Longos’ Growth

From Hollie Shaw, Financial Post: The taste of success

The key to running a strong family grocery business, Anthony Longo says, is to nurture strong relationships with everyone you touch: from customers and staff to the bank and the farmers you deal with. That’s a philoshophy embraced by the president and chief executive of the Missisauga, Ont.-based grocery chain, which defied industry odds to embark on an expansion amid the recession. In 1956, his father, Joe, opened a single store with and his brothers Tommy and Gus. Today, Longos is a thriving Toronto-area business that will open its 23rd location on Oct. 6. Financial Post’s Hollie Shaw spoke with Mr. Longo about his philosophy.

Q How did you come to love the family business?

A I always loved going to Ontario food terminal with my father to see the product that had just been picked: lettuce, strawberries, six-quart baskets of peaches … and we are fortunate to still have the same relationships with the same farmers, some of them the second or third generation. I grew up in the stores.

Q How did your responsibilities increase over time?

A I worked part-time forever, and I then went to Humber and studied business administration. In 1982, I joined full-time. We had three stores at the time. Grocery, dairy and deli were the areas I had responsibility for. I began automating the payroll. I bought the first PC [computer] in 1985 and we really put the infrastructure in place during those first 10 years. Before then, we were buying [big-brand items] through a wholesaler. We went from that to buying directly from manufacturers–Kraft, General Mills and Kellogg. We needed to be able to compete to lower our costs; most of our purchases are direct today. We are also part of nationwide buying group United Grocers Inc. For us, what is important is building relationships so that we are being treated equitably in the market; it doesn’t help consumers or manufacturers if businesses like us aren’t around to keep the big guys honest.

Q What are the benefits to having a family-run business? Any interest in taking it public one day?

A The company keeps costs down because it is family-run; [it also] cuts out a lot of head office costs. Our competitors have a certain amount of cost associated with being public, and they have to meet the expectations of the Street. We can decide to take lower profits for a time if we need to, or to [put money into the business] for the long term. We don’t believe we need to go public. We have had a 54-year relationship with the same bank [CIBC], and it’s a very strong one.

Q What is your sense of where the grocery market in Canada is going in the next few months? Has deflation taken as much of a toll on Longo’s as it did on other retailers? A Our internal food-price deflation was 1.6% in the quarter ending in May–so [the effect] is real. We see some inflation coming in the fall with flat to slight inflation in food. I think the Canadian dollar started to have an impact on pricing last September so that will lap the year since that began.

Franchise Agreements Key To Success

From the National Post: Franchise agreements key to success

Derek Sankey, Financial Post · Monday, Sept. 27, 2010

When it comes to the business of franchising, the stakes are always high. Franchisors want to protect their brands and ensure smooth expansion; franchisees need a solid system to build a business on. But when things go awry for whatever reason, the consequences can be enormous.

There are plenty of examples of legal wrangling in the world of franchising, including the the much-publicized battle Tim Hortons has found itself embroiled in. Some of its franchisees have proposed a $1.95-billion class-action lawsuit, claiming the company is charging puffed-up prices for the frozen and reheated treats Tims serves. A hearing is scheduled for November to determine whether the suit can proceed.

And there are plenty more examples. Earlier this year, the Ontario Court of Appeal sided with hundreds of franchisees of Quiznos Canada by ruling their class-action lawsuit could proceed. The group alleges the franchisor and others illegally conspired to enhance and fix the prices of supplies used by franchisees in their businesses. In July, the same court ruled that franchisees of Midas Canada could not be forced to waive or release their rights to participate in class-action lawsuits to sell or renew their franchise agreements.

Regardless of the outcomes, these are the kind of situations that can get messy — fast. And corporate franchise lawyer Joseph Adler, a partner with Toronto-based Hoffer Adler LLP, warns “class-action [lawsuits] are on the rise.

“[Franchisees] gang up together and they create a much more liable threat to the franchisor,” he says.

Avoiding such threats starts with drafting a good franchise agreement. These agreements are the cornerstone of the relationships between franchisors and franchisees. “The franchise agreement is central — absolutely core — to the relationship,” says Lorraine Mc-Laughlin, president and chief executive of the Canadian Franchise Association. “I can’t underscore how important it is to take a franchise agreement to a lawyer … who specializes in it.”

While the aforementioned cases don’t necessarily have anything to do with the quality of the franchise agreement, there’s no question such agreements guide the relationship between the parties. Nor does a lawsuit necessarily indicate a bad franchise system, Ms. McLaughlin says.

There are plenty of reasons these disputes can end up in court — a franchisee who consistently fails to meet quality standards or volume targets, for example — but the point is not to end up there in the first place. “It takes essential energy that needs to be spent on building the system and diverts it to something that’s negative, costly,” Mr. Adler says. “It will eat you up.”

Michael Bateman, president and chief executive of Grade Learning, a chain of learning centres in Ontario, does his due diligence to ensure he never ends up in court, and so far it’s worked. He spent weeks in consultation with lawyers and stakeholders to ensure his franchise agreement was up to snuff.

“If you start with common sense and deliver on what you say, then it’s fairly simple,” he says.

“It’s when things are left and the communication is not flowing properly that things can go astray.

“It’s almost like a marriage. If everybody understands what the expectations are … then really the agreement isn’t something that’s looked at again.”

For every franchise relationship, two key documents should be drawn up and maintained: The franchise agreement, which lays out the terms of the relationship between franchisor and franchisee, including expectations of both parties; and the disclosure document, which lists mainly the financial information about the inner workings of the company.

