$1.50/APRIL 4 - 10, 2011
County to revisit real estate holdings FitzGerald open to sale of properties as he looks to address government space needs By JAY MILLER email@example.com
The new Cuyahoga County government is picking up on the old government’s attempt to rethink its real estate portfolio and to incorpo-
rate its space needs into broader redevelopment efforts in downtown Cleveland. County Executive Ed FitzGerald said last week his administration is working on a strategy that would address the county’s longstanding
need to find a new home for many of its workers, dispose of some of the property it owns and be a catalyst for other private development. Mr. FitzGerald told Crain’s he plans to reopen the conversation regarding the best solutions for the real estate puzzle this Wednesday, April 6, during his State of the County address, which will be held before a City Club of Cleveland audience at the Marriott at Key Center.
“We’re trying to come up with a process that’s really going to throw it open to anybody who can come up with a creative package,” Mr. FitzGerald said. “You might, for example, have somebody that owns a building that we might want to do a swap with. “We want to see if there are ways to either sell (buildings) off piecemeal or ways to package them together,” he said.
Two county-owned properties are of particular interest to the real estate community: the Ameritrust complex at East Ninth Street and Euclid Avenue, and the four-story county administration building on Ontario Street that sits next to the site of the new convention center and medical merchandise mart, which are under construction. A transformation of the vacant See COUNTY Page 18
FDA testing resolve of biomed firms More scrutiny may slow product approval process By CHUCK SODER firstname.lastname@example.org
SHIPPERS FEEL THE SQUEEZE Freight companies, customers face rough road as rising fuel prices start to ding bottom lines By DAN SHINGLER email@example.com
teep fuel prices are affecting more than commuters, with local trucking and logistic companies feeling the pinch as their gasoline and diesel costs climb. Next, they say, manufactures and other shippers are likely to be hit by
price increases and possibly even truck shortages. “Trucking right now is very, very dangerous. Rates are going through the roof, and trucks are hard to find,” said Hank Newman, president and founder of Recon Logistics, a company in Chagrin Falls that helps small manufacturers and other shippers See GAS Page 9
NOT PUMPED UP Trucking and logistics companies and manufacturers are troubled by the implications steep fuel costs may have on their business: ■ Even when shippers pass on their higher fuel costs, their profit margins still suffer because they cannot apply surcharges when trucks run empty. ■ With fewer dollars available to invest in more trucks, the supply of available shipping capacity threatens to collide with an increased demand for shipping services from busier manufacturers.
Getting a medical device past federal regulators has gotten a lot harder lately, according to several Northeast Ohio biomedical companies. Now they’re wondering if it might get harder still — and whether the increased scrutiny could make it difficult for fledgling device makers to attract investment or simply survive the process. The U.S. Food & Drug Administration in January announced a list of 25 changes it plans to make to the 510(k) process, which is the pathway by which a large majority of medical devices receive FDA approval. The 510(k) pathway is reserved for products See FDA Page 6
INSIDE Ball’s in their court Some local companies and other organizations say they are looking at how effective their Cavs sponsorships are as certain metrics such as TV ratings decline. Read Joel Hammond’s story on Page 3.
We profile nine family owned businesses ■ Page 13
Entire contents © 2011 by Crain Communications Inc. Vol. 32, No. 14
CRAIN’S CLEVELAND BUSINESS
CRAIN’S SEEKS ‘COMEBACK KIDS’ On June 27, Crain’s Cleveland Business will publish a special section called “Northeast Ohio’s Comeback Kids: Great Business Turnaround Stories.” We’re aiming to profile individuals or businesses that have proven to be battle-tested — those that came close to the brink of ruin, but instead moved in a positive direction due to careful management and calculation. Nominations can be submitted via email to sections editor Amy Ann Stoessel at firstname.lastname@example.org; please include “Comeback Kids nomination” in the subject line. In addition,
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they can be sent via regular mail to Ms. Stoessel at 700 W. St. Clair Ave., suite 310, Cleveland 44113. More than anecdotal evidence — such as current and past revenue and employment numbers, in the case of businesses — is preferred and recommended as part of the nomination. Turnarounds must have been sustained over at least a twoyear period. Nominations should be no longer than a single page. The deadline for submission is the close of business on Monday, April 25.
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FAMILY PROBLEMS In 2010, 12.4% of U.S. families included an unemployed person, the highest level since the federal government began collecting the data in 1994 and a reflection of the deep impact the recession has had on the labor market. The proportion of families with an unemployed member in 2010 was up from 12% in 2009 and nearly double the 6.3% recorded in 2007. Among families with an unemployed person in 2010, 67.7% also had an employed member, down from 68.6% in 2009 and 71.2% in 2007. Here’s how the data break down: Families with an unemployed member, as a percent of total U.S. families, 2000-2010
% of total
% of total
SOURCE: U.S. BUREAU OF LABOR STATISTICS
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APRIL 4 - 10, 2011
CRAIN’S CLEVELAND BUSINESS
THE WEEK IN QUOTES
Tax changes could hinder donations to hospitals
“We started making some progress with the economy, and then fuel spiked. We’re getting ready for the perfect storm again.” — Chris Haas, CEO of All Pro Freight Systems. Page One
“The novelty items always get the press and intrigue the public, but most concessionaires are expanding the availability of healthy offerings, and some are offering glutenfree items.” — Chris Bigelow, president of Kansas City-based Bigelow Cos., a food service consultant to sports teams. Page 7
“I never assumed when I started out that it was going to be a family business.” — Larry Yankow, founder of International Transport Services Inc. Page 13
“We didn’t have our first employee until 1946 … up until then, it was all family.” — John Luck, 43, president of Lucky Shoes and great-grandson of the founder. Page 16
Proposals include cutbacks on some incentives to contribute JASON MILLER
Dim and Den Sum chef Chris Hodgson readies his truck for lunch at Superior Avenue and East Ninth Street in downtown Cleveland last week.
MOVING FORWARD After surviving startup struggles, owner of Dim and Den Sum food truck grows his following By KATHY AMES CARR email@example.com
hen Chris Hodgson first hit the streets last April selling gourmet comfort food with an Asian twist from his mobile food truck Dim and Den Sum, he only made a couple hundred dollars a day. Mr. Hodgson, his sister, Catie, and his former partner, Jeremy Esterly, labored 15 to 20 hours each day prepping, cooking and serving lunch and late-night dinner crowds around Northeast Ohio. Personal credit cards were maxed out paying for gas, truck repairs, parking, permits, licenses, a health inspection certificate, promotional materials, and, of course, ingredients. “Last year, at times, we were hanging on by a string,” Mr. Hodgson said. One year later, the chef has steered Dim and Den Sum into the forefront of Cleveland’s evolving food scene, which reveres the 25-year-old and his staff for their passion for serving food to “hungry Clevelanders,” as Mr. Hodgson puts it through social media. With daily sales this year of at least $1,000, Mr. Hodgson said he hopes to do $500,000 in sales in 2011, up from about
By TIMOTHY MAGAW firstname.lastname@example.org
Hospital fundraisers warily are eyeing proposals to overhaul the nation’s tax code, an effort that some say could hamper their fundraising efforts at a time when philanthropy is becoming an increasingly vital component of doing business. Earlier this year, President Barack Obama proposed allowing individuals who make more than $200,000 or families earning more than $250,000 to reduce their tax liability to 28% of their total donations rather than the current 35%. Also last December, members of the president’s deficit reduction commission proposed converting the charitable deduction to a 12% tax credit and limiting it to those who had donated more than 2% of their income. Although similar proposals have failed in the past, the nation’s ballooning budget deficit is raising the pros“We depend on pect that some sort of philanthropy ... measure tackling the deducespecially tion issue could make it through Congress. around research “I think it’s likely that, and education.” with the changes in Congress – Armando Chardiet, from the mid-term elections, chair of institutional this is the year for some relations and developchange to occur in the ment, Cleveland Clinic deduction rules for charitable contributions,” said Chris Anderson, shareholder and head of the tax department at Maloney + Novotny, an accounting firm in Cleveland. Hospitals’ fundraising efforts appear to be on the mend after the recession, but fundraisers suggest changes to the tax code could slow that growth. Many of the health systems reported flush charitable giving last year and say, though it’s still early, that they’re on track to meet or exceed their goals for 2011. According to a recent survey from the Association for Healthcare Philanthropy, 90% of those surveyed say the deficit reduction commission’s proposal would reduce overall giving to their organizations. Mr. Anderson notes that the deficit commission’s proposal likely would hurt giving more than President Obama’s proposal as it would affect more people. See HOSPITALS Page 10
See ROAD Page 11
Corporate sponsors still back Cavs, but watch declining metrics By JOEL HAMMOND email@example.com
Fans at the Cleveland Cavaliers’ March 8 home game against the Golden State Warriors left Quicken Loans Arena with at least two items: an Anderson Varejao bobblehead and a small card inviting them to take an Internet survey when they got home. One lucky fan who took the survey later would be drawn to win two courtside seats to the Cavs’ April 13 home finale against Washington. However, the survey’s results are likely to be more valuable than those primo tickets to one Cleveland
company. KeyBank, as part of ongoing efforts to analyze the return on its sponsorship at The Q, used the survey to ask fans upwards of 15 questions, such as whether Key’s sponsorship of the Cavs would make them more likely to bank with the company. The results will come in handy at negotiating time. KeyCorp marketing manager Dave Lowery said the company values its partnerships with the Cavs, Indians, other pro sports teams and PlayhouseSquare. However, if the survey finds less impact from its Cavs sponsorship, Key will address the decline when it
comes time to renew its marketing agreement with the team. “We’ve been with the Cavs since they moved to (the Historic) Gateway (Neighborhood),” Mr. Lowery said. “We try to take the long view, but we watch attendance and TV ratings and will negotiate more aggressively.” While there appears to be no mass sponsorship cutback by Cleveland-area companies at The Q, the Cavs likely can expect some similar pushback from other corporate sponsors. It’s simple math: The team’s regional TV ratings, while still in the top 10 in the NBA, are down by nearly half from last season, See CAVS Page 10
JASON POHUSKI/CAL SPORT MEDIA
As wins like last Tuesday’s over Miami — Baron Davis works against Dwyane Wade here — have been sparse this season, attendance and TV ratings are down. Some sponsors say that will factor into their negotiations with the team.
CRAIN’S CLEVELAND BUSINESS
APRIL 4 - 10, 2011
Developers venturing outside Ohio Some local concerns take advantage of distressed properties By STAN BULLARD firstname.lastname@example.org
In western deserts and the MidAtlantic region, two Northeast Ohio real estate developers have snagged distressed properties in the fallout from the recession and banking crisis. Zaremba Group, the Lakewoodbased retail and apartment developer, recently bought for about $30 million a 30-story residential tower and
its 22-story sister tower in Tempe, Ariz. Likewise, Small Brothers LLC, a real estate investment and development arm of the Small family that runs Mentor-based Cleveland Construction Inc., recently set to work on the partially finished Park Tower condo in Charlotte, N.C., after buying it last summer. In both cases, the projects are so challenged the new owners will need to spend millions to complete the projects and reposition them from the original developer’s shattered visions. Joseph Urbancic, president of Zaremba’s residential unit, said part of the attraction for Zaremba was that the Tempe project “is one of the few fractured condominium deals that did not have any residents who had closed on their units.”
