The Franchise Edge Also in this Issue: • Julee’s Jewelry • Q Computers • Parties & Weddings Plus
and the winners are...
sPecial secTions 2nd Place
125th Commemorative Edition
Tanner KenT 1sT Place
BesT Use of social media
Arts & Entertainment: Special Feature on the Gestures
2nd Place
Tim Krohen
2012
2nd Plac
Reporting Investigative f farmland o ts c e ff a e on th the draignage on iver Minnesota R
oPinions Page 3rd Place
ing ediTorial WcreiT 3rd Pla
PhoTograPher John cross
general rePorTing
eron on Feature photo of a h Crystal lake
Offering our subscribers well-written stories on issues imporant to locals.
2nd Place
www.mankatofreepress.com
3rd Place
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Brochures Annual Reports Catalogs Magazines Posters Hard and Soft Cover Books Direct Mail and More!
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F E A T U R E S March 2013 • Volume 5, Issue 6
■
14
The ins and outs of franchises
Buying into a franchise takes considerable risk out of a business by offering a tested system, a well-known brand name, national marketing and a vendor system. But a franchise doesn’t eliminate the need for business skills and hard work.
■
24
Julee’s Jewelry
Julee Johnson realized her dream when she opened a jewelry shop in St. Peter. While she finds fulfillment in her job, Johnson has faced extraordinary challenges recently, as she lost a son and is battling cancer.
■
■
22
Special Focus: Employee selection
Annie Bennett, sales account manager for Jeane Thorne in Mankato, says businesses that are most effective in hiring use a team approach between human resources staff and hiring managers.
28
Q Computers
Mark and Susan Broman have taken Q Computers from a retail and repair store to a multi-service company that includes Web design and hosting, networking and IT services for businesses, and computer training classes.
MN Valley Business • March 2013 • 3
D E P A R T M E N T S ■
■
From the Editor................................. 6
20
Joe Spear: People behind the numbers
■ Business Commentary.................... Peter Olson and Charlie Weaver
Job trends......................................... 8
■
Construction, real estate trends....... 9
■
Regional, state unemployment information ■
Jack M. Geller: New message for a new time
Retail trends....................................10
Greater Mankato Growth................38 2012: More growth for Greater Mankato
■
Auto sales, retail sales and hotel business ■
Agriculture Outlook.........................12
■
Kent Thiesse: Crop prices will weaken ■
Agribusiness trends........................13 Area commodity prices
■
Minnesota Business updates.........18
Johnson Outdoors turns to profit, Fastenal vending sales grow, Hutchinson Technology reports another loss, and more
Business and Industry trends........36 Following the trends
Building permits, housing starts, home prices, interest rates ■
Regional Outlook.............................34
Greater Mankato Growth Member Activities . ........................40 Groundbreakings, new businesses, relocations and expansions
Local Business memos/ Company news................................44 Dehen honored, Olsen back at Pioneer Bank,
■
Nesvold honored, and more.
On the Cover: Kevin Bores has been successful in a number of franchises over the years, most recently with Jersey Mike’s gourmet sub shops. Photo by Pat Christman
4 • March 2013 • MN Valley Business
there for
you
Tom Evensvold
Steve Olson
Mark David Thompson Monson
Many have trusted MinnStar Bank’s personal service to help them build and grow their businesses—and we can do the same for you.
Downtown Mankato 507-625-6816 Lake Crystal 507-726-2137
BUSINESS BANKING www.minnstarbank.com Member FDIC
MN Valley Business • March 2013 • 5
March 2013 • VOLUME 5, ISSUE 6 PUBLISHER James P. Santori EXECUTIVE Joe Spear EDITOR ASSOCIATE Tim Krohn EDITOR CONTRIBUTING Jack M. Geller WRITERS Tim Krohn Pete Steiner Peter Olson Charlie Weaver Kent Thiesse Marie Wood PHOTOGRAPHERS Pat Christman John Cross COVER PHOTO John Cross GRAPHIC Jenny Malmanger DESIGNER PAGE DESIGNER Christina Sankey ADVERTISING David Habrat MANAGER ADVERTISING Karla Marshall sales ADVERTISING Barb Wass ASSISTANT ADVERTISING Sue Hammar DESIGNERS Christina Sankey CIRCULATION Denise Zernechel DIRECTOR
For editorial inquiries, call Tim Krohn at 507-344-6383. For advertising, call 344-6336, or e-mail kmarshall@mankatofreepress.com. MN Valley Business is published 12 times a year at 418 South 2nd Street Mankato, MN 56001.
People behind the numbers add up for a region
I
t seems a growing number of reports suggest the Mankato/North Mankato region is performing like the quintessential Minnesotan made famous by humorist Garrison Keillor. We’re above average. To note: A report on job growth comparing the Mankato/North Mankato Metropolitan Statistical Area (MSA) shows Mankato job growth at a robust 7.5 percent from 2002 to 2012, far ahead of our regional center competitors. St. Cloud was second in the state with 6.1 percent job growth while Rochester had 1.9 percent job growth, Minneapolis 1.6 percent and Duluth was down 1.5 percent. Greater Mankato Growth, in its 2012 annual accounting of some basic economic indicators, reported gains in areas from the number of businesses, total payroll and average weekly wage. Those indicators were up 1.6 percent, 6.2 percent and 2.6 percent. GMG also reported other softer ranking measures. Forbes ranked the area 11th in Best Small Places for Business and Careers of all places with populations under 250,000. (The Mankato/North Mankato MSA currently includes about 97,000 people). Forbes measures job growth, cost of doing business and cost of living as well as income growth, educational attainment and quality of life. With so many kudos, it’s useful to ask, quoting a famous Talking Heads tune: “How did we get here.” The usual answers make sense and have been oft cited. We have a diverse economic base with growth engines like health care, higher education and a solid manufacturing as well as a regional retail center and service hub. But I like to think it’s also nononsense business people including a few showing up in this month’s Minnesota Valley Business that help drive the area’s success. Take people like Kevin Bores, a guy who didn’t go to a real fancy college (Bowling Green State) and a guy who doesn’t appear to shy away from hard work, calculated risk and has no romantic notions about the business of business. This month’s feature on franchising is
6 • March 2013 • MN Valley Business
By Joe Spear a fascinating business story. It’s part a dissection of the American dream, part lesson of the harsh realities of doing business in the year 2013. Bores might be called the godfather of Mankato’s franchise businesses. He was the first to bring Domino’s pizza franchise to Mankato, the first Subway, the first BW3 (now called Buffalo Wild Wings) and the first Jersey Mike’s. So, far it doesn’t look like he ever fell on the negative side of those statistics for business startup failures. Tim Krohn writes that Bores is “quick to dispel any romantic notions about owning a restaurant and is blunt about the limits of what a franchise will do for you.” Says Bores: “If you don’t have the management skills and business skills, you won’t make it whether it’s a franchise or not. People romanticize owning a restaurant. There’s nothing romantic about it — you keep your nose in spreadsheets all the time,” Bores said. “There’s a myth the franchise is going to train you and prop you up and be there for you. I’ve never seen that. They want your money, and if you fail, they have a guy down the road who’ll buy it for 20 cents on the dollar who will run it right.” So, in a way, a solid entrepreneurial culture can do just as much for an area’s economy as highly educated people and a good quality of life. MV Joe Spear is executive editor of Minnesota Valley Business. Contact him at 344-6382 or jspear@mankatofreepress.com
Read us online!
keep them healthy and happy. occupational medicine services Mankato Clinic Urgent Care @ Adams Street is your provider of Occupational Medicine Services. Our staff will collaborate with you to help manage risk factors, keep your employees healthy and happy and get them back to work quickly and safely after an injury. No appointment is necessary for most examinations. Just walk in for prompt, professional service. For additional information call 507-385-4075 or visit www.mankatoclinic.com
Urgent Care Hours of Operation: Monday - Friday from 8 a.m. - 8 p.m. Saturday from 8 a.m. - 5 p.m. Sunday 11 a.m. - 5 p.m.
Initial unemployment claims
Minnesota initial unemployment claims
Nine-county Mankato region
Major industry
January
Construction Manufacturing Retail Services Total*
’12
’13
Percent change ’12-’13
484 441 140 330 1,395
455 369 85 301 1,210
-6% -16.3% -39.3% -8.8% -13.3%
2011
2012
130,000
110,000
1,000
A
M
8,425 4,784 2,632 8,733 24,574
7,854 4,030 2,280 7,901 22,065
-6.8% -15.8% -13.4% -9.5% -10.2%
2011
J
J
A
Local number of unemployed
S
O
N
2011
D
2012
Nine-county Mankato region
J
F
M
A
M
J
J
A
S
O
N
D
Minnesota number of unemployed 2011
6,826 7,139
10,000
0
2012 2,803.2 2,781.6
3,000 2,000
M
Percent change ’12-’13
Minnesota non-farm jobs
120,000
F
’13
(in thousands)
125,509 127,757
J
’12
Services consist of administration, educational, health care and social assistance, food and other miscellaneous services. *Categories don't equal total because some categories not listed.
Nine-county Mankato region
100,000
January
Construction Manufacturing Retail Services Total*
Services consist of administration, educational, health care and social assistance, food and other miscellaneous services. *Categories don't equal total because some categories not listed.
Local non-farm jobs
Major industry
2012
161,003 168,484
225,000
8,000 200,000
6,000 4,000
175,000
2,000 0
J
F
M
A
M
J
J
A
S
O
N
December
2011
Unemployment rate
4.6%
4.4%
55,059
55,885
2,698
2,542
2012
Source: Minnesota Department of Employment and Economic Development
8 • March 2013 • MN Valley Business
J
F
M
County/area
(includes all of Blue Earth and Nicollet Counties)
Number of unemployed
150,000
A
Unemployment rates
Mankato/North Mankato Metropolitan statistical area
Number of non-farm jobs
D
Blue Earth Brown Faribault Le Sueur Martin Nicollet Sibley Waseca Watonwan Minneapolis/St. Paul Minnesota U.S.
M
J
J
A
S
O
N
D
Counties, state, nation Dec. 2011 Dec. 2012 4.6% 5.0% 5.9% 8.0% 5.2% 4.5% 6.0% 5.6% 5.6% 5.5% 5.8% 8.3%
4.4% 5.0% 5.7% 7.6% 5.0% 4.2% 5.7% 5.7% 5.4% 5.1% 5.4% 7.6% J. Malmanger
Residential building permits Mankato 2011
$10,000
2012
(in thousands) $2,256.2 $5,715.5
Residential building permits North Mankato (in thousands)
2011
$3,000
$0 $295.9
2012
$8,000 $2,000
$6,000 $4,000
$1,000
$2,000 $0
J
F
M
A
M
J
J
A
S
O
N
D
Source: City of Mankato
J
F
M
A
M
J
J
A
S
O
N
D
Source: City of North Mankato
Existing home sales: Mankato region 2011
2012
250
Information based on Multiple Listing Service and may not reflect all sales
116 99
200
Housing starts: Mankato/North Mankato 2011
Includes single family homes attached and detached, and townhomes and condos
2012
40
6 1
30
150
20
100
10
50 0
$0
J
F
M
A
M
J
J
A
S
O
N
D
Commercial building permits Mankato $9,000
J
F
M
A
M
J
J
A
S
O
N
D
Source: Cities of Mankato/North Mankato
Source: Realtors Association of Southern Minnesota
2011
0
(in thousands) $1,171.4 $1,308.8
2012
Commercial building permits North Mankato (in thousands) $12,000
2011
$0 $121.3
2012
$9,000
$6,000
$6,000 $3,000 $0
$3,000 J
F
M
A
M
J
J
A
S
O
N
D
2011
County
2012 3.9%
5.0% 4.5% 4.0%
3.3%
3.5% J
F
M
Source: Freddie Mac
F
Foreclosures:
Interest rates: 30-year fixed-rate mortgage
3.0%
J
M
A
M
J
J
A
S
O
N
D
Source: City of North Mankato
Source: City of Mankato
5.5%
$0
A
M
J
J
A
S
O
N
D
Blue Earth Brown Faribault Le Sueur Martin Nicollet Sibley Waseca Watonwan
2012 third quarter 2011 2012 45 24 6 28 11 9 12 10 6
24 11 14 23 12 13 13 11 6
Percent change -47% -54% +133% -18% +9% +44% +8% +10% 0%
Source: Minnesota Foreclosure Partners Council J. Malmanger
MN Valley Business • March 2013 • 9
Vehicle sales
Sales tax collections
Mankato — Number of vehicles sold 702 2012 663
2011 1,200
Includes restaurants, bars, telecommunications and general merchandise store sales. Excludes most clothing, grocery store sales.
