December 2015/January 2016
Award-Winning Magazine
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Dual Forces Speed and Accuracy Driving Sales at Dunkin’ Drive-Thrus
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SAVING DOLLARS AND MAKING SENSE OF GOING GREEN
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For more information, contact Steve Olson at 734.793.6532 or visit us online at www.pspfranchise.com * This advertisement is not an offer to buy a franchise. An offer to buy a franchise can be made by prospectus only. Item 19 of PSP Franchising, LLC’s 2015 FDD provides that $2,548,565 is the average gross sales achieved by 119 franchised PSP stores during the measurement period beginning 12/29/13 and ending 1/3/15. Your results as a new franchisee may differ. Of the 119 franchised PSP stores, 44 PSP stores, or 37%, exceeded the average annual gross sales. ** APPA reports that in 2014, US consumers spent $58 billion on pets, up from 2010’s spending of $48.35 billion *** Entrepreneur Magazine - Franchise 500® #197 (2015) ©2015 Pet Supplies Plus. All rights reserved. 17197 N. Laurel Park Drive, Suite 402 Livonia, MI 48152
I CR EAT D E MA N E YO U D.
CA S H I N
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A NEW YEAR’S CALL TO ACTION
After enduring weeks of holiday messages and latenight comedians’ jokes about New Year’s resolutions, now is the time people decide just what they will accomplish in 2016. Jokes about losing weight, getting in shape or giving up bad habits can yield some laughs, but they often don’t result in action. Still, it’s important to look at the New Year as time for a new beginning and a renewed dedication. As small business operators, it’s important that you have a voice – an effective and informed voice – which can be heard by those who have the power to impact your bottom line, like governors, senators and representatives. Often times, that voice belongs to a “hired gun,” a lobbyist or other business professional who is familiar with the workings of government and knows how to best position an issue for consideration by elected officials. As one of those hired guns, I know well how the legislative process works and how to effectively influence legislative deliberations. But when push comes to shove, the elected official wants to hear directly from you—their constituents. Over the past year, we have reported regularly on state and local initiatives that can impact your ability to run your business. The issues are as familiar as they are daunting: Increased minimum wage, requirements to pay sick leave to your employees (whether full or parttime), or requiring you to provide a minimum of two weeks’ prior notice before you can change an employee’s schedule without incurring a fine or sanction. In the face of these – and other – initiatives spreading from state to state and coast to coast, it’s clear no single person or entity can stop the tide of regulation from overtaking our businesses. How many times have you read about a harmful new mandate or regulation, and how many times have you chosen to speak to your elected leaders so they can better understand the true impact of their actions? Perhaps this New Year is the right time to consider speaking up. We need many voices resonating throughout the halls of government and articulating, from a first-hand perspective, the negative impact that government
mandates have on small business operators. Over the past few years, government has taken aim at issues that favor the employee over the employer. One reason is that employee groups have spoken with a loud and consistent voice inside committee meetings and rotundas. Lawmakers do not always hear the other side. In some cases that’s because they don’t want to listen; in other cases it’s because no one is speaking loud enough and giving them enough information about laws that crimp business owners’ bottom lines. In the past, it may not have been necessary for individual business men and women to get involved on a regular basis, but because of the extent of government overreach – and the proliferation of anti-business laws and regulations – it’s crucial that more business owners step up and be heard. It’s easy to sit back and hope that someone else will take the initiative to speak up and let politicians know that anti-business regulations are harmful not just to the business owners, but also to their communities which pay the price when employment levels drop and reinvestment dries up in the face of over-regulation. And, it’s optimistic to think that hired guns can, on their own, make the case that business owners need protection from the greedy hand of government. But, if we commit to inform our legislators about our business needs, if we articulate how a particular initiative will impact our ability to create jobs, and if we get involved and provide elected officials our expertise and perspective, then we can better control our own business destiny. So, having flipped the calendar to 2016, what New Year’s resolution will you keep? Will I see you at the gym, at the State House, or still metaphorically sitting on the couch? Ed Shanahan DDIFO Executive Director
INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016 1
SUB HEADLINE
CONTENTS
From the Executive Director: A New Year’s Call to Action • • • • • • • • • • • • • • • • • • 1 What’s Brewing: A Look at State Issues Around the Footprint • • • • • • • • • 5 Building Loyalty DD Perks aims to reward customers and franchisees ������� 8 Saving Dollars and Making Sense of Going Green• • • • • • • • • • • • • • • • • 12
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12 16
Dual Forces Speed and Accuracy Driving Sales at Dunkin’ Drive-Thrus ��� 16 Welcome to Hollywood! NJ franchise owner meets the challenges of SoCal • • • • 20 Franchisee Profile: Jerome Johnson• • • • • • • • • 24 Directory of Sponsors • • • • • • • • • • • • • • • • 28 Legal: Sign At Your Own Risk • • • • • • • • • • • • • • • 32 2 INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016
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Independent The Magazine for DD Independent Franchise Owners
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December 2015/January 2016 Issue #35 Independent Joe® is published by DD Independent Franchise Owners, Inc. Editors: Edwin Shanahan, Matt Ellis Contributors: Karen Abrams, Cheryl Alkon, Cathy Cassata, Mike Hoban, Lisa Iannucci, Scott Van Voorhis Business Member Coordinator: Joan Gould Creative Director: Caroline Cohen Direct all inquiries to: DDIFO, Inc. 2 First Avenue, Suite 127 – 3, 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 © 2015 Printed in the U.S.A.
4 INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016
WHAT’S BREWING A LOOK AT STATE ISSUES
AROUND THE FOOTPRINT By Scott Van Voorhis
T
here is never a dull moment these days in the quick service restaurant industry, which has become a target of everyone from labor unions to the self-appointed food and diet police. The latest crusade by activists promises to be a doozy, with New York City having just rolled out a new labeling system forcing restaurants to post a salt shaker on menu items deemed to have an overabundance of sodium. Will we soon see sodium labeling protests pop up in cities across the country? It depends, but it is certainly a possibility.
principal of Pacific Management Consulting Group, of the new overtime rules.
Federal labor regulators have also been busy this fall, with a new proposal that could make managers eligible for overtime. That could push up payroll costs and force franchise owners to make some tough choices on how they pay their top employees. And of course, the debate over the minimum wage continues to rage, playing itself out one city, one state at a time and with legislators in some cases singling out the quick service industry for mandated pay hikes.
The move has raised the hackles of the National Restaurant Association, which has filed suit against the source of the controversial new rule, the NYC Board of Health. It’s not the first time the NRA has clashed with New York health officials. The association took the health board to court in 2014 and overturned a ban on the serving of sugary drinks larger than 16 ounces in restaurants, better known as the “soda ban.” The restaurant association argued the ban held eateries to a different and unfair standard compared to convenience stores and supermarkets.
“It is a material item that will impact everybody,” notes to DDIFO Restaurant Analyst John A. Gordon, the founder and
“Once again, the board has acted without any legislative guidance and improperly sidestepped the people’s representatives
Sodium, the new bad guy On Dec, 2, the new sodium labeling rule took effect in New York City for restaurant chains with 15 or more locations in the city. If an item on the menu has more than 2,300 milligrams of salt, restaurants are required to post the symbol of a salt shaker inside a triangle.
on the City Council,” Angelo Amador, the Association’s regulatory counsel, said in a press release. “Its actions, as with the beverage ban before it, are arbitrary in their scope, reach and application.” The NRA contends New York is undermining new calorie labeling rules ordered up by the federal government as part of Obamacare, which is set to finally take effect next year. One of the big concerns of the restaurant association is that New York’s action could result in a crazy quilt of different labeling requirements being stitched across the country, with every city, town and suburb deciding what disclosures should be put on local menus. “The Board of Health is using exclusions and loopholes to undo that uniformity on a local level and has acted outside of its scope,” Joan McGlockton, the NRA’s vice president of food policy and industry relations, said in a statement. Whether sodium labeling makes the jump beyond New York City remains to be seen, with the NRA’s legal challenge obviously a key factor. The NRA is pushing for a ruling before Feb. 1, when New York will start levying $200 fines against chain
INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016 5
WHAT’S BREWING
restaurants that refuse to label the saltier items on their menu. Gordon says he’s unsure whether the sodium disclosure is simply a New York thing or might have the potential to become a national trend. But with new calorie labeling rules still pending, it would seem to be putting the cart before the horse, he says. The Obamacare requirements for calorie labeling are set to finally take effect in December, 2016. “Frankly, we haven’t fully implemented menu labeling yet - the country has to get through that,” says Gordon. Managers to get overtime pay Managers have long been exempt from getting overtime pay – that’s typically reserved for hourly workers. But the U.S. Department of Labor is now hammering out rules, set to go into effect next summer, which would turn that time-honored rule on its head.
