Crain's Cleveland Business

VOL. 39, NO. 15

APRIL 9 - 15, 2018

Source Lunch

Akron Impact Group has built solid rep for work with Ohio schools. Page 20

CLEVELAND BUSINESS

John Sankovic, chief technologist, NASA Glenn Page 23

The List Largest family-owned businesses Page 18

FIRSTENERGY SOLUTIONS

Chapter 11 could be long, complicated court fight

By DAN SHINGLER dshingler@crain.com @DanShingler

FirstEnergy Solutions Corp.’s $2.8 billion bankruptcy case has the makings of a long and drawn-out fight that ultimately could affect thou-

sands of jobs in the region and maybe even the electric rates of industrial customers, observers say.

But, in the near term at least, the Akron parent company FirstEnergy Corp. says there are no planned cuts in employment, nor in service to customers or support of area nonprofits and other organizations.

What has struck some observers is that FirstEnergy Solutions did not come to the proceedings with much in the way of agreements it had already reached with its creditors. The trend in bankruptcies today is to come to the court with what’s known as a “prepackaged” case, in which the parties involved have largely agreed

on how to split up assets, settle debts and reorganize any ongoing operations. Not having a good head start on such negotiations likely means contentious issues will be fought out in court, in a case that’s already particularly complex, some observers say.

“With other cases, we’ve seen pre-

packaged or prearranged plans on the first day. People have walked in with some prenegotiated terms and things happened pretty quick. … That is not what’s going to happen in this case,” said Jack Tracy, head of legal analysis for Debtwire, which provides financial analysis to creditors.

SEE FIRSTENERGY, PAGE 21

GOVERNMENT

NAVIGATING THE SUCCESS OF DOWNTOWN DEVELOPMENT Drivers squeeze past construction barricades for the Lumen, Playhouse Square’s 34-story apartment high-rise on Euclid Avenue. (David Kordalski)

As area continues to grow, parking and traffic issues have become more difficult to navigate

By JAY MILLER jmiller@crain.com @millerjh

Downtown Cleveland is growing.

More people are moving in every month, and more workers are coming in from the suburbs every day. And with a hand-

ful of construction projects in progress, there are even more of both on the way.

There also are more restaurants popping up that offer valet parking and food trucks camping out at lunch time.

All that means there are more cars on crowded or narrowed streets trying to find fewer and fewer free parking spaces. And there are delivery trucks

Entire contents © 2018 by Crain Communications Inc.

parking in center left-turn lanes.

Those are all good things, downtown observers seem to agree, even with the traffic congestion they bring.

“What we’re seeing is an increase in residents and jobs, and our amenities are performing well,” said Joe Marinucci, president and CEO of the Downtown Cleveland Alliance, a nonprofit

that works to improve downtown, including balancing the interests of businesses, residents and drivers. “There’s always going to be that tension.”

Still, they are problems that residents and others are trying to overcome every day.

“We definitely notice the issues with traffic lately,” said Jonathan

Whigham, president of the Downtown Cleveland Residents Association (DCRA). “There are so many construction projects happening all at once. As a resident who uses the (downtown) trolley, there are definitely traffic delays because they can’t get around like they need to.”

SEE TRAFFIC, PAGE 19

Focus: Middle Market << There are good reasons why veteran

unemployment is at a historic low. Page 11 Adviser: Page 12; Tax Tips: Page 13 Mall operators use pop-ups to liven up the retail experience. Page 14

PA G E 2

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CRAIN’S CLEVELAND BUSINESS

Group finds sweet spot on Richmond Road

By STAN BULLARD sbullard@crain.com @CrainRltywriter

A recent sale of a largely empty multitenant commercial building in Bedford Heights looks like a minor league trade amidst an industrial market awash in big-league deals to construct massive warehouse projects.

But to Marty Divito, the suburb’s economic/community development director, the sale of the almost 40,000-square-foot building at 5020 Richmond Road is golden.

The $1 million cash purchase of the structure by a joint venture formed by real estate developer and hair salon chain owner Dino Palmieri and architect-realty investor Joel Scheer is the latest of six deals setting the stage for fresh investment in the town’s well-established industrial area.

“We say we’d like to give them the key to the city,” Divito said in a phone interview.

In the same vein, Rico Pietro, a principal of the Cushman Wakefield Cresco realty brokerage, calls the deal part of a “seismic shift” from the 1990s-era focus on the Chagrin Boulevard corridor to areas along Richmond Road south of the Chagrin Highlands Corporate Center project with its plethora of corporate headquarters, hotels and University Hospitals Ahuja Medical Center.

“It’s not a one-trick pony area where it’s all office buildings,” said Pietro, who will head leasing efforts for the newly purchased property. “It office, showroom, retail and industri-

A rendering of part of the Richmond Road complex that is being revamped by Dino Palmieri and Joel Scheer. Wood finishes and an elevated entrance will give the building a new look. (Contributed rendering)

Palmieri

Scheer

al. It’s a mixed-use area that reflects the way business, and its real estate, is changing today.”

For his part, Palmieri said simply, “We do small projects. Because I am a builder and live nearby, I go through this area all the time.”

He referred to the building products suppliers who still populate small buildings in the Richmond-Miles road area that sprang up in the 1960s to serve residential development in nearby eastern suburbs. The area has long been and remains a home to major manufacturers such as Sherwin-Williams Co.’s aero-

sol can plant and Wodin Inc.’s steel rod and bolt maker forging plant.

“This is a place where we make things,” Divito said of the commercial district where 4,000 people work daily in a town of 6,000 residents. Aging properties and business losses have had a toll, even though she estimates the industrial vacancy at 7%, in line with the region as a whole.

For Palmieri and Scheer, whose latest purchase was made in the name of PPJ 5020 Richmond LLC, it’s the latest of a half-dozen buys along Richmond Road south of Miles since 2013. All told, it’s about 250,000 square feet of properties and 3 acres of land that Cuyahoga County property records indicate totaled more than $3 million to buy, not counting the thousands of dollars they have put — and plan to put — in updating the vanilla brick, steel and concrete boxes.

For Scheer, who brainstorms ways to transform the buildings, it’s vision put into reality.

“We re-skin these buildings,”

Scheer said. “We punch out walls to provide windows. We make them places that work where people want to work.”

In one case, a sliver of the 5020 Richmond Road building is a line of six docks that no longer serves a purpose. Scheer looks forward to tearing them out to provide better parking and traffic movement between the new building and others the pair own next door.

Meantime, other ideas are germinating. A 3-acre site the pair bought in 2015 at 5141 Richmond Road was originally purchased to protect their ability to reposition and rejigger adjoining buildings. Now they are considering it as a site for a new project. Scheer is toying with the idea of putting up a 40,000-square-foot building — small by today’s standards — but with the newer, taller 32-foot ceilings tenants now prize for warehouse operations.

Sometimes the vision and the drive defies logic, with positive results.

A former fastener company building at 5185 Richmond Road was loaded with old equipment with floors covered with a sheen of oil when the duo bought it. Now it’s the new home of the Cleveland office and warehouse of Daltile, a tile floor provider that’s part of the Mohawk Industries floor covering business.

In another case, Pietro thought a former electrical supply warehouse and multitenant building at 5201 Richmond Road that a Palmieri affiliate bought last January for an undisclosed amount should be demolished. Instead, Palmieri is using part

TM

T EC H W E EK

of the building for a new headquarters for his companies under the Palmieri Enterprises name. The 12,000-square-foot suite is double the size of Palmieri’s long-term office on Bainbridge Road in Solon.

Palmieri hopes to lease space in the building to a carpet company for the Richmond Road side of the structure to add to other home-products suppliers nearby. He plans to incorporate a rooftop patio in the building with a pergola inspired by one he recently saw in Italy.

Others see the efforts by Palmieri and Scheer as a natural play.

Joseph Martanovic, a senior vice president in Hanna Commercial’s industrial unit, said Bedford Heights always has been a good, safe industrial address, and the pair are capitalizing on the value in the location and in the 50-year-old buildings.

Terry Coyne, vice chairman at Newmark Knight Frank’s Cleveland office, also fits the plays in a broader framework. He points to new car dealerships for CarMax and Tim Lally Chevrolet that have gone in nearby on Miles in Warrensville Heights that capitalize on the visibility of I-271 and U.S. 422, better known as the Solon spur. He and others see more, large plays on the way.

For Palmieri, working with Scheer combines his own construction background and entrepreneurship with Scheer’s ability to add new looks and curb appeal to properties.

“He’s in my office three or four times a week,” Palmieri said. “It’s nice to have someone to share ideas with and also to spread the risk for them.”

PA G E 4

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CRAIN’S CLEVELAND BUSINESS

Apple Growth Partners takes a bite out of North Canton

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Following two in-market acquisitions and some increased market share in 2017, Apple Growth Partners is hungering for more.

Whetting that growing appetite this year, the Akron-based accounting firm will mark its fifth location in its Northeast Ohio footprint with a de novo office in North Canton opening in May. The location will be on Belpar Street near Belden Village.

The firm already has several clients in the region adjacent to its Akron home base. Apple Growth chairman Charles Mullen said that while the firm had been considering a physical presence there for some time, the decision to pull the trigger with a de novo office there primarily was motivated by staff, who were pushing for the new location.

“After five years of talking about it, I think the nudges from our current staff and Canton natives provoked us to say we’re doing this,” Mullen said.

“The staff wants it, so we listened.”

Beyond that, however, it’s a logical move for the CPA firm, which is further developing its presence along I-77 in a market it already knows well to capitalize on further opportunities there in what marks the firm’s 75th anniversary this year.

Mullen said the privately owned firm plans to market its work for manufacturing, construction and real estate in particular in the Stark County region.

Meanwhile, the Akron/Canton market for the accounting sector has, indeed, been reshaped some through a number of mergers and acquisitions that have brought some big, non-local firms to the market in recent years, including BDO and Sikich LLP, among others.

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midsize and local firms in the area, Mullen indicated those changes in the market create opportunities for firms of their ilk to draw new clients.

“That middle market, small to midsize business market we serve so

AGP expansion Apple Growth Partners has added a couple new locations, several staff and grown market share through a series of new offices and acquisitions in the past decade.

2008: Brott, Mardis & Co. of Akron is acquired. (The deal brought on current chairman Charles Mullen.)

2010: AGP combines staff in Westlake and Mayfield Village in a new Independence office.

2017: KPFF LLC of Beachwood is acquired in January.

2017: Schlabig & Associates of Kent is acquired in July.

2018: AGP announces a North Canton office that will open in May.

well, it’s not becoming more competitive,” Mullen said. “I think it is because a lot of competitors are going upstream for bigger clients.”

Apple Growth completed two acquisitions in 2017: KPFF LLC of Beachwood in the first quarter and Schlabig & Associates of Akron and Kent in the latter half of the year.

Those deals have helped Apple Growth grow to 105 employees and $17.5 million in annual revenue, Mullen said. That’s growth of more than 33% from the firm’s revenue of $13.1 million in 2016 that was reported to Crain’s last year.

The new office will open with six current staff initially, and there are concerted plans to grow that presence through the coming years.

“We would like to have that office staffed with 12 people within a threeyear period,” Mullen said. “We want to outgrow that office and hopefully be up to 20 people there after five years.”

By the end of 2018, Mullen is projecting the firm to have at least $18.5 million in revenue and 115 employees.

It’s yet another move in the firm’s “measured and conservative” growth plans, he added. Apple Growth is a couple years into a strategic plan for doubling the business by 2020, which means growing to about $20 million in revenues and 160 people.

As far as other M&A deals, Apple Growth is looking around the Northeast Ohio market, and there are some current targets in the pipeline, Mullen said.

All of those are in this market, as Mullen emphasized the firm has no plans to go outside Northeast Ohio in the foreseeable future. The strategy at Apple Growth is to focus squarely on its current footprint.

“We are still hungry to pair up with any local firm that does not want to sell out to an out-of-state firm, who wants to stay local but is struggling perhaps with their succession plan,” Mullen said. “We would love to talk to them.”

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“After five years of talking about it, I think the nudges from our current staff and Canton natives provoked us to say we’re doing this. The staff wants it, so we listened.”

TAMPA

sbullard@crain.com @CrainRltywriter

DDR Corp.’s plans to remake West Bay Plaza did not include Marc’s, so the locally based retail chain is lining up a new location a few blocks east of its current one on Detroit Road in Westlake.

