bill revived Franchise owners in California were crestfallen when Gov. Jerry Brown vetoed the fair franchising bill last fall. The proposal would have instituted important protections for franchisees so their franchisors could not effectively confiscate their businesses without any compensation. The bill is back now, but with some wording changes aimed at easing concerns expressed by the governor. It’s backers include the Speaker of the California State Assembly.

“We are very hopeful,” says John A. Gordon, principal of Pacific Management Consulting Group and DDIFO’s restaurant analyst, who has been involved in the fair franchising effort. “The key to the bill is a very commonsensical issue: If franchise owners are leaving the business, they should have the opportunity to get fair market value for their businesses,” Gordon says. Keeping an eye out for you Quick service franchise owners are under siege these days, targeted by politicians and activists pushing a crazy quilt of various causes. And, if anything, the challenges are only intensifying. The Fight for $15 is just getting ramped up, as are proposals that would meddle with the power of business owners to schedule shifts. The next few months will also see the NLRB most likely finalize its jointemployer rule, with all its varied and serious implications for the future of franchising. Here at DDIFO, we are monitoring all the latest developments that could impact your bottom line so you can do what you do best, run successful Dunkin’ Donuts franchises.

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Former Cake Maker Gets Hands-on as a Dunkin’ Franchise Owner 10 INDEPENDENT JOE • APRIL/MAY 2015

By Cathy Cassata

ears before franchising entered Patty Babb’s mind, she started her mornings saying, “It’s time to make the donuts.”

“I owned a mom and pop ice cream shop, and I’d say this to my daughter who was about 6 years old at the time because she’d come with me to my store and help me make ice cream cakes,” says Patty. With 13 years of experience as the art director for an architectural, interior design and engineering company, Patty channeled her artistic talents into her ice cream store by making custom cakes. Her business grew to the point where she was making 30 to 40 cakes a weekend. “The reason I opened the shop in the first place was because I stopped working in the art field to be home with my twins, yet I volunteered for everything and coached almost every sport in town,” Patty remembers. “After I won the Volunteer of the Year Award in my town, my husband said, ‘You need a job!’” Russ Babb gave her the push she needed to open the ice cream store. Later, he was a key reason why Patty wound up in the Dunkin’ system. It was 2001 and Russ’ construction company was at work at a remote lake community about 50 miles outside New York City. He came across an empty building that he thought had Dunkin’ Donuts written all over it.

I had two hours together trapped in a car every day with my teenage kids,” says Patty. Around that time, Patty stopped volunteering in her town and began coaching soccer and softball at her kids’ high school. “They both played, so our days consisted of leaving at 4:30 in the morning. They’d brush their teeth and get dressed at Dunkin’ and go to school. Then we’d have practice, and head home around 9:00,” Patty says. The Babbs stuck to this routine for a year before moving to a house within 10 miles of their stores. Soon after, Patty sold her ice cream store. “I sold it as an ice cream shop, but ironically it’s now a Dunkin’ Donuts,” she says. When the Babbs took on their 3rd and fourth stores in 2011, Russ sold his construction company and began working full time at their stores performing all maintenance and equipment repairs. “The two of us do everything as far as all the operations, maintenance and office work,” says Patty. Patty is certified to work on all the equipment in her stores. “I’m mechanically inclined since I come from a family who all work in construction,” she says. If that’s not enough, she also prides herself on being present in her stores. “I make it a point to be in my stores most of the day, talking to customers and getting to know every one of my employees by name and a little bit about them,” she says.

“He realized there wasn’t a good place to get coffee in the area and thought it’d be the perfect spot for a Dunkin’,” says Patty. Russ says he pitched the location to Dunkin’ Brands for about a year until they finally checked it out. “They loved it, and so began the proceedings of me going to Dunkin Donuts University,” says Patty. “From the beginning, Russ was the construction guru and developer and I was the operator.” The Babbs’ first store opened in 2002 as a Dunkin’ Donuts/ Baskin Robbins combo, featuring a commercial kitchen and drive thru. “It was a challenge working at a new store 60 hours a week and still continuing to run my ice cream shop 35 miles away and coach sports while my husband continued to work with his construction company,” says Patty. She used her shop’s new kitchen to make ice cream cakes for Baskin. “I loved it. It was familiar to me since I had so much experience doing it at my ice cream shop,” she notes.

