Independent Joe #37 April/May

April/May 2016

The Magazine for D D

Independent Franchise Owners

SANDWICH ADVANTAGE Franchisees test sandwich stations

Slowing the Golden Arches Momentum

Technology Keeps Improving Dunkin' Operations

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I CR EAT D E MA N E YO U D.

CA S H I N

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UNINTENDED CONSEQUENCES Arguably, one of the greatest works in English literature is The Canterbury Tales. This collection of 24 individual stories is presented as a story-telling contest by pilgrims traveling to visit a shrine at Canterbury Cathedral back in the 14th century. In this iconic work, author Geoffrey Chaucer is credited with giving birth to the first version of today’s popular adage that “many a truth is spoken in jest”.

Jerry Brown – after acknowledging that another increase in the minimum wage (along with mandating paid sick leave for all employees) made no economic sense – signed into law a new $15 minimum less than one year after the increase to $10 per house was mandated.

I thought of that adage last month when I saw an editorial cartoon in one of the morning papers. The cartoon showed a man, obviously down and out, out of work, and holding a sign that said “Fought for 15 and won!”

So against a backdrop of political cowardice, how can we keep our businesses afloat and our economy growing at the same time our government mandates these unprecedented increases? The short answer is business innovation and our own ongoing political activism.

I have no doubt that some of the elected officials who advocate for raising the minimum wage to $15 an hour for all workers truly believe that it is the right thing to do. After all, it is human nature to want to see our fellow man succeed and enjoy a good life – safe, well-fed, properly housed and clothed and well-cared for. But in trying to be the good neighbor we must remember, as another old adage cautions, a little knowledge is a dangerous thing.

Sadly, the majority of those advocating an excessively high minimum wage appear oblivious to the damage it can cause. In their own political interests, they advocate for a position because they believe it will win them votes in the short term and that is where they are focused – the short term.

If we look back at the minimum wage discourse over the past few years, it’s interesting to note that it began with a call to increase the minimum to $9 per hour from the then-current $6.75 at the federal level. Of course, many states have instituted a higher minimum wage than is dictated by the federal government, but let’s put that aside. That $9 call came from President Obama in his 2013 State of the Union address. Quickly, that call for a 33 percent increase was insufficient for some in Congress who one-upped the President’s call by filing legislation to mandate a minimum wage of $10.10. No doubt they reasoned a 50 percent increase would, somehow, win them more votes.

Over the past several months, we have heard and read about a number of QSR brands experimenting with self-serve kiosks and even pushing wider tests of their feasibility in a number of markets across the country. I would submit that technological innovation will continue to bring new economies to the quick service industry and we will adapt, and move on. Our customers will demand it and with sound business acumen, we will deliver the value our customers expect and deserve – it just may not be in the manner that short-term-focused politicians envision.

Many a truth may be spoken in jest, but there’s another longtime concept that warrants some consideration in the minimum wage debate: the law of unintended consequences. It exists, and whether government and political forces choose to recognize it or not, it will ultimately have a role in how minimum wage mandates backfire.

And that brings me back to the editorial cartoon . . . fighting for $15 an hour and winning may very well be the worst possible outcome for tomorrow’s low-skilled worker.

Ed Shanahan DDIFO Executive Director

From there, the floodgates opened. Politicians across the country pressed for higher minimums to punish the “greedy, moneycentric business interests” that were keeping the minimum wage below the poverty level. Any responsible business owner who signs the front of the check knows, there must be a logical nexus between the value of the function a worker performs and the compensation that employee receives for performance of that job.

So, as more politicians pander to vocal advocates and organized labor interests, the trajectory of the proposed minimums continue to illogically and unsustainably rise: California set a statewide minimum wage of $10 per hour in 2015; New York followed when its Governor, Andrew Cuomo, arbitrarily picked fast food workers and unilaterally established for them a $15 per hour minimum. Refusing to be outdone, California Governor

INDEPENDENT JOE • APRIL/MAY 2016 1

SUB HEADLINE

CONTENTS

From the Executive Director: Unintended Consequences.• • • • • • • • • • • • • • • • • 1 What’s Brewing: A Look at State Issues Around the Footprint • • • • • • • • 5 Slowing the Golden Arches Momentum Dunkin’ Responds to McDonald’s All-Day Breakfast • • • • 8 Sandwich Advantage• • • • • • • • • • • • • • • • 12

12

8

Franchisee Profile: Lino Santos• • • • • • • • • • • Northeast Regional Member Meeting Food Safety, Dunkin' and the Media• • • • • • • • • • • • Technology Keeps Improving Operations • • Directory of Sponsors • • • • • • • • • • • • • • • Legal: Are Managers are Exempt from Overtime? • • •

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2 INDEPENDENT JOE • APRIL/MAY 2016

16 20 21 24 28

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Independent The Magazine for DD Independent Franchise Owners

•

April/May 2016 Issue #37 Independent Joe® is published

by DD Independent Franchise Owners, Inc.

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Editors: Edwin Shanahan, Matt Ellis Contributors: Cheryl Alkon, Cathy Cassata, Lisa Iannucci, Debbie Swanson, Scott Van Voorhis Business Member Coordinator: Joan Gould Creative Director: Caroline Cohen Direct all inquiries to: DDIFO, Inc. 2 First Avenue, Ste. 127 – 3, Peabody, MA 01960 978-587-2581 • info@ddifo.org • www.ddifo.org

䌀漀渀琀愀挀琀 匀愀戀爀椀渀愀 匀愀渀 䴀愀爀琀椀渀漀 㠀 ⴀ㠀㔀㐀ⴀ㐀㘀㈀㔀 砀 ㄀㄀㈀㄀ 眀眀眀⸀猀琀愀爀猀栀攀瀀⸀挀漀洀

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 © 2016 Printed in the U.S.A.

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WHAT’S BREWING A LOOK AT STATE ISSUES

AROUND THE FOOTPRINT

By Scott Van Voorhis Warning: A tidal wave of minimum wage laws and food labeling red tape may soon be headed your way.

Dunkin’ and other quick service franchise owners are facing what is shaping up to be a challenging and unpredictable 2016.

A no-holds-barred presidential race has pumped new energy into an array of activist causes, from the Service Employees International Union’s campaign for a $15 an hour minimum to new proposals to require labeling for GMO’s, sugar and salt.

Possibly the biggest change has been the $15 an hour minimum wage campaign, which, after scoring some successes in a number of cities, has suddenly jumped to the state level and is getting attention nationally as well.

It comes even as new overtime regulations are poised to further push up payroll costs for franchise owners.

“It’s a double whammy,” says John Gordon, principal and founder of Pacific Management Consulting Group, and DDIFO’s restaurant analyst. “Franchises are going to be hurt, no doubt.”

Payroll challenges loom Dunkin’ franchise owners, especially in blue states that lean Democratic, could face escalating payroll costs over the next few years.

The union-led $15 an hour minimum wage campaign has picked up significant momentum as the 2016 presidential race has kicked into gear.

