en Private Sector and Franchise Hiring Softens in April <!-- google_ad_section_start --><p><img alt="fast-food worker" src="" style="width: 320px; height: 320px; float: right; margin-left: 5px; margin-right: 5px;" />ROSELAND &ndash; Private-sector franchise jobs in the United States rose by 14,100 in April, according to payroll processor ADP in its National Franchise Report. </p> <!--break--><!--break--><p> Restaurants, which employ the most of the sectors in the franchise industry, had the most robust monthly growth rate of 0.4 percent compared to the previous month. The leisure sector &ndash;fitness and recreation centers &ndash; had the greatest fall at -0.4 percent in April (see table below).</p> <p>&quot;The restaurant segment drove franchise employment growth in April, actually adding more jobs than the sector as a whole,&quot; said Ahu Yildirmaz, vice president and head of the ADP Research Institute. &quot;Accelerating wage growth as reported in ADP&#39;s most recent Workforce Vitality Report may be motivating consumers to eat out more often.&quot;</p> <p>Private-sector small business, firms with 49 or fewer employees, increased by 93,000 jobs from March to April. Non-farm private sector employment for the United States grew by 156,000 jobs.</p> <p>&quot;Despite the softest overall monthly jobs added in three years, small businesses remained an engine for job growth in April,&quot; said Yildirmaz. &quot;Smaller businesses are less susceptible to global conditions, such as low commodity prices and the strong dollar, that may have caused larger businesses to ease up on hiring.&quot;</p> <p>Mark Zandi, chief economist of Moody&#39;s Analytics, added: &quot;The job market appears to have stumbled in April. Job growth noticeably slowed, with some weakness across most sectors. One month does not make a trend, but this bears close watching as the financial market turmoil earlier in the year may have done some damage to business hiring.&quot;</p> <p><img alt="" src="" style="height: 388px; width: 670px;" width="670" height="388" /></p> <hr /> <p><img alt=" U.S. Added 14,100 Franchise Jobs in April, According to ADP National Franchise Report " src="" style="border-width: 0px; border-style: solid; width: 640px; height: 1673px;" /></p> <!-- google_ad_section_end --> The Economy Wed, 04 May 2016 16:26:30 +0000 Don Sniegowski 15117 at Smashburger Names Co-Founder Tom Ryan as Chief Brand Officer <!-- google_ad_section_start --><div class="photoright"><img alt="Tom Ryan" src="" style="height: 320px; width: 320px;" width="320" height="320" /> <div class="caption">Tom Ryan, co-founder of Smashburger</div> </div> <p>DENVER&mdash;In a further shifting of its executive ranks, Smashburger announced on Monday that it is bringing back its co-founder, Tom Ryan, into a more active role in the company. Ryan has been named to be the better burger chain&#39;s new chief brand officer. </p> <!--break--><!--break--><p> The announcement follows the surprising departure of Smashburger&#39;s chief executive officer Scott Crane over a week ago and the announcement last week of his replacement, new CEO and president Mike Nolan.</p> <p>Rick Schaden and Tom Ryan co-founded the Smashburger chain in 2007. Ryan previously has served as Smashburger&#39;s chief concept officer, overseeing product development and quality standards. Having held marketing and product development positions at Procter &amp; Gamble, McDonald&#39;s, Pizza Hut and once bankrupt Quiznos, Ryan has helped develop and launch iconic menu items such as McDonald&#39;s McGriddle, Pizza Hut&#39;s Stuffed Crust Pizza and Quiznos&#39; Steakhouse Beef Dip sandwich.</p> <p>Rick Schaden, chairman and co-founder of Smashburger, wants to aggressively grow the chain: &quot;There is no better person than Tom to guide the evolution of the Smashburger brand as we enter this next phase of growth at home and abroad.&quot;</p> <p>The new chief brand officer will work closely with Smashburger&#39;s chief marketing officer.</p> <p>&quot;Smashburger is at an inflection point,&quot; said Tom Ryan. &quot;I&#39;m excited at the prospect of taking on a more active, day-to-day role and working with the talented team that Josh Kern, our chief marketing officer has assembled. All the ingredients are in place to take Smashburger to the next level as we restore burgers to their rightful place.&quot;</p> <hr /> <p><strong>Related reading</strong>:</p> <ul> <li><a href="">As Smashburger CEO Crane Leaves, Long Live Chief Nolan</a></li> <li><a href="">Smashburger appoints new CEO, Prokupek leaves</a></li> <li><a href="">Smashburger CEO Scott Crane forges ahead with chain&#39;s growth</a></li> <li><a href="">Avenue Capital sues Quiznos former ownership&nbsp;for fraud</a></li> </ul> <!-- google_ad_section_end --> Leadership change Tue, 03 May 2016 12:09:03 +0000 Don Sniegowski 15112 at Zarco: NLRB Ruling Is Good for Franchisees <!-- google_ad_section_start --><div class="photoright"><img alt="Robert Zarco" src="/sites/default/files/resize/Zarco-671x228.jpg" style="width: 671px; height: 228px;" width="671" height="228" /> <div class="caption">Franchisee attorney Robert Zarco of law firm Zarco Einhorn Salkowski Brito, P.A.</div> </div> <p>LAS VEGAS&mdash;Franchise owners have surely heard all the talk about the end of franchising as we know it. The National Labor Relations Board&#39;s controversial joint-employer decision has triggered a backlash in the franchising world, with the labor board ruling that a big recycling company is responsible for the employees of a staffing firm it hired.</p> <!--break--><!--break--><p>The decision comes even as the NLRB weighs this fall whether to declare McDonald&#39;s a joint employer with its franchise owners.</p> <p>The two cases have fueled doomsday-like fears that franchise relationships across the quick-service industry could be upended, with the line between franchisor and franchisee suddenly erased.</p> <p>But probably few in Las Vegas at the last annual gathering of DDIFO, the independent association for Dunkin&#39; Donuts franchisees, could have predicted renowned franchisee lawyer Robert Zarco&#39;s radically different and eye-opening take on the landmark issue. Zarco argued NLRB&#39;s joint-employer ruling is far from a catastrophe for franchise owners.