172-room Hyatt Place Hotel, ground-floor retail and a rooftop restaurant. Bud Balsom, Cleveland Construction’s manager of business development, said the Charlotte property was attractive because it provides a construction project for the firm now and a good real estate investment for Small Brothers LLC for the long term. Mr. Balsom said Small Brothers owns more than 1.5 million square feet of properties. He declined to comment on how much Small Brothers paid for the project or how much it would invest to finish it.
Opportunity knocks While big, locally based developers such as Forest City Enterprises Inc. and Developers Diversified Realty Corp. have acquired properties
“There has not been the expected avalanche of distressed properties nationally, but the volume of offerings sure looks like a once-in-a-lifetime opportunity.” – Alec Pacella, vice president, NAI Daus “If some (condo) owners are living there, and an association is in place, it gets more complicated,” Mr. Urbancic said. Zaremba plans to convert the 90%-finished, 22-story building and the shell-only, 30-story tower to rentals. “It’s near the University of Arizona, so we believe it will compete effectively with other student rentals nearby,” Mr. Urbancic said. “Nothing else is close to (the towers) in height, so you can imagine the views.” Zaremba was confident about the Tempe project because it has a development office in Phoenix, where it already has completed two other developments. In the case of the Small brothers who own Cleveland Construction — a major contractor with offices in Columbus; Cincinnati; Naples, Fla.; Raleigh, N.C.; and Washington, D.C. — the family acquired the stalled, 107-unit condominium project with plans to finish it as a mixed-use development. The project would have 67 luxury condominiums, a
and developed properties around the country for decades, the economic downturn has put other property owners on airplanes to size up distressed opportunities elsewhere. Alec Pacella, a vice president of NAI Daus of Beachwood, said fewer broken deals have surfaced than many experts expected. “There has not been the expected avalanche of distressed properties nationally,” Mr. Pacella said, “but the volume of offerings sure looks like a once-in-a-lifetime opportunity.” Cliff West, a principal of the DavisonWest real estate brokerage of Cleveland, said 90% of the sales he’s pursuing are outside Northeast Ohio, and not because he dislikes his home town. “When you’ve got a still-growing population and unemployment is low, even if the market has had a downturn, it may be more viable to do a deal there than here,” Mr. West said. “Pretty much every developer I know is looking for projects out of town.” ■
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APRIL 4 - 10, 2011
FDA: Uncertainty affects health care sector investments continued from PAGE 1
similar to a “predicate” device that already is on the market. The FDA also announced that it would hold off on implementing seven more controversial changes until it receives input on them from the Institute of Medicine, a nonprofit that serves as the health arm of the National Academy of Sciences. Some industry watchers aren’t sure what to make of some of the changes the FDA has announced, given that the agency itself still is figuring out the details. But Jack Scoville isn’t expecting the FDA to make things easier.
As vice president of quality and regulatory affairs for medical device maker Thermedx LLC of Solon, Mr. Scoville has noticed that the agency over the past few years has been slower to approve devices through the 510(k) process, named for a section of the Federal Food, Drug and Cosmetic Act that created it. Reviewers from the agency also have been asking more questions than they once did, he said. Mr. Scoville anticipates the latest changes will lengthen the time it takes for Thermedx — which has developed a system used to regulate the temperature of patients under-
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“If you’re an investor, I’ve got to tell you why it’s unique. If you’re the FDA, I’ve got to tell you why it’s not.” – Geoff Thrope, CEO, NDI Medical going surgery — to get new products to market. He also expects the FDA will require clinical data for more 510(k) submissions in the future. “They will be raising the bar,” he said.
Dominoes So, which proposals are considered controversial? For one, the FDA is waiting to decide whether it should develop more specific guidance regarding when a device no longer can be used as a predicate. If it does, the new guidance could lead to several predicates losing that status, which in turn could affect the approval status of the devices that cited those predicates during the approval process, said Dave Fisher, executive director of the Medical Imaging Technology Alliance of Arlington, Va. “If you take away the first one, what falls? The 20 after them?” he said.
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Mr. Fisher gave a few other examples of proposals he considers controversial: The FDA has yet to decide whether it will clarify and possibly expand the authority it has to revoke the approval of a product. The agency also might create a new approval category within the 510(k) program that would require products to meet a higher standard than typical Class II devices without falling into Class III, which is reserved for products that could pose a greater health risk. Some of the changes could be positive, if they are done in a way that doesn’t confuse or place too big a burden on applicants, Mr. Fisher said. “There needs to be a very detailed process to ensure that the company has some certainty,” he said.
Time is money Uncertainty at the FDA already has caused investors to put fewer dollars into the health care sector, said Baiju Shah, president of BioEnterprise Corp., a nonprofit that assists health care companies in Northeast Ohio. Sure, 33 Northeast Ohio companies raised $135 million in 2010, which was good, given the economy and the regulatory environment, Mr. Shah said. Still, he said the uncertainty at the FDA has been “keeping the numbers down.” Put simply, the FDA’s reluctance to approve devices faster means that the regulatory process “takes longer and costs more,” said Jonathan Murray, managing partner for Early Stage Partners, a Cleveland firm that invests in young companies. Mr. Murray said he suspects that, as long as the FDA is in a “risk averse” mode, investors will push for more equity per dollar when financing health care companies. “It will absolutely influence the types of investments we make and the way we structure investments,” he said. Though companies may not know what changes are coming, they know what they’ve seen so far — and they’re not thrilled. Two years ago, Integra Spine often could receive federal approval for new versions of its spinal
implant products within 90 days, said Rachael Smith, director of marketing communications for the company, which moved to Medina from Akron in January. Now the average approval time is about 120 days, Ms. Smith said. The FDA by law must respond to companies within 90 days, but now that response often comes in the form of more questions, she said. “In some cases we’re receiving questions near that 90-day mark, which pushes out our timeline,” she said.
Innovation conundrum Geoff Thrope has noticed the same trend. Mr. Thrope, who is CEO of neurological device developer NDI Medical LLC of Highland Hills, said the FDA over the past year or two has been asking a lot more questions, which makes it harder and more time-consuming to get through the 510(k) process. Small companies, he added, often don’t have enough cash to survive long waits. Mr. Thrope said the 510(k) process is good, but the FDA needs to improve the way it evaluates lowrisk devices that have no clear predicate. The FDA encourages companies to use the process for low-risk products, but lately the agency’s product reviewers have been asking for more evidence that those products have predicates — when many innovative devices do not. “If you’re an investor, I’ve got to tell you why it’s unique,” he said. “If you’re the FDA, I’ve got to tell you why it’s not.” As for the changes the FDA has proposed, Sachin Mani of ClinicalRM in Hinckley said the agency is pushing for greater control over what ends up on the market. Not that that’s a bad thing, said Dr. Mani, a program manager for the Frederick, Md., office of the provider of clinical trial services. Though he is unsure to what degree the changes might burden small companies, Dr. Mani said many of the changes are meant to help the agency clear up confusion or simply to ensure that products are safe. “It’s just about finding the right equilibrium,” he said. ■
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CRAIN’S CLEVELAND BUSINESS
Aeros buck healthy ballpark trend with new food items By JOEL HAMMOND email@example.com
The Akron Aeros aren’t forcing you to eat any of their new, gottabe-unhealthy food concoctions. But they sure aren’t making it easy to turn them down, either. The Aeros, with an entirely new front office in place since last November, have been marketing heavily the products in order to create a preseason buzz, said executive vice president and chief operating officer Jim Pfander. And they’ve done it with five new menu items: ■ a 1¼-pound hamburger topped with a half-pound hot dog and a quarter pound of bacon; ■ a 19-ounce hot dog/kielbasa/ bratwurst combo;
■ a 14-inch, half-pound hot dog; ■ a one-pound customizable hot dog, with up to 40 toppings (including peanut butter and jelly); and ■ the latest addition, a fivepound ice cream sundae with a one-pound brownie and four whole bananas. While the Aeros do have a Farmer’s Market stand with some healthy options, their focus this winter has been on these hard-tobelieve items, very much against the grain at stadiums nationwide. The recent trend has been to get healthier, from Progressive Field’s “Food Network” salad to Angel Stadium’s grilled vegetable vegan panini to the wild salmon at PNC Park in Pittsburgh. “The novelty items always get the
PUCO ruling good deal for industrial energy users By DAN SHINGLER firstname.lastname@example.org
The cost of new lighting and other high-efficiency equipment just dropped for manufacturers, warehouses and other large facilities across Northeast Ohio. A March 23 ruling by the Public Utilities Commission of Ohio has cleared the way for Akron-based FirstEnergy Corp. and its Cleveland Electric Illuminating Co. subsidiary to offer industrial customers rebates for installing high-efficiency lighting and buying more efficient electric motors, air conditioning units and other power-consuming equipment. Depending on what’s purchased, industrial customers might receive a flat rebate — say, $10 to upgrade an old illuminated “exit” sign with a more efficient LED model. Or, they might receive a specified rebate amount for “watts saved,” such as 80 cents per watt for the difference between the power used by old florescent lights and the newer, T8 florescent lights that replace them. Some savings are time-sensitive. “For example, a light might get an 80 cents per watt rebate for the first six months of the program, then it dips to 65 cents thereafter,” said FirstEnergy spokesman Mark Durbin. Lighting is the low-hanging, energyefficiency fruit for many manufacturers and other industrial customers that must keep vast amounts of floor space lit. Some can save thousands per month on their electric bills just by replacing their lighting, which is why it’s also perhaps the most generous rebate offered by FirstEnergy, said Bob Taussig, an account executive for Five Star Lighting in Twinsburg. Mr. Taussig makes his living largely by converting industrial and other commercial customers over to new lighting systems. He said other power companies, including American Electric Power of Columbus, where Five Star Lighting also sells lighting systems, have not offered rebates as large as FirstEnergy’s. “The most AEP ever offered was 35 cents a watt, so this is twice that. It’s very generous,” Mr. Taussig said. The rebate does have its limits. FirstEnergy only will rebate up to half the cost of the installation of
new lighting, for instance — though most companies do get that amount, according to Mr. Taussig. The rebate levels, as approved by the PUCO, were proposed and submitted by FirstEnergy, PUCO spokesman Matt Butler said. FirstEnergy’s Mr. Durbin said customers will receive details about the program this month, as the Akron-based electric company hammers out the final details for administering the program. However, there is a catch with the rebate program.
