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VOL. 37, NO. 28
JULY 11 - 17, 2016
Business of Life
FOCUS
Small Business Cleveland’s maker movement shows no sign of slowing down Pages 13-18
Passion for fly fishing recasts into business
CLEVELAND BUSINESS
Page 21
Source Lunch
Chris Thompson, CEO of Regional Physics. Page 22
RNC | SUPPLIERS
Vendors busy, but bottom line unclear
BUSINESS OF SPORTS
Investments worth a shot
By JAY MILLER jmiller@crain.com @millerjh
The Republican National Convention is going to make the week beginning July 17th a busy week at FastSigns Downtown. And at Event Source JBK Group Inc. And at GOP Convention Strategies. And at Rock the House Entertainment Group Inc. All of these businesses — and, of course, dozens of restaurants, hotels and more — are bracing for a hectic but profitable time beginning when delegates to the Republican National Convention start flooding into Northeast Ohio. Beyond the basic lodging and feeding of the 2,472 delegates and a similar number of alternate delegates, an additional 45,000 people are coming to town. Some will be wined and dined, while others will be doing the wining and dining. Of course, about 15,000 media workers will be
Food trucks: Fixed and mobile zones for RNC announced. Page 8 Distributors: Supplying downtown restaurants presents logistical challenges. Page 9 covering the convention activities and the wining and dining. They, too, will need to eat and be amused. Hundreds of vendors are involved in all of this, and these four companies, which represent the range of businesses that will be working overtime that week, corralled some of that work. Although the companies generally are pleased with the level of activity they see for convention week, executives of all four said it was too early to know exactly how much of a boost to revenue the convention will offer. Final orders haven’t been placed, and some customer events
SEE GOP, PAGE 7
Boulder Creek. (Contributed photo)
RNC | TECHNOLOGY
Carrier upgrades aim to avoid RNC cell hell By CHUCK SODER csoder@crain.com @ChuckSoder
Will your cell phone work during the Republican National Convention? The wireless carriers aren’t the only ones who think the answer will be, for the most part, “yes.” Because of the RNC, the top four carriers are making significant upgrades to their wireless networks in downtown Cleveland. And the vast majority of those upgrades are complete. Granted, there’s a good chance
that your cell phone didn’t work all that well if you were standing in the ridiculously large crowd that flooded the city for the NBA championship parade on June 22 — even though some of the upgrades were already in place by then. But the carriers say that they should be able to handle the estimated 50,000 people coming to town for the RNC. And two telecommunications experts say that they’re probably right. Though they weren’t familiar with the specific upgrades the carriers have made, both experts said that
In rough golf biz, two courses are making upgrades By KEVIN KLEPS kkleps@crain.com @KevinKleps
The Northeast Ohio golf business has experienced its share of divots in the last decade-plus. Competing in an uncertain industry wrought with declining participation and revenue numbers, at least two local golf courses are going in a different direction. Boulder Creek in Streetsboro and StoneWater in Highland Heights are making significant investments in their food and events businesses in an effort to boost their bottom lines and get more people to their clubs. Boulder Creek, which commercial developer Joe Salemi designed him-
self prior to its 2002 opening, has a new grill room and bar. Later this year, a new men’s locker room will be added. In 2015, the public club completed an event center that can accommodate up to 175 people, and Salemi said another event center that would allow Boulder Creek to host weddings and parties with up to 350 guests is in the works. The picturesque course was also remodeled, with the layout extended to almost 7,500 yards. “We did a complete rebuild,” Salemi said. StoneWater, a semi-private club owned by a group that includes golf pro and media personality Jimmy Hanlin, brought in former Anthony & Sylvan Pools CEO Stuart Neidus as
SEE CELL, PAGE 6
Entire contents © 2016 by Crain Communications Inc.
The clubhouse at StoneWater. (Contributed photo)
an investor, and to lead a revamp of the entire business. StoneWater has new event, planning and catering services led by Neidus’ three daughters, and the club recently debuted a new restaurant and bar, plus an expanded events space. “We were golf guys trying to do events. That doesn’t work,” said Hanlin, who hosts three golf shows on Fox Sports Ohio and SportsTime Ohio, plus a weekly radio program on ESPN Cleveland. “Now we have somebody in here who knows what they’re doing, and it’s a completely different world.” Neidus’ oldest daughter, Whitney, had her own events business, and the youngest sibling, Kathryn, launched a catering business two years ago. Instead of working on various events together, as they had been, the pair wanted to find a more permanent setup. Their dad, with the help of friend and longtime business partner Steve Calabrese, searched for a spot without much success — until they settled on the obvious choice, one for which Calabrese is a part-owner. “We were having dinner and cocktails one night and said, ‘You know, why aren’t we using StoneWater? This is crazy,’ ” Neidus said. Eventually, they did. SEE GOLF, PAGE 23
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Cliffs plans for the ‘next frontier’ in iron biz By RACHEL ABBEY MCCAFFERTY rmccafferty@crain.com @ramccafferty
It’s been nearly two years since Lourenco Goncalves joined Cleveland-based Cliffs Natural Resources Inc. as its chairman, president and CEO. In that time, the company has cut costs, lowered its debt and narrowed its focus primarily to U.S. iron ore. In recent months, Cliffs has announced a long-term agreement with existing customer ArcelorMittal USA LLC and a new one with U.S. Steel Canada. Now, Goncalves has his eye on expanding the company’s reach by targeting the direct reduced iron market, which would allow Cliffs to serve far more steelmakers than it can today. Goncalves was appointed chairman, president and CEO of Cliffs in August 2014, following a proxy contest led by activist investor Casablanca Capital LP. He quickly made it apparent that he intended to shed less profitable businesses and cut costs. Since then, Cliffs has sold its coal business and exited its business in Canada. It still has iron ore mines in Australia, but Goncalves said they only have four to five years of productivity left, and he doesn’t intend to buy more assets in the region. That leaves Cliffs’ business concentrated in the Great Lakes. The Great Lakes is a unique region, Goncalves said — it’s “insulated” geographically during the winter, the freight is “prohibitive,” and the relatively shallow water means product needs to be reloaded between the sea and lakes. That means Cliffs’ prices can be consistently lower than that of the competition. While that
puts Cliffs at a disadvantage if it wants to compete with seaborne pellets, its current focus on U.S. iron ore means the market is self-contained. Goncalves, who has experience at companies like Metals USA Holdings Corp. and California Steel Industries Inc., has been outspoken about the challenges the steel industry faces, like global overcapacity. Fixing the company without also fixing the environment the company operates in doesn’t do any good, he said. “We can’t have a company that supplies the steel industry in the United States without having a strong steel industry,” Goncalves said. “I need my clients to be strong.”