</p> <p>Instead, it may be the &quot;greatest benefit you guys ever had,&quot; he said.</p> <p>In fact, it could provide key leverage for franchise owners to push for a better deal from their corporate parents.</p> <p>&quot;You can level the playing field,&quot; Zarco said. &quot;Here is your opportunity to level the playing field on a silver platter.&quot;</p> <h3><span style="color:#800000;"><strong>Distorted picture </strong></span></h3> <p>Zarco&#39;s take is a bit jaw dropping given the conventional thinking about the NLRB ruling in the franchise world and beyond.</p> <p>In its late August decision, the labor board ruled that Browning-Ferris Industries is a joint employer with a staffing company that provides the employees that operated one of its California recycling centers.</p> <p>However, franchisors and their industry groups have been effective in obscuring the real issues and instead portraying the ruling as an effort by a big federal bureaucracy to undermine small businesses, he argued.</p> <p>The media has joined in, reporting how the NLRB decision is a looming threat poised to wreck the very foundations of franchising across a myriad of brands, including Dunkin&#39; Donuts.</p> <p>Franchisors have even hinted that the labor board&#39;s decision, if not reversed, could force them to take drastic action, such as terminating franchise agreements and turning what have been independent businesses into corporate stores.</p> <p>But such threats are simply a smokescreen, Zarco contends, to disguise the real issue that has the big franchisors pushing the panic button, and that&#39;s liability.</p> <p>Up until the NLRB ruling, most franchisors had the best of both worlds. They were able to effectively control everything from hiring to how a tomato is sliced at their franchised locations, yet &ndash; at the same time &ndash; could claim they were not at fault when injuries or things went wrong at their restaurants, Zarco explained.</p> <p>However, now that quick service chains face the real possibility of being labeled a joint employer, they could find themselves even more of a target for class action suits resulting from injuries or mistreatment of employees hired by the franchisee.</p> <p>Zarco says that could prove expensive, since lawyers would seek to go after the deep-pocketed franchisor in a case if they could.</p> <p>&quot;Franchisors are very upset &ndash; it&#39;s like apocalypse is coming or maybe Godzilla,&quot; Zarco said. &quot;It&#39;s not true &ndash; franchisors don&#39;t want the liability.&quot;</p> <p>Hence the stiff opposition, including efforts to recruit franchise owners to provide a sympathetic face for the cause amid a fierce lobbying push by the major franchisors.</p> <p>&quot;The franchisors need you to support them on Capitol Hill, to support them in doing what they cannot do themselves,&quot; Zarco said. &quot;This costs franchisors money.&quot;</p> <h3><strong><span style="color:#8B4513;">What the ruling really says</span> </strong></h3> <p>The fact that few people have actually bothered to read the 55-page NLRB ruling may be one reason opponents have been so successful in obscuring the real issues behind their campaign to torpedo the ruling, Zarco argued.</p> <p>Shortly after taking the podium in the Augustus Ballroom at Caesars Palace, Zarco asked for a show of hands from DDIFO members who had read the labor board&#39;s decision.</p> <p>Just one hand shot up.</p> <p>In his explanation, Zarco said that far from overturning the time-honored rules of franchising, the NLRB&#39;s decision simply updates rules crafted decades ago when most people worked directly for a company. But, because the economy has undergone a major transformation, with companies relying much more today than ever before on the work of independent contractors, the labor board is recognizing this shift and trying to ensure that companies aren&#39;t shirking their responsibilities to what are effectively employees through subcontracting relationships, he said.</p> <p>Many franchisors, in turn, have increasingly blurred this line, mandating in increasing detail what franchise owners should be doing on a day-to-day basis and calling into question their independent status.</p> <p>&quot;Franchisors, many of them have crossed the line,&quot; Zarco said. &quot;They have crossed the line from giving you guidance and recommendations and suggestions to dictating, mandating and requiring what you should do as an independent business owner.&quot;</p> <p>The NLRB lays out criteria for deciding whether a franchisor is in effect acting as a direct employer, rather than a more hands-off corporate parent.</p> <p>That, in turn, means exercising control over key areas that the independent franchise owner should control.</p> <p>He conceded, franchisors are allowed to control franchisees to protect the value of their brand and the quality of their products, but not to control things like hiring and firing, business hours and other day-to-day operations.</p> <p>&quot;To try and escape liability by planting a middleman is not going to work anymore,&quot; Zarco said. &quot;A true independent contractor status is truly what would work &ndash; not calling someone an independent contractor when they are not.&quot;</p> <h3><span style="color:#800000;"><strong>McDonald&#39;s case doesn&#39;t apply to other brands</strong></span></h3> <p>The McDonald&#39;s case has also been cited as potentially threatening the foundations of franchising.</p> <p>But the pending NLRB ruling, which could wind up labeling McDonald&#39;s a joint employer, won&#39;t necessarily impact franchise owners in other brands.</p> <p>That&#39;s because the case revolves around allegations that McDonald&#39;s snooped on and harassed employees at its franchises who were involved in protests over the chain&#39;s labor practices.</p> <p>Franchise owners who follow the law won&#39;t have anything to worry about, Zarco said.