Independent Joe #38 June/July by Dunkin' Donuts Independent Franchise Owners

June/July 2016

The Magazine for D D

Independent Franchise Owners

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

CA S H I N

FROM THE EXECUTIVE DIRECTOR Since joining DDIFO, I’ve encouraged many to join and strengthen the organization even as they strengthen their own prospects for success. Thankfully, many of them have. Others didn’t recognize the need for an independent franchisee association, telling me, “Relations with the brand are good,” or “We don’t need insurance from the brand.” I’ve preached that an independent franchisee association is in the best interest of all franchise owners—sometimes to no avail. Recently I came across an old poem that speaks to the importance of prevention, “The Ambulance Down in the Valley,” by Joseph Malins (1895). I want to provide some relevant citations here as it may have some application in the context of DDIFO. ‘Twas a dangerous cliff, as they freely confessed, though to walk near its crest was so pleasant; But over its terrible edge there had slipped a duke and full many a peasant. So the people said something would have to be done, but their projects did not at all tally; Some said, "Put a fence ’round the edge of the cliff," some, “An ambulance down in the valley.”

Earlier this year, DDIFO undertook its annual review of the 2016 Dunkin’ Franchise Agreement, to ensure that we are aware of any changes and how they would impact franchisees. Our analysis found many significant changes to the franchise agreement and other important documents. But the cry for the ambulance carried the day, for it spread through the neighboring city; A fence may be useful or not, it is true, but each heart became full of pity For those who slipped over the dangerous cliff; and the dwellers in highway and alley Gave pounds and gave pence, not to put up a fence, but an ambulance down in the valley.

While some changes will insulate the brand from the new “joint employer” ruling, others are more far reaching and limit your independence as a franchisee.

"For the cliff is all right, if you’re careful," they said, "And, if folks even slip and are dropping, It isn’t the slipping that hurts them so much as the shock down below when they’re stopping." So day after day, as these mishaps occurred, quick forth would those rescuers sally To pick up the victims who fell off the cliff, with their ambulance down in the valley.

But the reality is that their unilateral changes went far beyond protecting Dunkin’ from the new joint-employer definition. In fact, in certain situations, Dunkin’ reserved the right to force you to move your location or forfeit your renewal, even if you own your current location. Similarly, the new agreement expanded the brand’s right of first refusal in the case of transfers to include other assets beyond the franchise—assets like your real estate. Then an old sage remarked: "It’s a marvel to me that people give far more attention To repairing results than to stopping the cause, when they’d much better aim at prevention. Let us stop at its source all this mischief," cried he, "Come, neighbors and friends, let us rally; If the cliff we will fence, we might almost dispense with the ambulance down in the valley.

In the case of a termination under the new provisions, Dunkin’ said it would pay franchisees the original cost of furniture, fixtures and equipment, less depreciation computed on a straight-line 10-year basis. That’s a lot of money out of your pocket. "Oh he’s a fanatic," the others rejoined, "Dispense with the ambulance? Never! He’d dispense with all charities, too, if he could; No! No! We’ll support them forever. Aren’t we picking up folks just as fast as they fall? And shall this man dictate to us? Shall he? Why should people of sense stop to put up a fence, while the ambulance works in the valley?”

Other provisions in the 2016 Franchise Agreement expanded Dunkin’s options for finding a favorable venue and/or legal precedent in the event of a termination, essentially requiring you to submit to arbitration instead of seeking justice in

court. Yet, at the same time, Dunkin’ can elect to pursue any dispute in court if it chooses. And, since the agreement says you have to indemnify the company, you would likely wind up paying their legal costs anyway. But the sensible few, who are practical too, will not bear with such nonsense much longer; They believe that prevention is better than cure, and their party will soon be the stronger. Encourage them then, with your purse, voice, and pen, and while other philanthropists dally, They will scorn all pretense, and put up a stout fence on the cliff that hangs over the valley.

The changes cited here – and others – which Dunkin’ Brands made without the input of its franchisee community, or its Brand Advisory Council, have now been shelved while a process is worked out to negotiate future revisions to the document. But it’s important to note, those changes made unilaterally by the brand would still be in effect, and you would be signing that new franchise agreement today had DDIFO not undertaken its annual review. The new document was halted specifically because this organization not only exists to protect franchisee interests; it also identifies and publicizes those changes. That’s the good news. The bad news is that a number of them were also incorporated in other operable documents and hence, are now in force. Better guide well the young than reclaim them when old, for the voice of true wisdom is calling. "To rescue the fallen is good, but ’tis best to prevent other people from falling." Better close up the source of temptation and crime than deliver from dungeon or galley; Better put a strong fence ’round the top of the cliff than an ambulance down in the valley.

No doubt, there will be a process developed over the coming months that will involve some franchise owner representation. One of the many questions that will accompany that process is will they want to strengthen the fence or gas up the ambulance. Ed Shanahan DDIFO Executive Director

INDEPENDENT JOE • JUNE/JULY 2016 1

SUB HEADLINE

CONTENTS

Executive Director Message • • • • • • • • • • • • What’s Brewing: A Look at State Issues Around the Footprint • • • • • • • • Hall of Fame Committee to Select 2016 Inductees• • • • • • • • • • • • • • • • • • • • • DDIFO Does its Job• • • • • • • • • • • • • • • • • • • ANC

HISE O W N

ANC

HISE O W N

5 8 9

12 Dunkin’ Donuts tests “Ready-to-Go” Kiosks Experts say Grab-and-Go appeal to busy consumers • • • 12 Franchisee Profile: Alex Fernandez• • • • • • • • • 16 What Do Customers Think of the New Menu? • • • • • • • • • • • • • • • • • • • • • • 20 Directory of Sponsors • • • • • • • • • • • • • • • 24 Legal: New Federal Rules Mandate Overtime Pay for More Employees • • • • • • • • • • • • 28

16 2 INDEPENDENT JOE • JUNE/JULY 2016

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June/July 2016 Issue #38 Independent Joe® is published by DD Independent Franchise Owners, Inc. Editors: Edwin Shanahan, Matt Ellis Contributors: Cathy Cassata, Stefanie Cloutier, 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 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.