Making progress The recently announced agreements may indicate they’re getting there. In May, Cliffs and ArcelorMittal USA announced an agreement in which Cliffs would supply the steelmaker with iron ore pellets for the next decade, replacing a set of agreements that would have expired in late 2016 and early 2017. The ArcelorMittal agreement is what Goncalves called a ”musthave” arrangement for the company. It’s for up to 10 million tons — about 50% of the company’s U.S. iron ore production, Goncalves said. And the U.S. Steel agreement announced in June is new business that allowed it to restart one of its mining operations sooner than planned, though the company had worked with Cliffs under previous ownership in the past. It hasn’t been all smooth sailing since Goncalves took over — there have been lawsuits and plummeting stock prices. But he finds silver linings where he can. For example,
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“We can’t have a company that supplies the steel industry in the United States without having a strong steel industry. I need my clients to be strong.” — Lourenco Goncalves, Cliffs CEO
when the company’s stock price tanked, he said he “bought a lot of debt cents on the dollar,” cutting down the company’s overall debt. The company actually showed net income instead of net loss in the first quarter of 2016: a net income of $117 million compared with the net loss of $762 million in that quarter the previous year. And on Thursday, July 7, the company’s stock closed at $5.94, a good deal lower than it was in early 2014 or the years prior, but higher than it’s been all year.The ArcelorMittal deal took a lot of overhang off the stock, said Phil Gibbs, vice president for equity research at Cleveland-based KeyBanc Capital Markets Inc. The company now has the cost structure and the contracts, and it’s time to deliver. He said he thinks the “heavy lifting” on the balance sheet is done now and the rest of the work will be more gradual. Cliffs has seen a “tremendous turnaround” since Goncalves came on board, said Garrett Nelson, research analyst for Richmond, Va.based BB&T Capital Markets. There had previously been a lot of skepticism as to whether the company would survive, but Cliffs has been getting rid of the headwinds one by one. The new pellet agreement with ArcelorMittal was the last one, Nelson said. Now it will be critical for the company to grow demand for its product.
The future is now And one way that could happen could be through the creation of a direct reduced iron facility in the Great Lakes region. Goncalves calls direct reduced iron, or DRI, the “next frontier” for Cliffs. Currently, the company sup-
plies product for integrated steel makers with blast furnaces. But in the U.S., only one-third of steelmakers use blast furnaces. “So, we can no longer ignore the fact that EAFs (electric arc furnaces) are a big portion of our business,” he said. Cliffs plans to produce hot briquetted iron, or HBI, which is a kind of DRI, Goncalves said. Mini-mills use electric arc furnaces to melt scrap metal for its steel, which can be contaminated. Using HBI instead would allow the companies to create a higher quality steel. Last year, the company successfully developed DR-grade pellets and began supplying Nucor Corp. But Nucor’s DRI facilities are in Trinidad and Louisiana, near seaborne pellet supplies. So Cliffs needs a DRI facility in the Great Lakes, Goncalves said. His goal is to attract an equity investor to put a DRI facility in the Great Lakes, but if that fails, Goncalves said he’ll have Cliffs do it. He thinks there’s a good chance the Great Lakes will be producing DRI in the next two to three years. Goncalves said that, as a shareholder, he’ll be connected to Cliffs for at least the next generation. The 58-year-old doesn’t intend to stay at the top forever, though he said he has “no plans to leave the company any time soon.” In the meantime, he’s training his executives to run the business the same way he does. While his weekdays are spent in Cleveland, he lives in Florida and quite likes the sun, his wife and his dogs. “It’s not a thing that I’ll be here for the next 10 years,” he said. “Forget about that. That’s not going to happen. But it will not be six months either.”