$395.3 $382.5
$500
1,000
$400
800
$300
600 400
$200
200
$100
0
Mankato 2011 2012
(In thousands)
J
F
M
A
M
J
J
A
S
O
N
$0
D
Source: Sales tax figures, City of Mankato
Lodging tax collections 2011
$50,000
2012
J
F
M
A
M
J
J
A
S
O
N
D
Source: Sales tax figures, City of Mankato
Mankato food and beverage tax
Mankato/North Mankato $24,143 $26,234
2011
$75,000
$55,169 $44,650
2012
$40,000 $50,000
$30,000 $20,000
$25,000
$10,000 $0
J
F
M
A
M
J
J
A
S
O
N
Source: City of Mankato
D
$0
J
F
M
A
M
J
J
A
S
O
N
D
Source: City of Mankato J. Malmanger
Gas prices-Mankato 2013
2012
$4.00
$3.79 (2013)
$3.00
$3.45 (2012)
$2.00 $1.00 $0
J
F
M
A
M
J
J
A
S
O
N
D
Gas prices-Minnesota 2013
2012
$4.00 $3.00 $2.00
Jan. 14
Feb. 14
Archer Daniels
$28.29
$31.40
+11%
Ameriprise
$64.76
$69.04
+6.6%
Best Buy
$14.34
$15.71
+9.6%
Crown Cork & Seal
$38.00
$39.78
+4.7%
Fastenal
$47.00
$52.49
+11.7%
General Growth
$18.09
$19.80
+9.5%
General Mills
$40.80
$44.31
+8.6%
HickoryTech
$9.50
$9.56
+0.6%
Hutchinson Technology
$2.35
$2.99
+27.2%
Itron
$44.65
$43.51
-2.6%
Johnson Outdoors
$21.44
$21.83
+1.8%
3M
$97.01
$102.78
+5.9%
$3.44 (2012)
Target
$60.69
$63.09
+4%
U.S. Bancorp
$33.36
$33.99
+1.9%
Wells Financial
$18.60
$19.20
+3.2%
$0.89
$0.72
-19.1%
$27.03
$27.89
+3.2%
Winland J
F
M
Percent change
$3.74 (2013)
$1.00 $0
Stocks of local interest
A
M
J
J
A
S
O
Source: GasBuddy.com
10 • March 2013 • MN Valley Business
N
D
J. Malmanger
Xcel
J. Malmanger
507-625-4606 121 E. Main St. Ste 311 Mankato, MN 56001
Professional resources to help grow your business AUTOMOTIVE Jerry’s Body Shop, Inc. 1671 Madison Avenue Mankato, MN 56001 507-388-4895 www.asashop.org/member/jerrys
MEDICAL Mankato Clinic 1809 Adams Street Mankato, MN 56001 507-385-4075 www.mankatoclinic.com
For information on including your service to this directory, please contact
507-344-6390
MN Valley Business • March 2013 • 11
The looming price risk for commodities
I
f you go to almost any rural community and ask someone what the current cash corn price is, you are likely to get a response of “somewhere between $7 to $8 per bushel.” You may even get that response from some farmers who have not been following the grain markets closely in recent weeks. We have kind of been drawn into a mentality that corn prices of $6 to $8 per bushel are the new normal, but that type of thinking could change quite dramatically in the coming years. During the first six weeks of 2013, local cash corn prices remained near or above $7 per bushel for 2012 corn that was stored but not yet priced. However, local corn prices have started to drop in recent weeks, dropping 3035 cents per bushel during the first two weeks of February with a reduction of nearly $1 per bushel from the highest cash corn prices for the 2012 crop. A large amount of 2012 corn that is stored on farms already has been forward priced for delivery later this spring or summer. The average market price on 2012 corn for most producers will likely not be above $7 per bushel, as a lot of corn was forward priced before the effects of the 2012 drought caused prices to increase sharply by late summer; however, most average 2012 corn prices should be above $6 per bushel. Local cash soybean prices also have shown a sharp drop in prices in recent weeks, dipping to below $14 per bushel by mid-February, which is still a strong price level. Local soybean prices had dropped by 60-65 cents per bushel from Feb. 1 to mid-February with a reduction of more than $3.50 per bushel from the highest prices for 2012 soybeans. Most farmers have forward priced a large portion of the soybeans and have very few 2012 soybeans in inventory to be sold in 2013. USDA is estimating U.S. on-farm corn prices for the current 2012-13 marketing year (September to September) to average $7.20 per bushel. By comparison, the average corn for
the 2011-12 year was $6.22 per bushel, and was $5.18 for 2010-11. Soybean market prices for the 2012-13 marketing year should average $14.30 per bushel. The price for soybeans for 2011-12 was $12.50 and was $11.30 for 2010-11. The biggest concern with the recent drop in corn and soybean prices is for the 2013 crop year and beyond. Many farm operators, suppliers, landlords, and others are making future crop budgets assuming the crop price levels of the past couple of years will continue. There is a lot of evidence to suggest this may not be the case. As of midFebruary, the local new crop price for 2013 corn had dropped to below $5.25 per bushel, and new crop 2013 soybean prices to below $12.25 per bushel. These are still profitable price levels for most producers but certainly edge must closer to break-even price levels for many producers. The break-even cost of producing corn at “trend line” yields will likely be close to $5 per bushel for many producers in 2013 and near $12 per bushel for soybeans. Breakeven price levels could rise even higher for producers that experience reduced crop yields in 2013 or for farm operators with higher than normal land costs. The expected 2013 break-even prices compare to just over $3.50 per bushel for corn and near $8 per bushel for soybeans as recently as 2008. Cash rental rates for farm land have increased dramatically in the past two years in many areas of the Upper Midwest and can be a large variable in the producer break-even prices for corn and soybean production across the region. In the latest USDA long-term agricultural projections for the next 10 years (2013-2022) that were recently released, USDA is projecting a sharp decline in average corn and soybean prices in the coming years. USDA is estimating an average U.S. on-farm corn price of $5.40 per bushel, and an average soybean price of $11.35 per bushel for the 2013-14
12 • March 2013 • MN Valley Business
Agricultural Outlook
By Kent Thiesse marketing year, which will be for the crop produced in 2013. USDA is projecting the average on-farm corn price to drop to $4.10 per bushel for the following year, while estimating on-farm soybean prices to average only $10.35 per bushel for the 2014-15 marketing year. USDA is estimating average onfarm prices for the next decade (2013-2022) to be near $4.65 per bushel for corn and near $11 per bushel for soybeans. The consistently high cash price levels for corn and soybeans in 2011 and 2012 have made grain marketing decisions pretty easy. By contrast, if we return to the price levels in the next few years that are being projected, there will be a premium for the farm operators that have solid grain marketing in place as part of an overall farm risk management strategy. MV Kent Thiesse is a farm management analyst and vice president, MinnStar Bank, Lake Crystal. He can be reached at (507) 381-7960 or kent.thiesse@minnstarbank.com
Corn prices — southern Minnesota 2013
2012
$8.00
Soybean prices — southern Minnesota
(dollars per bushel)
$6.94 $6.20
$12.00
$4.00
$4.00 J
F
M
A
M
J
J
A
S
O
N
D
Source: USDA
$100.00
$80.00
M
A
M
J
J
A
S
O
N
D
$70.00 F
M
A
M
Minimum prices, class I milk Dollars per hundredweight
2013 $20.77
$22.00 $20.00 $18.00
$82.48
Source: USDA
F
2012
$24.00
$85.61
$90.00
J
J
Milk prices
185 pound carcass, negotiated price, weighted average
2013
2012
$110.00
$0
Source: USDA
Iowa-Minnesota hog prices
$60.00
$12.07
$8.00
$2.00 $0
$14.00
$16.00
$6.00
2013
2012
$20.00
(dollars per bushel)
$20.60
$16.00 J
J
A
S
O
N
D
$14.00
J
F
M
A
M
J
J
A
S
O
N
D
Source: USDA. Based on federal milk orders.
Corn and soybean prices are for rail delivery points in Southern Minnesota. Milk prices are for Upper Midwest points.
J. Malmanger
(507) 625-4171 | www.bolton-menk.com MN Valley Business • March 2013 • 13
Kevin Bores has been successful in a number of franchises over the years. His most recent venture is the Jersey Mike’s gourmet sub shop in Mankato.
Franchise advantage Less risk, but no guarantee of success
By Tim Krohn | Photos by John Cross/Pat Christman
F
ew people have been as successful as Kevin Bores in buying into the right franchise at the right time and growing them into successful chains. He brought the first Domino’s pizza franchise to Mankato, the first Subway sandwich shop, the first BW3 Buffalo Wild Wings restaurant and the first Jersey Mike’s. While he believes in the benefits a franchise brings to an
14 • March 2013 • MN Valley Business
entrepreneur, he’s quick to dispel any romantic notions about owning a restaurant and is blunt about the limits of what a franchise will do for you. “If you don’t have the management skills and business skills, you won’t make it whether it’s a franchise or not. People romanticize owning a restaurant. There’s nothing romantic about it — you keep your nose in spreadsheets all the time,” Bores said.
Cover Story
Chris Kunst prepares a sub sandwich at Jersey Mike’s, which features subs they say are realistic to the east coast originals. “There’s a myth the franchise is going to train you and prop you up and be there for you. I’ve never seen that. They want your money, and if you fail, they have a guy down the road who’ll buy it for 20 cents on the dollar who will run it right.” Despite the sober analysis, Bores has shown that with an eye on trends, a head for business and a strong work ethic, franchise ownership can be rewarding and fruitful. Mike Nolan, director of the Small Business Development Center at Minnesota State University, said perhaps the biggest benefit of a franchise is the groundwork that has been done for you. “It takes the operational aspects of running a business and makes it instantaneous. A franchise gives you a tested system,” Nolan said. Mike Welch, who owns a Minneapolis company that helps people find a franchise that fits them, puts it this way: “Can you make a better hamburger than McDonald’s? Sure you can. Will there be a line at your door to buy your hamburgers? No. It’s not in the burger, it’s the rest of the research and development,” said Welch of FranNet. The next big thing Bores, 59, traces some of his success to his college days when he was looking for an easy class to take at Bowling Green State University. “I took a pop culture class. One of the things that fascinated me was about what was trending in culture. Something got popular and you couldn’t lose money on it, and then it might crash.” That fascination led him to look for niches to fill in the restaurant market. Born in Anchorage, Bores didn’t come from an entrepreneurial family, but from a military family that moved around the country, and he had no intention of owning a business. He went to work for Domino’s to earn enough money to take the entrance test to go to law school but instead saw an opportunity to own a Domino’s. He chose Mankato in part because he knew a Domino’s assistant manager who was an ex-MSU student. He opened the city’s first Domino’s franchise in the Village East Center near East High School
Mike Welch
in 1980. He and partners went on to own 12 Domino’s in Minnesota and Kansas City, Mo., before he sold his interests. “I always keep my eye on trends, where the holes are in the market — looking for what’s next. “I grew up on the East Coast and I thought, why aren’t there sub chains here? Subway was small and on the move.” In 1984 he opened Mankato’s first Subway franchise, also at Village East, and went on to open others with partners, eventually selling his stake in those in 1994. That’s when a friend called him about a restaurant now called Buffalo Wild Wings. “I knew there was nothing like it in the market. Sports bars were just starting. BW3 had about a dozen stores in the country, I visited them all except a couple.” He built a partnership and opened the BW3 in the downtown mall. “We got good rent and we were banking on the (new) civic center.” Bores later sold his interest in what is now Buffalo Wild Wings on his way to his next trending venture. “Five or six years ago this trend started in the burger segment called ‘better burger.’ It’s not quick, fast burgers. It’s higher quality burgers like Five Guys.” The trend played out with other types of food — Chipotle rather than Taco Bell — and Bores saw an opening in the sub sandwich market. “I looked at the sub market and there was nothing out there similar. I looked at a few (franchises) and thought Jersey Mike’s was in the best position to grow. It’s a great concept, great product, authentic subs,” he said. “People from the East Coast, they’ll tell you the way we make subs is the way you are supposed to make subs.” He and partners opened Jersey Mike’s 18 months ago in a strip mall in front of Gander Mountain. They are opening a second location this spring downtown in the old Blockbuster building. While his franchise history runs deep, Bores also had experience in the ‘90s running an independent restaurant — The Creamery in the small town of Otisco in Waseca County. In the end, it was the one business he couldn’t make successful. “It was a neat place. The problem was you need a really strong kitchen and really strong management, and I couldn’t
MN Valley Business • March 2013 • 15
Top franchises Here are the 30 top franchises for 2012, according to an annual survey by Entrepreneur’s magazine. The list is created by looking at a franchise’s financial strength and stability, growth rate, size of the system, years in business, litigation, percentage of terminations and whether the company provides financing. Hampton Hotels knocked Subway off the top spot three years ago and remains the No. 1 franchise.
