Business Connection; 0216

Business connection is made by MDC to serve all of our diverse communities and is made possible by the generous support of our members. Thank you. Business connection starts now. Hello I'm Jeff Salk and welcome to business connection on tonight's program. Everything you want to know about owning or starting a franchise plussed have a Smiley's advice for African-American business owners. But first and I think the parent company of the Baltimore Sun is up for sale. Could that mean the return of local ownership to the state's major newspaper. Joining us now is Ted Bennett tulis chairman and publisher of corridor media. Ted thanks for being with us. A pleasure John. You have a local group in waiting. Tell us about the group. Well it's a very substantial group of local civic and business leaders. It's been led by Bob Emery and Walter

Sondheim before you passed away and in myself and we've we've come together to make an effort to bring the Sun paper back home. We just think it ought to be local. There's been some question about the the conglomerate model that is kind of invaded the media business conglomerates owning and. And it just doesn't seem to work because they're more interested in quarterly earnings in stock prices and a result they often strip the local papers of their valuable assets their reporters their cartoonist the workers the employees because they've got to make that quarterly beat whatever it is that you would have to if you want up owning the paper you would have to worry about those things sure. The cautionary tale is what happened in Philadelphia with a local the new local owners are said to have overpaid and wound up needing to do sizable That is true. You never know. OK I think we've learned from the Philadelphia experience. And there's I think growing evidence that.

The most important thing is to have some sense of the local community local people who know where Dundalk is and know where tacit is no where highland town is I mean that doesn't happen when the owners are out of town. But it is a business and the son is doing very well in terms financially. It appears as if there are substantive quality has slipped since they've been stripped of a lot of their resources and we hope to do that in the same time make it a worthy investment not an investment we're worried about quarterly earnings. A good business a solid business. You know you can do a 10 percent a day and you do it OK. Unfortunately in a media business they were expecting 25 26 percent. Well that's not realistic on a long term basis. Has your group been able to see the books see the numbers because Tribune has been set saying that it's not going to sell it's not going to sell peace piecemeal right now and as a result we haven't been able to do our due diligence yet. We've done a lot of other work though we've talked to experts all over the country in terms of where the newspaper business has gone because as you know is this kind of a dismal atmosphere for the newspaper business. There are people that don't

think it's going to be around in 15 20 years. We've taken a little different approach we think that the most important thing that a newspaper provides is content. It's the only institution in town that provides content. All the other institutions and you know how television works read the paper and send their reporters out the cover that story paper the major paper provides that content. And I think content people will always need content so that's what we're basing our theory on local ownership and the improvement of the quality of content. Give me a ballpark what you think it's worth I'll set the stage a little more you have declining circulation all the week city dailies. You have advertisers moving more of their money over to the Internet you have a heavily unionized workforce in Philadelphia they supposedly paid 500 million something like that five hundred forty two million. If you can what do you think rough guess is that the Baltimore Sun Well it's going to be probably somewhere in the range maybe a little lower because of the atmosphere it's more of a buyer's market

today but it's going to be expensive. The banks the banking community has been very cooperative. There were a number of major banks who would like to help us finance this thing so that's been a help. But the real issue is the one that you raise How do you maintain those advertising revenues how do you move to the Internet. At the same time how do you bring the newspaper into kind of the 21st century without losing your readers. It's tricky but it can be done. What's the what's the impact of the start up of the examiner free local paper on the value that that you or anybody else would pay for the sun. Well I don't know what I was sure that it has some impact of the papers spread people are reading it. I don't think it's the same thing as the sun the sun has a wonderful historic reputation it has an elaborate resources to gather the news. And I think if it regains its old quality and

reputation it will it'll be OK. Last question on this the likely buyer reportedly for Tribune is a billionaire real estate investor named Sam Zell. Right. You've approached him What have you approached Mr cell we've approached Eli Broad in his group. There are three groups in the channeling groups. They're all where that there is a local group with the capital ready to acquire the Sun papers if they're ready to sell it. And our feeling is that whoever buys the Tribune this is a 12 billion dollar deal will create so much debt that they're going to have to spin off some of its assets some of their assets to pay down that debt. And we hope that we're able to persuade them and negotiate with them to acquire the Sun papers. That's our strategy any did anybody say no not yet. All right. Let's talk about your local paper. You've run a number of community papers over the years you have a startup. Called. The Carter Carter Inc. You know me about well where is the carter.