Marc’s is the anchor for a retail development that Canton-based Deville Developments plans to install on the northwest corner of Detroit and Canterbury roads. The parcel currently is the site of Givens Roofing, 26324 Detroit, and an outdoor storage center housing everything from sailboats and RVs to old-school buses.

The 45,000-square-foot Marc’s store would go on the northern part of the site near Interstate 90. Two small retail buildings, each fewer than 4,000 square feet in size, would go in on the Detroit Road frontage.

That’s the word from Cleveland attorney Kenneth Fisher, who represented current property owner West Park Realty in securing a rezoning for the parcel. Deville is preparing site plans for the project to submit to the

city later this spring, Fisher said, with a goal of opening the new store by year-end.

Fisher said the plan was put in motion after DDR did not renew Marc’s lease at its current location and the retailer decided it wanted to remain in Westlake. DeVille has developed Marc’s stores in Avon and South Euclid, he said.

The $28 million renovation of West Bay will install a Fresh Thyme Farmers Market, along with other tenants, who will be in a new building rising where a Sears store stood until last year in a longtime former Kmart building. The section of the center housing Marc’s may be repurposed later.

Chicago-based Fresh Thyme is a natural grocer that opened its first Cleveland-area store in early 2017 in Mayfield Heights. It also has a North Canton site. A west suburban Cleveland store was a natural for Fresh Thyme to begin covering the market.

However, having both grocers in the same open-air center was openly considered a non-starter.

After Fresh Thyme surfaced with the West Bay revival plan in 2017, Westlake Mayor Dennis Clough and

others said the question locally was whether Marc’s would serve the suburb from stores in neighboring Avon and Rocky River or find a location for a new operation in the largely developed suburb.

“We’re glad they feel they have enough customers to want to reinvest in Westlake,” Clough said.

“They’ll wind up with a newer store.”

The Marc’s project will go in on a site that Westlake City Council on March 1 rezoned to general business from office. That vote, along with earlier Planning Commission action on the rezoning, was unanimous.

Although the rezoning opens the door to more retail in the suburb, Clough noted the site has been devoted to commercial use for decades.

He said the rezoning fits the city’s plans to keep commercial uses primarily on or near Detroit and Center Ridge roads.

Michelle Boczek, Westlake economic development manager, said the city felt the prospective Marc’s site was underutilized and installing general business zoning there matches nearby zoning plans.

Neither Marc’s nor DDR returned calls to comment.

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An activist investor in Wayne Savings Bancshares Inc. is again pushing to replace an incumbent board member at the Wooster-based holding company with someone eager to have the bank sold.

The Stilwell Group, a New York hedge fund and majority stockholder of Wayne Savings Community Bankâ&#x20AC;&#x2122;s parent company (owning 9.6% of it), said in 2017 after a narrowly lost proxy battle that it would be back with a fresh fight this year if the Wooster-based bank didnâ&#x20AC;&#x2122;t increase profitability or find a new owner.

Although the bank â&#x20AC;&#x201D; which has roughly $440 million in assets and 11 offices in and surrounding Wayne County â&#x20AC;&#x201D; seems to have improved, and its current leadership has made moves to achieve greater growth, Stilwell is making good on its word. It once again aims to replace an incumbent Wayne board member with one of its choosing at the bankâ&#x20AC;&#x2122;s annual meeting on April 20.

Stilwell is soliciting shareholders to elect its 31-year-old director of research, Corissa Briglia, in place of 71-year-old incumbent David Lehman for the purpose of helping push the bank toward a sale. Lehman is a Wayne board member for the past five years who also served as interim CEO in between former CEO Stewart Fitz Gibbon resigning from the bank in December 2016 and the hiring of James VanSickle II as the permanent president and CEO last August. â&#x20AC;&#x153;Thereâ&#x20AC;&#x2122;s a lot of interest in Wayne Savings from neighboring community banks, and itâ&#x20AC;&#x2122;s inexplicable that the board refuses to find out more,â&#x20AC;? said Stilwell spokeswoman Megan Parisi, referencing claims that the bank has failed to entertain discussions from interested banks about a sale.

Parisi declined to comment on any other topics, such as whether the bankâ&#x20AC;&#x2122;s improvement since last year failed Stilwellâ&#x20AC;&#x2122;s expectations. She deferred other questions to commentary in various letters sent to shareholders. â&#x20AC;&#x153;As the largest shareholder of Wayne Savings Bancshares Inc. (WAYN) for over seven years, we have witnessed WAYNâ&#x20AC;&#x2122;s subpar performance,â&#x20AC;? Parisi

wrote in a Feb. 27 letter. â&#x20AC;&#x153;The bank is on its fifth CEO since we became stockholders. Of course, we wish him good luck. But then again, we wished the four previous CEOs good luck.â&#x20AC;?

Stilwellâ&#x20AC;&#x2122;s letters question why the bank hasnâ&#x20AC;&#x2122;t sought a sale and contends interested buyers are being snubbed. â&#x20AC;&#x153;We have heard of numerous community banks interested in buying WAYN. We are not saying that Wayne Savings should sell to Bank of America,â&#x20AC;? Parisi wrote. â&#x20AC;&#x153;We are asking that the board explore teaming up with a more adequately scaled bank.â&#x20AC;?

Stilwell also has questioned why Wayne Savings hasnâ&#x20AC;&#x2122;t retained an investment bank to determine its value in a potential deal. â&#x20AC;&#x153;We are not aware of any phone calls theyâ&#x20AC;&#x2122;re talking about,â&#x20AC;? VanSickle said, regarding Stilwellâ&#x20AC;&#x2122;s claims that some interested buyers have been ignored. He added that Wayne also has New York investment bank Sandler O'Neill and Partners on retainer.

While Wayne clearly wants to remain independent, VanSickle argues the bank has never outright shirked its fiduciary duties to evaluate a possible sale while maintaining the bank is performing well and on a steady growth trajectory.

Itâ&#x20AC;&#x2122;s Wayneâ&#x20AC;&#x2122;s position that the time is simply not right for a sale. â&#x20AC;&#x153;We feel, and the directors feel, itâ&#x20AC;&#x2122;s in the best interest of shareholders to continue on with our plan, optimizing our efficiencies and earnings,â&#x20AC;? he said. â&#x20AC;&#x153;We feel that is the best way to build shareholder value right now.â&#x20AC;?

In terms of entertaining a sale, VanSickle cited the bankâ&#x20AC;&#x2122;s relationship with their investment bank, noting, â&#x20AC;&#x153;We are prepared should any situation arise. But we are focusing on what we can do operating the bank to maximize shareholder value.â&#x20AC;?

A lot has happened with Wayne in the past year.

The bankâ&#x20AC;&#x2122;s return on equity and dividends have increased. Earnings per share increased in 2017 by 37.8%.

The bank, still independent, landed VanSickle last summer. It then converted its charter from a stock savings and loan association to an Ohio-chartered commercial bank shortly after. Doing that removes requirements for the bank to have 65% of its loan portfolio in residential mortgages and allows it to

rework its portfolio with a greater focus on more commercial loans with higher yields. That move is a key factor in the bankâ&#x20AC;&#x2122;s growth strategy.

Last fall, the bank delisted from NASDAQ and began trading on OTCQX, which should translate to significant cost savings, according to Wayne.

The bank expanded its board with a seventh director, adding Ancora portfolio manager Brian Hopkins (Ancora Advisors LLC and Hopkins each own 5.75% of the bank, respectively).

In December, the company repurchased $1.4 million worth of shares.

A few weeks later, Stilwell initiated its second proxy contest currently underway.

Wayne maintains itâ&#x20AC;&#x2122;s doing objectively well doing as well or better in comparison to peers. Stilwell begs to differ. Each is using different stats to make their case.

However, proxy advisory firm Institutional Shareholder Services (ISS) issued a report last month siding with Wayne and encouraging them to vote for Lehman instead of Briglia.

ISS issued the same opinion last year when Stilwellâ&#x20AC;&#x2122;s candidate â&#x20AC;&#x201D; who, it was revealed in corporate filings, was being offered financial incentives contingent on the bank being sold within three years after election â&#x20AC;&#x201D; lost a bid to unseat incumbent Debra Marthey by what amount to a 1% margin. â&#x20AC;&#x153;The dissident, which is arguing that the company should retain an investment bank to determine its value in a potential transaction, has not made a compelling case for board change,â&#x20AC;? ISS wrote. â&#x20AC;&#x153;The company installed a permanent CEO, operational performance has improved, and a representative of a significant shareholder with extensive regional bank experience recently joined the board.

In light of these factors, the board and management team should be afforded an opportunity to continue executing on the current business plan.â&#x20AC;?

VanSickle hopes the opinion from ISS will help his board retain Lehman. At that time, the bank can again devote its attention to executing its growth plan. â&#x20AC;&#x153;The silver lining of this proxy contest is the shareholder outreach. I think Iâ&#x20AC;&#x2122;ve talked with at least 300 shareholders over this process,â&#x20AC;? VanSickle said.

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PA G E 7

At the Table

Tommy’s key to longevity: Give ’em what they want Talk about survivors. Despite changing cultural tides, a major fire and three addresses — all within a few hundred feet of one another — Tommy’s Restaurant on Coventry remains a landmark with nearly 50 years under its belt. And it’s Joe still going strong.

Crea “What keeps me in business?” asked owner Tommy Fello, who opened the place in 1972. “It’s the strong Coventry connection that’s so tied with the mutual admiration we have.”

Candor and an open rapport are a big part of that. Since the start, the locals who became his customers spoke their minds, and still do.

“They’re not afraid to come right to me and say, ‘You did something different with the tuna.’ You’ve got to listen and make it right if there’s something wrong,” Fello said.

It started when the then-14-yearold Fello got a job at a drugstore near the corner of Euclid Heights Boulevard and Coventry Road in Cleveland Heights. He handled the usual odd jobs, including working the seven-seat lunch counter.

“We were making milkshakes and other treats, and people were coming from all over,” Fello recalled. “There were a couple of other places to eat in the neighborhood in those days, and I worked through three different owners. The last one happened to be Lebanese: Fawze Saide and his wife,

Helen, who ran the Fine Arts Confectionery.”

With no real kitchen and just a heating oven, the place offered a few dishes, all of which were awful, Fello said “At lunch, Fawze would sit in the corner and eat falafel and hummus and baba ganoush,” Fello said.

“The people drinking the shakes would ask, ‘What’s Fawze eating?

Why don’t you serve that, instead of this crap?’ ” After graduating high school, Fello enrolled in a technical school downtown to study computer programming.

He liked it a lot, but as he attended classes he realized there wasn’t a nearby cafeteria for students.

“So I started making sandwiches and brought them downtown and sold them,” he said. “And I saw how people’s eyes lit up when they ate something they enjoyed. That’s when I realized I might do something in the restaurant industry.”

Meanwhile, Saide decided he missed his home in Beirut. He wanted to sell Fine Arts.

“I liked the interaction with the people more than the interactions with the machines,” Fello said. “I had $6,000 saved up. So part of the deal was that I’d get some of the recipes [Helen] made, and my mom was Italian so she taught me the different sauces, soups and other dishes I could sell.

“But I couldn’t figure out what to

Survivors In an era when, statistically, a restaurant that stays open for five years is considered a success (and one that survives 20 years practically deserves a jubilee), longstanding operations are a rarity. We call them “survivors.”

Over the coming months, we’ll talk with chefs and owners who’ve stood the test of time and hear how they’ve managed to keep the doors open and keep customers, sometimes generations of customers, content and coming back for more.

In this installment, we spotlight Tommy’s Restaurant in Cleveland Heights.

Tommy’s Restaurant owner Tommy Fello, left, and a couple of the restaurant’s employees show off items from the iconic Coventry spot’s vast menu. (Contributed photo)

call it. I kept coming up with names, but none of them were ‘it.’

“Finally, some of the people coming in said, ‘Why don’t you just call it ‘Tommy’s,’ because that’s what WE call it!’ And on Jan. 14, 1972, we became Tommy’s.”

Smack in the middle of the Age of Aquarius, Tommy’s was at the crossroads of Northeast Ohio’s most scintillating neighborhood. Clevelanders of a certain age can still feel the psychedelic vibe resonating within what came to be known as Coventry Village. The sound of folk rock and electric guitar

seemed to pulse from every storefront, while the mingling scents of incense and marijuana wafted through the air as an endless parade of rainbow-clad youth filled the streets.

Hippies, hungry for countercultural fare, loved Tommy’s milkshakes, “but they were getting into yogurt.

‘Why don’t you make yogurt shakes?’ they asked. So we gave them a try.”