Now, or later? FirstEnergy, like other utilities across Ohio, has been mandated to improve the energy efficiency of customers across its footprint and is using a combination of carrots and sticks to achieve that end with business customers. Those that don’t improve their efficiency will pay higher rates in the form of special riders on their electric bills. To be exempt from the riders, customers must show they’ve improved their energy efficiency — but they can’t count rebated improvements toward that claim. For industrial customers, it’s a choice between receiving help with the up-front cost of a project or paying higher bills down the road. Mike Brakey, an energy consultant in Shaker Heights, suggests they look closely at the situation before taking the fast rebate. Those riders likely will become more expensive going forward, Mr. Brakey predicts. “I believe many mercantile customers, who believe they can improve energy efficiency each year, might be better off financially” by pursuing the rider exemption, Mr. Brakey said. “I would personally hate to give that option up for 30 small pieces of silver” today, he added. Either way, Five Star Lighting’s Mr. Taussig figures that he and his company are winners. Business already is good, driven in part by federal tax regulations allowing his customers to depreciate energyefficiency investments in a single year. Add to that a rebate that, more often than not, amounts to half of a project’s cost, and Five Star Lighting expects an even greater pick up in business, Mr. Taussig said. ■
Jason Kerton, the director of food and beverage for the Akron Aeros, shows off “The Screamer” at a recent media event at Canal Park in downtown Akron. The fivepound ice cream sundae includes a one-pound brownie and four whole bananas. PHOTO PROVIDED
press and intrigue the public,” said Chris Bigelow, president of Kansas City-based Bigelow Cos., a food service consultant to sports teams, “but most concessionaires are expanding the availability of healthy offerings, and some are offering gluten-free items.” Yet the Aeros are unfazed. Mr. Pfander, an Akron native and previously assistant general manager of the Charleston (S.C.) RiverDogs for six years, has left no stone unturned at Canal Park, which sits in the heart of downtown Akron. They’ve lowered ticket costs (from $10/$9 to
$9/$5) and concession prices (new $2 hot dogs, down from $3.25), made over the stadium’s team shop and expanded the promotional schedule. And yeah, the food. Mr. Pfander’s former colleague with the RiverDogs, Jason Kerton, was given “carte blanche” with the menu, and let his imagination fly. Dan Foust, who previously worked for the Indians for 19 years and now is the Aeros’ assistant general manager of media and marketing, said news releases about the new menu options received plenty of publicity locally and
nationally on blogs and Twitter. He added that the response — or, more precisely, lack thereof — to Canal Park’s new Farmer’s Market area showed the team made the right decision. Mr. Pfander said he’s heard from fans at his many speaking engagements throughout the area that they’re excited for the new options, though it comes with a caveat of, “Don’t tell my cardiologist!” The items range from $6 (Wonder Dog, the accessorized half-pounder) to $20 (The Screamer, the ice cream monstrosity). The 1¼-pound burger — dubbed the “Nice 2 Meat You Burger” — was featured on Comedy Central’s “The Daily Show with Jon Stewart,” right after a bit about Taco Bell’s muchpublicized PR battle over the content of the meat it uses. An Alabama law firm sued the fast food chain for selling beef the firm said was only 36% meat; Taco Bell later responded by saying it starts with 100% USDAinspected beef and then uses a proprietary mix of spices. “(‘The Daily Show’) said, ‘Here’s some real meat!’” Mr. Pfander said. “They’ve created the ‘wow’ factor, and that’s what we’re after. People love the extreme.” ■
CRAIN’S CLEVELAND BUSINESS
APRIL 4 - 10, 2011
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he Page One, banner headline looks like a throwback to something you’d have seen in another era in Northeast Ohio. “Automotive industry will drive the state out of recession,” it reads. But a blast from the past it is not. That exact headline ran atop the lead story of the Feb. 7, 2011, issue of the Columbia Regional Business Report, a Crainlike newspaper in South Carolina. Gee, but haven’t we been told that manufacturing — particularly of the automotive variety — is dying, and that we shouldn’t chase smokestacks? Well, they don’t think so in South Carolina, where an industry group known as the South Carolina Automotive Council recently released a study that shows the auto industry’s economic impact on the state is $27 billion a year — and growing. “This is the biggest impact of any well-defined (industry) cluster in the state,” economist Doug Woodward, the study’s author, tells the regional newspaper in talking about the auto industry. “If you want to create jobs, this is the way to do it,” said Dr. Woodward, who is on the faculty of the Darla Moore School of Business at the University of South Carolina. According to the report, more than 5% of South Carolina’s work force and 10% of its economic output are tied to the auto industry, which seems to excite Bobby Hitt, who is secretary of that state’s Department of Commerce. “That’s wealth,” Mr. Hitt tells the regional newspaper. “That’s what manufacturing does.” As a former executive of BMW Manufacturing Co., which runs an auto assembly plant in Spartanburg, S.C., Mr. Hitt might be biased. But he isn’t wrong. People who make things use their paychecks to support the service and government sector jobs that make up such a large part of any local economy. Without a solid manufacturing base, those other sectors begin to crumble. At this stage, Ohio only can look on wistfully at all the auto plants, especially of foreign automakers, that dot the South. They were set up at a time when labor-management relations in the auto industry were awful, and foreign manufacturers wanted nothing to do with the United Auto Workers union and the type of costly, restrictive contracts that hung like lead weights around the necks of the domestic automakers. So, the transplants stayed away from established union havens such as Ohio and built their factories in nonunion states that were eager to shower them with financial incentives. It took the near-death experiences of the domestic automakers for the UAW and management to wise up and to work on something closer to a collaborative basis. Now, factories such as the Ford engine plant in Cleveland and the massive General Motors assembly plant in Lordstown are on more secure footing. In a world where much of the economic development conversation focuses on technology, government officials at the state and local level should not neglect developing policies that sustain and promote Ohio’s manufacturing sector. These jobs are too important to concede to South Carolina, or any other state for that matter.
Join me in helping some brothers out ew lines in the Alanis Morissette 56 little brothers on the waiting list as of song “Ironic” actually have Thursday, March 24, according to figures anything to do with irony. from the agency. The group expects to Rain on your wedding day find a match for me and 15 other guys isn’t ironic. It’s just unfortunate. over the next 30 days, but that still leaves Here’s real irony: At the root of Northeast 40 boys without big brothers. And that’s an Ohio’s biggest problems — low graduation improvement: In December 2008, before rates, poverty, crime, etc. — are thousands the agency started a push to recruit more of boys who grew up without men, there were 265 boys on the positive male role models. waiting list. The average boy on CHUCK Yet, many more women than SODER that list had been waiting for men sign up to be mentors one year and five months, through Big Brothers Big Sisters according to the agency. of Greater Cleveland. Every Big Brothers Big Sisters Isn’t it ironic? chapter in this region needs to I’ve seen the problem firsthave a long waiting list — of big hand, having just signed up to brothers waiting to be paired be a big brother. On March 12, I with little brothers. Same goes visited the group’s Prospect for every other program where Avenue office to go through adults mentor troubled kids. orientation. In the room, I counted six Why? Mentoring works. If common men and 18 women. sense hasn’t already convinced you of Many of those women will be put on a that, here are some statistics: A 1993 waiting list. That’s a good thing, though: study by Philadelphia-based Public/ It means the agency can find matches for Private Ventures showed that, 18 months girls almost as fast as their parents sign after being paired with a match, kids in them up. Big Brothers Big Sisters programs were The boys aren’t so lucky: There were 46% less likely to begin using illegal
drugs than peers who were randomly assigned to waiting lists. They also were 27% less likely to begin using alcohol, 52% less likely to skip school and 33% less likely to hit someone, according to the study, which followed the progress of 959 boys and girls from across the United States. The study was paid for by the Lilly Endowment, the Commonwealth Fund, the Pew Charitable Trusts and an anonymous donor. So what’s the catch? Well, as a “big,” for four hours a month, you’ll be expected to make some serious sacrifices: You might have to play a few board games, eat a few ice cream cones and occasionally watch the Browns with someone other than your lonely self. Some people go so far as to play catch or help their matches with math homework. I know. It sounds tough. To make it even easier, the organization provides advice, activity ideas and ongoing support for its mentors. This year, the chapter aims to match 100 boys with big brothers. Will you help them hit that goal, or will this be the good advice that you just didn’t take? ■
THE BIG ISSUE Should the federal government make big spending cuts now, or should it wait until the economy gets better?
I say now. We’re in desperate need to create jobs. To help the economy move along.
I think they should wait until the economy gets better. The economists that I have listened to and read say that the stimulus was not enough to generate employment and encourage new production. And that needs to be done first.
They need to wait until the economy gets better. My fiancée is a teacher, and I don’t like them putting pressure on the state government … to make cuts, which will ultimately affect the unions and the teachers.
I don’t think the economy’s going to improve any time soon. I don’t think it will.
➤➤ Watch more people weigh in by visiting the Multimedia section at www.CrainsCleveland.com.
APRIL 4 - 10, 2011
CRAINâ€™S CLEVELAND BUSINESS
Gas: Fuel prices impact margins continued from PAGE 1
secure and negotiate shipping contracts as well as manage their logistics. High fuel prices and tight credit make it hard for trucking companies to expand their fleets and also reduce the number of available owner/operators of trucks, both of which throw the supply of over-theroad shipping capacity out of sync with demand. â€œThe bottom line is rates are going up, and theyâ€™re going up dramatically,â€? Mr. Newman said. Mr. Newman said small manufacturers and other shippers are the most vulnerable to price spikes, as well as fuel surcharges, because they often ship less than truckloads of goods at a time. And when they do fill whole trucks, they still use fewer of them than a larger company, so they canâ€™t negotiate the same rates as a bigger consumer of shipping services, Mr. Newman said. Because fuel surcharges usually are applied as a percentage of the total shipping costs, smaller shippers often pay more in surcharges, too. For example, if a big company that receives a price break pays $100 in shipping charges, a 30% surcharge is $30, but if a smaller company is paying $200 for the same size shipment, the surcharge is $60.
Margin pincher Trucking companies themselves might be getting hit the hardest, especially now in the early days of rising fuel prices, when theyâ€™ve not yet passed along all of their added fuel costs. â€œWe started making some progress with the economy, and then fuel spiked,â€? said Chris Haas, CEO of All Pro Freight Systems in Avon. â€œWeâ€™re getting ready for the perfect storm again.â€? Even when trucking companies
do pass on the increased cost of fuel, Mr. Haas said, it still eats into their margins because trucks always run without loads at least some of the time, and thereâ€™s no surcharge that can be applied to those miles. For a company such as All Pro Freight that runs about 200 trucks, the cost of fuel is significant if each truck travels empty even 25 miles a day, Mr. Haas said. Kelley Stewart, owner of T&K Logistics in Sheffield, also is feeling the pinch. Ms. Stewartâ€™s company provides shipping services to large manufacturers such as Ford Motor Co. It moves inventory from delivery trucks to Fordâ€™s yards and from the yards into production plants using specialized tractors. â€œItâ€™s killing me,â€? Ms. Stewart says of the rising cost of fuel. Ms. Stewart is able to say it with a laugh, as business overall is good and Ford just hired her for a significant new contract, but she noted that fuel costs still are a serious matter. In her business, increases in those costs generally are not passed on as a surcharge, and when the price goes up, it affects her bottom line. â€œIâ€™m feeling positive about opportunities, but Iâ€™m not feeling positive about the margins,â€? Ms. Stewart said. Rising fuel prices also affect T&Kâ€™s credit and liquidity, Ms. Stewart said, because the companyâ€™s fuel accounts have maximums and she approaches those maximums faster when each gallon of fuel costs more.