The proposal would eliminate the current “duties test” that helps determine whether an employee is a manager, supervisor or simply a glorified line worker. Instead, under the new rules, the dividing line between an employee who has to be paid overtime and a manager who doesn’t will be determined by weekly and annual pay. Employees making under $970 a week – or $50,440 a year – would get overtime, while those making above that mark would be exempt. Bottom line: the proposal nearly doubles the current limit of $23,660 that’s been used to determine eligibility. The new overtime rules, which had been expected to take effect this year, are now likely to go live next summer or fall. “Employers are well advised to immediately assess the potential impact on their annual budgeting processes and evaluate how to best align their workforces to comply with the regulation,” DLA Piper attorneys Erik Wulff and Nicole Smith write in an advisory. DLA Piper advises franchise owners to
tally those positions that are currently exempt from overtime but which would lose their exemption after the new rules go into action. For those employees who are likely to lose their exemption, franchise owners should consider giving them raises to push them over the $50,400 threshold, the law firm contends. And franchise owners should also brace themselves for the possibility of even more litigation on the labor front, with the likelihood of additional federal and state investigations as well, according to DLA Piper. However, the last thing franchise owners need to do is panic. Gordon suggests thinking carefully before simply raising everyone's pay level in order to prevent overtime. He says a careful cost benefit analysis is needed first. “Just don’t automatically react – it might be OK to pay a few hours of overtime,” Gordon says. “People have been afraid of overtime for decades now. We need to be smarter about it.”
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Minimum wage rolls on Just how far will the minimum wage campaign go?
“ When labor gets more expensive, you can’t be inefficient with your labor practices.”
It certainly appears tough right now for those opposing efforts to raise the minimum wage, with cities and states across the country ordering up higher wages and, in the case of New York State, specifically singling out the quick service restaurant industry.
of Dunkin’ Brands, has offered mixed signals on the issue. In an interview with FOX Business Network’s Stuart Varney, Travis said he would prefer to see the debate kept at the state level rather than elevated to a federal issue.
Seattle’s minimum wage will jump 18 percent in January, to $13 an hour, a change that will cover most workers in the city’s quick-service restaurant industry. The latest is a proposal in Delaware that would boost the minimum wage in that state to $16 an hour by 2023. California remains the leading hotbed, though, with the state home to 15 of the 30 cities across the country that has voted to boost the minimum, according to the UC Berkeley Labor Center. For his part, Nigel Travis, chief executive
“We fully support a state-by-state basis because every state has different economics, but we remain very focused on improving our franchisees’ economics,” Travis told the Fox Business radio host. As far as the minimum wage itself goes, Travis said, “We fully support and encourage discussions about the minimum wage, particularly in periods of high employment as we have now.” New Year, new challenges One thing is clear: 2016 is sure to bring new challenges for Dunkin’ franchise owners across the country. Aside from the issues covered here, activists continue
pushing everything from GMO labelling to Styrofoam bans to additional mandatory sodium labeling. Gordon, DDIFO’s restaurant analyst, says in order to stay ahead of the cost curve, franchise owners need to begin planning for how to deal with the growing reality of higher labor costs. He dismisses predictions that franchise owners will be forced to make big job cuts, noting that turnover is high enough in the industry that laying off employees makes little sense. Rather, franchise owners will have to look at being “more judicious” about doling out hours, steering them to their better employees. “Restaurants have to be able to take the labor costs out of the structure,” Gordon says. “When labor gets more expensive, you can’t be inefficient with your labor practices.”
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Learn more at watchfiresigns.com/donuts
INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016 7
Building Loyalty DD Perks aims to reward customers and franchisees By Lisa Iannucci
E
very week, Gina Zaubi Mann and her son Jon root extra hard for both of New York’s professional football teams. Unlike many New Yorkers, their allegiance to “Big Blue” or “Gang Green” has little to do with where they grew up or what teams their parents rooted for. For them, they will cheer both clubs onto victory because a win means Gina and Jon will receive a medium coffee for only 25 cents through the DD Perks program. “Jon gets a lot of mileage with his DD Perks,” says his mom. “He also builds points to get free drinks and was rewarded on his birthday and when he registered.” This is exactly what franchise owner Ann Nasary wants from her customers. DD Perks, she says, is vital to keeping her doors open. “When you walk around New York City there is so much competition that could pull customers away. Our aim is to please the regular customers because they are the ones who are paying the bills.” According to Dunkin’ Brands, the DD Perks program had more than three million members enrolled as of June, 2015. The program launched two years ago but added its “New York Wins, Quarterback Score” promotion in ’15. It allows DD Perks members in the Metro New York area to receive a medium hot or iced coffee for just a quarter on the day following a New York Giants or New York Jets victory. Dunkin’s loyalty programs vary from market to market. Aside from New York’s football teams, DD Perks rewards patrons when the New England Patriots, Philadelphia Eagles, Arizona Cardinals and Cincinnati Bengals win. The program
extends to college football as well in markets like Miami and Omaha, Neb. There is even a promotion in the Nashville market for when the NHL’s Predators win. In some cases the perk is a reduced price beverage (coffee for a quarter in New York); in markets like Boston, the medium coffee is free after the local team wins. Dunkin’ Brands routinely points to the strength of its DD Perks program as a factor in the brands’ strong sales story. Consumers love loyalty programs, according to the research firm COLLOQUY, total loyalty program subscriptions jumped from at 2.65 billion in 2012 to 3.3 billion in 2014. And, while the research firm says “many programs lack clarity and ignore – or simply fail to discover – what customers truly value,” that does not appear to be
8 INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016
the case with Dunkin’. Because the brand has such a loyal following – particularly in its well-established markets – customers are thrilled to get a deal on a cup of coffee they are probably going to purchase anyway, especially when it comes after a victory by their local sports team. Consider this online post from Bevin Branlandingham of Brooklyn, who wrote about her DD Perks experience and the Quarterback promotion on her website, “I have found myself Googling sports scores, finding out when games are and generally wishing a team I otherwise care nothing
about, good luck. The Jets and the Giants have had a really great season so far, based on the number of 25 cent medium coffees I’ve received. Thanks dudes!”
Conyngham of the Bronx says she loves the perks. “You get good deals and I drink so much coffee that I earn a free medium beverage almost once a week.”
According to Patrick Kaufmann, Boston University professor of marketing and an Everett W. Lord Distinguished Faculty Scholar, loyalty programs can be very effective if done properly, especially when customers come in to redeem one reward and it leads to the purchase of other items. “Anything that creates stickiness with the customers is a good thing,” says Kaufmann, who is also a member of the DDIFO Board of Directors. “You want to keep your customers from going down the street. It costs more to obtain a new customer than it does to retain an old one, so it’s an efficient marketing strategy if it maintains that customer.”
Bill Dyszel of New York City, a regular Dunkin’ Donuts customer, says he hadn’t paid much attention to the DD Perks program until he heard about the Quarterback Score promotion. “I go to Dunkin’ Donuts when I’m in too much of a hurry to make coffee myself or want a quick breakfast sandwich, but I don’t stay around long enough to look at the perks.” But, now, he says he is “intrigued.”