A family affair Today, the Babbs own six stores in five different towns that are all located around Lake Hopatcong, the largest lake in New Jersey. Two years after opening their first store, the Babbs opened their second. They still lived 35 miles from their stores, but at this time, their twins began high school, so they attended a private school closer to the stores. “The kids commuted with me 35 miles each way to attend school. It was the greatest experience since

INDEPENDENT JOE • APRIL/MAY 2015 11

FRANCHISEE PROFILE: PATTY BABB While Patty is the division manager and operator of five stores, her brother operates their sixth. “He was in construction with our other brothers, but was looking to get out of that. There happened to be an opportunity to buy an existing store by his house so I asked him to manage it. It’s a Baskin and he and his wife are really crafty, so they love making the cakes,” says Patty. Family involvement also includes the Babb’s twin son and daughter who worked in the stores throughout their high school and college days. Both recently graduated with master’s degrees, and continue to work in the stores while they look for jobs in their fields of study. “They’ll be off and running with their careers soon, but if they want to take over the business when we’re ready to retire in about 15 years, it will be great timing since they’ll have world experience to offer to the company,” says Patty.

A passion for the brand The Babbs plan to add three more stores to the mix in the next couple of years. “As we add more stores I will need to hire a division manager or general manager to handle the workload,” says Patty. No matter how many more they take on, Patty says she’s sticking

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"When we go to our local Dunkin' meetings everything is very Dunkin' specific, and when we go to DDIFO meetings, they're more informative about government laws that affect your business" with Dunkin’. “I’m passionate about Dunkin’. I love the brand and I don’t have any desire to branch out to other brands,” she says. “It’s not big business for me. I’m really hands on with each store and my employees, and I want to continue to be able to operate this way.” Staying in business as she knows it requires staying in the know with the brand and DDIFO, notes Patty. When we go to our local Dunkin’ meetings everything is very Dunkin’ specific, and when we go to DDIFO meetings, they’re more informative about government laws that affect your business,” she says. “There’s a lot involved in running your business other than what’s just in the Dunkin’ world, like HR and legal issues, which Dunkin’ doesn’t really inform you on. Going to our local Dunkin’ meetings and DDIFO meetings gives me a balance. I feel like I need both.”

Spreading Dunkin’ cheer to the community Since Patty spends her days driving around the lake visiting her stores, she decided to volunteer for the Lake Foundation, as well

as the Chamber of Commerce in the towns where her stores are located. “One town does a summer picnic for the residents and I set up a booth where we charge $1.00 to $2.00 for coffee and donuts. Everything we make, we match and donate back to something in the town, such as the Little League,” she says. The Babbs also set up booths for other charities throughout the year, including the Wounded Warrior Project, and they participate in holiday parades and motorcycle runs. “Russ and I go to all of these ourselves along with some of our employees,” says Patty. “We like the opportunity to get out and talk with people and make a presence. People love to get free Dunkin’ Donuts, but we want them to know that this is our business that we take pride in. We want them to put a face to their donuts and coffee.” There’s no doubt the Babbs are leaving an impression.

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INDEPENDENT JOE • APRIL/MAY 2015 13

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INDEPENDENT JOE • APRIL/MAY 2015 15

Sports Give Athletes FRANCHISING Playbook

PhotoCredit:UniversityofNebraska

By Cristin Mitchell

16 INDEPENDENT JOE â&#x20AC;˘ APRIL/MAY 2015

s the clock ticks down, when the last points have been scored and the cheers have gone silent, many professional athletes are left wondering what comes next. For more and more athletes, the somewhat surprising answer is franchising. In increasing numbers, athletes are hanging up their uniforms in exchange for a partnership with leading chains, putting their money and their names behind some very prolific brands. While there are no official stats on how many athletes are turning to franchising, there is a growing roster of names that reads like a who’s who of professional athletes. NFL quarterback Peyton Manning may be the most visible, as both a franchisee and the face of Papa John’s pizza in television commercials. Tennis ace Venus Williams is behind five successful Jamba Juice locations serving up fruit smoothies in the Washington DC area and Keshawn Johnson leads an all-pro group of investors who have opened several Panera Bread franchises in southern California.

PhotoCredit:MGlasgowvia Flickr

As athletes think about their off-the-field careers, there are constant reminders that the road ahead is paved with well documented failure. A 2009 Sports Illustrated investigation estimated more than 75 percent of NFL players (who earned $5.5 million, on average) run out of money within two years of leaving the league and more than 60 percent of NBA players (who earned $1.9 million, on average) are broke within five years. Former placekicker Kris Brown was determined to not be one of those statistics. After a record-breaking career at the University of Nebraska, where he was part of two national championship teams, Brown spent 12 years in the NFL, playing with the Pittsburgh Steelers, Houston Texans, San Diego Chargers and Dallas Cowboys. But even as his football career was taking off, Brown was always thinking about his next move.