That year, another fledgling institution, Rolling Stone magazine, published an article naming Tommy’s dairy drinks “Best Milkshake East of the Mississippi.”

Suddenly, his reputation beyond the

shores of Lake Erie was cemented.

From there, the story unfolds. In 1978, Tommy’s expanded to a 77-seat space around the corner, at 1820 Coventry Road. Ten years later, a fire ravaged the better part of a block and took out Tommy’s dining room. The restaurant continued using the existing kitchen but moved seating to 1824 Coventry Road, home to Coventry Cats and High Tide Rock Bottom.

Fello took over additional space and in 1993 settled in at his 4,200-squarefoot, 125-seat permanent home.

Business, he admitted, wasn’t his first “language.” During an early renovation, he’d go to breakfast with some of the tradesmen and marvel at how much some places charged for a glass of orange juice.

SEE TOMMY’S, PAGE 22

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PA G E 8

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CRAIN’S CLEVELAND BUSINESS

Opinion From the Editor

Welcome a new addition to the Crain’s ad team

Editorial

Leadership audit We’ve spent a considerable amount of newsprint decrying the state’s lack of investment in public transit — and, most recently, the laissez-faire approach of local leaders in figuring out a fix for the Greater Cleveland Regional Transit Authority’s ongoing funding woes.

That stance holds, but it’s due time the RTA does some soul searching of its own, as evidenced by the recent ouster of its board chairman of 24 years, George F. Dixon III. Dixon was asked to resign after evidence suggested he had for years failed to pay premiums for health insurance provided by RTA. An investigation is ongoing, so RTA’s board isn’t commenting further — but questions remain. What took so long? Why does the cash-strapped agency even offer health insurance to its board members? Is this an isolated incident, or is Dixon’s alleged behavior only skimming the surface of a much deeper issue? RTA’s board promises answers following the investigation.

While RTA’s board should be commended for taking decisive action, we can’t help but view this debacle as RTA, once again, stepping on its own foot. RTA is considering asking Cuyahoga County voters to approve a tax hike to buoy the agency’s coffers, and voters will — and should — ask why an agency that can’t do something as simple as collect a health care premium is deserving of more taxpayer support.

As the Clevelanders For Public Transit advocacy group rightly noted in its statement following Dixon’s resignation, now is an opportune time to reshape RTA’s 10-member board given Dixon’s departure and two looming term expirations. Both the city and Cuyahoga County will have appointment decisions to make.

A few innovative thinkers can drastically improve a board’s performance. Look no further than MetroHealth as an example. The county-subsidized hospital’s board included some of the same faces for decades before being retooled by Ed FitzGerald in his lone term as Cuyahoga County executive. That newlook board set the tone for a dramatic turnaround at the hospital and the hiring of Dr. Akram Boutros as CEO.

A board, of course, can only do so much when it comes to steering an organization with a $300 million budget. The bulk of the heavy lifting falls to Joseph Calabrese, the RTA’s chief executive and general manager of the last 18 years.

By all accounts, Calabrese is a good and decent man who has done an admirable job managing an almost unmanageable situation. Unfortunately, innovative leadership often takes a back seat to filling budget gaps.

Really, it’s a chicken-and-egg situation — it’s difficult to think creatively about the future when state-imposed funding problems are crippling your current operations. But as we’ve said before, RTA’s routine of simply crying foul and blaming its problems on a lack of investment from the state can get tiring.

RTA’s board and hired leadership need to articulate a clear and honest vision of what it means to be a regional transit system in the 21st century to prove it is deserving any increased investment from taxpayers. Surely that doesn’t mean fare hikes and reduced service, which is what we’ve come to expect.

Solving the local transit crisis requires leadership on all fronts, and sadly, we’re not seeing much of it from any of the responsible parties — the city, county, RTA and, yes, the state.

It’s time to get out of neutral.

Rock on

The news that the Rock and Roll Hall of Fame would call Cleveland home came as a surprise to some coastal elites who doubted a Rust Belt city could pull off the project. Well, since the museum’s opening in 1995, we’ve certainly proven them wrong.

Attendance is rising at a steady clip and the inductions are now poised to be held in Cleveland every two years, including the sold-out April 14 ceremony. That’s certainly good news for rock fans, but more importantly, Cleveland. After all, what’s more rock ‘n’ roll than proving one’s doubters wrong?

Publisher and Editor: Elizabeth McIntyre (emcintyre@crain.com)

CLEVELAND BUSINESS

CLEVELAND BUSINESS

Managing Editor:

Scott Suttell (ssuttell@crain.com)

Sections Editor:

Timothy Magaw (tmagaw@crain.com)

Contact Crain’s:

216-522-1383

At the beginning of the year, I wrote how career paths are rarely straight lines. They twist and turn for many reasons, sometimes not intentionally, and they lead us to different, sometimes unexpected, opportunities.

The impetus for that column was the departure of our sales director. The selfish part of me, as a manager, wished she would stay and continue to bring her accomplished skills to our staff and clients.

But any manager knows that change is inevitable, that the path is never linear. And wise managers know that change can be good.

When this particular change presented itself, we set out to determine where we would turn to continue serving the business community of Northeast Ohio.

Elizabeth As I wrote then, “Change is hard, but it McIntyre can’t be hard on those you serve.”

The good news is that we had a bounty of excellent options, and any of those paths would have produced excellent results.

The one that emerged as the best way forward was this: Lisa Rudy is the new director of sales for Crain’s Cleveland Business.

I know that she will motivate our excellent sales team at Crain’s Cleveland Business and that, with her leadership, we will continue to deliver creative marketing solutions for our clients.

And she will help us find new ways to be indispensable.

I know this because she has an exemplary track record and she really knows the job. Lisa is currently sales director of our sister publication, Crain’s Detroit Business, and she will expand her role to include Cleveland.

Sometimes, when you hear about executives expanding their roles, some may chalk it up to downsizing or corporate cost-cutting. Let me assure you that’s not the case here. Lisa has the right skills, enthusiasm and creativity to help guide our Cleveland efforts, and both the Detroit and Cleveland publications can benefit from shared ideas and proven best practices.

It helps, too, that she has the right people here to accomplish the mission. Smart, enthusiastic and creative sales people in Cleveland who know our business community and how to help them reach their customers.

This isn’t the first time Crain’s has shared expertise between Cleveland and Detroit. Cleveland’s Creative Director, David Kordalski, has helped deliver award-winning design to both publications. And we’re continuing to examine ways that we can share ideas that work among all of our city publications — Detroit, Cleveland, Chicago and New York.

Lisa, a native of Syracuse, N.Y., will be here often to collaborate with staff and to meet with business leaders in Cleveland.

She has a deep background in media advertising sales in print, digital and radio. She joined Crain’s in December 2016 and has held senior sales management positions at CBS Radio, The Detroit News and The Detroit Free Press and the Detroit Metro Times, where she served five years as publisher.

We’re already at work looking at ways to continue to serve the business community, and support the important independent reporting our news staff does, through ad sales in print and digital, events and custom content publishing.

Feel free to reach out to Lisa at lrudy@crain.com.

And, as always, I’m happy to hear from you, whether it’s about an advertising question, a news tip, a comment on the work we’re doing or just to say hello.

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing ClevEdit@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.

Sound off: Send a Personal View for the opinion page to emcintyre@crain.com.

Please include a telephone number for verification purposes.

Letters to the Editor

Bill passage would benefit credit unions The U.S. Senate recently voted to support a bill that will strengthen our community, and now Ohio’s smaller financial institutions need the U.S. House of Representatives to see it to final victory.

The Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) is a bipartisan, common-sense approach to lawmaking that we haven’t seen in quite some time from Washington, D.C. This legislation is a positive step toward enabling Ohio credit unions to more effectively meet the needs of Ohioans and Ohio’s small businesses. This in turn will facilitate a fuller blossoming of local economies across the Buckeye State.

The bill will accomplish this by making the process of getting mortgage loans from credit unions easier and more straightforward for consumers. It will adjust thresholds that ensure lending regulations intended to rein in Wall Street banks do the job without overburdening credit unions and community banks.

It will change how credit unions designate certain apartment loans, freeing up capital for additional small business lending, and it will provide important safeguards against elder abuse, giving greater protections to some of the most vulnerable consumers of financial services.

On behalf of the Ohio’s 276 credit unions serving nearly 3 million members, I respectfully urge the U.S. House to pass these common-sense fixes that will enable credit unions back home to grow the local and state economies.

Brian M. McCue Chief Executive Officer Unity Catholic Federal Credit Union

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National Volunteer Week is around the corner On behalf of Greater Cleveland Volunteers, I bring attention to National Volunteer Week, April 15-21, 2018, and thank all the wonderful volunteers we have in Cuyahoga County.

National Volunteer Week began in 1974 as a way to recognize and celebrate the efforts of volunteers.

It’s about inspiring, recognizing and encouraging people to seek out imaginative ways to engage in their communities. It’s about demonstrating to the nation that by working together, we have the fortitude to meet our challenges and accomplish our goals.

Greater Cleveland Volunteers worked with more than 2,300 volunteers in 2017 who donated 124,428 hours of service.

This service is valued at $3 million.

We know volunteers help at a wide variety of organizations in the community.

From tutors and mentors that help children in the schools, to dedicated food preparation and delivery volunteers, caring individuals comforting patients in senior living facilities and medical agencies and those volunteers who work with adults looking for work. The benefits are not only for others, but also for the volunteer in witnessing the success of their efforts.

If you have an interest but aren’t sure what volunteer opportunities are available, look at our website, greaterclevelandvolunteers.org, or call 216-3919500.

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Serving the country then your business Unemployment rates for veterans hit record lows

By DOUGLAS J. GUTH clbfreelancer@crain.com

All Bruce McCann asks of companies searching for talent is to give veterans a fair chance.

McCann, a Macedonia resident, served in the U.S. Army from 1984 to 1988, harnessing the skills and discipline he learned in the military for jobs in manufacturing and later in the trucking industry. He currently drives a big rig for a company in Richmond, Va., hauling goods throughout the Akron area for nine hours each day.

“Keep an open mind for veterans — they served our country and have struggles they’re dealing with,” McCann said. “You can count on me to

“Keep an open mind for veterans — they served our country and have struggles they’re dealing with.”

— Bruce McCann, Army veteran

be at work at the crack of dawn, and to volunteer on weekends.”

By the numbers, American servicemen and women are indeed getting an opportunity in today’s job market.

The unemployment rate for this population fell in October to a record-low 2.7%, in line with a drop in the nationwide jobless rate, according to the U.S. Bureau of Labor Statistics. For post9/11 veterans, the unemployment rate was 3.6%, compared to a 10.2% unemployment rate among the demographic in 2009. In February, veteran unemployment sat at 3.5% compared to the 4.3% for total nonveterans.

But experts interviewed by Crain’s said the data mask issues veterans continue to face in the marketplace, namely underemployment and the need for help translating their skills into the civilian workforce. Northeast Ohio companies, universities and support organizations are seeking to fill these gaps not just through well-paying civilian jobs, but via inhouse programs and infrastructure designed with long-term veteran success in mind.

SEE VETERANS, PAGE 16

Illustration by Daniel Zakroczemski for Crain’s

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CRAIN’S CLEVELAND BUSINESS

MIDDLE MARKET

Adviser: Arthur C. Brumett II

Don’t get beat when it comes to non-competes You hire employees, train them, introduce them to clients and customers, and set them up for success with your company. Then, an employee leaves, starts a competing company, and begins taking your business. This is a common concern for business owners, but employee non-competition agreements, or “non-competes,” can act as effective safeguards.

Since the 1940s, Ohio has recognized the validity of agreements that restrict competition by an ex-employee if the restrictions are reasonable. The Ohio Supreme Court has held that such an agreement does

Arthur C. Brumett II is a shareholder in Reminger’s Cleveland office. He focuses his practice on advising and representing employers of all sizes

not violate public policy if it is reasonably necessary for the protection of the employer’s business, and not

unreasonably restrictive upon the rights of the employee.

In the 1975 case of Raimonde v.

Van Vlerah, the Ohio Supreme Court established a test of “reasonableness” when determining whether to enforce a non-compete provision in an employment contract. Each case is decided on its own facts.

There are three primary components to non-competes that must all be reasonable in order for the provision to be upheld: duration, geography and scope of business. Courts are empowered to modify or amend employment agreements so that a

covenant restraining an employee from competing with his former employer is no greater than is required for the protection of the employer; does not impose an undue hardship on the employee; and is not injurious to the public.

