Franchising in New England

Health Magazine has named Boston based bakery-café franchise Au Bon Pain one of America’s Healthiest Fast Food Restaurants and Boston based franchise Uno Chicago Grill as one of America’s Healthiest Restaurants.

The editors of Health praised Au Bon Pain’s Nutrition Kiosks, which allow guests to plan a nutritious meal and sort the menu by a specific nutritional requirement — high fiber or protein; or low carb, fat, cholesterol, sodium or calories. Au Bon Pain’s recent move to using preservative-free chicken also was cited as one of the reasons the editors chose the chain.
Au Bon Pain recently introduced a new product line called Portions. Tapping into the tapas/small plates trend, Portions is a line of 14 dishes made fresh daily, packaged individually and containing 200 or fewer calories per dish.

Complete nutrition information for the entire Au Bon Pain menu also can be found online at the company’s Web site. Guests seeking further assistance planning a nutritious meal can use Au Bon Pain’s online “Smart Menu” application, where they can view the nutrition information for a specific combination of food choices, and search for combinations that best meet their individual dietary needs.

The editors cautioned that Uno’s famous deep-dish (read high-fat) pizzas still hold court, but nutrition has become the word of the day with a completely trans fat–free menu and plenty of grilled entrees (including antibiotic-free chicken). Adding to the healthy variety: whole-grain pasta and brown rice, organic coffee and tea, and flatbread pizzas that have half the calories of deep-dish ones. Plus, you can add a salad to your pizza for half-price because, according to the menu, “We want you to get some greens in your diet.” Now that’s a blue-ribbon commitment to health.

Another reason Uno’s is at the top of the editor’s list: You know what you’re eating. In the lobbies of most of the restaurant’s locations, there are Nutrition Information Centers that detail ingredients, fat and sodium contents, and calories and fiber of every item, in addition to gluten-free options.

The U.S. Small Business Administration today announced the selection of 11 cities to participate in the Emerging 200 initiative, a jobs and growth stimulation effort targeting promising inner-city small businesses. The designated cities where the program will begin are Boston, Philadelphia, Baltimore, Memphis, Atlanta, Chicago, Milwaukee, Albuquerque, New Orleans, Des Moines and Oakland.

The SBA initiative will focus on small, poised-for-growth inner-city companies with potential for job creation. Research shows that small firms with fewer than 20 employees created 80 percent of the net new jobs in the economy from 1990 to 2003, and also that small businesses in inner cities added nearly three times the number of new jobs than larger companies between 1995 and 2002.

This innovative initiative is designed to accelerate the growth of companies that are poised for sustained expansion,” said SBA Administrator Steve Preston. “With the selection of these eleven cities, the Emerging 200 initiative will begin to prepare 200 high potential companies for their next phase of growth. It will attract and tap the power of these local entrepreneurs to transform their communities, grow wealth and increase the tax base in a real and lasting way.”
The Emerging 200 initiative will have its official unveiling in each of the pilot cities at a series of local launch events to be scheduled in late March and early April.

he SBA Emerging 200 initiative will enable entrepreneurs from the 200 companies to participate in an intensive and comprehensive curriculum focused on developing winning, local strategies and attracting capital to fuel growth. Participants also will have the opportunity to work with experienced mentors, attend workshops and develop connections with banks and the private equity community.

ngaging the local network of business resources that is already in place in each city is a critical component of Emerging 200. Consequently, the local SBA District Offices will be deeply involved in assembling community partners, including state or local government, technical assistance partners, and capital providers.

he growth of small businesses in underserved markets is a prime focus of the SBA. Increasingly, the delivery of SBA products and services to inner city entrepreneurs has become a high priority for the agency and part of a long-term strategy to stimulate and sustain economic activity.

Clearly, in inner-city communities throughout our country, it is the small businesses that are creating employment opportunities,” added Preston. “The Small Business Administration, through the Emerging 200 initiative, is now focusing further support on these job producing engines.”

Just under 50 people attended the March 18th NEFA Meeting. The meeting was held at the Marriott Hotel in Burlington, MA. The featured speaker was Leonard Swartz of the iFranchise Group. The meeting was sponsored by CIT Small Business Lending.

From Left to Right,
Tony Padulo, Papa Gino’s;
Featured Speaker: Leonard Swartz, iFranchise Group;
Robert Rosenberg, Past Chairman Dunkin Donuts and Past President IFA

From Left to Right:

Larry Flaherty: Previously of Kablooms;
Dennis Mullen, Club Z Tutoring, Area Developer,
Ken Cheo, Winfree Sales Training Systems, Franchisee.