Democratic candidate Bernie Sanders’ campaign has put the spotlight on the issue of income inequality, with the $15 an hour minimum becoming a political touchstone for the left.

What started on the local level with a few deep blue cities like San Francisco and Seattle boosting the minimum wage within city limits has now made the jump to the state level, with Democratic governors scrambling to get out ahead on what has become a key issue for their supporters.

California Gov. Jerry Brown in early April signed into law a bill that will boost the state’s minimum wage to $15 an hour by 2022. Not to be outdone, New York Gov. Andrew Cuomo inked a $15 an hour minimum wage deal on the same day.

Boston Mayor Martin Walsh is now calling for a $15 an hour minimum wage, though he faces likely opposition from Republican Gov. Charlie Baker.

Still, there is likely a ceiling to how far the $15 an hour minimum campaign can go.

Even as the issue starts to get national attention – with Sanders making a $15 an hour minimum one of his campaign pledges – any wage bill would face tough sledding in a polarized Congress, Gordon contends.

“There is almost zero chance it will go national,” says Gordon.

Meanwhile, franchise owners face a new threat to their bottom lines, this one coming out of Washington. D.C. Managers across the country, including in the quick-service sector, will soon find themselves eligible to collect overtime, under new federal labor rules.

The new regulations, set to kick in over the next few months, will require companies to pay overtime to managers who make less than $50,000 a year.

INDEPENDENT JOE • APRIL/MAY 2016 5

WHAT’S BREWING

The current threshold is $23,600.

With managers often working as much as 60 hours a week or more, this could prove to be a budget buster for some franchise owners.

Particularly vulnerable are chains where managers are paid less than $50,000 a year, a group that includes Dunkin’, according to a recent note by a Wall Street investment firm.

(You can read more about this legal decision on page 24) New menu challenges ahead Calorie labeling may turn out to be the least of the menu labeling challenges franchise owners may soon face.

New York City health officials have declared war on salt, with new rules requiring chain restaurants to put salt shaker symbols next to items containing more than 2,300 mg of sodium, or the recommended daily amount.

The salt shaker symbols, in turn, are accompanied by an appetite killing warning that “high sodium intake can increase blood pressure and risk of heart disease and stroke.”

However, Dunkin’ Donuts franchise owners in the Big Apple have received a temporary reprieve thanks to a lawsuit filed by the National Restaurant Association.

A state appeals court granted a temporary stay in March, barring New York officials from implementing and enforcing the new rules.

Undeterred, a Brooklyn councilwoman is now pushing for yet another crackdown, with a proposal requiring restaurants to put up posters explaining the impact of sugar and carbs on diabetics and pre-diabetics.

President Obama is gearing up to take on excessive salt in foods, POLITICO has reported.

The rules, expected to be rolled out sometime in the next several months, would set “voluntary” targets for how much sodium can be put in processed foods.

Tough choices for franchise owners Dunkin’ Donuts franchise owners will need to carefully examine their payroll structure and how they do business in order to stay ahead of these coming changes, Gordon advises.

With the cost of labor headed up, operators will need to find ways to reduce the number of hours worked.

And the salt crusade may be poised to go national.

If a franchise owner has some shops operating 24/7, one possibility might be cutting back. That might mean closing during the wee hours of the morning and instead opening at 4 or 5 a.m.

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sense to boost the employee’s salary past the $50,440 mark. That, in turn, would make the manager exempt from the new overtime rules, he says.

A wild ride ahead Election year, 2016 is turning out to be an action packed one for Dunkin’ franchise owners.

“They might jigger some of the wages up so they are not conflicting with the overtime rules,” Gordon says.

The hotly contested Democratic presidential primary has pushed to the forefront some key bread and butter issues crucial to franchise and business owners across the country.

Conversely, if a manager is making closer to $30,000 a year, it might make more sense to convert the position from a salaried job to an hourly one.

And franchise owners may also need to reemphasize an age-old retail technique, upselling. expensive while adding significantly to wear and tear, Gordon says.

The new overtime rules will also require some quick thinking on the part of franchise owners.

If an assistant manager, for example, is making $40,000 a year, it might make

That means convincing customers to upgrade their orders to buy more than what they came in for, Gordon says.

At the same time, franchise owners may also want to take a look at getting rid of any down selling that may be happening, such as a cashier urging a customer to buy a less expensive value meal, he noted.

And it’s not just the candidates who are sounding off.

Democratic governors and mayors, eager to grab their share of the limelight, are racing against each other to $15 an hour minimum wage laws.

Given we are not even halfway through 2016, it promises to be a very interesting year.

As always, we will keep an eye out for issues and stories that could impact your bottom line.

Stay tuned.

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INDEPENDENT JOE • APRIL/MAY 2016 7

Dunkin’ Responds to McDonald’s Release of All-Day Breakfast

By Cathy Cassata

I

t’s a lingering question: Is McDonald’s all-day breakfast hurting Dunkin’ or isn’t it?

According to John Gordon, principal of Pacific Management Consulting Group and DDIFO’s restaurant analyst, the question will hang around for a while longer.

“It’s still too early,” says Gordon. “First, Nigel Travis says Dunkin’ didn’t see any impact and then he says it did. But it’s well known that McDonald’s 1.4 billion dollar ad fund allows them to do way more in terms of advertising than anyone else.”

Even as industry experts pronounce McDonald’s revitalized after its foray into all-day breakfast, they note how Dunkin’ Donuts is facing a drop in U.S. same store sales. The 0.8 dip is part of a 5.4 percent fall since 2011. According to Gordon, the trend is not positive, “but Dunkin’s same store sales rate has been weak for

8 INDEPENDENT JOE • APRIL/MAY 2016

several periods of time and it just so happened to move a little more negative.”

And so has the media coverage. A recent article in Barrons, the financial publication, had this to say: “We like Dunkin’ Donuts coffee—the doughnuts, too. But the stock may give investors indigestion.”

“Their same store sales story is nuanced,” says Bryce Bares, owner of seven Dunkin Donuts in Nebraska. He points to K-Cups. “Last year we were selling K-Cups in our stores exclusively. When the grocery stores started selling Dunkin’ branded K-Cups too, that had a big impact on sales, particularly in an emerging market like ours. But that top line sales drop is deceptive because now we’re getting a profit sharing piece of grocery store K-Cup sales. That profit sharing piece does not show up on our top line sales. This year will be more telling starting in the 3rd and 4th quarter.”

One doesn’t need to look far across the QSR industry to see slumping sales. Losers include Jack in the Box, Shake Shack, Wendy’s and YUM Brands (which owns KFC, Pizza Hut, and Taco Bell). But, McDonald’s – which was nearly pronounced “dead on arrival” last year – has seen increases in both sales and stock value, thanks to its introduction of all-day breakfast. Same store sales at the Golden Arches jumped 5.7 percent in the 4th quarter of 2015.

cut their earnings forecast twice last year. They also had a lot of international problems.”