An informal survey of some metro New York City customers finds the DD Perks program does build loyalty. Andrea
Dunkin’ jumped into the loyalty program game four years after Starbucks, which boasts 10.4 million loyalty card members. “When we launched the DD Perks program, we started to target our guests with valuable offers right away to drive incremental spend and visits,” Scott Hudler, Dunkin’ Brands’ Vice President of Global Consumer Engagement, told Colloquy’s
magazine, Loyalty Talks. “This targeting will become more refined as we continue to learn more about how each guest is behaving as members within DD Perks. The DD Perks program will continue to be an important driver of long-term growth for our brand.” And, at a time when Dunkin’ is opening new stores at a steady pace – 405 new restaurants opened in 2014 following the opening of 371 in 2013 – creating loyalty among customers in emerging markets through adoption of the DD Perks program can increase the data the company receives about its growing customer base, while also helping boost sales. Loyalty programs are not only just about the reward, but they are also about making the entire shopping experience easier and more enjoyable. Combining a mobile app with the rewards creates an experience for the customer that hopefully keeps them coming in the door for years.
INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016 9
DDPERKS “You need to use anything you can to create that customer’s commitment to your brand,” Boston University’s Kaufmann says. At a time when more brands are competing for customers’ loyalty, Kaufmann says nurturing the relationship between brand and consumer is more important than ever. “It enhances the customer’s appreciation for the brand or what the brand means to that customer. Anything you can do to enhance [the relationship] is important.” And, while DD Perks is an important piece of the story Dunkin’ Brands tells to Wall Street, one New York franchisee we spoke with says customers who come in just to redeem their rewards (especially after a Jets or Giants win) do not necessarily benefit the bottom line. “We have a lot of guests who should be rewarded and the loyalty rewards program brings in a few new customers, but it floods the rewards,” says Yuwen Chen, a multiple franchise owner in the Hudson Valley north of NYC. “So if the customers
are getting one every time they come into the store, it is not a treat, it becomes an expectation now and it loses the effect.” Chen believes coupons, in addition to loyalty rewards, encourage visitors to make larger purchases. “It would be more strategic with the amount of rewards and not overlap them. Customers try to piggyback off of them and want to combine them,” he says. In Brooklyn, Nasary dismisses that
10 INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016
concern. "It’s really only one out of ten customers who will combine the loyalty rewards and the coupons, but our aim is to please the customers since they are the ones who are paying the bills.” Still there is one important change she would like to see the brand consider: “The reward doesn’t always have to be coffee,” she says. “It could be for a croissant or a bagel or items that aren’t really selling as well and might get customers interested in them.”
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WE SERVE IT LIKE YOU SERVE IT Financing that’s quick, easy and convenient “The best part about working with Direct Capital is that I literally didn’t have to worry about anything. I would absolutely use Direct Capital again in the future.” – Adam Goldman, Dunkin’ Donuts Franchisee
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Saving Dollars and Making Sense of G
Going Green
By Matt Ellis
reen Elite is still a relatively new term for Dunkin’ Donuts. When Dunkin’ Brands launched its Green Initiative in late 2014, it identified two levels of green achievement. Green Elite is the top tier, “where stores reach beyond requirements, and achieve additional suggested sustainable goals,” a press release stated. While it may not be the first topic to come up at a RAC or DAC meeting, the idea of transitioning existing Dunkin’ shops into more sustainable and environmentally friendly ones is starting to be viewed as a responsible, viable and – in some cases – cost neutral proposition within the franchisee community. To achieve DD Green status, a franchisee must incorporate a number of sustainable practices and/or products into the restaurant’s design and construction. There are five categories: Site development, store efficiency, healthy indoors, sustainable operations, and innovation and Community. Strategies for each are scored according to a Dunkin’ audit. A Dunkin’ Donuts restaurant that receives 12 points earns DD Green status; if it receives 20, the shop earns Green Elite status.
The latest Green Elite Dunkin’ shop to open is situated in an east coast community that has long been known as a spark of innovation. West Orange, New Jersey is where Thomas Alva Edison had his laboratories and his family home. Today, the Thomas Edison National Historical Park welcomes visitors to the place “where modern America was invented.” It is also the childhood home of Adam Goldman, who operates a network of five Dunkin’ Donuts shops. Three years ago, Goldman bought an existing Dunkin’ Donuts across from the South Mountain Recreation Complex, which features the Turtle Back Zoo, an ice rink and a mini-golf course. He loved the general location, but not the exact spot on which the shop was situated. “There was limited space and not enough parking and no drivethru,” says Goldman. So, when the chance came up to move down the block, Goldman grabbed the opportunity and decided it would be worth building a sustainable shop that would qualify as DD Green. He also chose Dunkin’s new Jazz Brew store design—a more sophisticated and expensive motif intended to
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create a cozy and comfortable ambiance for guests who choose to enjoy their beverages and snacks while surfing the Web and listening to soft jazz music. “I began working with my architect, who is LEED certified,” Goldman says referring to the U.S. Green Building Council’s designation for Leadership in Energy and Environmental Design. “We began investigating the options for sustainability, while reviewing Dunkin’ Brands’ Green Achievement program.”
Charting the green course
Goldman credits his Dunkin’ Brands construction manager, Tony Foranello, for identifying sustainable practices and products that would work for the West Orange shop and help Goldman achieve Green Elite status. “One of the ways we satisfied the local planning board, which
" IT’S THE RIGHT TIME AND THE RIGHT PLACE FOR THIS. IT’S A GOOD BALANCE BETWEEN WHAT’S GOOD FOR THE ENVIRONMENT AND WHAT’S GOOD FOR BUSINESS." had to approve our move, was to demonstrate how the new shop would not only satisfy Dunkin’ Brands’ checklist, but also the township’s goals of making its businesses more sustainable,” Goldman says. With Foranello’s guidance, Goldman identified the sustainable elements he wanted for his new shop, keeping in mind that Dunkin’ Brands called for products and practices that would help improve the energy efficiency and sustainability of a Dunkin’ restaurant. “We looked for items with fastest ROI and the best impact,” says Goldman. “We wanted to determine how to use the money we were investing for a much better return.” Inside Goldman’s new shop the kitchen hoods are outfitted with an automatic temperature control system; low-flow faucets and other water-saving fixtures help control water use. There are LED lights and high-efficiency HVAC units to reduce energy use. Outside he established an outdoor garden with indigenous plantings watered with a drip irrigation system. These elements helped Goldman achieve the 12 points needed for DD Green status. To take the project over the top, Goldman installed three sustainable components he believes establishes his new shop as a model Green Elite franchise. They are: an aerobic digester, a charging station for electric vehicles and a sustainable electric fireplace which uses water and lights to give a warming effect. When it was all tallied, the new West Orange Jazz Brew drivethru had received 29 points.
A “cost-neutral” approach to waste
Measuring 48 inches by 30 inches, the Eco-Safe Digester eliminates food waste by utilizing mechanical and biological treatments to convert food waste into greywater which can be flushed into a municipal sewage system. Virtually all food waste goes into the digester including coffee grinds, reducing the amount of trash that employees have to bag and bring outside to a dumpster. The Eco-Safe can handle up to 2400 pounds of waste per day. “There is less garbage and what remains is a lot lighter for the crew to carry out,” Goldman says. “Plus, it means I don’t have to have the dumpster emptied as often which reduces my costs as well as the amount of solid waste we put into the landfill.” Frank E. Celli, CEO of BioHitech America, which makes a full line of digesters including the Eco-Safe model, says Dunkin’ Brands piloted the product in Massachusetts before another New Jersey franchisee – Bill Mulholland – became the first to use it in a live restaurant. According to Celli, Mulholland realized a 60 percent drop in waste fees. “Our experience with [Dunkin’ Brands] and the franchisees we have dealt with thus far has been a positive one and we look forward to working with additional franchisees to help with their sustainability efforts,” says Celli. “As more regulations are passed throughout the U.S., our Eco-Safe Digester will provide a way for store owners to become compliant without it costing them significantly more money than what is already being spent on waste and janitorial services.” Goldman calls the Eco-Digester “cost neutral.”
INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016 13
DUNKIN'S GOING GREEN Charge your batteries at Dunkin’
DD Green Achievement is made up of five stages. The final of those is known as “Innovation and Community.” According to Dunkin’ Brands, that stage “is about advancing sustainability goals by installing renewable energy or electric vehicle charging stations, or by coming up with a whole new sustainable innovation.” In West Orange, which is home to many affluent people and is a bedroom community to New York City, electric vehicles are catching on. Goldman says his community’s interest in alternative vehicles prompted him to include a charging station at his new Dunkin’ Donuts.” “I am hoping that there will be a growing need for vehicle charging stations in the future,” West Orange Mayor Robert Parisi says. “This location on the heavily trafficked Northfield Avenue is certainly a convenient location for owners of electric cars.” A Dunkin’ Donuts is a great place for electric car owners to come in and charge their batteries. Customers can enjoy a cup of coffee and browse their mobile phones or tablets while they wait 30 minutes for their cars to charge. Mayor Parisi says he anticipates more business owners will follow Goldman’s lead and add charging stations to their properties.
Sustainable ambiance
One of the ways restaurants create ambience is with a fireplace. Most restaurants opt for gas fireplaces, but they give off heat.
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That was the dilemma Goldman faced when he envisioned a fireplace jazzing up his new Jazz Brew environment. “We wanted to warm the atmosphere without affecting the environment,” says Goldman. “The solution was this Canadian company that uses water vapor to create a mist and LED lights to illuminate the mist so it looks like a flame. It gives off no heat and creates no pollution.” The Opti-myst 1000 by Dimplex gives the appearance of an open flame but is safe to the touch. And, it is designed with sustainability in mind. Heather Sakai, a representative with Dimplex says the product is “One hundred percent efficient and, unlike its gas and wood competition, will not generate carbon monoxide nor does it release airborne particles.” Goldman cleared the Opti-myst fireplace with Dunkin’ Brands ahead of time to be sure it was tasteful and met brand standards. This was the first Dunkin’ shop to install the fireplace. Sakai says the company had not targeted Dunkin’ or the QSR segment but, “We do our best to present our products to the hospitality industry when the design concept focus is to create warm and inviting spaces.”
A green impression
The West Orange Dunkin’ Donuts Green Elite store opened right
after Thanksgiving. As a franchisee whose brief Dunkin’ career has been entirely in the county where he – and his wife – grew up, Goldman has had the chance to forge a more personal connection between his business and his community. Like a proud papa, he posts regularly on Facebook about the new shop, discussing its many green benefits. “The community loves that we are green. We’ll get 2500 views for a Facebook post within two hours. People here are loyal to
MAGNA INDUSTRIES
Dunkin’ Donuts,” he says. Going green and earning “elite” status has helped Goldman give back to his community and he’s confident it will help him significantly lower his expenses while lowering his environmental footprint. “It’s the right time and the right place for this. It’s a good balance between what’s good for the environment and what’s good for business,” Goldman says.
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1825 Swarthmore Avenue, Lakewood, NJ 08701 Toll Free 1.800.510.9856 Office 732.905.0957 Fax 732.367.2989 www.magnaindustries.com sales@magnaindustries.com
INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016 15
Dual Forces Speed and Accuracy Driving Sales at Dunkin’ Drive-Thrus By Cheryl Alkon
16 INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016
Y
ou learn a lot about drive-thrus after two dozen years as a Dunkin’ Donuts employee and franchise owner. For Monica Enright, operating partner of RCJFPA Management, Inc., owners of five Dunkin’ Donuts franchises in WilkesBarre and Scranton, Pennsylvania, making the most of your drive-thru means giving it the attention it truly deserves. “At the end of the day, the drive-thru is a second business,” she says. “It’s another way to reach more people. If you can do it, you should do it.” The drive-thru business accounts for about 60 percent of RCJFPA’s sales, which is about on par with what most franchisees report, according to DDIFO Restaurant Analyst John A. Gordon, the founder and principal of Pacific Management Consulting Group. His data shows that the drive-thru sales mix is 60 percent or more of total store sales. “Restaurants with drive-thrus bring in, at a minimum, twice the average sales volume than those that don’t,” Gordon says. In its 2015 Drive-Thru Performance Study, QSR Magazine reported some restaurant chains are now reporting drive-thru comp sales exceeding dining room comp sales. Dunkin’ franchisees know why. Drive-thrus are convenient for guests, particularly in bad weather, plus customers have an expectation – based on past history – that they can generally get through the drive-thru
pretty quickly and get on their way. Gordon and QSR Magazine make the point, however, that speed isn’t enough to keep them coming back. Orders must be accurate.
Strategies for Success For its 2015 Performance Study, QSR commissioned 1882 mystery shopper visits to 890 restaurants representing 29 chains, and what they found was that accuracy had increased or stayed about the same across all dayparts. At Enright’s Dunkin’ shops, like so many others, drive-thru efficiency comes from effectively training the staff. It sounds straightforward enough, until you consider all the variables. There is employee turnover, which can make franchisees feel like they are always going back to square one with basic training. Then there is the constant evolution of technology, which requires specific training. And, there is the influx of new products as part of the growing product mix. “I feel we are always in training,” says Enright. “It takes about 3-4 weeks for a new worker to feel confident to work at the drive-thru. And, you always need to have a senior person there.” Successful franchisees say managing the drive-thru as its own entity can really improve customer satisfaction. “It’s almost like having two businesses in one,” says Danny Costa, the managing partner of MDM Management Group, LLC, based in Acton,
INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016 17
DRIVE-THRUS Massachusetts. MDM Management Group operates 43 Dunkin’ franchises in Maine, Massachusetts and Pennsylvania. “There’s a team who manages the front counter and a team who manages the drive-thru. We typically have one or two managers in a store, and they have different skill sets to help with set up and staff deployment. It’s important to make sure people are in their places and have the ability to do their jobs.” They also need supplies stocked and at their fingertips. “The layout of basic items, like having lids and cups in a certain place, really speeds up the entire process,” Costa says. “Everything needs to be well-thought out and efficient. It really affects the speed of service.” Franchisees need proper systems in place to ensure compliance with the 150-seconds-or-less drive-thru time Dunkin’ sets as a goal for operators. Turning around an order in that timeframe can be a piece of cake when the customer wants two medium regulars; it’s a different challenge when the customer orders a Coolatta, an Iced Macchiato, two bakery sandwiches and hash browns—or a dozen donuts. Many operators offer an “Express Dozen” of predetermined – and popular – donut types to speed up the process of delivering a dozen through the drive-thru. Costa has one more piece of advice: “Make sure your friendliest
18 INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016
person is the one greeting people at the speaker, and your best coffee maker is making coffee. A lot of those things add up to seconds and seconds add up to satisfaction on the customer side.”
Thinking Outside the Box What happens outside the store is important for faster drive-thru sales, too, according to Gordon. Improving sound and clarity in the intercom speakers, known as squawk boxes, is key. You want to be sure that your employees and customers are able to communicate clearly. To that end, he says, Starbucks is placing video screens in 2,400 drive-thru lanes across the country over the next year. Drivers will see the employee, along with images of items ordered and costs. The goal, he says, is to eliminate the impersonal feeling of ordering into a box. The chain wants to see if it can also improve accuracy. Some chains are now using wirelessly connected tablets in the hands of employees to take orders directly from the customers as they wait in the line. According to Gordon, operators like it because, “An order-taker can punch requests into a laptop-like device, which is transmitted into the store. If there’s a long line in the chute, this helps speed things up and a driver doesn’t have to stop and speak into a squawk box.”