The reasonableness test permits courts to fashion a contract reasonable between the parties, in accord with their intention at the time of contracting, and enables them to evaluate all the factors comprising “reasonableness” in the context of employee covenants.

As to duration, restrictions on

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competition for one year are commonly enforced. Restrictions of up to two years have been upheld, while in other cases courts have reduced the duration down to 90 days. This is a very fact specific determination based upon the circumstances of each case.

Non-competes also generally restrict the former employee from engaging in business activities within a certain geographic distance from the office of the former employer. Again, the reasonableness test is used to determine whether the distance restriction imposed on the employee is reasonable under the circumstances.

Unless the agreement states otherwise, the distance is measured by the “straight-line approach,” as opposed to the driving distance between two locations.

Geographic restrictions should reflect the location where the former employer actually conducts business. For example, a company that only conducts business in Cuyahoga County attempting to restrict former employees from working in an industry nationwide would be considered unreasonable. However, non-competes covering all states in which the employer actually does business have been deemed reasonable.

Courts will take into consideration situations where the industry in question is a niche with fierce competition.

As for scope of business, the non-compete must restrict activity that would actually be in competition with the business of the former employer. A restriction that exceeds the scope of the former employer’s business will be viewed as punitive rather than a legitimate attempt to protect business interests.

What if you want to require current employees to sign non-competes? In Ohio, current employees may be required to sign non-competes in order to continue employment. Continued at-will employment is sufficient consideration to support the enforcement of a non-compete agreement.

What if you buy a company, or there is a merger? Non-competes may transfer by operation of law to a surviving company after a merger and may be enforced by the surviving company as if it stepped into the shoes of the original company.

Companies should ensure that the language of the non-compete addresses this type of transfer.

A business seeking to use non-competes should consult with counsel, as there are many potential pitfalls that could prevent enforcement.

The law greatly varies state-bystate, and an enforceable agreement in Ohio may not work elsewhere and vice versa.

Also, public policy prevents certain professions from being restricted from competition (attorneys, for example). For additional protection, many agreements combine non-competition clauses with provisions restricting the solicitation of customers and employees, as well as prohibiting the disclosure of confidential information and trade secrets.

Applied correctly, non-compete agreements are excellent tools to protect your business.

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MIDDLE MARKET

Tax Tips: Carl Grassi

Tax reform speeds up depreciation of business vehicles Changes contained in the recent Tax Cuts and Jobs Act will allow many companies to write off the cost of vehicles used in their businesses over a much shorter period.

The tax code generally allows companies to recover the cost of a vehicle by taking depreciation deductions over a six-year period, beginning in the year the vehicle is placed in service. In most cases, these depreciation deductions are highest in the early years of the period and taper off in the later years.

Some vehicles qualify for additional bonus depreciation, which allows a larger deduction in the year the vehicle is placed in service. For an eligible vehicle placed in service in 2017, the amount of the bonus depreciation deduction was 50% of the adjusted basis of the vehicle (subject to a cap for certain vehicles, as discussed below). That amount reduced the vehicleâ&#x20AC;&#x2122;s basis for purposes of calculating regular depreciation deductions allowable in 2017 and later years.

Historically, bonus depreciation has been available only if the original use of the vehicle begins with the company â&#x20AC;&#x201D; meaning only new vehicles would qualify.

Congress has long been concerned that there is an element of personal consumption with the business use of cars, particularly higher-end cars. To limit this perceived benefit, the tax code places annual caps on the amount of depreciation deductions (both regular and bonus) that a company otherwise could take. These caps have the effect of stretching out the recovery period.

Passenger automobiles subject to these caps are defined broadly to include most four-wheeled vehicles that are manufactured primarily for use on public streets, roads, and highways, and are rated at no more than 6,000 pounds unloaded gross vehicle weight.

Although the annual caps theoretically are aimed at luxury cars, the caps historically have been so low that a taxpayer could not fully recover the cost of even a modest car over the normal six-year period. For example, a company that placed a passenger auto in service in 2017 could deduct no more than $3,160 of depreciation in 2017, plus an additional $8,000 if the company took bonus depreciation. The cap in later years would be $5,100 in 2018, $3,050 in 2019, and $1,875 in 2020 and all subsequent years. Over the six-year period, the company therefore could recover no more than $16,935 of the cost of the auto, or $24,935 if the company took bonus depreciation. (Due to inflation calculations, slightly higher limits applied to trucks and vans.)

Tax reform makes the depreciation rules for business vehicles more generous.

First, tax reform doubles the amount of allowable bonus depreciation, to 100% of the adjusted basis of the vehicle for eligible vehicles placed in service before 2023. (The percentage is scheduled to step down to 80% for vehicles placed in service in 2023, 60% for vehicles placed in service in 2024, 40% for vehicles placed in service in 2025, and 20% for vehicles placed in service in 2026.)

However, as discussed below, the $8,000 cap on bonus depreciation for certain vehicles has been retained, so bonus depreciation for those vehicles is effectively less than 100%.

Second, a used vehicle is now eligible for bonus depreciation, provided

Carl Grassi is chairman of McDonald Hopkins LLC.

that the vehicle is not acquired from certain persons related to the taxpayer.

Third, tax reform substantially increases the annual caps on depreciation for passenger autos. A company that places a passenger auto in service

in 2018 may deduct up to $10,000 of depreciation in 2018, plus an additional $8,000 if the company takes bonus depreciation. The cap in later years will be $16,000 in 2019, $9,600 in 2020, and $5,760 in 2021 and all subsequent years. The company therefore may recover as much as $52,880 of the cost of the auto over the normal six-year period, or $60,880 if the company takes bonus depreciation. The caps will be adjusted for inflation for autos placed in service in future years. (However, the $8,000 increase for bonus depreciation will not be adjusted for inflation.)

The above rules apply in the case of

a vehicle that is used only for business purposes. If a vehicle is used predominantly (more than 50%) for business purposes, but also is used for non-business purposes, the amount of otherwise allowable depreciation deductions is reduced proportionately. More restrictive rules apply to vehicles that are not used predominantly for business purposes.

We expect the Internal Revenue Service will provide technical guidance regarding the interaction of 100% bonus depreciation and the first-year cap on depreciation for passenger autos.

In the meantime, it is clear that the

Tax Cuts and Jobs Act provides more generous depreciation deductions that will allow companies to recover the cost of their vehicles much more quickly. Tax reform also introduced more generous expensing rules under Section 179. Some companies will be eligible for the new Section 179 expensing, the new 100% bonus depreciation, and the increased caps on business vehicle depreciation, so we suggest that you consult your tax adviser to confirm eligibility and plan for maximum benefit from the new, more favorable limits. It may be time to revisit your plan for the vehicle fleet.

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CRAINâ&#x20AC;&#x2122;S CLEVELAND BUSINESS

MIDDLE MARKET

Mall operators use pop-ups to liven up the retail experience

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The future of retail can be found in the Great Northern Mall food court.

The light blue table tent cards adorning every place setting advertise the return of the Battle of the Pop-ups.

Pop-ups are popping up from coast to coast. Theyâ&#x20AC;&#x2122;re the modern interpretation of short-term leasing primarily for specialty wares. The word pop-up can conjure images of local maker marts, flea markets or farmers markets such as the Cleveland Bazaar, Cleveland Flea or North Union Farmers Markets at Shaker Square and Crocker Park.

Pop-ups are a way a way to attract shoppers, boost sales and offer a competitive advantage in the larger battle of online versus in-person shopping. Unlike more traditional retail leases in the five to 10-year range, pop-up shops last for a day, month or season. They generate social media buzz. Their limited time instills fear of missing out. Theyâ&#x20AC;&#x2122;re a bright spot among more somber news of bankruptcies and closings, which threaten operatorsâ&#x20AC;&#x2122; revenues and leave them struggling to fill the empty space.

And, theyâ&#x20AC;&#x2122;re growing. One estimate from PopUp Republic, a social media marketing company, pegs the

U.S. pop-up segment at $50 billion.

Pop-ups work in part because they work in small spaces. The physical concept can include a store within a store; kiosk, cart or booth; in-line shopping center stores; general vacant space; and vacant street level space. And increasingly, the pop-up is going national as malls and companies like Nordstrom, Pier 1 Imports, Best Buy and Target are embracing the concept.

Simon Property Group â&#x20AC;&#x201D; the largest mall operator in the U.S. with more than 300 shopping centers â&#x20AC;&#x201D; is piloting a dedicated space for pop-up shops. The Edit@Rossevelt Field in Long Island, N.Y., launched in November 2017, offers retailers spaces spanning 20 to 200 square feet inside a dedicated portion of the mall with rents on a quarterly basis. Simon owns Summit Mall in Fairlawn and Aurora Farms Premium Outlets in Aurora.

Washington Prime Group â&#x20AC;&#x201D; owner of Great Lakes Mall in Mentor â&#x20AC;&#x201D; also launched a pop-up shop called Tangible in four of its properties last November, one of which is at Polaris Fashion Place in Columbus. Described as an e-commerce installation, the operator will showcase two online brands each quarter at Polaris center court.

Starwood Retail Partners, a nation-

al operator that owns Great Northern, is offering cart or kiosk spaces in common areas at 20 of its properties nationwide through its Battle of the Pop-ups competition.

The idea of the competition is to soliciting new business ideas from rising local entrepreneurs to find a mix of unique retailers for todayâ&#x20AC;&#x201D; and tomorrow, says Catherine Loy, vice president and head of specialty leasing for Starwood. â&#x20AC;&#x153;Every successful retailer has to have a first store at some point,â&#x20AC;? Loy said. â&#x20AC;&#x153;We thought, what better way than to create something that could help them get started? (Plus,) we want to create an even stronger bond with our communities. Most of our malls are in the suburb markets, hence the reason why we want to be a part of the community where people live and play in.â&#x20AC;?

The battle is designed to benefit all parties. Starwood can have conversations with entrepreneurs who otherwise wouldnâ&#x20AC;&#x2122;t be at their mall, and entrepreneurs can set up without fear of a long-term lease or burdensome costs with potentially unknown sales. Starwood also is giving entrepreneurs advice on merchandise focus, choosing a point of sales system and setting up a profit and loss statement.

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Althea Young, owner of NoBasis, a customizable self-expression clothing, accessories and novelty shop in Great Northern Mall. (Contributed photos)

A NoBasis worker demonstrates the shopâ&#x20AC;&#x2122;s hydro-dipping station, which allows patrons to apply designs to three-dimensional surfaces.

rent, use of existing mall or store fixtures, free utilities and a $500 merchandising package for interior signage, table-printed displays and graphic design services. They will have their own kiosk cart in a to-be-determined location from June 1 through Sept. 30.

Loy said that national chains, anchor stores, local retailers and popups are all helping to augment each otherâ&#x20AC;&#x2122;s opportunities and the shopperâ&#x20AC;&#x2122;s overall mall experience. Thatâ&#x20AC;&#x2122;s something only malls, not online retailers, can provide. â&#x20AC;&#x153;People go to the mall for that experience that theyâ&#x20AC;&#x2122;re looking for â&#x20AC;&#x201D; to touch and feel the item they are considering or just to see whatâ&#x20AC;&#x2122;s new,â&#x20AC;? Loy said. â&#x20AC;&#x153;If people are making the trip to the shopping center, as a mall owner, we have a responsibility to deliver that, not just what you expect to see at Victoriaâ&#x20AC;&#x2122;s Secret, Ann Taylor or Banana Republic. We need to deliver what is unexpected: Your local neighbor who is making jewelry or your neighborâ&#x20AC;&#x2122;s daughter who started this new concept and is running the store now.â&#x20AC;?

Last yearâ&#x20AC;&#x2122;s pilot competition was so well received that it has been expanded from just 1% to 66% of its properties this year, including four centers in Ohio: Beldon Village in Canton, Great Northern Mall in North Olmsted, SouthPark Mall in Strongsville and Franklin Park Mall in Toledo.

Loy said that the excitement when they told the current winners about the second competition was unexpectedly rewarding.

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PA G E 15

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PA G E 16

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Locally, employers are recognizing the quality of training and experience the military provides, DeChant CONTINUED FROM PAGE 11 said. Companies such as Olympic McCann, 52, enrolled in Cuyahoga Steel, Swagelok, Parker Hannifin, Community College’s Truck Driving Stripmatic Products and Westfield Academy in 2016 to relearn skills Insurance put a focus on military regleaned during his army stint in Fort cruitment in their hiring practices.