</p> <p>&quot;Maybe if you start threatening your employees if they start complaining about their wages and working conditions, you may find yourself in the same situation,&quot; Zarco said. &quot;But if you don&#39;t violate your employees&#39; rights, you are going to be fine.&quot;</p> <h3><span style="color:#800000;"><strong>What to expect next </strong></span></h3> <p>The prospects of expanded liability and costly lawsuits are what franchisors are most concerned about now, Zarco explained.</p> <p>In fact, many current franchise agreements leave franchisors extremely vulnerable on this front, detailing many requirements and mandates that could be interpreted by the NLRB as evidence of a joint-employer situation.</p> <p>Zarco believes franchise owners should expect to receive calls from their brands in the months ahead, seeking to rewrite their franchise agreements.</p> <p>Franchisors want to protect themselves from liability by distancing themselves in their new contracts and potentially inserting legal language which puts all liability on the franchise owner.</p> <p>Yet for franchise owners, the demands of their corporate parents and the trade groups that represent them, both for political help and for cooperation rewriting franchise agreements, presents a golden opportunity, Zarco argued.</p> <p>Franchisees should seize the moment and use their newfound leverage to get better terms.</p> <p>&quot;You can use this time, this law, as a bargaining chip to change your contract,&quot; he urged.</p> <h3><span style="color:#800000;"><strong>Propaganda alert </strong></span></h3> <p>As franchise owners consider what, if any steps to take next, Zarco said there is one thing that definitely won&#39;t happen. Despite hints and threats, franchisors will not start terminating franchise agreements and taking them over as corporate stores.</p> <p>&quot;We are now going to start taking over your day to day operations,&quot; Zarco said, reciting the propaganda coming out of franchisor circles. &quot;Bull! Not happening.&quot;</p> <p>First, such a move would cost franchisors a fortune, requiring the hiring of countless new managers, among other things. Second, Wall Street would go nuts, punishing their stocks, given that franchising has long been at the core of success of these corporations, he said.</p> <p>&quot;Their stock price will crash, their investors will head for the hills,&quot; Zarco said.</p> <p>Last but not least, by taking over restaurants directly, the quick service chains, instead of insulating themselves from liability, will instead put themselves directly on the firing line.</p> <p>&quot;Think outside the box,&quot; Zarco said. &quot;This is your livelihood. Don&#39;t get sucked in by baseless propaganda. Don&#39;t follow like sheep.&quot;</p> <hr /> <p><em>This article was first published in the <a href="" target="_blank">October-November issue of Independent Joe</a>, the bi-monthly magazine for Dunkin&#39; Donuts independent franchise owners.&nbsp; It is republished on Blue MauMau by&nbsp;permission of <a href="" target="_blank">independent franchisee association DDIFO</a>.</em></p> <p><strong>Related reading</strong>:</p> <ul> <li><a href="">Jeff Goldstein: Chicken Little and the NLRB: Franchising Joint-Employers are Falling Everywhere</a> | BMM</li> <li><a href="" target="_blank">Editorial Cartoon: NLRB falls on franchisor chicken little</a> | BMM</li> <li><a href="" target="_blank">Editorial Cartoon: ZorFox wants control of ZeeHen, without liability</a> | BMM</li> </ul> <!-- google_ad_section_end --> Legal joint-employer National Labor Relations Board v McDonald's NLRB Tue, 03 May 2016 01:15:32 +0000 Scott Van Voorhis 15108 at NAACP Files Civil Rights Suit against Alabama Governor for Blocking Wage Hike <!-- google_ad_section_start --><div class="photoright"><img alt="" src="" style="height: 230px; width: 320px;" width="320" height="230" /> <div class="caption">Alabama Gov. Bentley signs HB174, Feb 25, 2016 (</div> </div> <p>BIRMINGHAM &ndash; Fast food workers filed a civil rights lawsuit yesterday along with Alabama&#39;s NAACP against Gov. Robert Bentley for blocking a measure that would have raised Birmingham&#39;s minimum wage from $7.25 an hour to $10.10.</p> <!--break--><!--break--><p>The push to raise Birmingham&#39;s minimum wage to $10.10 followed strikes and protests by local fast-food workers&nbsp;and other supporters as part of the national Fight for $15 movement, initiated by the Service Employees International Union (SEIU).&nbsp;With cities, states and companies around the country racing to significantly raise pay&nbsp;as a result of the Fight for $15, the Birmingham City Council decided to act to address the&nbsp;city&#39;s low-wage crisis.</p> <p>Birmingham&#39;s city council had voted last year in favor of the $10.10 increase, to become effective by mid-2017. It was estimated that 40,000 workers in predominantly black neighborhoods would benefit from the new minimum wage. However, in February the state legislature pushed through a bill that was signed by Gov. Bentley that bans cities from increasing their own wages and rolled back Birmingham&#39;s wage hike. Workers and other supporters are responding to that &quot;rash state action overriding the city&#39;s newly-passed local minimum wage ordinance&quot; by asserting in its federal lawsuit that the city&#39;s action is illegal.</p> <p>&quot;The state&#39;s move to block Birmingham&#39;s minimum wage increase&nbsp;was not only unjust and immoral,&nbsp;it was illegal too,&quot; said&nbsp;Benard&nbsp;Simelton, president of&nbsp;the&nbsp;Alabama State Conference of the National Association for the Advancement of Colored&nbsp;People. &quot;The city council and mayor of Birmingham made a decision they believed to be in the best interest of the citizens of Birmingham, but the state legislature, continuing a long history of discrimination, overturned it.&quot;&nbsp;</p> <p>One 23-year old fast food worker employed at Moe&#39;s Restaurant in Birmingham told of her plight. &quot;Despite working hard for the same restaurant for three years, I&#39;ve only gotten one 25-cent raise.