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Study: NE Ohio’s logistics off courseLocal trade advocate reveals shortcomings withinarea’s distribution hub; other cities steam ahead

INSIDE

Recall creates inventorylog jam for Toyota dealers

By DAN [email protected]

In an era where companies haveworked to keep inventory levels low,Cleveland-area Toyota dealers suchas Chuck Gile face a pricey dilemmathey don’t prepare students for inbusiness school — what to do withinventory that can’t be sold at all.

Mr. Gile, co-owner of MotorcarsToyota in Cleveland Heights, wasamong the dealers who spent muchof last week awaiting parts and instructions to fix problem acceler-ators in many Toyota vehicles. Theyalso watched hundreds of cars sitidle on their lots, awaiting fixes andthe chance to be turned from ongoingexpenses into revenues the dealersneed.

Mr. Gile already had determinedthat the first repair kits he receiveswould go into cars already ownedby customers.

“They had confidence in us whenthey bought the vehicle, and wehave to restore that confidence,”

Mr. Gile said.Fixing customer cars first,

though, means his own inventorywill wait to be repaired and sold.And that’s a costly proposition.

Mr. Gile said about 75% of his inventory of roughly 200 cars is affected by a recall of the problem accelerators, which have been blamedfor causing vehicles to speed up unexpectedly. He estimated the average dealer cost of those vehiclesat about $25,000 each — leaving himwith about $3.75 million in inventoryhe could not yet sell.

Other Toyota dealers are in thesame position when it comes to

JASON MILLER

Michael Matoney, executive director of New Directions, a nonprofit that provides substance abuse treatmentfor teens, is encouraged by local foundations’ efforts to foster collaboration among nonprofits.

STRENGTH IN NUMBERS Foundations spearhead collaboration among nonprofits as demand for services rises, and funds become scant

By SHANNON [email protected]

onprofits in NortheastOhio face two challengingcertainties: Money is tightand the need for the

services they provide has climbed.To help address those challenges,

a cluster of local foundations has established the Cuyahoga CountyHuman Services Strategic Restruc-turing Pilot Project.

The project is an effort led by 15foundations that aims to determineways for local nonprofits to work together to reduce overhead expensesand, therefore, provide more servicesto the needy, said Denise San AntonioZeman, executive director of SaintLuke’s Foundation and co-chair ofthe project.

Under the initiative, the foundationsinvolved pooled $400,000 and hiredthree consultants to take nonprofits

By JAY [email protected]

A study due out this month froma local economic development cooperative says Northeast Ohiohas fallen far behind Columbus and

the Toledo area as a center for thetransportation and distribution ofcargo from around the world.

It lays the blame for that lag on alack of coordinated regional plan-ning for logistics and freight-relatedtransportation improvements.

“(The study) points out a defi-ciency we have” in Northeast Ohio,said Ron DeBarr, president of thestudy’s sponsor, the Northeast OhioTrade & Economic Consortium, or NEOTEC, in Kent. “It seems likeNortheast Ohio is coming up short.”

NEOTEC was created in 1996 to coordinate and bolster the economicdevelopment efforts of six counties inthe southern tier of Northeast Ohio.Since then, it has expanded its scope

by operating a foreign trade zone and by doing research on economicdevelopment issues for the broaderregion.

Its report says the Columbus andToledo regions have done a goodjob developing their logistics infra-structures by securing state andfederal money for highway and railimprovements and by linking withfreight railroads. These planning efforts have spurred investments in

freight transit terminals by the rail-roads, and have attracted new busi-nesses, notably distribution centersfor retailers, and new jobs.

“By comparison, Northeast Ohiohas no such ambitious projects,” thereport’s executive summary says.“Nor does it have equivalent govern-mental, industry and university support for planning, defining nichemarkets and developing new business

See LOGISTICS Page 4

See NONPROFITS Page 6

N

Vehicles awaiting fix languish on sellers’ lots

Franchisors entering new territories It is estimated that there will be more than 900,000 business-format

franchise establishments in the U.S. in2010, a 2% increase from the previousyear. Indeed, some local entrepreneurs arefinding that the business model pays off, allowing them to grow faster than theymight have been able to on their own.

Read Amy Stoessel’s story on 3.

See TOYOTA Page 18

“You can’t tell someonewho’s had five Toyotas not to buy another Toyota,because they have faith in the product.” – Ken Schneider, co-owner,Metro Toyota in Brook Park

20100208-NEWS--1-NAT-CCI-CL_-- 2/5/2010 3:00 PM Page 1

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NOTHING VENTURED, NOTHING GAINED

Area ’04 ’05 ’06 ’07 ’08 ’09

Great Lakes $2.9B $3.0B $4.8B $4.1B $3.8B $1.1B

Ohio 213.9M 94.5M 223.5M 344.8M 254.9M 21.7M

California 10.2B 10.7B 13.0B 14.0B 14.5B 4.1B

Massachusetts 2.8B 2.8B 2.9B 3.6B 2.9B 1.0B

U.S. 22.3B 23.7B 28.4B 29.9B 28.8B 8.8B

The Great Lakes region generally had seen a buildup of venture capital invest-ments until the recession hit, according to a new Brookings Institution report.Nonetheless, the public policy think tank used the report, “Turning up the Heat: HowVenture Capital Can Help Fuel the Economic Transformation of the Great LakesRegion,” to call for the creation of a massive venture capital fund that would pumpmoney into Great Lakes businesses to help the region move forward. The reportcalls for the creation of a $1 billion to $2 billion venture capital fund that would feedsmaller funds investing in businesses and startups across the Great Lakes states.

Venture capital investments in the 12-state Great Lakes region, 2004 through the 2009 second quarter


By CHUCK [email protected]

If technology advocacy group NorTech has its way, theBoogie Board won’t be the coolest product to come outof Northeast Ohio’s flexible electronics industry.

That’s not to say the liquid crystal-based electronicmessage pad that Kent Displays Inc. released last monthisn’t cool. It’s just that NorTech president RebeccaBagley believes Northeast Ohio is in a position to exploitmany opportunities related to flexible electronics, whichcompanies are using to develop cheaper solar panels,smarter medical devices and computer screens that canbe rolled up like newspapers.

That’s why NorTech in October 2008 chose to startworking on growing the region’s flexible electronicssector after narrowing its focus to two industry sectorsfrom five. The other sectorit is focusing on is advancedenergy.

NorTech likely willspend more of its time onadvanced energy, given thenumber of different tech-nologies in that field, Ms.Bagley said. In the longrun, however, flexibleelectronics could presentan opportunity just as bigfor Northeast Ohio.

“I think the outcomescould be similar,” Ms.Bagley said.

NorTech in Novemberreceived a $25,000 grantfrom the GAR Foundation of Akron to draft a strategyfor creating a viable flexible electronics cluster in North-east Ohio, and three weeks ago it hired Byron Clayton, aformer division president for window manufacturing tech-nology company GED Integrated Solutions of Twinsburg,to lead that effort. NorTech believes the region has whatit takes to make it big in flexible electronics, and hopesits efforts will help make that happen.

Buoying that belief is the presence of Kent Displaysand AlphaMicron, two Kent State University spinoffsthat already sell flexible electronic products, Ms. Bagleysaid.

She also noted that Northeast Ohio is strong in research related to polymers and liquid crystals, which

“We are a commu-nity that offerswonderful services,but ... more moneyis going to pay fora variety of infra-structures thanthere needs to be.”— Debora Rodriguez, CEOof Recovery Resources.Page One

“We can promotesafety as an insur-ance carrier anddemonstrate thatit’s not really asscary as it seems.”— Drew Tewksbury, vicepresident and programmanager of Allegiant Programs Group andAmusement Insurance Resources. Page 10

“It’s a great businessmodel for the rightperson in the rightarea at the righttime of their lives.”— Joel Libava, FranchiseSelection Specialists. Page 13

“The repossessionbusiness is basedon credit. … Thewhole downturnrevolved aroundeasy credit. If youwant to dry up ourindustry, cut credit.”— Robert “Skip” Blowers,owner of Skipco Auto Auction. Page 15

FEBRUARY 8-14, 2010 WWW.CRAINSCLEVELAND.COM CRAIN’S CLEVELAND BUSINESS 3

INSIGHT

THE WEEK IN QUOTES

‘Flexibleelectronics’offer areatech muscle

PR OUTFITSSEE RAPIDCHANGE

JANET CENTURY

Joel Goldstein, president of the Greater Cleveland chapter of the Public Relations Society of America and Goldstein Group Communications, saidthe industry is undergoing “dramatic shifts,” about which industry leadershave been talking for a number of years.

As clients demand more, companies pitch themselveswith emphasis on versatility

By KATHY AMES [email protected]

Public relations firms say theyare not going to let the reces-sion get the last word, but the feeble economy, coupled

with the increasing dominance of digital communication, nonethelesshave forced them to rethink the waythey get the word out about clients.

Indeed, change has been a recur-ring theme in the PR field over the lastdecade, though the last 12 months inparticular have mobilized a transfor-mation within the business, said JoelGoldstein, president of the GreaterCleveland chapter of the Public Rela-tions Society of America.

“There are dramatic shifts going onin the industry,” Mr. Goldstein said.“We’ve been talking about it for the

See CHANGE Page7

See MEDICAID Page 10

See FLEXIBLE Page 6

Medicaid numbers still climbing, with a twist: help from hospitalsBy SHANNON [email protected]

The Medicaid rolls continue toswell in Ohio, but several area hospitalssay that’s not necessarily problematicfor them — with some even helpingfuel the trend.

The recession has caused thou-sands of Ohioans to lose their jobsand health insurance. As a result, anumber of local hospitals are lookingfor ways to streamline operations tooffset lost revenue, while others havebeefed up their staffs to help people

They’re aiding recession victims in signing up to limit charity care amount

sign up for Medicaid or other formsof coverage to avoid further increasesin the amount of uncompensatedcare they provide.

“The more people we can get onMedicaid, the better off we are,”said Sharon Dougherty, chief finan-cial officer for MetroHealth MedicalCenter in Cleveland.

In December 2009, there weremore than 2 million Ohioans onMedicaid, compared with 1.8

million in December 2008 and 1.7million in December 2007, accordingto the Ohio Department of Job andFamily Services, which overseesMedicaid in Ohio.

MetroHealth still contracts witha company that helps uninsuredpatients sign up for Medicaid, butlast fall the county-subsidized hospital hired five people to helpscreen all self-pay patients for Med-icaid eligibility. Ms. Dougherty said

five more employees soon will beadded in MetroHealth’s outpatientcenters to determine if those patientsqualify for Medicaid and to helpsign up those that do.

In May, the county hospital alsowill begin reaching out to localchurches, homeless shelters andminority groups to sign more peopleup for Medicaid who already qualifybut don’t know how to navigate thesystem.