It’s In the Bag Another consideration for fast and efficient drive-thru service is
packaging. And here Gordon says, Dunkin’ excels. “You want to have packaging that travels well,” he says. “You’re putting food and drinks into the customer’s hand. The cups can’t spill. They need to be thick enough so that people aren’t burned by them, and the bag and wrapper need to be of sufficient quality.” If a guest is buying a bagful of breakfast sandwiches, the food needs to have some chance of staying hot until the driver gets to his or her destination, he adds. At the same time, customers need to be confident the order was done right before they drive off. To help ensure accuracy McDonald’s is implementing a program called “Ask, ask, tell,” where employees must twice confirm a customer’s order: once at the intercom, again at the window before payment, and then again when the paper bag is handed to the driver. Paper bags are also kept open – instead of folded shut – so the customer can look inside quickly to confirm the order is correct. According to a November 2015 article in Bloomberg, drive-thru order accuracy has increased by 2-3 percentage points since the program was tested at McDonald’s restaurants last summer. With new advances in technology and procedures coming to drive-thrus across the country, Dunkin franchisees – and other quick service restaurant operators – will have greater choices for how to ensure speedy, friendly and accurate service for their customers.
•
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INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016 19
NJ franchise owner meets the challenges of SoCal By Cathy Cassata
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his time it’s different. When Dunkin’ Donuts’ pushed into California in the 1980s, people weren’t sleeping outside their shops to be first in line for the grand opening. Thirty years ago, coffee wasn’t as trendy as it is today; people brewed their coffee and drank it at home. It was hard to find a drive-thru to hit on the way to work. When Dunkin’s iconic pink and orange logo landed in southern California, it screamed “Donuts.” But, the donut market was pretty competitive and Dunkin’s west coast initiative lasted a decade before it ended in retreat. It was a different time and Dunkin’ had a different approach. California 2.0, if you will, reflects better planning, as well as a better understanding of the market and the competition. Logistics are better because of the NDCP’s Arizona facility and the franchisees who are developing California this time – along with the Brand – are more sophisticated and experienced than their big-hair, 80’s predecessors.
20 INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016
There are approximately 20 Dunkin’s open for business in California. But, you know that Dunkin’ has truly arrived now that it’s in Hollywood. The shop near Tinseltown’s famous Hollywood & Vine intersection is part of Gary Haar’s network. A New Jersey guy, Haar is working diligently to overcome the inherent challenges in a place like LA.
Why L.A.?
To understand why a kid who grew up in New York’s shadow, in the land Bruce Springsteen sings about, would fall in love with the sprawling city that is Los Angeles, you have to go back to the 1970s. Haar was a teenager on a seven-week tour of Israel with a synagogue youth group. While the trip itself was memorable, Haar says a big takeaway was the connection he made with other teenagers on the tour. “Half the teens on the tour were from LA, and I became lifelong friends with one of them. I went to visit him and his family many times, and began to gain an affinity for the city.” He says that affinity continued into his adulthood.
Right out of college, Haar used his bachelor’s degree in finance and worked for his family’s food service distribution business. After a few years, he bought a similar business in Connecticut. Haar wanted to be his own boss, but his timing wasn’t right. The business struggled and he was ready for a reboot. “After that business failed, I didn’t want employees or customers, anymore so I tried day trading. I wasn’t very good at it though, and it didn’t go so well,” he says. Haar spotted a Dunkin’ Donuts ad in the Wall Street Journal and The New York Times. “They were offering franchise opportunities in the New York metro area. Dunkin’ was a product I liked and bought, so I applied,” he says. Haar and Dunkin’ signed their development deal in 2003. His first store was in Wyckoff, NJ—20 miles west of New York City. It was five minutes from where he grew up. Haar was successful and kept adding stores. Today, he runs eight Dunkin’ Donuts restaurants in New Jersey and he knows what all other operators in the heavily penetrated Northeast know: it’s hard to find opportunities to expand in your current footprint. Haar knew he had to consider another market. “I was familiar with [LA] from visiting it so much. Before Dunkin’ opened the territory, my wife and I would drive around LA and I’d point out which spots I think would be great for a Dunkin’ Donuts,” he remembers. So, when Dunkin’ made development territories in California available in 2013, Haar set his sights on LA. Haar applied for, and the brand awarded him, a store development agreement to open 10 stores on the west side of LA over eight years. He was thrilled. “There isn’t really another territory that I would have gone to outside of New Jersey. I didn’t want to go to Arkansas, Atlanta or Detroit. Instead of Florida, as me and my wife get older, we see ourselves spending more time in California. The weather is great, and we can be right by the ocean. Can’t beat that,” he says. Haar opened his first store in 2014 in Santa Monica; it was no ordinary event. “People slept in front of the store before the opening and there was a three-hour wait for people to get in the store for coffee and donuts,” he says. “We were on local stations and picked up by other local stations across the country." As he remembers it, his very first customer waited 30 hours outside to get in. Dunkin gave him free coffee for a year, and gave
the next 99 customers swag bags. “I was shocked at how the hype continued for about three months. It’s is still one of my better stores,” Haar says. His next store opened in August, 2015 in Culver City. Haar rolled out a pink carpet for customers to stand on as they waited in line for the much anticipated Santa Monica (SaMo) grand opening. This restaurant also achieved DD Green status, which endeared it to the largely liberal beachfront community. (Editor’s note: You can read more about DD Green and the latest Green Elite Dunkin’ shop on p. 12). Haar’s newest store is at the heart of Hollywood, in a new mixeduse development right along Hollywood Blvd. near the famed Pantages Theater called Eastown, which will offer 535 apartments, 75,000 square feet of retail. Given its location, it seems plausible that paparazzi photos capturing celebrities in their PJs
INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016 21
HOLLYWOOD with Dunkin’ coffee in hand may soon appear on social media.
Overcoming L.A. Challenges
There’s no denying that when Haar decided to break into the competitive landscape of America's second largest city, he knew he’d face big challenges. Some are the same ones Dunkin’ faced in the 80’s: limited brand awareness, a shortage of prime real estate and competition from mom-and-pop Cambodian donut stores that have dotted the Southern California area for decades. Today, though, you also have to battle other big coffee brands. “Dunkin’ is late to the game in California and a market the size of L.A. has been well-developed by a lot of competitors like Starbucks, Coffee Bean and Tea Leaf,” says Haar, who points out there are 100 Starbucks in his territory alone. “Even so, Starbucks is still looking for new sites so they’re competing for the same sites I am, and there are other coffee shops, as well as other QSRs competing for those sites too,” he says. Then there is issue of drive-thrus. Haar’s LA stores don’t have them. “All the good drive-thru locations in my territory are pretty much occupied,” he says. “It’s not like there are empty corners anymore to put a drive thru on. There’s a McDonald’s or Jack in the Box or In-N-Out Burger on great corners that we’ll never get.”