Franchise
Startup cost
1. Hampton Hotels
$3.7 - 13.5M
2. Subway
$85 - 260K
3. 7-Eleven
$31K - 1.64M
4. Servpro (cleaning after fires/disasters)
$133K - 181K
5. Days Inn
$187K - 7M
6. McDonald's 7. Denny's
$1M - 2.2M $1.18M - 2.4M
8. H & R Block 9. Pizza Hut
$32K - 139K $295K - 2.15M
10. Dunkin' Donuts
$375K - 1.6M
11. Anytime Fitness
$56K - 354K
12. Stratus Building (commercial cleaning)
$3K - 58K
13. Jazzercise
$3K - 77K
14. Supercuts Salon
$104K - 197K
15. Jiffy Lube
$197K - 304K
16. ampm (convenience store)
$1.8M - 7.8M
17. KFC
$1.3M - 2.5M
18. Kumon Math & Reading
$70K - 147K
19. Miracle-Ear
$123K - 450K
20. Taco Bell
$1.3M - 2.5M
21. Aaron's (electronics, computers)
$264K - 693K
22. Jimmy John's
$306K - 488K
23. Dairy Queen
$780K - 1.7M
24. Circle K (convenience store)
$173K - 1.4M
25. Liberty Tax
$57K - 70K
26. Matco Tools
$83K - 222K
27. Papa Murphy's
$216K - 381K
28. Snap-on Tools
$19K - 296K
29. Ace Hardware
$750K - 1000K
30. CleanNet USA
$9K - 98K J. Malmanger
do it because I was running other places. “Getting that combo of expertise in Otisco was tough and it just fell apart on me.” Bores said the difference between starting from scratch — even with his experience — and starting with a franchise is huge. “For a restaurant, it has to be a visionary process if you’re
16 • March 2013 • MN Valley Business
not starting with a franchise. The menus, the concept, the look, everything. For those of us creatively deprived, that’s already taken care of with a franchise,” he said. “But the actual dynamics of running the business isn’t much different either way.” So, the obvious question remains for the man who loves watching trends: What’s next? “I do know what the next big thing is. I’m 99 percent sure. If I can do it, it will happen. But I won’t tip my hand.” Franchise benefits, drawbacks Nolan of the SBDC said the biggest upside to a franchise is that it limits risk. “People still need a business plan and still need to know what they’re doing. They need to do their homework. That’s something we can help with at the Small Business Development Center,” he said. “But once you open your doors, the franchise has the system in place; they have the vendors in place. You get the benefit of a national brand — if someone from the East Coast comes here and sees the same brand, they like, they’ll buy it. “On the downside, you have to share. You pay a franchise fee and then you pay, usually a percentage of your top line, to have that ability to minimize your risk,” Nolan said. Welch of FranNet is a franchise broker who helps those looking to get into a franchise business. He is paid by the franchise a customer ultimately chooses. “A lot of the people coming in tend to be displaced workers. They say ‘I was always going to start a business, and now I’m going to do it.’ They are often mid-level managers to senior executives who got laid off,” Welch said. “Most people who walk in don’t know what they’re looking for. We do a match-making process. It’s science and art — a series of meetings and tests.” Welch said the key is to focus on a person’s core competence, what transferable skills they have, what management skills they have, how many employees they want, what their budget is, what their weaknesses are. “Mot people just don’t know what questions they should be asking of themselves. We give them the questions and they answer, and it really shows the right business for them.” He said the other major thing FranNet offers is a way to sort the good from the bad franchises. “There are 3,300 franchises in the country, the bulk of which I would never introduce my customers to no matter what. There are bad franchises out there.” He said his firm vets franchises, in part, based on audit documents they must file on the federal and state levels. The franchise disclosures show lawsuits, closure rates, bankruptcies and a variety of other information. “You also need to talk to existing franchise owners to see what they are saying — it should match what the franchise is saying about itself,” Welch said. He said there is always a one-time franchise fee and then an ongoing royalty payment to the franchise of 6-10 percent of sales. “People paying royalties usually couldn’t hire someone for that amount to do what the franchise does.” The cost of getting into a franchise generally runs from about $55,000 to more than $1 million. “There’s no correlation to the dollars invested and the potential return. You can have a service franchise with little investment and it can yield a lot. You can invest a lot and not return a big
Top home-based franchises Home-based franchises often have a lower startup cost and less ongoing expense is needed for leasing or buying a building. Here’s the top home-based franchise businesses.
Franchise
Startup cost
Servpro (insurance/disaster restoration & cleaning
Steve Windschitl owns several NAPA stores in the region. While not a franchise, the association with a national brand offers a variety of benefits, he says. income.” And, Welch said, franchising isn’t just burgers and fries. “There’s sign manufacturing, business coaching, massage, hair care, custom T-shirt franchises.” Not quite a franchise Going it all alone or as a franchise owner isn’t the only option for entrepreneurs. There’s also the option of being an independent owner affiliated with a national brand name. After graduating from technical college in parts sales and management, Steve Windschitl worked at the Sleepy Eye NAPA Auto Parts for several years before buying it in 1981. Today he and partners own 10 NAPA stores, employing 95 people, including stores in Mankato, Waseca and New Ulm. “We’re independent owners, there’s no franchise fee. We do pay an advertising fee, computer fees and some freight fees,” Windschitl said. And while he buys most of his parts through NAPA, he’s not required to. “We can source parts through other vendors, and we do.” He said the biggest advantage of being part of a national chain is brand loyalty. “The name recognition is the best thing. They’ve been around since 1925. The NAPA hex logo is the second most recognized logo after McDonald’s.” Windschitl said the next big advantage is being able to get parts without a lot of hassle. “The sourcing is a big deal. You’d have to deal with 100 different vendors otherwise. Thirty years ago you saw more independent (auto part stores), but now they’re pairing up with someone. Especially in auto parts, there are just so many vendors to deal with otherwise.” Finally, he said, the marketing and training provided by NAPA is a big benefit. Those edges are needed as the industry becomes increasingly competitive. “It’s a narrow-margin business and there’s a lot of competition — parts stores, fleet stores, auto dealers, Wal-Mart. There’s a lot of people selling auto parts.” MV
$133 - 181K
Stratus Building Solutions (commercial cleaning)
$3K - 58K
Jazzercise (dance fitness classes, conventions, apparel)s
$3K - 77K
Matco Tools (mechanics' tools & equipment)
$83K - 222K
Snap-on Tools (professional tools & equipment)
$19 - 296K
CleanNet USA (commercial cleaning)
$10K - 98K
System4 (commercial cleaning)
$6K - 38K
Vanguard Cleaning (commercial cleaning)
$10K - 39K
ServiceMaster Clean (cleaning & disaster restoration) Cruise Planners (cruise & tour travel agency)
$48K - 169K $2K - 19K J. Malmanger
Hottest franchise sectors Here’s some of the fastest-growing sectors for franchising. Business Coaching/Consulting/Brokerage Services Children’s Enrichment Programs Children’s Fitness Programs Identification Services Children’s Retail Tutoring Miscellaneous Children’s Businesses Convenience Stores Fitness Hamburgers Hotels & Motels Ice Cream & Frozen Desserts Senior Care
J. Malmanger
MN Valley Business • March 2013 • 17
Minnesota Business Updates
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City of Hutchinson takes unique approach
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The town of Hutchinson, located about 45 minutes northwest of Mankato, is taking a unique approach to spurring downtown business development. The Hutchinson Economic Development Authority launched a “Jump-Start Downtown” business plan competition — which is designed to identify and assist with the start-up of a new business on Hutchinson’s Main Street. With over $25,000 in prizes, the contest is one of the largest of its kind. “We wanted to provide a big boost for this new business” said EDA Director Miles Seppelt. Prizes include $10,000 in start-up capital, $2,000 for a new sign, free tuition for small business management classes, ongoing business coaching and mentoring, a free website with one year of hosting, radio and newspaper advertising, logo design, business cards, letterhead and envelopes. Any type of business is eligible, so long as it meets the zoning requirements of downtown. Taking its inspiration from television talent shows, the contest will unfold over three rounds: In Round 1, the application, along with a one-page business proposal is reviewed with the most promising entries moving to Round 2, in which a full-fledged business plan is due. Finalists chosen to participate in Round 3 will have one week to prepare for an oral presentation to the judges panel, which will take place on May 17. The winner will be announced immediately and will have to open their new business Oct. 1.
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Johnson turns to profits
Johnson Outdoors Inc. said it turned around a year-ago loss with a fiscal first-quarter profit. For the three months ended Dec. 28, the Racine-based maker of outdoor and recreational equipment, with facilities in Mankato, reported net income of $247,000, or 2 cents a share, compared with a loss of $2.9 million, or 30 cents, a year ago. The company said revenue increased 9 percent to $87.3 million on higher sales in marine electronics and the addition of the Jetboil brand acquired in November. Sales during the first quarter are typically the lowest of the year for the company as it prepares for its primary selling period during the second and third quarters. “While it is too early to predict how the year will go, we are pleased by such a strong start as we ramp up for the primary selling period for our products over the next two quarters,” said Helen Johnson-Leipold, chairman and chief executive officer. “The competition for consumer discretionary dollars is always tough, and we feel good about our position and ability to grow share across every segment.” Total company operating profit during the first fiscal quarter was $1.5 million compared to an operating loss of $3.7 million in the prior year period, the company reported.
18 • March 2013 • MN Valley Business
Fastenal vending sales grow
Fastenal Co. reported diluted earnings of 33 cents per share in the fourth quarter of 2012, up 10 percent on the back of decent margin growth. The company’s earnings were in line with estimates. Fastenal reported net sales of $757.2 million, up 8.5 percent year over year. Revenues were also in line with the Zacks Consensus Estimate. Both earnings and revenues declined sequentially. Fastenal’s daily sales growth rates in the second, third and fourth quarters of 2012 were lower than that of the first quarter as well as year-ago comparable periods. Daily sales growth rates declined sharply in the fourth quarter due to end market slowdown, the negative impact from Hurricane Sandy and foreign currency headwinds. The company has adopted an industrial vending process that has the potential to revolutionize the industrial distribution system and increase profitability. The company installs vending machines that aid in controlling inventory and administrative costs while reducing product consumption. Despite all overall weak sales, the company is seeing some progress around its vending program. In the fourth quarter, the company installed 4,082 machines with the cumulative machines installed standing at 21,095 at the end of the year. The vending machines now account for over 25 percent of the company’s sales.
General Growth buys warrants
General Growth Properties, the No. 2 U.S. mall owner and owner of River Hills in Mankato, purchased warrants from The Blackstone Group and Fairholme Funds Inc. for $633 million, leaving its main investor, Brookfield Asset Management Inc. as the only holder of warrants. The warrants were exercisable into 52 million General Growth common shares at a weighted average exercise price of about $9.37 per share, General Growth said. The warrants were scheduled to expire in November 2017.
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Hutchinson reports another loss
Hutchinson Technology Inc. reported a net loss of $6.5 million, or 27 cents per share, on net sales of $63.7 million for its fiscal 2013 first quarter ended December 30, 2012. Results for the quarter included $1 million of severance costs and $1 million of non-cash interest expense. Excluding these items, the company’s first quarter net loss was $4.5 million, or 19 cents per share. In the preceding quarter, the company reported a net loss of $14.7 million, or 62 cents per share, on net sales of $63.6 million. Excluding certain items, the non-GAAP net loss in the preceding quarter was $13 million, or 54 cents per share. Gross profit in the fiscal 2013 first quarter was $7.4 million, or 11.6 percent of net sales, compared with a gross loss of $0.2 million in the preceding quarter. Compared with the fiscal 2012 fourth quarter, gross profit benefited from improved absorption of fixed costs due to higher weekly volume, continued efforts to reduce costs, increased shipments of higher-priced development products and increased scrap recoveries.