“We are going to go after the popu-lations we haven’t aggressivelydone,” Ms. Dougherty said. “We’retrying to bring resources to our(community) facilities.”

Community Health Partners inLorain has eight patient advocateshelping people sign up for healthcare coverage programs such as dis-ability and Medicaid, said SamanthaPlatzke, chief financial officer andsenior vice president of finance forCommunity Health Partners.

“We’re not just giving them a

NorTech sees bright future thanks toregion’s polymer, liquid crystal bases

PHOTO PROVIDEDKent Displays Inc.’s BoogieBoard allows users to writenotes or draw and then erasetheir work with a simple pushof a button.


opportunities.”Transportation and distribution

have become increasingly importantas India, China and other parts of Asiabecome key trading partners.

“Unfortunately, we are becomingmuch less of a manufacturing country and much more of a distrib-utor and consumer,” said Lou Cerny,vice president of Sedlak ManagementConsultants Inc., a local warehousingand distribution consultancy. “Sothose areas that specialize in and takeadvantage of the fact that change isoccurring and will continue to occurwill find themselves ahead of thecurve, and those that don’t will try toplay catch-up.”

Mr. DeBarr agrees that efficient

transportation access to distant markets has become a more impor-tant factor to site selectors whochoose locations for new businessoperations, especially for manufac-turers who must bring in raw materialsand send out finished products.That’s partly because transportationcosts are now 9% to 10% of the cost ofgoods sold, he said.

The study was led by Bradley Hull,associate professor of managementand business logistics at John CarrollUniversity’s Boler School of Business.Mr. DeBarr said it is phase one ofNEOTEC’s effort to involve publictransportation agencies, private ship-pers and freight handlers in identifyingstrengths and weaknesses of North-east Ohio’s transportation infrastruc-


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continued from PAGE 1

Logistics: Region can get back on trackture and then figuring out ways toboost the region’s competitiveness inworld markets.

The research describes how Colum-bus is becoming a busy inland exten-sion of ports in Virginia because ofNorfolk Southern Railway’s HeartlandCorridor project, a $150 million plan toimprove freight-handling capacityalong a rail route from Norfolk, Va., toChicago, passing through Columbus.

Columbus is developing the 1,500-acre Rickenbacker Global LogisticsPark around Norfolk Southern’s $68million intermodal terminal, whichopened in 2008. At the time, the presi-dent of the Columbus Regional AirportAuthority said she expected the logis-tics hub to create 20,000 jobs over thenext 30 years.

In Northwest Ohio, CSX Trans-portation last year broke ground forthe $175 million Northwest OhioTrans-Shipment Terminal in NorthBaltimore near Toledo along a CSX railline that runs to Chicago. CSX will usethe new terminal to break down ship-ments from either coast and sort themonto trains or trucks to Midwest desti-nations. That work is done in and nearChicago, but CSX wants to move itaway from that city’s congestion.

The new terminal is expected toemploy 200 and could create as manyas 2,600 more jobs in ancillary opera-tions in its first decade of operation.

Getting back on trackThe study finds Northeast Ohio has

the potential to strengthen its logisticsprospects, particularly because of itsposition on water, which gives it con-nections across Lake Erie to Canada,the largest U.S. trading partner, and toseaports via the St. Lawrence Seaway.

The authors believe local portscould develop niches as hubs for re-frigerated products that can’t travel byrail and for oversize cargoes that arecumbersome and expensive to ship byrail or truck.

However, Dr. Hull writes, “embarking on such opportunities requires coordination, with organizedand sustained efforts, such as thosedisplayed by Columbus and Toledo.”

In phase two of NEOTEC’s effort,Mr. DeBarr hopes to develop a mar-keting message to promote NortheastOhio as a logistics hub and to identifypotential bottlenecks in the system.

Edward Hill, dean of the MaxineGoodman Levin College of Urban Affairs at Cleveland State University,said the region needs to embark on astrategic review of the logistics andtransportation network in the northernpart of the state. But Dr. Hill cautionedthat Northeast Ohio may not be ableto play the same kind of logistics roleas Columbus and the Toledo area.

Dr. Hill said Northeast Ohio lacksthe greenfield space that exists alongrail lines in those regions. He also saidwarehouse and distribution center op-erators prefer to stay south of the OhioTurnpike, a reference to the strengthof organized labor in Northeast Ohioand even the Toledo area. North Balti-more is 30 miles south of Toledo andthe turnpike. ■


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through a three-step process to oper-ate more efficiently through collabo-ration.

“In order to serve a growing needin an environment where funds havediminished because of the economy,(nonprofits) needed to figure outhow to coordinate their efforts,”Ms. San Antonio Zeman said.

The conversation began about ayear ago when Ms. San Antonio Zeman and Deborah Vesy, presi-dent and CEO of Deaconess Community Foundation, asked thenonprofits they support how theirfoundations could be of more assis-tance. Nonprofits, it turned out,wanted to learn how to collaboratebetter, Ms. San Antonio Zemansaid.

So, Ms. San Antonio Zeman andMs. Vesy began assembling a groupof foundations to create the pilotproject, which included two work-shops in December that were attended by 76 nonprofits. Founda-tion representatives were not included in the workshops becausethey wanted nonprofits to speakfreely without feeling like theymight be judged, Ms. San AntonioZeman said.

The results were promising, saidMichael Matoney, executive directorof New Directions, a nonprofit thatprovides substance abuse treatmentfor teens.

Mr. Matoney said he had beenconsidering collaboration with othernonprofits that would enable hisgroup to provide more services.Though he was making cold calls to other nonprofits to see if theywould consider working together,he felt as though he was on an expe-dition without a map.

“You always feel like you’re chasingthe wave,” Mr. Matoney said. “Youdon’t even know if you’re makingany headway.”

The workshops enabled him tointeract with executives and boardleaders of like-minded nonprofits,

Mr. Matoney said. The nonprofitgroups could send only their leadersto the workshops because they arethe ones who can institute changewithin the organizations, Ms. SanAntonio Zeman said.

Eliminating the overlapChange has been in the works

at Recovery Resources since thenonprofit in January 2008 merged with Community Challenge, which provides substance abuse programsto people in the western suburbs.

By combining back-office opera-tions, Recovery Resources andCommunity Challenge were able toprovide more services to those inneed, said Debora Rodriguez, CEOof Recovery Resources. And RecoveryResources wants to stay on that collaborative path, she said.

“We are a community that offerswonderful services, but I do believethere is overlap and more money isgoing to pay for a variety of infra-structures than there needs to be,”Ms. Rodriguez said.

In the December workshops, thenonprofits considered the pitfallsand advantages of collaboration,restructuring and integration, Ms.Rodriguez said.

The consultants provided examplesof partnerships, which could include integrating management,staff and volunteers; sharing communications and marketing;and merging systems such as finance,fundraising and technology.

However, collaboration is notnecessarily limited to joint effortswith other nonprofits, said PatriciaNobili, executive director of theAchievement Centers for Children,which provides help for disabledchildren.

Achievement Centers has beentalking with a for-profit entity about partnering to save money on marketing, to expand its geographicfootprint and to provide comple-mentary services and training, Ms.Nobili said. She wouldn’t identify

the for-profit group with whichAchievement Centers has been indiscussions.

Though Ms. Nobili said she isn’tsure if nonprofit/for-profit partner-ships are what the foundations arelooking for in the way of collabora-tions, Achievement Centers wastold the idea wouldn’t be ruled out,so the organization has moved onto phase two of the pilot project.

Pilot takes offNonprofits interested in moving

on to phase two of the pilot projecthad to submit their letters of intentby last Monday, Feb. 1. Once theconsultants tally up the number ofnonprofits interested in phase two,they will review the collaborationproject proposals and recommenda yet-unspecified number of non-profits to move on to phase three,which includes receiving financialsupport to implement the ideas bythe end of the year, Ms. San AntonioZeman said.

Ms. Nobili said AchievementCenters chose to enter phase twobecause the nonprofit has nothingto lose.

“There’s absolutely no downsideto this offer of assistance … so thatwe can be more efficient with theuse of our resources, which alsohelps us deliver our mission,” she said.

Recovery Resources and New Directions also decided to move onto the second phase, but the Cleve-land Rape Crisis Center opted outof the process, said Megan O’Bryan,executive director of the center.

Though the pilot project is a goodidea, she said her organization received a grant last year that it’s using, in part, to work with a consul-tant to map out possible collabora-tive efforts across Northeast Ohio.

“We’re really interested in oppor-tunities of how we can collaborate ona regional basis with other counties,”Ms. O’Bryan said. “There’s a signifi-cant demand for rape crisis services,especially outside the city.” ■


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are used in flexible electronics, andthat the region has a large base of potential parts manufacturers thatare ready to move away from theauto industry.

NorTech aims to capitalize onthose advantages in part by convening companies and collegeswith expertise related to the tech-nology and by securing public moneyfor research and development.

While individual companies andresearchers often have technical expertise in the technology, they often are so focused on their ownwork that they miss broader oppor-tunities to work with others, according to Ms. Bagley.

“We can be thinking three stepsahead,” she said.

Let’s BoogieKent Displays and AlphaMicron

show where the industry might beheaded. For instance, Kent Displaysalready has sold out of its new Boogie Board message pad, whichis sort of like a high-tech Etch-A-Sketch. With a finger or a stylus,users can write or draw pictures onthe plastic liquid crystal display ofthe $30 product, then erase them bytouching a button.

That’s just the first product Kent

Displays plans to produce on theroll-to-roll manufacturing line it installed in late 2008. It also is developing a liquid crystal film thatwould allow mobile phones andportable music players to changecolor with the touch of a button, aswell as a clear plastic display forcredit cards that would provide adifferent confirmation numberwith each use to prevent thievesfrom reusing stolen card numbers.

Kent Displays CEO Albert Greensaid he believes Northeast Ohio canbecome a player in the still-youngflexible electronics industry, becauseit has a wealth of people with exper-tise in material science and manu-facturing. It’s an opportunity the region should not miss, Dr. Greensaid.

“It is a multibillion-dollar industryencompassing many current andfuture products,” he said via e-mail.

Likewise, AlphaMicron, whichlast July doubled the size of itsheadquarters when it moved into30,000 square feet at Kent StateUniversity’s Centennial ResearchPark, already makes ski goggles andmotorcycle visors that dim with thepush of a button. It’s also developingsunglasses that do the same thing,in addition to other products.

The presence in the region of two

companies focused on flexible electronics is impressive, said AlphaMicron chief operating officerTamas Kosa.

“It’s hard to find another concen-tration in the (industry) like KentDisplays and AlphaMicron,” Dr.Kosa said.

Huge market potentialThe flexible electronics sector

is starting to gain momentum, according to information from SanJose-based Semi, a global associationserving suppliers for the microelec-tronic, display and solar industries.Among the countries with significant investments in relatedresearch and development areJapan, Korea, China, Germany andother countries in the EuropeanUnion, according to the association.