To combat that nightmare, Brown got an internship in the offseason for his first six seasons in the NFL. “It gave me an idea of what I liked and what I didn’t like.” When he left football for good in 2011, he explored his options and zeroed in on Dunkin’ Donuts. It was a brand he had grown up with in Dallas and he knew it had a loyal following. He signed on with two other partners and is now CEO and coowner of the Berliner Group, which operates four Dunkin’ restaurants in Kansas City and Omaha. The group is planning openings for four more Dunkin’ shops this year and five more in 2016. That transition from sports to business isn’t always so smooth for former athletes and the NFL, among others, has recognized that. The NFL Players Association has partnered with Babson College, a top-tier business school in Wellesley, Mass., to create a program that helps give former NFL players some business basics. The program is designed to help them decide if owning, partnering or investing in a business makes sense as their next move. Many of them have the money in the bank, but no plan in place. Babson Professor Angelo Santinelli says the program gives them the tools to ask the right questions about investing their money. “You make a lot of money at a very young age and you don’t have a lot of experience

managing that capital. It’s not that they don’t have the smarts, it’s that they don’t have the resources.” Professor Santinelli says franchising can make sense for players because it’s a structured and fairly regulated industry. “You’re not taking the risk of establishing

Kris Brown was drafted in the 7th round of the 1999 NFL draft. He spent 12 years in the league, and was part of the Houston Texans' inaugural squad.

“When you’re playing you’re constantly inundated with data and information about the staggering statistics about what happens when you’re done,” the Texas native says. “I had this recurring nightmare for my first six years of playing that I would be done and would sit down to write a resume and have nothing to write.”

INDEPENDENT JOE • APRIL/MAY 2015 17

COVER STORY: PROFESSIONAL ATHLETES IN FRANCHISING a new brand. The brand is already established. It’s a lot different joining a franchise than starting a restaurant. It’s not in their interest to see you fail.” That franchise framework is important, says Brown. “We are so used to structure. I think that’s where a lot of guys struggle. Your whole life has been structured. You

leave and there’s none at all.” Players put in the work and the hours, but at the same time are told where to be and what to do. “I think the franchising world gives that structure that athletes are so used to.” While that doesn’t mean franchising is an automatic victory for these former pros, Michael Stone, an NFL safety for seven

years, believes it can be the winning strategy for success as a second career. Stone is the Executive Director and founder of the Professional Athlete Franchise Initiative (PAFI.) A member of the Arizona Cardinals, St. Louis Rams and Houston Texans, Stone ended his career in 2008 playing for the New York Giants. He says he founded PAFI because he saw a need for helping players transition to a life after sports. After a meeting with former NBA player Junior Bridgeman, who owns more than 300 restaurant franchises worth an estimated $250 million, Stone decided franchising was a near perfect form of entrepreneurship for athletes because it parallels their experience. “As a player, I wasn’t asked to make the playbook or the formations. I wasn’t asked to think about the marketing or how we were going to get people to come to the games. I was given a playbook and I was there to execute it, with some coaching along the way. That’s pretty much what a franchise does. You’re given a playbook for the business, you get some coaching and you execute it.”

18 INDEPENDENT JOE • APRIL/MAY 2015

The PAFI has created a playbook to help athletes transition from the field to the franchise. Founder Michael Stone (far left) says franchising closely parallels the players' experience Since its founding, PAFI and its parent organization, the International Franchise Association (IFA), have partnered with more than fifty brands and helped hundreds of athletes explore opportunities in the industry. Their mission is to educate athletes about franchising. PAFI puts franchisors and potential franchisees

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together and gives players the tools to help them make smart business decisions. One of the challenges, Stone says, is managing the expectations of a population that, for the most part, has only known success in their professional lives. “What we are is a resource for guys to

build a network,” says Stone. They help them build that network, in part, with the PAFI Annual Franchise Summit. The three-day conference puts athletes with a variety of sports backgrounds into classroom sessions that cover the X’s and O’s of franchising. It’s

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INDEPENDENT JOE • APRIL/MAY 2015 19