“McDonald’s despite their problems has never fallen from the mid $70s, and now they’re up to $105 or $110. Part of that is due to them having a new CEO and the notion that the company is starting to find its way, with all-day breakfast being part of that,” says Gordon. “Dunkin’ is down generally because they had

“Dunkin’ Donuts’ new menu boards offer our guests a more contemporary, brighter, easier-to-read menu with attractive fonts, imagery and video content, to create an overall warmer, more modern design,” Scott Hudler, Dunkin's senior brand marketing manager, wrote in a statement to Fortune Magazine.

But, Dunkin’ isn’t sitting still while the competition heats up.

The brand introduced a breakfast burrito to spice up its all-day breakfast offerings and introduced fully revamped menu boards at counters in all of its 8,400 U.S. restaurants and drive-thru windows.

INDEPENDENT JOE • APRIL/MAY 2016 9

ALL-DAY BREAKFAST Industry watchers were concerned that bright new menu boards would not only spotlight tasty Dunkin’ treats; they would also shine the light on calorie counts which are now required on all food and beverage offerings.

percentage of sales. Boards feature bright images of Dunkin’s dark-roast coffee, lattes and Coolatta, while enticing shots of egg sandwiches jog the memory of customers that anytime is the right time to enjoy a Dunkin’ all-day breakfast item.

“Calorie counting is becoming more and more a part of life and people’s expectations on how they manage what they eat. I think it’s a sign of a progressive restaurant,” said Gordon.

“We have a lot of competitive advantages that we lose sight of sometimes with our marketing. We can get lost in the product of the month, and I think there are times when it’s beneficial to remind people about how great our core business is, such as the infinite ways we can make a cup of coffee, and how we make every cup to order,” says Ken Blum, who operates a network of Dunkin’ Donuts shops in Ohio.

Bares admits calorie counters are not having much of an impact on his customers.

“For most of our beverages, the number of calories is decided by the ingredients guests add to their own drinks. It’s less impactful on beverage based businesses like ours than it might be for McDonald’s, which derives more sales from its food. Let’s be honest, if you come in to get donuts, you know what you’re getting yourself into. We haven’t had a single complaint about calories since we instituted the new menu,” Bares says.

Back to Beverage and Breakfast Roots

In addition to an attractive cursive font, Dunkin’s new menu boards make it a point to remind customers that Dunkin’ knows beverages. Boards emphasize Dunkin’s multitude of iced- and expresso-based drinks and ignore combo meals, which took up 60 percent of the old menu board, but only represented a small

Bares believes Dunkin’s core strengths will carry the brand through this ultra-competitive period.

“We’ve been doing all-day breakfast forever, and we’ve been able to establish it as our identity. But at the end of the day, beverages are what people come to our stores for, so I think it’s wise of the brand to focus on innovating beverage options for the afternoon because I don’t think it’s something that McDonald’s is addressing; they’re focused on their food items,” he says.

A Stay-the-Course Strategy

Gordon believes Dunkin’ has the right strategy. “This makes sense because beverages are more profitable, even though if you get a coffee customer, you want to sell them something else at the same time,” says Gordon. “Nigel has told the press that Dunkin’ isn’t going to do dollar menus, which is generally healthy because that can ruin the brand quality. Sticking to what Dunkin’ does best is a good move.”

Both Bares and Blum say they haven’t seen a negative effect on their business since the institution of McDonald’s all-day breakfast.

“We were curious to see what would come of it. Sometimes you get a tailwind when your competition heavily promotes something you also sell, so we were wondering if it may actually help us or if we’d lose customers later in the day because of it, but in my network we haven’t seen either,” Blum says.

He adds that if Dunkin’ franchisees do the right things on their end, they’ll be successful. “If we give good service, offer great products, keep our stores clean, and stay fast we’re going to be successful. Executing on our side is the number one thing we can do when it comes to any of our competitors.”

Bares concurs, noting that Dunkin’s best move is to stay focused on its core product line and technology.

“By focusing on our beverages and relying on new innovations that are coming out like on-the-go ordering and other technological advances, I think we can drive our sales, and be much better off than if we try to create product lines that are outside of our comfort zone as an effort to try to keep up with competitors like McDonald’s,” says Bares.

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10 INDEPENDENT JOE • APRIL/MAY 2016

Other Chains Push Back

Competitors launched several new tactics to counter McDonald’s all-day breakfast blitz.

Burger King: Added the Supreme Breakfast Sandwich and hot dogs to its menu.

Chipotle: Gave away burritos in February (if not in

response to McDonald’s, possibly to repair its image after its food safety issues).

Jack in the Box:

Gave away one million burgers to promote its new burger and announced upgrades to dozens of menu items.

Subway: Added a chicken sandwich with antibioticfree meat.

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SANDWICH ADVANTAGE Franchisees test sandwich stations

By Debbie Swanson

12 INDEPENDENT JOE • APRIL/MAY 2016

N

o longer just a ho-hum combination of white bread and filling, today’s sandwich has evolved into a creative and versatile snack or portable meal, and a gastrointestinal necessity for Americans on the go. For Dunkin’ Donuts franchisees, this translates into big opportunity and a big challenge.

How do you add new and more complicated sandwich choices, while also accommodating “have it your way” beverages without making customers wait any longer than they have to? Dunkin’ Brands believes a newly redesigned, modular sandwich station will expedite the production of sandwiches and other hand-held items, like wraps or burritos.

Stephen England, vice president of Operating Systems at Dunkin’ Brands, says that Dunkin’ has always been committed to offering all-day-breakfast and an all-day menu, before the increased popularity of sandwich items. The new stations are one more way to support that commitment.

“Our goal was always to have a ‘future-proof’ solution that enables our guests to receive our full menu of products quickly and whenever they want, day or night, without the need to change the sandwich station equipment as consumer preferences change,” England says.

A gradual introduction The sandwich business has been steadily growing, providing reliable revenue – and some operational headaches – for franchisees. As Dunkin’ Brands worked to develop its new sandwich

" Sandwiches, bagels and wraps are good business, but they are more time consuming to prepare. The goal was to look at the different elements of the sandwich station, and adapt scaled versions to suit the different types of space available." station, the company sought input from franchisees as well as their employees and managers.

Prototypes have enabled franchisees to take an active role in developing the sandwich station’s design. In February 2014, Canton, Massachusetts franchisee Michael Cavallo became the second franchise owner – and the first one in Dunkin’ Brands’ home state – to install a new sandwich station prototype.

Cavallo says his store’s existing plans for renovation, along with their larger design, were important factors in serving as a test site for the prototype. Able to accommodate a large station, information from his store was used to analyze ways to create scaled-down versions to accommodate different settings. Cavallo says he and his workers have been pleased with the benefits they’ve gained.

“We can house up to four workers at a time, with a large freezer on one end, and two VDUs (visual display units) making it easier for workers to see orders,” Cavallo explains. Information from his

INDEPENDENT JOE • APRIL/MAY 2016 13

SANDWICH ADVANTAGE store has played a crucial part in developing solutions to accommodate smaller locations.