Barbara Arena, CIT Small Business Lending,

NEFA Treasurer;
Steve Dubin, PR Works, NEFA President

Michael Dow, Source4;
Carol Ryan, Conceptual Designs

Susan Grueneberg a partner at the law firm of Dreier Stein Kahan Brown Woods George LLP, writes in Franchising World that the final version of the amendments to the Federal Trade Commission’s Rule on Franchising was finally announced in early 2007. Franchisors have until July 1, 2008 to convert their offering circulars to the new disclosure format and transform them into “Franchise Disclosure Documents (FDD).” For more than 12 years, the FTC has conducted its rulemaking and franchising industry members have attended seminars, read articles, observed public comment periods and harkened to innumerable warnings about what living in the world of franchising under the new FTC rule will be like. After 12 years of probing every nook and cranny of the changes to the rule, one would expect that issues about how to comply with it would have all been thoroughly explored and resolved. However, there are quite a few details that still require explanation.

Who is a franchise seller?

One of the new terms is “franchise seller.” A franchise seller offers or sells the franchise. A franchise seller can refer to the franchise system, its employees and franchise brokers representing the franchisor. One detail that escaped everyone in the process of adopting the rule was the requirement that contact information for a franchise seller be included in the receipt page of the franchise disclosure document. Obviously, this does not mean that every possible person who could fall within the definition of a franchise seller has to be included. The purpose is to provide the prospective franchisee with contact information for an individual who has been involved with the prospective franchisee in the sales process and who can answer follow-up questions that the prospect may have. What becomes quickly apparent is that in many franchise systems, any number of people might be the individual to be listed. So how does one prepare a receipt? Does the receipt have to be different for every prospective franchisee? Can it even be filled out ahead of time? If a franchise organization has several franchise sellers, can it list them all and allow the prospective franchisee to circle the one with whom he or she is dealing?

The FTC’s Web—www.ftc.gov—site provides some guidance. The commission wisely decided that it should set up a “Frequently Asked Questions” section on its Web site to address the questions that started pouring in after the rule was officially announced. The FAQ on the topic of franchise sellers allows for alternative approaches. One of these is an instruction on the receipt allowing the prospective franchisee to write in the name of the franchise seller before signing it. Another alternative is for the franchise company to take a previously signed receipt and attach a statement, business card or other document with the name of the franchise seller and then send it back to the prospective franchisee. Of course, in some franchise systems, the franchise seller can be identified ahead of time. This is likely true for start-up franchises.

In determining the individual to list, the first step is to determine whether there are specific employees or brokers that are assigned to specific prospects. If not, consider listing the person whom the prospect would contact if a question were to arise following delivery of the disclosure document. If this further inquiry does not result in a readily identifiable individual, the next possibility is a supervisor or other manager of the franchise system designated to respond to prospects’ inquiries. If there is still no such person, then the only alternative may be the individual who signs the agreement on behalf of the franchise company.

What happens on July 1, 2008?

At the stroke of midnight July 1, use of the amended FTC Rule format becomes mandatory. Just like the story of Cinderella, offering circulars will turn into pumpkins. Even if properly filed with registration states prior to July 1, Uniform Franchise Offering Circular Guidelines-formatted documents will not be in compliance with the law after midnight, July 1, and cannot be used.

What happens to prospective franchisees to whom disclosure was given prior to the “witching hour?” If the disclosure document was not in the new format, franchise systems must redisclose utilizing an FTC Rule-compliant disclosure document. State franchise agencies are likely to notify any applicant who files a UFOC in early 2008 at renewal time that its effective life will be limited.

Who owns what? The trap in Item 8

The new disclosure requirement in Item 8 seems fairly simple. Disclose whether an officer of the franchise company owns an interest in an approved or designated supplier. While seemingly a straightforward proposition, both the proliferation of executives listed in Item 2 who could be considered officers and the number of restrictions on product sourcing in today’s franchise programs mean that this could be very difficult information to track. It is easy to imagine a violation: an officer may own a miniscule interest in a public company that is approved to sell products or equipment to franchisees; an officer may have invested in a mutual fund that owns shares in a supplier; the franchisor itself may be a supplier with many if not all of its officers participating in a stock option plan. But these examples are likely not the main focus of this disclosure requirement. More relevant to a prospective franchisee is the degree of control a franchisor’s officer has over a supplier. Also important may be how crucial that supplier is to the franchise system.

As of this writing, there are more questions than answers. Is there a materiality standard that should be applied in evaluating what to disclose? Is the importance of the ownership interest in the supplier to the officer relevant?