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z JULY 11 - 17, 2016 z CRAIN’S CLEVELAND BUSINESS
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Citizens Bank looks to boost Midwest presence By JEREMY NOBILE jnobile@crain.com @JeremyNobile
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Citizens Bank is in build mode, and there’s quite a bit of construction happening in Ohio and Michigan. That’s not a physical brick-andmortar buildup per se — especially for a large bank with nearly $110 billion in assets converting old retail locations into smaller, “branches of the future� designed around technology — but a buildup of profitability as the company battles a prolonged depressed interest rate environment that’s showing little sign of shooting upward any time soon. Citizens executives met with investors in Cleveland recently to talk about the bank’s performance, how it’s evolved and its vision for growth throughout the Midwest. Despite challenges to hit some past growth targets, like a 10% return on equity goal that’s been stymied by flat interest rates, they have a pretty good, and interesting, story to tell. Citizens Financial Group went public in the largest traditional bank IPO in history in 2014. In 2015, the bank rebranded its legacy Charter One operations under the Citizens moniker. That was a significant managerial change here in the Midwest where a more thrift-focused company in Charter One was replaced by a large commercial bank. And just last October, Citizens became officially independent of Royal Bank of Scotland — the overseas parent company that acquired Citizens in 1988 to break into the U.S. market only to retreat from it a couple decades later — when it divested its last shares of the company. The bank performed well in its recent stress tests. Its capital levels are very strong, which has allowed it to boost its dividend and launch an aggressive share repurchase plan. And analysts have generally praised them for improving profitability by controlling costs. So what’s next for Citizens?
“We’re going to have evolution as opposed to revolution,� Citizens chairman and CEO Bruce Van Saun told Crain’s. “To put it into an Ohio football Van Saun analogy, it’s three yards and a cloud of dust,� he said, channeling legendary Ohio State University football coach Woody Hayes. “Every quarter, we’re getting a little bit better.� So as the bank looks to eat up additional yardage, or market share in this analogy, there seems to be a fair amount of potential in the Ohio and Michigan markets where the Rhode Island-based bank already has a solid presence in its 11-state footprint. In the Cleveland MSA alone, Citizens is only behind KeyBank and PNC Bank in deposit market share, controlling nearly 10% of it, although they’ll fall back a spot when Huntington Bank completes its acquisition of FirstMerit Bank. Strategically, they’re building out the commercial bank here under Ohio market president Joseph DiRocco, who joined the bank in late 2013. Charter One, after all, focused largely on consumer loans and residential lending. Last year’s rebranding punctuated those efforts. “We see Ohio and Michigan as two very important markets where we want to continue investments and continue to gain market share,� Van Saun said. “There is no shortage of banks out here. But there’s also no 800-pound gorilla across the whole state. I think there’s room for a competitor like us to build up our business and leverage our capabilities.� Commercial lending will undoubtedly remain a major focus, DiRocco said. Growth in that book has been steady across the state, helping the bank overall see commercial loans grow around 8% annually. In this region in particular, DiRocco said he’s seeing mid-market business ex-
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panding, but also several going for dividend recaps. Other areas the bank has developed somewhat of a niche in, like chemicals, manufacturing and distribution, are doing well across Ohio and Pennsylvania and will remain a focus for them.
A rebirth While the bank was lending consistently while under the RBS umbrella, being truly independent has helped some of those efforts. The end of that relationship purported a weird dichotomy that naturally hampered some of those goals — RBS, an overseas parent company, was pulling back while Citizens wanted to grow, analysts point out. “I suspect Citizens was on cruise control for a few years while RBS was dealing with homegrown issues,� said Scott Siefers, managing director of equity research at Sandler O’Neill + Partners. “When Bruce came over (in 2013), he probably found a company that had been under invested and not as actively managed for a few years.� That historic IPO, he said, was kind of a symbolic “rebirth of operations.� Citizens also recently broke into student lending. And they’re making a strong push to grow the wealth management business to bolster fee revenue. “The story itself has been pretty dynamic because the environment hasn’t panned out as theyhoped. The rate environment is a lot different, particularly following Brexit,� Siefers said, noting how that IPO from two years ago happened at a time when rates were forecast to move. “But rather than rest on their laurels, management has been forced to make some adjustments to be proactive and control what they can to improve profitability despite the rate environment not moving.� While Citizens isn’t drastically different with its newfound corporate independence, it’s well-positioned to gain more ground in the Midwest. And both Ohio and Michigan will be critical in those efforts. “Our ambition is to be a top-performing regional bank� Van Saun said. “We were inside a global bank, and that did limit how we were playing the game. But we have the foundation to be a good bank with time. The fun of it is building on that foundation little by little and upping your game so you can deliver for all the stakeholders.�
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Volume 37, Number 28 Crain’s s Cleveland Bus sines ss (ISSN 0197-2375) is published weekly at 700 West St. Clair Ave., Suite 310, Cleveland, OH 441131230. Copyright Š 2016 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s s Cleveland Bus sines ss, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373. REPRINT INFORMATION: 212-2 210-0 0750 Subscriptions: In Ohio: 1 year - $64, 2 year - $110. Outside Ohio: 1 year - $110, 2 year - $195. Single copy, $2.00. Allow 4 weeks for change of address. For subscription information and delivery concerns send correspondence to Audience Development Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, Michigan, 48207-9911, or email to customerservice@crainscleveland.com, or call 877-824-9373 (in the U.S. and Canada) or (313) 446-0450 (all other locations), or fax 313-446-6777.