COVER STORY: PROFESSIONAL ATHLETES IN FRANCHISING As a partner of the International Franchise Association, PAFI has forged strong connections with many of the most successful brands

a new playing field and subjects of study range from finance to law to the day-today operations. The athletes are taught to do their own due diligence and decide what brand best fits their lifestyle and expectations. In turn, chain representatives have an opportunity to meet the athletes. They don’t just turn over the keys, athletes are put through the same rigorous screening as any prospective owner. Stone says their attendance has grown every year and they’re now seeing athletes who are now successful franchisees come back to mentor those who are just starting on this second career. One of those mentors is Brown. He has participated as a panelist at the Summit and says he relishes the opportunity to give back to his fellow athletes. “I try to really communicate to them what the experience will be like so, if they make a decision to go into this business, they’ll be well aware of what it takes to be successful.”

Any franchise owner will tell you leadership is an important part of the job. Brown says teamwork should also be considered a key to success in franchising. Leaders know how to best place workers where they belong, empower them to do their job and make sure everyone not only shares the vision, but understands they have a role in it. “You understand that the sum is greater than the individual parts. That’s the first thing that athletes bring to the business world.” But he says there’s more. “Obviously, hard work. You’ve got to be a hard worker, you’ve got to have dedication and a clear sense of purpose.” And most important? The will to win, the competition of it all. “As an athlete, you’re extremely competitive. The business world is the fiercest competition that you’ll ever face, even more so than athletics, because it means your survival. You’re trying to go out and win one guest over every day. And that, in and of itself, is the challenge.”

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Stone points out many professional athletes spent years honing their leadership abilities and have demonstrated those abilities in high-pressure situations; it’s second nature for most athletes, he says. “Athletes know how to rally a team, how to manage, how to lead and how to follow, which is just as necessary at times. The skills are very similar to those of a successful franchisee.”

franchisee and his life as a top collegiate and professional football player, he can’t help but find a parallel to Dunkin’ Donuts and an NFL franchise. His answer: The team that first drafted him, the Pittsburgh Steelers.

“Dunkin’ has a long history, just like Pittsburgh does. A Steelers fan is there every year, just like the loyal guests of Dunkin’ and they’re going to be there through thick and thin. They love the brand and they start ’em young.”

•

As on the field, leaders emerge in business. “When you look at the leaders on a team, they’re a leader because of the work ethic they possess and the way they make everyone around them better,” says Brown. “That’s what we’re trying to do. We watch our top performers who are leaders help make everyone around them better.” As Brown considers the parallels between his life as a

INDEPENDENT JOE • APRIL/MAY 2015 21

Franchisees Celebrate K-Cup Deal By Matt Ellis

22 INDEPENDENT JOE • APRIL/MAY 2015

n the summer of 2007, news broke in the city of Cincinnati – the home of consumer brand giant Procter & Gamble – and in Boston – the home of Dunkin’ Donuts. P&G was to begin selling Dunkin’ coffee in supermarkets and other retail outlets. No longer did a customer have to go to a Dunkin’ shop to get Dunkin’ coffee. “Through a licensing agreement with Dunkin' Donuts, the largest coffee and baked goods chain in the world, P&G will provide Dunkin' Donuts coffee to grocery stores, mass merchandisers, club stores, and drug stores throughout the U.S.,” P&G wrote in a press release. At Dunkin’ Brands headquarters in Canton, discussions had centered on how to get Dunkin’ coffee into more American kitchens and consumers’ coffee pots. In a press release, former Dunkin’ Donuts President Robert Rodriguez said, "We are thrilled to be working with Procter & Gamble to introduce new consumers across the country to our great-tasting coffee and we are pleased with the initial response from retailers.” The news was heralded by the business press and was most assuredly well received at the headquarters of Bain Capital, the Carlyle Group and Thomas H. Lee Partners, the private equity trio that owned Dunkin’ Brands at the time. But, within the community of Dunkin’ Donuts franchisees, who own over 99 percent of the Dunkin’ Donuts shops, it felt like a knife in the back for their prime product to be sold in the consumer packaged goods (CPG) business right outside their shops.