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U.S. Bank banks on solar
U.S. Bancorp and SunPower Corp. are investing $100 million in to install solar-power systems on the roofs of about 3,000 U.S. homes, with the bank being the lead investor. SunPower, of San Jose, Calif., built its business on solar-panel manufacturing, but the company has increasingly expanded into development of large solar-power plants and smaller home rooftop-solar systems. Independently owned solar-panel installers who have dealer agreements with SunPower will build the rooftop solar systems using SunPower solar panels under the deal. The solar panels will be installed on the roofs of homeowners who sign a long-term lease agreement with SunPower, agreeing to buy the electricity the systems generate through monthly payments. Through these types of solar leases, homeowners can use clean energy and in many cases cut their monthly utility bills without having to pay thousands of dollars to buy the solar system, SunPower and other solar firms say. “With residential solar systems, more families can take control of their electricity bills and deliver the environmental and health benefits of solar power to their community,” said Darren Van’t Hof, director of renewable energy investments at U.S. Bancorp. ■
What to expect from airline merger
The boards of US Airways and American parent AMR have voted to merge. Here are some things you can expect in a merger between American and US Airways, according to Ben Mutzabaugh, a travel reporter for USA Today who was interviewed for Minnesota Public Radio. Is it safe to buy tickets on these airlines? Definitely. It will likely take the airlines months to win approvals and close on the merger. And, even if that happens, it still will take many months to combine operations. During that time, each carrier would continue to operate normally. That includes selling their own tickets and operating their own flights. Once the airlines are ready to combine, the newly merged carrier would honor all future tickets sold on either one. What name would the new carrier take? American in all likelihood. Although US Airways’ management will have many of the top jobs in the merged airline, CEO Doug Parker and other US Airways executives are on record as saying that they will assume the American name and brand. Are my miles safe? This is one of the top questions people want to know any time there’s a merger. Fortunately, the answer is “yes.” Mileage programs are a key perk airlines use to hold onto their top customers, and the new “merged” American won’t risk alienating any of those customers by not honoring the “other side’s” miles in a merger. Would the merger be good or bad for frequent fliers? As with any merger, there would be changes that cut both ways. One of the most obvious improvements would be an increased number of international destinations available to frequent fliers. More broadly, American’s AAdvantage program is widely regarded as one of the best loyalty programs in the world. The program has many options to earn miles, and AA is considered to be among the easiest U.S. airlines for redeeming miles for award tickets.
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Gas prices make unusual jump
The average price for a gallon of gasoline across the U.S. is up to $3.67 a gallon. That’s an increase of 12 cents in the past week and 42 cents in the past month. Oil analyst Patrick DeHaan, with GasBuddy.com, says the reason, as usual, is the rising price of oil. DeHaan says he’s surprised to see the price jump so high in February when demand is normally low, and he’s now concerned about what might happen in the months ahead. DeHaan explains, “traditionally gas prices rise anywhere from 40 to 60 cents a gallon in late March through early May.” He says if that happens this year “it will easily send the national average over $4 a gallon.” ■
Little faith in Best Buy takeover
Best Buy founder Dick Schulze and the company’s board have carried on a very public sequence of negotiations over Schulze’s proposal to buy the company and take it private. Schulze says he is very confident he can line up the financing to pay between $24 and $26 per share for all of the company’s stock. If you’ve been following the story, you know that there’s been a lot of discussion that Wall Street is skeptical. So, how can one determine investor skepticism without talking directly to a lot of investors? The ticker tells the tale. Essentially, the stock price speaks volumes about what investors think. When Schulze revealed his proposal the share price jumped, but landed well short of the proposed minimum of $24 a share. The stock closed that day, August 6, at $19.99. The gap between the proposal and the closing price was at least $4.01. Compare that to another large recent buyout in the news. A week ago, the big health insurer, Aetna, announced an agreement to buy Coventry Health Care, a managed care company. The offer was valued at $42.08 per share. That day Coventry’s share price closed at $42.04 — a gap of just four cents. Translated into percentages, on Day One Coventry’s share price closed at 99.9 percent of the sale price. Best Buy’s share price on day 1 closed at about 83 percent of the proposal’s bottom price. Why the difference? Risk. In the case of Aetna and Coventry, the companies announced a merger agreement with a firm price. Investors decided there was very little risk that the deal would fall apart. They had high confidence that if they bought a share today at, say $40, Aetna would soon pay them $42.08 for that same share. In the case of Best Buy investors were showing considerable doubt that if they bought a share at, say $22, that Dick Schulze would pay at least $24 for that same share. The day 1 close at $19.99 suggests they were more comfortable betting that they might get around $20 for that share. You can calculate how skeptical investors are and attach a number to it, and that’s where the depth of doubt about Dick Schulze’s plans becomes apparent. The clear message is this: investors have yet to give Schulze even a 50/50 chance of buying the company.
MN Valley Business • March 2013 • 19
Children’s museum will unleash the super power of play Business
S
outhern Minnesota is a vital, productive region. Even during challenging times, our area enjoys stability and prosperity because of a solid tradition of building on the riches of the land, investing in our people, resourcefulness, and working together. The Children’s Museum of Southern Minnesota presents a unique opportunity to advance this legacy of regional vitality forward by investing in our best hope for a strong future: our children. By positioning children at the heart of all we do, the Children’s Museum is a vital resource in the learning landscape of southern Minnesota. As southern Minnesota’s largest museum for children, it is our job to help all children of our region develop the skills they’ll need to navigate their world. From birth and up, children are growing into the skills needed to succeed in the world they will inherit, and the Children’s Museum strives to support this development in all that we do. In return, as the children of today move through life and develop into the talent pool of tomorrow, they will be better prepared to meet the needs of our rapidly changing world. Growing up After six years of operating out of leased spaces, the Children’s Museum is now a vital regional resource welcoming more than 50,000 visitors from 47 counties and 24 states. To continue and expand the high quality offerings families have come to rely on, community stakeholders have developed a plan for a permanent facility for the Children’s Museum to own and operate once funding is secured. As a highly attractive family destination, the new Children’s Museum will significantly increase offerings and amenities and expects to draw nearly 50,000 visitors annually. Truth about childhood Children’s museums serve families in around 350 communities in North America, and their role has never been more important. We know children today are living a different type of childhood than many of us experienced, and national studies confirm what we see happening in our own communities. Children are more sedentary, less connected to nature, and live more structured lives with less time for free choice play than in previous generations.
In fact, from 2004 to 2009 the amount of time children ages eight to eighteen spent in front of a screen, either a computer or a television, jumped from one hour and seventeen minutes a day to a total of seven hours and 38 minutes a day according to the Kaiser Family Foundation. This change in widespread accepted standards of how children spend their time is having a real impact on children’s lives, how they learn and their overall well-being. Children’s champion Informal learning settings like the Children’s Museum are characterized by intrinsically motivating experiences that offer curiosity, confidence, challenge, control, play and communication. In late 2010 a diverse team of local expert advisers and nationally recognized consultants began a series of workshops and play assessments to develop the Children’s Museum “Learning Experience Master Plan.” The Master Plan includes 10 gallery concepts for the permanent facility including:Êthe infant/toddler Play Porch, Market Square, Quarry Zone, Mankato Clinic Tree of Forts Climber, Building Central, Farm Park, Whiz Bang STEAM Gallery & Studios, and the Play Prairie. To support 21st century learning in all exhibits and programs, the Children’s Museum creates engaging interactive experiences that build on a set of six process and content skills that children use day in and day out. Collaboration, communication, content exploration, critical thinking, creativity and innovation, and confidence are skills of practical importance now for young learners and youth, as well as in their future as workers and citizens. These skills are practiced and strengthened as children make choices, negotiate with friends about a story to act out, or discuss and compare how best to chisel a sandstone block. The Children’s Museum invests significant attention to understanding the lives of children, play and learning, and how to set the right conditions for optimal benefits in an informal setting. With the new facility, the Children’s Museum of Southern Minnesota will be a champion for our children and for the play they need to learn, develop, and succeed in the 21st century. The Children’s Museum creates opportunities that capture children’s curiosity, tap their imaginations and creativity, build on their interests, and
20 • March 2013 • MN Valley Business
Commentary
By Peter Olson invite exploration of materials, tools, technology, and objects in ways that make children’s thinking and learning visible to them and to their parents, teachers, and caregivers. As the permanent museum planning progresses, the southern Minnesota businesses are stepping up as major partners. Lead contributions from the Mankato Clinic, Ridley Inc., Minnesota Corn, Paulsen’s Architects, Jones Metal, HickoryTech, Scheels, Orthopaedic and Fracture Clinic, MinnStar Bank, United Prairie Bank, BLK Electric, Wells Concrete, and retired business leader Lyle Jacobsen and his wife Kay have helped the Museum reach the half way point in its fundraising goal. In addition to monetary donations, businesses are providing volunteers, services, and inkind donations. Ridley employees are informing development of the permanent museum’s Ridley Live Animal Area and Mankato Clinic pediatricians are helping make sure wellness is a key attribute of Mankato Clinic Tree of Forts Climber. The business community of southern Minnesota is helping our children be prepared to meet the demands of our global society. But to achieve the dream of a permanent museum befitting the amazing potential of our children, more involvement is needed. Today, the Children’s Museum is opening up a diversity of options for businesses of all sizes and their leaders to get involved. If you would like to get involved, please email info@cmsouthernmn.org or call 507-386-0279. MV Peter Olson is president of the Children’s Museum of Southern Minnesota.
A high school diploma shouldn’t be a lump of coal
D
uring the holiday season, I sometimes flash back to a joke my dad used to play on me at Christmas. He would find the biggest box he could, deposit something inside he knew that no self-respecting 6-year-old boy would want (usually socks or underwear), wrap it nicely and put it under the tree. Upon opening his gift, I would loudly complain: “This is not what I wanted!” Today, another joke is being played out in the form of our state’s education policy — and the surprise could be something much crueler than getting socks for Christmas. The gift our students deserve when they graduate from high school is a diploma indicating that they’re ready for postsecondary education. Increasingly, that is not what they’re getting. The facts are startling. Forty percent of the graduating class of 2008 needed remedial coursework upon enrollment in a public postsecondary institution in Minnesota. Nationally, among students who do take remedial courses, fewer than 10 percent graduate from community colleges within three years, and only one-third complete a bachelor’s degree within six years. For students of color (the state’s fastest-growing student population), the numbers are even worse. A generation ago, these kinds of statistics weren’t so troubling. Students who graduated from high school only (or in some cases even dropped out of high school), could find work that would earn them a modest living. But times have changed, and those jobs are vanishing. In fact, by 2018, 70 percent of all jobs in Minnesota will require completion of some level of postsecondary education. So how do we ensure that our seniors are ready to attend the University of Minnesota, or Minnesota State University, Mankato, or Alexandria Technical and Community College? The obvious answer is to figure out what colleges expect incoming students to know, set high school graduation requirements to match those expectations, then ensure that students can meet the requirements. Which is exactly what legislators began to do nearly 15 years ago. They adopted standards in math, reading and writing and wisely determined (as have 25 other states) that high school graduates would need to demonstrate basic competency in those three areas. Unfortunately, much of the work that has gone into aligning our K-12 and higher-
By Charlie Weaver education systems may soon be undone — at least if a working group convened by the state Department of Education gets its way. The group has proposed dropping the math, reading and writing graduation requirements. That’s right. No longer would students be required to demonstrate competency in basic skills to get a high school diploma. Supporters of the proposal argue that some students aren’t able to pass these tests (which were developed by teachers and test at only about a 10th-grade level) and that it’s “unfair” to deny them a diploma. What is far more unfair is to graduate a student without the basic skills needed to succeed in the world. If the Legislature were to adopt these unwise recommendations, our students would lose a valuable assurance that their diploma means something. Also, employers would no longer be certain that our graduates have the foundational skills they need to enter the workforce. The jobs of the future will require more rigor in the classroom, not less. If Minnesota students are having difficulty passing a basic skills test, our response should not be to eliminate the test but to ask why they’re falling short and make sure they can meet expectations. My dad giving me socks for Christmas was twisted but kind of funny (particularly now that I can do it to my own children). But a high school diploma that doesn’t prepare Minnesota kids for a postsecondary education? Now that’s just cruel. MV Charlie Weaver is the executive director of the Minnesota Business Partnership.