Stormy shipping seas ahead So far, manufacturers say they are coping with the rising shipping costs. Thatâ€™s especially the case if they make expensive stuff such as medical device parts or aerospace components that involve exact machining, tough fabrication or
other specialized production. In those cases, the cost of shipping is often small compared with the cost of the product. But even some of those making more simple items say that, so far, shipping costs are manageable. â€œWe have been notified by steel companies of a delivery surcharge, and we fold it into the greater steel increase, but from a percentage of total cost it is slight,â€? said Jeff Walters, president of Master Products, a metal stamping company in Cleveland. Many small to midsize manufacturers also say theyâ€™ve been using socalled â€œF.O.B.â€? origination shipping, which stands for â€œfreight on board.â€? Under such arrangements, the customer agrees to pay for shipping and does so when the goods are delivered. â€œIn our business, the customer usually pays for shipping,â€? said Rich Peterson, vice president of Astro Manufacturing and Design, a contract machine shop in Willoughby. â€œWe have added a fuel surcharge to our delivery prices when we use our trucks. We try not to do this, but I think our delivery prices are still reasonable.â€? But the worst is yet to come, according to All Proâ€™s Mr. Haas. He said increasing demand for trucks by manufacturers is about to collide head-on with a shortage of trucks and drivers nationwide. Many small trucking companies and independent operators did not survive the recession, Mr. Haas said, resulting in fewer trucks on the road. Then, manufacturers began hiring again, and some of the people they hired had been driving trucks but gave it up due to steep fuel prices and the allure of a fixed job. â€œItâ€™s going to get way worse,â€? Mr. Haas said. â€œItâ€™s a pickup in manufacturing and a decrease in shipping capacity all happening at once.â€? â–
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APRIL 4 - 10, 2011
Cavs: Devotion to city spurs investment Hospitals: Maintaining continued from PAGE 3
and attendance — while listed as nearly a sellout each night according to paid figures — is thousands less on most nights. (According to official league numbers, the Cavs are averaging 20,095 fans per game, 97.7% of The Q’s capacity.) The Cavs are early in the process of renewing those multiyear corporate sponsorship agreements that expire after this season, said team spokesman Tad Carper. Yet Mr. Carper said the Cavs expected little trouble re-upping those deals. “(Sponsors) know there’s an ebb and flow,” Mr. Carper said. “Elements of any partner’s deal evolve and change, depending on what their goals are and any new opportunities they want to take advantage of. Ultimately, we look at these partnerships as long-term and dynamic, and they offer unique value.”
Value proposition Paul Matsen, chief marketing and communications officer at the Cleveland Clinic, said the hospital system analyzes its sponsorship of the Cavs as it would analyze all other media buys: How much does it cost it to reach its audience? The hospital system has a deep role with Cleveland’s three pro teams, using them as vehicles to promote its “Let’s Move It!” wellness campaign. In addition, its physicians care exclusively for players’ bumps and bruises, and the Clinic provides
first aid and medical support to fans in the Quicken Loans Arena. While Mr. Matsen acknowledged the difficult circumstances the Cavs faced this year after LeBron James’ “Decision” and departure, the Clinic also is watching attendance and ratings. “If there is a sustained loss in viewership and attendance, it affects the value of media, just like a drop in circulation at a newspaper,” Mr. Matsen said. “We’d seek more value.” Others see their sponsorship as a community commitment and this down season won’t affect their presence. That group includes Medical Mutual, which is designated as the official health insurer of the Cavs and which also has a large presence at Progressive Field and Cleveland Browns Stadium, too. “While we do care about winning as much as anyone else, we don’t put much emphasis on ratings or won/loss records,” Medical Mutual spokesman Ed Byers said. “We are consistently behind the Cavs, win or lose. We have long valued the team as a partner and customer and always will.” Sherwin-Williams Co. lets its post-LeBron actions speak for its plans, said director of corporate communications and investor relations Mike Conway. The Clevelandbased paintmaker replaced Nike’s gigantic LeBron banner outside The Q with one featuring the city’s lit-up skyline and the words, “Our home since 1866. Our pride forever.”
“That says a lot about our commitment,” Mr. Conway said.
An eye on team’s ‘trajectory’ KeyBank and the Clinic — the organizations most willing to discuss their plans to play a little hardball at the negotiating table — acknowledge the Cavs continue to provide quality service and a willingness to help their corporate partners any way they can. Representatives of each organization to which Crain’s spoke for this story also said they’re confident in Cavs owner Dan Gilbert. One sponsor that will be cutting back its Cavs-related advertising is Shearer’s Foods Inc., though its decision is unrelated to LeBron’s. Under a new marketing team hired last year, Shearer’s will reduce by one-quarter of its previous expenditures its sponsorship commitments with the Cavs, Indians and Browns, said marketing brand manager Rob Koller. Nonetheless, he said the company maintains an excellent relationship with the Cavs, which provide a unique, national platform for its brand to be recognized. The Cavs’ Mr. Carper said Cleveland’s corporate community has remained supportive. But the Clinic’s Mr. Matsen said there’s only one way to ensure that continued support: a rebound in the standings. “In the end, they know they have to provide a quality on-court product,” Mr. Matsen said. “Next year will be the key year to see the team’s trajectory going forward.” ■
donor base paramount continued from PAGE 3
The prospect of fewer raised dollars concerns some institutions, as many of the donor gifts support renovation and construction projects as well as research and education initiatives. “I think anytime that there are tax issues, there’s a sense that some of our donors may not make as large a contribution to us, and that’s really a problem for us,” said Armando Chardiet, chair of institutional relations and development at the Cleveland Clinic. “We depend on philanthropy so much to be able to accomplish many of our goals, especially around research and education.”
Holding steady If changes do come down the pike, hospital fundraisers say familiarizing themselves with any changes will be paramount. In the meantime, though, it’s business as usual, said Bobbie Simmerman, executive director of the Southwest Community Health Foundation, which supports Southwest General Medical Center in Middleburg Heights. Given the rate at which the discussions shift gears in Washington, anything could happen. “I don’t have a crystal ball to know what’s going to happen in Congress, but we pay attention to those things,” Ms. Simmerman said. “But for now we’ll stay the course.” Continuing to cultivate a strong
base of donors and selling an organization’s mission is about all one can do, according to Kate Brown, vice president for development at the MetroHealth System. “We don’t lead with the tax story, but I’d think we’d need to be informed and understand it and share that information with a potential donor,” Ms. Brown said. “We wouldn’t change the way we share information or the way we engage donors.” The Summa Foundation, which supports the Summa Health System in Akron, has broadened its reach by focusing more on individual donors rather than event-driven fundraising, said Kathy Taylor, the foundation’s executive director of development. Ms. Taylor said in order to weather a potential tax code overhaul, the foundation aggressively will work to expand its donor base and to maintain existing donor relationships, in part by sharing with donors how patients were impacted by philanthropy. For example, the system might let donors know the results of a research project or share a patient’s feedback about a new facility that was built in part with donor dollars. “At the major gift level in particular, they’re increasingly looking at their gift as an investment,” Ms. Taylor said. “They truly analyze the cost benefit to them of giving the gift.” ■
APRIL 4 - 10, 2011
CRAINâ€™S CLEVELAND BUSINESS
Road: Catering growth, 2nd truck on tap continued from PAGE 3
$100,000 last year. A second, larger truck is on the way that will allow Dim and Den Sum to serve more people. And his catering business is building, with about $120,000 of weddings and other events booked so far this year. The operation employs five full-time workers, but Mr. Hodgson said he hopes to at least double his staff if business keeps growing. His ideas for taking the company in new directions can give one whiplash. He is eyeing a spot for a potential restaurant in Lakewood, heâ€™s working on becoming a vendor at the West Side Market so he can serve food outside the main building on Saturdays, and he wants to establish a nonprofit that would benefit exconvicts who would like a second chance in the food business.
â€œMy end goal is to open a restaurant that employs people who are passionate about cooking but have struggled.â€? â€“ Chris Hodgson, owner, Dim and Den Sum For now, Dim and Den Sum has the attention of Northeast Ohioâ€™s largest employer. It will serve this year employees at the Cleveland Clinicâ€™s Lyndhurst campus twice a week, Clinic spokeswoman Stephanie Jansky said. Last year, the operation served food to patients, visitors and employees at a weekly farmerâ€™s market on Cleveland Clinicâ€™s main campus, something Mr. Hodgson hopes to do this year as well. The business also has caught the attention of the Food Network; Dim and Den Sum last fall was voted No. 3 out of 280 food trucks in a network contest ranking the best food trucks in the United States. But getting the business to where it is today hasnâ€™t been easy.
Rough road The operators in the beginning couldnâ€™t buy ingredients in bulk because they didnâ€™t have sufficient off-site cooler space for storage. As a result, â€œwe were giving away food for free at the end of the day,â€? Mr. Hodgson said. The mobile food truck also has been chased off the street by small cafĂŠs, even with the proper permits in hand. And their Twitter and Facebook followers know all too well how often they run out of food. On a recent brisk, chilly day, for example, the truck was sold out by 12:30 p.m. But the small business is navigating through those challenges. Dim and Den Sum solved last June its food purchasing problems by renting an 1,800 square-foot kitchen at Goodwill Industries of Greater Cleveland on East 55th Street for about $849 a month ($150 a month in the winter). This year, the truck plans to extend its afternoon schedule of serving food from three hours to about seven, during which a catering van will shuttle product from the Goodwill kitchen so food shortage is not an issue.
mobile restaurant business a breeze. Cleveland City councilman Joe Cimperman recently introduced an ordinance that would make the parking and permitting process easier for food trucks, which must obtain separate permits for each spot at which they idle. Mr. Cimperman says food trucks are a boon to permanent restaurants and cafĂŠs. â€œWe just had a food truck meet up (on March 27) in Tremont, and 1,500 people came,â€? Mr. Cimperman said. â€œThe surrounding restaurants and cafĂŠs said they had one of their busiest Sundays ever.â€? Meanwhile, Mr. Hodgson plans to expand his philanthropic outreach. Last year he gave away $21,000 in food, he says, because charitable
and missionary work is steeped in his family values. â€œIâ€™ve been to 13 countries on missions,â€? he said. â€œI grew up handing out blankets, soup and sandwiches with my family to homeless people at churches and shelters.â€? He is working with Goodwill Industries to develop a program through which the organization will provide counseling services to individuals with nonviolent backgrounds who have been released from prison. Mr. Hodgson then would help place them in a restaurant. â€œMy end goal is to open a restaurant that employs people who are passionate about cooking but have struggled,â€? said. â€œPeople deserve a second chance.â€? â–
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APRIL 4 - 10, 2011
CLEVELAND STATE UNIVERSITY: Stephanie McHenry to vice president for business affairs and finance.
FINANCE FIRSTMERIT CORP.: Robert L. Dezso to senior vice president, enterprise risk officer; Peter Hollinger to senior vice president, commercial lender; Joseph P. McNeill to vice president, commercial banking; Eric Stropkay to vice president, commercial portfolio manager.