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22 INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016
That means finding good locations in busy strip centers and on pedestrian dense city blocks–like the location in Hollywood– and hoping the stores can reach a sufficient revenue platform without the additional money drive-thrus bring. (Editor’s note: Turn to p. 16 to see our article about drive-thru success stories.) Building a new Dunkin’ Donuts in Southern California also involves educating the city’s municipal inspectors. Haar says this has been a time-consuming enterprise, “Because they're not familiar with our equipment and product lines so they need to learn about them to make sure what we have designed for our stores is in line with their codes. There’s a lot more back and forth.” And, there’s Haar’s own learning curve to understand the operational differences between New Jersey and Southern California. “For instance, the stores [in LA] need to be earthquake resistant, and we have to get earthquake insurance, which you don’t have to get elsewhere. These are additional costs to operate that I don’t have in New Jersey. They’re not insignificant, but they’re also not going to change the equation of whether a store is going to be profitable or not.” Haar considers wage issues in the same regard. As the calendar turns to 2016, California’s minimum wage increase to $10.00 an hour, compared to $8.38 in New Jersey. California also requires paid time off; every employee who works at least 30 days in a year is entitled to three paid sick days. Haar views these as regular costs of doing business. “If you believe you can do business, then these issues are generally manageable. Even though minimum wage is lower in New Jersey, it’s not like I’m paying significantly less for employees. If I only paid the minimum wage to my New Jersey employees, I wouldn’t be able to staff the stores.” But there is one challenge Haar believes will take some time to overcome, and that’s SoCal’s unfamiliarity with Dunkin’
Donuts—and not just from the consumer perspective. “In New Jersey, most people I hire have some knowledge of the brand. However, when we first opened our store in Santa Monica, not only did we have to train customers on our products, there was no employee population that had any real experience with Dunkin’,” he says. Yes there are earthquake threats – a recent study showed a fault
line close to Haar’s Hollywood location – and high operations costs. Yes, he is learning what it’s like to be a smaller player in a giant coffee and snack business, but LA is a place where the sun always shines and dreams come true. “It’s where I want to grow my business, and both my wife and I enjoy having an apartment here,” he says. “I don’t have plans to branch out to other states. Unless someone comes to me with an offer I can’t refuse, New Jersey and California are it.”
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INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016 23
G n i n i a r T y r a t Mili Makes this Colonel an Effective Dunkin’ Operator By Mike Hoban
T
he transition from serving his country to operating a string of successful Dunkin’ Donuts franchises in the Washington D.C. area may seem like a radical change for retired Army Lieutenant Colonel Jerome Johnson, but apparently it was less of an adjustment than one might imagine. Johnson, who retired from active duty after a 22-year career, says that from an operational standpoint, the two careers have a lot in common. “Dunkin’ wants you to plug into their system, and do what the system needs you to do. In the military, it’s the same thing – you plug into that organization’s system and just run within the organization,” Johnson says. “We’re used to working with guidance from above and we’re used to understanding the regulations and working within those confines. For someone who has run their own business before, plugging into a franchise is probably going to be a very different experience, because all of a sudden you’ve got someone telling you what to do.” In 2001, Colonel Johnson and his wife Brenda (a retired Army Major) were working as government contractors for the Pentagon
24 INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016
when they began investigating franchise opportunities. They looked into other franchises available in the Washington, DC area, including IHOP and Quiznos, then met with a Dunkin’ Donuts representative who indicated the brand was close to opening a shop in the Pentagon. “I worked at the Pentagon, so I knew exactly where they were going to put the store, and I knew exactly what they had,” Colonel Johnson recalls. “The Pentagon is like a little city. About 25,000 people come to work there every day and there’s also about 10,000-15,000 visitors every day. It’s got its own hospital and police and fire departments, so that’s a lot of people. I knew about the Dunkin’ brand, but the location was the big driver. If you’re talking coffee in the Pentagon, you can’t miss.” Colonel Johnson was still working as an Army contractor at the time and was being well compensated, so his initial plan was to keep his job and enlist the help of his son (Jerome R. Johnson) to run the stores. He visited his son at Virginia Union University in Richmond, where he was working toward a business degree, and told him of the opportunity. His son decided to first check
with his professors about leaving college to work with his father, and was told, “You can always go back to school and finish your education, but these doors may not open again,” Jerome says. So he left school to go into the business with his father (and later returned to his studies and graduated from the University of Phoenix) and is now the COO. As for the elder Johnson, he “opened his first store and hasn’t been back (to his Army contracting job) since.” For the first four months of the new venture, Colonel Johnson and Jerome traveled back and forth to Boston for training, and were all set to open their first store in the Pentagon – located in a prime spot at the top of the escalator in the building’s Metro train station stop – in January of 2003. “We were getting ready to open up, everything was going great, but then my baker quits on the very first night,” laughs the Colonel. “So for the first three or four weeks, all of the baking was being done by me and my son.” “That’s how we found out that the body doesn’t need that much sleep,” Jerome adds. “Because after that happened, we were up in the morning serving customers and at night we were making
the donuts. But by getting that hands on experience, it definitely helped us prepare for the future.” They survived that trial by fire, and opened a second Pentagon location in April of the same year. Since then, five more stores have been added, with a sixth slated to open at the end of 2015. Five of the eight stores are located in government buildings (four in Department of Defense buildings and one in a HUD building), including the latest location in the newly constructed Mark Center Building (DoD) in Alexandria, VA. Colonel Johnson acknowledges that there are unique challenges to operating the stores in the government buildings (such as more stringent background checks on all employees), but the benefits far outweigh the negatives. “With the government buildings, you’ve got a captive audience within the building, so you get more repeat business throughout the day,” the Colonel says. “And if you do a good job and treat them well, you can keep their business and almost predict how your store is going to perform. It’s also not as weather dependent as some other businesses on the outside. And that makes a big difference.”
INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016 25
FRANCHISEE PROFILE: JEROME JOHNSON In addition to the government building locations, Johnson leases two Virginia properties, one in Alexandria and another in Crystal City, and in 2008, they built a location from the ground up in Woodbridge, VA, that he owns. That location has a special significance for Jerome, because it once was home to the Champions Family Fun Center, a Go Kart track where he had his first job. “I started that job when I was 16-years-old, and my family was actually able to build a store there when I was in my twenties, so I’m really proud of that,” says Jerome. Colonel Johnson says that his early hands-on experiences helped make him a better operator. “It put me into a faster learning curve than I had planned, but it helped me because by being so involved, I got to see how the business is run,” he says. “Now 12 years later, it really makes it so I can pull back and let other people handle things.” With eight locations, Colonel Johnson and Jerome have had to learn to successfully delegate store management to others, with the majority of the store managers (75 percent) having risen through the ranks of the stores they now manage. Johnson says the process begins with making strong initial hires and then developing their own talent by soliciting input from the staff – from the cashiers to the store managers – and then listening. “You have to have a degree of trust in the people that you hire, especially now when I’ve got managers running stores,” says Johnson. “And then learn how to back off and give some trust to them, and let them know that they can run the store without you
26 INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016
being too much of a micromanager.” Jerome concurs. “For us, it’s more of a family environment, which I think is the reason that our turnover is low. We trust our employees, and put a lot of time into developing them. Most of our managers are individuals who came in and started as cashiers, so we give talented people the opportunity to grow. Our big thing is that it’s like a family.” That statement could also be taken literally. A few years after Jerome and his father started the business, mother Brenda joined the team as the office manager in 2006; in 2012 his sister Amanda came aboard as CFO. The Washington, DC market comes with its own set of competitive challenges. Colonel Johnson quickly rattles off the names of the brands he closely monitors: Wawa, 7-Eleven and McDonald’s—especially now that the burger brand has added all-day breakfast to its menu. And, let’s not forget Starbucks, which has at least 75 shops in and around the District—including spots at the National Zoo, Union Station and along the National Mall close to the Smithsonian’s famed Air and Space Museum. One of the great challenges Colonel Johnson faced was proving to his customers that Dunkin’ didn’t just stand for donuts. “It’s in the name – Dunkin’ Donuts – so when you start up, donuts are the majority of what you sell, because people are coming to you for the donuts,” he says. “But over time, they begin to switch over and drink more and more of the coffee. They love our coffee and it’s got a real good following. Especially since you’ve got people in
the Pentagon from Boston – they just love it.” Four years after opening his first Dunkin’, America plunged into a deep recession. The Johnsons had just opened a shop on 17th Street in Northwest Washington, just east of Dupont Circle. It was not an ideal location and the combination of an economic downturn and a lack of store traffic proved too much. They shut the shop in 2010, but walked away with an important lesson Colonel Johnson likes to share with new franchisees he meets. “In picking your first locations, it’s critical that those stores perform well, because if that had been, say, my second store the whole system would have collapsed because of how much I lost on that venture. I think the brand needs to do a good job of making sure that the locations that these individuals are seeking are – if run right – ones where they can make money.” He also advises new franchisees to come into the business with realistic expectations. “The thing I always tell people is that this is no ‘get rich quick’ scheme. It takes time to build an organization. Unless you have deep pockets to fund your business, it takes time to pay off those small business loans and I’m anticipating the time when all my hard work will reap the rewards.” That’s a lesson Colonel Johnson learned from his years serving his country and leading ranks of soldiers. It’s serving him well as a Dunkin’ Donuts franchisee working in the nexus of his nation’s government.