MN Valley Business • March 2013 • 21
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Special Focus: Employee selection
Firms assist in screening and hiring By Marie Wood Annie Bennett, sales account manager for Jeane Thorne in Mankato, specializes in placing people in administrative, customer service, sales and other positions. “We have high standards. People expect that from us. Many of the companies that we work with choose to add our employees to their staff,” said Bennett. Businesses that are most effective in hiring use a team approach between human resources staff and hiring managers. Human resources is typically better equipped to conduct a behavioral interview and a hiring manager has a better knowledge of the culture, skills and personality required for the position, explained Bennett. A skills assessment, called a Prove It! Test, is one method that Jeane Thorne uses in screening candidates. The online tests cover grammar, spelling, math, and the Microsoft Office Suite. The results assist in defining a candidate’s skill set. Once Jeane Thorne accepts a candidate, Bennett coaches and markets them to companies based on the needs of the client and the skill set of the employee. In return, she expects follow-through from her candidates. “If they’re engaged in the process with us, they’ll be engaged in their employment,” said Bennett. Red flags Bennett and Rachal Hollerich, Jeane Thorne account manager, recruit, screen and interview candidates on a daily basis. Screening interviews last a full hour and contain a mix of traditional and behavioral interview questions. Many answers and behaviors demonstrate a candidate’s attributes such as being a team player, following through, good decision making, initiative, punctuality, communication, professionalism and more.
Annie Bennett However, some answers and behaviors raise red flags. Negative attitude: You know when applicants have a “glass half empty” outlook on life, explained Bennett. Sometimes they will make judgmental or negative statements about their past bosses. It makes one wonder if they will do the same in their next job, said Bennett. I want: If applicants talk almost exclusively about what they want in a job, salary or benefits, then they’re all about them and what they want, explained Bennett. Chances are they are not team players or looking at what they can contribute to your company. Oversharing: If applicants tell you about their boyfriend, spouse, children or medical issues, that’s too much information, said Bennett. MV
Top 10 behavioral interview questions Tell me about how you worked effectively under pressure.
Give an example of how you set goals and achieve them.
How do you handle a challenge? Give an example.
Give an example of how you worked on a team.
Have you ever made a mistake? How did you handle it?
What do you do if you disagree with someone at work?
Give an example of a goal you reached and tell me how you achieved it.
Share an example of how you were able to motivate employees or co-workers.
Describe a decision you made that wasn’t popular and how you implemented it.
Have you handled a difficult situation? How?
22 • March 2013 • MN Valley Business
Source: About.com
Learn to interview What’s legal in an more effectively interview? By Kristie Campana
By Kristie Campana
In behavioral interviews, the point of the questions is to learn about what your applicants have done in the past and what they are likely to do in the future when faced with tricky situations. You have to think about what an applicant’s response is really saying about their decision-making and behaviors.
Civil rights acts have identified characteristics that cannot be targeted in hiring, such as race. Minnesota also has passed a number of acts that prohibit hiring or firing based on additional demographics, such as sexual orientation. Illegal or inadvisable interview questions: Are you planning on having children? or Are you married? It is not legal to ask about their children or familial status. One reason: these questions are often directed at women, but not at men. Where are you from? Although you can ask whether applicants have the right to work in the country, you cannot ask them whether they were born in the U.S. When did you graduate high school? Applicants over the age of 40 are protected from discrimination; asking a question like this can lead to age disclosure. Do you go to church on Sundays? Religious institutions can require an applicant to be of a certain religion, but most jobs cannot. This question can discriminate against people of certain religions. Have you ever been arrested? In some circumstances, it may be okay to ask about convictions, it is never acceptable to ask about arrests, as certain racial groups are often more likely to be arrested, but not necessarily convicted. Do you have any physical impairments? In some positions, being able-bodied may be a requirement. However, asking about this in an interview setting is not legal. This includes mental health conditions, such as depression or alcoholism.
Question: Tell me about a time you made a mistake at work. Poor Response: At my last job, I was responsible for putting together displays at work based on instructions we get from headquarters. We were having a slow night, so I started putting them together early, based on the last set of instructions, since they are usually very similar. After an hour of work, my supervisor saw what I was doing. It turns out that because of an upcoming holiday, the displays were going to be different, so we had to undo what I had started and begin over again. Why this is a poor response: The applicant demonstrated poor critical thinking skills by not following directions, especially when it would be reasonable to expect a holiday might affect the displays. She might make impulsive decisions often. The applicant did not check in with her supervisor. This applicant seems apt to rush into action without getting permission first. What has the applicant learned from this situation? From the way she presents it, nothing. If an applicant never thinks she needs to change her behavior, that can be a red flag. Strong Response: I was responsible for putting together advertisements for our local newspaper. Once when it was printed, I found an embarrassing typo on one of our longtime clients’ ads. I immediately let my supervisor know, and I called the client to let them know my mistake, apologize, and make it right. Ultimately, we gave them a few weeks of free advertising. Now, I proofread all the ads twice; once right away, and again before they go to print. Why this is a strong response: The applicant identified and admitted her mistake on her own. This suggests she has integrity and will not cover up mistakes She took responsibility and worked with the client to fix the problem. She is likely to demonstrate good customer service and go the extra mile. She learned something from her mistake. She employs actions to keep it from happening again.
MV
Kristie Campana Kristie Campana specializes in recruitment and employee selection. For five years, she worked at MDA Leadership Consulting and was an internal consultant for Target and Schwan’s. Today, she holds a Ph.D. in industrial/organizational psychology and teaches at Minnesota State University. Campana is also part of the Organizational Effectiveness Research Group (OERG). OERG, a private consulting practice led by MSU professors and staffed by graduate students, specializes in employee selection, training and development. To learn more about OERG, visit www.mnsu. edu/oerg/.
MN Valley Business • March 2013 • 23
Julee Johnson opened her jewelry store in St. Peter in 1999.
Gold mine on 169 Julee Johnson sees success, personal despair By Pete Steiner Photos by John Cross
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ulee Johnson would not deny that she’s “the Other Woman.” In fact, she’s proud of it, even using it as a slogan for her business, Julee’s Jewelry on Highway 169 in St. Peter. She means, of course, she loves giving buying tips to guys, who are sometimes gift-giving-challenged. She’ll help discover what their beloved really wants by asking, for example, “What does she wear?” Or, “Have you peeked in her jewelry box?” You may have missed stopping in for Valentine’s Day, but of course, jewelry is always in season. How Johnson came to own a jewelry store in
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St. Peter is a story with lots of twists and turns, worthy of an Oprah segment. Originally intending to be an engineer, Julee enrolled at the University of Minnesota, and was nannying to help pay tuition. One day, while grocery shopping for her family, she noticed a good-looking young man working in carry-out: “I went back and tried to get in his line every time,” she says. Seeing him one night at a dance club, she decided to find out more. His name was Clayton, and, well, it wouldn’t be long before they married. Julee would transfer to Mankato State University. And
Spotlight
she and Clayton would have three children while she was still in college. Switching from engineering to math education, Julee would teach one year at WatervilleElysian-Morristown before settling into a temporary role as stay-at-home mom, volunteering and helping her husband with his building restoration business. Later, with her own kids in school, Julee would return to teaching. But at the same time, she had begun looking at the curriculum of the Gemological Institute of America. She was hoping to begin doing jewelry appraisals from her home. The year was 1998, and soon the great St. Peter tornado would hit, changing many people’s lives, including Julee’s. Starting from scratch For decades, Hawkins Jewelry had served as the only jewelry store in St. Peter. The store was tucked in next to the historic building on Minnesota Avenue that once housed Nicollet County Bank. Within a year of the tornado, the couple that owned the store both died. The inventory was liquidated, and the building sat empty. Julee asked Clayton, what he’d think if she opened a jewelry store in that same building. His biggest question: what would she call it. She doodled an entire page full of possible names. Clayton said “Julee’s Jewelry” sounded good. Julee contacted Ed Mays at the Gem Den in St. James about how to operate a small-town jewelry store. She needed to know how to procure inventory, how to price it, how to do payroll, accounting and marketing, and how to do gold-smithing. In 1999, Julee’s Jewelry was born. Love stories Julee Johnson loves it when a customer comes in to pick up a ring or a necklace and exclaims, “Oh, my gosh, I never expected that!” She smiles, “When Grandpa buys Grandma (a
beautiful piece of jewelry), that affects the entire family! It’s all about the giving.” Not long ago, a man had picked out a ring from Julee, and when he brought his girlfriend into the store, he put the ring right on her finger and asked her on the spot if she would marry him. Another man came in with his wife to upgrade her diamond, and as Julee showed them the new stone, he got down on one knee and asked his wife, will you STAY MARRIED to me? Daunting challenge Ten years after opening her store, Julee would face a series of
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a naturopathic approach mean that today, more than a year after her diagnosis, her vital numbers are “in a good range.” The business gave Julee a reason to try to regain a sense of normalcy after the loss of Trevor. Now she tries to help others in similar situations. She started a non-profit, RememberingOurLovedOnes.org. She joined the group Grief Share, and organized an annual Angel Walk in her son’s memory. “You never forget your loved ones,” she says. “I believe there is a reason for my misfortunes, but I don’t understand it. I strive to focus on my faith and have a deep appreciation for my family and friends. I have always tried to look for the positive in everything.” St. Peter is a city with lots of destination stores — the Food Co-op, Swedish Kontur, Contents and more. Julee points out that jewelry stores are destination stores as well. She knows marketing is key, but it can be costly. The trick is effectively budgeting your marketing plan. So Julee started organizing with other St. Peter merchants: “If we could work as a group, supporting each other, marketing would be easier and more affordable.” Her St. Peter Business Alliance complements the St. Peter Chamber’s efforts, utilizing crosspromotion and group advertising. Julee has been an enthusiastic supporter of the Chamber’s “Girl’s Night Out,” and she helped organize the city’s first “Recipe Walk” three years ago. Her newest idea: a “Chocolate Stroll.” Her store will feature chocolate diamonds — what woman could resist? Important symbols One of the most enjoyable parts of Julee Johnson (left) and associate Gina Kiewatt prepare display cases at the jewelry business is traveling to the Julee’s Jewelry in St. Peter. buying shows. A member of the Retail Jewelers’ Organization, Julee loves trials worthy of Job. For starters, the long-anticipated going to New York and other cities to reconstruction of Highway 169 along St. Peter’s main drag learn about jewelry trends. A certified diamond and gemstone would drastically cut into business for six months. But that was importer, she also travels to buy in Antwerp, Belgium, the nothing compared to the discovery that the Johnsons’ 23-year- world’s diamond-import capital. In fact, as an interviewer old son, Trevor, just two months past his college graduation, enters her store, she is doggedly trying to certify the paper trail had a brain tumor. Dealing with Trevor’s medical issues would on a particular stone. All of her diamonds have that paper trail, mean having to close the store at times. Just one year later, she says, and when she is asked about her advertised “conflictTrevor died. Still grieving his loss, Julee would learn a year later free diamonds,” she replies by asking if the questioner has seen that she herself had stage four multi-organ cancer. Surgery and the movie “Blood Diamond.”
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Through deep personal acquaintance with both joy and sorrow, Julee knows that jewelry can be an important symbol for all occasions. After losing Trevor, she said many customers stopped by to share their stories of loss. She began offering items in her store, like 24-karat roses, guardian angel pins, ash-holder necklaces, and Corinthian Bell wind chimes that many customers have found to be deeply meaningful. She believes that calls from Nova Scotia and Michigan at Christmas probably originated from one of her Websites. Philosophical outlook The interviewer had asked for half an hour or 45 minutes. An hour-and-a-half later, we’re still talking. It occurs that that’s
probably why her customers are so loyal. Relaxed, never rushed, Julee takes the time to get it right. Fourteen years into her retail venture, and nearly four years after the start of perhaps the most difficult time of her life, Julee Johnson can look at this world philosophically: “You never know what turn of events will shape your future.” MV
MN Valley Business • March 2013 • 27
The staff of Q Computers, (left to right) Joel Iverson, Mark Broman, Matt Rush, Sue Broman, Chris Amorim, Wendy Greiner. The trophy was awarded to the business for programming the choreographed light show for the Kiwanis Holiday Lights.