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Conversions slash older office vacancies By STAN BULLARD sbullard@crain.com @CrainRltywriter
Conversions of old office buildings to apartments in downtown Cleveland — and planned conversions — keep growing and increasingly promise to slash vacancy in the Class B and Class C office markets. How much is forecast in a new study by the Newmark Grubb Knight Frank brokerage firm which estimates that if the 14 buildings slated for makeovers or functionally obsolete stand to slash more than a million square feet from inventory. NGKF estimates Class B vacancy drops to 14.7% from 23.5% and Class C vacancy to 13% from 22%. Part of the growing impact is that big chunks of more prestigious, larger properties are targeted for conversion, such as Tower at Erieview, 1301 E. Ninth St., and Terminal Tower, 50 Public Square. Both have more than a million square feet of office space. For example, at Tower at Erieview, the volume of available space for office tenants stands to slip from 300,000 square feet to as little as 75,000 square feet if the apartment plan goes through. Terry Coyne, NGKF vice chairman, said, “We think the market has tightened a lot. It’s building pressure to push up rents and concessions are down. There’s not a lot out there for a few tenants in the market for space.” At the same time, Kristy Hull, an NGKF managing director, said tenants from the oldest buildings wind up looking at newer ones and get sticker shock. “We’ve seen a lot of tenants look at One Cleveland Center who are trying to figure out how to shrink their square footage to cope with the change in their rents at a newer building,” she said. “They’re probably looking to slice 25% of their square footage from their office. Many are lawyers who have been in the same offices for years and years.” For some, it’s an epic disruption — and change. Take as an example 15-attorney Nurenberg Paris, a high-profile plaintiffs firm with a total staff of 50. Name partner David Paris said conversion of the Standard Building, 1300 Ontario St., to apartments meant the firm left the corner of Ontario and St. Clair Avenue for the first time since 1928, though it had moved across the street to Standard when the Brotherhood of Locomotive Engineers Building was demolished in the 1980s for the Marriott at Key Center. The firm made the exceptional move to Fifth Third Center, 600 Superior Ave., one of downtown’s trophy buildings last September. “We had Class A space in a Class C Building at a Class A location near the courthouse,” Paris said of the old office. The firm occupied about the same amount of space but Paris downplayed the hike in rents. “We had good representation with a real estate lawyer and absolutely marvelous agent so we got competitive rents the next few years,” Paris said. A longer trek to courts, he said, is more an issue for older lawyers than the firm’s younger ones.At the same time, it’s not like conversions are taking prime office buildings from the market. Often conversion targets are the last ones with any
hope of landing office tenants. “It’s not affecting all the people who are looking for space,” Hull said. “There is a reason these buildings are going residential from current office use.” E.V. Bishoff Co.owns the City Club of Cleveland and Superior Buildings that are increasingly becoming a haven for tenants looking for less expensive offices — a market the Columbus-based property owner has pursued for more than a decade. “We have new clients from the Leader Building, the Standard Building and Huntington Building (now known by its original Union Trust name),” said David Bishoff, Bishoff president. “It comes at a time when employment is growing and down-
town is active. I don’t think it’s anything short of amazing.” However, he won’t disclose changes in occupancy or identify tenants because his firm is private. The top-tier office market — termed Class A for buildings primarily under 30 years old — has remained viable and is not subject to the conversion craze. However, Coyne believes newer buildings on the market will benefit because lower vacancy rates in the market generally will make it more attractive to investors. NGKF defines Class C office as obsolete, typically more than 60 years old. The Class B market is more than 30 but less than 60 and the largest segment of the downtown market.
The City Club of Cleveland building, right, owned by E.V. Bishoff Co., is popular with tenants looking for inexpensive space. (David Kordalski)
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the companies have for the most part figured out how to handle reasonably large crowds. Especially when those crowds spend a lot of time indoors. Of course, the wireless networks could have problems if too many people simultaneously try to post videos online. And that could happen “if this is as dramatic an event as everyone seems to think it’s going to be,” said Ray Nettleton, a wireless industry consultant who lives in Orange County, Calif. But unless things get really crazy — which is always possible when Donald Trump is the presumptive nominee — he thinks the wireless networks will hold up reasonably well. “It’s not that different from a big sporting event,” Nettleton said. It is different in at least one way: Convention delegates will be moving to different venues throughout the city. But Nettleton predicted that most of the people coming to town for the event, aside from protestors, will be indoors when using their smartphones for data-intensive purposes. That would bode well for the wireless carriers, who typically have an easier time preparing for large crowds when they are indoors, said Tal Lavian, a telecom consultant who also is a fellow and lecturer in the engineering department at the University of California, Berkeley. Another benefit: If data is flowing through indoor wireless systems, that means it won’t be weighing down the outdoor network, Lavian added. “They are not on the wireless infrastructure of the city,” he said.