&quot; Marnika Lewis, a plaintiff in the lawsuit, said she now makes $7.75 an hour and can&#39;t&nbsp;make ends meet. &quot;I can&#39;t afford to feed my son or heat my home on the $270 I&#39;m paid each week, so I have to rely on public assistance just to scrape by. If the legislature and governor hadn&#39;t illegally stolen my raise, I would have had money to pay for my son&#39;s child care,&quot; she exclaimed.</p> <p>Lewis and her co-plaintiffs&nbsp;contend that nullification of the wage increase&nbsp;to $10.10 from the federal minimum of $7.25&nbsp;relied on the 1901 Alabama Constitution, which&nbsp;concentrated&nbsp;power at the state level&nbsp;with the express purpose of denying minority&nbsp;populations&nbsp;local control over matters affecting their own communities.&nbsp;</p> <p>Another plaintiff in the lawsuit, a Hardees fast food worker and resident of Birmingham, voiced his difficulty. &quot;I want to go to college, but on $7.25 saving up is impossible,&quot; said Antonin Adams, adding, &quot;I&#39;d love to be a computer technician, and a raise to $10.10 sure would have helped me along that path.&quot;</p> <p>The lawsuit filed in U.S. District Court in Birmingham states that HB 174 is tainted &quot;with racial animus&quot; and that it violates the equal protection clause of the United States Constitution. &quot;The exercise of complete control over regulation and policy pertaining to wages, leave or other employment benefits&nbsp;can be directly traced to provisions&nbsp;in the racially discriminatory 1901 Constitution that deprives black citizens the right to regulate such matters of central concern&nbsp;to their daily lives.&quot; The complaint explains that such provisions that grant exclusive authority to the State legislature to override any and all local ordinances &quot;are vestiges of race discrimination&nbsp;and HB 174 disproportionately impacts African American residents who live and work in the City of Birmingham.&quot;&nbsp;</p> <p>Attorney General Luther Strange, also named as a defendant, is linked to the civil rights suit. The complaint alleges that HB 174 further violates the U.S. equal protection laws because it specifically targets an ordinance that ordinance that Birmingham&#39;s black community and its city council strongly supported. It states that the&nbsp;Alabama legislature&nbsp;also&nbsp;failed to follow legally required notice procedures before &quot;ramming&nbsp;HB 174 through the legislature.&quot; The low-wage-worker plaintiffs seek an injunction prohibiting the state from enforcing HB 174, or taking any action to prevent the wage increase from taking effect. Alabama is one of only five states without a state minimum wage law.</p> <p><strong>National Employment Law Project commends advocates for determination </strong></p> <p>&quot;Today, low-wage workers and their supporters in Birmingham, Alabama moved their quest for living wages from legislators and the streets to the halls of justice,&quot; remarked Christine Owens, executive director of the NELP, regarding the lawsuit. She said she commends advocates and the City of Birmingham &quot;for their sustained determination to address the working poverty of low-income residents of this largely-African-American city.&quot; Owens expressed that she hoped the court will move quickly to reverse the state&#39;s acts.</p> <p>The National Employment Law Project is a non-partisan, not-for-profit organization that conducts research and advocates on issues affecting low-wage and unemployed workers.</p> <p>The NELP director said Alabama is one of only five states that has no state minimum wage law, and the legislature&#39;s and governor&#39;s hasty use of state authority to nullify Birmingham&#39;s minimum wage law &quot;smacks of heavy-handed subterfuge to maintain an economic order rooted in racial segregation and discrimination.&quot;</p> <p>&quot;The days of a Jim Crow [a derisive slang term for a black man, that came to mean any state law passed in the South that established different rules for blacks and whites] economy should be long-gone, but sadly, the refusal of Alabama&#39;s legislature to allow Birmingham to meet local needs through appropriate local measures signals the past persists. We call on the court to set aside the state&#39;s unconstitutional act, to restore the authority of Birmingham and other cities in Alabama to enact reasoned economic measures improving local health and welfare, and to ensure that justice, though often delayed, will no longer be denied.&quot;</p> <p>Perhaps Scott Doulas, executive director of Greater Birmingham Ministries, another supporter of low-wage workers, summed it up best stating, &quot;Gov. Bentley&#39;s signature on HB 174 took away Birmingham&#39;s ability to raise itself up and grow. The problem with Birmingham is that it&#39;s in Alabama.&quot;</p> <!-- google_ad_section_end --> The Economy Gov. Robert Bentley lawsuit HB174 Jim Crow minimum wage increase for workers NAACP NELP SEIU Fight for $15 Sat, 30 Apr 2016 14:21:02 +0000 Janet Sparks 15106 at Consumers Respond to Burger Combo Deals <!-- google_ad_section_start --><div class="photoright"><img alt="" src="" style="height: 320px; width: 320px;" width="320" height="320" /> <div class="caption">Wendy&#39;s 4 for $4 promo; source:Wendy&#39;s webpage</div> </div> <p>CHICAGO&mdash;After trying to wean consumers off chronic deals used during the Great Recession, the major quick service hamburger chains are back to offering combo meal deals. This time consumers are buying. </p> <!--break--><!--break--><p> After years of declines, quick service hamburger restaurants visits for combo meals rose by 1 percent for the year ending February 2016 compared to the same period a year ago. The entire increase was driven by combo meal deals, according to foodservice researcher The NPD Group.