Blue collar high tech Q Computers offers diverse services
By Marie Wood Photos by John Cross
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hen Mark and Susan Broman bought Q Computers Mankato in 2003, the company was a retail and repair store where people could buy new and used computers and parts. Mark has expanded the company to include Web design and hosting, networking and IT services for businesses, and computer training classes. While one school of business recommends specialization, Mark’s success is a result of doing everything in the business and personal computer world, as well as filling a void for electronics repair. As always, residential customers can bring their computers into Q Computers for repair because they have all the used parts to get old computers going. But Q also builds new computers and sells used computers. “We have a computer pawn shop persona, but that’s not who we are at all,” Mark said. Before he was a local businessman, Mark was a research and development engineer for Thin Film Technology in North
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Mankato. He is still a consultant and development engineer for the company and holds more than 80 patents for the electronic components he has invented. Mark was logging 50,000 miles on an airplane every year. With two daughters, he wanted to spend more time at home. Meanwhile, Susan is a senior application specialist at HickoryTech. But she is also Q Computers CFO and handles payroll, accounts payable and works at the store every other Saturday. Many of Q’s business clients are small firms that do not warrant their own IT staff. However, due to Mark’s background, many of Q’s largest clients are in the manufacturing field. When Agristrand Mankato started up its plant for soy-fiber building panels, they called Q Computers. They had bought a large manufacturing facility with an antiquated computer system. Q Computers set up a new server and email system with remote access for the sales force and employees in the field. In addition, Q Computers rewired the plant and set up
Profile
Chris Amorim works on a computer in the shop wireless networks and video monitoring, said Agristrand CFO John Ahlberg. Q staff also worked with vendors to implement industry-specific software and trained Agristrand employees to use the system. “We wanted to find a Mankato firm that we could rely on and be accessible to us,” Ahlberg said. “We have them on an on-call basis.” Extra engine IT, networking and security are critical to business operations. Mark uses an airplane analogy to explain what Q Computers does for businesses. When you have a mission critical process in any business, you need to have redundancy in the same way that airplanes have two engines in case one fails. “We’re the extra engine just in case.” A Microsoft Small Business Specialist, Q staff manages Microsoft small-business servers, provides full networking services, assists with local wireless networks, and sets up IT security to protect network PCs and servers from viruses, malicious spyware and more. “We come in and we’re the backup to your staff. We help take you to the next level,” Mark said. He and original employee John “Rock” Greiner, along with two other employees, go on site to businesses daily. They solve IT and networking issues. Wendy Greiner, Rock’s wife, heads up Web design and training. With a graphic designer and programmer, she has developed 250 websites for national organizations and local businesses. Wendy creates databases for companies, which often requires converting databases to Web applications. Susan, with her experience in databases, is Wendy’s No. 1 resource and helps when needed. Plus, Wendy trains Q business clients, as well as their employees, to maintain their websites and databases. She shows them how to protect their computers and clean up their servers. “The biggest thing we do is we partner with business. We find a way that they can do some things themselves,” Wendy
said. “We’re working our way out of a job, but with technology always changing, that’s not going to happen.” Business training also includes Microsoft certifications in Office, Excel, Word and Quickbooks. Training is tailored to business needs and employees’ skill level. “Everything’s on the honor system. If we do a good job, they pay us. Everybody pays us. I call our business service blue collar. We don’t do contracts and we’re not very expensive,” Mark said. Computer training Q Computers has expanded its shop with a computer training classroom. The computer training provider for Mankato Community Education, Q Computers offers 10 pages of technology classes from novice to advanced. Class sessions are held at Q Computers. In naming classes, staff must think like a new user. Classes include Help for the Computer Challenged, Telling Your Computer Where to Go and Protecting Your Identity & Your Computer Online. Q Computers also offers sessions on web development; Microsoft Quickbooks, Outlook, Access, Powerpoint and Excel; Dreamweaver, Facebook, Adobe Photoshop and more. Class offerings even include smart phones and e-readers. Through website traffic, Mark learned its biggest customer base is senior citizens. On Friday afternoons, Q Computers offer Senior Help Hours, where seniors can make free 15-minute appointments to get their questions answered. Entrepreneur Finding employees has never been difficult as Q has grown from a staff of four to 15. A believer in cross training and redundancies, Mark and his employees can cover for each other. Mark doesn’t advertise for employees. When someone comes in looking for work, he asks what they’d like to do. “A typical interview would be what do you want to do and I’ll figure out how to make money on it,” said Mark. Mark also participates in a local entrepreneurial group that meets weekly. He expects that his next business venture will be outside the technology field. MV
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Parties & Weddings Plus owner Linda Miller and her daughter, manager Katie Hayes.
Making it special
Mom, daughter team plan special events By Marie Wood Photos by John Cross
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hen brides come in to Parties & Weddings Plus in Mankato, they can be anxious about their wedding day decorations. After a free consultation with owner Linda Miller, they are relieved. Manager Katie Hayes, Miller’s daughter, can help them choose invitations, design invites, and custom print them. Seamlessly, invitations, floral arrangements, centerpieces, swags and decorations come
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together as details are ironed out in emails. A crew assembles the décor in shop and decorates on site. They do the same for corporate events. While the retail store offers party supplies and balloons for all occasions, the magic is stored in the basement. Large heavy duty props transform ballrooms and gyms into a safari, Route 66, casinos, Mardi Gras, cruise liners, pirate ships and Hollywood for events and proms. Silk flowers, vases, tea lamps, candle holders, chair
All In The Family
The business stocks supplies for all types of parties and special events. covers, paper lanterns and photo booths for rent await the next event. After managing and growing a manufacturing company for 13 years, Miller bought Paper Services Plus in 1997. Paper Services Plus was a small retail store and truck route business that provided janitorial and hospitality supplies to businesses. They still provide janitorial supplies, but Miller changed the name to Parties & Weddings Plus a few years ago. Together, mother and daughter run the only retail wedding and event decorating company with a retail storefront in Mankato. MVB: What is the key to the success of your business? Hayes: We’ve grown the company. We sell balloons, party supplies. We also have turned it into a high-end decorating business. We continue to change as the economy is requiring it. For instance, the wedding consignment area. Miller: That diversity has been the key for allowing us to grow and use everybody’s talents here... When people offer only one service, it’s difficult to maintain a business. MVB: What do you offer brides and event planners? Hayes: You’re getting the expertise here. Miller: We really do sell service. After working here for 16 years, we have the knowledge of all the clubs, owners, rooms, what’s allowed and what’s not, what time to show up. Hayes: In Southern Minnesota, you have a hard-working community who will make and do things themselves. We try
to cater to them and help. Miller: We offer our customers the opportunity to work with their family. One decorator, with all the décor, will meet at the venue at a set time to work with the family to put everything up. Hayes: We direct. You can cut costs, but you still get the professional look you want. Miller: The other option is the day of the wedding, we send a team of three to four people...When we leave and set-up is complete, all that needs to be done is the candles lit or the lights turned on. Hayes: At tear-down, we send a crew out at midnight, 1 a.m. - 15 minutes after the DJ stops, we’re there. MVB: How has the wedding industry changed in 16 years? Hayes: The industry has changed significantly since she bought this business. The wedding industry has blossomed into a whole new game. Miller: So much of what we do is for brides to see what we do. Visually, they see it on TV, DIY, Pinterest and Facebook. People can sit and surf and they do. Brides have a sincere interest in what the events look like. MVB: How long have you been working together? Hayes: I was here in 97 when she opened the doors. Then I went off to college, fell in love and came back six years later. Mom said if you need a job, I could use a little help at the store. I’ve been here since 2003 giving a little help at the store.
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when we have disagreements and we talk to each other like a mother and daughter, not as an employer and employee. Miller: We do bring each other focus. Hayes: I’ve learned a lot of management and interpersonal skills. I’ve leaned on my mom for guidance in that area. Miller: Because it’s Katie and her personality, she’s introduced a lot of creativity to what we have here. We’ve unleashed her graphic designer. Katie can visualize a project. Hayes: I am able to keep you up to date on trends. MVB: Has working together changed your mother daughter relationship? Hayes: Yes, it has changed, but not in a bad way. When we’re away from work, it’s hard not to talk about work. ... Working with family is always going to change the dynamic. You are a different person in your personal life than your professional life. Miller: In a lot of ways, it brings you closer and grows your relationship. Hayes: We both are thinkers. At 10:30 at night, if I think of something for the store, I can call her. I know she’ll be up. Miller: When we have an inspiration, we’ll text each other.
Linda Miller and daughter Katie Hayes prepare arrangements.
MVB: What are your roles in the business? Hayes: I’m the store manager. I handle scheduling, payroll. I do all the custom printing, Internet upkeep. I designed the web site. I wear pretty much every hat. My role is manager, Linda is owner. Miller: We’re all prepared to cover for one another, anybody of the four of us here can step in and take over. You have to be able to do that in a small business. My focus today is primarily sales, marketing and the physical labor of setting up events. Hayes: She’s the main contact for large events, proms and weddings. MVB: What have you learned from each other? Hayes: There is a good balance between us. There are times
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MVB: What do you love about your work? Miller: I learned a long time ago what was most important to me. It wasn’t having a big sale. The most rewarding thing is to watch the people grow that you work with from the age of 16 until they graduate from college. We’re still in contact with them and watching them grow into young women. You want to find the people and use the talents they have, because then you keep your people. Hayes: We both love talking with our customers. Miller: When we ask how was your event and they tell us it was so much better than they ever imagined. We’re in a party store. We sell happiness. MV
Complete Auto Repair Foreign & Domestic
Pickup & Delivery Available Emergency Road Service
Serving the Mankato Area Since 1975
257-3730
MEMBER
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MN Valley Business • March 2013 • 33
A new message for a new time
I
n October of 2012 my column in Minnesota Valley Business was titled “Has Minnesota lost its Rural Voice?” It was a column focused on the reality that rural Minnesota seems to have lost its champions; i.e., those legislative, community and nonprofit leaders who helped craft a message and agenda for rural Minnesota’s economy, communities and well-being. Approximately three months after the publication of that column in January 2013 the St. Peter-based Center for Rural Policy and Development reinforced that message with the release of their latest report “Finding the Voice of Rural Minnesota.” In that report consultant Tom Horner conducted an extensive array of interviews with public, private and policy leaders to reach the same conclusion: Rural Minnesota is less effective in its advocacy in the legislature as well as government as a whole. But what is really leading to this diminished stature of rural Minnesota? Is it less relevant today? And if so why? To these questions I would answer unequivocally no. With its abundant natural resources, recreational opportunities and food and energy production, rural Minnesota and rural America for that matter is still quite essential to the American economy. In fact, just based upon the agricultural and energy resources found in rural Minnesota alone, it is quite clear that it is vital to our economy and our way of life. After all, there were times during the recent “Great Recession” that the only saving grace in our economy and the American export industry was our thriving agriculture and energy sectors. And of course, this is equally true for rural Minnesota’s growing renewable energy industry as well. Another rationale often cited has been the demographic shifts in Minnesota, where rural places are being depopulated and as a result, rural legislative districts are getting fewer and larger. While this is partly true, it is not uniformly true. For example while there are over 40 rural counties whose populations peaked between the 1930’s and the 1970’s, there are over 20 rural counties whose population were counted at an all-time high during the 2010 census. So it is difficult to brush it all over with one broad stroke. But even if you wanted to make that argument, it
is important to recognize that this process has been going on for decades and decades; and in fact, some of the most innovative rural policies ever legislated in Minnesota (e.g., school payment equalization or LGA) occurred in the midst of this demographic transition. So are we suggesting that somehow we have reached a demographic tipping point, where urban and suburban legislators no longer care about their rural cousins? I don’t think so. So let me posit three alternative hypotheses or explanations: First, I would suggest that the leading organizations that had provided that advocacy and rural voice in the past have been decidedly quiet. Second, there seems to be a discernible lack of younger, second generation leaders and organizational advocates on behalf of rural Minnesota. Third, as Tom Horner noted in his report, rural Minnesota needs innovative solutions and it appears that such solutions are hard to come by at the moment. As I stated in my October 2012 column there was a time not too long ago when there were multiple organizations that were both competing and collaborating to trumpet that rural voice. Groups like Minnesota Rural Partners, the Center for Rural Policy and Development, as well as the U of M Extension were regularly convening groups, hosting summits and providing visible support for rural Minnesota in the state legislature. Today however, that visibility is not as apparent. Whether it is a change in the times, a change of personnel or a change in the mission, the organizational leadership providing that rural voice seems to be elusive. At the same time, we know that emerging leadership is the life blood of any community, organization or movement. And to be honest many of the old rural guard (myself included) need to help our younger contemporaries rise to find their voice. Evidence of that too seems hard to find, as meeting and
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Regional Outlook
By Jack M. Geller, Ph.D after meeting seems to look more like a reunion with the same names, faces and positions. So at this point in time it seems clear to me that if that rural voice is going to be found and expressed in policy actions, it will be by that next generation of young and enthusiastic rural leaders. Accordingly, it is not enough for us in the “Old Guard” to step aside, but rather we need to give these emerging leaders a hand up. And lastly, rural Minnesota needs to bring to the table new, fresh and innovative ideas and solutions. We can’t keep treading out the same argument of parity. For in truth, rural Minnesota is not a victim. Rather, Minnesota and the nation as a whole has changed; and so must rural Minnesota. And that must be the content of the message of our rural voice. MV (Geller is a professor and head of the Liberal Arts & Education Department at the University of Minnesota, Crookston. He also serves as the director of the federallyfunded EDA Center at UMC. He can be reached at gelle045@umn.edu.)