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All of the top four carriers — Verizon, AT&T, Sprint and T-Mobile — told Crain’s that they’ve upgraded their indoor wireless systems at venues that will see a lot of activity during convention week, such as Quicken Loans Arena, which will be the site of the convention; the Huntington Convention Center of Cleveland, which will serve as the media headquarters; and area hotels. Carriers have made a long list of
An engineer works on a Verizon network hub near Quicken Loans Arena. The new data centers should double the number of devices that can access the network at one time. (Contributed photo)
A can-like small cell sits atop a lightpole near Progressive Field. outdoor upgrades as well. Here’s a taste of the work they’ve done, based on conversation with the carriers: ■ AT&T, which is the official provider of communications and video technology for the convention, has made more than 165 upgrades to its wireless network in Cuyahoga County so far this year. Companies officials noted that an individual cell site can receive multiple upgrades. ■ Verizon has installed about 30 “small cells” on poles and buildings throughout downtown Cleveland in preparation for the RNC. And just last week it finished upgrading nearby data centers that route calls and data traffic in the area, which should double the number of devices that can access the network at one time. ■ Sprint and AT&T both noted that they’d installed outdoor distributed antenna systems — systems that are
typically used to handle large crowds. ■ Sprint and T-Mobile both mentioned that they’d added additional frequencies to standard cell sites that serve downtown Cleveland. ■ All four carriers will have cellular units mounted on vehicles at the ready. They’re often called COWs, which stands for “Cell on Wheels,” or COLTS, which means “Cell on Light Truck.” And a few noted that they will have engineers on site to make tweaks to the network during the convention. So they’ve been preparing. In some cases for more than a year. But will it be enough to do the job? There’s no way to be 100% sure. Christy Moore, who is helping oversee convention preparations for AT&T, previously told Crain’s that preparing for a convention is “like planning an outdoor wedding.” But the carriers have been in similar situations before. For instance, Moore and Patrick Zimmerman, another AT&T official overseeing the convention preparations, helped AT&T handle the 2012 political conventions in Tampa, Fla., and Charlotte, N.C. “We have several of these under our belts,” Zimmerman said.
The dry run Here in town, the carriers were really put to the test by the Cleveland Cavaliers’ championship run. Zimmerman said AT&T’s system at the Q, which underwent upgrades just before Game 7 of the NBA Finals, held up particularly well during the sold-out watch party for that game, which took place in California. Scott Santi, vice president of network for Sprint’s central region, made similar comments about how well its network performed during Finals games at the Q. Though cell service was unreliable during the championship parade, the convention isn’t expected to draw anywhere near that many people into the streets of downtown Cleveland. Even so, the parade was a good test for Verizon, said Steve Van Dinter, public relations manager for the Great Lakes market. “It was good for us from a network capacity to see where some of those pinch points were,” he said, noting that some of the company’s upgrades weren’t in place in time for that event. Santi, of Sprint, said handling large events is “a normal thing” in the wireless business. Still, it would be “unrealistic” for customers to expect that data transfer speed won’t be affected at all by the extra 50,000 people coming to town, he added. Overall, however, the wireless networks will probably hold up just fine, according to Nettleton. Probably. “We can talk again after I’ve been proven wrong,” he said with a laugh.
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GOP
CONTINUED FROM PAGE 1 were still tentative less than two weeks before the convention begins. “It’ll plug a lot of extra sales into our month,” was as far as John Doyle, an outside sales person at the family-owned FastSigns, would go.
Early signs are encouraging The common themes, though, are that a good week of business is expected, extra staff is being recruited, no one’s taking vacation and everyone’s hoping for a safe week that shows Cleveland in the best light. “It’ll be interesting to see what the convention does for our business,” said Bernie Doyle, vice president of the FastSigns franchise on St. Clair Avenue, just inside the convention week event zone. “We’ve gotten a significant uptick in business.” John Boyle said much of the business is in temporary signs — some signs welcoming convention goers or just drawing attention to a business that wants to attract convention goers. Others say a business is closed for the duration. It’s in the nature of special events that some of the needs crop up at the last minute — several people likened the planning for the convention and for the events around it as like planning for a wedding. “The phone is ringing frequently with stuff that people need for the RNC,” Bernie Doyle said. “People will send an email at 10 a.m. and say they need the sign by 5 p.m. That’s an all-the-time thing; it’s the nature of the business.” Bernie Doyle expects his business will get rush-order calls all week, but he is a little apprehensive about the possibility of violence. So he’s suggested to his staff that they pack an overnight bag in their cars. “I’ve got a shower here so that’s not a problem, if something does happen,” he said.
Nailing down the logistics Rock the House, which provides DJs and other entertainment for weddings, bar mitzvahs and business events, sees the week as helping its business on two levels. First, of course, is just the added business. The company has doubled the size of its staff to 120 this summer. But chief operating officer Ryan Konikoff said he expects hours worked to triple as the business is taking on jobs for a number of state delegations, including the Ohio delegation, and out-of-town groups holding events convention week. That work, like the weddings and bar mitzvahs, is nice, but Konikoff said the Oakwood Village company is focusing on business that strengthens its relationships with local intermediaries, the venues and party planners, who can be bring steady work in the future. “We probably could have gotten more work,” Konikoff said last Thursday, July 7. “We got three calls today.” Event Source of Garfield Heights rents everything from commercial stoves and warmers to forks and linen napkins and even the umbrellas to keep arriving guests dry in the rain, said marketing director Heidi Baumgart. Its customers are event planners, caterers, venues and organizations, the same customers Rock the House is focusing on. “It’s really exciting,” Baumgart said. “We’ve really felt the intensity ramp up.” Speaking just after the Fourth of July, Baumgart said the company didn’t yet have firm commitments for all customers who have asked for
quotes on events convention week. As soon as Cleveland was named the convention site, company president John Bibbo Jr. visited similar companies in previous convention cities to find out what kinds of rented products were in most demand and how the companies handled the surge. “He’s really worked his contacts to get as much information as possible in advance so we can be as prepared as possible,” Baumgart said, adding that the company is bringing in inventory from offices in Columbus, Detroit and Pittsburgh to handle the surge. She said the company has been working on a logistics plan that meets the demands of the Secret Service. Because it rents cloth table linens and napkins and flatware that must be picked up, cleaned and sanitized and be ready to go out again the next day, an efficient plan to move its 38 vans and trucks is critical. To ease
the flow, Baumgart said the company is encouraging customers to consider picking up equipment and supplies at its warehouse. “We’re just not sure what is going to happen,” she said. “We’ve got as much information as possible; we made our plans as best as possible and we’re scheduling accordingly. “This company was built to handle special events,” she added.