Hood, Texas. After completing the Meanwhile, security firms including four-week course, he passed his Ohio Wackenhut and Tenable are seeking Commercial Driver’s License test veterans to join their ranks. The and immediately landed a job, which OhioMeansJobs online portal has a he kept for six months before switch- military-friendly employer registry listing nearly 3,000 companies covering to another trucking company.

“The demand was there, so I didn’t ing a wide swath of industries, from struggle to find work,” McCann said. logistics to construction.

Makers in particular are looking to “You can make a very good living in fill positions with people who have the the industry if you stick with it.”

Tri-C’s trucking academy is heavily skills veterans possess. The Manufacpromoted by a larger on-site program turing Institute, a Cleveland affiliate of called the Veterans Initiative, aimed at the National Association of Manufac“educating, graduating and relocat- turers, launched its Heroes Make America initiative ing” veterans into in January, prea career or em- “Men and women senting veterans ployment, said ex- coming out of the with industry-speecutive director cific certifications Rick DeChant. The service have the initiative initially ability to be trained.” in production, processes and quality prepares ex-milicontrol. Considertary for the college — Carolyn Lee, executive director ing a manufacturenvironment, of- of the Manufacturing Institute ing skills gap that fering refreshers in computer usage and other funda- the organization predicts could leave as many as 2 million future jobs unmental areas.

Through the program, Tri-C awards filled, the 200,000 individuals leaving college credit for training in the armed the military annually would be perfect forces or National Guard as evaluated candidates for such highly skilled by the American Council on Educa- work.

“Men and women coming out of tion (ACE). More than 170 military courses are transferable for college the service have the ability to be credit at Tri-C, representing just one trained,” said institute executive diway Northeast Ohio can fill the re- rector Carolyn Lee. “They have soft skills along with practical experience gional talent pool, DeChant said.

“If there’s a young Navy corpsman working on tanks and Humvees, or in doing combat trauma and triage logistics and the supply chain.”

Ohio has one of the largest veteran work, why can’t they get credit to apply as a nurse in Ohio?” he said. “Vet- populations nationwide. Once hired, erans are coming home with better this group’s re-integration into civiltraining and skill sets that many col- ian work requires on-the-job support, said Bryan McGown, board leges can’t compete with.”

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CRAINâ&#x20AC;&#x2122;S CLEVELAND BUSINESS

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A P R I L 9 - 15 , 2 018

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PA G E 17

MIDDLE MARKET

POP-UPS

How veteran unemployment compares to nonveterans

CONTINUED FROM PAGE 14

Unemployment rates for people 18 years and older by veteran status. Not seasonally adjusted.

12%

Jan 2010: 10.4%

Nonveterans Veterans

Jan 2011: 9.9%

10% 8% 6% 4% 2%

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chairman of Neovets, a Cleveland nonprofit connecting service people to employers and other resources. â&#x20AC;&#x153;Most military people want to know how they can support a team,â&#x20AC;?

McGown said. â&#x20AC;&#x153;The onboarding process is an integral part of that person assimilating into a new setting and supporting a companyâ&#x20AC;&#x2122;s mission statement.â&#x20AC;?

In building its network, Neovets instructs area businesses in all aspects of veteran hiring, from a high-level overview of service branches to specific types of training veterans receive while on active duty. Access to Department of Defense Joint Service Transcripts provides companies additional information on military schooling and work history, but couched in civilian language.

Businesses in Neovetsâ&#x20AC;&#x2122; resource network match new veteran hires with already established vets to smooth their transition. The Ohio Regional Sewer District, for example, adopted a distinct military onboarding program and introduces new employees to veteran-focused health care providers.

Goodyear, which employs 120 fulland part-time associates with disclosed military status, hosts a resource group to assist in the retention and development of its veteran employees. Cleveland Clinicâ&#x20AC;&#x2122;s Hero Experience program offers veterans insight into the hospital systemâ&#x20AC;&#x2122;s recruitment and interview process, and aids them in â&#x20AC;&#x153;civilianizingâ&#x20AC;? their resumes. â&#x20AC;&#x153;Veterans will see a job description that looks exactly like what they did in the military, but it doesnâ&#x20AC;&#x2122;t translate into how their own resumes are written,â&#x20AC;? said Chris Reardon, the Clinicâ&#x20AC;&#x2122;s executive director of talent acquisition. â&#x20AC;&#x153;So educating veterans and hiring managers in how to best represent that experience is part of the work we do.â&#x20AC;?

Too many vets feel their skills are being underutilized, say observers. A 2017 study from the Call of Duty Endowment found one-third of veterans were underemployed, 15% higher than the rate for non-vets.

Misperceptions about former military personnel abound, mostly stereotypes regarding post-traumatic stress disorder and a perceived limited skill set among the population.

A business infrastructure built to value veteran experience â&#x20AC;&#x201D; bolstered by a supportive environment of mentorship and team-oriented goal setting â&#x20AC;&#x201D; can only be a boon for a community in need of talented employees, said McGown of Neovets. â&#x20AC;&#x153;One of the best ways to spur economic growth is a highly skilled and motivated workforce,â&#x20AC;? he said. â&#x20AC;&#x153;With a little careful training, we can easily get these people to understand a companyâ&#x20AC;&#x2122;s methodology.â&#x20AC;?

'17

'18

â&#x20AC;&#x153;They cannot wait to help us,â&#x20AC;? she said. â&#x20AC;&#x153;Their excitement is probably the most rewarding for me to see that our mission was accomplished: finding these entrepreneurs, helping them be successful and be a part of the community.â&#x20AC;?

Althea Young is the one of the initial battle winners. Sheâ&#x20AC;&#x2122;s the owner of NoBasis, a customizable self-expression clothing, accessories and novelty shop in Great Northern Mall. In addition to her online store, she has been traveling to concerts, attending other pop-ups including the Cleveland Flea and hosting private parties around Ohio for the past few years.

She said the competition helped her

fast-track her business plans. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve been embraced by the community and seen our business flourish,â&#x20AC;? Young said. â&#x20AC;&#x153;While we have some recognition, the exposure of being in this mall has been great for the brand. It has been amazing being somewhere that pulls in its own traffic. A mall is a place where people come to shop.â&#x20AC;?

On a recent March day, she was onboarding one of three new parttime in-store employees. She has the contest space through the end of April but has already extended her lease through June 2019.

Starwood plans to offer a second contest later in the year for businesses to operate during the critical holiday season through early 2019. Loy said the competition could expand to additional properties as well.

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PA G E 18

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A P R I L 9 - 15 , 2 018 |

CRAINâ&#x20AC;&#x2122;S CLEVELAND BUSINESS

THE LIST

Family-Owned Businesses

Ranked by Local Full-Time Equivalent Employees THIS YEAR

COMPANY

LOCAL FTE STAFF (1)

% FAMILY OWNED

FIRST-GENERATION YEAR OWNER FOUNDED BUSINESS DESCRIPTION

TOP LOCAL EXECUTIVE

1

Minute Men Cos., Cleveland (216) 426-9675/http://minutemenhr.com

38,825 (2)

100%

Sam Lucarelli

1967

Human resource company specializing in staffing, PEO, workers' compensation

Jay Lucarelli, CEO

2

Area Temps Inc., Independence (866) 995-5627/www.areatemps.com

8,000 (2)

100%

Raymond A. Castelluccio

1987

Staffing firm specializing in manufacturing and clerical placement

Kent J. Castelluccio, president

3

Discount Drug Mart Inc., Medina (330) 725-2340/www.discount-drugmart.com

2,159

96%

Parviz Boodjeh

1968

Regional drug store chain

Don Boodjeh, CEO

4

Ganley Auto Group, Brecksville (440) 584-8202/www.ganleyauto.com

1,773

100%

Thomas D. Ganley

1968

Auto dealership group offering sales, service, repair, insurance and financing

Kenneth G. Ganley, president, CEO

5

Fred W. Albrecht Grocery Co., Akron (330) 733-2263/www.acmestores.com

1,465

98%

Frederick Wilhelm Albrecht

1891

Retail grocery and pharmacy stores

Jim Trout, president

6

Sprenger Health Care Systems, Lorain (440) 989-5200/www.sprengerhealthcare.com

1,108

100%

Grace Sprenger

1959

Developer, owner and operator of senior living communities providing a full continuum of care

Nicole Sprenger, CEO Michael Sprenger, COO

7

Covelli Enterprises Inc., Warren (330) 856-3176 /www.covelli.com

1,000

100%

Albert Covelli

1978

Panera Bread, OĂ&#x2022;Charley's and Dairy Queen franchisee

Sam Covelli, CEO

8

The Reserves Network, Fairview Park (866) 876-2020/www.trnstaffing.com

997 (2)

100%

Don Stallard

1984

Provider of staffing services to the office, industrial, professional and technical markets

Neil Stallard, CEO

9

Safeguard Properties Management LLC, Valley View (216) 739-2900/www.safeguardproperties.com

905

100%

Robert Klein

1990

Mortgage field services company; inspects and maintains vacant properties across the United States

Alan Jaffa, CEO

10

Dave's Supermarkets, Bedford Heights (216) 763-3200/www.davesmarkets.com

870

100%

Alex Saltzman

1935

Grocery

Daniel Saltzman, president

11

Vitamix, Olmsted Township (800) 848-2649 /www.vitamix.com

697

100%

William G. Ă&#x2019;PapaĂ&#x201C; Barnard

1921

Manufacturer of high-performance blending equipment for home and commercial use

Jodi L. Berg, president, CEO

12

Sandridge Food Corp., Medina (330) 725-2348/www.sandridge.com

667

100%

Vincent R. Sandridge

1960

Fresh food manufacturer offering deli salads, soups and sauces

Mark D. Sandridge, chairman, CEO

DiGeronimo Companies, Independence (216) 446-3500/www.digeronimocompanies.com

618

100%

Sam DiGeronimo

1956

Group of construction companies offering site development, demolition, environmental solutions and concrete recycling

Victor DiGeronimo Jr., CEO; Anthony DiGeronimo, president, Precision Environmental, Precision ProCut

14

East Manufacturing Corp., Randolph (330) 325-9921/www.eastmfg.com

573

100%

Howard Booher

1968

Manufacturer of all-aluminum semi-highway truck trailers, including dump, platform and refuse

David J. de Poincy, president, COO

15

Car Parts Warehouse, Brook Park (216) 676-9304/www.carpartswarehouse.net

525

100%

Tonino and Carmelina Di Fiore

1975

Warehouse distributor and retailer of auto parts

Tony G. Di Fiore, owner

13

THE LIST

Family-Owned Businesses YOUR BUSINESS IS OUR BUSINESS Ranked by Local Full-Time Equivalent Employees

Ä´  ¢ Ƹ ¢Č&#x201C; ¢ ¢ǯ Ƹ Ĺ&#x2DC;Ĺ&#x2014;Ĺ&#x153;ÇŻĹ&#x2122;Ĺ&#x153;Ĺ&#x2122;ÇŻĹ&#x2013;Ĺ&#x2014;Ĺ&#x2013;Ĺ&#x2013;

THIS YEAR

COMPANY

LOCAL FTE STAFF (1)

% FAMILY OWNED

FIRST-GENERATION YEAR OWNER FOUNDED BUSINESS DESCRIPTION

TOP LOCAL EXECUTIVE

16

Famous Enterprises Inc., Akron (330) 762-9621/www.famous-supply.com

420

100%

Hyman Blaushild

1933

Wholesale distributor of plumbing, HVAC, building and industrial products

Marc Blaushild, president, CEO

17

Orlando Baking Co., Cleveland (216) 361-1872 /www.orlandobaking.com

372

100%

Guistino Orlando

1872

Baker serving breads and rolls throughout Northeast Ohio and across the country

Chester "Sonny" C. Orlando John C. Orlando Sr., co-CEOs

18

King Nut Cos., Solon (440) 248-8484/www.kingnut.com

360

100%

Michael Kanan

1927

Purveyor of nuts and snacks

Martin Kanan, president, CEO

19

K&D Group Inc., Willoughby (440) 946-3600/www.kandd.com

345

100%

Douglas E. Price III and Karen Paganini

1984

Owns and manages 11,000 apartment units throughout Northeast Ohio

Karen M. Paganini, president, COO Douglas E. Price, CEO

20

The Cafaro Co., Niles (330) 747-2661/www.cafarocompany.com

300

100%

William M. Cafaro

1949

Real estate development firm and shopping center owner and operator

William A. Cafaro Anthony Cafaro Jr., co-presidents

21

Majestic Steel USA Inc., Pepper Pike (800) 321-5590/www.majesticsteel.com

298

100%

Dennis H. Leebow

1979

Steel service center, distributor and processor of flat rolled and cold rolled steel in North American steel market