“Sandwiches, bagels and wraps are good business, but they are more time consuming to prepare,” Cavallo says, adding that “The goal was to look at the different elements of the sandwich station, and adapt scaled versions to suit the different types of space available.”

Shaving off valuable time comes from having steps for each process and reducing the number of motions the employee takes, says Cavallo, and the new stations have demonstrated gains in both areas.

Modular approach The sandwich stations are uniquely adaptive due to their scalable, modular design, giving franchisees the flexibility to implement the best solution to suit their store size, staffing and customer demand.

According to England, “With an estate in excess of 8,500 stores, we clearly have many different footprints. We’ve developed stations that will fit in all of our locations, while attaining the maximum capacity levels.”

Some of the popular components include: a dual belt toaster, which accommodates different requirements; larger holding areas for cooked foods; more refrigerator units; and a doublesided work configuration, enabling prep to occur on both sides of the aisle.

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In addition to those key features, Dunkin’ has examined best practices from across the board to make sure all key components were included, to maximize efficiency, and to determine ideal space and product access.

“For example, the stations were designed to be easier to clean and keep clean, with things like crumb-catchers and built in trash areas,” says England. “We (also) enhanced refrigeration units to allow for a more open worktop area, and increased refrigerated capacity to ensure stations can stay fully stocked through peak periods.”

The modular design also minimizes upheavals when it’s time to upgrade; as demand changes, modules can be added to stations without replacing existing equipment.

Focus on the employee Getting the product to the customer quickly is an important focus, but another factor emphasized is employee safety. Eliminating bottlenecks in the production process plays a key role; by placing equipment where it is needed and minimizing motions and footsteps, potential collisions are reduced. As an example, refrigeration units can be placed on either end of a station, each containing the products specific to the nearest worker, rather than funneling multiple workers to one central refrigerator.

Employee comfort was another consideration. “We concentrated

14 INDEPENDENT JOE • APRIL/MAY 2016

on ensuring the ergonomics were suitable for employees of differing heights, in order to make the station as user-friendly as possible. Equipment was placed in easily accessible areas,” says England.

Cavallo feels the more efficient stations help employees adapt to new products and LTOs. One example is with the burrito, a popular item on their menu. With efficient steps in place and a carefully designed setup, the station offers the framework to move more units through and quickly serve the customer.

“It takes a while for a worker to get used to a new process. There’s always a learning curve, and then you try to make it a little bit more efficient,” he says. “Every part of making the sandwich is a step which takes time, and we want to be done within two minutes. The sandwich station is a critical part of getting it done in time. The smallest improvement – whether it’s in labor or time – is a win.”

The need for quickly prepared, portable, nutritious food remains strong, sending other restaurants and convenience stores scrambling to join the action. The streamlined and efficient sandwich station can only build upon Dunkin’s solid reputation and success as an all-day, go-to destination.

“The sandwich competition is fierce,” Cavallo agrees. “But we’ve been doing this for 25 years, we do one thing and do it well.”

•

INDEPENDENT JOE • APRIL/MAY 2016 15

Learning about Franchising and Life

Lino Santos watched, listened and learned before branching out on his own

S

ome entrepreneurs learn about business by going to college, while others absorb books written by the business greats before them. Lino Santos started learning about business when he was in his 20s and a baker in a Dunkin’ Donuts franchise. Even then, he knew that one day he wanted to own his own shop. Today, he owns six in New Jersey and has three in the queue to develop within the next year.

It was the early 1990s when Santos manned the baking table, kneading dough and making donuts. He worked for Carlos Andrade and Manuel Andrade, who were uncles to his new wife Dora. When the Andrades sold the store to Joe Prazeres, Lino and his new wife stayed on, choosing to remain in southeastern Massachusetts. Over the next seven years, Santos and his wife worked closely with Prazeres, learning valuable business lessons that no book or university could teach them.

“The new owner was a down-to-earth, compassionate human being who we highly admire [to] this day,” says Santos. We agreed with his work ethic and his principles and desires to accomplish the best customer service. My wife and I truly believe that he was, in fact, one of our biggest inspirations. He instilled in us values that we use to this day.”

The employee experience was invaluable, but the couple aspired to own their own store one day. The only thing that was holding them back? Money. It took seven years for the couple to come up

16 INDEPENDENT JOE • APRIL/MAY 2016

with enough money to buy their first Dunkin’ Donuts shop. At that point, Santos remembers, “We approached my wife's uncles, Carlos and Manuel, who still are current franchisees with large networks, and asked them for help finding a location.”

The family entered into a partnership to purchase two existing stores in Marlborough, Massachusetts, about an hour north of Santos’ home in Taunton. However, as excited as the new franchise owners were, taking over existing businesses come with their own unique set of challenges. That’s when you come to appreciate the selfless acts of others who are there for you.

“My cousin Peter Santos and his wife Lucy were there when we took over the stores to help us settle in. When I was short a baker and working long days to cover both shifts, Peter was there to bake for me to give me the night off to rest. When my wife was exhausted and needed some reassurance, Lucy was there for moral support. Over time, Peter was more like a brother to me.

I am forever grateful. Peter and Lucy now reside in Florida as Dunkin' franchisees.”

Right off the bat, Santos concentrated on remodeling his new shops.

“They were in terrible condition and extremely overdue for remodels and repairs,” he says. “The businesses were also not profitable.”

Santos estimates that the businesses were $80,000 in the red, but with retraining, remodeling and a dedicated work ethic, it didn’t

By Mike Hoban

take long to see a change. “Within six months we were already generating a profit,” he says. “The first and second year we had 23 percent increases each year, and the third year we had an 18 percent increase and continued to increase thereafter for as long as I was there. The increases were due to better customer service and better efficiency that came with the remodels.”

Like many franchisees who discover how to make their stores work for them, the couple always felt they could continue to grow their business.

“We were working on the fourth location when my wife and I looked at each other and realized we loved the area, but knew we were limited,” Lino Santos remembers. “There was such a saturation around the area with a lot of well-established franchisees, so the opportunities for someone like us to continue [growing] would be very limited.”

The couple sold their interest in the partnerships and decided to fly solo. It was late 1990s when they acquired their first two wholly-owned franchises in New Haven, Connecticut. Recognizing the opportunity to create more density in their territory, they built two more for a total of four locations, all the stores within a mile and a half of one another.

“At that time, New Haven was, unfortunately, a very urban environment,” he explains. “The crime rate was at a level where I

didn't feel comfortable. Our daughters were at that time starting to work in the business and we were growing concerned if something could happen to one of them.”

So they sold the Connecticut stores and acquired stores in Morris County, New Jersey. “I was looking at some of the opportunities in Florida, but I wasn’t happy with their product mixes and lease rates,” he says. “The opportunity in New Jersey was a suburban environment and the financials made more sense. It was a right fit.”

Still, the couple was facing familiar challenges. “We had to retrain personnel and make many updates, such as remodels, updating the sandwich stations, get new ovens because they weren't operationally acceptable.” Santos even replaced the old Casio cash registers with new POS (Point of Sale) systems.