Strategic thinking GOP Convention Strategies is not an established local business. It’s more like a pop-up business that for several election cycles has been showing up in cities that are hosting presidential nominating conventions. Call it a highly specialized event planner. It set up shop earlier this year in an office in the Hanna Building in Playhouse Square under the auspices of Matthew Cox, a Republican
political consultant and lobbyist. Cox said recently that the firm is working on events for 15 state delegations. It has built a paid staff of seven and expects to have between 30 and 40 volunteers, people who are willing to work to be close to the convention action. For some states, the firm is planning out a whole week’s activities. For others it’s just a single event. In all, he said, he’s planning about 50 events, using more than 20 local restaurants. Most are downtown, but a few are on West 25th Street or in Little Italy. “It’s a huge mix of stuff,” he said. “Some (state Republican) parties will let their delegates go and do what they want and won’t script too much. Some parties put together corporate sponsored events.” GOP Convention Strategies also is working for a handful of corporations and trade associations that are putting
on events convention week. Cox would not disclose specific clients. Most of the business should be done by Friday, July 22, when most of the 50,000 attendees will head home or, for the media in particular, to the Democratic National Convention the next week in Philadelphia. Although he’s focused on getting his own business through convention week, FastSigns’ Bernie Doyle, a transplant from Toronto who has been in Cleveland since 1981, sees the convention as a big boost for the city. “I’ve seen just an unbelievable transformation,” he said. The end of the convention may bring a sigh of relief, but for Event Source in particular, that sigh will be brief. “We’ll go right into the Pro Football Hall of Fame (for enshrinement week events that begin Aug. 4) and then to the U.S. Senior Open in Columbus (that begins Aug. 8),” Baumgart said.
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ROOM TO HEAL. For optimal healing, patients need quiet and space. The new patient rooms are remarkably spacious and wonderfully private. They were designed to create a soothing atmosphere and include floors that minimize noise, lighting to support a patient’s sleep and wake cycles and floor-to-ceiling windows that offer views of the city. Each room includes a large shower, a charging station for phones and laptops and a large, flat-screen TV for both education and entertainment offering more than 60 cable channels, including ESPN. The design also enhances ease of care, with splash-less deep-basin sinks for infection control and fully reclining patient chairs. Doctors and nurses can monitor patients from just outside their rooms, decreasing response time and increasing patient satisfaction.
FAMILIES WELCOMED. Studies show that incorporating a patient’s loved ones into the healing process lowers stress and helps recovery. The new design treats family and loved ones as caregivers. Family members are encouraged to stay overnight with an additional comfortable bed in each room. A shower area for family or loved ones is also provided nearby. Other features include welcoming lounges with clustered seating for families to gather, rooms for private discussion, Wi-Fi and a snack and beverage area.
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As with everything MetroHealth does, the goal of the expanded pavilion is to make a positive impact on the community. MetroHealth consulted with patients and family members from concept through completion to ensure it was providing a facility that would truly meet the community’s needs. The new space includes a special disease care unit designed to both treat and contain diseases such as Ebola. The $82 million project was completely financed by MetroHealth and completed both on time and on budget. Over 30 percent of the work was done by local and minority-owned businesses reflecting MetroHealth’s commitment to provide local jobs during its campus transformation.
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Food trucks hit bumpy path to serve RNC By BOB SANDRICK clbfreelancer@crain.com
When the Republican National Convention opens in Cleveland next week, area food trucks will hit downtown streets with dishes prepared specially for the event. However, food truck operators have endured a tortuous permitting process, involving security checks and possible last-minute inspections, similar to what others involved in the convention have faced. It has caused some frustration because the rules seem to change every day. Izzy Schachner, owner of Streat Mobile Bistro and president of the Northeast Ohio Food Truck Association, is working with the Republican National Committee on the placing of various food trucks for the convention. About two weeks ago, he was told trucks would have to undergo another layer of inspections by Cleveland’s Division of Fire and Department of Building and Housing. Then, last week, Schachner wasn’t sure if the inspections would be necessary after all. Schachner is remaining patient, saying he knows the city feels a heavy responsibility to keep people safe.