</p> <p>Combo meals, which previously were three menu items offered at a bundled price, had been declining in popularity for years because consumers wanted more choices and the ability to customize. Over the past six months, one chain after another has introduced value-oriented combo meals that offer choices. Wendy&#39;s introduced a 4 for $4 Meal. McDonald&#39;s launched the McPick 2 for $2 offering, and then changed the offer to 2 for $5 with a different product offering. Burger King followed suit with a 5 for $4 deal and a number of other QSR chains have added a value proposition of one kind or another to their menu.</p> <p>Consumers are responding to these combo meal offers. They consider them deals. Combo meals purchased on a deal at lunch and dinner rose from a rate of 6 percent in the year ending February 2015 to 8 percent in the year ending February 2016. This increase resulted in an additional 110 million combo meal deal orders or a total of 686 million orders. The three major hamburger chains that offered meal deals &ndash; Burger King, McDonald&#39;s, and Wendy&#39;s &ndash;were entirely responsible for the order increases.</p> <p>&quot;This once again suggests that given the right promotional offer at the right time, dealing can generate positive traffic growth,&quot; says Bonnie Riggs, NPD restaurant industry analyst and author of the recently released report, Value Wars: A New Twist on Combo Meal Deals. &quot;The response also points to the importance consumers place on the ability to customize and have choices.&quot;</p> <!-- google_ad_section_end --> Foodservice Fri, 29 Apr 2016 07:11:01 +0000 Don Sniegowski 15103 at As Smashburger CEO Crane Leaves, Long Live Chief Nolan <!-- google_ad_section_start --><div class="photoright"><img alt="Michael Nolan" src="" style="height: 320px; width: 320px;/" width="320" height="320" /> <div class="caption">Smashburger new CEO Michael Nolan</div> </div> <p>DENVER&mdash;In an email on Friday to employees and franchisees, Smashburger announced that its CEO, Scott Crane, was immediately leaving the company. Three working days later, yesterday, the franchisor of better burger restaurants announced it had appointed a replacement &ndash; industry veteran Michael Nolan.</p> <!--break--><!--break--><p>Outgoing CEO, Scott Crane, wrote his own memo to Smashburger employees and franchisees to explain his departure: &quot;After nearly 8 &frac12; years of being a part of the Smashburger family, it is time for Smashburger, and me personally, to move in a new direction.&quot; As is typical with such executive departures, there was no explanation why. Crane concluded, &quot;I will be cheering you from the sidelines.&quot;</p> <p>Rick Schaden, troubled chairman and CEO of bankrupt Quiznos, who is now <span style="color:black">chairman of Smashburger and its private equity holding company Consumer Capital Partners</span>, praised how Crane had helped build the firm since its beginning days. &quot;We have a deep appreciation for everything he has done for the company, our brand and, most importantly, our people,&quot; stated Schaden.</p> <p>The resignation of Crane comes nearly half a year after Philippine fast-food chain Jollibee Foods Corporation bought 40 percent of U.S.-based Smashburgers for $135 million.</p> <h3><strong><span style="color:#800000;">From Icon Burger to Smashburger</span> </strong></h3> <p>The better burger concept has come a long way in a short time. In June 2006, Smashburger took over Icon Burger, a restaurant that offered Coloradoans better burgers with gourmet toppings. By 2009, the concept had been rewrapped and sold as Smashburger franchises. The company quickly grew.</p> <div class="photoright"> <table border="0" style="border-collapse:collapse"> <colgroup> <col style="width:336px" /><br /> </colgroup> <tbody valign="top"> <tr> <td style="padding-left: 7px; padding-right: 7px; border-top: solid 0.5pt; border-left: solid 0.5pt; border-bottom: solid 0.5pt; border-right: solid 0.5pt"> <h3 class="rtecenter"><span style="color:#800000;"><strong>History of Smashburger</strong></span></h3> <ul> <li><strong>2006</strong>: Rick Schaden&#39;s Cervantes Capital, owner of franchising firm Quiznos, buys Lance Perryman&#39;s Lafayette, Colorado-based <a href="">Icon Burger LLC restaurant </a></li> <li><strong>2007</strong>: Scott Crane joins Consumer Capital Partners and Smashburger. Smashburger has&nbsp;2 company stores</li> <li><strong>2008</strong>: Smashburger&#39;s in-house attorney John Moore finalizes the deal to convert the original Icon Burger restaurant into Smashburger</li> <li><strong>2009</strong>: The first 13 franchises open under the Smashburger name</li> <li><strong>2011</strong>: <a href="">Smashburger cuts deal with Kentucky-based Dairy Cheer to obtain original Smashburger trademark </a></li> <li><strong>2011 </strong>Affiliated firm Quiznos files bankruptcy. <a href="" target="_blank">Consumer Capital Partners loses Quiznos</a></li> <li><strong>2015:</strong> Smashburger&nbsp;reports 185 company-owned or managed Smashburger restaurants and 141 franchised</li> </ul> </td> </tr> </tbody> </table> </div> <p>Today Michael Nolan is its newest CEO. Before him there was Scott Crane, who stepped in as Smashburger&#39;s chief executive two and a half years ago. Crane&#39;s immediate predecessor, CEO David Prokupek, left without public explanation.</p> <p>All CEOs faced high expectations, and short terms.</p> <p>In May of 2013, <a href="">Prokupek told business journal Bloomberg</a> that he expected the chain to have 500 units in the U.S. within the next two to three years. But as April 2016 closes, the private company has yet to reach that lofty goal. It has a respectable 365 restaurants under its logo, but not 500. Prokupek also expected an initial public offering.</p> <p><span style="color:black">&quot;Schaden and Prokupek failed to take Smashburger public,&quot; observes John Gordon, principal and founder of Pacific Management Consulting Group, about the chairman as well as the company&#39;s ex-CEO. </span></p> <p>Having been with the chain from its earliest days, David Prokupek&nbsp;started as&nbsp;the chairman of Icon Burgers, which became&nbsp;an early prototype for&nbsp;franchisor Smashburgers. He would become the young franchisor&#39;s CEO. Prokupek&#39;s term as Smashburger&#39;s chief executive officer was roughly the same length as Crane, two and a half years.