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BOARDS ADOPTION NETWORK CLEVELAND: Bernadette Kerrigan (Center For Families and Children) to chair; Anita Miller to first vice chair; Nicole Wilson to second vice chair; Joshua L. Berman to secretary; John Zaranec III to treasurer. ASSOCIATION OF LEGAL ADMINISTRATORS, CLEVELAND CHAPTER: Stephanie Cruz (Gallagher Sharp) to president; Mark Biddlestone to past president; Kris Oliveri to presidentelect; Nicole Tucci to secretary; Robert D. Moran Jr. to treasurer. CENTER FOR COMMUNITY SOLUTIONS: Robin C. Cottingham (Key Bank) to chair; Anne M. Pombier, Michael J. Peterman and Stephen J. Squeri to vice chairs; Irwin M. Feldman to secretary; Michael S. Mayor to treasurer. DIABETES ASSOCIATION OF GREATER CLEVELAND: Gary Lichtenstein to chair-elect; Sara Snow to secretary; Larry Gilbert to treasurer; Debbie Hoffmann to chairperson; Roger Ruch to vice-chair. LAKE HEALTH FOUNDATION: Tim Cahill to chair; Patty Kuhar to vice chair; Chris Cook to treasurer; Mark Fosnaught to secretary. NAIOP COMMERCIAL REAL ESTATE DEVELOPMENT ASSOCIATION, NORTHERN OHIO CHAPTER: Dave Robar (Vocon) to president; Scott McCready to president-elect; Traci Hunt to treasurer; Jeff Wherry to secretary; Dave Sobochan to past president. NORTH COAST COMMUNITY HOMES: Ronald D. Holman II to chair; Patrick T. Finley and Anne Rapacz-Kimmins to vice chairs; Richard K. Greaves to secretary/ treasurer.
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or the second year, Crain’s Cleveland Business profiles nine of Northeast Ohio’s family owned businesses, from their starts generations ago to today. These companies address how they’ve navigated the difficult dynamics of working with family, and a difficult economy that has forced them to adjust.
ROUNDING OUT THE ROSTER Second generation ■ Mar-Bal Inc., Chagrin Falls PAGE 14
Third generation ■ House of LaRose, Brecksville. PAGE 14 ■ Leimkuehler Inc., Cleveland PAGE 15
■ PFI Displays Inc., Rittman PAGE 16
Fourth generation ■ Federal Metal Co., Oakwood Village PAGE 16 ■ Lucky Shoes, Fairlawn PAGE 16 ■ Speed Exterminating Co., Cleveland PAGE 17
International Transport Services Inc. Cleveland ◆ second generation By JAY MILLER firstname.lastname@example.org
arry Yankow got into the air freight business because he badly wanted to be around an airport. So he went to work for a freight forwarder until he was ready to start his own business, now known as International Transport Services Inc., in 1986. “My vision was just to start a company, hire some employees” and stay in the shipping business, Mr. Yankow said. The company, now with 22 employees and running out of office space, last week moved around the corner to Cleveland from Middleburg Heights — still within shouting distance of Cleveland Hopkins International Airport. International Transport doesn’t own trucks or ships or airplanes. Instead, it handles the movement
of the freight of its customers, anything over 250 pounds from anywhere in the world to anywhere else in the world. The company finds the right shipper and then prepares the bills of lading, export declarations, customs paperwork and sometimes more. His sons and successors are Bill and Matt Yankow. Air freight was what they always knew, too, a place at which they spent time as kids. Their mother, Anne, also works at International Transport, as vice president of finance. The boys say they knew their dad’s business was where they would end up, though Larry, 56, wasn’t so sure they would follow in his footsteps. Now, he thinks he has planned his exit strategy. “I never assumed they were going to be in the business,” Larry said recently. “I never assumed See TRANSPORT Page 17
Larry Yankow (from left), with wife, Anne, and sons, Bill and Matt, in International Transport Services Inc.’s Middleburg Heights warehouse last month, before it moved to Cleveland last week.
Logan Clutch Corp. Westlake ◆ second generation By DAN SHINGLER email@example.com
B Siblings Andrew and Lisa Logan unexpectedly took over Logan Clutch Corp. after their father died in 1986. JESSE KRAMER
eing an entrepreneur is tough for people who have dreamed of it their entire lives. Imagine what it’s like for someone who has it thrust upon them. Andrew and Lisa Logan weren’t expecting to become business owners in 1986, when he was still in college and she, 10 years older, was working her way up the corporate ladder at machine tool giant Warner & Swasey. But an unexpected illness befell their father, Bill Logan, who died that year. Shortly thereafter, the oldest and youngest siblings joined their mother, Madelon, and decided to carry on the business, Logan Clutch Corp. of Sheffield Village. Bill Logan knew what he was
doing; he made custom clutches for machine tools that remain a mainstay of the company today. But the business was only 4 years old when he died, and his illness kept him from it for much of the last two years of his life. The family inherited a viable business, but one that badly needed attention. They looked for help, and found it from area business groups, including Cleveland’s Council of Smaller Enterprises, which provided them with mentoring. “COSE really hooked us up — we were the real widows and orphans,” recalls Lisa Logan, now the company’s vice president. The brother and sister took their father’s original concept, which was to offer clutches made to customer specifications, rather than offer only one standard
model, and expanded it. While the screw machines that make screws and bolts were the original use for the Logan clutch, today you’ll find them not only in a wider variety of machine tools, but also in tug boats, fire trucks, and oil and gas drilling operations. Along the way, the company has grown from two employees to a couple dozen and still is expanding. After coming through the recession without a money-losing year, Logan Clutch is expanding at its location in Westlake, where it is spending about $1.5 million on new manufacturing space and equipment this year, said company president Andrew Logan. Marketing is key, the brother and sister say, and it has been the major reason for the company’s growth. Five years ago, the company was adding about 75 customers a year, but it has found a way to top even those results more recently. “We’ve added 100 new customers or more in each of the last three See LOGAN Page 17
CRAIN’S CLEVELAND BUSINESS
APRIL 4 - 10, 2011
House of LaRose
Chagrin Falls ◆ second generation
Brecksville ◆ third generation By JOEL HAMMOND firstname.lastname@example.org
By CHUCK SODER email@example.com
arolyn Balogh remembers when Mar-Bal Inc.’s first press was attached to the back of the family’s Volkswagen Beetle, heading up a ramp leading into the company’s first plant on Scranton Road. The vehicle made it to the top. Barely. “The bumper fell off. The muffler fell off. That was just about the end of the VW,” Carolyn said. The sacrifice was not made in vain: Today, Mar-Bal has three plants and routinely posts annual sales exceeding $40 million. The company makes plastic parts and compounds, many of which go into appliances and electrical distribution systems. The company rarely has stopped growing since 1970, when Jim and Carolyn Balogh opened the Scranton Road plant after Jim noticed that his previous employer was turning down small, specialized orders. After a few years, they moved the business into a bigger plant on West Third Street in Cleveland’s Flats, and a decade later relocated the company to Chagrin Falls. Now Mar-Bal has plants in Virginia and Missouri and is opening one in Mexico. The company employs about 340 people, including about 140 in Northeast Ohio. As the firm grew, so did Jim and Carolyn’s boys, Scott and Steven. Today, Scott is president and CEO of Mar-Bal and Steven is vice president. As kids, however, they rode their tricycles around the shop floor. As they got older, their parents
Mar-Bal Inc. vice president Steven Balogh (left) and president Scott Balogh put the energies to more productive use: They would help finish parts by breaking off the little, unwanted pieces of plastic that didn’t come off during the manufacturing process, Steven said. “Back then, we were the machines,” he said with a laugh. They both worked at the company on and off through high school and college, but at the time, neither of them showed interest in joining the family business, said Carolyn Balogh, who remains vice chair of Mar-Bal’s board of directors. Jim Balogh is chairman of the board. “They heard so many business stories around the table, they said, ‘No, that’s not for me,’” she said. Turns out, it was for them. After graduating from Capital University with a bachelor’s degree in business and economics, Scott spent the next eight years in sales at IBM. Likewise, Steven graduated from the Berklee College of Music in Boston and had moved to New York City to pursue a career in music production and engineering.
They decided to come back in the early 1990s after Jim Balogh started looking to sell the company or take on a partner. They took their current titles seven years ago, when Jim and Carolyn retired. Steven Balogh laughed when he described his sister Julie as the smartest of the Balogh children “because she didn’t get involved in the business.” Though it’s no easy job, working for Mar-Bal has allowed Steven to put his creativity to uses other than music, he said. For instance, the company recently launched a process called Thermital that allows Mar-Bal to give a metallic look and feel to plastic products such as oven door handles. So how does the family keep things humming without getting on each others’ nerves? At work, they try to treat each other as colleagues, not family members, Carolyn Balogh said. “I think you have to maintain respect, just as you would for your employees,” she said. ◆
One firm. Managing Partner Stephen E. Walters
nce inside a massive warehouse off Interstate 77 in Brecksville, there seems to be little mystery about how House of LaRose has endured for 75 years. Beer is delivered. Beer is loaded. Beer is distributed to nearly 5,000 customers across a wide swath of Northeast Ohio, who then pass it on to thirsty drinkers. If only it were that simple. The company was founded by brothers Thomas P., Peter D. and Joseph F. LaRose in Akron in 1936, originally as a side business to the family’s transportation ties. Tom LaRose founded the Grant Street and South Bus Line in the early 1920s, but the trio in 1939 gave up transportation to focus on their beer distribution. Since those humble beginnings, the company established roots in Cleveland in 1979 by buying an Anheuser-Busch distributorship. In 1990, House of LaRose opened a warehouse on Grant Avenue on the city’s near East Side, and in 2004, it combined its Cleveland and Akron operations into its current, hulking 310,000-square-foot operation in Brecksville. It employs 305. “We have a pretty basic product; it runs through our veins,” said Jim LaRose, the company’s president and chief operating officer. “But the product has been complicated over time.” Mr. LaRose has led the company since 1999, when he succeeded his brother, Tim, now the company’s chairman. Siblings Frank (vice president of government affairs), Mark (vice president of operations and facilities planning) and Ann (director of corporate and community affairs), and cousin Peter (vice president of business development) also have roles with the company. And while it has become Ohio’s largest Anheuser-Busch whole-
saler, Mr. LaRose said the company most recently has contended with a “stagnant” marketplace amid the sour economy and the rise in popularity of wine and spirits. Still, House of LaRose distributes the equivalent of 11 million cases annually out of a warehouse that holds 800,000 and 900,000 cases of beer. In addition to AnheuserBusch products, it also distributes Crown Island (Corona), Mike’s Hard/Mark Anthony (Mike’s Hard Lemonade), Hansen Beverage Co. (various tea products) and Goose Island beer, from Chicago. Part of the impetus for the move to Brecksville was implementing new technologies, such as warehouse management systems — each pallet gets a bar code when it comes in and is tracked until it’s loaded onto a truck — and efficient routing, which allows the firm to track orders and not overwhelm certain delivery drivers, thus eliminating overtime. Mr. LaRose said he has benefited from his various roles in the company, starting as a warehouseman in the summer months while he attended Arizona State University and then taking on duties in marketing and sales. He acknowledged that family businesses can be difficult to manage, but clearly defined roles for family members and a team of non-LaRose executives have helped stymie any major problems. “Managing people and expensive equipment is complicated and can be difficult,” Mr. LaRose said. Bill Bartolomeo, vice president of Circle K Stores’ Great Lakes region, said the company has worked with the House of LaRose since 2007 and has been impressed. House of LaRose services more than 100 Northeast Ohio Circle K stores. “They consistently deliver on what they say they are going to do,” Mr. Bartolomeo said. “They care about meeting my expectations as a customer of theirs, and (they) provided us with excellent service levels.” ◆
Many answers for family businesses. Passed down through generations, family businesses are built on the guiding principles of hard work, perseverance and talent. Reminger wants to help your family business continue to thrive, especially when you are confronted with challenges requiring legal expertise.