“This isn’t something that happens all the time,” Schachner said. “I’m sure there is a huge learning curve in the city. And you have the (U.S.) Secret Service involved, and that’s probably one of the main reasons for the additional steps in the process. “Everyone is trying to figure it out, and we’re on standby waiting,” Schachner said. “But most of the food trucks are already legally operating kitchens in the city, so we’re confident that anything they throw at us won’t be a big issue.” Ken Hatfield, chef at Hatfield’s Goode Grub, initially thought he would station his food truck at Burke Lakefront Airport for a private party. He was recruited by Roaming Hunger, a foodtruck hiring firm, to subcontract for a California catering company. Now he doesn’t know where he stands. “They can’t tell me exactly where I’ll be working or who is throwing the party I’m working,” Hatfield said. Daniel Ball, Cleveland’s assistant director of media relations, said street vendors can call the city’s Division of Assessments and Licenses if they have questions. He added that the city has always required food trucks to pass inspections by the fire
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division and building department. Despite several requests, the city did not turn over public records showing which food trucks and other street vendors applied for permits to work downtown during the convention. The deadline for vendors to apply was July 8. Dan Williams, Cleveland’s director of media relations, referred questions about the RNC’s street vendors to the Secret Service. But Nicole Mainor, Secret Service spokeswoman, referred the matter back to Cleveland. So it’s not certain which street vendors Cleveland visitors will encounter during the RNC. One thing is almost certain – everyone will eat well. Schachner said about 25 vendors in the food truck association will participate in RNC activities, including the opening ceremony July 18 at North Coast Harbor. He said convention organizers chose food trucks that would complement each other but whose cuisines would not overlap. Todd Berry, owner of Krav Food Truck, learned about the chance to cook for the RNC through the association. He will take part in the firstday party, then set up shop near Public Square on subsequent days.
“It’s a different experience, great for downtown Cleveland,” Berry said. “It will be very energetic, and I’m happy to be part of it. It will create a lasting memory.” As part of the RNC application process, Berry submitted a food theme of Mediterranean-style dishes with Korean and Latin accents. He will serve Korean barbeque chicken and pork loin, Cleveland cheesesteak, lemon chicken, lamb and chicken gyros and vegetarian pitas. Hatfield, if he ends up at Burke, will provide southern comfort food like pulled pork, barbeque beef and chicken and catfish tacos. His Hillbilly Philly, a 14-ounce shredded beef sandwich, comes with several types of bell peppers, plus onions. Kelly Waddell, owner of 216 Bistro, will sell pierogis during the welcoming ceremony. After that, he will continue working the convention, but he doesn’t know where yet. “We didn’t have any choice or input about where we will be,” Waddell said. “Just to be involved is important for us. We really don’t care where it’s at.” One problem, Berry said, is that vendors who chose not to apply for an RNC permit, or whose applica-
tions weren’t approved, won’t work downtown much, if at all, in the days leading to the convention. Walnut Wednesdays, a regular gathering of food trucks in Perk Plaza at Walnut and East 12th streets, are cancelled the week before and during the convention. Food Truck Fridays on Lakeside Avenue also have been suspended those weeks. The news disappointed Sonmez Bozkurt, owner of Chef Grey Wolf, who never misses Walnut Wednesday and Food Truck Friday. “The convention will hurt some people and help some people,” Berry said. In July 2014, Cleveland City Council created special guidelines for street vending during the RNC. The city required vendors to fill out RNC permit applications. In its 2014 resolution, council said the RNC was expected to draw 50,000, which now seems like a quaint number compared to the crowd that swarmed downtown for the Cavs’ June 22 victory parade. The resolution said the RNC crowd will generate “unique challenges” and the city must keep vehicles and pedestrians moving. Toward that end, vendors who stick to one spot, and those who like to move around, are confined to three stationary zones and two mobile zones. Stationary zones include areas bordered by Superior and Lakeside avenues and West 3rd and West 9th streets; and Euclid and Prospect avenues and East 18th and East 24th streets. A third, skinny stationary zone is along East 12th Street between Chester and St. Clair avenues. One mobile vending zone is bordered by Frankfort and Lakeside avenues and West 9th and West 3rd. A SEE FOOD, PAGE 9
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RNC won’t be hassle free for distributors By LEE CHILCOTE clbfreelander@crain.com
For Northeast Ohio food distributors that supply downtown restaurants, the Republican National Convention certainly presents some additional logistical challenges. However, with ample lead time running up to the RNC, planning started several months ago and they don’t expect any hiccups. “We feel confident that we are ready or will be ready,” said Joe Canfield, vice president of business development with Northern Haserot, a Bedford-based foodservice distributor that serves customers in Ohio and Michigan. “We spent a lot of time and effort preparing for this – both to make sure we provide food service to Cleveland, but also to our customers in other demographics. We took it seriously and started the planning process in February.” Vince Sirna, vice president of Sirna & Sons Produce in Ravenna, said the week of the RNC should certainly be easier than trying to make deliveries downtown during the recent Cavaliers championship parade. It also should be easier than a major holiday like Mother’s Day, since increased demand will be concentrated in one area. “The way we look at this thing is that it’s good for everybody,” he said. “Is it going to be a little more inconvenient for everybody? Sure. But we’ve been doing this a long time and you adjust so it runs as smoothly as possible.” Yet the RNC will be far from hasslefree for food distributors. A few of the challenges include shortened delivery windows, increased delivery times due to the fact that all trucks have to be screened by the Secret Service and then escorted by police to a security checkpoint, and the difficulty of navigating downtown streets filled with more than 50,000 visitors. Although restaurant suppliers typically make deliveries between 6 and 8