“Overall, there were a lot of capital investments needed in the first twelve months, but even with those improvements, it was still profitable from day one,” he says.

While running the franchise in New Haven, Santos earned his license to sell commercial real estate. “I did that as an enhancement to complement what I do, because when I'm looking for sites to develop, the information and resources comes in handy,” he says. “I also enjoy assisting other people and enjoy the interaction I have with the commercial representation; I find it rewarding.”

INDEPENDENT JOE • APRIL/MAY 2016 17

FRANCHISEE PROFILE: LINO SANTOS As he settled in, Santos also reached out to the local communities. “We support local police and fire departments,” he says. “Even though we're a national brand, we treat each shop as a mom and pop store. I'm sure a lot of franchisees can relate that we treat our customers and try to provide more of a personal connection. They feel loyal to us, and I think that goes a long way.”

The couple’s daughters have since graduated from college and work in the family business. “I’m making acquisitions and developing more locations so I can better position my family and daughters to have their own shops in the future,” he says.

Today his entire family is fully involved in the business with Santos taking care of the administrative duties and development opportunities, including acquisitions. “Everyone has their responsibilities and roles, and it makes things a lot easier when it is not one person having to take care of all facets of the business,” he says. “My operations manager, Michael Resendes, has been with me since I took over my first 5 Benefit Street, Providence, RI 02904 Tel: 401-274-0600 Fax: 401-421-6117 E-mail: clisa@lisasousa.com

www.lisasousa.com

We Know Your Business.

Franchise Corporate & Business Real Estate & Development Employment Trust & Estate Planning

A Transactional Law Firm The Rhode Island Supreme Court licences all lawyers in the general practice of law. The Court does not licence or certify any lawyer as an expert or specialist in any field of practice.

Carl B. Lisa Sr.* and Louis A. Sousa named Legal Eagles 2010 Martindale-Hubbell ®

*AV® Rated By Martindale-Hubbell Signifying the highest standards of legal proficiency and ethics.

Lisa & Sousa Ltd. is a firm with over 50 years of collective experience representing multi generational Dunkin Donuts franchisees in the acquisition, financing, development, structuring, transitions and transfer of franchised and other businesses.

Specific examples include: transfer of ownership of 100 franchise locations in the Northeast, Southeast and other parts of the United States; sale of 48 locations in New York; purchase of 15 stores in the Northeast; acquisitions of multi‑shop networks in Florida (42, 18), Vermont (20) and Cape Cod, Massachusetts (20); Store Development Agreements (SDA’s) throughout the country; and formation of cooperative Central Production Locations (CPL’s).

Lisa & Sousa Ltd. is general counsel for the Dunkin Donuts Independent Franchise Organization (DDIFO) with a membership of approximately 2000 Dunkin Donuts franchise units nationwide.

Our clients have chosen to have an ongoing relationship with Lisa & Sousa Ltd. because of experience, proficiency, determination and attention to detail.

18 INDEPENDENT JOE • APRIL/MAY 2016

store in Marlborough. He was 15 years old, and today he’s 35. He's moved with me since I've owned my first store, to the point where my oldest daughter grew fond of him and today he’s my son-inlaw.” This year, Santos will be a grandfather.

“I couldn’t do this without my wife, she backs me up when I need help and are my ears when I need to vent,” he says. “She was in the store we just took over three days ago, cleaning, organizing and training.

Looking back on his career, Santos admits being a franchise owner is much easier today. “The business is more of a retail operation where the majority of our items, especially the baked goods, come in prepared,” he explains. “It's nice because you don't have to divide your focus between production and retail. In the past you would have to juggle the front and back of the house, but now you have more time to interact with guests.”

The family’s hard work has paid off, not just in terms of profitability and success. They’ve also been recognized twice by Dunkin’ Brands earning the Operations Excellence Award for 2013 and 2015.

“Although we do the best for our businesses and for the brand regardless if we get awards or not, it is humbling to be recognized,” he says. “I truly enjoy what I do.”

Santos knows that with any business there is always a financial risk and no guarantees, but he says that the Dunkin’ Donuts brand is a reputable and sound investment.

Santos explains that the partnerships that an entrepreneur forms are vitally important to their success. “I know when I was buying my first store it was very frustrating because the financial institution was not familiar with our business, so you spend a lot of time discussing it over and over. The fortunate thing for me is I found Northern Bank, which does a lot of business with Dunkin’

franchisees,” and helped expedite the lending process because of their familiarity with the brand. “The way I look at it, every minute, every hour that you have is important. You don't want to spend valuable time discussing your business when it's not producing anything,” he says, echoing what he could have read in a Business Administration course at any top university.

“The general public seems to think you just turn the key and start making money, but it doesn't work that way,” he says. “Like any other business, you make the investment and you have to work at it. You just can't sit back. No matter how many stores you have, you have to be involved in the business and [monitor] every step of the way so that things don't fall apart or divert off course.”

•

INDEPENDENT JOE • APRIL/MAY 2016 19

Northeast Regional Dunkin’ Donuts

FRANCHISE OWNERS MEETING Tuesday, March 1st Sheraton Framingham Hotel

DDIFO members from the Northeast Region recently gathered in Massachusetts for a spirited and informative discussion about food safety and the news media.

Kevin Scott, a certified food safety instructor, offered an insightful look at proper food safety techniques for Dunkin’ Donuts franchise owners.

DDIFO is now collaborating with the National Restaurant Association to offer their ServSafe food safety exams. Scott is ServSafe’s national accounts manager.

Food safety has become a more critical issue in the wake of multiple food safety scares at quick service restaurants (QSRs) like Chipotle. The issue has generated tremendous media interest and DDIFO was pleased to welcome veteran Boston news anchor Maria Stephanos to lead a pointed discussion about how the media reports on issues affecting restaurants and small business.

20 INDEPENDENT JOE • APRIL/MAY 2016

Stephanos noted that stories about unsafe food conditions will always prompt major media coverage. One of the challenges franchisees face, she said, is how to provide information for reporters when direct communications with the media is forbidden by the brand. Consumers turning to the media for information could assume that because a particular franchisee refuses to comment or allow reporters inside their restaurant, he or she is blocking the release of information. She said, in the case of Dunkin’ Donuts, there is so much goodwill toward the brand that consumers are likely to be more forgiving, unless and until there is a serious food safety incident involving Dunkin’.

Technology Keeps Improving Dunkin’ Operations K

en Blum, who owns SMB Donuts and operates 20 Dunkin’ Donuts franchises in the suburbs of Cleveland, Ohio, found one of his stores drowning in a donut overrun one day. To help them move before they went stale, he used the store’s digital outdoor sign to get them sold quickly.

“We had installed a Watchfire sign in 2008 in our Cuyahoga Falls, Ohio shop and right away we had success with it,” he says. “If we had too many donuts, we could do a spontaneous, ‘All donuts 50 cents sale, 4:00 p.m. to close’ sale advertised on the outdoor sign.”

That day, they sold out within an hour.