WHAT’S BREWING A LOOK AT STATE ISSUES

AROUND THE FOOTPRINT By Scott Van Voorhis It would be an understatement to say these are challenging times for the restaurant business, and, in particular, for the quick service sector. In fact, Dunkin’ franchise owners find themselves in the midst of a veritable superstorm of new government-mandated overtime rules, minimum wage hikes, family-leave requirements and now “voluntary” sodium disclosures as well. Possibly the biggest change franchisees face right now is the way government is changing the rules on who gets overtime. It will force franchise owners to think long and hard on how to comply while keeping costs down.

depressed,” says John Gordon, principal at Pacific Management Consulting Group and DDIFO’s restaurant analyst about the growing pressures on franchise owners. “It is troubling all this is happening at the same time wages have been going up.”

making less than $47,476 a year overtime pay on any hours over 40 worked in a week. That is more than twice the current limit of $23,660, or $455 a week.

Overtime rules loom The Obama Administration’s new overtime rules are now expected to take effect this coming December.

However, pressure from the restaurant industry – and some timely lobbying – has helped blunt the blow a bit. In fact, the requirements are slightly lower than earlier versions, which had pegged the threshold at roughly $50,000 a year.

Under these new rules, franchise owners will be on the hook to pay any manager

In another change, franchise owners are also allowed to count bonuses towards

The battle over the minimum wage has also escalated, with activists on a roll. No longer is it just deep-blue cities voting here and there to hike the minimum; now it’s entire states. On top of it all, an improving economy has made it more difficult to land the best employees, forcing franchise owners to up pay to keep their stores staffed and the donuts, coffee and sandwiches rolling. “The franchise owners I have talked to are

INDEPENDENT JOE • JUNE/JULY 2016 5

WHAT’S BREWING

meeting the manager pay threshold, capped at 10 percent of the overall salary. Gordon says he has discussed the idea of including bonus pay in the calculations with federal labor officials. Even so, many franchise owners will be faced with a dilemma when it comes to the pay of their store managers, especially if they are below the $47,476 mark. Dunkin’ is one of a number of quick service chains, including Burger King, that pay their store managers less than $50,000 according to a recent Piper Jaffray report that tallied up the salaries listed on Glassdoor. One option, Gordon noted, will be to boost the pay of managers already close to the $47,446 threshold. That may be particularly compelling if the manager in question is already working long hours, with 60 to 70 hours a week not uncommon in the restaurant business. (For the legal perspective on federal overtime regulations, turn to page 28)

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But as costs go up, franchise owners will need to come up with new strategies to boost the amount of revenue their restaurants bring in per customer. One good place to start is to ban down selling, such as discouraging customers away from ordering items, even if well intentioned. “If someone is willing to pay more, let’s not overthink it, let’s just take the money,” Gordon urges.

That opportunity is lost once you hit the door – you may not get them back later. Sure such proposals were concerning for franchise owners, but it didn’t seem like the start of a national movement, either.

“That opportunity is lost once you hit the door – you may not get them back later,” Gordon says.

But union activists – in particular Service Workers International Union – with their “Fight for $15” wage push, have managed to take what was a scattering of local efforts and transform them into a national campaign. Two of the biggest states in the country, California and New York, both took the $15 an hour plunge this spring.

Wage hikes gaining momentum It wasn’t so long ago that just a few liberal leaning cities like San Francisco and Seattle were talking about boosting the minimum wage.

The Golden State next year will start phasing in a series of increases that will top out at $15 an hour in 2022 for businesses with more than 25 employees and 2023 for smaller businesses.

There also needs to be a great push to increase “food attachment,” convincing the customer in for a $2 dollar coffee to add a donut, bagel or sandwich.

The Empire State followed California with its own big hike, raising the minimum to $15 an hour in New York City by 2019 for businesses with 11 or more employees and 2020 for smaller firms. The suburbs will follow in 2022, with more rural upstate New York slated to hit $12.50 in 2021. After a review of the law’s impact, that number will rise to $15 an hour. Now Washington D.C. is preparing to join the growing list of cities and states jumping on the $15 an hour bandwagon. D.C. city councilors voted in early June to boost the minimum to $15 by 2020. Currently at $10.50, it was already scheduled to hit $11.50 this July. Under the measure just passed by the City Council, it will increase in phases until it reaches $15. Nor is it just the minimum wage states are racing to outdo each other in raising. New York’s minimum wage deal also includes a provision guaranteeing workers across the state 12 weeks paid family leave. That policy will also be phased in,

rising from eight weeks at 50 percent pay to 12 weeks in 2018, and then to 67 percent of pay in 2021. That would make it one of the most generous policies in the country, with New Jersey and California offering six weeks, and Rhode Island four. But Washington, D.C., in the aftermath of the wage hike vote, is now eyeing a proposal that would guarantee workers four months family leave. Salt the latest FDA target What with wake hikes and new overtime rules, there’s never a dull moment these days for franchise owners. Looking to spice things up even more, the Food and Drug Administration now wants restaurants to start cutting the amount of salt in the food they serve. The FDA recently released “voluntary” guidelines calling upon restaurants, food service companies and manufacturers

to reduce the sodium in 150 different categories of food over the next decade. The guidelines call for a long-term reduction in sodium in breakfast sandwiches from 736 milligrams today down to a long-term goal of 440. The FDA wants to wring sodium out of bagels as well, with hopes of pushing the sodium count down to 320 from 471 today. And donuts? They would see their sodium content slashed in half, from 365 to 180, under the new FDA guidelines. The agency’s ultimate goal: Reduce the average American’s sodium consumption form 3,400 milligrams today to 2,300. Looking ahead The changes coming down the pike for franchise owners are nothing short of fast and furious these days. Decisions are being made each day by federal regulators and state and local officials that could impact your bottom line. The only way to stay ahead of the curve is to stay informed. So follow us here and in the weekly email newsletter, “Small Regular, No Sugar.”