</p> <p>After leaving, Prokupek <a href="">sued Smashburger</a> and Consumer Capital Partners, claiming that they deceptively cheated him out of millions in stock. He was known and liked in the franchising industry. So it is no surprise that a&nbsp;few months later in 2014 a large tax service franchisor, <a href="">Jackson Hewitt, recruited him</a> as its own chief executive officer.</p> <p>&quot;It is very ominous for a brand when CEOs come and go every three years,&quot; thinks franchise unit economist John Gordon about Smashburger&#39;s changing of the guard yet again. &quot;It takes some time for a new CEO to get in place and even longer to shift the corporate culture. There is uncertainty for Smashburger in that now more time needs to be spent to get its new CEO up to snuff.&quot;</p> <p>New CEO Michael Nolan became Smashburger&#39;s executive vice president and chief development officer two months ago. Having served as a member of the Smashburger board of advisors since 2012, his new role had him managing the selling of franchise licenses, restaurant build-outs and real estate.</p> <div class="photoleft"><img alt="" src="/sites/default/files/resize/SmashburgerCo-ZMix_1-330x331.png" style="width: 330px; height: 331px;" width="330" height="331" /> <div class="caption">Source: FDD</div> </div> <p>Nolan is a seasoned executive with strong brand experience. Serving most recently as an executive vice president and chief development officer at Corner Bakery, prior to that Nolan oversaw restaurant development strategy at Bloomin&#39; Brands Inc. for more than 1,500 locations across 26 countries. Previous to that he led growth strategies for fast-casual giant Panera Bread Company during a 12-year expansion phase that saw its units grow from 250 to more than 1,500.</p> <p>&quot;Michael has a great history with the Smashburger brand and a great career delivering unparalleled food and hospitality experiences for customers around the world,&quot; commented Rick Schaden, chairman and co-founder of Smashburger. &quot;At Smashburger we continue to set aggressive goals for quality, value, service and sales on an increasingly large scale. Michael&#39;s experience and perspective will be instrumental as we evolve from a regional player to a food first global brand.&quot;</p> <p>The announcement follows a significant recapitalization of Smashburger that was completed in the fourth quarter of 2015. In late 2015 Smashburger announced a new strategic partnership with Jollibee Foods Corporation (PSE: JFC), a Philippines-based fast food firm.</p> <h3><span style="color:#800000;"><strong>Smashburger Smashes against Wall of Slipping AUV, Tougher Competition </strong></span></h3> <p>One worrisome sign for the better burger restaurant chain is the significant increase in the ratio of company-owned to franchised restaurant units. The mix of franchises in its system has decreased from 56 percent in 2010 to 43 percent by the end of 2015. Company-owned stores have now become the majority of restaurants in the system. &quot;The company store ratio has gone up,&quot; observes restaurant economist Gordon. He stresses that a healthy franchise system should have sustainable and growing store sales averages and unit counts, with the mix of franchises growing.</p> <p>So what&#39;s wrong with a company that is so bullish on its prospects that it wants to invest more into its own company stores rather than selling proportionally more franchises?</p> <p>Gordon points out that can indeed be a good thing, but points out that chains that want to grow fast like Smashburger grow faster by selling franchise rights to owners, not by building a massive supply of their own brick and mortar stores. The analyst also looks at the average unit volume, or store revenue, which has been dropping.</p> <p>&quot;The large upsurge in company restaurants through corporate acquisitions is a signal that Smashburger franchisees are struggling and that the company is stepping in,&quot; surmises Gordon.</p> <p>Smashburger&#39;s ex-CEO Crane tried to meet the chain&#39;s many challenges. He bundled menu offerings at a better value price <a href="" target="_blank">to be more competitive</a>. Smashburgers do not have drive-thru service like quick service restaurants Wendy&#39;s, Burger King&nbsp;or McDonald&#39;s. Crane tried increasing store traffic by experimenting with drive-thru service. Though the chain&#39;s rate of growth was strong, particularly in buying stores for itself, Crane was under pressure to sell even more franchises.</p> <p>To analyst Gordon, Crane&#39;s difficulty in increasing store traffic and his need to bundle burger menus show that competition has heated up in this sector. &quot;The better burger space is extremely competitive and overloaded,&quot; says Gordon.</p> <p>&quot;Smashburger&#39;s same average unit sales have declined,&quot; he says to show additional evidence of the restaurants&#39; troubles within the chain.</p> <div class="photoright"><img alt="Smashburger company-owned restaurant AUV in 2010 vs 2015" src="/sites/default/files/resize/SmashburgerAUV2015_0-330x331.png" style="width: 330px; height: 331px;" width="330" height="331" /> <div class="caption">Source: FDD</div> </div> <p>What Gordon is talking about is that Smashburger reported a drop in <span style="color:black">average unit volume for its </span><span style="color:black">company-owned stores from $1,049,522 in 2010 down to $1,017,276 in 2015, according to its franchise disclosure documents that it files annually.</span></p> <p>Meanwhile, competition keeps pouring in. Other major players have announced their interest in this fast-casual sector. Even troubled Mexican grill chain Chipotle, which has seen its same-store sales tumble because of an earlier outbreak of E.coli and norovirus in its restaurants, has been <a href="">talking about hopping on</a>.</p> <p>Darren Tristano, president of food researcher Technomic, has a different viewpoint. He thinks Chipotle is not too late to the kitchen. &quot;The U.S. market probably isn&#39;t saturated with too many burger chains, said <a href="">Tristano to Bloomberg</a>. &quot;If you&#39;re Chipotle, you&#39;re kind of looking at it saying, &#39;Wow, look at Shake Shack&mdash;they went from one to such a large volume of sales.