The group cited statistics fromanother organization predictingthat the global market for flexibleelectronics would be in the range of$126 billion by 2020. And there’s noreason why Northeast Ohio can’tget a big piece of that market, saidKirstin Toth, senior program officerwith the GAR Foundation, whichhelped NorTech pay for its strategicplan.

“I think it just makes a lot ofsense,” Ms. Toth said. ■

Flexible: Technology becoming popular here, abroad

Nonprofits: Workshops offer connections




there, and it’s instantaneous.” Mr. Falls said the firm is ensuring

that story pitches are succinct andrelevant, and that staff membershave a depth of knowledge aboutthe subject matter.

“It comes down to quick deliveryof good content,” Mr. Falls said.

Scott Chaikin, chairman andCEO of Dix & Eaton in Cleveland,said many of his firm’s clients —several of which are large publiccompanies — have been sticking tobasic services, such as a news eventthat announces a new store orproduct, in order to communicatewith investors.

“There’s not a lot being investedin experimentation,” he said.

Still, the integrated communica-

tions company is working closelywith its clients on deciphering socialmedia, and whether the mediumbenefits a company’s communica-tions strategy.

“We’re helping separate rhetoricfrom reality,” Mr. Chaikin said. “Onthe b-to-b side, we’re doing a lotmore monitoring for our clients” ofdiscussions about their companiesand products on social media sites.

It’s a deal The recent acquisition of Edward

Howard & Co. by Columbus-basedFahlgren Inc., one of the nation’slargest marketing communicationscompanies, is another example that represents industry changes.

The deal, expected to close Feb.

28, combines the nation’s oldest independent PR agency withFahlgren Inc., and is expected tocreate Ohio’s largest independentpublic relations firm. Financialterms were not disclosed.

Kathy Obert, chairman and CEOof Edward Howard, dismissed suggestions that the bad economyinfluenced the deal, and said thefirm had been in talks about part-nering with Fahlgren for years.

“We actually saw this as the perfecttime to partner, because companies’budgets are coming back,” she said.

Ms. Obert said that in the last yearshe’s seen an increasing number ofclients seeking multiple servicesfrom one agency. “They want an al-ternative to the multinational

last eight years, but there’s been anacceleration and urgency to movefrom traditional to online.”

As such, leaders of public relationsagencies say they’re making sureclients know they can deliver multipleservices, from social media campaignsto interactive digital press releases.

“It’s no longer just about gettingyour client’s name out in the paper,”said Howard Landau, president ofLandau Public Relations in Cleve-land. “Like any other industry thatcreates content, there’s been an evolutionary change, but the reces-sion put those changes on steroids.”

Mr. Goldstein said the recessionalso has heightened agencies’ account-ability for each dollar their customersspend.

“Clients more than ever have slimmer budgets and higher demands for ROI,” said Mr. Goldstein,who also is president of GoldsteinGroup Communications in Solon.“Everything we do for our clients hasa number attached to it.”

Electronic measuring stickMr. Landau said his company last

year launched the Landau ImpactReport in response to the increasingneed to measure return on invest-ment for clients. The report is anelectronic summary of media coverage,filled with interactive charts andgraphs, that monitors and analyzeswhat is said about clients and theircompetitors through a myriad ofplatforms, including social media,blogs, TV and print.

The electronic version evolvedfrom a binder about as thick as a dictionary that was filled with articlescontaining coverage about the client,Mr. Landau said.

Jan Gusich, president of AkhiaPublic Relations and MarketingCommunications in Hudson, saidher firm about a year ago began automatically incorporating socialmedia and highlighting sustainablebusiness practices in its clients’ public relations campaigns.

“We’re not waiting to be asked,”she said.

Robert Falls, president and CEO ofthe Falls Communications in Cleve-land, said long-term relationshipswith reporters and editors used todrive business, but those relationshipshave been sacrificed as traditionalmedia companies shed jobs amidthe digital revolution.

“Because the media are changing,we’ve had to change how we communicate to the media,” Mr. Fallssaid. “How we present information ismore important than ever becausethere is so much information out


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agency, but are still looking for a na-tional reach and a provider with theresources and expertise in a varietyof disciplines,” she said.

Under the deal, Edward Howardwill retain its name as a subsidiary ofFahlgren Inc.

As public relations companieslook to expand their market sharesand offerings, more deals like the Edward Howard-Fahlgren marriageare possibilities here, Mr. Goldsteinsaid. But, he added, “Many localfirms already have or are growingnational market share because theycan offer quality services withoutNew York price tags.”

Dix & Eaton, for one, which isNortheast Ohio’s largest PR agency,is not actively pursuing partner-ships, or “tuck-ins” of other smalleragencies, according to Mr. Chaikin.But, he added, “we’re open to thepossibility.” ■


Iwrote in a blog item last week thatperhaps Tiger Woods and Toyotacould join up and get a frequent-buyer discount with a crisis-

management consultant. Just that simple sentence led me to think aboutan amorphous word: “quality.”

Of course, I’m thinking about Toyotaon a number of fronts. I own aToyota — in fact, I own two —one of which takes my preciousson and daughter to and fromhigh school each day. Until thepast week or so, I never thoughttwice about the quality of theproducts, even after I got theletter about the floor mat recall.

Floor mat? I should take time away to bring it in for a floor mat? I will eventually, Isaid to myself.

A year ago, I bought a Toyota Avalonafter a very short exploration of the competing products. It was, after all, replacing another Avalon that was stillhumming along nicely way past 100,000miles. Why tempt fate, I thought, andchange models when my experience had

been so good?Now, like everyone, I am questioning

the wisdom of my decision. I worryabout my long drive to and from the office, but more importantly I worryabout my kids. I’m angry at Toyota because I feel the company cut cornerson its way to becoming the leading

seller of cars in the lucrativeAmerican market. Greed, it appears, honors no borders.

The company awaits deci-sions from an American government considering multi-million-dollar fines for failing to disclose these acceleration-related problems in a timelyfashion. Automotive News,another Crain publication, lastweek quoted Transportation

Secretary Ray LaHood as saying that National Highway Traffic Safety Admin-istration officials flew to Japan in December to remind Toyota of its “legalobligations” and then followed up in ameeting last month “to insist that theyaddress the accelerator-pedal issue.”

“While Toyota is taking responsible

action now,” the secretary said in a state-ment quoted by Automotive News, “itunfortunately took an enormous effortto get to this point.”

Our sister publication reported thatnews in a package of online stories onWednesday of last week. Of course, thenews kept coming, with Toyota then admitting it had problems (which itclaims now have been fixed) with thebrake pedals on its popular Prius hybrid.

I will have our cars repaired as quickly aspossible, though now I am nervouslyawaiting the recall letter so I can get theprocess started. But for the time being, Ifind myself wondering about just howToyota will dig itself out of this mess.Now that the automaker’s once-legendary reputation for quality hasbeen put into question, it will remain thatway for untold thousands, and perhapsmillions, of American customers.

Was it really that important for Toyotato surpass General Motors as the leadingseller of vehicles in America? In hind-sight, it sure wasn’t to this customer. Tome, the Toyota brand will be a questionmark for a very long time. ■


Keep it goin’B

ob Taft’s approval rating stood at 15% bythe end of the scandal-plagued second termof his administration. However, Ohio owesthe former governor a big debt of gratitude

for creating in his first term the Third Frontier program, which has been a rousing success inspurring investment in technology research andcommercialization efforts across the state.

The best way Ohioans could repay Mr. Taft wouldbe to approve a $700 million bond issue this Maythat would provide the money to continue the ThirdFrontier beyond next year.

The numbers alone argue in favor of keeping theprogram going. According to a study released lastSeptember by independent research institute SRIInternational in Menlo Park, Calif., the state’s investment from 2003 to 2008 of $681 million inThird Frontier money yielded $6.6 billion in economic activity, 41,300 jobs and $2.4 billion inemployee wages and benefits.

The passage in 2005 of a $500 million bond issueto finance the Third Frontier made a huge state-ment to venture capital and angel investors thatOhio was serious about providing seed money forinvestments in technology segments where the statehas perceived strengths. Private investors have responded by putting hundreds of millions of their own dollars into technology commercializa-tion efforts at companies throughout the BuckeyeState.

People in Northeast Ohio should be particularlyfond of the Third Frontier, because a healthy chunkof the money has gone into companies and researchinitiatives here. State dollars that go toward ground-breaking medical research at the Cleveland Clinicand Case Western Reserve University tend to attractthe most publicity. However, Third Frontier moneyalso helps propel small companies such as TechnologyManagement Inc. in Highland Heights, which alongwith Lockheed Martin won a $1 million grant lastmonth to develop jointly a fuel cell system thatcould be used by military units in the field.

The Ohio Venture Association, a group that encourages entrepreneurship and venture capitalinvestment, last month issued a position paper that strongly supports continuation of the ThirdFrontier.

“This program has been very valuable in creatingtechnology in the state’s research institutions, supporting the commercialization of that technologyin companies, and supporting company formationand capital formation throughout Ohio,” associa-tion president Jonathan Murray said. “As I travel to other states, particularly in the Midwest, theThird Frontier program is held up as an example tofollow.”

Ohio has a winner on its hands with the ThirdFrontier. That’s why business groups that includethe Greater Cleveland Partnership and GreaterAkron Chamber of Commerce plan to support acoming campaign that will promote passage of thebond issue. It should be money well-spent, becausewe believe informed voters will say “yes” to a program that should continue to yield economicdividends to Ohio for years to come.

FROM THE PUBLISHER

BRIANTUCKER

Toyota, like Tiger, soils its reputation

PUBLISHER/EDITORIAL DIRECTOR:Brian D.Tucker ([email protected])

EDITOR:Mark Dodosh ([email protected])

MANAGING EDITOR:Scott Suttell ([email protected])

OPINION

AND COUNTING ...

LAURA MCCARTHYClevelandI liked when they built the BPbuilding. … It was nice that itwas at Public Square.

TED MANNSolonI would say probably the BPbuilding because of … what it’sdone for Public Square. But it’snot my favorite building (everbuilt in Northeast Ohio). I’d say my favorite building is theHuntington Building.”

KENT SMITHEuclidFor both a tourist destinationand architectural quality, I’mgoing to go with the Rock andRoll Hall of Fame.

Crain’s Cleveland Business iscelebrating its 30th year asNortheast Ohio’s premier sourcefor business news with a specialMay 24 double issue, which willfeature profiles of 30 of themost influential Clevelanders.

As part of the celebration, wealso are reflecting on the mostmemorable events of the pastthree decades with weekly polls— some of which can be found inthis space — trivia questions,online content and video interviews.

You can get in on the fun byvisiting www.CrainsCleveland.com/30thAnniversary.

What’s your favorite Northeast Ohio building that was constructed in the last 30 years?