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INDEPENDENT JOE • JUNE/JULY 2016 7

Hall of Fame Committee to Select 2016 Inductees F

all will be here before you know it and, once again, DDIFO will recognize the pioneers and visionaries who helped build Dunkin’ Donuts into the powerhouse brand it is today. The 2016 Hall of Fame Dinner and Awards Gala will be held on October 25 in conjunction with the DDIFO National Conference (October 24 & 25) at Foxwoods Casino and Resort in Mashantucket, Connecticut. According to franchise owner John Motta, who is chairman of the Hall of Fame Selection Committee, “We are hoping to get nominations from across the country, as this brand is well represented throughout the country.” Started in 2011, the DDIFO Franchise Owners Hall of Fame honors franchisees and others who made important contributions to the Dunkin’ Donuts system. The inductees include, from 2011: John Boujoukos, Antonio Couto, Jose Couto, Ralph Gabellieri, John Henderson, George Mandell and Dunkin’ Donuts founder William Rosenberg; from 2012: Manuel Andrade, Brooks Barrett, Jason Dubinsky, John Rader, Robert Rosenberg and actor, Michael Vale famously known as “Fred the Baker;” from 2013: Tony Andrade, Helen D’Alelio, Carl Lisa, Amrit Patel, Dave Segal and Mark Silverstein; from 2014: Carlos Andrade, Joe Batista and Bill Daly; from

8 INDEPENDENT JOE • JUNE/JULY 2016

2015: John Cadete and Guido Petrosinelli.

deserve recognition in the Hall of Fame.

As his committee prepares to begin the careful task of reviewing nominations for the next class of inductees, Motta says there are certain criteria that must be met. “We look at their accomplishments over time so a person in the system for 35 years has a better chance of being selected than someone who’s been in for only five years. But, it’s not about the size of someone’s network or their revenue; it’s what you contributed to grow this brand. You could have only one store but if you’re active in the system, serving on committees and supporting local activities in the community, we would strongly consider you.”

“We will begin the nominating process in the next few weeks and we welcome nominations from any franchisees that are members of the DDIFO.” Motta says you can email him at soccerjpm@aol.com to discuss the nomination process.

Motta says there are many franchisees from across the Dunkin’ system who

“This is a great opportunity to recognize the pioneers of our system, the ones that planted the seed to get this brand and all of us franchisees to where we are today,” Motta says. So much of what makes Dunkin’ Donuts a great brand is its history and its people. The DDIFO Franchise Owners Hall of Fame is where much of that rich history is celebrated and where the visionaries who are shaping tomorrow’s successes will be honored.

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DDIFO Does its Job A

sk any Dunkin’ Donuts franchise owner who was in the system ten years ago about the level of trust that existed between franchisee and franchisor, and he or she will have a story to tell. At that time, Dunkin’ Brands had more lawsuits pending against its franchisees than any other quick service restaurant system. And, while relations improved dramatically when Nigel Travis and his team came on board, the release of the 2016 franchise agreement has made some within the Dunkin’ franchisee community stop and take pause. The turbulence that existed at the end of Jon Luther’s reign as CEO in the latter years of the 2000s highlighted for many franchise owners – especially second generation operators who were assuming a larger role in their family’s operations – the need to better protect their rights to harvest and transfer wealth derived from their hard work. The distrust that existed at the time gave franchisees the resolve to push back. They leaned heavily on their independent franchisee association and, as a result, Dunkin’ agreed to a more collaborative process. “When Nigel came in there were pending lawsuits and bad feelings. He went on his listening tour and heard loud and clear that we needed improvement in the [franchise] agreement,” says DDIFO attorney Carl Lisa, of the Providence law firm Lisa

By Matt Ellis

& Sousa. “2011 was a turning point and we were able to negotiate many substantive changes to the agreement.” Perhaps that is why Lisa was so surprised by the provisions he found in Dunkin’s new franchise agreement. DDIFO engages Lisa to regularly review all new Dunkin’ franchise agreements and report any changes or irregularities. After looking through the 2016 version, he characterized it as “a step backwards,” because in prior years changes had been minimal. “No one expected this,” he says. The 2014 joint-employer ruling from the National Labor Relations Board sent shockwaves throughout the franchise industry, and caused wholesale rewrites to many franchise agreements. When he sat down to review Dunkin’s new agreement, Lisa says he expected to see language reflecting the brand’s hands-off approach to labor issues, but not provisions involving issues of wealth transfer or real estate ownership. “They put conditions you would expect to see in a franchise agreement into these ancillary documents that you are required to sign,” like the Rider to Contract for Sale and the Four Party Assumption, Lisa notes.  “We are talking about franchisee value here,” he says. “Dunkin’ is trying to say that the value really belongs to the brand and not to

INDEPENDENT JOE • JUNE/JULY 2016 9

DDIFO DOES ITS JOB the franchisee. It’s a further encroachment onto franchisee value.” “This is exactly why DDIFO exists,” reminds the association’s Executive Director Ed Shanahan. “We are the only truly independent voice for Dunkin’ franchisees with the resources capable of representing this group of owners and operators in the face of regulatory, legal or, most importantly, corporate threats.” In the case of the new form franchise agreement, Shanahan says perhaps the most troubling fact is that Dunkin’ went ahead and made the changes unilaterally, without seeking franchisee input. “They inserted some pretty extreme language and then said, ‘OK, here it is,’ as if there would be no alternative point of view.” “It was clear the process put in place to alert [franchisees] to franchise agreement changes didn’t work,” states Rob Branca, who is active on the Brand Advisory Council (BAC) and is a longtime chairman of the Northeast Regional Advisory Council (RAC). He says Dunkin’ emailed their new franchise agreement to BAC co-chair Perry Shah, with a “misleading subject title,” which didn’t stand out amid his flood of daily emails, and sent no subsequent emails to follow up. Shah did not respond to our request for an interview. The BAC had Branca and the Baltimore-Washington RAC co-chair Ram Javia meet with Dunkin’s lawyers and express the