Amid high-speed hoopla, freight system chugs along By Minnesota Public Radio From the steam engine to visions of a national high-speed rail system, railroads have made their mark on American culture. In his first term, President Obama promised to create a national system of high-speed rail, though he was scarcely the first politician to have done so. The January 2010 stimulus bill allocated $8 billion for high-speed rail projects, but Congress rejected federal funding for it. In his State of the Union address last month, the president reiterated the goal of having passenger rail rise again. But these new projects could conflict with the freight systems that go largely undetected for many Americans. As it stands now, Amtrak pays private companies in the center of the country to run its low-speed passenger trains on freight-rail tracks. But high-speed trains would need their own tracks, depriving the freight-rail system of some of that revenue. How to build a high-speed system without hurting the freight industry is a problem that has not yet been solved, says professor Christopher Barkan, director of the RailTEC center at the University of Illinois at Urbana-Champaign. “The freight railroad network is a great asset to our economy and environment,” he says, “and we need to be careful that expansion of passenger service does not harm the viability of that efficient freight-rail transit system we’ve developed.” Mark Sprague’s Illinois farm covers about 3,000 acres near the Mississippi River. He grows mainly corn, soybeans and a bit of winter wheat, and he relies heavily on freight rail to get it around. “For the past several years, I’d say close to 70 percent of my corn has actually left this area by rail,” he says. Cheap rail is hugely important to Sprague’s harvest. “You can move a ton of freight about 125 miles with a gallon of diesel fuel (by truck). But by rail, it’s more like 500 miles you can move a ton of freight with a gallon of diesel fuel,” he says. “We have the world’s best freight-rail system, but no one sees that. And when they do see it, they’re waiting for a mile-long train to go by so they can get to their child’s soccer game. - Edward Hamberger, Association of American Railroads From Sprague’s farm in Hull, his corn travels 130 miles by rail to the city of Decatur, in central Illinois. He says he feels like he’s in a good spot: Freight rail carriers compete for his business, which helps keep it affordable. “There’s good competition between the rail lines. There’s several major carriers, and here in the Midwest we’re served by all of them essentially,” he says. Edward Hamberger is the president and CEO of the Association of American Railroads, a freight-rail industry group. “We have 140,000 miles of track, an interconnected network that binds this country together,” he says. Hamberger says Sprague is just one of millions of customers served by American freight rail. “Not everyone knows that the freight-rail system in America is privately owned. This year alone America’s private freight companies will spend $24.5 billion — that’s 40 cents of every revenue dollar — back into the infrastructure in terms of new locomotives, railroad ties, miles of track, signal systems, rail cars,” he says.
Photo by Tim Boyle/Getty Images
A Union Pacific freight train passes over a grade crossing in Elmhurst, Ill. Hamberger says freight rail is a geographic necessity in America. “In the U.S., with 3,000 miles from coast to coast, we better have a pretty effective, efficient and cost-effective way of moving that freight just to get to ports so we can compete in world markets,” he says. Even though freight trains are heavier and slower than trucks, they’re more fuel-efficient, and therefore more cost-effective. Plus, many American highways and bridges need infrastructure repair. But most Americans don’t see trains every day, like they do trucks. So Hamberger says their idea of the railroad is kind of out of date. “Everybody says, ‘My grandfather worked on the railroad,’ and everybody says, ‘My goodness, why don’t we have a railroad system like Japan has?” We have the world’s best freight-rail system, but no one sees that,” he says. “And when they do see it, they’re waiting for a mile-long train to go by so they can get to their child’s soccer game.” Hamberger says that image could be a problem as America begins to build high-speed passenger rail systems. The issue, he says, is that high-speed passenger trains could actually threaten the health of freight rail if not carefully coordinated. In addition, political opponents of the president’s vision say America is just too spread out, too large and diffusely populated for high-speed economics to work. “The population densities in countries where it has worked are different than in the U.S.,” says RailTEC’s Barkan. “Well, that’s definitely true out in the West, where you have vast swathes of land with very little population.” It’s a different story in large metropolitan centers in the Midwest, though, Barkan says. “If you actually look at the demographics and the distribution of the people and geography, it’s not that dissimilar from, say, France,” he says, “which is another country that has a very successful high-speed passenger rail system and continues to expand their system.”
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Business and Industry Trends
Employment
Unemployment claims fall First time unemployment claims fell significantly in January in Minnesota and the region, following several months late last year when claims in manufacturing and some other sectors had risen. In the nine-county Mankato region, claims fell 6 percent year-over-year among construction workers, 16 percent in manufacturing, 39 percent in retail and 9 percent in services. On the state level, first time claims fell 7 percent in construction, 16 percent in manufacturing, 13 percent in retail and 10 percent in services compared to a year earlier.
new pipeline capacity lowers the cost of moving midcontinent crude oil to the Gulf Coast refining centers.
Pump prices $3.55 Falling crude prices will contribute to a decline in the national annual average regular gasoline retail price from $3.63 per gallon in 2012 to $3.55 per gallon in 2013 and $3.39 per gallon in 2014, about 11 cents per gallon and 4 cents per gallon higher than last month’s forecast. Diesel fuel retail prices averaged $3.97 per gallon during 2012 and are forecast to fall to $3.92 per gallon in 2013 and to $3.82 per gallon in 2014.
U.S. crude production rising ■■■
Agriculture
Crop prices edging down While crop prices remain historically strong, there has been a slow but steady decline in recent months. Local corn prices were $6.94 per bushel in February, slipping steadily since hitting a high of $7.98 a bushel last August. Soybeans were bringing $14 per bushel in February, after peaking at $16.92 per bushel last September.
Hogs still lagging Hog prices continued a three month slide, falling to $82.48 per 185-pound carcass in February, in spite of recordhigh feed prices for hog producers. Hogs peaked at $94.67 last July and hit a low of $63.33 in September, before rising again and then falling.
Dairy down Milk prices were $20.77 per hundredweight in February, just above where they were a year ago but down two dollars from January and last December.
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Energy
Crude oil leveling off The Brent crude oil spot price, which averaged $112 per barrel in 2012 and rose to $119 per barrel in early February 2013, will average $109 per barrel in 2013 and $101 per barrel in 2014, according to the Energy Information Administration. The projected discount of West Texas Intermediate (WTI) crude oil to Brent, which averaged $18 per barrel in 2012, averages $9 per barrel in 2014 as planned
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U.S. total crude oil production averaged 6.4 million barrels per day (bbl/d) in 2012, an increase of 0.8 million bbl/d from the previous year. Projected domestic crude oil production continues to increase to 7.3 million bbl/d in 2013 and 7.8 million bbl/d in 2014.
Liquid fuel use down Total U.S. liquid fuels consumption fell from 20.8 million bbl/d in 2005 to 18.6 million bbl/d in 2012. The total consumption should rise slowly over the next two years to an average of 18.7 million bbl/d in 2014, driven by increases in distillate fuel and liquefied petroleum gas consumption, with mostly flat gasoline and jet fuel consumption.
Cold drives up natural gas The Henry Hub natural gas spot price, which averaged $2.75 per million British thermal units (MMBtu) in 2012, will average $3.53 per MMBtu in 2013 and $3.84 per MMBtu in 2014 Cold weather helped drive northeastern natural gas prices up at the end of January. The Northeast is infrastructureconstrained and the tight supply-demand balance during extreme cold or heat often leads to price spikes. Cold weather also affected natural gas production in the western United States, where producers reported wellhead freeze-offs
Coal use to go up Coal consumption in the electric power sector will increase, as electricity demand and natural gas prices rise, but still remain significantly lower than the 1,003 million short tons (MMst) averaged during 2000-09. Coal consumption in the electric power sector will be 859 MMst in 2013 and 870 MMst in 2014. Annual nonpower-sector coal consumption will average more than 65 MMst, similar to the amount of consumption estimated in 2012.
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Greater Mankato Growth
2012 in Review: More Growth for Greater Mankato The final figures have been tabulated, revealing that 2012 was another year of growth for the Greater Mankato marketplace. According to Greater Mankato Growth President & CEO Jonathan Zierdt, the individual strengths of the cities and counties here combine to create a powerful portfolio of combined assets, resulting in collective success for the region. “This unique combination of assets includes access to a talented workforce, supply chain availability, industry diversification, outstanding livability and a commitment to regional collaboration, to name a few.” Each February Greater Mankato Growth compiles the marketplace’s annual economic data and benchmarks for the previous year. Greater Mankato Growth identifies the “Greater Mankato marketplace” as including Blue Earth and Nicollet counties and communities immediately adjacent like Le Sueur. In many cases, however, the latest economic information is limited to the Mankato-North Mankato Metropolitan Statistical Area (MSA), which specifically includes all of Blue Earth and Nicollet counties. Key economic successes for the MSA in 2012 included: 11th in the nation on Forbes 2012 list of “Best Small Places for Business and Careers” In June 2012, Forbes ranked the Mankato-North Mankato MSA 11th in the nation of all places in the U.S. with populations less than 250,000, up from 25th place in 2011. Forbes based the ranking on the entire MSA’s performance in variety of areas, including job growth, costs (business and living), income growth, educational attainment, projected economic growth and quality of life. Top 25% in the nation for Job Growth by NewGeography.com In May 2012, NewGeography.com ranked the MSA number 80 among all 398 MSAs in the U.S. for creation of short and long-term jobs. This was the highest ranking of any of the six Minnesota MSAs. The Mankato-North Mankato MSA was also ranked top in Minnesota and 52nd in the nation among the 243 MSAs in the U.S. that are classified as “small sized” (those with fewer than 150,000 employees).
141 new building and renovation projects Of the 141 new projects initiated or completed in 2012, square footage was available for 45 projects and totaled more than 2.5 million square feet. Construction costs were available for 81 of the projects, which totaled more than $223 million. This follows two strong years, with a total of 270 building and renovation projects initiated or completed from the beginning of 2010 through the end of 2012. These figures do not include a planned Walmart distribution center coming to the area. Average Number of Establishments up 1.6% The average number of establishments in the MSA at the end of the 2nd Quarter of 2012 was at 2,719, compared to 2,675 at the end of 2011, a 1.6% increase in six months. Payroll Increase of 6.2% Total payroll in the MSA for the 2nd Quarter of 2012 was $461 million, compared to $434 million for the same period of 2011, a 6.2% increase. The average weekly wage in the 2nd Quarter of 2012 was $697, compared to $679 at the end of 2011, a 2.7% increase. Year over Year Job Growth of 2.3% Between 2011 and 2012 the average number of jobs for all non-farm businesses located in the MankatoNorth Mankato MSA grew by 2.3% (or 1,220 jobs). This was the largest gain of any of the six MSAs in the state. It was also well above Minnesota overall, which grew by 1.3%, and the U.S, which grew by 1.7%. More than just a one year trend, over the past 10 years, from 2002 to 2012, the Mankato-North Mankato MSA’s average job number increased by 7.5%, again higher than any other MSA in the state of Minnesota (ranging from -1.45 to 6.1%), the entire state of Minnesota (1.7%) and the U.S. (2.5%). Average Monthly Unemployment down by .6% Average monthly unemployment for residents living in the MSA dropped from 5.3% in 2011 to 4.7% in 2012, a difference of .6%. For more details and data sources for the above statistics, visit greatermankato.com/economy.