Until this issue is addressed by the FTC, franchise companies should consider describing all of the more “interests” officers may have irrespective of materiality.

Item 20: The power of the footnote

While much of the basic information to be disclosed in Item 20 is the same, the format is radically different. For franchise systems that do not have traditional “outlets,” completing the new charts in Item 20 will involve a re-examination of assumptions that have been made for years. For example, does the franchisor treat the units that it manages as franchisees or company units? When do franchises that do not have brick-and-mortar locations open for business? Whatever assumptions are made and categories assigned in specific programs, footnotes are an important device to make sure that the information presented is clear, accurate and not misleading.

These are just some examples of the challenges franchise companies face in adapting to the brave new world of disclosure under the new rule. Franchisors will no doubt laud the efforts of the FTC to keep up with the barrage of issues through the FAQ section on its Web site. No less praiseworthy are the efforts of the North American Securities Administrators Association’s Franchise Project Group that has and will strive to assist state franchise examiners as it accepts filings under the new format. In the end, the resolution of these challenges will hopefully cause no more than a wrinkle in the fabric of franchising.

Stephen Smith, reports on Boston.com that Boston health regulators today unanimously approved a ban on artery-clogging trans fat in restaurants and grocery stores.

Boston joins a growing number of cities, including New York, Philadelphia and Brookline, in banning the food ingredient, commonly found in french fries, donuts and other fried foods. Trans fat have been linked to heart disease in humans and diabetes in experimental animals.

The first phase of the ban goes into effect in September and will apply to the use of cooking oils, shortening and margarine that contains artificial trans fat. The makers of baked goods will have a year to eliminate trans fat from their products.

Packaged goods clearly labeled as containing trans fat can still be sold. Most major manufacturers have already removed trans fat from their products.

The Boston prohibition would include all restaurants, including school and hospital cafeterias, as well as food that is prepared in kitchens inside groceries and delis.

City inspectors will visit businesses to make sure they comply with the ban, and scofflaws could face fines of up to $1,000 for each violation.

Studies estimate that having as few as 40 calories of trans fat a day can boost the risk of a heart attack by 23 percent. A fast-food meal of chicken nuggets and French fries, if prepared with artificial trans fat, can easily contain more than 100 calories of the substance.

Naomi R. Kooker reports in the Boston Business Journal that according to a new law that was signed by Massachusetts Governor Deval Patrick today, gift card sellers cannot impose certain late or administrative fees.

Under the law, if Mass. retailers impose certain fees they’ll be slapped with a $300 fine.

The law also changed the cash-out policy. Previously, reloadable gift cards could have been cashed out when the remaining balance hit 90 percent of the original value. Under the new law, consumers can only cash out their cards if they hit a $5 value or less.

“There was some effort to make it $10,” said Jon Hurst, president of the Retailer’s Association of Massachusetts. “We strongly opposed that — that would be asking (retailers) to become a bank.”

For the third consecutive year, NEFA member, MaidPro, has been named to the Franchise Business Review’s Franchise 50 list for excellence in franchise owner satisfaction. MaidPro is ranked tenth among franchise systems with 50 to 200 units.

“We’re thrilled to be included in the Franchise 50 list again, and even more excited to be cited among the top 10,” said Richard Sparacio, Co-Founder and President. “Our goal is to create a franchise system that enables our owners’ success, and this award is proof that we are reaching our goal.”

The Franchise Business Review surveys franchise owners each year to ascertain their levels of satisfaction across categories such as training and support, financial opportunity and relationship with the home office. MaidPro owners gave MaidPro a total average score of 4.4 out of 5, which was the highest overall rating among all housecleaning franchises surveyed.

MaidPro is a Boston-based franchisor of housecleaning services with more than 90 offices in 27 states plus the District of Columbia. The company, franchising since 1997, takes pride in its strong owner community, cutting-edge technology and creative marketing. It has been honored with the Franchise Business Review’s Four-Star Rating and Franchise 50 awards in 2006, 2007 and 2008 for owner satisfaction. MaidPro is a proud member of the International Franchise Association and the New England Franchise Association. The company can be found online at www.maidpro.com.

Franchising nationwide expanded by more than 18% from 2001 to 2005, adding more than 140,000 new businesses and 1.2 million new jobs to the nation’s economy, International Franchise Association, (IFA) President and CEO Matthew Shay today announced during a press conference at the National Press Club in Washington, D.C. “The economic impact of franchising goes beyond the franchise sector,” said Shay.

“The spillover effects of franchised businesses on non-franchised businesses included providing 21 million jobs and $660.9 billion of payroll.” New research findings also show the direct economic output of franchises grew by more than 40% to $880 billion in 2005.