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10 INDEPENDENT JOE • JUNE/JULY 2016

council’s opposition to a number of the changes. “We understand [Dunkin’s] legal team’s rationale for the changes that they made, and they understand where we believe a certain number of the changes don’t work for us and why they don’t,” says Branca. Working independently of the BAC, DDIFO attorney Lisa obtained a copy of the new agreement and began poring over the document. He highlighted the multitude of important changes Dunkin’ made to the agreement, including language “that distances [Dunkin’] from the business operations of franchisees in an attempt to limit the court’s and legislative body’s ability to determine that an employer/employee or other agency relationship exists, thereby limiting Dunkin’s liability and responsibility for the acts of its franchisees, and employees,” he wrote in his memo to DDIFO. Additionally, he points out that the proposed language attempts to require franchisees to insure and indemnify the brand against its own liability. It is language he calls, “far reaching and onerous,” and notes franchisees received nothing in exchange for the inclusion of these and other provisions. But, while those changes – prompted by the joint-employer ruling – were expected, others stood out. Among the most egregious: Requirements and conditions affecting renewing the franchise term; the transfer provisions covering and extending Dunkin’s right of first refusal to include real estate transfers: and

“ We are talking about franchisee value here. Dunkin’ is trying to say that the value really belongs to the brand and not to the franchisee. It’s a further encroachment onto franchisee value.” the formula the brand uses to determine what it will pay for the assets of a franchisee who is in default. “The process was one sided and in some cases changed provisions previously included through negotiations with the brand” Lisa says. According to Branca, Dunkin’ and the BAC have now agreed to “restart the process.” In the meantime, the brand has reverted back to the 2015 franchise agreement as the document franchisees must sign to join the system or renew existing term, but it continues to enforce the changes to the ancillary documents related to transfers and assets. “Dunkin’s legal department is protecting its interests; that’s what lawyers do, but changes to the franchise agreement should be subject to the BAC process so all interests are protected and we can come up with a mutual compromise that protects the equity of franchisees. Something this important should never just be

rolled out to meet an arbitrary deadline.” Branca expects the brand will also come up with “more robust notification process,” for franchisee leaders. This incident underscores the fact that franchisors and franchisees are not always on the same page. Shanahan says even though the BAC is elected by franchise owners to watch out for their interests, the franchisees need more protection. “We must remember that, as its name states, the Brand Advisory Council is an advisory panel, created by Dunkin’ to advise the brand on those issues where it wants its advice and input. It exists only as long as Dunkin’ wants it to exist.” “Throughout its history, DDIFO has been there to ensure franchisees don’t get the short end of the stick. While brand relations have been good, this situation reminds us that even in the best of times, the brand can act unilaterally in its own interests—without consideration of its franchise owners and what might be best for them,” Shanahan says.

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DUNKIN’ DONUTS TESTS “READY-TO-GO” KIOSKS Experts say Grab-and-Go options appeal to busy consumers

By Matt Ellis

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ver since it started offering deli-like sandwiches to its customers in 2012, Dunkin’ Donuts has been in a constant state of change—searching for the right meat-cheese-andegg combos to boost breakfast sales and provide all-day companions to its growing roster of beverages. Now, with snacks representing approximately 60 percent of sales, Dunkin’ Brands is trying out new methods to increase food sales and traffic amid a super-competitive quick service restaurant field. Which is why Dunkin’s new “Ready-to-go-Choices” kiosks – currently being tested in several markets – have the industry keeping a close watch. “When you look at food as a complement to beverages, grab-and-go gives consumers more choices and that is especially appealing to people who are busy,” says John Gordon, principal of Pacific Restaurant Management Consulting Group and DDIFO’s restaurant analyst. “It’s a great way to compete with Starbucks and with convenience stores.” Dunkin’ doesn’t issue press releases when it tests new concepts. This program received attention after Stephen Anderson, a restaurant analyst with the investment banking firm Maxim, publicized the kiosk he spotted in Connecticut, then confirmed with Dunkin’ Brands that it was part of a test market. Anderson believes kiosks could boost same store sales by one to two percent. “We believe that morning customers may pick up an additional item, such as a sandwich or salad, for consumption later that day, while afternoon beverage customers can pick up a snack on the run,” Anderson wrote in a note that was published in Nation’s Restaurant News. He also said the kiosks would help with franchisees’ cost structure because operators will have to keep prepared food on hand and the items are made at a central commissary, which keeps costs down. Lauren Hallow, concept analyst for the restaurant consulting firm Technomic, says grab-and-go choices are a great way for Dunkin’ to compete with Starbucks, which has been adding new products to its refrigerated kiosks – like fruit and cheese plates and sandwich roll-ups – in the hope the chain can increase impulse buys at the point of sale. “People will buy something they may not ordinarily buy if they see it packaged at the register, instead of waiting for it to be made fresh,” she says.

Gauging Customer Opinions Independent Joe recently visited a test site in a northeast market to ask customers their opinions about grab-and-go options. The kiosk at this urban location was right next to the counter and was stocked with yogurt parfaits, Mandarin orange slices packed in fruit juice, turkey-apple-cranberry wraps, southwest

style chicken wraps, hummus snack packs, fruit and cheese snack boxes, green salads with chicken and packages of salami and cheese, in addition to bottled water and soda. According to the franchisee, on the day we visited, the kiosk had been up and running for less than two weeks. A mixture of people who work and live near the restaurant came through during the morning hours we were there. Overall, people responded positively to the concept and to the choices, though we witnessed only a few making purchases. The franchisee says sales are growing slowly and, thus far, the yogurt parfait is the best seller. Hallow from Technomic notes more restaurant chains are experimenting with grab-and-go kiosks and operators are learning to find the right mix of products. “Items that complement their current offerings work best,” she says. “Focus is better. You don’t want to add 20 different options. That will overwhelm customers.”

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“READY-TO-GO” KIOSKS Lauren, a customer who works near the shop we visited said, “I love it. I love how they have the fruit and the sandwiches to go and different choices, the cheese, the crackers, I like it all.” Anne, who was standing three customers behind Lauren in line, said the choices look great. “Yeah, they look good, but they are expensive.” Dunkin’ Brands declined our offer to discuss the “Ready-to-goChoices” kiosks, and franchisees we contacted didn’t want to discuss the program on the record. And, while cost could be an issue for budget-conscious customers, a more direct threat appears to be the perception of freshness. Several of the customers we talked with said they were “concerned about when it was made.” We asked Margo, who works near the location we visited, if she would consider buying one of the wraps in the case. “Never,” she said, “because I feel like it’s old. I would rather buy something fresh [off-the-menu].