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Our attorneys have demonstrated experience with issues impacting businesses of all sizes. From contract negotiations to litigation, succession planning to labor and employment law, Reminger provides experienced counsel that achieve results. Contact Managing Partner Stephen E. Walters for more information.
House of LaRose president and chief operating officer Jim LaRose
CRAIN’S CLEVELAND BUSINESS
APRIL 4 - 10, 2011
Leimkuehler Inc. Cleveland ◆ third generation By TIMOTHY MAGAW firstname.lastname@example.org
ust like most teenagers, Greg Leimkuehler wasn’t sure what he wanted to do for a living. He’d worked in construction for a period and learned pretty quickly that he was good with his hands. But it wasn’t until he started helping out in 2000 at Leimkuehler Inc. — a prosthetics and orthotics company in Cleveland owned by his family — that he realized his true calling. Greg, who was 17 at the time, took a patient home one day, and at that moment he realized the company that was founded by his grandfather, Paul, and now run by his father, Bob, was something on which he could build a career. Greg, now 28 and a certified orthotist, is finishing his residency work to become a certified prosthetist, and he hopes one day to follow in his father’s footsteps and take over the company. “It takes time and work, but we really do everything to get our patients back to what they used to do and what they would like to do,” Greg said. Paul Leimkuehler, a World War II veteran who lost a portion of his leg during the Battle of the Bulge, founded the company in 1948. At the time, there were only about three or four employees, but since then, the size of the company has grown to about 25 employees. It has locations in Cleveland, Lyndhurst, North Royalton and Akron, as well as a mobile unit that goes to patients at their homes, hospitals or nursing homes. The industry’s technology dramatically has changed since the company was founded. Many of the prostheses were outfitted with wood and rawhide, a process that Bob Leimkuehler, 59, characterized as “very labor intensive.” Some of the old instruments still sit in a conference room at the company’s headquarters on Detroit Avenue on Cleveland’s West Side. Bob took over as the company’s president in 1983 — the same year Greg was born. At Leimkuehler Inc., it’s truly a family affair. Bob met his wife, Rosie, at the company in the early 1970s, and each of the couple’s four children worked stints at the company. As the company has evolved, so has the health care industry. For one, regulations dictating reimbursements from Medicare, Medicaid and other insurers increasingly are becoming complex. Also, many insurers are scaling back reimbursement rates for many of the services Leimkuehler Inc. provides, which Rosie said forces the company to “work faster and more efficiently.” Rosie, 55, now the company’s vice president, left the company in 1970s and pursued other opportunities, but she returned in 2005 after beating cancer. She had been pursuing a nursing certificate at Case Western Reserve University but decided it made more sense to go back to work with her husband. She’s now a certified orthotic and mastectomy fitter. As for Greg, working under his parents’ noses isn’t necessarily a bad thing. Occasionally, they’ll even bring him some leftover food — something any 20-something might appreciate. Many of Leim-
kuehler Inc.’s other employees have been around for decades, and those relationships mean a lot to him. “They’re kind of like my family, too, because I’ve known them my whole life,” Greg said. Working with amputees is no easy task, the Leimkuehlers said. It’s not as simple as fixing a broken leg, as it takes a fair amount of tact and sensitivity to treat patients who have lost something as vital as a limb. Still, the difficult job didn’t deter Bob from following his father’s lead or Greg from doing the same. It was just a natural way to extend the family’s legacy. “It all seemed to be the right thing to do,” Bob said. ◆
Greg, Rosie and Bob Leimkuehler at the company’s West Side headquarters JESSE KRAMER
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Life and Disability products underwritten by Anthem Life Insurance Company. Anthem Blue Cross and Blue Shield is the trade name of: In Colorado and Nevada: Rocky Mountain Hospital and Medical Service, Inc. In Connecticut: Anthem Health Plans, Inc. In Indiana: Anthem Insurance Companies, Inc. In Kentucky: Anthem Health Plans of Kentucky, Inc. In Maine: Anthem Health Plans of Maine, Inc. In Missouri (excluding 30 counties in the Kansas City area): RightCHOICE® Managed Care, Inc. (RIT), Healthy Alliance® Life Insurance Company (HALIC), and HMO Missouri, Inc. RIT and certain afﬁliates administer non-HMO beneﬁts underwritten by HALIC and HMO beneﬁts underwritten by HMO Missouri, Inc. RIT and certain afﬁliates only provide administrative services for self-funded plans and do not underwrite beneﬁts. In New Hampshire: Anthem Health Plans of New Hampshire, Inc. In Ohio: Community Insurance Company. In Virginia: Anthem Health Plans of Virginia, Inc. trades as Anthem Blue Cross and Blue Shield in Virginia, and its service area is all of Virginia except for the City of Fairfax, the Town of Vienna, and the area east of State Route 123. In Wisconsin: Blue Cross Blue Shield of Wisconsin (“BCBSWi”), which underwrites or administers the PPO and indemnity policies; Compcare Health Services Insurance Corporation (“Compcare”), which underwrites or administers the HMO policies; and Compcare and BCBSWi collectively, which underwrite or administer the POS policies. Independent licensees of the Blue Cross and Blue Shield Association. ® ANTHEM is a registered trademark of Anthem Insurance Companies, Inc. The Blue Cross and Blue Shield names and symbols are registered marks of the Blue Cross and Blue Shield Association. OH_CrainsCleveBiz_040411
CRAIN’S CLEVELAND BUSINESS
APRIL 4 - 10, 2011
PFI Displays Rittman ◆ third generation By KATHY AMES CARR email@example.com
FI Displays’ first address was a barn in Medina. Founder Vincent J. Tricomi figured after 25 years of working with a display manufacturer, he was ready to launch his own family business. Unlike some entrepreneurs who start a business for the purpose of selling it, Mr. Tricomi’s goal was to establish a sustainable and successful company for multiple generations, according to his grandson, Vincent Tricomi. It seems the family is carrying out those goals. More than 40 years after its founding, the thirdgeneration family operation has grown from its 10,000-square-foot rural incubator to consuming a total of 176,000 square feet in real estate between its headquarters and manufacturing plant in Rittman and its assembly, fulfillment and warehouse facility in Orrville. “We’ve been expanding as we grow by making careful investments,” said the junior Mr. Tricomi,
who is vice president of development at the designer and manufacturer of retail displays and trade show exhibits. Mr. Tricomi said the company remains financially strong and continues to grow organically, though it went through a shaky period for a couple years because of the recession. Now, PFI Displays is planning to bolster its 30-employee roster with additional sales, project management and factory staff. “We started pulling out of the slow business cycle last summer,” Mr. Tricomi said. The company has between 50 and 60 local, national and international clients, but it is working to increase and diversify its customer base. “We’re targeting industries that are doing well, such as housewares, sporting goods and medical,” Mr. Tricomi said. PFI Displays also is reaching out to new and prospective clients through Facebook, Twitter, blogs and new e-mail products as a part of a social media campaign that launched in January.
The Tricomis — from left, Vince, vice president of development; Tony, CEO; and Jim, senior vice president of sales — at PFI Displays’ showroom in Rittman JASON MILLER
“We are an owner-active firm, meaning we always make sure we are interacting with our clients,” Mr. Tricomi said. The outreach extends beyond clients. PFI Displays’ family members are involved with a variety of organizations such as the American Marketing Association and St. Vincent-St. Mary High School in
Akron, where the Tricomi family established the Raymond V. Tricomi scholarship, in honor of a cousin. More than 20 students have benefited from the family memorial scholarship, which assists students who might not otherwise be able to attend the school. The company’s culture is the reason Wright Tool in Barberton has been a client for nearly as long
Federal Metal Co.