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LETTER

Sanders’ transformation plan a farce■ Nothing illustrates the disconnectbetween suburban/exurban North-east Ohio and the city of Clevelandmore than the letter to the editorsubmitted to Crain’s by Jim Rundo ofChesterland in your Jan. 25 issue.

Mr. Rundo rhapsodizes about thefoundation-funded Boston ConsultingGroup/Eugene Sanders Transforma-tion Plan for the Cleveland schools,and admits that he lives nowherenear Cleveland — but only hasCleveland’s best interests at heart —when he steps up to proudly endorsethe plan that he acknowledges willbe painful.

Well, it is time that those of you livingoutside the city of Cleveland realizethat we, who do live here and who dopay taxes in the city of Cleveland, aretired of being your blood meal.

It is time that you acknowledgethat Eugene Sanders and DanielBurns were recruited to destroy and corporatize the unionizedCleveland public school system.Outside corporations and contrac-tors have had their field day at thetaxpayers’ and at our children’s expense. Corporate interests haveintentionally undermined ourschools and communities to linetheir pockets.

This Cleveland MetropolitanSchool District school board can either recognize the fraud and voteagainst the Sanders’ Transforma-tion Plan on Feb. 23 or they cancontinue to bleed away our future.

It’s that simple. Eugene Sandersand his administration are underinvestigation in Toledo for fiscal

malfeasance. It’s only a matter oftime before the full extent of fraudand corruption is uncovered here inCleveland as well.

I respect Crain’s Cleveland Busi-ness and the business community inNortheast Ohio. I ask you to not endorse this plan and to hold ourschool administrators accountableto every child and to the taxpayerssupporting our schools.

Laura A. McShaneCleveland

PERSONAL VIEW

Mr. Shingler covers manufacturing forCrain’s Cleveland Business.

Let’s re-evaluate buying decisionsBy DAN SHINGLER

he people can spend theirmoney more wisely than thegovernment can.

That’s been a mantra ofmany for the last 30 years, but whatif it’s wrong?

The very notion will no doubtdraw gasps from a few readers,maybe more. But let’s explain andalso clarify the message here beforeany breaths are released behind angry words.

America has, and is generallyproud of, the most consumer-driveneconomy in the world — and, so far,it’s still the largest. In the decadesany of us can remember, this has become even more prevalent as oureconomy shifted to rely more onconsumer spending and less on government’s buying decisions.

That reduced the bulk of spendingin the United States to trillions andtrillions of tiny, lowest-price buyingdecisions made by millions of individuals who, as any economistwould have predicted, sought andfound the best deals for themselves.

This is how markets work.But what happened?As individuals, we chose to buy our

shoes from India, our clothes fromBangladesh and almost everythingfrom China. No one meant any harm,but the result is that almost nothingthat any of us uses on a day-to-day basis is made in this country anylonger. Sure, a few of us can afford tobuy the few remaining clothes madein America, but not most. Most of uscan’t even find them.

The odd thing is, we generallydon’t let our government do this. Wewould rail against our government ifit made huge purchases of overseasgoods that could have been boughtfrom American factories. Often, weprohibit our government from evenconsidering such an economicallytraitorous act.

Collectively, we not only havegood intentions, but we enforcethem. We protect what we knowdeep down is good for us all. Individ-ually, it’s more like every man for

himself — and women, too.So, what is the solution?Some would say it is simply to put

more buying power back into thehands of government — and this hasbeen done, voluntarily or not, as partof efforts to fight the economic down-turn. When you hear that the govern-ment spent $3 million on signs, thatmoney went into an American company, which paid an Americanworker — regardless of whether a specific new job can be traced to thespending. But there is no push for along-term change in philosophy orpolicy to put more spending in government’s hands, nor are we arguing that there should be.

A better question might be howwe get ourselves, each one, to act theway we would demand that our government act.

Otherwise, we might find ourselvesin straits so dire that more than half usjust decide to let our government doall or most of the spending for us. Andyou know what that means — moreAmerican-made goods, perhaps, butmaybe no more of those cool Asianelectronics, either. ■

T

WRITE TO USSend your letters to: Mark Dodosh,editor, Crain’s Cleveland Business,700 W. St. Clair Ave., Suite 310,Cleveland, OH 44113-1230e-mail: [email protected]

Ulmer & Berne growsWindy City presence

Ulmer & Berne LLP is making “an aggressivepush” into Chicago, the

firm said, by signing a lease thatallows room to more than triplethe number of employees in itsChicago office.

The firm, which is headquar-tered in Cleveland and has eightattorneys in Chicago, has signeda lease for more than 18,000square feet in the Citigroup Center, an office that can accom-modate 30 attorneys and theirsupport staff. Ulmer & Berne isscheduled to move into the newspace in April.

The firm started the Chicagooffice in 2001 with two attorneysand added six attorneys last September. — Arielle Kass

ON THE WEB Story from www.CrainsCleveland.com



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bunch of forms,” Ms. Platzke said.“We physically go to the patients’homes and help them learn how tofill out the forms and we accompanythem to the Ohio Department ofJob and Family Services office, ifthey need that.”

Likewise, Lake Health has employees dedicated to helpinguninsured patients begin the Medic-aid enrollment process, said JulieannStrogin, a spokeswoman for LakeHealth.

“With high unemployment in thestate, you’re going to see some obvious upticks in the Medicaidpopulation and self-paying patients,”Ms. Strogin said.

Though Medicaid pays less thanprivate insurers, it’s still better thannot receiving any payment for services rendered to the uninsured,Ms. Strogin said. Statewide, Medicaidpays an average of 84 cents on thedollar for the care provided, accordingto the Ohio Hospital Association.

Starting youngAkron Children’s Hospital and

University Hospitals Rainbow Babies & Children’s Hospital inCleveland also have seen increasesin the number of children on Med-icaid or who qualify for the public

subsidy. In response, they have boosted

their efforts to sign children up forMedicaid and are looking for waysto trim overhead costs. Medicaidreimbursements typically cover onlyabout 75% of the cost of providingcare at Akron Children’s, saidShawn Lyden, executive vice presi-dent of Akron Children’s.

Rainbow has seen its number ofMedicaid patients rise 4% over thelast 12 to 16 months, and 57% of itspatients now are on Medicaid, saidMike Farrell, president of Rainbowas well as UH MacDonald Women’sHospital.

While Rainbow constantly raisesprivate dollars to help fund somepatient care, the hospital also is trying to expand its share of the pediatric market to offset the lossesit absorbs from serving more chil-dren on Medicaid, Mr. Farrell said.

Rainbow launched multidiscipli-nary clinics on its main campusabout 18 months ago to allow patientsto see several specialists at once.Mr. Farrell said their popularity hasprompted Rainbow to try to offermore clinics and to open on Saturdaysby mid-spring.

The children’s hospital in Marchwill add pediatric sub-specialty services to its Twinsburg location,

which opened last year. And a newUniversity Hospital satellite openingin Medina in April will include pediatric services, while otherneighborhood clinics also could seean expanded range of pediatric ser-vices to boost access, Mr. Farrell said.

Akron Children’s entered theMahoning Valley in 2008 when itpartnered with Forum Health andHumility of Mary Health Partners toopen a children’s hospital on onefloor of the new St. Elizabeth Board-man Health Center.

But, with 60% of the child popu-lation it serves there on Medicaid,the move “had a serious adverse affect on our overall payer mix,” Mr.Lyden said. To compensate, AkronChildren’s is expanding geographi-cally beyond its Summit County roots.

The hospital will open a primarycare office in Brecksville in March,is planning an office in Medina andhopes to collaborate with indepen-dent hospitals in western Pennsyl-vania, where there’s a shortage ofsub-specialists, he said.

While such measures of dealingwith an expanding Medicaid popu-lation help, a healthier economy isneeded to remedy the problem, Mr.Farrell said. “Until we change theemployment base, I don’t know thatwe will hit a plateau,” he said. ■

Medicaid: Healthier economy a sure remedycontinued from PAGE 3

Solon insurer finds funin amusement industryBy ARIELLE [email protected]

A Solon insurance broker’s entréeinto the world of bouncy houses,mechanical bulls and parking lotroller coasters came about througha fireworks connection.

Drew Tewksbury, vice presidentand program manager of AllegiantPrograms Group and AmusementInsurance Resources in Solon, saidthe broker started an amusement-specific offering after a client thatfocused on pyrotechnics lamentedthe lack of options for other formsof entertainment insurance.

So Allegiant employees rolled uptheir sleeves, Mr. Tewksbury said,and started to talk to companies thatuse amusement insurance about thedifficulties and restrictions they face.

Eight years ago, he said, pyrotech-nics companies faced the same problems — insurance was expen-sive because the work was viewed asparticularly dangerous. But Mr.Tewksbury said while there are certain risks in both fields, the frequency of payout is lower thanmight be expected.

He called the amusement industry“misrepresented and misunderstood.”

“We can promote safety as an insurance carrier and demonstratethat it’s not really as scary as itseems,” he said.

Jim Oremus, the South Carolinaowner of Let’s Play Entertainment,which operates four Monkey Joe’s franchises, said he switched toAmusement Insurance Resourcesnearly a year ago. He has found Mr.Tewksbury to be more interested insafety than his previous agent, hesaid, as well as more responsive topotential claims calls.

“They’re making sure we’re doingeverything correctly,” Mr. Oremussaid. “Drew just seems to be morein tune with my industry.”

Mr. Oremus said while he mayhave saved some money on the premiums by making the switch, itwasn’t his primary motivation. “It’sreally not a dollars-and-cents move,”he said. “It’s a personality move.”

The insurance is written by CNAFinancial Corp. and is a brandednationwide program for amuse-

ment device rentals and inflatables,Mr. Tewksbury said. He said thereare probably a dozen programs forsuch insurance, but that since it began to dabble in the field fiveyears ago, Amusement InsuranceResources has become one of thetop three providers with about 300clients. Together with the pyrotechnicgroup, it has collected roughly $2million in premiums.

With plans to expand into Canadaand its eye on three possible acqui-sition targets this year, Mr. Tewks-bury said he expects the program tocontinue its growth.

“I anticipate in 2010, we’ll be the800-pound gorilla,” he said. “Ourstrength as an insurance firm is inidentifying underserved marketswith relatively high liability and ahigh need for expertise. … Few people like to entertain those risks.”

Because of the risks, Mr. Tewks-bury said, there’s a “considerablepremium” to be made.

Spark of an ideaMitch Wilson, spokesman for the

Ohio Insurance Institute, said thegroup’s members tend not to be involved with such specialized linesof business, but that it works well withwhat brokers often try to accomplish.

“Brokers will create a programbased on the needs of their clients,”he said. “If there’s a specialty need,they’ll see if they can pull some-thing together with the exposurecoverage, risk coverage they need.”