Todd M. Leebow, CEO

21

Sirna & Sons Produce, Ravenna (330) 298-2222/www.sirnaandsonsproduce.com

298

100%

Gaetano Sirna

1979

Food distributor

Tom Sirna, president Vince Sirna, vice president

23

New Horizons Acquisition Corp., Norwalk (419) 660-4000/www.newhorizonsbaking.com

265

100%

Tilmon F. Brown

1967

Commercial bakers

Tilmon (Tim) F. Brown, CEO

24

Ross Environmental Services Inc. and affiliates, Elyria (440) 366-2000/www.rossenvironmental.com

249

100%

Bob and Ada May Ross

1949

Hazardous and industrial waste management firm

William E. Cromling III Jon Cromling, co-owners

25

Motorcars Cleveland, Cleveland Heights (216) 932-2400/www.motorcarscleveland.com

240

100%

Chuck Gile

1972

Auto dealer (Honda and Toyota); offers sales and service, including collision, parts and accessories

Chuck Gile, president

Angstrom Graphics, Cleveland (216) 271-5300/www.angstromgraphics.com

224

100%

Wayne Angstrom

1917

Provider of print, direct mail, fulfillment, omnichannel and marketing solutions

Wayne Angstrom, chairman; David Neumann, CEO, Angstrom Graphics MW; Kristina Neumann, managing director

27

Donley's Inc., Cleveland (216) 524-6800/www.donleyinc.com

223

66%

Terry Donley

1941

Construction and concrete solutions provider

Malcolm M. Donley, president, CEO

28

Great Lakes Brewing Co., Cleveland (216) 771-4404/www.greatlakesbrewing.com

175

100%

Patrick and Daniel Conway

1988

Craft brewery serving the Great Lakes region

Patrick Conway Daniel Conway, co-owners

29

Frank Novak & Sons Cos., Bedford Heights (216) 475-5440/www.franknovak.com

170

100%

Allen Pinchot

1912

Commercial finish contractor and manufactrurer of custom lighting, acoustic panels and OEM parts

Gayle F. Pinchot, president

30

Jarrett Cos., Orrville (330) 682-0099/www.jarrettlogistics.com

162

100%

W. Michael and Diane Jarrett

1999

Holding company for Jarrett Logistics Systems, PackShip, Jarrett Fleet Services, Zephyrs Fitness and Fortis Group LLC

W. Michael Jarrett, president, founder

31

Cres Cor, Mentor (440) 350-1100/www.crescor.com

160

100%

George T. Baggott

1936

Manufacturer of commercial foodservice equipment

Cliff Baggott, president, CEO Greg Baggott, VP of operations

32

Mars Electric, Mayfield Village (440) 946-2250/www.mars-electric.com

155

100%

Sam and Rebecca Doris

1952

Wholesale distributor of electrical supplies

Fran Doris, CEO

33

Beverage Distributors Inc., Cleveland (216) 431-1600/www.beveragedist.com

152

100%

James Conway

1933

Beverage distributor

James V. Conway, CEO Michael D. Conway, president

26

RESEARCHED BY CHUCK SODER (CSODER@CRAIN.COM)

Want the full Excel version of this list Ă&#x2018; and every Crain's list? Become a Data Member: CrainsCleveland.com/data The full digital list includes 69 companies as well as additional data and executive names. Information is supplied by the companies. Send feedback to Chuck Soder: csoder@crain.com.

(1) As of March 1, 2018 (2) This is a staffing firm; the vast majority of these employees work on behalf of other companies.

CRAIN’S CLEVELAND BUSINESS

TRAFFIC

CONTINUED FROM PAGE 1

Whigham also complained about the problems he and other residents have as pedestrians trying to make their way home from a downtown office.

The resident population of downtown Cleveland topped 15,000 by the end of 2017, increasing 40% since 2010, according to the Downtown Cleveland Alliance’s 2017 annual report. The report also found that the working population grew 8.8%, to 104,100. In addition, 23,5000 students are enrolled in classes at downtown campuses. Not to mention the additional 1,000 hotel rooms that have opened up in recent years, bringing travelers unloading baggage on city streets.

In addition, there has continually been a handful of construction projects that close a lane of traffic, constricting travel, particularly along Euclid Avenue. The lost lane on Euclid is a big problem for the buses and trolleys of the Greater Cleveland Regional Transit Authority.

“It’s a challenge,” said Joseph Calabrese, CEO and general manager of RTA. “At the same time we’re trying to be quicker and faster, there seem to be more disruptions in our flow.

More people parking illegally, delivery trucks (parking outside) delivery zones or in center lanes.”

Cleveland traffic commissioner James Muhic said he has a car assigned to check construction zones and make sure they are not encroaching further into traffic than permitted, but he concedes construction-narrowed roads downtown will continue to contribute to congestion.

“Obviously, we have a lot of work,” he said.

In the big picture, these are all good problems to have, said Muhic, who has been leading the Cleveland Division of Police’s traffic unit since 2011.

Neither Muhic nor Robert Mavec, commissioner of Cleveland’s traffic engineering division, could offer any

Delivery trucks have been clogging streets in the Warehouse District. (Jay Miller)

specifics on the increase in traffic volume in the last few years, but they believe they are managing the situation as well as possible.

“All I know is there is a lot more traffic,” Muhic said. “Downtown is growing and growing and growing, it’s been continuous, and I don’t see any end in the near future.”

Among the key issues Muhic, residents and downtown drivers have to contend with, in addition to the general growth in traffic and construction zones, are delivery trucks and the balance between keeping traffic moving and allowing parking — especially allocating valet zones used by restaurants.

Both Muhic and Mavec shrugged noncommittally when asked whether it was legal for delivery trucks to park in center left turn lanes instead of in established truck zones.

“The reality is if we created (curbside delivery zones to meet the demand) within the downtown area, you basically eliminate most of the parking,” Mavec said. “That’s pretty

much why they are off-loading in the center turn lane.”

The problem is especially acute in the Warehouse District, where dense clusters of restaurants, bars and nightclubs mean delivery trucks clogging the streets in the daytime. The congestion is so heavy that West Sixth and West Ninth streets between Lakeside and St. Clair avenues will often have three lanes packed with parked vehicles — the curb lanes and center left-turn lanes — and only two lanes for moving traffic.

“It’s not a perfect situation, but it’s manageable,” Mavec said of the Warehouse District. “I don’t see it getting any worse. This is a constant area of flux.”

In the evenings, the proliferation of bars and restaurants led to packed on-street parking in the Warehouse District and along Euclid Avenue in particular.

That led to the creation of valet parking zones, and there are dozens in the downtown area. The mayor’s

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office could not supply a current count of the number of zones downtown at press time, but the number topped 40 a decade ago.

In the Warehouse District, the traffic around the busy nightspots led to the city banning on-street parking on West Sixth Street.

“It’s safety first,” said police public affairs Sgt. Jennifer Ciaccia. “If we can’t get an ambulance down the street, if we can’t get a fire truck, so many things can happen. What we’re doing is keeping people safe.”

DCRA’s Whigham would like to see improved safety for pedestrians trying to make their way home from a downtown office.

“The biggest concern that has been brought up (by residents) is at rush hour,” he said. “When I’m trying to cross the intersection of East Ninth and Euclid, nobody is directing traffic.”

The city has 10 to 15 traffic controllers at intersections during a typical weekday outbound rush hour. Ciaccia said that while a traffic controller is not regularly assigned to direct traffic at the East Ninth and Euclid intersection daily, the number of controllers will be growing under the city’s recently approved budget. She said the number of full-time controllers will grow from 22 to 26 and part-time controllers, who are employed during special events, will grow from 14 to 32.

“There might be some growing pains,” Muhic said. “I don’t know that we can make everybody happy.”

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CRAIN’S CLEVELAND BUSINESS

AKRON

Kayak tour company finding fresh water

By NICOLE HENNESSY clbfreelancer@crain.com

Industrial waterways, like the Mahoning and the Cuyahoga rivers, are getting a new life and offering entrepreneurs new opportunities.

Cuyahoga Falls-based Burning River Adventures began offering kayaking trips on the Cuyahoga River in 2015. Now the husband-and-wifeowned venture is expanding to the Mahoning River, with the new Mahoning River Adventures launching in May. Burning River operates seven days a week, offering guided and self-guided trips of varying lengths. Mahoning is starting smaller, offering self-guided trips Friday through Sunday. Both locations are scheduled to open May 25, weather permitting.

Owners Moneen and Brad McBride have always loved the outdoors. Serving as advocates for waterways that have been plagued environmentally in the past — and which still face challenges — sweetens the deal.

This will be the first time a kayaking company with a livery service has operated on the Mahoning River, 23 miles of which the Ohio Department of Natural Resources designated as a state water trail in 2012.

Dams left over from long-gone industries still pose issues for both accessibility and water quality. Their removal is still a work in progress.

The effort to remove outdated dams is a national trend led by environmental groups, municipalities and activists concerned with restoring

Cuyahoga Falls-based Burning River Adventures has been taking kayakers down the Cuyahoga River since 2015. (Contributed photo)

habitats and improving ecosystems.

When dams started coming down in the Cuyahoga River in the early 2000s, the McBrides realized nobody was using the river for recreation. So far, four dams have come down: one in Kent, one in Munroe Falls and two in Cuyahoga Falls. And the Gorge Dam between Akron and Cuyahoga Falls is slated to come down in 2019.

Aside from fishermen scattered about, Moneen McBride rarely saw anyone on the river. So in 2015, the McBrides invested in a fleet of 10 kayaks purchased from Dick’s Sporting Goods (plus one canoe they already owned) and launched Burning

River Adventures.

On both rivers, they now have about 80 kayaks and six to seven employees. About 18 single and two double kayaks are being sent over to the Mahoning. The rest of the boats are staying put on the Cuyahoga. A long way from heading to the nearest sporting goods store, the McBrides now have a kayak supplier: Tennessee-based Jackson Kayak.

Burning River has been growing steadily since its inception, turning a profit in its third year. Moneen McBride estimated there were about 300 to 500 reservations made that first year, at which point they operated

Friday through Sunday on the Cuyahoga. That number jumped to 2,000 reservations in 2017. The company declined to talk about specific revenue numbers.

Expanding to the Mahoning is about capitalizing on the opportunity that exists there.

“We’re taking a pretty big risk,” McBride said.

The boats and resources they’re sinking into the Mahoning adventure would be going into the Cuyahoga side, but the opportunity was too good to pass up, she said. And the couple is passionate about reviving these natural resources.

Brad McBride has lived in Cuyahoga Falls since 1994, when his family moved from Lake Milton. As a child, he played on the river endlessly. Moneen McBride also spent as much time as possible outside as a kid, fishing, canoeing and practicing archery.

The couple both earned bachelor degrees in biology from Muskingum University. Moneen McBride also has an MBA from Cleveland State University — the perfect ingredients for an outdoors-focused business. Brad McBride also works full-time as an arborist for Davey Expert Tree Co. in Kent.

The Trumbull County MetroParks emerged as an important partner for Mahoning River Adventures. The McBrides lease park-owned property — 75 North Leavitt Road — for their business for $1 annually.

MetroParks operating director Zachary Svette said his team has been working on developing the river and access points for nine years. In addition to designating part of the

river as a water trail, which includes signage and brochures, the state has awarded a $50,000 grant to develop two launch sites.

When the McBrides approached the parks at the end of 2017, Svette said it confirmed that all the hard work was paying off.

“Having them come to us shows that we have made improvements,” he said. “We’re extremely happy to have them at that location. It is a viable resource to the park district.”

In the Mahoning, kayakers will have the option to paddle almost 4 miles, or 11 miles, between the Newton Falls Dam and the Leavittsburg Dam. All Cuyahoga trips start and end at Water Works Park in Cuyahoga Falls.

Self-guided trips are 2, 4.5 or 6.5 miles.

Efforts to remove the 57-foot-high, 450-foot-wide Gorge Dam on the border of Cuyahoga Falls and Akron are underway. So far, no dams have been removed from the Mahoning.

In the Cuyahoga, doing so has been a game-changer.

“It used to smell,” Moneen McBride said. “It used to be brown and mucky.”

Now customers being shuttled back to their cars after trips constantly talk about how beautiful the trip down the Cuyahoga is: a hidden adventure winding through the city, brimming with blue herons, hawks, otters and even an eagle.

Moneen and Brad McBride are easing into their new territory with plans for slow, well-planned growth.