A new Dunkin’ makes a new deal

Fast forward nearly eight years and sales of K-Cups at Dunkin’ Donuts shops are falling. What’s more, while the single-serve K-Cup market is exploding, Dunkin’ is facing a dwindling share of the market. In the face of these circumstances, Dunkin’ inks a deal with the J.M. Smucker Company and Keurig Green Mountain to start selling K-Cups in supermarkets. But, this time the reaction by franchisees couldn’t be more different. Having remained true to his 2011 promise not to sell the brand’s K-Cups outside its restaurants, Dunkin' Brands CEO Nigel Travis and his team now worked collaboratively with franchisees, through the Brand Advisory Council (BAC), to forge an unprecedented deal, calling for a 20-year profit sharing agreement under which Dunkin’ Brands and its franchisees will share equally in the net profits from these retail sales. “This was a better outcome than all of us would have hoped for because there is a win on the franchisor side and the franchisee side,” says John A. Gordon, principal of Pacific Management Consulting Group and DDIFO’s restaurant analyst. “I give the brand and Nigel Travis credit for waiting for a period of time and staying true to his word of concern about franchisee profitability.” “It’s a truly collaborative relationship. They technically could have done this without us but Nigel made a promise and he has definitely kept his word and has treated us as partners in this process,” according to a franchisee and BAC member who requested anonymity.“ It wasn't easy, and both sides walked away from the table at times, but we worked together to achieve an unprecedented accomplishment. We believe that no other franchise system in history has a partnership in CPG like Dunkin's does." The K-Cup deal, which was finalized in April 2015, is a partnership between Dunkin’ Brands, Smucker and Keurig. It’s estimated the deal could yield between $2,500 and $3,000 a year for franchised locations. According to Finance.com, “For once we find the franchisees on the royalty-collecting end of the arrangement.”

INDEPENDENT JOE • APRIL/MAY 2015 23

K-CUPS “We have industry-leading partners in Smucker’s and Keurig Green Mountain,” the franchisee says. “They have their own pretty substantial advertising and marketing budgets so we hope to be able to leverage them with our own efforts,” In addition, he says, the Dunkin' strategy specifically calls for marketing initiatives meant to drive grocery consumers back to Dunkin’ Donuts shops for coffee, baked goods and sandwiches."We call it boomerang marketing." “At this point in time, I can’t think of any better way to demonstrate the strength of Dunkin’s coffee than having it actually present in the grocery channel,” says Gordon.

Single serve coffee a growing presence

According to the magazine The Atlantic, nearly one in three American homes now has a pod-based coffee machine. Keurig has virtually cornered the market providing convenience, quickness and choice to the task of making coffee. Nine billion K-Cups were sold in 2014 accounting for much of Keurig Green Mountain’s $4.7 billion in revenue, which was more than five times what the company earned five years earlier. While

drip coffee-maker sales are stagnant, pod-machine sales have increased six-fold since 2008. That’s an important consideration for Dunkin’ Donuts franchisees who’ve been devoting valuable shelf space and marketing money towards the sale of coffee-by-the-pound and K-Cups. Even as the demand for single-serve coffee has recently exploded, Dunkin’ has had trouble seizing a significant share of the market since it first introduced K-Cups sold only in its shops. A few months before the K-Cup announcement, Travis said publicly, “K-Cups had double digit negatives last quarter,” meaning sales fell by more than 10 percent, even as Keurig’s K-Cup sales increased 13 percent in fiscal year 2014, according to Bloomberg Businessweek, which called Dunkin’s previous K-Cup sales strategy “not very effective.” Franchisees say K-Cup sales in Dunkin’ shops were initially very good when the single serve market was in its infancy, but the market changed with the explosion of single-serve options in grocery aisles. Experts say 80 percent of all K-Cup packs are purchased where consumers buy their groceries and since Dunkin’ K-Cups were not on grocery shelves, customers chose other brands. The new deal, however, gives Dunkin’ – and its franchisees – a chance to tap into a category which is predicted to grow an additional 90 percent over the next several years. Already, sales of K-Cups are exceeding coffee-by-the-pound as the largest share of packaged coffee sold in supermarkets.

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24 INDEPENDENT JOE • APRIL/MAY 2015

“Consumers are now buying their K-Cups in groceries anyway, and it’s a market that Dunkin' would have had zero part of had we not done this. Even if there was cannibalization of in store K-Cups, it is cannibalization of a shrinking business. And if the brand had done it without us, we would have had zero share of it,” one franchisee told Independent Joe. “Now we are in the game and getting half of the profits.”

An unprecedented arrangement

“We believe this profit-sharing agreement is unprecedented in our industry and underscores the collaborative franchisor/franchisee relationship we have at Dunkin’ Brands and our focus on building store-level profitability,” Dunkin’ Brands chief communications officer Karen Raskopf told Independent Joe. The K-Cup announcement was positively received on Wall Street, boosting the stock price. But, beyond that short-term gain, the impact of this deal should provide long-term benefits to both Dunkin’ Brands and the franchisee community. Aside from the revenue split for sales of K-Cups, Dunkin’s new CPG agreement also calls for splitting the profits derived from creamer and bagged coffee sales. And it leaves the door open to funneling other Dunkin’ Donuts branded products into the consumer channel and providing franchisees with additional revenue. As the old saying goes, “Half of something is better than 100 percent of nothing.”