It’s just one example of how technology is evolving to help Dunkin’ Donuts franchises improve operations and stay relevant in an intensely competitive QSR marketplace. In this issue of Independent Joe, we examine a handful of technological advances in various fields all critical to a franchisee’s success.

Illuminating the way Today’s digitized signs, similar to digital billboards, can be programmed by franchise owners to advertise specials, sales, and other notices to people driving by. “Instead of putting plastic changeable letters on letter boards, you have this option,” says David Watson, Watchfire’s Director of Corporate Programs. Franchisees can communicate messages such as sales on breakfast foods, and the sign can automatically change to advertise items at lunch, after school, and late night.

With such signs, “you’re reaching everybody and giving them an opportunity to pay attention to a sign, and to give messages that are most likely to promote at a certain time of day,” says Watson. The

signs have software that can be programmed and set it years in advance if need be. “You can set it and forget it.”

Blum, the Ohio franchisee, says the signs have given his stores a tremendous boost because the technology gives him more control of what he is saying to his customers. He now has digitized signs in 14 of his 20 shops.

“We have 25,000 cars driving by every day seeing our advertising,” he says. “When we bought the first sign, it was about $15,000 with a five-year warranty. It was $3,000 a year, and that was about what it cost us to do a direct mail campaign.

For the cost of one direct mailing, we had 365 days of advertising. We’ve been hooked ever since.

“Unfortunately, some municipalities do not allow them,” and some that do impose other restrictions, Blum says.

“Most towns don’t want to have a flashy ‘Vegas’ sign. In some places, we can only change our messages a certain amount—maybe three times a day. In other towns, we have no restrictions.”

And, in every case, Blum says, the signs have helped to improve sales.

“When you think about the investment you make in your business, this is such a powerful

By Cheryl Alkon tool to drive sales.”

A key change in sign technology is the move from fluorescent bulbs to LED bulbs, which help franchisees save money and energy, according to Bill Gavigan, Sr., of New Bedford, Mass. based Poyant Signs.

“We do a lot of retrofits, where we go in and service a Dunkin’ Donuts location and all its outside lighting. We go in and do an energy audit and, in most cases, we contract the servicing electric company for rebates.” And Gavigan says in most cases the local electricity provider will cover half the cost of switching to longer lasting, more efficient LED bulbs from old-style fluorescent bulbs.

“Typical signs need to be serviced every one and a half to two years with LEDs, and draw roughly 20-25 percent of the power a fluorescent bulb would draw, so there’s big savings there,” says Gavigan.

“With LEDs, the signs should be able to go 8-10 years, and that’s the rotation for remodels.

Back Office Automation Nish Parekh knows a lot about the back office piece of running a quick service restaurant. He is not only

INDEPENDENT JOE • APRIL/MAY 2016 21

TECHNOLOGY UPDATES

a Dunkin’ Donuts franchise owner, he is also a principal of Neovision, a Cranbury, New Jersey-based tax and accounting services firm. Franchisees representing over 100 quick service restaurants, including Dunkin’ Donuts, use Neovision for their accounting, bookkeeping, payroll and tax returns.

We handle all their numbers and financial reporting while they focus on business in the front of the house,” says Parekh. “We can take care of everything from bill payment to check writing to bank reconciliation to reporting a franchise’s financials to the franchisor to remain in compliance with the franchisor requirements he says.

“There are no limitations.”

Through the years, Parekh has seen systems change where franchises used Point of Sale (POS) systems and owners had to email, fax, or send their end-ofthe-day or end-of-the-week reports by snail mail to Neovision’s offices. Today, advances in information technology allow the company’s computer to automatically interface with a franchise’s Radiant/BlueCube system, as well as the DCP portal and various central kitchens. As a result, Neovision can download reports directly from the portals, reducing any transposition errors so often associated with manual data entry and saving valuable time. “From the franchisee’s perspective, they don’t have to do anything more from their end,” says Parekh.

Some franchise owners “still want to do things the old way, but we want to help them realize we can help them do the same thing with less input,” says Parekh.

“As they see the value, they are coming around.”

Advances in information technology

22 INDEPENDENT JOE • APRIL/MAY 2016

throughout the accounting field help busy franchise owners stay ahead of the curve, and better manage their stores notes Robert Costello, of the Adrian A. Gaspar & Company, which provides small business accounting and tax services for Dunkin’ Donuts franchise owners. He says they “can pay their bills, and be linked to our general ledger system, access histories, and take sales and payroll system information from Radiant to another software we’ve helped develop, and download it to the system.” Costello notes many of their clients – whether in New England states, New York, New Jersey, Pennsylvania, Wisconsin or Florida – opt for the “soupto-nuts” service.

But, even in this day of technical advancement, Costello says some franchisees still prefer a low-tech approach to their tax and accounting. “Although we prefer all clients use our computerized system, we can accommodate all our clients.”

Payment Goes Digital Perhaps the most important technological breakthrough for Dunkin’ customers is how they pay for their beverages and snacks. “Today, the big movement is paying for everything on your phone,” says Neal Faulkner, who operates 26 Dunkin’ franchises in Massachusetts and Rhode Island and is co-chair of the National DCP’s Information Technology (IT) committee. “We are probably seeing up to 15 to 20 percent of all transactions using the phone. That’s up from maybe zero to two percent just two years ago. And it’s absolutely going to grow.”

Since its launch in 2012, Dunkin’s Mobile App has been downloaded more than 16 million times enabling customers to securely connect their credit or debit to their smartphones for instant payment and access to DD Perks Rewards, which boasts over 4.3 million members.

With Wi-Fi, people can sit in the store in the afternoons and have meetings on their laptops, which is a different feeling than how it was five years ago when you just had people running in and out.

Paying using an app is “about making the customer happy,” says Faulkner. “It’s more about retaining customers,” than just having the customer spend more.

Faulkner, also points out wireless technology is improving the customer experience at every Dunkin’ Donuts restaurant “With Wi-Fi, people can sit in the store in the afternoons and have meetings on their laptops, which is a different feeling than how it was five years ago when you just had people running in and out. We encourage it, because it keeps people in the afternoons when in our business things slow down. It’s a benefit for us, absolutely.”

Clear Conversations Lead to Faster Service, More Sales Perhaps nothing has improved the drive-thru experience for Dunkin’ Donuts customers and employees more than digital communications technology. “Digital

technology has enabled us to provide Dunkin’ Donuts customers with terrific audio quality, which enables them to have better communications,” according to Michael Murdock, sales manager at RF Technologies of Buffalo Grove, Wisconsin, one of several communications technology providers which include 3M, DTT Surveillance and New England Drive-Thru Communications.

RF Technologies provides surveillance, timer systems, order confirmation displays and music in addition to noise-canceling headsets, which Murdock believes speed up service at the drive-thru.

“Increased speech clarity helps with repeat business and higher revenue,” he says.

Angela Bechard, of Manchester, NHbased New England Drive-Thru Communications explains digital technology improves the sound quality by removing the background noise. “Being able to hear the customer clearly the first time saves an enormous amount of time at the drivethru, and our timing systems also provide a valuable tool for the Dunkin’ Donuts owners to track the whole drive-thru experience for the customer.”