•
640 George Washington Hwy. • Lincoln, RI
401.334.9099 Joseph Mansour, CPA jmansour@mm-cpas.net
Dedicated provider of accounting, income tax, payroll and consulting services to Dunkin’ Donut franchisees across the country.
INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016 27
2015
BUSINESS MEMBER
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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
Cynthia A. Capobianco, CPA
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Marcovich, Mansour & Assoc. Inc.
Sansiveri, Kimball & Co., LLP
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Tom Colitsas 609-452-0889 • tcolitsas@tcacpa.com 103 Carnegie Center, Ste. 309, Princeton, NJ 08540
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Jera Concepts
Joseph Mansour 401-334-9099 • jmansour@mm-cps.net 640 George Washington Hwy., Lincoln, RI 02865
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Neovision Consulting Inc.
BUILDING
Nish Parekh 609-531-4444 • info@neovisioncpa.com 1246 South River Road, Ste. 101 Cranbury, NJ 08512 www.neovisioninc.com
Nimble Accounting Software
Subbu Krishnan 480-434-9936 • subbu@nimbleaccounting.com 200 Motor Parkway, Suite D-26, Hauppauge, NY 11788 www.nimbleaccounting.com
Poyant Signs
Bill Gavigan 125 Samuel Barnet Blvd, New Bedford, MA 02745 508-717-4930 • bgavigan@poyantsigns.com www.poyantsigns.com
Watchfire Signs
David Watson • 205-542-7881 David.Watson@watchfiresigns.com 1015 Maple Street, Danville, IL wwwwatchfiresigns.com
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Ellen Hui 949-428-0498 • eh@Nationalfranchisesales.com 1601 Dove Street, Ste. 150, Newport Beach CA 92660 www.nationalfranchisesales.com
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Trivanta, LLC
Steven & Brian Ribeiro 465 Sykes Rd, Fall River, MA 02720 508-677-0401 • brianr@homelandbuilders.com www.homelandbuilders.com
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Heath Stone 603-793-2129 • heath.h.stone@sprint.com 3 Van De Graaff Drive, Burlington, MA 01803 www.sprint.com/ddifomembers
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28 INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016
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EF Cost Recovery
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2015
Directory of Business Members
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Performance Business Solutions, LLC
Jeff Hiatt 508-878-4846 • jdh@revenuebanking.com 87 Lafayette Road, Ste. 11, Hampton Falls, NH 03844 www.revenuebanking.com
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Plotwatt, Inc.
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Analytix Solutions
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Tom Fitzgerald 401-574-1119 • tfitzgerald@bankri.com One Turks Head, Providence, RI 02903 www.bankri.com
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Angelo Maragos 949-293-0152 • angelo.maragos@bmo.com 7700 Irvine Center Drive, Ste. 510, Irvine, CA 92618 www.bmoharris.com/franchisefinance
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City National Bank
Dave Skinner 425-468-2851 • dave.skinner@cnb.com 10900 NE 4th St. Suite 1920, Bellevue, WA 98004 www.cnb.com
Direct Capital Franchise Group
Douglas Solomon 603-433-9413 • DSolomon@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
Santander Bank
Sally Buffum 508-762-3604 • sbuffum@fidelitybankonline.com 465 Shrewsbury Street, Worcester, MA 01604 www.fidelitybankonline.com
Michael DiSandro 401-752-1037 • michael.disandro@santander.us One Financial Plaza, Providence, RI 02903 www.santanderbank.com
First Franchise Capital
Susquehanna Commercial Finance Inc.
Richard Riecker 201-326-4021 • Richard.riecker@firstfcc.com 2715 13th Street, Columbus, NE 68601 www.firstfranchisecapital.com
Brian Colburn 443-966-1792 • brian.colburn@susquehanna.net 2 Country View Road, Ste. 300, Malvern, PA 19355 www.susquehanna.net
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
Joyal Capital Management Franchise Development
Michael Vallorosi 201-962-5187 • michael.vallorosi@td.com 535 East Crescent Avenue, Ramsey, NJ 07446 www.tdbank.com
Marlin Franchise Finance Group
Mark McGwin 508-793-8342 • mmcgwin@bankatunited.com 33 Waldo St., Worcester, MA 01642 www.bankatunited.com
Pacific Premier Franchise Capital
William Wildman 844-848-4739 • WWildman@BankUnited.com 101 W. Ohio Street, Suite 2000, Indianapolis, IN 46204 www.unitedcapitalbusinesslending.com
GE Capital, Franchise Finance
Daniel Connelly 508-747-2237 • dconnelly@joycapmgt.com 50 Resnik Road, Plymouth, MA 02360 www.jcmfranchise.com
Chris Holland 856-505-4206 • cholland@marlinfinance.com 300 Fellowship Rd, Mount Laurel, NJ 08054 www.marlinfinance.com Sharon Soltero 402-562-1801 • ssoltero@ppbifranchise.com 3154 18th Avenue, Ste. 3, Columbus, NE 68601 www.ppbifranchise.com
TCF Franchise Finance
TD Bank
United Bank
United Capital Business Lending
INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016 29
2015
BUSINESS MEMBER
Directory of Business Members Please Visit The DDIFO Business Members Directory online at www.DDIFO.org 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
York Risk Services Group
Lori Ross • 337-230-5437 Lori.Ross@yorkrsg.com 99 Cherry Hill Road, Suite 102, Parsippany, NJ 07054 www.rfcp1.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
ADP
John Stefko 908-625-7966 • john.stefko@adp.com 99 Jefferson Rd. MS 322, Parsippany, NJ 07054 www.adp.com
First Advantage
Suzanne Cormier 317-245-1665 • Suzanne.Cormier@fadv.com 9800 Crosspoint Blvd., Ste. 300 Indianapolis, IN www.fadv.com
Granite Payroll Associates
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
HIRETech
Lindsay Conderman 281-558-7100 x123 • lconderman@hiretech.com 1500 S. Dairy Ashford Rd. Ste. 240, Houston, TX 77077 www.hiretech.com
Paychex
Diana Devivo 212-239-9400 x5142182 • ddevivo@paychex.com 911 Panorama Trail South, Rochester, NY 14625 www.paychex.com
Snagajob
Chris Wirt 804-433-2761 • chris.wirt@snagajob.com 4851 Lake Brook Drive, Glen Allen, VA 23060 www.snagajob.com/employers
INSURANCE
Access Development
Colton Henderson • 801-954-2172 colton.henderson@AccessDevelopment.com 1012 West Bearsley Place, Salt Lake City, UT 84119 www.accessdevelopment.com
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
Insurance World Agency Inc.
Todd Rouse 800-637-8606 • Todd.Rouse@bunn.com 1400 Stevenson Drive, Springfield, IL 62703 www.bunn.com
IOA Insurance Services
Doug Falcone 973-599-0600 • dougf@cardtronics.com 628 Route 10 - Ste. 8, Whippany, NJ 07981 www.cardtronics.com
Starkweather & Shepley Insurance Brokerage, Inc.