•

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INDEPENDENT JOE • APRIL/MAY 2015 25

The Captive Insurance Program Opportunity By Everett Newman Jr.

Most corporate buyers of insurance have heard the terms “Captive Insurance” or “Captive Insurance Program.” However many business owners, including Dunkin’ Donuts franchisees, may have differing levels of understanding of this concept. The goal of this article is to help all Dunkin’ franchisees gain clarity on the subject of captive insurance programs and provide basic knowledge on just how a captive program could benefit their business performance and profitability.

History of Captives

WHAT IS A CAPTIVE?

A captive is an insurance company created and wholly owned by one or more non-insurance companies to insure the risks of its owners (example: a group of Dunkin’ Donuts franchisees could form a captive). Captives are a form of self-insurance (with full reinsurance protection) where the insurer is owned wholly by the insureds. They are typically established to meet the risk management and insurance needs of its owners or members. One of the main reasons businesses form a captive program is to earn underwriting profits and investment income based on the performance of their individual company. Because members have the potential to earn underwriting profits and investment income, participation in a captive insurance program is viewed as one way to transform the insurance expense line of a P&L into a profit source.

26 INDEPENDENT JOE • APRIL/MAY 2015

The term “captive” was coined by Fred Reiss, known as the father of captive insurance, when he formed American Risk Management in 1958. During this time, U.S. regulations made it too expensive to form and operate captives in the states. Reiss looked offshore and formed the first modern day captive in Bermuda in 1962. By the end of the 1960’s there were over 100 captives formed, with Bermuda and the Cayman Islands being the leading domiciles. By 1978, Bermuda established the first comprehensive legislation, licensing and oversight procedures for the captive industry. The growth trend continued and by the 1980’s there were about 1,000 captives. Today there are over 7,000 captives operating in the world with more than $10 billion in annual premiums. Bermuda is still the largest domicile, with over 900 captives. And, as a result of a more favorable regulatory environment, there are now over 2,000 captives domiciled in over 30 U.S. states. The fastest growing segment of captives is within mid-sized companies which used Group Captives. At the same time, over 90% of Fortune 500 companies now own captives.

A Success Story: the Restaurant Franchise Captive Program The Restaurant Franchise Captive Program (RFCP), an exclusive program of York Risk Services Group, is an excellent example of a group captive that was formed for the benefit of restaurant franchisees. This program began in the midst of California’s “hard market” in 2004, at a time when workers’ compensation insurance rates were skyrocketing and many businesses failed or left the state. Two franchisees – one a Carl’s Jr. and the other a Denny’s – partnered to start the RFCP and began writing insurance business on July 1, 2004. The primary goal of this venture was to gain control

of their own insurance costs. By getting access to claims management and embracing safety services, these two franchisees were able to drive the cost of their workers’ compensation, general liability and property insurance down to the lowest level they’d ever experienced. In the 11 years since inception, the RFCP has delivered: •A successful, growing captive insurance program with over $15 million in annual premiums • $10.4 million in underwriting returns to members •H istorical loss ratios of 30 percent compared to 55-60 percent industry norms (this is the ratio of claims costs to premiums paid, so lower is better) • Over 1,500 locations in over 30 U.S. states • Over 20 restaurant brands insured in the program

A Captive Program that Exceeded all Expectations The RFCP program has more than exceeded the expectations of its members when first formed in 2004. Thanks to the efforts of members working with their program manager and broker to manage claims and safety issues, members have received millions of dollars in underwriting profits, turning a business expense into a profit center. A founding member of the RFCP told us, “Getting into the RFCP was one of the best decisions I’ve made as a business owner. I have been in the program since its start in 2004, and the RFCP has done more to enhance my profitability than

any other single thing I could have done.” Among the benefits to franchise owners: • Underwriting Profits that directly enhance your company’s profitability • A market-competitive insurance rate • Superior Safety and Claims Management Services that reduce your claims frequency and drive costs to the lowest possible level • Comprehensive coverage designed to meet the insurance requirements of your franchisor (for Workers’ Compensation, General Liability, Property & Auto Coverage) • Full insurance and reinsurance protection from an “A” Rated insurance carrier • Greater control and say in how your claims are managed • The lowest net cost for insurance, which provides a competitive advantage in the franchisee marketplace Captives are the fastest growing segment of the commercial insurance marketplace. Chances are a captive could be a good fit for your company and satisfy your insurance needs. For many franchisees, a captive program would provide a greater degree of control over insurance costs while also providing a welcome new profit stream.