The goal this summer is simple: to offer people who may have never ventured out on these rivers an opportunity to discover their own backyards.

Impact Group likes its boutique size, client niche

By JUDY STRINGER clbfreelancer@crain.com

When the Hudson City School District wanted to get ahead of swelling safety concerns immediately following the Parkland school shooting in February, it did not have to go far.

The district invited Tom Speaks from the Impact Group, a boutique marketing and public relations firm in its hometown, to facilitate a March public forum addressing campus safety and security issues.

Hudson schools spokeswoman Sheryl Sheatzley said engaging the firm was an easy call. The district has used the Impact Group, which also goes by IGPR, to conduct focus groups and moderate community engagement meetings about other issues such as new facilities. It also has hired the company for wide-scale community surveys and assistance in a strategic planning process that involved large groups of stakeholders, including parents, students and staff.

“They have a good understanding of the K-12 environment,” Sheatzley said, “and they have the unique ability to listen to our needs and work with us to enhance our communications.”

Hudson may be one of IGPR’s closest public school clients, but it’s far from the only one. The 18-person firm, founded by Speaks and fellow political scientist Don Polyak in 2001, has built an impressive reputation among superintendents throughout Ohio for its ability to open the lines of communication with residents in

IGPR assisted Perry Local Schools in crafting press releases, speaking points, social media posts and newsletter articles in response to the suicides of six current and former Perry High School students.

Polyak said about one-third of the company’s business can be traced to edImpact Group principals Don Polyak, left, and Tom ucational organizaSpeaks try to perfect the selfie on a recent trip to tions such as public Europe. (Contributed photo) and private schools and community colleges. Other clitheir districts.

“Really what we do, we just get out ents include municipalities and rethe facts,” Speaks said. “We help them gional developmental disability tell the truth about what they are do- boards, which like school districts ing and making sure the public un- “must convey their value proposition” to taxpayers and other constituents, derstands that.”

A steady stream of IGPR’s educa- he said.

“Political campaigns turned into tional assignments involves levy campaigns, according to Polyak. Because marketing campaigns that then turn property taxes are the primary source into retainers with a growing base of of funding for public schools in Ohio, organizations,” he said.

IGPR worked with Gov. John Kalevies are their lifeblood. There is a never-ending cycle of expiring levies sich’s office to develop messaging for that must be renewed or replaced, an anti-human trafficking campaign and with dwindling state funding and and created the promotional strategy aging buildings, districts often ask and materials to launch Akron’s inaugural Rubber City Jazz & Blues Festivoters to add new ones to the tax roll.

For IGPR, early levy wins, especially val. In addition, the company has those during the Great Recession, helped hundreds of private and pubopened the door to additional school- lic companies with marketing everybased work, ranging from more rou- thing “from garage door parts to wood tine projects like websites and surveys pellet stoves,” Polyak said, each time to very specialized crisis communica- employing the same idea of, first, untion programming. In recent months, derstanding the target audience and,

second, “developing a single, clear message that speaks to them.”

“We operate under the belief that the best marketing campaigns follow the disciplined, strategic approach of political campaigns,” Speaks said.

It’s a strategy Polyak thinks IGPR does especially well, although he is quick to credit public relations pioneer Don Edelman with planting the seed. Polyak first encountered Edelman’s philosophy about integrating public engagement into marketing campaigns while reading an article in the lobby of Edelman’s global communications firm’s San Mateo, Calif., office in 2000.

When he returned home to Los Angeles, Polyak called Speaks. The two had been friends since middle school in Cuyahoga Falls and had followed parallel paths in politics and marketing, albeit on different coasts with Speaks in Washington, D.C. They spent about a year developing a business plan, including a weeklong furlough in San Francisco’s storied Haight-Ashbury district.

“We are both history geeks, and so we like to conduct our seminal events in places that have some historical significance,” Polyak explained.

After reaching a recent milestone, which he declined to specify, Polyak and Speaks flew to France to trace the footsteps of the 101st Airborne from the drop zones in Normandy to the Eagle’s Nest in Germany.

IGPR’s first big success came when it landed a small lingerie client out of Long Beach, Calif., Lucy B. Lingerie, a feature spot on the cover of Lucky

Magazine in 2002. Speaks was back in Northeast Ohio but Polyak was still on the West Coast. With the client roster growing, Polyak relocated to Boston Heights in 2003, and IGPR operated out of an office in his basement until 2005 when staff growth fueled a move to a rented space off Boston Mills Road in Hudson.

About four years ago, the company bought a vintage octagon “bank barn” on the south end of Hudson, where it now calls home. The three-story cow barn was built in 1881 and designed with an open center to allow farmers above to feed cattle with a single pitch of the hay. It had been put to many uses throughout the years, as boat storage, an antique auction house, a meeting place for Civil Air Patrol in World War II and the offices of the Smithers-Oasis Co. The historical significance appealed to Polyak and Speaks, of course, but the open concept also provided a “terrific creative space,” Polyak said.

While the founders are reluctant to share financials, Polyak said the company “is growing at a steady pace.” He is currently renovating space in the basement of the bank barn to make room for additional employees, along with a small conference area where IGPR plans to start offering community engagement and crisis communications workshops to small groups of public school administrators.

“We are not looking to be a big agency,” Polyak said. “At best, we want to be a big small agency. Tom and I still want to know every client.”

CRAIN’S CLEVELAND BUSINESS

FIRSTENERGY CONTINUED FROM PAGE 1

Rocco Debitetto, a bankruptcy attorney and partner at Hahn Loeser & Parks in Cleveland, said the case is likely the largest and most complex to be heard in Ohio’s Northern District since LTV Steel filed bankruptcy in the 1980s, “which at the time was the largest bankruptcy in history,” he noted.

Tracy and his colleague, Debtwire senior credit analyst Seth Crystall, are watching the case closely, since it’s one of the largest in the nation currently.

And they’re both among the cadre of observers who were surprised this case was filed, with so few things apparently agreed upon in advance.

They began an April 2 report on the case: “FirstEnergy Solutions Corp. and six affiliates filed for Chapter 11 bankruptcy in Ohio this weekend without a plan — only a hope that the case concludes with either a creditor-backed reorganization or a sale of its assets.”

Later in the week, they elaborated in an interview as to what that likely means.

“As of now, there’s going to be a lot of fighting,” predicted Crystall, who said the case has a host of contentious issues to settle — not the least of which is what to do with FirstEnergy Solutions’ coal and nuclear generation plants. The company may have been waiting — so far, in vain — for government support, rather than successfully working to shed those plants, he said.

“Looking at where it’s headed without government support, who’s going to want to operate nuclear power plants, who’s going to want to operate coal? … I think the answers they’ve gotten back have not been encouraging, but that’s why I think there’s no kind of agreement,” Crystall said.

FirstEnergy Corp. — FirstEnergy Solutions’ largest senior creditor, with about $700 million in debt — said it does not yet have a pro-forma financial statement, which would show what a reorganized FirstEnergy Solutions would look like after the reorganization and address the disposition of some of its assets. FirstEnergy Corp. spokeswoman Tricia Ingraham said

The value of FirstEnergy Solutions’ nuclear power plants, such as this one in Perry Township, is still a moving target. (Crain’s file photo)

the company hopes to have a pro-forma prepared in time for an April 22 conference call with analysts.

The lack of a prepackaged plan did not surprise Debitetto, though he also predicts the case will be long and difficult.

“It’s because there are so many divergent interests here, and it’s difficult to put the ship in a single direction and have everyone want to row in that direction, because it’s such a large crew,” he said.

Tracy said the case will have to address myriad inter-company deals between FirstEnergy Solutions, its parent and other affiliates. That includes things the court may have a tough time deciding, such as the sale and leaseback for the Bruce Mansfield coal-fired plant in Pennsylvania. FirstEnergy Generation Corp., another subsidiary, sold it to investment trusts more than 10 years ago, and FirstEnergy Solutions has been leasing it back. Getting out of that lease would be great for other creditors, but whether that happens will be a tough call, Tracy predicts.

Should the court treat it like a standard real estate lease, which often is vacated or amended in bankruptcy, or is it something else?

“They (the plant’s investors) are not creditors of the company. They are creditors of a trust that bought and then leased back the Bruce Mansfield facility — so they’re a special flavor,” Tracy said.

Additionally, the Mansfield plant’s value, along with the value of FirstEnergy Solutions’ nuclear power plants in Perry Township and Ottawa County, is still a moving target. With reports still circulating after the Chapter 11 filing that President Donald Trump may yet force ratepayers to subsidize those plants, their value is tough to determine.

Some are also concerned about how the court will treat FirstEnergy Solutions’ contracts to provide power directly to large customers. Matt Brakey, a Chagrin Falls-based energy consultant who works with many of the region’s large power users, said he worries whether long-term contracts that lock in power prices will remain in effect, or whether big customers might be asked to pay higher, standard power rates.

“I think, in the short term, anyone who is currently under contract with FirstEnergy Solutions for power is going to be in for a roller coaster ride, because essentially FES is probably going to be trying to find a buyer for its electric generation agreements.

That means that people who are contracting with FES may find their contract being assigned in the coming weeks and months. It’s unclear, if that happens, who that new counter party will be and if it’s a party we’ll feel comfortable with the agreement,” Brakey said.

He added, “We are recommending that customers, particular large cus-

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tomers under contract with FES, con- ees to a host of local nonprofits and sult counsel to explore their options.” other organization it supports — are There will be the finger pointing, too watching anxiously.

FirstEnergy Corp.’s Ingraham had — something that happens in many bankruptcy cases, but that is likely to some encouraging words for those be particularly prevalent with FirstEn- constituents.

“I don’t think there’s any question ergy Corp. and FirstEnergy Solutions.

Environmentalists and others have we will continue to support our combeen gleefully pointing out that man- munities as we always have,” she agement made a bad bet on coal, for said, when asked about the compawhich the company now deserves to ny’s philanthropic activities.

As for employment, she said the suffer, and creditors may blame them as well. Did FirstEnergy Corp. and its company has no current plans to elimsubsidiaries act with necessary care inate jobs in downtown Akron or elseand due diligence when they bet heav- where and noted that FirstEnergy ily on one fossil fuel, only to find out Solutions announced plant closures when it was too late that another would are not set to take place until 2020 and come along and undercut their prices? 2021, assuming there is no government Or should FirstEnergy Corp. have bailout that would keep them open.

She said Akron, though home to allowed FirstEnergy Solutions to draw down $500 million from an in- FirstEnergy Corp.’s headquarters and ter-company credit agreement just its largest concentration of employdays before it filed bankruptcy, leav- ees, need not fear job cuts from the ing its parent as its chief creditor and bankruptcy.

“FirstEnergy Solutions and FirstEnfirst in line to get paid back?

That may have been necessary and ergy Nuclear Operating Co. (the two in the interest of all parties, but still largest bankrupt affiliates) have about will all be looked at, Debitetto pre- 3,000 employees that report through those businesses, and our total emdicted.

“Everything from the sale lease- ployment is around 15,500. A lot of back to the process support agree- those employees are at the plant locament, the standstill agreement and tions, and there are not a large numthe intercompany agreements will be ber in Akron, though there are cerexamined,” Debitetto said. “Just be- tainly some. But for now, we don’t cause something is not that surpris- anticipate any big changes on eming doesn’t mean it shouldn’t be ployment in Akron,” Ingraham said.

Mulligan said FirstEnergy Solutions looked at.”

For their part, FirstEnergy Corp. has only 118 employees in Akron.

In the long run, Ingraham said the and FirstEnergy Solutions are not saying much about the case beyond bankruptcy could provide some security for employees of parent FirstEnertheir court filings.

FirstEnergy Solutions spokesman gy Corp., which views the case and its Thomas Mulligan cautioned against separation from unregulated FirstEnreading too much into the lack of a ergy Solutions as a “milestone” in its prenegotiated plan of reorganiza- quest to again become a fully regulated and profitable utility. tion.

With $2.8 billion in FirstEnergy Solu“We’re at the beginning of the process. Not commenting for now on tions debt off its balance sheet, FirstEnhow it might unfold,” Mulligan said ergy Corp. can focus on making $10 in email correspondence. “As to a billion in planned improvements to (prepackaged deal), why a company the electric grid in Ohio and other might choose that route or might states, Ingraham said — investments choose instead to work with creditors for which it is guaranteed a return.

“We said in 2016 we thought it was in within the Chapter 11 process … we’d just caution against drawing firm the best interest of our customers and conclusions about what one choice our investors to focus on our regulated businesses,” she said. “We think now or the other implies.”