Oakwood Village ◆ fourth generation
Fairlawn ◆ fourth generation
By MICHELLE PARK firstname.lastname@example.org
By DAN SHINGLER email@example.com
hey liken the work they do to baking a bunch of cakes every day — only these “cakes” are forged of metal and weigh 20 pounds each. Scrap metal comes to The Federal Metal Co., a fourth-generation family business in Oakwood Village, in all shapes and sizes — radiators, punch-outs, strands that look like hair. The company melts and forms the scrap into brass and bronze ingots, which look like metal bricks, and sells the ingots to foundries that re-melt them to make castings for uses such as plumbing. Today, in the company’s 98th year, David Nagusky, 71, is chairman and CEO; his son, Peter, 40, is president; and David’s daughter and Peter’s sister, Karen Calo, 44, is purchasing associate. David’s father, Mark, worked 62 years for the company, which began one generation before Mark when his father, Joseph, opened the business in 1913. When David joined the company in the early 1970s, sales totaled maybe $15 million, he said. There was enough business in the United States that Federal Metal dealt only within 200 miles of Cleveland, David said. Today, Federal Metal still conducts most of its business in the Midwest, but it also exports to Canada, Mexico, Europe and Asia. Sales are pushing $150 million a year, bolstered by volume that has tripled and copper prices that are nearly five times what they were in the 1970s, David said. The basic equipment and processes haven’t changed, though they’ve been refined. Inside Federal Metal’s main building are large furnaces that churn out white smoke as they pump out ingots. The year 2009 was “very rough,” but the company has been rebounding, Peter and David said. In early 2009, Federal Metal laid off
Peter Nagusky, holding a copper ingot, David Nagusky and Karen Calo, the braintrust of Federal Metal Co. several employees, but has been able to hire back to its previous staffing level. Over the past year, the number of employees has grown to 90 from about 75. A banner hung high in the main building reminds employees their company is one of nine remaining brass and bronze ingot producers in North America. David said there were probably 60 in 1960. He cited customer focus as one reason for Federal Metal’s perseverance. Then Ms. Calo chimed in. “Good management, of course,” she said, glancing at her father. “If you’re not going to admit it, I will.” David leaves it at that. Federal Metal also employs degreed metallurgists, he adds, which means its product comes complete with in-house professional advice. Both David and his father, Mark, had opportunities to sell the business. David stayed the course, in large part because of his children, he said. Now, his children hope their
children will consider Federal Metal a career, too, when they’re older. Bill Grodin, president of River Recycling Industries Inc. in Cleveland, said he has known Federal Metal “forever.” His firm first competed with Federal Metal as an ingot manufacturer, but in 2001 it suffered a serious explosion and subsequently became a client, contracting with Federal Metal for ingot manufacturing. Today, River Recycling is a scrap metal vendor to Federal Metal. “They tell me they’ll do something, they do it,” Mr. Grodin said. Mr. Grodin also noted his respect for the way Peter, who joined his family business in 1997, transitioned into leadership. “He didn’t immediately go to the executive suite,” he said. “He learned the business from the bottom up, and I respected that a lot. I’m thinking when the fourth generation comes into our business, I’d like to do the same thing.” ◆
or generations of Akron rubber workers and their children, getting shoes meant a trip to Lucky’s. The company for 62 years operated a single Lucky Shoes store in the city’s Firestone Park neighborhood. The store was built by family patriarch Joe Luck, who had come to sell dry goods in what he deemed to be the fastest-growing city in America. “We didn’t have our first employee until 1946,” said John Luck, 43, the founder’s great-grandson and current company president. “Up until then, it was all family.” But if those first 30 or so years in business seemed as unchanging as a Norman Rockwell canvas, the last 30 have been more like paint in a blender. The original store is gone, along with countless other small city retailers that were left behind by changing shopping habits. But unlike most of those others, Lucky Shoes found a way to stay on top of the churning foam. Joe Luck’s progeny went to where the customers were, just like he did. When city shoppers headed out to the malls, Lucky went with them. When buyers began favoring newer retail outlets in upscale suburbs,
as PFI Displays has been in business. “They have a slogan: ‘Radical attention to detail is part of our culture,’” said Debbie Looper, Wright Tool purchasing manager. “It is so very true. They ensure their clients’ peace of mind because they are so detailed on every aspect of what they’re doing. “We plan to continue a long-term relationship with them,” she said. ◆
Lucky Shoes did the same. It also found a way to make its old-fashioned Nordstrom-like fitting and advisory services work with a modern partner, by pairing up with fit-conscious New Balance athletic shoes. Today, the company has three Lucky Shoes stores, nine New Balance stores and two Stride Rite stores across Northeast Ohio. Its store in Beachwood, which it opened five years ago, has been a success, John Luck said, and it plans to open a similar store in Westlake this fall. The company has focused on service to differentiate itself, he said. Not only does it have the old-style shoe-fitting devices that slide and collapse to measure each foot — it’s called a Brannock Device, by the way — Lucky Shoes boasts computers to measure a foot, special pads that capture a foot impression in stride and other ways to measure a customer’s foot and determine his or her needs. Pronators, supinators, high arches and flat feet all are addressed with either the footwear, a full line of orthotic and sports inserts or both, Mr. Luck said. Shoppers won’t find cheap shoes at Lucky’s. It carries “comfort” brands such as Clark’s and Ecco and performance shoes such as New Balance — and some customers do balk at spending $100 or more for a pair. But if Mr. Luck can sell them that first pair, he said, they usually come back. It’s tough to doubt him. They’ve been coming back for more than 90 years. ◆
John Luck, the greatgrandson of Lucky Shoes founder Joe Luck, and current company president JANET CENTURY
CRAINâ€™S CLEVELAND BUSINESS
APRIL 4 - 10, 2011
Transport continued from PAGE 13
when I started out that it was going to be a family business. And up until three years ago it was, â€˜OK, someone, come and buy me,â€™ and that would be it.â€? Bill, 27, got the farthest away, attending Spring Hill College in Mobile, Ala. After college, he looked at jobs in insurance and finance. â€œI graduated in May (2006),â€? he recalled. â€œThe second week in June I went to Hong Kong, I joined Larry on a business trip. I met a lot of customers and business partners. I hit the ground running.â€? He left International Transport after two years, to go back to Alabama to try the bar business with some friends. Larry thought Bill might be gone, but not Bill. â€œHe makes a bigger deal of it than I do,â€? Bill said. â€œI still had access to (the companyâ€™s) e-mail. Itâ€™s one of those things, when itâ€™s a family business, youâ€™re never really out it.â€? Matt, 26, decided he was going to work at International Transport in the middle of his freshman year at
Logan continued from PAGE 13
years,â€? Andrew said. Logan Clutch understands its niche, he said, which is to serve customers that make small numbers of specialized machines that have special performance needs when it comes to clutches. By focusing on
Bowling Green State University. He transferred to Cleveland State University and worked nights at International Transport as a second-shift warehouseman. â€œI like working with my family,â€? he said, though he concedes, â€œIt has its ups and downs and moments.â€? Larry expects to work perhaps five more years before turning over the reins to his sons. Bill will be president, and Matt will be second in command. Matt said he and Bill have the businessâ€™ future figured out. Heâ€™s the inside guy, while his brother will be the face of the company to customers. â€œIâ€™ve always been more the operations person; they donâ€™t take me out on many sales calls,â€? Matt said. â€œThatâ€™s not the skill I have. Iâ€™m good at knowing rules and regulations, everything that deals with operations.â€? Bill, too, said heâ€™s ready for the future. â€œOn a daily basis Matt and I talk it over, where we see it going,â€? Bill said. â€œWeâ€™ve looked at different areas for expansion and growth. Weâ€™re on the same page.â€? â—†
the right potential customers, Logan Clutch has been able to rack up new sales, Andrew said. But some things donâ€™t change. Not only does the company still use some of Bill Loganâ€™s design concepts and his philosophy of adjusting a design to suit a customerâ€™s needs, but Madelon Logan still staffs the companyâ€™s phones and reception area. â—†
UPCOMING EVENTS Crainâ€™s 2011 Ideas at Dawn business breakfast series is in full swing, and two installments are on tap for this month. The first, set for this Wednesday morning and sponsored by Kent State University, will address Health Care Informatics, best practices for information management for today's medical community. Breakfast and networking starts at 7:30 a.m. at the Ritz-Carlton Cleveland, with a panel discussion slated for 8 a.m. On April 12, a similar panel discussion â€” sponsored by Benesch and
KPMG â€” will tackle the trends and strategies for merger-and-acquisition activity in 2011. Again, the breakfast and networking begins at 7:30 a.m., with the discussion to follow. Visit www.CrainsCleveland .com/breakfast for more information and to register for these events, or for details on the rest of this yearâ€™s breakfast topics. Additionally, visit www.crains cleveland.com/marketing/event promo.html for details on the rest of our 2011 events, including Women of Note and Health Care Heroes.
Speed Exterminating Co. Cleveland â—† fourth generation By STAN BULLARD firstname.lastname@example.org
peed Exterminating did not get its name from a rush of marketing fancy, as in getting right on your bug problems. Rather, John W. Speed put his name on his exterminating company startup in 1907. Today, John Young is the fourth generation to carry on the family business. The business started simply. Mr. Youngâ€™s great-grandfather came from Cincinnati to start a Cleveland branch of a neighborâ€™s exterminating business, but decided to set out on his own. Speed Exterminating was a homebased business on Valley Road for most of its history until 1963. That was when Mr. Youngâ€™s father convinced his grandfather they could grow the business by finding a new home. They set up shop at 4141 Pearl Road in Clevelandâ€™s Old Brooklyn neighborhood, where it remains close to its first home today. Mr. Young, 44, joyfully recalls much of that history. He recently pulled out an old letter in his office that his great-grandfather used to direct his family to their new home here and read it aloud: â€œItâ€™s a beautiful city. The streets are wide and the parks are green,â€? Mr. Speed wrote of the semi-rural Brooklyn area near Cleveland. Each generation grew the business in some way. John Youngâ€™s father, John Warren Young, became a community and business leader; he helped found the Old Brooklyn Development Corp. neighborhood group and
John Young, the great-grandson of the founder of Speed Exterminating Co., said he knew heâ€™d eventually enter the family extermination business. served as a board member and president of the Council of Smaller Enterprises, the small business advocacy group in Cleveland. Today, the younger Mr. Young volunteers with both groups, and is particularly active in COSEâ€™s workersâ€™ compensation program. He attributes his COSE role to crucial advice it gave him in dealing with a business-threatening insurance premium run-up. Speed Exterminating employs 17, and it remains a family business. Mr. Youngâ€™s wife, Jackie, does the books from home, and his stepdaughter, Madaline, works in the office during free time from college. Employees also stay with the company for years â€” in two cases, more than 40 years. Mr. Young said he did not plan to enter the family business when he graduated from BaldwinWallace College; he knew he would. Like his father, the only time he ever worked for someone else was as a part-timer in college.
â€œI like people, and I like insects,â€? Mr. Young said. Speed Exterminatingâ€™s storefront, where it also sells exterminating supplies to do-it-yourselfers, doubles as a museum of the company and neighborhood, decorated with pictures of Mr. Youngâ€™s forebearers. The shop also showcases collections of bugs and stuffed varmints. Among the items it sells are screens it makes itself to top chimneys because Mr. Youngâ€™s father disliked the ones commercially available. The business is half residential and half commercial. Mr. Youngâ€™s great-grandfather and other family members did not restrict their business ventures to the exterminating business. On the side, they sold eggs and produce from the seven acres on Valley Road they still own. Mr. Young continues that family tradition, selling eggs in the store when he has them, only from his own home in Richfield. â—†
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CRAIN’S CLEVELAND BUSINESS
APRIL 4 - 10, 2011
County: Properties present redevelopment possibilities continued from PAGE 1
Price, CEO of the K&D Group, says he’d like another shot at redeveloping the former Ameritrust headquarters. “Doug Price had an amazing plan for the Ameritrust site,” said David Browning, managing director of the Cleveland office of the CB Richard Ellis commercial real estate brokerage. “Unfortunately, the timing was awful as the financial markets collapsed.” The county put the complex up for sale in 2008 and K&D Group was the only bidder. Mr. Price envisioned a $200 million mixed-use project that would have included a new, 13-story office building south of the existing Marcel Breuerdesigned office tower. He then would have converted the Ameritrust tower into a hotel and apartments.
Ameritrust property could spur a revitalization of nearby properties along Euclid Avenue that have fallen into decline. As for the 50-year-old county administration building, it has been considered a prime site for a hotel ever since the county selected the nearby Mall site for the new convention center and medical mart. Last week, Mr. FitzGerald told members of the county economic development commission that he has been fielding inquiries about the two properties since he took office in January. In a later telephone interview with Crain’s, he declined to identify with whom he has had conversations, citing a need to keep discussions of potential real estate deals confidential. However, one developer, Doug
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by the Ohio Revised Code, under which the county is governed. Mr. FitzGerald has called on a group of loaned executives to help his administration overcome that hurdle. At the center of Mr. FitzGerald’s push for a real estate plan is the need to consolidate a county work force that is in space scattered across dozens of buildings, some owned by the county, some leased from private property owners. The county employs less than 8,000 people now, though plans for centralized county offices never considered more than 2,000 under one roof. The former Cuyahoga County commissioners thought they had a solution in 2005, when they bought the Ameritrust complex, but that decision proved to be a $40 million mistake. The building, with its small
But K&D’s $35 million bid called for the county to extend the developer a $15-million loan that, in the private sector, would be considered seller financing. K&D also offered a lower deposit than called for in the county’s request for proposals and included other changes in bid terms to create a package that Mr. Price believed would have netted him private financing. The K&D offer, the county’s lawyer determined, had to be refused for not meeting the terms of the bid.