There’s no question, advanced technology in signage, accounting, point-of-sale transactions and communications have changed the way franchisees do business, for the better. But, with the improvements also come some learning curves.

“Technology is a two-headed coin,” says Faulkner. “On one hand, it gives you great information about how you’re selling. On the other, it takes longer to ring up a sale.

It can be confusing for training versus the simplicity of the old style. But honestly, none of us would ever go back.”

•

INDEPENDENT JOE • APRIL/MAY 2016 23

2015

BUSINESS MEMBER

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

ACCOUNTING

Adrian A. Gaspar & Company, LLP, CPAs

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

Brendon Pierson

Jessica L. Worthy 732-681-4800 • jworthy@brendonpierson.com 6333 North State Highway 161, 4th Fl., Irving TX 75038 www.brendonpierson.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

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

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

Marcovich, Mansour & Assoc. Inc.

BUILDING

Neovision Consulting Inc.

Steven & Brian Ribeiro 465 Sykes Rd, Fall River, MA 02720 508-677-0401 • brianr@homelandbuilders.com www.homelandbuilders.com

Cynthia A. Capobianco, CPA

Joseph Mansour 401-334-9099 • jmansour@mm-cps.net 640 George Washington Hwy., Lincoln, RI 02865 Nish Parekh 609-531-4444 • info@neovisioncpa.com 1246 South River Road, Ste. 101 Cranbury, NJ 08512 www.neovisioninc.com

Nimble Accounting Software

Subbu Krishnan 480-434-9936 • subbu@nimbleaccounting.com 200 Motor Parkway, Ste. D-26, Hauppauge, NY 11788 www.nimbleaccounting.com

Homeland Builders

Persona Signs, Lighting, Image

Susan Koelzer 700 21st Street SW, Watertown, SD 57201 800-843-9888 x390 • skoelzer@personasigns.com www.personasigns.com

Poyant Signs

Steven Song Marketing Door to Door

Steven Song • 626-423-2660 steven@marketingD2D.com 70 South Munn Ave., E. Orange, NJ 07018 www.marketingD2D.com

Watchfire Signs

David Watson • 205-542-7881 David.Watson@watchfiresigns.com 1015 Maple Street, Danville, IL www.watchfiresigns.com

BUSINESS BROKER

Trivanta, LLC

Mark Wheeler 512-473-8322 • mark@trivanta.com 807 Nueces St., Austin, Texas 78701 www.trivanta.com

COMMUNICATIONS

Comcast Business Services

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

Time Warner Cable Business Class

Tricia Petway 919-654-4115 • tricia.petway@twcable.com 4200 Paramount Parkway, Morrisville, NC 27560 bc2.timewarnercable.com/nationalsales/copartner/dd1.html

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

24 INDEPENDENT JOE • APRIL/MAY 2016

2015

Directory of Business Members COST RECOVERY

Performance Business Solutions, LLC

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

ENERGY

Berkshire Bank

David L. Sabourin 508-329-7851 • dsabourin@berkshirebank.com 303 Turnpike Road, Westborough, MA 01581 www.berkshirebank.com

BMO Harris Bank N.A.

BUSINESS MEMBER

Eastern Bank

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

Fidelity Bank

Plotwatt, Inc.

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

FINANCE

Analytix Solutions

Sue Hacker Nelson 317-258-0983 • SNelson@BankUnited.com 215 Schilling Circle, Suite 100, Hunt Valley, MD 21031 www.bridgefundinggroupinc.com

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

City National Bank

Joyal Capital Management Franchise Development

Bank of America/Merrill Lynch

David Sandoval 213-673-9026 • david.sandoval@cnb.com 555 S. Flower Street. Los Angeles, CA 90071 www.cnb.com/franchise-finance/

Adam Gardiner 401-297-5439 • adamgardiner@plotwatt.com 1715 Six Gables Road, Durham, NC 27712 www.plotwatt.com

Satish Patel 781-503-9000 • snpatel@aixsol.com 800 West Cummings Park, Ste. 2000, Woburn, MA 01801 http://insight360.aixsol.com/Dunkin/ Earl Meyers 585-546-9162 • earl.w.meyers@baml.com 1 East Ave., Rochester, NY 14450 www.bankofamerica.com

Bridge Funding Group

Direct Capital Franchise Group

Douglas Solomon 603-433-9413 • DSolomon@directcapital.com 155 Commerce Way, Portsmouth, NH 03823 www.franchise.lendedge.com

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

First Franchise Capital

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

Marlin Franchise Finance Group

Chris Holland 856-505-4206 • cholland@marlinfinance.com 300 Fellowship Rd, Mount Laurel, NJ 08054 www.marlinfinance.com

Learn more at watchfiresigns.com/donuts

INDEPENDENT JOE • APRIL/MAY 2016 25

2015

BUSINESS MEMBER

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

Pacific Premier Franchise Capital

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

Santander Bank

Peter J. DiFilippo 401-752-1060 • peter.difilippo@santander.us One Financial Plaza, Providence, RI 02903 www.santanderbank.com

TCF Franchise Finance

HIRETech

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

Paychex

York Risk Services Group

Snagajob

LEGAL

Diana Devivo 212-239-9400 x5142182 • ddevivo@paychex.com 911 Panorama Trail South, Rochester, NY 14625 www.paychex.com

Bill Johnson 952-656-3268 • wjohnson@tcfef.com 11100 Wayzata Blvd., Ste. 801, Minnetonka, MN 55305 www.tcfef.com/franchise

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

TD Bank

INSURANCE

Chris Capecci 732-966-6868 • Christopher.Capecci@td.com 535 East Crescent Avenue, Ramsey, NJ 07446 www.tdbank.com

United Bank

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

HUMAN RESOURCES Granite Payroll Associates

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

Wells Fargo Insurance Services

Lindsay Conderman 281-558-7100 x123 • lconderman@hiretech.com 1500 S. Dairy Ashford Rd. Ste. 240, Houston, TX 77077 www.hiretech.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

IOA Insurance Services

Angela Newman 909-786-3645 • Angela.Newman@ioausa.com 3281 E. Guasti Rd., Ste. 400, Ontario, CA 91761 www.ioausa.com

Lori Ross • 337-230-5437 Lori.Ross@yorkrsg.com 99 Cherry Hill Road, Ste. 102, Parsippany, NJ 07054 www.rfcp1.com

Lisa & Sousa Attorneys at Law Ltd.