•

Everett Newman, Jr, CIC. is the managing vice president for York Alternative Risk Solutions

INDEPENDENT JOE • APRIL/MAY 2015 27

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

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.

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

Neovision Consulting Inc.

Nish Parekh 609-531-4444 • info@neovisioncpa.com 1246 South River Road, Ste. 101 Cranbury, NJ 08512 www.neovisioninc.com

Sansiveri, Kimball & Co., LLP

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

BUILDING

Poyant Signs

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

Trane HVAC

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

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

Verizon

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

COST RECOVERY EF Cost Recovery

Ed Craig 774-263-7388 • ecraig3@efcostrecovery.com PO Box 79361 North Dartmouth, MA 02747 www.efcostrecovery.com

Performance Business Solutions, LLC

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

28 INDEPENDENT JOE • APRIL/MAY 2015

2015

Directory of Business Members

BUSINESS MEMBER

ENERGY

Plotwatt, Inc.

Adam Gardiner 401-234-0825 • adamgardiner@plotwatt.com 1715 Six Gables Road, Durham, NC 27712 www.plotwatt.com

FINANCE

Analytix Solutions

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

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

Richard Henderson 603-433-9434 • rhenderson@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

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

GE Capital, Franchise Finance

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

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

TD Bank

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

United Bank

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

United Capital Business Lending

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

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

Santander Bank

FOOD PRODUCTS

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

Susquehanna Commercial Finance Inc.

Brian Colburn 443-966-1792 • brian.colburn@susquehanna.net 2 Country View Road, Ste. 300, Malvern, PA 19355 www.susquehanna.net

TCF Franchise Finance

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

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

John Stefko 908-625-7966 • john.stefko@adp.com 99 Jefferson Rd. MS 322, Parsippany, NJ 07054 www.adp.com

CareerBuilder

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

INDEPENDENT JOE • APRIL/MAY 2015 29

2015

BUSINESS MEMBER

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

Alarm Grid

Joshua Unseth 954-933-5095 • support@alarmgrid.com 2510 NE 47th St, Lighthouse Point, FL 33064 www.alarmgrid.com/alarm-monitoring-dunkin-donuts

Bunn-O-Matic Corporation

First Advantage

Snagajob

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

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

Granite Payroll Associates

INSURANCE

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

Heartland Ovation Payroll

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

Paychex

Diana Devivo (516) 946-8551 • ddevivo@paychex.com 14 Penn Plaza, 225 West 34th St, Suite 700 NY, NY 10122 www.paychex.com

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

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

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

30 INDEPENDENT JOE • APRIL/MAY 2015

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

Cardtronics

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

Davis Bancorp

Richard Davis 847-998-9000 • security@davisbancorp.com P.O. Box 1690, Barrington, IL 60010 www.davisbancorp.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

2015

Directory of Business Members Ecolab

BUSINESS MEMBER

Thank You to Our Busin ess M emb ers!

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

KD Kanopy

John Behrens 303-650-4707 • john@kdkanopy.com 1921 E. 68th Ave. Denver, CO 80229 www.kdkanopy.com

Magna Industries, Inc.

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

MCD Innovations

Will Knieper 214-883-5656 • wknieper@mcdinnovations.com 3303 N.McDonald St., McKinney, TX 75071 www.mcdinnovations.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

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

R.F. Technologies

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

QualServ

Tellermate

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

Dana Glaze 770-220-5113 • dana.glaze@tellermate-us.com 3600 Mansell Road, Ste 500, Alpharetta, GA 30022 www.tellermate-us.com

SensoScientific

Tryad Solutions

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

ServSafe/NRA Solutions, LLC

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

UAS Security Systems

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

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

Shoes For Crews

York Risk Services Group

SKAL East, Inc

PCI COMPLIANCE

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

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

ANXeBusiness

Mark A. Wayne 313-268-1606 • waynem@anx.com 2000 Town Center Ste. 2050, Southfield, MI 48075 www.anx.com

INDEPENDENT JOE • APRIL/MAY 2015 31

A LOOK ON THE LAW

Making Sense of Healthcare Law Requirements M arch 23rd marked five-years since the Patient Protection and Affordable Care Act (ACA) became law and it has already had a significant impact on how employers offer health insurance coverage to employees. Employers with 50 or more full-time and full-time equivalent (FTE) employees are known as Applicable Large Employers (ALE) and are subject to the controversial Employer Shared Responsibility provision (Employer Mandate). This mandate took effect for employers with 100 or more full-time and FTE employees on January 1, 2015. Employers with 50 to 99 full-time and FTE employees are exempt from compliance until 2016 if they meet certain requirements.