In New England, over 875,000 jobs area result of franchising, the total output is over 100 Billion dollars a year, and there are over 35,000 franchise establishments in the six New England States.

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Neal Lyons of L & W Investigations, a NEFA Member wrote an article in IndUS Business Journal regarding workers compensation fraud. As private investigators, we fight the battle of perception versus reality on a daily basis—even when it comes to something as unglamorous as investigating fraudulent workers compensation claims. The Hollywood image of the investigator tricking the collar-wearing workers comp claimant into turning his neck or head quickly by dropping a briefcase on the floor of the courtroom just doesn’t happen.

Investigating fraudulent worker’s comp claims involves the private investigators working with companies or their third-party administrators to get the proper intelligence to catch abusers in the act.
Another perception is that people who file worker’s comp claims are “faking.” As a point of fact, those abusers represent a relatively small percentage of workers comp claims.

Roughly 80 percent of all claims filed are legitimate, from people who are genuinely hurt and entitled to a worker’s compensation claim. That’s not to say companies should rubber-stamp every claim, but you shouldn’t have a chip on your shoulder that everybody who files is trying to take advantage of the system.

As an organization, you do have to be wary of the red flags of potential worker’s comp abuse. In L&W Investigations’ training seminars on workers comp, we teach companies to be on the look out for red flags and identify the wide variety of red flags that can exist in a potentially fraudulent claim. The following are a few common red flags that are covered in these training seminars:

• Multiple claims – has the claimant filed more than one workers comp claim in the past or within a short period of time?
• Longer absences than anticipated for minor injuries; an unwillingness to come back to work on partial duty or other jobs within the company.
• Missed medical appointments

While these red flags will help you sniff out potential fraudulent claims, the majority of your suspicions will probably be based on reports from other employees—anonymous or otherwise. They’ve either seen their “injured” co-worker doing some sort of physical activity or even heard it from the horse’s mouth about getting paid for workers comp while working under the table for somebody else. The list goes on and on when it comes to abuses. The question is what to do next.

Investigating a tip of abuse requires either hiring an investigator on your own if you’re self-insured or contacting your third-party administrator. In either case, the information you provide to the third-party administrator or investigator will determine the success or failure of the investigation. Period.

Why? Because 99 percent of all workers comp investigations will require video surveillance of the claimant, an operation that generally occurs over two to three days in eight-hour shifts. So if you’re not providing the investigator or third-party administrator with the information needed to identify the claimant—name, photo, physical description, current address, injury and its limitations—the investigation is doomed to fail from the start.

Once the investigator can positively identify the claimant then it’s a matter of continuing surveillance and documenting their behavior and actions. If he or she is working a second job while collecting on a worker’s comp claim, the video surveillance and subsequent report will tell the story. Same thing if he or she claims a back injury yet is training for the Boston Marathon during the day. If the investigator’s report, with video and still photos, shows the claimant behaving in ways not appropriate for their reported condition, your company will be able to confirm that the claim is fraudulent.

Again, that’s not to say you should suspect everybody who files a worker’s comp claim of trying to get away with something. Quite the contrary, if somebody’s injured on the job it’s the job of the insurance company to pay that claim.
As the employer, your best defense against fraudulent worker’s comp claims is to keep current records on your employees.

Make it a point to have employees update their information annually and check off if their information has changed. Keep photos on file of your employees, whether it’s their ID badge photo or just get in the habit of taking a photo of all new employees. If you’re a larger company, you may want to consider a toll-free fraud hotline for employees to report abuse anonymously.

Fraudulent worker’s comp claims costs businesses in the billions each year, both in lost man-hours, medical payments and increased premiums. By simply increasing your awareness and making a few procedural changes (such as keeping current employee information) you can greatly reduce the impact fraudulent worker’s comp claims have on your company and your bottom line.

Neal Lyons is the chairman and chief executive officer of L&W Investigations Inc., a franchise system based in Westborough, Mass. For more information, please visit Web site at www.lwinvestigations.com or call (508) 616-9370.

Legislation improving the Fair Dealership Law will be the focus of Rhode Island Franchising Day, March 19, in Providence.

Strong support from Rhode Island businesses will be critical in making the state a better place for franchising. The International Franchise Association event will begin at 1:30 p.m., at the Greater Providence Chamber of Commerce, with meetings at the state house to follow. The event will conclude by 5:30 p.m. Contact IFA Director of Government Relations Troy Flanagan at (202) 662-0792 or tflanagan@franchise.org for details or to RSVP.