Learning from mistakes With credit markets still tight, a big obstacle Mr. FitzGerald must overcome is that real estate deals require layers of financing and a level of creativity not contemplated
Genny Donley (216) 771-5172 (216) 694-4264 email@example.com
floor plates, turned out to be ill-suited for the larger offices county departments needed and rehabilitation cost estimates soared. Then the deal with K&D Group couldn’t be completed because of the legal limitations. Mr. FitzGerald has said he doesn’t see the county as a property owner and manager, though he doesn’t view the sale of properties as a way to solve the county’s short-term financial needs. However, he could see putting sale proceeds into programs that spur economic development. “Generally we don’t want to be holding property,” Mr. FitzGerald told members of the county economic development commission last week. “We want others to join (with us), though the county will be the ultimate beneficiary through higher property taxes” from the return of countyowned properties to the tax rolls and the general rise in property values smart redevelopment brings. ■
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APRIL 4 - 10, 2011
CRAIN’S CLEVELAND BUSINESS
REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
MARCH 28 - APRIL 3
Bubba Baker (and others) are all ears for Malley’s
The big story:
■ Hugh Hefner has nothing on these bunnies. So says Dan Malley, who since 2008 has been hand-picking wellknown locals to be photographed wearing bunny ears for the Malley’s Chocolates Easter catalog. Al “Bubba” Baker “I’ve got real Easter bunnies in my catalog, and they’re all great people,” said Mr. Malley, president and CEO. Among those included in this year’s catalog are Matt Fish, chef and owner of Melt Bar & Grilled; Dick Feagler, television host and retired Plain Dealer columnist; and Rocco Scotti, who sang the national anthem at nearly every Indians game at old Cleveland Municipal Stadium for 20 years. Oh, and Dan had his father and Malley’s chairman, Bill Malley, dress for the cover shoot in a full bunny suit. This year’s catalog should arrive to more than 200,000 recipients this week, Dan Malley said. Over the last four years, more than 40 people have participated in the bunny shoots, including Mal Mixon, chairman of wheelchair maker Invacare Corp., and television icons Big Chuck and Lil’ John. “I was flattered,” said Al “Bubba” Baker, a former Cleveland Browns defensive lineman who during his bunny shoot this year
Berkshire Hathaway Inc. executive David Sokol apparently profited handsomely by buying a sizable stake in Lubrizol Corp. just before suggesting that his boss, CEO Warren Buffett, take over the company — but that’s not the reason he suddenly resigned, according to Mr. Buffett. In early January, Mr. Sokol bought 96,060 shares of Lubrizol for as much as $104 a share, Mr. Buffett said in a March 30 news release. Berkshire Hathaway subsequently agreed on March 13 to acquire Lubrizol for $135 a share, providing Mr. Sokol with a profit of at least $2.98 million, based on Mr. Buffett’s numbers. But Mr. Buffett insisted, as has Mr. Sokol, that no wrongdoing occurred, even though it was Mr. Sokol who recommended in mid-January that Berkshire Hathaway acquire Lubrizol. Mr. Buffett maintained that Mr. Sokol’s March 30 resignation was a surprise, even though Mr. Sokol twice before had said he wanted to resign, only to be talked into staying by Mr. Buffett.
DDR in deal mode: Developers Diversified Realty Corp. acquired a partner’s half-interest in two shopping centers in the Cleveland and Minneapolis areas for a total of $40 million and disposed of $43 million of assets it feels no longer fit its portfolio. The Beachwoodbased real estate investment trust did not identify the partner whose interests it acquired nor the shopping centers involved due to a confidentiality agreement. However, its description of the two properties indicates one of them is Macedonia Commons in suburban Macedonia. Paid in full: As expected, KeyCorp completed the repurchase of $2.5 billion of preferred stock it issued to the U.S. Treasury in exchange for the $2.5 billion Key received from the government in 2008 under the Capital Purchase Program of the federal Troubled Asset Relief Program. The transaction follows Key’s successful completion of a $625 million common equity offering and a $1 billion debt offering.
Job well done:
Baldwin-Wallace College president Richard Durst announced that he will retire at the end of the 2011-12 academic year. Mr. Durst, 65, joined Baldwin-Wallace in 2006 after serving as a dean at Pennsylvania State University. Under his watch, the college conducted its most successful fundraising campaign to date. Baldwin-Wallace raised more than $97 million — $15 million above its goal. The school’s board of trustees will conduct a national search for a successor.
Tasteful growth: Matt Fish, chef and owner of Melt Bar & Grilled, isn’t one to spend his time loafing. By mid-September, he plans to open another Melt in Independence. The gourmet grilled cheese restaurant already has locations in Lakewood, where it opened in 2006, and Cleveland Heights, where it opened last year. The new, 4,500-square-foot eatery will be in the $4 million Liberty Commons, a strip shopping center at 6700 Rockside Road.
latest green efforts, including organic composting and a solar array installed in 2007. The Indians long have practiced sustainable techniques and were recognized by Crain’s as part of the newspaper’s 2010 Emerald Awards. The Indians in 2009 increased their recyclables collected by 10%, though last season’s total declined along with baseball’s lowest overall attendance. The team in 2010 continued its reduction in trash collected — 613 tons, down 15.1% from 723 in 2009 — and trash hauls — 92 tons, down 5.2% from 97 tons in 2009 and nearly 64% from 254 tons in 2007. — Joel Hammond
Indians are a hit with Ukrainian delegation
■ You could call it an ambulatory care application. An Akron company that developed a software system designed to help doctors and medical researchers keep tabs on their patients last month won TiEQuest Ohio 2011. The company, iRxReminder, won a $25,000 prize package that includes $5,000 cash, incubator space and advisory services. The software is designed to help doctors make sure their patients take their medications, and it allows researchers to gather and manage information from clinical trial participants who have left the hospital. Thirty-five companies participated in the competition, which was organized by TiE Ohio. Now iRxReminder moves on to compete for $150,000 in prizes at the TiEQuest Global competition, which will be held April 6 in Toronto. — Chuck Soder
■ The Cleveland Indians have imported talent from all over the world: Shin-Soo Choo (Korea), Asdrubal Cabrera (Venezuela) and Fausto Carmona (Dominican Republic) dot the starting lineup. Now the Indians are in the exporting business, too. Ten business leaders and political figures from the Ternopilska region of Ukraine toured various Cleveland hotspots last month to learn about the city’s sustainability efforts, and members of the group visited Progressive Field as the Indians played host to their “What’s New” event, showcasing new ticket policies, stadium changes and culinary additions. Brad Mohr, the team’s assistant director of ballpark operations, showed off the Indians’
Cleveland falls short in Forbes minority report
THE COMPANY: Union Process Inc., Akron THE PRODUCT: S-200 Attritor Union Process, a manufacturer of sizereduction and dispersing equipment, said it has built an S-200 production Attritor for conductive ink manufacturing. The S-200 Attritor features a stainless steel grinding tank with an ASME (American Society of Mechanical Engineers) pressurerated stainless steel cooling jacket, which allows for precise product temperature control, the company says. Tungsten carbidesleeved agitator arms provide high-level wear resistance. To meet customer requirements for low noise, the company added an acoustic insulation jacket to the tank. The S-200 also has a sealed cover and a pneumatically operated product discharge valve, Union Process says. The control station features timer operation, high product temperature safety shutoff and low-flow/no-flow cooling water safety shutoff. Attritor is a registered trademark of Union Process. The company is the original developer of Attritor technology and manufactures wet and dry grinding mills as well as small media mills. Send information about new products to managing editor Scott Suttell at email@example.com.
First it takes on Ohio, then the world
BEST OF THE BLOGS Excerpts from recent blog entries on CrainsCleveland.com.
Pressure rises: Roughly one in three small and midsize business owners in Ohio expect to increase their selling prices in the next six months to preserve profit margins against higher non-labor costs such as gasoline prices, according to the spring 2011 PNC Economic Outlook Survey. That’s more pricing pressure than the survey revealed last fall. Meanwhile, 40% of business leaders expect sales to increase, which is about the same percentage that expected higher sales in the fall, and a growing number expect to hire full-time employees — 15% now compared to 6% in the fall.
wore a shirt advertising Bubba’s Q BBQ, the Avon restaurant of which he’s executive chef and co-owner. “Malley’s is helping us brand our name. It’s an honor to be part of a tradition.” Want to join next year’s bunny class? Keep quiet like a rabbit: Dan Malley has a firm rule that those who ask to wear the bunny ears may not. “This way, it’s much more of an honor,” he said. “These people are also Malley’s customers. It works out perfect. It’s a sincere endorsement they’re giving our company.” — Michelle Park
■ Forbes.com and economist-demographer Joel Kotkin looked at data from 52 U.S. metropolitan areas and put Cleveland near the bottom of their list of the best cities for minority entrepreneurs. For each ethnicity (African Americans, Asians and Hispanics), Forbes.com measured housing affordability (median value divided by household income), population growth (2000 to 2009), income growth (1999 to 2009) and entrepreneurship (per capita self-employment). The web site said each ethnicity received a rank, with entrepreneurship weighted onehalf and the other half split evenly among the other variables. Those scores then were averaged to calculate overall city rankings. Cleveland, sad to say, ranked 51st out of 52; only Milwaukee was worse. The top city was Atlanta. If Cleveland is going to grow again, it has to do better in this area.
Squire Sanders deal sets the pace in a global economy ■ The trans-Atlantic law firm merger of Cleveland’s Squire Sanders & Dempsey and Hammonds, in the United Kingdom, is “unlikely to be the last of its type,” according to an analysis in The Financial Times. “As mid-tier UK law firms handle a sharply reduced pool of commercial work following the financial crisis, many are looking at mergers with US firms to help them expand outside their UK bases to cater for the increasingly international nature of their clients,” the newspaper reported.
The Squire/Hammonds combination, completed in January, created a firm that The Financial Times said is ranked among the top 25 worldwide legal practices, with 37 offices in 17 countries. Tony Williams, principal of Jomati Consultants and a former managing partner of U.K. law firm Clifford Chance, told the newspaper, “Part of the reason why many U.S. law firms are expanding is because traditionally they have had a strong domestic market but many of their clients now see greater opportunities outside the U.S. Doing a merger with a UK-based firm can help them achieve a greater scale and geographic coverage quickly and relatively cheaply.
In tough times, he wants to make every penny count ■ If you see Paul Behe around town, thank him on behalf of all taxpayers. Mr. Behe, a paralegal specialist for the Department of Homeland Security in Cleveland, was among the government workers whose money-saving ideas from the SAVE award program (Securing Americans’ Value and Efficiency) is being incorporated into President Barack Obama’s proposed budget for fiscal 2012. About 20 ideas from the program are being used, and the Office of Management and Budget expects them to save $867.5 million through 2015. Mr. Behe suggested advertising property seized by Customs and Border Protection online instead of in newspapers. The OMB pegs the government savings through 2015 at $5 million. “After having processed the advertising for the Cleveland Port Office, I thought there had to be a more efficient way to comply with the statutes,” which require print advertising, Mr. Behe told The Washington Post.