While Mr. Tewksbury said brokerBritton-Gallagher, of which Allegiantand Amusement Insurance Resourcesare subsidiaries, started writing thebusiness five years ago internally,retail offerings began three yearsago and the insurance wasn’t soldwholesale until the fall of 2009.

Linda Dixon, CNA’s assistant vice president of the select risk program, said Britton-Gallagher’sstaff approached her about puttingsomething together for amusementclients. In the past, she said, the insurance marketplace had “prettymuch abandoned” the industry because safety standards had notyet been established, leading to anumber of injuries. In subsequentyears, standards improved. ■


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MANUFACTURINGEATON CORP.: Doug Grossman-McKee to director, health and welfareplans.

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LEGAL AID SOCIETY OF CLEVELAND:Richard Panza (Wickens, Herzer, Panza, Cook & Batista Co.) to president;Ilah Adkins and Adrian Thompsonto vice presidents; Rick Petrulis to secretary/treasurer; David Kutik topresident emeritus and Patricia Pooleto president emerita.

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It wasn’t just a desire to grow that drove Proformafounder Gregory P. Muzzillo to franchise hisprinting and promotional products company — itwas the realization that his entire industry was

incredibly inefficient. “We all had to invent our complete back offices,”

he said. Mr. Muzzillo formed his company in 1978 after

graduating from Baldwin-Wallace College. By 1982,sales reached $1 million, and Proforma was named insuccessive years to Inc. magazine’s 500 FastestGrowing Companies.

But the push Mr. Muzzillo needed to franchisecame as the company was looking to expand intoColumbus. The candidate who had been identifiedas a potential branch manager decided it was moredesirable to own a business rather than work for one.

Mr. Muzzillo began to research different businessand franchise models, ultimately deciding on “conversion franchising.” In such an arrangement,existing businesses join the franchise, thereby bene-fiting from purchasing power, marketing dollars andback-office support.

“My model was looking to empower and align current industry participants,” Mr. Muzzillo said. Today, Proforma does about $350 million in sales.

“It’s almost impossible to build a large organizationon your own,” he said. “There were some days Ithought I was insane. … It was a far larger shift than Ithought.”

Today, there are more than 720 Proforma fran-chises. The economy has been a boon to Proforma interms of franchises. A record 150 were added in 2009,and this year there are hopes to add another 200.

— Amy Ann Stoessel

It wasn’t just a desire to grow that drove Proformafounder Gregory P. Muzzillo to franchise hisprinting and promotional products company — itwas the realization that his entire industry was

incredibly inefficient. “We all had to invent our complete back offices,”

he said. Mr. Muzzillo formed his company in 1978 after

graduating from Baldwin-Wallace College. By 1982,sales reached $1 million, and Proforma was named insuccessive years to Inc. magazine’s 500 FastestGrowing Companies.

But the push Mr. Muzzillo needed to franchisecame as the company was looking to expand intoColumbus. The candidate who had been identifiedas a potential branch manager decided it was moredesirable to own a business rather than work for one.

Mr. Muzzillo began to research different businessand franchise models, ultimately deciding on “conversion franchising.” In such an arrangement,existing businesses join the franchise, thereby bene-fiting from purchasing power, marketing dollars andback-office support.

“My model was looking to empower and align current industry participants,” Mr. Muzzillo said. Today, Proforma does about $350 million in sales.

“It’s almost impossible to build a large organizationon your own,” he said. “There were some days Ithought I was insane. … It was a far larger shift than Ithought.”

Today, there are more than 720 Proforma fran-chises. The economy has been a boon to Proforma interms of franchises. A record 150 were added in 2009,and this year there are hopes to add another 200.

— Amy Ann Stoessel

SMALL BUSINESSI N S I D E

FEBRUARY 8-14, 2010 CRAIN’S CLEVELAND BUSINESS 13

15 WITH FEWER CARLOANS, DEFAULTS, THE REPO MAN IS LESS BUSY.

FRANCHISORSBRANCH OUT

Proforma’s move stems in part from wanting more efficiency

See BRANCH Page 16

Model helps a business grow, but starting one and succeeding can be a challenge

By AMY ANN [email protected]

Jaime Brenkus may be best known forthe fitness video series “8 Minute Abs,”but these days he’s flexing his musclesto make his mark as a franchisor.

Mr. Brenkus, a native Northeast Ohioan,in 2008 opened his first Slim & FIT facility inConcord, and late last year he began to fran-chise the concept, which incorporates fitnesstraining and nutrition consultations into asingle location.

In just one week last month, Mr. Brenkussold seven Slim & FIT franchises. In addition to the Concord location, there now are 10



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SMALL BUSINESS

THEINTERVIEWERIC KOGELSCHATZ/HALLIE BRAMOrganizersTEDxCLE

Two native Midwesternersare hoping to get the creative juices flowing withan event they have organized

for later this month.Eric Kogelschatz, senior account

executive for Marcus Thomas, andHallie Bram, studio manager at Adcom Communications, havejoined forced to organize TEDxCLE,a local event dedicated to the sharing of ideas that’s modeled aftersimilar programs held worldwide.

The Cleveland event, which issold out, is slated for 9 a.m. to 1 p.m.on Feb. 26. It will be held at The Capitol Theatre and will include presentations by the following:

■ Terry Schwarz of Pop Up City/Kent State University: “Fixing broken cities.”

■ Chris Yanc of cyancdesign:“Open source technology and multi-touch exploration.”

■ Danielle DeBoe of Room Service/Made in the 216: “Turninga desire into a reality ... it’s not sohard, really.”

■ Benson Lee of TechnologyManagement Inc.: “Solving globalsocial problems with fuel cell technology.”

■ Aaron LeMieux of TremontElectric: “Alternative energy: Kinetic energy generation withnPower.”

■ Sean Bilovecky and BrianO’neill of Wrath Arcane: “Drawingfrom the past, thinking fashion-forward.”

■ Dana Myers of Myers Motors:“The future of transportation andthe electric vehicle.”

■ Patrick Perotti: “Class actionlawsuits help Cleveland ... $21 millionso far.”

■ Michael Ruhlman, food writer:“The Cooking Animal.”

■ Dr. C. Martin Harris of TheCleveland Clinic: “Health care 2.0.”

Mr. Kogelschatz and Ms. Bramanswered a few questions about theevent and their motivation for orga-nizing it in Cleveland.

Q: Explain a little about the TEDxprogram.

A: TED is an annual event wheresome of the world’s leading thinkersand doers are invited to share whatthey are most passionate about. TEDstands for technology, entertain-ment, design — three broad subjectareas that are, collectively, shapingour future. And in fact, the event isbroader still, showcasing ideas thatmatter in any discipline. Attendeeshave called it “the ultimate brainspa” and “a four-day journey intothe future.”

The diverse audience — CEOs,scientists, creatives, philanthropists— is almost as extraordinary as thespeakers, who have included BillClinton, Bill Gates, Jane Goodall,Frank Gehry, Paul Simon, SirRichard Branson, Philippe Starckand Bono.

TED was first held in Monterey,Calif., in 1984. In 2001, Chris Anderson’s Sapling Foundation acquired TED from its founder,Richard Saul Wurman. In recentyears, TED has expanded to includean international conference,

Kogelschatz Bram

IN BRIEF■ HELPING HANDS: Sisters TiffanyCroucher and Teri L. Andersonhave opened a nonmedical, in-homehealth care service that helps thehomebound and elderly. The Painesville-based company, Heritage HomeHealthcare of Lake & GeaugaCounties, is the sixth Heritage HomeHealthcare franchise in NortheastOhio. Heritage Home Healthcare alsoprovides relief respite care, and abroad range of services for both tem-porary and long-term needs.

■ FULL RANGE: The owner of a

South Florida radiology center haspurchased the assets of Spectrum Diagnostic Imaging LLC, which hassix locations in the Cleveland area.Dr. Mark Zhuk is the owner of thenewly named Spectrum DiagnosticImaging of Ohio LLC, which haslocations in Mentor, Willoughby, Lynd-hurst, Warrensville, Brooklyn and Mid-dleburg Heights and employs morethan 70 people. Spectrum offers awide range of diagnostic testing de-vices and provides competitive pric-ing for consumers. Terms of the dealwere not disclosed.

TEDGlobal; media initiatives, including TED Talks and TED.com;and the TED Prize.

In the spirit of ideas worthspreading, TEDx is a program oflocal, self-organized events thatbring people together to share a TED-like experience. At a TEDxevent, TEDTalks video and livespeakers combine to spark deepdiscussion and connection. Theselocal, self-organized events arebranded TEDx, where “x” equalsan independently organized TEDevent.

Q: How did each of you get involved in TEDx?

A: While both of us are native Midwesterners, we met while livingin Boston, Mass. Upon meeting wequickly realized that we shared apassion for being a part of the urbanrevitalization efforts happening inthe Rust Belt. We decided to moveback to the area in order to be an active part of these efforts.

Upon moving back to Cleveland,we were excited to find so many creative, innovative thinkers livinghere. We began brainstorming waysto highlight these positive “thinkersand doers” both within our city andto an audience outside of Cleveland.We realized that the city had neverhad a TEDx event, but that surrounding cities like Columbusand Detroit had.

We submitted our TEDx curatorapplication and TEDx quickly granted us approval to found TEDxCLE, Cleveland’s first officialTEDx event.

Q: What will occur during the event?

A: The event will feature 10 speakersas well as several speeches in videoform from other TED and TEDxevents. Attendees will be exposed toinnovative, positive thinking fromsome of Cleveland’s most dynamicthinkers. At TEDxCLE, TEDTalksvideo and live speakers spanningtopics such as health care, urban revitalization, art and product devel-opment will combine to spark deepdiscussion and connection amongstspeakers and attendees alike.

Q: What results are you hoping tosee from TEDxCLE?

A: We’re hoping to share positivethinking from Cleveland with thosein the TED community and theworld. Videos of all speeches will appear on TED.com and contentwill be seeded in blogs as appropri-ate. We want to change the way thatClevelanders feel about the city andtake an active role in revitalizing thecommunity. Further, to share innovative thinking happening inCleveland with people around thecountry and world.

Q: What mix of attendees are youlooking for?

A: Our hope is to have a diverse audience made up of NortheastOhioans that share one centraltrait: curiosity. This passion for life certainly spans across age groups,race, income level and occupation.

More information can be found atwww.tedxcle.com/.



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SMALL BUSINESS

Meet IRS guidelines to keep life insurance benefit tax free

Life insurance can serve several critical needs forbusinesses. For example, lifeinsurance can provide cash

flow to help a business deal withthe death of a key employee, orfunding for buy-sell arrangementsbetween the business and its owners. Historically, a key benefitof life insurance was that the pro-ceeds paid upon the insured’s deathgenerally were received tax free.

In response to a concern that lifeinsurance policies were being takenout by businesses on rank-and-fileemployees, Congress in 2006 intro-duced new rules that require businesses to include certain life insurance proceeds in income.