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14 INDEPENDENT JOE • JUNE/JULY 2016

George, who lives nearby, looked into the case and said he liked the look of the turkey apple wraps. “I’ll probably try one of those [sandwiches],” even though he worried a bit whether they would be fresh. “Some of the things [in the kiosk] have preservatives, I’m sure. So I would be concerned most about the sandwiches.” Gordon, DDIFO’s restaurant analyst, warns if Dunkin’ Brands moves ahead with kiosks in all restaurants, the brand will have to ensure the supply chain it uses to get the products to the store, have great quality assurance and control.” It has potential, but could be fraught with problems,” he says, particularly because of shelf-life considerations. He points out if the waste is 20 percent then the effective cost rises which could be counterproductive. Because freshness is the key, Hallow says, sandwiches and boxed snacks have to be made that morning and delivered the same day. “You have to emphasize that these sandwiches haven’t just been sitting there,” she says.

Looking at Trends In 2015, Technomic produced a College & University Consumer Trend Report, in which college and university foodservice operators were asked to gauge the impact various menu initiatives had on increasing traffic and sales. The types of initiatives included: indulgent menu items; healthy menu items; and pre-packaged, grab-and-go items. Of those, grab-and-go had the greatest impact. Pre-packaged items scored highest, impacting traffic and sales 72 percent, compared with 55 percent for healthy items and 51 percent for indulgent items. According to Hallow, “This shows that Dunkin’ could attract more young patrons with grab-and-go fare.” What’s more, a 2013 study from The NPD Group, a food and beverage research firm, found that every day 28 million Americans eat a “grab-and-go snack,” defined as candy bars, gum, donuts, chips, cookies, ice cream, fresh fruit and bagels. NPD reported

It’s a sign they are evolving with the times and catering to what consumers want. That’s snacking. If they can offer more options for an in between meal or afternoon snack, customers will respond and know they can go to DD for these items. young adults – ages 18-24 – are “the most inclined toward the instant gratification these types of snacks offer.” Grab-and-go snacking typically occurs in the car, which makes convenience stores a primary source for such items. “The sense on the Street is that Dunkin’ Donuts has been hurt by convenience stores,” according to Gordon, who notes “c-stores” are projecting growth of 10 percent in their sales of food items. “If

analysts continue to downgrade Dunkin’ stock, the brand may find itself taking more pages out of the c-store manual,” he says. The general consensus is that convenience stores can’t compete with Dunkin’ Donuts when it comes to fresh, hot coffee, which is still the staple of its sales. But, as the brand continues to find ways to increase same store sales, grab-and-go items have greater appeal.

•

INDEPENDENT JOE • JUNE/JULY 2016 15

A Commitment to Family Spawns a Second Career for Florida Franchisee By Stefanie Cloutier

lex Fernandez thought he had retired. After almost 30 years with AIG, the international insurance and financial services firm, Fernandez was ready to try a life of golf and relaxation. Then a family crisis intervened and Fernandez found himself back in the world of work, in a different country and a different business entirely. And he was happy to be there. “Family is the most important part of my life,” says Fernandez. “And I still have too much energy for me to go play golf.” Along with his two sons, Fernandez now owns five Dunkin’ Donuts stores and is building a sixth one in Polk County, Florida, an area smack in the middle of the state. They also recently purchased five more stores in Jacksonville, on the state’s east coast border with Georgia. In the five years since they became franchise owners, Fernandez and his sons Alex (who is also called Junior) and Randy have doubled the size of their business. By all accounts, this has been a successful next phase for Fernandez.

16 INDEPENDENT JOE • JUNE/JULY 2016

But why Dunkin’ Donuts? “A Dunkin’ Donuts business is really a family business,” says Fernandez. “It’s a business where my sons and I can work together.” Because, while Fernandez’ path to becoming a Dunkin’ Donuts franchisee was far from a straight line, his family has always been at the heart of it.

Family first A little more than five years ago, Fernandez and his wife, Gloria, were in Chile, where they had been living for 25 years. Though retired, he was far from idle, doing consulting work and serving on boards. Junior and Randy, who were born in the United States, were living in Tampa, Florida, so that Junior's wife could get the medical care she needed. When she passed away, Fernandez realized his son would need him, so he and Gloria pulled up stakes and relocated to Tampa. He bought a house big enough for everyone to live in, so Gloria could take care of the grandchildren, four boys aged 13 to 18. Fernandez jumped into the business his sons had already begun,

By Mike Hoban

as Dunkin’ Donuts franchise owners. In Chile, the boys had had separate McDonald’s franchises; here, they found that Dunkin’ Donuts would allow them to work together. Dad was a welcome member of the team. They divide responsibilities based on their strengths: Fernandez oversees the strategy and financial part of the business, while Junior and Randy take care of the operations and management end of things. Fernandez likes the fact that the breakfast sector is growing – an important part of his strategy for growth – and that Dunkin’ Brands is not a competitor of theirs. “They’re not in the real estate business,” he says, unlike some other fast food franchises. “They’re here to support the franchisees. Their primary focus is getting sales higher to increase their royalty income. They give you a lot of support to achieve that.” This past year has been their most successful yet, with doubledigit growth. And while Fernandez acknowledges he and his sons do well on the operations side of things, he also credits the economy with fueling their success. “We’re in a blue collar county,” he says. “Between people getting back to work and gas

A Dunkin’ Donuts business is really a family business. It’s a business where my sons and I can work together. prices going down, customers are coming back.” The substantial growth in his stores fueled his commitment to expand into Jacksonville.