&#39;&quot;</p> <p>Smashburger&#39;s investors may feel left out. They may think that the market is great and with just the right CEO, he can supersize the medium-sized chain and attract Wall Street&#39;s interest even better than Shake Shack.</p> <p>Chairman Rick Schaden stated in a letter, &quot;As this chapter of Smashburger closes, our leadership team stands ready to take the brand to new heights and the future remains bright.&quot;</p> <p>There is now talk about reaching a thousand restaurants.</p> <hr /> <p><strong>Related reading</strong>:</p> <ul> <li><a href="">Smashburger appoints new CEO, Prokupek leaves</a></li> <li><a href="">Smashburger CEO Scott Crane forges ahead with chain&#39;s growth</a></li> <li><a href="">Avenue Capital sues Quiznos former ownership&nbsp;for fraud</a></li> <li><a href="" target="_blank">What Quiznos Changes Mean for Smashburger</a> | QSR Magazine</li> <li><a href="" target="_blank">New Quiznos owners Avenue Capital, Fortress Holdings sue old Quiznos&#39; owners Schaden and Consumer Capital Partners</a></li> <li>2014 Top 20 Fastest Growing Concepts, <a href=";view=article&amp;id=3&amp;Itemid=42">Smashburger listed #8 for 2014 in under 300 units list</a></li> </ul> <!-- google_ad_section_end --> Leadership change Cervantes Capital Consumer Capital Partners Quiznos Smashburger Thu, 28 Apr 2016 23:35:02 +0000 Don Sniegowski 15102 at Uber Agrees to $100M to Settle Class Action Lawsuits with Drivers <!-- google_ad_section_start --><div class="photoright"><img alt="" src="" style="width: 330px; height: 186px;" /> <div class="caption">Uber protest in Portland (photo/<a href="" target="_blank">Aaron Parecki</a>)</div> </div> <p>SAN FRANCISCO - Uber agreed last week to settle two class action lawsuits for $100 million. The legal actions were filed by drivers in California and Massachusetts to determine if they could be reclassified as employees instead of independent contractors, to receive benefits they lack now. Had the lawsuits proceeded to trial and Uber had lost, the outcome could have cost the firm billions in employee expenses.</p> <!--break--><!--break--><p>Drivers suing Uber Technologies, the ride&nbsp;sharing company, had argued that they should be treated as employees because the company exerts significant control over their work, sets compensation and enforces vehicle standards.</p> <p>Uber&#39;s argument, according to a Dow Jones report, has been that it prefers to use independent contractors over employees because they are not covered by certain legal and tax liabilities which can cost companies less in pay and benefits. &quot;Employees are generally covered by protections such as minimum-wage and anti discrimination statutes, workers&#39; compensation and union-organizing rights, while independent contractors have no such protections.&quot;</p> <p>The tentative settlement represents approximately 385,000 drivers in California and Massachusetts who complained that they should be reimbursed for necessary expenses related to the business, and for losses incurred during the discharge of their duties. Uber now is allowed to continue its fast-paced business using independent contractors as drivers. In a press release, Uber said it agreed to pay $84 million, with a second payment of $16 million if it goes public and its valuation increases one and a half times from that of December 2016. USA Today reported that Uber CEO Travis Kalanick stated in March that he didn&#39;t expect the company to go public this year, and in fact &quot;would put that event off as long as possible.&quot;</p> <p>U.S. District Judge Edward M. Chen of Norther District of California must approve the settlement before moving forward. Shannon Liss-Riordan, representing the Uber drivers, has already stated that the settlement is a victory for her clients. &quot;We realize that some will be disappointed not to see this case go to trial. We believe the settlement we have been able to negotiate. . . provides significant benefits, both monetary and non-monetary, that will improve the work lives of the drivers and justifies this compromise result,&quot; she said in a statement.</p> <p>Dow Jones Morningstar reported last Friday that &quot;for a company that has raised more than $10 billion in debt and equity, the payment is a small concession relative to the larger triumph of preserving the high-margin business of connection passengers to freelance drivers.&quot; It said that losing these cases at trial could have forced the company to reclassify drivers as employees, which could have cost Uber billions, paying for health benefits and auto expenses. And it could have jeopardized its long-term prospects for profitability.</p> <p>The report further stated that approval for the two class action lawsuits is by no means assured. &quot;Two weeks ago in a similar case, a federal judge rejected a settlement between Lyft and California drivers. The judge said the settlement amount of $12.25 million shortchanged drivers&#39; mileage expenses, and a revised proposal could be filed by the end of May. Lyft said it believed the agreement was fair and is evaluating next steps.&quot;</p> <p>One clear victory for drivers in the settlement is a plan to revise Uber&#39;s policy for deactivating them from the service. As part of the case, Uber was forced to release a series of internal emails on driver termination to the court, showing that drivers could be &quot;deactivated&quot; for passenger ratings that fall below 4.5 on a five-point scale. Uber now plans to roll out new procedures for warning drivers when they have received a high number of complaints and being more transparent with the ones it kicks off the app,&quot; Dow Jones reported.</p> <hr /> <p><strong>Related Articles: </strong></p> <ul> <li><a href="" target="_blank"><strong>Uber Settles Two Class-Action Labor Disputes</strong></a><strong> </strong></li> <li><a href="" target="_blank"><strong>Uber to Pay Up to $100M in Driver Status Suits</strong></a></li> </ul> <!