Exceptions were provided forseveral common arrangements, assuming compliance by the business with certain notice andconsent requirements. In a recentnotice, the IRS has provided signifi-cant additional guidance on theserules, including guidance on whattypes of contracts are covered, howthe exceptions apply and details onthe notice and consent requirements.

Under current law, the generalrule is that life insurance proceedsfrom employer-owned life insurancecontracts are taxable to the extentthey exceed the excess of premiumsor other amounts paid.

Several exceptions are provided,including whether the insured wasa highly compensated employee atthe time the contract was issued;the proceeds are paid to a familymember; or the proceeds are usedto buy an equity interest in the employer from a family member orthe employee’s estate.

These exceptions only are avail-able if the employer follows certainnotice and consent procedures.Generally, the employee must benotified in writing that the businessintends to insure the employee’slife and in what amount, and thatthe business will be a beneficiary ofany proceeds. Importantly, the employee must provide writtenconsent to the arrangement and anacknowledgement that coveragemay continue after the insured terminates employment.

The recent IRS guidance providesseveral important clarifications tothe definition of employer-ownedlife insurance contracts (EOLI).

First, an insurance contractowned by a person related to theemployer is not an EOLI. Thiswould be a common situationwhere one shareholder owns a policy on the life of another share-holder for purposes of financing abuy-sell arrangement.

On the other hand, the noticeprovides that an insurance contractcan be EOLI if owned by a sole proprietorship and that there is noexception to the rules for an owner-employee of a wholly ownedcorporation.

Finally, the recent notice makesit clear that a life insurance policythat is part of a split-dollar arrange-ment could be considered EOLI, although the death benefits wouldnot be included in the employer’sgross income to the extent of anyamounts paid to a family memberor certain other beneficiaries of theemployee.

These rules are effective only on

CARLGRASSI

TAX TIPS

policies issued or materiallychanged after Aug. 17, 2006. The recent guidance provided some important information on whenchanges to a policy issued prior tothis date will be considered “material,”causing a grandfathered policy tobe subject to these rules.

For instance, the notice makes itclear that increases in the deathbenefit that occur pursuant to theterms of the existing contract arenot material changes, nor arechanges resulting from the exerciseof an option or right granted underthe original contract considered tobe material.

As discussed above, even if one ofthe exceptions to the rule applies,insurance proceeds only will be excluded if detailed notice and consent requirements are met. Thenotice provides that these require-ments can be satisfied electronicallyas long as the system allows forsome means of formally recordingthe employee’s consent and a hardcopy of the notice and consent canbe produced if requested by theIRS. The notice also discusses indetail the timing requirements ofthe notice and consent relative tothe issuance of the policy.

Most insurance planning is doneassuming that proceeds will be received tax free. Businesses needto make sure that they meet the requirements of the applicable exceptions, and that the rules relating to notice and consent arefollowed. The recent guidance fromthe IRS will serve to help in thistype of planning. ■

Mr. Grassi is a member and presidentof McDonald Hopkins LLC.

Fewer car loans, defaults limit reposBorrowers get a littlemore leeway; drop inauto sales plays roleBy KATHY AMES [email protected]

Abad economy does notnecessarily mean thatbusiness is taking off forthe repossession companies

that take away vehicles from borrowers in default of their vehicleloans.

According to some who work inthe vehicle repossession business,the industry’s performance is tiedmore closely with the lending environment, which has been in avirtual lockdown since 2008, whenthe economy turned sour. Sincelending has been tight, fewer vehiclesare being sold, which translatesinto fewer repossession orders, saidJim Hall, president of the AmericanRecovery Association, an organiza-tion of collateral recovery specialists.

“There’s a misconception withour industry,” he said. “Peoplethink if the economy is doing bad,we’re doing well. That’s not thecase.”

Meanwhile, David Skinner, presi-dent of Bancers Recovery Servicesin Cleveland, said business hasbeen flat — the company averages“a couple thousand” repossessionsannually — over the last couple ofyears for the company that recoversvehicles in Northeast Ohio andthroughout the state.

“Lenders are doing more workoutsand loan modifications with borrowers,” said Mr. Skinner, whoalso said he has noticed more repossessions from middle-incomefamilies. “Usually my larger clientsgive the debtors between 60 and 90days to pay the loan. Once it reaches120 days late, though, they have towrite it off, and that’s a liability forthe lender.”

Mr. Skinner said business maypick up about mid-year once someborrowers who took advantage ofthe Cash for Clunkers program begin to default on their loans. The

federal program ran July 1, 2009,through Nov. 1, 2009, and encouragedpeople to trade in their clunkersfor new cars.

“It’s a terrible way to make a living, but someone has to servicethese clients,” he said.

But unlike Mr. Skinner, Mr. Hallsaid he is not expecting the repos-session industry overall to benefitfrom the Cash for Clunkers program.

“That program wasn’t aimed atsubprime borrowers,” Mr. Hallsaid. “People who bought carsthen would not have had troublebuying a car beforehand.”

Business stallsMr. Hall said it’s difficult to

quantify the industry’s performanceas a whole, but he said overall heexpects fewer repossessions in2010 compared with 2009, which wasan abnormal year for the industry.

Typically, the repossession business is cyclical. Until 2009, theindustry experienced a lull in assignments during the first half ofeach year, because lenders oftenheld out on ordering repossessionssince many borrowers paid on orbrought their loans current oncethey received their income tax returns.

However, 2009 remained fairlyflat because the credit crunchstymied new car sales in 2008,which meant there were fewer loan defaults — and lessbusiness for repossession companies.

Robert “Skip” Blowers, owner ofSkipco Auto Auction, said whilebusiness has remained fairlysteady over the past couple ofyears, he said 2010 is a large question mark because of the fallout from the more stringentlending environment and risingunemployment.

The auto auction business haslocations in Cleveland, Dayton,Columbus, Mansfield, Youngstownand Akron-Canton, all areas thathave suffered economically because of their close ties to theauto manufacturing industry. Thecompany auctions repossessedcars, so Mr. Blowers said he has apulse on how business is faringwithin the repossession industry.

“We’ve had a steady work flow ofcars over the past three years, butour business is about a year be-hind” how the economy trends,Mr. Blowers said. “A year or so outwe may be busy, but it hasn’t hityet. Will we be busy in 2010? 2011?I don’t know.”

Mr. Blowers said until credit flowsmore freely and more people beginbuying vehicles, the repossessionindustry will remain sluggish.

“The whole story of the reposses-sion business is based on credit,” hesaid. “The whole downturn revolvedaround easy credit. If you want todry up our industry, cut credit.

“If credit is tight, we slow down.If it’s available, we’re busy,” hesaid. ■



SMALL BUSINESS

Branch: Franchisor must shift into mindset of business ownerfranchises: five in the Scottsdale,Ariz., area; one in Nashville; one inPhiladelphia; two in Birmingham,Ala.; and one in Westlake (owner-operated).

And, the fitness guru says it’s justthe beginning — he said he’s confi-dent there will be more than 100Slim & FITs by the end of the year.

Mr. Brenkus is far from alone inhaving lofty ambitions for his busi-ness concept. According to esti-mates included in the “2010 Fran-chise Business Economic Outlook”prepared for the International Franchise Association EducationalFoundation, it is expected that therewill be more than 900,000 business-format franchise establishments inthe United States in 2010, a 2% increase from the previous year.

“Our belief was always to focuson the franchise aspect of it,” Mr.Brenkus said. “We felt we couldgrow much quicker that way.”

Joel Libava, self-proclaimed“Franchise King” and owner ofconsulting firm Franchise SelectionSpecialists of University Heights,said he looks for a business that’sbeen up and running for a period

of time when considering whatmight make a successful franchise.

“I like to see something that hasbeen around,” he said, noting thatit’s even better if that businessowner has been documenting operations along the way. “I’mlooking for someone that has theright thought process in mind.”

But it takes more than proceduresand staying power to be a strongfranchise candidate: “It’s got to becutting edge … something that’seasy to replicate,” he said.

For Mr. Brenkus’ part, he believeshis business has that point of differ-entiation, and he said that from afinancial standpoint, franchisingmakes the most sense. “Our idea wasto hit the ground running,” he said.

More than just moneyWith $35,000 being the average

initial franchise fee, access to capital— or as Mr. Libava puts it “OPM,” or“other people’s money” — can be akey motivator for an entrepreneur todecide to franchise their business.

Of course, it’s not all about money.“Franchisors who realize the fran-chisee is the most important cog inthe wheel are the ones that are

really successful,” Mr. Libava said.Fred Peters, for example, opened

his first Original Pizza Pan store in1985 at West 117th Street and Lorain Avenue in Cleveland, andtoday there are about 75 stores.

The relationship between franchisor and franchisee is an important one to Mr. Peters. “For me to pick a franchisee, theynot only have to like me, but I haveto like them,” he said.

The Original Pizza Pan charges a$25,000 franchise fee and a flatmonthly royalty fee to its fran-chisees. Mr. Peters said the reasoning behind the flat fee —which is $1,500 for new locations —is that he wanted to encourage honesty among franchisees and givethem a better gauge of overheadeach month.

Surrounding himself with goodpeople is critical for Mr. Peters,who said there’s been a learningcurve in the franchising process.

“At first I had to realize I was nolonger a pizza shop operator. … Iwas in the business of selling fran-chises,” he said.

As for potential Slim & FIT fran-chisees, Mr. Brenkus is focused on

investment teams, which then hirean on-site manager. But, Mr.Brenkus said, he’s not acceptingjust any franchisee.

“We’re looking for people who literally have a passion to help people,”he said.

In fact, Mr. Brenkus likened fran-chising to parenthood: “You’re incontrol for all those years and all ofsudden your baby’s gone to college.”

Not as easy as it looksStanley Dub, a Beachwood attorney,

has been in practice for 30 years,much of it working with franchiseesand franchisors, and he said the decision to franchise a business isone that is document-intensive.

The Franchise Disclosure Docu-ment — which must be prepared incompliance with Federal TradeCommission rules and registered instates where it is required (Ohio is anonregistration state) — includes acomplex set of information, includingthe business background of theowner, franchisee obligations aswell initial and other fees. The franchise agreement, which spellsout the relationship between thefranchisor and franchisee, also isincluded as part of the document.

“From the franchisor point ofview, it’s a device that has a lot ofadvantages,” Mr. Dub said of fran-chising. “It lets somebody else providecapital for a piece of the business.”

Ultimately, it means that a business is able to grow faster thanit might have been able to on itsown. But, Mr. Dub cautioned, thearrangements don’t always work.

“It puts your business at risk,”Mr. Dub said. “If someone getssued … it’s the franchise name.”

In the grand scheme of things,however, the advantage goes to thefranchisor, who can build in a lot ofcontrol into the franchise agreement.