The long and winding road Originally from Cuba, Fernandez first came to the United States as an 11-year-old boy, through Operation Pedro Pan. It was the early 1960’s, Fidel Castro was in power, and there were rumors of children being sent to the Soviet Union to be indoctrinated into communism. The Pedro Pan program brought more than 14,000 children from Cuba into the U.S. over a 20-month period. Fernandez and his sister landed in Miami and were sent to live

INDEPENDENT JOE • JUNE/JULY 2016 17

FRANCHISEE PROFILE: ALEX FERNANDEZ

with a family in Albuquerque, New Mexico. “They were wonderful to us,” Fernandez says of the family, who had nine children of their own. He and his sister lived there for two years, until his father and mother could get visas and join them. They settled in New Jersey, where Fernandez met his

wife – they went to senior prom together. He attended Rutgers University before beginning his career with AIG, a career that took him to Paris, Venezuela and Mexico, in addition to Chile. It also prepared him for his second career as a franchisee. While Dunkin’ Donuts and AIG are clearly different types of businesses, they require a lot of the same skills. “Most people are waiting for someone to mentor them, to show them the way,” says Fernandez. “I’m a passionate person, both here and at AIG. I show [employees] passion and they feel it and can be as passionate as me.” That passion translates into better customer service, something Fernandez says differentiates their Dunkin’ from its competition. “People will pay more but they have to get something for that,” he says. “When I hire somebody, first thing I ask them is, ‘What is your number one responsibility? Customer service. What does that mean?’ When someone opens the door, they have to see a pleasant place: clean, with music on. They need to be greeted at the counter, and be offered good products, products they want. Then we have to thank them on their way out the door. What should they be saying? ‘This is a place I want to come back to.’” He admits this isn’t easy to do: his employees have a lot to do, and it’s easy to get sidetracked by little things. So he tells his managers to keep giving that message to their employees, over and over and over until they truly believe it. When they make their store a place people want to come back to, he tells them, “We’re busy, we sell more. They get more hours and more money.” It’s a win-win for everyone.

A man for all seasons Fernandez has embraced his new career so fully that he has immersed himself in the franchisee community at large. Last October he was elected by his fellow franchisees to represent

18 INDEPENDENT JOE • JUNE/JULY 2016

them at the regional level. At the national level, he participates on the profitability and marketing committees. And for the last two years, he has sat on the advertising committee, to help determine how to spend local advertising dollars.

on working. So, is he planning a retirement from the Dunkin’ Donuts business any time soon? “I hope so, ask my wife!” he says with a laugh. “I just have too much energy for right now. I don’t see that horizon yet.”

•

There’s one other committee he considers important: the sustainability committee. The last store he built was a DD Green store, which according to Dunkin’ Brands, “provides a framework for our franchisees to build restaurants that are more energy- and water-efficient, healthier and reduce landfill waste.” For each item complied with, a store earns a point, sometimes two. It takes 12 points to receive the DD Green designation, 20 points for Green Elite. Fernandez’s store received the Green Elite designation; there are only a handful in the entire state of Florida. “We wanted to do that, to show customers we’re sensitive to the issue of the environment,” he explained. “We should get the money back through savings and energy costs. We can save by investing a little more upfront.”

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An enduring legacy They live together; they work together; they even vacation together. But Fernandez acknowledges that, as much as he loves it, working with family can be challenging. “At the end of the day, they’re your sons; they’re not like you. They are their own selves,” he says. “But we’ve done very well. The boys work very hard, and we play hard, too.” And while his oldest grandchild is off to college in the fall with plans to study business, Fernandez doesn’t want him joining the family business just yet. “He should go work somewhere else first, then come work here,” he says, perhaps reflecting on his own work experience. Alex Fernandez had a chance to retire before and chose to keep

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

INDEPENDENT JOE • JUNE/JULY 2016 19

What Do Customers Think of the New Menu? By Cathy Cassata

We asked a few in Illinois to share their thoughts N

ew competition has a knack of forcing change. In the QSR space, McDonald’s successful all-day breakfast promotion prompted Dunkin’ Donuts to make significant changes to its menu boards—both from a style and content perspective. Scott Hudler, chief digital officer for Dunkin’ Brands, spelled out the importance of the redesign in an interview with Bloomberg News earlier this year. He said, “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. The menu board layout is designed to strategically emphasize Dunkin’ Donuts’ coffee and beverage varieties as well as our sandwich options all served any time of day, making it easier for guests to personalize their order.”

20 INDEPENDENT JOE • JUNE/JULY 2016

While some franchisees might agree with this notion, others are not convinced the changes – and the elimination of combo meals – are in the best interest of operators and customers. In a recent interview with The Street, Dunkin’ Brands CEO Nigel Travis said, “We found that about 60 percent of the space on our menu boards was combo meals, so we decided it was much better to promote our products, particularly our beverages, which have higher margins for our franchisees," he added. "We expected we would get some people who wouldn't like the change because people don't like change, but the number of complaints we have had have only totaled seven.” While it would be nearly impossible to quantify that number, Independent Joe spent a recent morning at the Dunkin’ Donuts on S. US Highway 12 in Volo, Illinois, and talked with a few customers in the store and at the drive-thru. Summer

break began a few days earlier for kids in the area and it was a warm and sunny day. This also happened to be “Cop on the Rooftop” day throughout Illinois, and this shop was one of 234 locations throughout the Land of Lincoln that teamed-up with law enforcement officials to raise money for Special Olympics. Given so, customers were in a mood to talk. Most admitted they paid little attention to Dunkin’s menu changes; most had an idea of what they wanted before they got into line. Their comments provide a snapshot – though unscientific – of what customers in one of Dunkin’s largest markets like.

What customers are saying Officer Michelle Hernandez, who was volunteering for the event, was one of the first people to share her input. While her coworkers were on the rooftop trying to attract customers driving along Highway 12, she was on the ground collecting donations at an informational booth

donut with sprinkles. Gage told us he misses the combo deals.

outside the shop. Officer Hernandez said she's a regular to the Volo Dunkin’, visiting when she is on-and off-duty. “I like lots of things here; donuts, the bacon and cheese bagel, French vanilla coffee, and more depending on the day,” she said. As far as the menu, she says she looks at it for ideas, but didn’t notice the recent changes. “I feel like I know what Dunkin’ has to offer.” Adam Gage, a regular at this location, was having a late breakfast with his son. He was eating his usual: an egg-cheeseand-sausage sandwich and a black coffee, while his son enjoyed a chocolate glazed

“I’m a combo guy. When I want food and drink, I come here. If I were just going to get a drink, I might go to Starbucks instead.” he said, expressing his frustration that some shops are keeping combos while others have discontinued them. “The thing is, now I never know if the Dunkin’ I’m at is offering the combo or not so now I just ask, ‘does that come with hash browns?’” Travis has told interviewers the brand may reinstitute combos at some point, if brand leaders decide it could help drive traffic in the future. The fact that many other QSR chains have been leaning heavily on combo deals to increase sales does not seem to impact Dunkin’s thinking.