Meanwhile, a lot of people who de- we’re in a better position to provide pend on FirstEnergy Corp. for jobs long-term value for our shareholders CRAIN'S CLEVELAND BUSINESS μ APRIL 9, 2018 μ PAGE 21 and support — from its own employ- and benefit to our customers.”

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A P R I L 9 - 15 , 2 018 |

CRAIN’S CLEVELAND BUSINESS

ANALYSIS

List: Family businesses are growing

By CHUCK SODER csoder@crain.com @ChuckSoder

The companies on our Family-Owned Businesses list have been growing lately.

The 69 companies on the full digital list added roughly 900 full-time equivalent local employees over the past year — a 1.4% increase.

And it’s not one or two companies driving the growth. Of those 69 companies, 44 reported increases in local employment over the past year, while only 14 reported decreases (the rest submitted the same number for both years).

Most of those companies added employees the previous year, too.

Fifty-one of the 69 companies have submitted numbers for each year going back to 2015, when we first published the list. Their total local employment dropped by 0.5% in 2016 (mainly because of significant decreases at a few companies).

Since then, however, they’ve increased headcount by a total of 3.3%.

Companies outside the top 20 have generally grown faster since 2015, on a percentage basis. But a few of the bigger companies did help beef up the numbers this year.

Ganley Auto Group (No. 3 on the

Growing family The companies on our Family-Owned Businesses list have been growing lately. Here are the local, full-time equivalent employment numbers for the 51 companies that have submitted data from 2015 through 2018:

2018: 54,851 2017: 54,116 2016: 53,121 2015: 53,396 Find the list of Northeast Ohio family-owned businesses on page 18

list) jumped from 1,476 local employees last year to 1,773 this year.

The auto dealer grew organically in 2017, but it also bought two dealerships in Northeast Ohio: Central Cadillac and Baumann Auto Group.

The story was similar for Car Parts Warehouse (No. 15), which jumped from 410 local employees to 525. The Brook Park-based company acquired Lake County Parts Warehouse Inc. last year. It also hired 60 people who had been temporary employees at a local distribution center.

Three of the top 10 companies on the list — Minute Men (No. 1), Area Temps (No. 2) and Reserves Network (No. 8) — are staffing firms. Most of their employees work on behalf of other companies.

Otherwise, the top 10 is dominated by consumer-facing companies like Ganley, Fred W. Albrecht Grocery Co. (No. 5), restaurant franchisee Covelli Enterprises (No. 7) and Dave’s Supermarkets (No. 10).

Manufacturers — including those that make food products — are well represented throughout the rest of the list (the biggest one being Vitamix at No. 11).

Only four companies were founded after 1990. The newest is Constantino’s Markets, founded in 2004.

ADVERTISING SECTION

TOMMY’S CONTINUED FROM PAGE 7

“One of the guys looked at me and said, ‘Buddy, if you don’t increase your prices fast, you’re going to go out of business!’ That’s when I started to learn,” he said.

“Sometimes I’ll get a customer come right up to me and ask, ‘How can you charge $5 for potatoes?’ Well, you know, it hurts me to raise a price, but I have overhead. My electric bills can run $5,000, $6,000 a month.

There’s a cost of doing business, and over the years I’ve learned if you don’t raise the prices when you have to, you’ll soon be out of business.”

Still, Fello’s commitment to Coventry’s hippie spirit built Tommy’s menu and fed the restaurant’s growth.

“Listening to the people and giving them what they wanted made the place a success,” he said. “I don’t think I’ve ever said no to a customer, really. Having an open mind goes with my generation.”

Look over Tommy’s menu — a vast puzzle of dishes, with some self-describing classics and others bearing funky names — and you see further reflection of his customers’ personalities.

“So you see the IRS pie on the menu and you may think it stands for Internal Revenue Service,” Fello said. “Actually, it’s shorthand for a spinach pie with cheese and mushrooms, named for Ira Robert Schwartz, who walked over every day after he played basketball and ordered the same thing.”

Despite a reputation for generous

burgers, excellent fries and a big array of Middle Eastern dishes with meat, about 75% of the offerings are vegetarian or vegan — again, the result of customer demand. And to honor customer demands, meatless dishes are prepared using separate grills, fryers and cooking equipment.

Fello, who has five daughters and 10 grandchildren with his wife, Cindy, feels that respecting customers’ dietary beliefs and sharing food together are essential to the nation’s social fabric.

“It goes back to giving customers what they want,” said Fello, 65. “You know, I didn’t really set out to be a ‘family’ restaurant, but back in the days when the hippies would order something without meat, their parents came in and still wanted meat.

“I feel it’s important that families can eat together, get what they want, and order it the way they want it,” he added. “I think if there’s one thing wrong with this country, it’s that we’re losing our time together eating as families. That’s so important.”

In his first year of business, sales were $68,000. Today, Fello said, “We’re well over $1.5 million.”

“I’m very proud of that. When I first took over and went to ring out the old non-electric cash register, I was hoping it was more than $34 or $35 a day.

If it was $50, I was doing cartwheels! I was working 7 a.m. to midnight six days a week, and playing four games of softball on my day off. I wasn’t making any money, but I still loved it.

“These days, people come in and say, ‘Tommy, you’re an institution.

And I tell them, ‘I think you mean I should BE in an institution!’ ”

MBA

WEATHERHEAD SCHOOL OF MANAGEMENT

www.crainscleveland.com/onthemove

To place your listing or for more information, please call Debora Stein at (212) 210-0274 or email dstein@crain.com

CONSTRUCTION

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REAL ESTATE

KNOW SOMEONE ON THE MOVE? Lauren Rudman

Ed Matzules

Aaron Davis

Director of Human Resources

Senior Advisor

Associate Advisor

Donley’s Inc.

SVN Summit Commercial Real Estate Group, LLC

SVN Summit Commercial Real Estate Group, LLC

Ed Matzules joins SVN Summit Commercial Real Estate Group, LLC in Akron as a Senior Advisor. He has been involved in Northeast Ohio Commercial Real Estate for more than 30 years with specializing in the areas of Industrial, Office, Healthcare, Land and Business Development. Ed graduated from Ohio State University.

With his strong performance and background, we are confident he will be a strong addition to SVN Summit Commercial Group, LLC.

Aaron Davis joins SVN Summit Commercial Real Estate Group, LLC in Akron as a new Associate Advisor. He comes to SVN Summit Commercial Real Estate Group, LLC with an extensive background working in the Commercial Industry, Land Development and Property Management.He will be concentrating on the development and implementation of new business and sales plans, emphasizing on Land and Office in the Summit County area. Aaron is a welcome addition to SVN Summit Commercial Real Estate Group, LLC.

Donley’s welcomes Lauren Rudman as our new Human Resources Director. Lauren was previously the Human Resources Manager at Pentair. She is a past President of the Cleveland Society of Human Resource Management. Other board positions include Engage! Cleveland, LEAP, Malachi House, and CSU Alumni Association. Lauren obtained her Bachelor’s degree from Miami University in Business Administration and her Master of Labor Relations and Human Resources from Cleveland State University.

For more information or questions regarding advertising in this section, please call Debora Stein at (212) 210-0274 or email: dstein@crain.com

CRAIN’S CLEVELAND BUSINESS

Source Lunch

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A P R I L 9 - 15 , 2 018

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PA G E 2 3

John Sankovic

Chief technologist, NASA Glenn For years, NASA Glenn Research Center would do maybe one or two licensing deals per year — deals that let companies use space technology to create products for use here on Earth.

Then, in 2015, the center did eight deals. In 2016, it did 23 deals, and last year it did 12 more. So what happened? Four years ago, when John Sankovic was put in charge of NASA Glenn’s tech transfer office, then-center director Jim Free wanted the center to do more tech transfer deals. So NASA Glenn ramped up efforts to market its technologies. The center also started promoting special evaluation licenses that let companies work with technologies before paying for full licenses. And the center started offering licenses that let startups avoid paying royalties for a few years. Those efforts paid off. “We did more licenses than any NASA center ever has in that year (2016),” said Sankovic, who is also tasked with promoting innovation throughout NASA Glenn. But issuing more licenses isn’t enough: Sankovic also wants to figure out what else NASA Glenn can do to help local companies create jobs. — Chuck Soder

Five things Least favorite Olympic sport “I thought there was too much curling in the last Olympics.”

Highly educated Sankovic has three master’s degrees. Not to mention a bachelor’s and a Ph.D. All are engineeringrelated, other than his MBA.

Not all that geeky NASA Glenn employees probably don’t like “Star Wars” and “Star Trek” more than the general public. “But what they realize is that those type of science fiction movies can become reality.”

On licensing patents It’s usually not enough. “The IP sits in the inventors’ heads. How do we get the technology from the inventor’s mind and into the hands of the entrepreneur — really get them to work together?”

No time for pets “I like dogs, but it’s just too much. It’s not fair to the dog.”

Lunch spot 100th Bomb Group 20920 Brookpark Road, Cleveland

The meal Fish and chips with an iced tea for one; chicken pesto sandwich with fries and a Diet Coke for the other.

The vibe The restaurant was founded by David Tallichet, a World War II pilot who served in the original 100th Bomb Group. Thus, memorabilia from the war covers the restaurant’s walls.

The expansive venue bills itself as an event destination with cozy fire pits and sweeping views of Cleveland Hopkins International Airport.

The bill $38.88 plus tip

How much potential is there for NASA Glenn to serve as an engine for economic development?

We’ve done a great job in the hardcore engineering and technology development we’ve been assigned to do. But I think we’ve looked a little below the fence line. We’ve kept our pencils sharp and down on our notepads. We haven’t really looked up above the gate. What I don’t see at our center that you see in places like Huntsville, Ala., is the growth of the companies all around the ring. ...

What motivates me is how could that change?

Have you ever thought about taking a page out of the Cleveland Clinic book and doing more spinout companies?

The difficulty is federal regulations. We really don’t have the resources or the authority to provide venture funding.

And you might not be able to take equity.

We cannot. When we invest in a technology, we’re not looking to take an equity share to recoup our investment. ... Part of that limits how far we can take a technology in development. If it’s for our own use, we’ll certainly develop it. But we’re not going to keep developing a technology for, you know, athletic wear. Which could be a huge market, so we’d really love to have that partner. That’s been a challenge, because some of the technologies do need that bridge funding.

What NASA Glenn technology excites you the most?

The work we’re doing with shape memory alloys. You see them deform, you put them in hot water and they swing right back. But the experts at NASA Glenn can really design that alloy for the application.

Now they’ve started making tires out of shape memory alloys. ... They actually put them on a Jeep — one of the researcher’s Jeeps. They drove it.

Part of your job is to take a group of a few thousand people and get them to think outside the box.

Any tips for readers facing that same challenge?

There’s always something you can learn from everyone. It’s not just one group that’s responsible for innovation. ... It’s important that leaders take the time to listen to all levels of the

organization, and that people feel comfortable sharing their ideas.

Did you imagine that you would end up sticking around at NASA Glenn for 31 years?

I don’t think you ever do when you’re 19 years old. Although I’ve been at the same place, I haven’t done the same thing. There’s no way I could do the same thing for 31 years.

What are your passions outside of work?

I really enjoy the Cuyahoga Valley National Park. I live in Brecksville, so the park’s a big part of what’s around. I work at this federal lab next to the airport. I pass by the steel mills. Then when I get home I can have bald eagles, otters right out there. I have three kids. They’re older now. One has a disability, so that takes up a lot of time for my wife and myself. She has cerebral palsy ... Every time I enter a room, I’m looking at accessibility. Part of that is, we had to make our own home accessible. That was a big effort for many years. We had one of those TV show lives where your roof gets ripped off your family room. But it really helps change your perspective.

For example, with shape memory alloys, I’m always thinking about, “These wheels are good for off road.”

There are no good wheelchairs that can go off road. ... It would be great if entrepreneurs would be willing to take some of the technologies around and apply them to those types of areas.

What did you think of “The Martian?”

I read the book and I saw the movie.

It was pretty good. I was keeping a scorecard of which technologies he’s using that we’re developing here.

That was kind of cool. The power system he digs up, the radioisotope power system, that is something we have responsibility for here in Cleveland. ... Some of the things he’s doing are not so crazy. You had to have probably 40 things work together sequentially to survive, and he made it all work.

He had the advantage of ...

It was a movie (laughs).

Was it worth the risk for the astronauts to go back to save Mark Watney?

Those are big policy questions.

That’s above me. I would hope if it was me they’d come for me.

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