Together, these documents help protect the company brand, set clear expectations, provide an accurate snapshot of the company’s financial health, lay out the type of franchising model (single unit, multiple unit, area development or master agreement), exit strategies, additional fees and other critical factors in the relationship.

In 1993, when Grade Learning was founded, Mr. Batement immediately put an agreement in place because he planned on franchising from the start. In 2000, he revamped the disclosure document and continually updates it. This year, it underwent another overhaul because of changes to laws and other factors.

“The disclosure document is more of a living, breathing thing that can change on a quarterly basis,” he says.

“As laws change or as situations occur where there was some learning, you change them over time. You want to make sure that people are clear as to what the opportunity is and the company’s objectives.”

Alberta, Ontario and Prince Edward Island have enacted legislation governing franchising, while New Brunswick is expected to do so early next year, and Manitoba expects to have laws in place in about a year, Ms. McLaughlin says, noting CFA members, whatever province they operate in, are required to have franchise agreements and disclosure documents available.

Both sides in the relationship need to have someone who specializes in franchise law review the documents before signing anything, she recommends. Ideally, it helps set the tone for a positive relationship.

Arthur Wishart discussion at Queens Park

NBN Board Nominations

From the NBN:

Last Chance for Board Nominations! Board nominations will close by the end of the week.

If you have not submitted your nominee, please do so now.  Email Nikki at members@breadnet.ca with your nominee.

As NBN Membership increases we need to expand our regional representatives by adding 4 additional Directors this coming year.

We will be electing Directors from each of the following regions for a total of 9 Directors:

Eastern Ontario
Western Ontario
Northern Ontario
Manitoba
Saskatchewan
Alberta
British Columbia
2 Directors from the GTA

Board of Directors responsibilities:

• Elect Officers of the Association; President, Vice-President, Secretary and Treasurer
• Approve 2011 Budget
• Monthly conference call
• Attend and participate in regional meetings

Email members@breadnet.ca with your nominee.

Western Business Law Clinic

The National Bread Network has been approved as a client at the Western Business Law Clinic.

From their website:

In a world with strict requirements, overwhelming paperwork and other complexities, the law often deters aspiring entrepreneurs. The Western Business Law Clinic strives to change that by providing small start-up and early stage businesses with affordable legal counsel, while at the same time creating an environment for students to learn invaluable practical skills.

The Clinic provides legal information and services to small businesses on matters that include:

• Incorporation
• Contracts
• Shareholders Agreements
• Corporate Maintenance
• Patnership Agreements
• Employment Agreements
• Trademarks
• Licensing Agreements
• Supplier Agreements
• Franchise Agreements
• Zoning and Real Estate
• Government Regulations
• Liability Assessment
• General Legal Information

 

It is a great opportunity to provide an extremely valuable service to NBN Members at an affordable ($100 one time administrative fee) price.

Looking forward to it!  Thank you to all that helped.

Revisited: What Would You Do For A New Call?

Feburary 1st, 2009 I posted What Would You Do For A New Call?

Highlights:

 - CBCL puts changes in place and decisions are made based on dollars and costing.  Simple, business oriented. Think of all the measures put in place to either make CBCL more money or protect from loss of money.  When it comes to new business being handed out you would think CBCL would make sure that the most efficient, reliable and skilled franchisee would get the business to ensure that CBCL makes the most money possible.  Yet that does not seem to be the case.

 - Actually there never really is a consistent reason for the rewarding of new calls to franchisees.

 - What does that do to the network?  How does that help instill productive competition between franchisees?  All it does is create suspicion and discontent between the franchisees in a depot. 

 - So why does CBCL do it that way?

 - I would hope it’s because they’ve been lax on trying to improve the process, but I’m sure to a certain extent they want the discontent.  They want franchisees to be focused on issues and concerns at the depot.  They want franchisees to distrust each other (just enough) so that CBCL does not have to worry about all working as one. 

 - I’d like to propose a (hopeful) solution.  It’s a start and I’m sure it could be tweaked a little but it offers a positive, productive environment that pushes franchisees to compete but takes the distrust out of the equation.  Franchisees need to be offered a quantitative analysis of how they can obtain new business.

 - When a new call opens up and franchisees bid on that call each franchisee should be graded out of 60 points.

Officers, Directors and Shareholders

Shareholders own a company. 

Shareholders elect the Board of Directors, and the Directors hire the Officers (Managers).

Which shareholders have the confidence in their Directors and Managers to sit down with functional Franchisee leadership to increase the value of a corporation?

New Vice President, Franchise Managment at CBCL

I’d like to welcome Teresa Partridge as the new Vice President – Franchise Management at Canada Bread Company Limited. 

She has a strong franchise background from Director – Franchise Development at Regis Corporation where she was responsible for all areas of Franchise Development for Regis Corporation for Canada for six brands: First Choice Haircutters, Magicuts, Supercuts, Beauty Supply Outlet, City Looks, RAZE.

Prior to that she was Franchise Manager at Ardency Corp/Williams Coffee Pub responsible for franchise development of Williams Coffee Pub including recruitment, legal, resales, communications to franchisees via monthly newsletter creation; strategic planning initiatives and franchise meeting planning and the implementation of wireless technology in all stores.

She is currently a committee member at the Canadian Franchise Association.

Also changing roles is Kelly Costa, who is now in the Senior Franchise Manager position for Western Canada.

Best wishes to Robyn Thompson in her new role for the Human Resources department within Canada Bread Frozen.