Well you know start ups are uneasy but the corridor we're dealing with is between Baltimore and Washington. It may be one of the most aggressive Carters in the country in terms of its growth potential potential as you know the nation has decided to close some military bases and relocate those folks they're doing it in Maryland essentially the Fort Meade and as I say think of the institutions in that Baltimore Washington Carver it's got Annapolis on one side Columbia and the other Baltimore a major urban Now area Washington a major urban area. And in this complex four five county complex there's BWI There's Fort Meade there NSA there's and I h the elaborate institutions and of course now with the expansion of the military bases there there's going to be huge government contract contractors other people they anticipate 30 35000 people over the next 10 years into that or read reign of the other one is of course the northeast corridor. But we're focusing

on that Baltimore Washington car it's like a huge community. If it was a community it have a mayor maybe even a governor. You know and many of the counties are kind of parochial they deal with their own things Howard in Toronto Prince George in Montgomery but what we're trying to do is create more of a regional community so they work more closely together. We've painted this bleak picture for the big city newspaper business. It's different if you're running a niche product or a small town product considerably. One of the blessings of the Sun papers that they have a monopoly of all the community papers and Howard Baltimore and in Harford counties they but you know Kentucky still are ten times my old papers up there the Aegis up in Harford County all those papers and they're very successful They don't have the problem that the big city newspapers have. And the same with our corridor has been very very successful. It's a niche paper distributed free. Plenty of circulation to whatever the advertisers think they need so that if you're right the niche publications are doing OK. Are you making money with us.

We're doing the first year we're breaking even that's not so bad is it. Let's talk about the. You're already expanding the franchise with with this corridor of living. Yeah. Which is. It's a Life magazine format. But yeah we we started the main corridor is essentially more of a business oriented but we realized it was a huge lifestyle component in the corridor and so we launched a lifestyle journal that will be quarterly at the beginning and then we'll make it monthly and hopefully all of it will be weekly at some point. Is there an Internet component to it. Yes you have to do that today right off the bat we created a nice website that will help people circulate through the corridor. We put a lot of figures relating to the carter personalities relating to the quarter. You can't do a newspaper today without a website without dealing with the Internet. It's critical going to switch gears for the last couple minutes we have you mention the word governor before and we found in our dusty I forget about that TV commercial from years past and all I wanted Vanna tulis for governor he took county

government out of the back room and gave it to the people and made it work in the top job a Baltimore County executive he provided better services at a reduced tax rate. Trim spending in the county a triple-A bond rating. People want him for governor. They want his experience energy and integrity. None of that fiendish people want to take advantage to us because they want a new Marilyn when she saw no way of life. Who was that fella that feller was the how do you say it in Baltimore County that's when I remember you and then you were our political analyst when I was a Channel 11 years ago I noticed the hair I once difference a little grayer as it was a gray hair still it's a that was you know 20 30 30 30 years ago. 78. Good grief I was thrown out years ago so the door has been closed on the political career for some time you get into business but you still keep an eye on this. Absolutely I do it a lot and represented Baltimore County and you still live in the county. Baltimore County. Want to talk state politics moral politics a little bit.

Baltimore County was was crucial four years ago when Bob Ehrlich wanted I was there and it was great. Crucial this time when Martin O'Malley is talk about the tide shifting. Well I think one of the reasons it was unsuccessful is because his margin in Baltimore County dropped down considerably. But having said that. Previously the county was a second or third largest subdivision in the state. In fact in my day it was the largest outside of the city. Today it's shifting to the Washington suburbs. And if you look at O'Malley's votes in those Washington suburbs he came out of Prince George's County with one hundred thirty five thousand edge in Baltimore County with the help of the county executive in a lot of people who shifted from early key drop Ehrlich's margin from 65000 to 5000. That was substantial. So those two counties alone wiped out everything that Governor Ehrlich got in the rest of the state. So it's a different environment. MARTIN Governor O'Malley did a great