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

Marks & Klein LLP

Justin Klein 732-747-7100 • justin@marksklein.com 63 Riverside Avenue, Red Bank, NJ 07701 www.marksklein.com

Paris Ackerman & Schmierer LLP

David Paris 973-228-6667 • david@paslawfirm.com 103 Eisenhower Parkway, Roseland, NJ 07068 www.paslawfirm.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

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26 INDEPENDENT JOE • APRIL/MAY 2016

2015

Directory of Business Members

BUSINESS MEMBER

OPERATIONS

3M Company

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

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

BioHiTech America

Lisa Giovannielli 845-262-1081 • lgiovannielli@biohitech.com 80 Red Schoolhouse Road, Chestnut Ridge, NY 10977 www.biohitech.com

Bunn-O-Matic Corporation

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

MCD Innovations

Cardtronics

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

Carrier Corp

Angela Bechard 603-475-2046 • angela@nedrivethru.com 999 Candia Rd. Ste. 7, Manchester, NH 03032 www.nedrivethru.com

Davis Bancorp

Joey Agee 404-952-2745 • joey.agee@onsiteris.com 2010 Avalon Pkwy, Ste 400, McDonough, GA 30253 www.onsiteris.com

DTT Surveillance

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

Ecolab

Michael Murdock 847-495-7350 • michaelm@rftechno.com 330 Lexington Drive, Buffalo Grove, IL 60089 www.rftechno.com

HME Drive-Thru Headsets

Kyle Clendennen 785-295-6664 • kyle.clendennen@safetstep.com 3231 Southeast Sixth Ave, Topeka, KS 66607 www.payless.com/safetstep-1/

Tom Spooner 973-452-4131 • tspooner@Cardtronics.com 628 Route 10 - Ste. 8, Whippany, NJ 07981 www.cardtronics.com Bob Eckweiler 973-222-6742 • Bob.Eckweiler@carrier.utc.com 3 Hollyhock Way, Newton, NJ 07860 www.carrier.com Richard Davis 847-998-9000 X4466 • rdavis@davisbancorp.com P.O. Box 1690, Barrington, IL 60010 www.davisbancorp.com Mira Diza 800-933-8388 • mdiza@dttusa.com 1755 North Main Street, Los Angeles, CA 90031 www.dttusa.com Arliene Bird arliene.bird@ecolab.com 8300 Capital Drive, Greensboro, NC 27409 www.ecolab.com/Businesses Brady Campbell 858-535-6034 • bcampbell@hme.com 14110 Stowe Drive, Poway, CA 92064 www.hme.com

New England Drive-Thru Communications

OnsiteRIS, Inc.

Pentair Filtration & Process

R.F. Technologies

safeTstep by Payless Shoesource

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

Thank You to Our Busin ess M embers!

INDEPENDENT JOE • APRIL/MAY 2016 27

A LOOK ON THE LAW

BY PETER BENNETT, BENNETT LAW FIRM

Court Examines Whether Managers are Exempt from Overtime W hen I was a child, I once heard my father tell a client: “If you are looking for loyalty, then you will find it in the dictionary.” Decades later this exchange still sticks with me. No matter how well we treat our employees, it takes very little for one of them to turn on us and find a reason to sue. Classifying managers as exempt from overtime is a fertile area for such lawsuits.

duties. He visited the restaurants weekly and was involved in the hiring and firing of staff.

Although both managers were “in charge” of their restaurants, they spent the vast majority of their time engaged in regular staff duties. Converting their salaries to an hourly rate equivalent, they both made close to the same amount of money as the line staff and had little decision-making Frequently, employers assume that paying opportunities at work as well. One mana manager a significant salary and having ager stated in his complaint that he did that person manage two or more employnot have time to actually be the manager ees is enough to meet the executive exemp- as he was “on the floor 90 percent” of the tion from the overtime pay requirements time, serving customers, cleaning inside of the Fair Labor Standards Act (FLSA). and out of the building, landscaping, and However, to be exempt, management must covering shifts. He stated that he could be a primary duty and the manager must not delegate clean-up or shift coverage be able to influence or have authority over because of a lack of staff. personnel decisions. Overtime exemption claims are costly to defend since they tend The Court of Appeals focused on the to be fact intensive. Depending upon the primary duty test in reaching its decistate, these claims can go back as far as six sion that a trial would be necessary to years with exposure for back pay, liquidated resolve this dispute. The primary duty (multiple) damages, interest and attorneys’ test looks at several factors. First, what is fees. A recent decision from the United the “relative importance” of the manager’s States Court of Appeals in Boston highexempt and other duties? While the job lights the potential for these cases to occur. descriptions and other written policies make clear that managing is the expectaAn established and successful Dunkin’ tion, the managers’ testimony established franchisee was sued by two store managthat their manual work, such as serving ers in Massachusetts. Each had agreecustomers and cleaning, also was “critical ments that stated that they were to work to the success of the restaurant,” and likely “no less than a six-day, 48-hour work created a question as to whether they were week,” but they worked well in excess of 50 actually performing managerial and nonhours per week. Both admitted that while managerial duties simultaneously. Second, management was a job duty for them, it the Court analyzed the amount of time was not their primary duty (which is the spent on managing and found the evidence statutory requirement), as a result of liminconclusive. Third, the Court reviewed ited staffing and the general responsibilithe level of direct supervision and manageties of the stores. They did not have input ment involved in their jobs. in regard to hiring, firing, or promotion of staff and claimed that they were, for the Again, the owner and the two managers most part, just basic employees. Obvihad differing views of how independently ously, the owner saw things differently. the stores were actually managed. Finally, the Court looked at the relationship Supervising the two managers was a disbetween the managers’ rate of pay and the trict manager. The district manager was rate of pay earned by the hourly employees responsible for seven stores in the area, they managed. For the sake of comparison, and it was he who coordinated staffing lev- the Court reviewed relative rates of pay by els, ordered the baked goods and arranged converting the managers’ salaries to hourly maintenance, among other management rates based on the hours the managers

28 INDEPENDENT JOE • APRIL/MAY 2016

claimed they worked. They were close enough to trigger at least suspicion on the part of the Court regarding the applicability of the exemption.

In requiring that this matter go to trial, the Court did not set “black letter law” for the percentages of time spent on various duties.

Even though one manager testified he spent 90 percent of his time performing the same tasks as hourly employees, the Court said that it did not necessarily mean that the manager was not primarily performing managerial duties, such as coaching and training workers, at the same time. However, the Court found that the percentage could be “significant in evaluating whether a manager is able to perform supervisory and nonexempt tasks concurrently.”

This case likely arose because the relationship between the owner and the managers broke down and the managers sought revenge. Even if the owner wins the trial, he loses. The expense incurred in a case like this can easily top six figures. Getting exemption status correct can be tricky.

According to the U.S. Department of Labor (DOL), there were over 4,500 FLSA lawsuits filed last year regarding misclassified employees. With millions of dollars potentially at stake, it is critical that employers be extremely cautious and rely on their experts to guide them through this subject.

As widely reported, the Department of Labor (DOL) is expected to issue significant new regulations later this year regarding eligibility for this exemption. The changes will include a dramatic increase in the minimum salary that an exempt employee must earn, and also may include more stringent requirements as to the job duties requirement, even if the increased minimum salary amount is satisfied. Being advised in advance by a lawyer who specializes in these issues is crucial.

•

Peter Bennett is president of the Bennett Law Firm, with offices in Boston and Portland, Maine and represents management in areas including labor law and employment relations.

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