We Know What we Want Christine Schramm and her dad were in the shop to get donuts for her two toddler sons. One son was sitting next to his mom and across from them, the other son was seated next to his grandpa.

“We hardly look at the menu because we know what the boys want,” she said. “We fed them a healthy breakfast earlier and then came here for a snack.” Between the two boys, they shared three chocolate glazed donuts. “It’s something they look forward to doing with their grandpa and me,” Schramm said. Christine Olsen, who visits the Volo location twice a week on her route to work, says she’s not a big menu-reader either. She usually goes through the drive-thru, but the Cop on the Rooftop event drew her into the store. “I’ve been drinking coffee since 4th grade, so I know what I want,” she said. “I usually get what is in season, so as the new season comes, I’ll pay attention to the menu to decide what I’m going to go for, and then usually I don’t pay attention to it for a while.” Dunkin’s strategy for its new menu boards, which came online shortly after McDonald’s introduced its all-day breakfast, was to highlight beverages first from left-to-right, then feature the various

INDEPENDENT JOE • JUNE/JULY 2016 21

MENU CHANGE REVIEWS

Illinois Dunkin’ Shops Raise Money for Special Olympics On May 20th, 234 Dunkin’ Donuts shops throughout Illinois teamed up with local police departments to raise money for Special Olympics athletes during “Cop on the Rooftop” day. This was the 14th anniversary of the statewide event, in which police officers sit on the rooftops of Dunkin' shops, as a way to attract people to the stores. Customers who are drawn to the shops and make a donation to Special Olympics, receive a coupon for a free donut. This year, the event raised more than $600,000 collectively throughout Illinois for Special Olympics, and nearly $2.3 million has been raised during the partnership over the years.

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sandwich offerings and then draw the eye further right with images of donuts, muffins and other sweet treats. That way, the menu has a logical flow.

I’ll Try a New Drink Next Time It’s those images of beverages – gleaming in high-definition – that caught the eye of two customers in line to grab snacks. Kim Jones was making her usual

munchkins order when she noticed a picture of the frozen hot chocolate. “I hadn’t noticed that before. It looks really good,” she said. When asked if she'd buy the drink next time, Jones nodded and said, "Probably." The same advertisement for frozen drinks made an impact on Jessica Kerns too. “I came for a donut and coffee, but next time

I’m going to get that blue drink. It popped out at me,” she said, referring to Dunkin’s blue raspberry Coolatta.

I Didn’t Notice Bagels are Marcin Simson’s thing. While the Volo store isn’t his usual Dunkin’, he was driving by and made a stop for a late breakfast. “At all the Dunkin’ Donuts I go to, I always get a bagel. Sometimes a coffee too,” he said. “I looked at the menu this time, but didn’t really notice anything different about this one that made me think, ‘I should get something other than a bagel,’” he said. So was the case for Sarah Kane. “The drive-thru menu looked the same to me. I always come for my donuts, so I don’t really pay attention to what else is on the menu,” she said.

I Don’t Know What I Want Veronica Woodall was dining with her two daughters—a common occurrence for them. She enjoyed an egg sandwich while her daughters ate donuts. “We always look at the menu because we don’t know what we want sometimes,” she said. “I noticed the menu was a little different, but didn’t know exactly what changed.” Laurie Barnowski, who was enjoying a late breakfast in the restaurant with her two daughters, pointed out that the three of them rarely buy the same items off the menu. She ate her usual donut and coffee while one of her teenage daughters had the same. Her other daughter had a breakfast sandwich. “I noticed the new menu,” said Barnowski. “It’s easy to see the drinks are separate from the sandwiches. My daughter looked at the sandwich section before choosing.” Because Dunkin’ Donuts welcomes so many return customers to its shops, the new menu layout may not resonate with those regulars. As we found out, many skip looking at the menu because they know what they want. One criticism of the menu is that its cursive font may not appeal to the millennial generation, a key target demographic. As one Associated Press reporter jokingly noted in a recent posting on Twitter, “Big mistake by Dunkin’. New menus use cursive - millennials don't know how to read cursive.” We’ll have to see if that really matters.

•

INDEPENDENT JOE • JUNE/JULY 2016 23

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

Nimble Accounting Software

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

Sansiveri, Kimball & Co., LLP

Michael A. DeCataldo 401-331-0500 • mdeca@sansiveri.com 55 Dorrance Street, Providence, RI 02903 www.sansiveri.com

BACK OFFICE

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

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

Steven Song Marketing Door to Door

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

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

Marcovich, Mansour & Assoc. Inc.

BUILDING

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

Cynthia A. Capobianco, CPA

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

Neovision Consulting Inc.

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

Homeland Builders

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

Watchfire Signs

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

COST RECOVERY

Performance Business Solutions, LLC

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

ENERGY

Plotwatt, Inc.

Adam Gardiner 401-297-5439 • adamgardiner@plotwatt.com 1715 Six Gables Road, Durham, NC 27712 www.plotwatt.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 • JUNE/JULY 2016

Directory of Business Members

FINANCE

Analytix Solutions

Satish Patel 781-503-9000 • snpatel@aixsol.com 800 West Cummings Park, Ste. 2000, Woburn, MA 01801 http://insight360.aixsol.com/Dunkin/

Bridge Funding Group

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/

Bank RI

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

Berkshire Bank

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

Earl Meyers 585-546-9162 • earl.w.meyers@baml.com 1 East Ave., Rochester, NY 14450 www.bankofamerica.com Tom Fitzgerald 401-574-1119 • tfitzgerald@bankri.com One Turks Head, Providence, RI 02903 www.bankri.com David L. Sabourin 508-329-7851 • dsabourin@berkshirebank.com 303 Turnpike Road, Westborough, MA 01581 www.berkshirebank.com

BMO Harris Bank N.A.