Mr. Libava agreed that there aresome downfalls to the franchisemodel. For one, there are definite ex-penses up front to franchising theright way, and it can be a complicat-ed and many-faceted process. It’salso not the right method for some-one too entrepreneurial in spirit.

“It’s a great business model for theright person in the right area at theright time of their lives,”he said. ■

GRANDOPENINGSOOH LA LA BRIDAL BOUTIQUE107 Water St.Chardon 44024www.oohlalabridal.com

Ooh La La Bridal — founded by AmyHissa and Angie May — aims to offeraffordable prices while featuring a fullcollection of attire and accessories forthe bride and bridal party. The boutiquespecializes in wedding gowns, brides-maid, flower girl and mother of the occasion dresses, and offers customersthe option of designing a gown. Promgowns also will be available in thecoming [email protected]

THE CHOCOLATE BAR CLEVELAND347 Euclid Ave.Cleveland 44114www.chocolatebarcleveland.com

The Chocolate Bar Cleveland is in thecenter of the entertainment district atEast Fourth Street and Euclid Avenue.The restaurant, which serves martinis,food and desserts among other specialties, also offers a private partyroom, a chocolate novelty shop andan outside patio, which is coming thisspring. This newly franchised opera-tion is the first outside of Buffalo, andit is co-owned by Tammy Gunya-Novakand Dominic Fanelli.

Phone 216-622-COCO (2626)Fax [email protected]

FERROTRADE CORP. 1691 Georgetown Road, Suite KHudson 44236 Gerald Mink, a veteran scrap trader,has formed a new company calledFerroTrade Corp. The company special-izes in the management and marketingof scrap metal generated at industrialplants, such as stampers and fabricators,in addition to scrap metal brokerage.

Phone 234-380-1720 Fax 234-380-1725 [email protected]

To submit a new business, contactAmy Ann Stoessel at [email protected] or call 216-771-5155.




LARGEST AIRLINES SERVING CLEVELANDRANKED BY NUMBER OF ENPLANED PASSENGERS

Enplaned passengersEnplaned air freight

(in pounds)Enplaned air mail

(in pounds)

RankAirlineWeb site 2009 2008

Percentchange 2009 2008

Percentchange 2009 2008

Percentchange Landings Reservations number

1 Continental Airlineswww.continental.com 1,540,618 1,760,602 -12.5% 4,809,484 6,150,485 -21.8% 1,587,723 2,142,953 -25.9% 12,844 (800) 523-3273

2 Continental Expresswww.continental.com 871,493 1,046,544 -16.7% 243,151 306,701 -20.7% 1,228 2,585 -52.5% 23,261 (800) 523-3273

3 Southwest Airlineswww.southwest.com 511,950 563,281 -9.1% 656,450 852,677 -23.0% 0 0 NA 5,451 (800) 435-9792

4 Chautauqua-Continentalwww.flychautauqua.com 505,674 587,090 -13.9% 1,156 768 50.5% 650 1 NM 13,430 (800) 523-3273

5 Continental Connectionwww.continental.com 229,764 303,527 -24.3% 0 0 NA 0 0 NA 9,932 (800) 523-3273

6 American Eaglewww.aa.com 208,576 187,911 11.0% 13,954 15,431 -9.6% 0 57 -100.0% 4,430 (800) 433-7300

7 Republic-US Airwayswww.usairways.com 117,064 97,871 19.6% 3,926 2,492 57.5% 4 0 NA 1,871 (800) 428-4322

8 United Airlineswww.united.com 107,092 152,480 -29.8% 199,801 239,318 -16.5% 0 0 NA 1,171 (800) 241-6522

9 Atlantic Southeast-Deltawww.flyasa.com 104,937 82,415 27.3% 21,235 15,787 34.5% 4 5 -20.0% 2,101 (800) 221-1212

10 Pinnacle-Northwest Airlinkwww.delta.com 91,168 89,040 2.4% 13,705 49,773 -72.5% 0 0 NA 2,332 (800) 221-1212

11 Mesaba-Northwest Airlinkwww.mesaba.com 67,308 44,519 51.2% 4,234 13,103 -67.7% 0 30 -100.0% 1,667 (800) 221-1212

12 SkyWest-Unitedwww.united.com 59,248 41,228 43.7% 0 0 NA 0 0 NA 1,006 (800) 241-6522

13 USA 3000www.usa3000.com 54,183 81,273 -33.3% 0 0 NA 0 0 NA 560 (877) 872-3000

14 Mesa-US Airwayswww.mesa-air.com 47,286 25,087 88.5% 853 1,767 -51.7% 0 16 -100.0% 726 (800) 428-4322

15 Mesa-Unitedwww.united.com 45,817 59,961 -23.6% 0 0 NA 0 0 NA 1,022 (800) 637-2247

16 US Airwayswww.usairways.com 40,169 90,919 -55.8% 11,779 66,710 -82.3% 0 251,455 -100.0% 486 (800) 428-4322

17 Comair-Delta Connectionwww.delta.com 31,946 52,283 -38.9% 0 1,372 -100.0% 0 0 NA 992 (800) 221-1212

18 Air Wisconsinwww.airwis.com 27,283 38,674 -29.5% 320 1,778 -82.0% 45 1 NM 795 (800) 241-6522

19 Express Jet - Unitedwww.expressjet.com 26,051 0 NA 0 0 NA 0 0 NA 667 (800) 241-6522

20 Freedom-Deltawww.mesa-air.com 19,347 1,602 1,107.7% 0 0 NA 0 0 NA 467 (800) 221-1212

21 Trans States-Unitedwww.transstates.net 19,006 4,827 293.7% 0 0 NA 0 0 NA 545 (800) 241-6522

22 Gulfstream-Continentalwww.gulfstreamair.com 17,199 4,778 260.0% 0 0 NA 0 0 NA 2,716 (800) 523-3273

23 Midwest Connectwww.midwestairlines.com 14,550 22,273 -34.7% 0 2,026 -100.0% 0 2 -100.0% 698 (800) 452-2022

24 Chautauqua-Deltawww.flychautauqua.com 14,173 30,996 -54.3% 0 0 NA 0 0 NA 368 (800) 221-1212

25 Skywest-Deltawww.skywest.com 14,069 14,515 -3.1% 0 1,164 -100.0% 0 0 NA 311 (800) 221-1212

26 Pinnacle-Deltawww.delta.com 14,018 3,608 288.5% 0 0 NA 0 0 NA 230 (800) 221-1212

27 Air Canada/Jazz Airwww.flyjazz.ca 11,638 14,242 -18.3% 0 0 NA 0 0 NA 834 (800) 247-2262

28 Deltawww.delta.com 11,281 60,093 -81.2% 0 69,354 -100.0% 0 0 NA 80 (800) 221-1212

29 Northwest Airlineswww.delta.com 10,756 46,581 -76.9% 21,143 76,506 -72.4% 0 0 NA 217 (800) 221-1212

Information is from the Cleveland Airport System Statistical Report, December 2009. Crain's Cleveland Business does not independently verify the information and there is noguarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. Individual listsand The Book of Lists are available to purchase at www.crainscleveland.com.

RESEARCHED BY Deborah W. Hillyer

LARGEST AIRLINES SERVING AKRON-CANTONRANKED BY NUMBER OF ENPLANED PASSENGERS

Enplaned passengersRank

AirlineWeb site 2009 2008 Percent change Most frequent destinations Reservations number Station manager

1 AirTran Airwayswww.airtran.com 337,605 335,372 0.7% Atlanta, Boston, New York City, Orlando, Tampa, Ft.

Lauderdale (seasonal), Ft. Myers (seasonal), Milwaukee (800) 247-8726 Lin Alida

2 Delta Connection(1)www.delta.com 169,137 137,730 22.8% Atlanta, Detroit (800) 354-9822 Paul Kaparoff

3 US Airways Expresswww.usairways.com 93,613 91,507 2.3% Washington, D.C., Charlotte, Philadelphia (800) 428-4322 Dave Wyatt

4 Frontier Airlineswww.frontierairlines.com 76,769 83,633 -8.2% Denver (800) 432-1359 Cass Tyson

5 United Expresswww.united.com 40,826 37,168 9.8% Chicago (O' Hare) (800) 241-6522 Paul Kaparoff

Source: Information is from the Akron-Canton Airport. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings arecomplete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. The Book of Lists and enhanced versions ofmost lists, with more companies, are available to purchase at www.crainscleveland.com. Originally published Feb. 9, 2009.(1) Delta and Northwest merged during the year, Akron-Canton Airport is reporting the number of enplaned passengers for Northwest and Delta under the Delta name for 2009.The 2008 number is for Delta only.

RESEARCHED BY Deborah W. Hillyer



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Toyota: Customers remain patientdealing with their inventories, saidAlan Spitzer, owner of Spitzer Man-agement in Elyria and its dealershipsin Ohio, Florida and Pennsylvaniathat represent 15 manufacturers.

“It’s the dealer’s car” once it buys itfrom the manufacturer, Mr. Spitzersaid; there is no option for the dealerto sell the car back to Toyota. For Mr.Spitzer, that means sitting on about150 vehicles and awaiting the fix,while he pays interest on the financinghe used to buy the vehicles — aprocess followed by nearly all dealers.

In the end, some less-capitalizeddealers might be pinched hard andsome could even go out of business,but most will survive, Mr. Spitzerpredicted. Toyota is helping by paying dealers up to $75,000 apieceto cover the expense of addinghours in service departments andcarrying inventory, Mr. Spitzer said.

Image is everythingDealers say they are more worried

about protecting their long-term image and Toyota’s reputation forproducing quality cars than they arewith moving their existing inventory.And they say they still can sell Toyotas, either models not affectedby the recall or vehicles built in Japanthat also are not subject to recall.

The number of available orJapanese-built cars varies fromdealer to dealer. Mr. Gile said about25% of his inventory is unaffected,and he had at least a couple Japanese-built versions of every Toyota modelavailable for sale last week.

“We’re still in business and stillselling cars,” Mr. Gile said. “On prettymuch everything (model) we have,we could probably sell you some-thing. We’d have one or two anywayand sometimes as many as 20.”

At Montrose Toyota, general manager Brad Wolkov said about40% of the dealership’s 150 or so new cars still are ready to sell. That’slargely because they are U.S.-builtmodels that are not affected by

the recall.So far, dealerships say their

customers have been patient andloyal — sometimes even willing towait to buy a new Toyota.

Ken Schneider, co-owner ofMetro Toyota in Brook Park, said hehas had several customers tell himthey want their cars, defect or not,as long as they’re fixed before theyget them. He has about 600 Toyotasin stock, about 350 of which needthe recall fix.

“Surprisingly enough, last Saturdaywas a busy day for all the dealers,”Mr. Schneider said. “We had peoplebuying cars we can’t deliver andsay, ‘Let me know when I can pick it up.’”