-- google_ad_section_end --> Legal judgment & dispute resolution Attorney Shannon Liss-Riordan independent contractor v employee Uber class action lawsuits Uber drivers litigation Tue, 26 Apr 2016 22:47:57 +0000 Janet Sparks 15101 at Meineke Franchisee Jailed for Not Paying Royalties <!-- google_ad_section_start --><div class="photoright"><img alt="jailed" src="" style="width: 330px; height: 186px;" /> <div class="caption">(Photo:<a href="" target="_blank">D Sniegowski</a>)</div> </div> <p>CHARLOTTE, N.C. &ndash; After terminated Meineke franchisees ignored a court default judgment that&nbsp;directed&nbsp;them to &quot;cease and refrain&quot; from operating their auto shop in Nevada, after bragging to customers that corporate &quot;can&#39;t do anything about it,&quot; a district judge determined that contempt sanctions of imprisonment and fines of $1,000 a day were necessary.</p> <!--break--><!--break--><p>The March 2016 ruling was the result of a lawsuit filed two years earlier by Meineke Car Care Centers, LLC against Ralph Ahmad and Ashvinder Asmad in North Carolina federal court. The company alleged the franchisees had breached their 2009 franchise agreement by failing to submit weekly business reports showing their auto center&#39;s revenues and required franchise fees and advertising contribution payments.</p> <p>Meineke had sent the franchise owners a notice of default in January 2013, stating they would be terminated if the payments were not received by corporate within a 30-day period. When the franchisees did not cure the default, Meineke sent a notice of termination informing them that their franchise agreement would be terminated effective March 29, 2013.</p> <p>The Ahmads did not answer Meineke&#39;s legal complaint and continued to run their auto center under the Meineke name. The court then entered a default judgment directing them, among other things, to &quot;cease and refrain&quot; from operating their business or any competing franchise in the area. Meineke sought and obtained an order to show cause why the former franchisees should not be held in contempt, but the Ahmads ignored the order and failed to appear for the court hearing.</p> <p>Because the franchisees acknowledged their violations to customers and continued to &quot;willfully violate&quot; the directives of both the court and the franchisor, the judge decided that the &quot;utter disregard&quot; showed that contempt sanctions of imprisonment and fines were necessary in order to coerce the franchisees to comply with the default judgment order. In addition to paying $1000 a day until they complied with the court&#39;s judgment, they also were required to produce their business records showing all revenues made since August 2014. The court order also awarded Meineke attorney fees and costs in the amount to be determined.</p> <p>In the March 2016 default judgment order, the court authorized the U.S. Marshal to arrest Ralph Ahmad, officer and shareholder of ASAR Incorporated, and place him into custody, allowing the officer to enter the auto shop in Carson City, Nevada property, and to use reasonable force in the arrest if necessary. The officer was authorized to seize or impound any property on the premises identified by Meineke as personal property belonging to the franchisees. The U.S. Marshal was also directed to sell the items seized by public auction at a time and place designated by the officer.</p> <p>Court documents show that the franchisees were prohibited from competing directly or indirectly with Meineke for a period of one year from the date of compliance with the default and court order. In closing, U.S. District Judge Robert J. Conrad, Jr. added, &quot;This order may be executed nationwide pursuant to Federal Rule of Civil Procedure 4.1(b) which provides that &quot;an order committing a person for civil contempt of a decree or injunction issued to enforce federal law may be served and enforced in any district.&quot;</p> <p>The Revised Order Finding Contempt, filed March 10, 2016, states that The U.S. Marshal was allowed to directly incarcerate Ralph Ahmad in a facility chosen by the U.S. Marshal. Meineke was ordered to pay the Marshal a deposit for anticipated expenses in connection with &quot;the apprehension and custody of defendant Ralph Ahmad&quot;; the transportation cost to the facility and other costs associated with the finding of contempt. Ralph Ahmad was ordered to reimburse Meineke for the expenses incurred in his arrest and incarceration.</p> <p>The Legal Intelligencer reported on the case, Meineke Car Care Centers LLC v. Asar, last Friday, authored by Craig R. Tractenberg of Nixon Peabody. He states that when the one franchisee was taken into custody, the court observed that the incarceration had &quot;caused the franchisees to make substantial strides&quot; toward compliance. The report states, &quot;The franchisee was released from custody, and the court awarded the franchisor $26,000 to the judgment, which included actual damages, costs and attorney fees.&quot;</p> <p>Franchisor Meineke Car Care Centers, LLC was represented by Robert L. Zisk and Stephen Vaughan of Gray Plant Mooty in Washington, D.C.</p> <p>No attorney is listed for franchisees Ralph Ahmad and Ashvinder Ahmad and their company ASAR Incorporated.</p> <hr /> <p><strong>Related Articles: </strong></p> <ul> <li><a href="" target="_blank"><strong>Enforcement of Court Orders and Contempt Proceedings</strong></a></li> </ul> <!-- google_ad_section_end --><table id="attachments" class="sticky-enabled"> <thead><tr><th>Attachment</th><th>Size</th> </tr></thead> <tbody> <tr class="odd"><td><a href="">Meineke v Asar Complaint.pdf</a></td><td>53.39 KB</td> </tr> <tr class="even"><td><a href=" W.D.N.C._null_null_0.pdf">Meineke Order.pdf</a></td><td>190.21 KB</td> </tr> </tbody> </table> Legal judgment & dispute resolution ASAR Inc. cease and refrain contempt sanctions of imprisonment Meineke litigation against franchisees notice of termination Mon, 25 Apr 2016 03:43:45 +0000 Janet Sparks 15098 at