Bob Eckweiler 973-222-6742 • Bob.Eckweiler@carrier.utc.com 3 Hollyhock Way, Newton, NJ 07860 www.carrier.com
Anil K. Sharma 630-654-6067 • info@iwainsurance.com 100 E Ogden Avenue Ste. 203, Westmont, IL 60559 www.iwainsurance.com Angela Newman 909-786-3645 • Angela.Newman@ioausa.com 3281 E. Guasti Rd., Suite 400, Ontario, CA 91761 www.ioausa.com Sabrina San Martino 800-854-4625 ext. 1121 • ssanmartino@starshep.com 60 Catamore Boulevard, East Providence, RI 02914 www.starkweathershepley.com
Cardtronics
Carrier Corp
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.
30 INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016
Photo Credits: Zoran Dobrijevic
HUMAN RESOURCES
Bill Muenkel 952-484-4875 • wemuenkel@mmm.com 3M Center, 220-12E-04, St. Paul, MN 55144 www.3M.com/communications
2015
Directory of Business Members
BUSINESS MEMBER
Davis Bancorp
Richard Davis 847-998-9000 X4466 • rdavis@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
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
New England Drive-Thru Communications
Angela Bechard 603-475-2046 • angela@nedrivethru.com 999 Candia Rd. Suite 7, Manchester, NH 03032 www.nedrivethru.com
OnsiteRIS, Inc.
Joey Agee 404-952-2745 • joey.agee@onsiteris.com 2010 Avalon Pkwy, Ste 400, McDonough, GA 30253 www.onsiteris.com
Pentair Filtration & Process
Hockenbergs
Jeannine Gaine 630-240-1298 • jeannine.gaine@pentair.com 1040 Muirfield Dr., Hanover Park, IL 60133 www.everpure.com
KD Kanopy
Michael Murdock 847-495-7350 • michaelm@rftechno.com 330 Lexington Drive, Buffalo Grove, IL 60089 www.rftechno.com
Magna Industries, Inc.
Becky Dubose 800-643-2980 • bdubose@qualservsolutions.com 7400 28th Street, Fort Smith, Arkansas, 72906 www.qualservsolutions.com
Tom Schrack Jr. 402-609-5111 • tomjr@hockenbergs.com 7002 F St., Omaha, NE 68117 www.hockenbergs.com John Behrens 303-650-4707 • john@kdkanopy.com 1921 E. 68th Ave. Denver, CO 80229 www.kdkanopy.com 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
R.F. Technologies
QualServ
safeTstep by Payless Shoesource
Kyle Clendennen 785-295-6664 • kyle.clendennen@safetstep.com 3231 Southeast Sixth Ave, Topeka, KS 66607 www.payless.com/safetstep-1/
Shoes For Crews
Rebecca Tharp 877-437-6176 • rebeccat@shoesforcrews.com 250 S. Australian Ave. West Palm Beach FL 33401 www.shoesforcrews.com
SKAL East, Inc
Kevin Huerth 781-806-3139 • kevin@skaleast.com PO Box 303, 31 Eastman Street, Easton, MA 02334 www.skaleast.com/index.cfm?keyword=dunkin
Staples Advantage
Joe Shea 508-238-0106 • joseph.shea@staples.com 31 Commercial St. Sharon, MA 02067 www.staplesadvantage.com
Tellermate
Dana Glaze 770-220-5113 • dana.glaze@tellermate-us.com 3600 Mansell Road, Ste 500, Alpharetta, GA 30022 www.tellermate-us.com
Thank You to Our Busin ess M embers!
INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016 31
A LOOK ON THE LAW
BY KAREN ABRAMS, PARIS ACKERMAN & SCHMIERER, LLP
Sign At Your Own Risk Critical Lease Provisions to Negotiate or Avoid N
egotiating a retail lease is one of the most critical stages in the life of a quick service restaurant. Each lease presents is own distinct issues and challenges; failing to have significant attention to detail can inadvertently result in an unsuccessful business or impede your growth; one oversight can destroy your succession plan or exit strategy. Franchisees, often faced with immense market competition and the franchisor’s demanding development requirements, are prone to concede important issues and make careless mistakes in lease negotiations. What follows is a list of some critical lease provisions, which if not identified and properly negotiated, could have a material impact on the viability of your business:
Exclusive Use Protection An exclusive use clause allows you to maintain an edge against competitors by restricting your landlord’s ability to lease space in your shopping center (and sometimes even within a larger area beyond the perimeter of your shopping center) to another tenant who is your competitor. When it comes to exclusive use protections, the interests of landlords and tenants are diametrically opposed; landlords want narrow exclusive use language so as to have the most freedom when choosing the tenant mix in their centers; whereas tenants want broad language to ensure that they won’t face competition in their own center. Franchisee tenants need to carefully consider exactly what part(s) of their business need protection so that the lease is as precise as possible. When negotiating this provision, tenants must be sure that the lease not only expressly requires the landlord to enforce the tenant’s exclusive, but also addresses the tenant’s remedies if the exclusive use is violated. Failure to addresses these points renders the protection granted by the provision essentially meaningless.
Landlord’s Consent to Assignment and Continuing Liability
As a tenant, your ability to assign your lease to a third-party has a direct impact on your ability to sell your business and ultimately realize a return on your investment. Like exclusive use protection language, assignment provisions are another instance where the landlord and tenant have conflicting needs. Landlords seek to exert extreme control over the transfer of their leases so as to ensure the qualifications and viability of the assignee tenant. Contrarily, tenants look for the ability to freely assign the lease, so as to minimize any delays or road blocks to the exit of their businesses. Landlords will often seek to maintain the right to approve or reject the proposed assignee, in their sole discretion. Franchisee tenants should, at minimum, seek to tie the landlord’s ability to approve an assignment to a standard of reasonableness, thus curtailing the landlord’s ability to reject a proposed assignment. Ideally, if possible, the franchisee tenant should negotiate the ability to assign the lease as of right (i.e., without landlord consent), to their franchisor, to other approved franchisees within the same system, or to any other party who purchases all or substantially all of their assets. Related to the need to address landlord’s consent to assignment is the need to address whether or not the assigning tenant and any then existing guarantor have continued liability for tenant obligations which accrue after the assignment. Landlords will always seek to collect as many potential obligors as possible and typically require that, even if they consent to an assignment of the lease, the tenant and guarantor will remain liable under the lease. From the landlord’s perspective, multiple obligors ensures that the landlord has a long list of parties to sue in the event of a tenant default, thereby increasing their chances of actual collection. It is critical for a tenant to negotiate, up front,
32 INDEPENDENT JOE • DECEMBER 2015/JANUARY 2016
the tenant’s release as well as the release of any-then existing guarantor upon an assignment of the lease. As a compromise, again, franchisee tenants should, at a minimum, seek to tie their release to certain minimum thresholds (such as the net worth of the assignee tenant and its principals, in the aggregate).
Right to Participate in the Sale Landlords often seek to retain the right to share in the sales proceeds when their tenants sell their businesses, stating that it is only because of the landlord’s property that the tenant has a store to sell in the first place. We have seen leases where the landlord is entitled to up to 50 percent of the sales proceeds. Failing to address this properly can result in the tenant not being able to afford to sell its business because it won’t be able to keep enough of the sales proceeds. Given that it is the tenant, and not the landlord, who uses blood, sweat and tears to grows its business and make it saleable, at a minimum, the lease should provide that the landlord is not entitled to any portion of any monies received by the tenant in connection with an assignment of the lease to the tenant’s franchisor or another approved franchisee. Ideally, this provision should be deleted completely and the lease should expressly state that the landlord is not entitled to any portion of sales proceeds under any circumstances, period. These are some of the most important steps franchisees must consider in any lease, but there are more. Among other things, we will examine non-compete clauses and what happens when your landlord tries to terminate your lease and recapture your premises in an upcoming issue of Independent Joe.
•
Karen Abrams is Senior Counsel at Paris Ackerman & Schmierer, LLP. She represents tenants in the full range of their business matters including leases, financing, sales, acquisitions and business operating
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