Chamber of Commerce and Economic Development
507.385.6640 • greatermankato.com 38 • MArch January2013 2013• •MN MNValley ValleyBusiness Business
2012 in Pictures
Songs on the Lawn
New Greater Mankato Website
Legislative Forum
Business Awards & Hall of Fame
Greater Mankato Talent Symposium
Greater Mankato Leadership Institute
Grow Minnesota! Visit
Greater Mankato on the Green
Greater Mankato Business Showcase
Greater Mankato Day at the Capitol
Training Camp Reception
Tour of Manufacturing
Greater Mankato Campus & Community Fair
MN Valley Business • march 2013 • 39
Greater Mankato Growth
Kiwanis Holiday Lights Parade presented by Greater Mankato Young Professionals.
2012 in Pictures
CVB Staff Promoting one of the area’s assets, the Blue Earth River
Greater Mankato Growth
2012 Tourism Award Winners
Minnesota Ag Expo at Verizon Wireless Center
Minnesota Senior Games
Trade Show Booth
3rd Annual Mankato Marathon
Mahkata Wicipi Pow Wow (Recipients of CVB’s 2012 Bring it Home Award)
40 • March 2013 • MN Valley Business
Travel & Tourism Week Event at Mankato Brewery (Recipients of CVB’s 2012 Hospitality Award)
2012 in Pictures
CityDesign Awards of Excellence
City Center Signage
CityArt Walking Sculpture Tour
New Mankato Public Safety Center Opening in the City Center
Alive After 5 Entertainment
City Center Social
City Center Partnership participating in Kiwanis Holiday Lights Parade
MN Valley Business • March 2013 • 41
Greater Mankato Growth
Alive After 5 Attendees
Shop Small Holiday Campaign
Member Activities Business After & Before Hours
5:00 - 7:00 p.m.
Greater Mankato Growth
March 5 April 2 May 7
7:30 - 9:00 a.m.
Children’s Museum of Southern Minnesota March 13 Minnesota State University, Mankato – April 17 Intercollegiate Athletics May 15 AAA Minnesota and Jersey Mike’s Subs
Primrose Retirement Community Mankato Ford — Quick Lane Tire & Auto Alliance Insurance Agency
2013 Business After Hours Sponsored by
2013 Business Before Hours Sponsored by
January Business After Hours at Pub 500
January Business Before Hours hosted by Waste Management
Business After and Business Before Hours gives representatives from GMG member businesses at the Engaged Level or higher an opportunity to get together with one another to exchange ideas and learn about each other’s businesses. For more information on these and other member events, visit greatermankato.com/events.
42 • March 2013 • MN Valley Business
Cavalier Calls on our
Newest Members
growth
in Greater Mankato
New Business Minnesota Autism Center 2101 Rolling Green Lane, North Mankato
Blue Cross and Blue Shield of MN 99 Navaho Avenue, Suite 101, Mankato bluecrossmn.com
New Business The Boulder Tap House 291 St. Andrews Drive, Mankato
Indulge Salon & Tanning 1713 Commerce Drive, North Mankato indulgesalonandtanning.com
New Location Cleary Building Corp. 20969 549th Avenue, Mankato
Rural Strategies, LLC Elysian goffpublic.com/partners/rural-strategies/
Ribbon Cutting Dr. Mary T. Dooley Map Library Minnesota State University, Mankato
Savoy Bar & Grill 526 South Front Street, Mankato facebook.com/Savoy.Mankato
New Housing Sibley Park Apartments 410 Sibley Parkway, Mankato
MN Valley Business • March 2013 • 43
Greater Mankato Growth
504 Corporation 1961 Premier Drive, Suite 202, Mankato 504corporation.com
Local Business Memo/Company News
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Dehen honored as alum Mark Dehen was presented the “Distinguished Alumnus Award” by Northwestern Health Sciences University’ College of Chiropractic Alumni Association during the university’s annual homecoming celebration for his leadership and service to the chiropractic profession. Dehen has practiced in North Mankato for 26 years at the Back to Wellness Clinic. He is also mayor of North Mankato.
Schneider brings 30 years of experience in general management, strategic/comprehensive planning, consumer and business to business marketing, finance, mergers and acquisitions, new products/services, business start-up and professional relationship development. He most recently comes from The Broughton Group, Merrill Lynch. ■■■
■■■
Kelly Hulke
Hulke to head association Kelly Hulke, general manager of Home Magazine in Mankato, has been named president of the Midwest Free Community Paper Association. The organization is comprised of 130 free community papers and shoppers serving over 2.3 million households.
Peter Nelson
selected.
Peter Nelson honored Peter Nelson, financial adviser of LPL Financial at Nicollet County Bank in St. Peter, has been named a Twin Cities area recipient of the 2013 Five Star Wealth Manager Award by Five Star Professional. The award winners appear in a special section in the January issues of Mpls.St.Paul Magazine and Twin Cities Business. Fewer than 5 percent of wealth managers were
■■■ ■■■ Ludeman in leadership conference Sander Ludeman, an Edward Jones financial adviser in Mankato, qualified for the firm’s 2013 Financial Advisor Leaders Conference. The conference recognizes financial advisers who are among the leaders in the financial-services firm. Ludeman was one of 793 financial advisers who qualified out of the firm’s nearly 12,000 financial advisers. ■■■ United Prairie collects 1,200 food items United Prairie Bank employees teamed up for their local food shelves for an activity called “Food Shelf Golf.” Employees separated into 12 teams, each representing a different food shelf and created a golf hole comprised of nonperishable food items. Each team was given 100 pieces of food to build their structure in addition to donations from employees. As boxes and cans of food lined the outer edges of their golf holes, team members worked together to overcome the challenge of constructing a creative, yet functional golf hole. ■■■ Olsen back at Pioneer Bank Dean Olsen has been named president of Pioneer Bank, St. James. Olsen spent 10 years with the bank from 1986 to 1996. In 2000, Citizens State Bank of St. James merged with its sister bank, Pioneer Bank of Mapleton, Elmore and Delavan to create one bank, which now has $295 million in assets. In 2004, the bank purchased an existing bank branch in North Mankato and opened a new branch in Mankato. ■■■ Schneider joins Abdo, Eick & Meyers Richard (Rick) Schneider has joined Abdo, Eick & Meyers to head up the firm’s consulting business.
44 • March 2013 • MN Valley Business
Metro Sales buys Kato Richo Metro Sales Inc., the largest independent Ricoh dealer in the Midwest, has acquired the Mankato Ricoh branch and five others in Minnesota. The office is led by longtime sales manager Ken Anderson. ■■■ Nesvold honored for volunteerism Dick Nesvold, CEO of SouthPoint Federal Credit Union in Sleepy Eye, is among a group of nine credit union professionals who were inducted into the World Council of Credit Unions Executive Volunteer Corps. The corps recognizes industry leaders for their dedication to international credit union Dick Nesvold development and volunteer service. Nesvold is one of three Minnesota credit union representatives who participate in an ongoing exchange between the Minnesota Credit Union Network and a Paraguayan credit union association. ■■■ I&S Group honored with ACEC Award I&S Group was recognized with an Honor Award for Engineering Excellence from the Minnesota Chapter of the American Council of Engineering Companies. Blue Earth County Ditch No. 57 encompasses a 6,000-acre watershed and was constructed nearly 100 years ago. I&S Group designed an improvement to the system that incorporated numerous storage/treatment practices to improve water quality for the watershed while also improving the drainage capabilities of the system.
Carlson Craft unveils new logo North Mankato-based Carlson Craft has unveiled a redesigned logo featuring the words “Carlson” and “Craft” with contrasting fonts — “Carlson” is in a larger script font and “Craft” is done in an all-caps serif font. This dual font logo is a nod to the previous logo and to the use of dual fonts in wedding invitations. ■■■ Sherburne joins Abdo, Eick & Meyers Josh Sherburne, CPA, has joined Abdo, Eick & Meyers as a business manager in the Mankato office. Sherburne brings more than nine years of experience to the firm in attestation services for both domestic and international clients involved in a variety of industries with his focus primarily Josh Sherburne CPA on software and manufacturing and distribution operations. He also will provide business risk management and internal audit services. ■■■ Lonnquist joins Eide Bailly Eide Bailly, regional certified public accounting and business advisory firm, has hired June Lonnquist. She will be serving as a financial assistant to Ryan Spaude in the Eide Bailly financial services department. ■■■
Becky Schendel
assets.
Schendel joins Eide Bailly Eide Bailly has added Becky Schendel to its financial institutions compliance team and audit department. She has more than 15 years of experience as a financial professional with a recent focus on internal audits and compliance. She tests the adequacy and effectiveness of internal controls, compliance with policies and procedures, regulations, and controls over safeguarding of ■■■
Wullschleger, Schafer join Brunton Architects Brunton Architects has hired architect Scott Wullschleger. He holds a master’s degree in architecture and bachelor’s degree in environmental design from North Dakota State University. Brunton also added Joel Schafer as part of the business development team. Schafer brings more than 20 years sales experience to the North Mankato firm. ■■■
Ann Willaert
Willaert named a director at SCC South Central College’s Center for Business and Industry announced that Anne Willaert is the new director of professional and continuing education. Willaert will be responsible for meeting the changing needs of individual learners, business, and organizations within the region through the
development of CBI’s professional and continuing education programs. ■■■ Complete Basement recognized Complete Basement Systems received the Angie’s List Super Service Award for 2012. The award recognizes industry leaders with less than 5 percent of the businesses on Angie’s List earning the award. Businesses must have achieved and maintained a superior service rating on Angie’s List throughout the year to earn the designation. ■■■ Abdo, Eick & Meyers donates to MSU The Advisory Council for Minnesota State University’s college of business announced accounting firm Abdo, Eick & Meyers will provide a $25,000 lead gift for a $200,000 Advisory Council Executive Suite in the future college of business Global Solutions Center. The commitment brings the total amount raised for the suite to $50,000. ■■■ Lago to lead United Prairie Bank Doug Lago, former president and CEO of Emmet County State Bank in Estherville, Iowa, has been selected to lead United Prairie Bank’s Mankato market. CEO Scott Bradley said Lago’s experience and depth in agricultural finance helps strengthen United Prairie’s position as an ag lender in the area. According to American Banker Weekly, United Prairie Bank is the second largest ag lender by total loan volume among all of Minnesota’s independently owned community banks. ■■■ Eide Bailly adds staff Eide Bailly has hired Denise Engels and Kyle Bahe. Engels serves as an accounting services associate and has her bachelor of science degree in elementary education from St. Cloud State University. Bahe, who was a tax intern last year, is an audit associate. He graduated from Minnesota State University with a degree in accounting. ■■■ Schmidt gains certification Brady Schmidt, of Coulter, Schmidt & Klein private wealth advisers, successfully completed the requirements of becoming a certified financial planner professional. To get the certification, individuals must meet the experience and ethical requirements, successfully complete financial planning coursework and have passed an examination, as well as agree to ongoing education.
To submit your company or employee news. e-mail to tkrohn@mankatofreepress.com Put “Business memo” in the subject line. Call or e-mail Associate Editor Tim Krohn at tkrohn@mankatofreepress.com or 344-6383 for questions.
MN Valley Business • March 2013 • 45
A Welcoming Space
R Just as Trinity Lutheran Church in Owatonna opens its arms and welcomes the community to fellowship, the new addition designed by I&S Group welcomes people in and makes them comfortable. Open spaces, ample natural light, and tactile materials make it a space that begs to be used. And, with a multipurpose room, narthex space, offices, and classrooms, it will certainly be well used. Find out more about the advantages of I&S at www.is-grp.com.
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