Determining who a full-time employee is for purposes of the Employer Mandate continues to be one of the more challenging aspects of the law, particularly for employers like Dunkin’ Donuts franchise owners who can have high turnover and employees with hours that vary. Employers must correctly identify their full-time employees and offer health insurance coverage to 70 percent of them (in 2015; 95 percent in 2016) and their dependents by no later than the first day of the fourth month of their employment to avoid potential tax penalties ($2,000 times the number of full-time employees, less 80 if one receives a Health Insurance Exchange subsidy). ALEs will also be penalized if their coverage does not meet the affordability and minimum value standards of the ACA, which is $3,000 times the number of fulltime employees receiving an Exchange subsidy, but no more than the potential tax penalties discussed above. Beginning in 2016, employers must also report information about their employees and coverage to the IRS. Employers should prepare now for these reporting requirements as the IRS will use the information provided to enforce the Employer Mandate.

32 INDEPENDENT JOE • APRIL/MAY 2015

The Employer Mandate defines a full-time employee as one who works 30 hours or more per week, calculated on a monthly basis. In general, an employer must use the same tracking method for all employees. Acceptable methods for tracking include counting employees’ hours of service for each month. Alternately, an employer may use the look-back measurement method, which permits employers to select a measurement period of 3-12 months during which the employer tracks employees’ hours. If during the selected measurement period, an employee works 30 hours or more per week, the employer must offer that employee health insurance coverage during a subsequent stability period no shorter than 6 months and at least as long as the initial measurement period. What’s more, the employer must offer coverage to this employee during the stability period regardless of the number of hours the employee works throughout that period. Employers with high staff turnover should be aware that selecting a longer measurement period will not necessarily exclude from coverage a short-term employee who works 30 hours or more. The Employer Mandate requires employers to treat a new employee as a full-time employee if the employer reasonably expects at the time of hire that the employee will work 30 or more hours per week. The employer may not take into account the possibility that the employee may not work for the employer for the entire, initial measurement period. For example, if an employer reasonably expects that a new employee will work 30 hours per week for only four months, the employer must still offer coverage on the first day of the fourth month of employment, even if the employer’s measurement period is 12 months. However, if an employer cannot determine whether a new employee is reasonably expected to work 30 hours or more per week as of his/her start date, this

BY RACHEL E. MUÑOZ, ESQ. employee is a variable hour employee. In this case, the employer is not required to offer coverage until the employer’s stability period. For example, if an employer’s initial measurement period is 12 months, the employer does not have to offer health insurance until 13-14 months after the employee’s date of hire. Employers with a large number of short-term, variable hour employees may want to consider a 12-month measurement period. The longer measurement period for these employees would likely permit employers to save the associated time and expense of covering them on their plans. In addition to informing coverage decisions, tracking employees’ hours will help employers meet the ACA’s reporting obligations. In early 2016, employers must report information about their employees and coverage to their employees and the IRS. There are two types of reporting, one of which helps the government enforce the individual mandate and administer premium credits and subsidies to individuals. The second applies to ALEs subject to the Employer Mandate. ALEs are required to report information about their offer of coverage, insurance plan, the lowest monthly premium cost, and their full-time employees. The IRS will use this information to assess penalties under the Employer Mandate and determine employees’ eligibility for premium subsidies on the Health Insurance Exchanges. Despite recent legal challenges, the ACA is expected to remain the law of the land. The more employers know now, the greater their likelihood of success in navigating its many minefields. All employers offering health insurance should select or update any existing record-keeping systems to track employees’ hours and collect information about their health insurance plans in order to meet the ACA’s reporting requirements. Finally, it is recommended that employers consult with trusted advisors, including their benefits brokers, legal counsel, and accountants to review questions and additional requirements of the law.

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Rachel E. Muñoz is a partner at Morgan, Brown & Joy, LLP. She represents employers in the full range of labor and employment legal services.

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