job of organizing the major suburbs and the royalty is he carried a number of really carried Howard County and I think one or two on the shore. So he he ran a great campaign. How do you think your your old friend Nancy Pelosi who you've known since when. Well we grew up together again chill here right. We we were we were buddies and families always been for Tommy and always been friends and so how's she doing. Terrific. I'm telling his She's just she's done a great job and I don't think the president the Republicans really know what they're dealing with here they think she's a you know kind of a San Francisco liberal. This woman has a lot of old Baltimore practical roots and I think she indicated that when they were able to successfully win this Iraq thing and made it easier for the Senate she's going to a great job and the first woman speaker in this country it's it's just stork and I'm you know I'm so prejudiced it's ridiculous. You know I think Ted metal it's great to see a good luck with all of your publishing ventures

will will stay in touch. Thank you very much Jeff. And just ahead everything you need to know about franchising and advice from TAB a smiley for African-American business owners. You're watching business connection will be right. M. P.. Stevenson kidnapped include the one James is interested in you can tell you stuff like. That just about what you claim to be unmasked. Sunday night at 9:00 on NPT. Doctor let's try to put it in a suit for a rich wife. It's in the news in there. She said that when the street lights and. Dr. Bradley decides he wants to

turn over. And listen because we're doing pretty soon good news and that's a complete write malice of forethought and mystery. Sunday night at 10:00 on the MP. I'm Mark Wahlberg immobile Alabama. This what collectors want. That's what everybody wants. I mean. Where you pulled this out. I almost lost it. What would Truth think if I told true they were worth ten times. You've got a victim. But. The. Thing that. I don't miss these appraisals and many more next time. On antiques road show. Monday night at 8:00 on NPT. Was. She mixed religion with entertainment. A real potent combination to bring conservative Christianity to the mainstream. She believes that American Christians need to reclaim the state. But at the height of her popularity any simple McPhearson

disappeared people began to suspect that there was an affair. Sister Amy one American experience Monday night at 10:00 on AM Peetie. The reporters of the public square investigating Maryland issues that matter. Not afraid to dig deeper to find the truth. Trusted experience public square get the real story. Learning from one's peers is a solid strategy in any successful business. Just as important for African-American business owners many of whom attended the third annual black CEO summit and Charles Robinson has our report. You will find some that are doing extremely well and others that are reading with a lot of difficulty. I think generally we have an upbeat economy. I think Baltimore is a great place to be in business. However I still believe that there are many barriers and challenges for minority businesses.

Haskins assessment of the business climate in the state was on the minds of many who would tend to the third annual black CEO summit. Now these business leaders are looking for any edge to compete with their customers and business relationships are just in Maryland but nationwide to drive home the point was to have a smiley of PBS Frontline and the stand is all fine. Just a few years down the road that Smiley is in the midst of a nationwide book tour. It's amazing when you put a book out and every day people take it and push it to number one on the Times list. It says there's a hunger and thirst in black America for thoughtful conversation about how to make black American all of America better. So I'm excited about the possibilities of one of the ideas of the summit is to brainstorm on ideas that will help advance African-American business in the state. We had a discussion this morning about purchasing a hundred a business that's worth 100 million dollars. There are no African-American businesses in this town yet that could leverage itself up to

purchase 100 million dollar business. And the reason being is because we haven't nurtured any. There is no shortage of opportunities for minority business. There are major projects underway in the Baltimore region business opportunities through base realignment and the development around the National Harbor project. These activities know they can't wait for business to come calling. They'll have to go out and get it. I'm Charles Robinson for business connection. The international franchise Expo kicks off this weekend at the Washington Convention Center. Joining us now for advice for entrepreneurs who are looking for a franchise Brian Colburn managing director of franchise finance at Butler Capital Corporation and David Kay multi-unit owner an area developer for the daily grind. Gentlemen thanks to both of you for being with us. Thanks for having us. Thank you. David if I can start with you tell me about the daily grind What kind of business do you have there. Oh we're a retail coffee shop much like Starbucks. But we also offer

light fare to lot of desserts. So anybody can start a coffee shop. What's the advantage to you of starting a franchise version. The franchise allows people who have dreamed of owning their own business an opportunity to get into that business with the assistance of someone who has experience running the business and gives them a greater likelihood of success. Brian tell me about what Butler capital does in this area. Butler capital provides financing for franchise concepts like the daily grind. We work with large franchise concepts in small franchise concepts alike. Typically we look for anywhere from 20 to 30 percent cash injection into a transaction. So we're David's daily grind would basically be anywhere between two and three hundred thousand dollars. You know what $300000 we would be looking for you know approximately 20 percent of $60000 cash into the business