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

First Franchise Capital

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

Direct Capital Franchise Group

Eastern Bank

Fidelity Bank

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

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

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

INDEPENDENT JOE • JUNE/JULY 2016 25

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

TCF Franchise Finance

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

TD Bank

Paychex

Ryan Birtles (843) 576-9337 • rbirtles1@paychex.com 7204 Copperfield Ct, Wilmington, NC 28411 www.paychex.com

Snagajob

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

Joe Gabriel 703-457-7873 • joe.gabriel@snagajob.com 1110 N. Glebe Rd. Ste. 220, Arlington, VA 22201 www.snagajob.com/employers

United Bank

INSURANCE

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

HUMAN RESOURCES Granite Payroll Associates

IOA Insurance Services

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

Starkweather & Shepley Insurance Brokerage, Inc.

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

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

HIRETech

York Risk Services Group

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

Lori Ross • 337-230-5437 Lori.Ross@yorkrsg.com 99 Cherry Hill Road, Ste. 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

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

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

26 INDEPENDENT JOE • JUNE/JULY 2016

Directory of Business Members 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

Cardtronics

Tom Spooner 973-452-4131 • tspooner@Cardtronics.com 628 Route 10 - Ste. 8, Whippany, NJ 07981 www.cardtronics.com

Carrier Corp

Bob Eckweiler 973-222-6742 • Bob.Eckweiler@carrier.utc.com 3 Hollyhock Way, Newton, NJ 07860 www.carrier.com

Davis Bancorp

Richard Davis 847-998-9000 X4466 • rdavis@davisbancorp.com P.O. Box 1690, Barrington, IL 60010 www.davisbancorp.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

HME Drive-Thru Headsets

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

Jarrett Services ATM, Inc.

Alexander Pezzolla 732-572.0706 ex 202 • alex@jarrettforcash.com 1315 Stelton Road, Piscataway, NJ 08832 www.jarrettforcash.com

MCD Innovations

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

New England Drive-Thru Communications

Angela Bechard 603-475-2046 • angela@nedrivethru.com 999 Candia Rd. Ste. 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

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

Prince Castle/Silver King

Zachary Waas 630-873-0088 • waaz@princecastle.com 355 East Kehoe Blvd., Carol Stream, IL 60188 www.princecastle.com

R.F. Technologies

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

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

Thank You to Our Busin ess M embers!

INDEPENDENT JOE • JUNE/JULY 2016 27

A LOOK ON THE LAW

BY DANIEL S. FIELD

New Federal Rules Mandate Overtime Pay for More Employees Congressional Challenge Unlikely to Delay Rules

ast month the U.S. Department of Labor Wage and Hour Division (US DOL) issued its much anticipated final regulations that substantially increase the minimum salary required to qualify for exemption to the minimum wage and overtime requirements of the Fair Labor Standards Act of 1938 (FLSA). An effort by Republican congressional lawmakers to challenge the rule is unlikely to delay the December 1, 2016 effective date for the new rules. The US DOL claims that 4.2 million workers will become eligible for overtime under the new regulation. The rules changes, the first in 12 years, will limit the existing FLSA exemption covering white collar workers, including retail managers and administrative workers. Under the updated regulations, beginning on December 1, 2016, most salaried workers earning less than $913 a week—about $47,476 a year—will have to receive overtime pay when they work more than 40 hours a week.  The new threshold salary is a substantial increase from the previous salary cutoff for overtime exempt status, which had been $455 a week or $23,660 annually.  Salaried employees who meet the duties tests set forth in existing FLSA white collar overtime exemptions, but earn less than an annual $47,476 salary, become ineligible to be treated as exempt from overtime rules. To qualify for exemption under the FLSA, white collar employees generally must meet certain tests regarding their primary job duties and be paid on a guaranteed salary basis at the minimum salary level. Actual job duties, not job titles, determine exempt status. For an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the DOL’s duties regulations. The final

28 INDEPENDENT JOE • JUNE/JULY 2016

Labor Department rules have been revised to permit certain non-discretionary bonuses and commissions that are earned quarterly, or more frequently, to be included in the salary-level. rule does not make any changes to these “duties tests” that determine whether white collar salaried workers earning more than the salary threshold are eligible for overtime pay. Under existing regulations, a more relaxed test makes it easier for workers earning more than $100,000 per year to qualify for the overtime exemption under the so-called “highly-compensated” exemption. However, the updated regulation also increases the total annual compensation threshold required to meet the highly compensated employee exemption from $100,000 to $134,004.  This increase is significantly higher than the threshold proposed for compensated employees in the US DOL’s initial draft issued in the summer of 2015. In a more positive development for employers, the Labor Department rules have been revised to permit certain nondiscretionary bonuses and commissions that are earned quarterly, or more frequently, to be included in the salary-level.  However, this non-guaranteed compensation cannot constitute more than 10% of the total earnings.  This means that employers may pay an employee a fixed salary as low as $821 per week, and at the end of each quarter (or more frequently), pay a lump sum bonus of $1,186.90 (the equivalent of $91.30 a week in non-discretionary bonus over 13 weeks). Under a more troubling change to the regulations, every three years employers

will now be required to review and, if necessary, readjust the salary levels for many exempt workers. This is the result of a provision in the updated regulations establishing a mechanism for automatically updating (and increasing) the minimum salary and compensation levels every three years based on various indices.  According to the US DOL, “[t]he standard salary level will be updated to maintain a threshold equal to the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region.”  Future automatic updates to the salary and compensation thresholds will occur every three years, beginning on January 1, 2020.

How to Comply To ensure compliance with the new regulations, employers should review salary levels and job duties of employees who are currently being characterized as salariedexempt. It may be necessary to reclassify some employees as overtime-eligible, or adjust salary levels to meet the requirements of the new rules. It is essential for employers to have in place effective time and record keeping policies. Compliance is crucial in light of the US DOL’s aggressive enforcement position and the ever increasing number of overtime lawsuits being filed around the nation by plaintiffs’ class action law firms.

•

Daniel S. Field is a partner with Morgan, Brown & Joy, LLP in Boston, Mass., representing employers in employment and labor matters.

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