He and other dealers are relyingon just that sort of brand loyalty —as well as upon Toyota handling the recall in a way agreeable to customers.

“You can’t tell someone who’shad five Toyotas not to buy anotherToyota, because they have faith in

also wanted to support a car companynot on the government dole. TheToyota situation has further acceler-ated that trend, Mr. Walker said.

The situation also is likely to reduce prices for used Toyotas, butthat likely won’t be dramatic or long-lasting, the dealers said.

“The Toyota product will be downin value over the next 45 days or so,”Montrose Toyota’s Mr. Wolkov said.“But I think it will spike right backup.”

If Toyota handles the situationright, it could come out an evenstronger brand than when the crisisbegan, Mr. Schneider of Metro Toyota predicted. He’s not alone.Commentators on the CNBC financialcable network last week suggestedToyota could emerge from this period stronger than before — muchthe way crisis management expertsbelieve Tylenol strengthened itsbrand by reacting well to a crisis involving poisoned pills in the 1980s.

“You’re not judged by your mistakes, but by how well you dealwith your mistakes, and we thinkToyota is handling this the rightway,” Mr. Schneider said. ■

the product and in the company,”Mr. Schneider said.

Driven a Ford lately?All the Toyota dealers who spoke

with Crain’s for this story said theirsales either have been largely unaf-fected by the crisis, or that it’s justtoo hard to tell the effect on sales inwhat is a still-weak environment forauto sales generally. But Mr. Spitzer,for one, noted Toyota’s sales nation-wide are down.

“Our sales for January were veryclose to (sales levels for) 2009, but,nationally, Toyota sales were off16%,” Mr. Spitzer said. “Toyota estimates it cost them 20,000 (vehicle)sales last month.”

Some sellers of American-madeautos are thrilled to pick up marketshare from Toyota’s woes.

“I couldn’t be happier. It’s a greattime to be a Ford dealer,” said EricWalker, general manager of MarshallFord in Mayfield Heights.

Mr. Walker said he already wasseeing an uptick in business over thelast eight months, with many customers saying they not onlywanted an American-made car, but



Progressive searches forsomeone to go with the Flo■ Flo, Progressive Corp.’s perky spokes-woman, is looking for a sidekick.

The company already has held auditions inNew York, and insurance-selling wannabescan try out later this month in Miami and nextmonth in Los Angeles.

In Cleveland and elsewhere,video tryouts can be submittedat www.helpflo.com throughMarch 21. Already, more than500 videos have been uploadedto the web site — though onlythree from Ohio. The most-viewed entry has been watchedmore than 307,000 times.

Online voters will narrow thetop 10 finalists to three peoplewho will be flown to Los Angelesto audition with Flo, who isknown for her “tricked-out name tag” and “I ❤ Insurance” button. Finalists will be an-nounced in May and the new sidekick in June.— Arielle Kass

Almost everyone loves the Third Frontier■ Debate about the Ohio Third FrontierProject these days seems to center aroundwhether it’s great or really, really great.However, a few Ohio lawmakers — 15, to beexact — did vote against putting a $700 billion bond issue to continue the technology-focused economic development programon the May ballot.

Four of those legislators, all Republicans,

who spoke with Crain’s didn’t take much issuewith how the state runs the program, whichfeatures an independent commission of busi-ness leaders who, based on merit, give grantsto product-focused technology projects.

Most were more concerned about the statetaking on more debt, especially so soon afterthe Legislature struggled to balance the bien-

nial budget this past summer.Two also had problems with thestate investing in private compa-nies at all, saying private investorswould be supporting such pro-jects if they were any good.

In the Senate, everyone seemsto like the Third Frontier — eventhe two guys who voted againstit. Sen. Keith Faber, R-Celina,said he would have supportedthe $500 million bond issue orig-inally proposed by the Senate.

Sen. Bill Seitz, R-Cincinnati,said he voted against the bill because he thinksit will fail without being coupled with bondsfor infrastructure projects across the state. Henoted how voters supported the $500 millionThird Frontier ballot issue in 2005 only after itwas coupled with $1.5 billion in bonds for infra-structure projects.

When the bond issue stood alone in 2003,they rejected it.

So, will there be a vocal opposition? Thesmall government fans at the Buckeye Insti-tute think tank in Columbus aren’t speakingup just yet. However, institute executive director Matt Mayer remains suspicious ofthe rosy job creation figures touted by ThirdFrontier supporters.

“They can’t seem to pick a loser. It seems

too good to be true,” Mr. Mayer said. —Chuck Soder

All is not happy in TV Land■ After nine months of tug-of-war over contract negotiations, union employees atWKYC-TV, Channel 3, say they are at theend of their rope after the station and itsowner, Gannett, unilaterally instituted onJan. 29 salary reductions of 8% to 18% for 54of the station’s unionized employees.

The employees, who are members of theNational Association of Broadcast Employeesand Technicians, Communication Workersof America-Local 42 in Cleveland, said thestation also imposed a reduction in paid sickdays and changes in the work week.

Lou Fallot, the NABET-CWA staff represen-tative, said the union is meeting Feb. 13 withmembers to discuss the next steps.

According to the union, non-union employees at WKYC in June 2009 received a4% to 6% pay cut and a one-week furlough, although Brooke Spectorsky, WKYC presidentand general manager, said that was inaccu-rate. Nonunion employees did receive a salaryreduction and pay freeze, though.

Mr. Fallot said the union offered a compromise that included a salary reductionand a furlough, but that the station and Gan-nett declined. “Gannett and WKYC are themost arrogant and cheapest companies I’vehad the misfortune of dealing with,” he said.

Mr. Spectorsky’s reply: “When the uniongets realistic about changes in the broadcastbusiness, maybe we can reach terms for anew contract.” — Kathy Ames Carr

WHAT’S NEW

REPORTERS’ NOTEBOOKBEHIND THE NEWS WITH CRAIN’S WRITERS

THEINSIDER

THEWEEK FEBRUARY 1 – 7

The big story: There will be a Third Frontierbond issue on the May ballot after all. By over-whelming votes in both houses, the General Assembly approved a $700 million bond issue,which represents a compromise between the $950million passed by the Ohio House and the $500million approved by the state Senate. Proceeds ofthe bond issue would finance Ohio’s Third Fron-tier program, which provides state money for tech-nology research and commercialization initiativesstatewide. See editorial, Page 8.

Flight plan: The city of Cleveland would likeCuyahoga County to close Cuyahoga CountyAirport in Richmond Heights so that generalaviation traffic can be consolidated at city-owned Burke Lakefront Airport. Ricky Smith,director of the city’s Department of Port Control,brought that idea to Cleveland City Council’saviation committee Feb. 3. Burke has enough capacity to accommodate small aircraft traffic nowhandled by the two small airports, Mr. Smith said.He said the county is faced at the airport in Rich-mond Heights with problems meeting new federal safety requirements, including neighbor-hood opposition toits plan to extendthe runway.

D.C.-bound: NASAGlenn Research Center soon will have a new leader— one who may end up overseeing the center’stransition away from the Constellation space exploration program. The National Aeronauticsand Space Administration named NASA Glenn director Woodrow Whitlow Jr. as associate admin-istrator for Mission Support at NASA’s headquar-ters in Washington, D.C. He will remain director ofNASA Glenn until a replacement is found. The announcement came just two days after the WhiteHouse issued a budget proposal for NASA thatcould eliminate the Constellation program, thegoal of which is to return astronauts to the moonand eventually send a manned flight to Mars.

Downside at Diebold: Even as it postedhigher fourth-quarter earnings, Diebold Inc.also said it would be eliminating 350 jobs inNorth America, with about two-thirds of the cutscoming at its headquarters in Green. DieboldCEO Thomas Swidarski said the company’sbusiness related to bank branch construction inNorth America “remains especially challengingand will likely not return to historical norms inthe near future.” Diebold makes automatedteller machines and bank security equipment.

Thanks for the money: PNC Financial Services Group said it’s paying back all $7.6 billionof government bailout money it received in 2008.The Pittsburgh company, which bought NationalCity Corp. about a year ago, reached an agreementto redeem the preferred shares held by the U.S.Treasury under the Troubled Asset Relief Program, or TARP. Those shares were issued to thegovernment in exchange for the federal money.

Stay up on the news at www.CrainsCleveland.com.


Excerpts from blog entries on CrainsCleveland.com.

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Can’t we all just get along,at least at the dinner table?■ The dinner party will never be the same.

So wrote Jim Sollisch, creative director atMarcus Thomas, in a funny, somewhattongue-in-cheek Christian Science Monitorcommentary.

In the good old days, he wrote,when you threw a dinner party “allyou had to worry about was findinga topic everyone could talk about.”Now, the task is harder: Find adish everyone can eat.

Two culprits bear the blame,according to Mr. Sollisch: the riseof food allergies in America, andfood writer Michael Pollan, whose books“Omnivore’s Dilemma” and “In Defense ofFood” have raised Americans’ awarenessabout what they’re eating but also have ledmore of them to have, shall we say, lots ofissues at the dinner table.

“I see a time when the dinner party willsimply go extinct,” Mr. Sollisch wrote. “It willjust be too much bother to try to cook for a

group of people with so many food tics. Easierto dine alone. Or find a restaurant to go to.(Good luck finding one everyone agrees on.)”

Ivy Leaguer makes the gradein listening to constituents■ Connor Diemand-Yauman, a PrincetonUniversity senior from Chesterland, spoke upin a Feb. 1 New York Times piece about grade

deflation at the Ivy League school.In response to a long period of

grade inflation, Princeton has made itmuch harder to get an A. “The percentageof Princeton grades in the A rangedipped below 40 percent last year,down from nearly 50 percent when thepolicy was adopted in 2004,” The Timessaid. “The class of 2009 had a meangrade-point average of 3.39, comparedwith 3.46 for the class of 2003.”Mr. Diemand-Yauman, from his perch as

undergraduate student body president, toldThe Times, “I had complaints from studentswho said that their professors handed backexams and told them, ‘I wanted to give 10 ofyou A’s, but because of the policy, I couldonly give five A’s.’ When students hear that,an alarm goes off.”

Jakprints, a full-color, apparel and stickerprinter, bills its new product as a “green alterna-tive to traditional sticker stocks.”

The EcoGreen Sticker was born of the company’s realization that while it had many options for paper stocks of recyclable contentor organic apparel, an earth-friendly sticker wasn’t available, according to Jakprints co-founder Dameon Guess.

EcoGreen Stickers are printed on Jakprints’TruStick stock, which is made without using water or toxic agents and has a face stockmade entirely from inorganic stone (limestoneor calcium carbonate) and inorganic mineralpowders, the company says.

For information, visit www.Jakprints.com.

COMPANY: Jakprints, ClevelandPRODUCT: EcoGreen Sticker

PHOTO PROVIDED

Progressive Corp.’s Flo


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