from the from the franchisee. So when when you're evaluating a potential franchisee Who's Coming to you for financing. What do you look for in terms of determining if this operator is going to be successful. Well there are several feet. There are several factors that we look at. One is that we're looking usually for some kind of real estate collateral. There are capital is a non Small Business Association lending source as where a lot of other banks will direct borrowers toward Small Business Administration loans. Both of us would look for collateral in a transaction. We'd like to see that there may be some continued outside income from a couple. So one of the what happened to be a husband and wife team one of them will continue to do their job the other would have some income. We'd like them to have some kind of experience but that's not necessary in every situation. And the other the other factors that we like to see are that in addition to the

cash that they put in that there's some other cash available for them. To fall back on if the business doesn't start as quickly as maybe they had thought. Is that always the case that the business doesn't start as quickly as you're hoping. Absolutely not but it's always good to prepare for that rainy day scenario. What's the average franchise cost. I mean can you still get a McDonald's franchise and what does that go for. Well there are franchises are available from anywhere from 25000 to millions of dollars. You know most of the franchise concepts out there that people are looking to get into. The average person are usually under 500000 probably in the two to 300000 concept like the daily grind is it's a number that you know you can get in almost any strip shopping center where you could lease space that is available from from landlords and it works well. But you know McDonald's and so forth is typically outside of most in most people that are looking to get into business it's

a larger investment than they usually can take on. David if I can ask What's your background. Prompted you to look at franchising. I was originally years ago with Kinko's copies and I manage stores for them and got into store development. I open 24 stores in the Mid-Atlantic area for Kinko's and there was a bit of downsizing and I decided to get in the coffee I love coffee and still do. How did your past business experience come in handy in opening this location. Well I I got to learn a lot about how to manage people how to manage retail and how to find quality locations and that has proved very useful with the daily grind. Brian what would you say are the hot concepts hot concepts in franchising at the moment are there any types of businesses that have really taken off.

One of them is almost every retail concept out there that you can think about from food to batteries to any anything you could think of has been franchised pretty much today. Some of the hotter concepts are in food because food is a larger demand business. Coffee obviously is one concept that's done well. Some of these are categories as you've seen in some of the ice cream concepts like Maggie moves in cold stone you know and then you can get right on down to a lot of the even the home services like air conditioning and heating service. Contractors are now becoming franchised because typically you had one person in a truck who would go around and knew how to do the task at hand and didn't necessarily know how to market his business or run his business and that's the kind of things that a franchise or would provide. Give me some tips. Is there anything that a first time franchisee is going to overlook. One question off the top of my head is. Making sure that you have a defined territory.

I'll let David address the territory issue because that's more of a franchise or issue but one of the things that I would suggest anybody that was looking to get into a franchise concept needs to take a little bit of a profile on what kind of hours they want to work at that they want to work a 9 to 5 job there is franchises out there for that they want to run a retail business where they want their goal is to open multiple units. That's another idea that a lot of people think of but you know you like to manage people because obviously in a retail environment you've got a lot of people to manage or do you want to be kind of like a Remax agent where you're simply you know a sales person out there selling real estate responsible for yourself. Those are all different kinds of things to consider. David address the territory issue. The value of the franchise is it gives people more tools and a greater likelihood of success. They take advantage of the mistakes and successes that the franchisor is made in they can apply that to their own store. As

far as territories go. Most franchises do not grant exclusive territory rights to a franchisee. It's sort of a question for the attorneys but they don't want to hinder their opportunity for growth. They want to leave those options open for the future. We just have a couple seconds left. David tell me where you are will give me the commercial for the daily grind the new daily grind location in the maple one development in football can Maryland. It's at Route 29 and 216 and it's a fast growing area with a pretty good coffee shop here. Beautiful area excellent excellent coffee better than Starbucks. Try it David thanks very much for your time we do appreciate it. Thank you. That is our program for this week tomorrow on State circle of this time bracing for brak new concerns over gridlock as Maryland military expands. Thanks for watching business connection.

Have a good. Business connection is a production of public television in association with the University of Maryland Robert H Smith School of Business. Business connection is made by NTT to serve all of our diverse communities and is made possible by the generous support of our members. Thank you.