a.m., they’ll start much earlier during the RNC. That’s because they’re hoping to make their deliveries when there are fewer people on the streets. The delivery window has also been shortened to 3 a.m. until 11 a.m., making later deliveries impossible. “They basically want you in and want you out and want to make sure they check your trucks,” said Sirna. Larger trucks will have to go to West Third Street near FirstEnergy Stadium to get screened by the Secret Service while smaller trucks and sprint vans will use an alternate checkpoint, Sirna said. While Sirna & Sons typically re-
leases four to five trucks each day for downtown deliveries, they’re bumping it up to six to eight during the RNC. Routes are being tightened, drivers will be making fewer stops to keep their deliveries on schedule, and additional staff may be added. Northern Haserot has kept additional supplies on hand to deal with increased demand and possible lastminute orders. The company has also provided additional training to drivers to equip them to navigate traffic-clogged downtown streets. The biggest downside is not being able to make late deliveries, Canfield said. “It will be more challenging from that perspective,” he said. “If a customer wants something at 3 p.m., we’ll do it,
but we’ll be a little bit hamstrung. Our goal is to get it done early and get out.” Brandt Evans, chef-owner of Pura Vida restaurant on Public Square, said he’s looking forward to convention week. He’s ordered extra supplies of beer, wine and spirits ahead of time and also stockpiled items like paper goods and foods like butter, flour and chocolate that have a long shelf life. Given that the Republican Host Committee has booked Pura Vida that week, he’s had the luxury of knowing what to expect for a while. “It’s just like catering a wedding or major event, all the logistics,” he said. “I love it.” Evans is tentatively planning to open to the public around 10 p.m. with a limited menu and bar service.
He’s debating whether to stay open late, given that bars and restaurants can serve alcohol until 4:30 a.m. that week. “It’s the great unknown,” he said. “Are people going to be walking around at 4 a.m.? This isn’t New Orleans. I only have so much staff to pull from – I don’t want to kill them over a dollar.” Evans said that he’s been impressed with how the city has prepared and he’s doing his part to get ready. “I’m 100% confident in the city of Cleveland and everyone putting this together,” he said. “It’s just another great thing, that the world can see Cleveland shine, see what we Clevelanders already know.”
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larger mobile zone, on the east side of downtown, is roughly bordered by Lakeside, Interstate 90, Carnegie Avenue and East 13th street. Some places where vendors normally can work — including the Cuyahoga County Justice Center and locations along East 9th Street — are off limits during the convention. But for food truck vendors signed up for the RNC, it’s all good. Waddell doesn’t project a spike in sales due to the RNC but he’s still happy. He feels part of a Cleveland resurgence that includes the Cavs winning the NBA championship and the city redeveloping Public Square. “Our (food truck) industry is only about 6 years old,” Waddell said. “For us to be chosen to be part of the RNC, it shows our industry is successful.” Schachner – who during the convention will serve an “R ‘N’ C Bowl,” consisting of organic rice, slowcooked shredded chicken, “firecracker slaw” and sauce – agrees. He said that minus the security measures, the RNC is business as usual for food trucks. “It’s a decent opportunity to showcase Cleveland more than anything else,” Schachner said.
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Opinion From the Publisher / Editor
Some thoughts about that Donald Trump cover
Editorial
Cash in Often times, diversity and inclusion efforts tend to emanate a message of “Hey, at least we’re trying.” In many cases, they’re an attempt by businesses, foundations and other civic bodies to divert attention from the racial inequity deeply ingrained in the local business community. And frankly, these efforts make for a few good talking points rather than any substantive action, let alone results. However, JumpStart — the Cleveland nonprofit that supports promising startups — is offering more than lip service when it comes to diversity. JumpStart is continuing to provide services and investment capital to tech startups, but today, roughly 25% to 30% of the organization’s budget is focused on diversity and inclusion efforts. Specifically, Crain’s Chuck Soder reported late last month that JumpStart recently invested $350,000 in five startups via a new fund focusing on female and minority entrepreneurs. “Our focus is to accelerate or advance ambitious and diverse entrepreneurs to transform entire communities,” JumpStart CEO Ray Leach said at the organization’s recent StartupScaleup conference. Of course, a few hundred thousand dollars isn’t going to immediately transform Northeast Ohio into fertile ground for minority and women-owned businesses, but it’s a start. After all, cold, hard cash — not symposiums, white papers and panel discussions — is what can move the needle. It’s no secret that minority and female entrepreneurs nationwide have a more difficult time getting the attention of the funding community, and it’s no surprise as to why: The venture capital community (and the finance world in general) is dominated by white men. According to one study, 92% of senior investment team members at top VC firms are men. Moreover, 78% of senior team members at
top VCs are white. Those figures alone could deter a promising entrepreneur from seeking funding opportunity just because the decision-makers don’t look like him or her. Two years ago, civic leaders from Cleveland and three other cities (Detroit, New Orleans and Durham, N.C.) began meeting regularly to share ideas and figure out ways to help inner city entrepreneurs as part of the Forward Cities project, which we explore in this week’s Focus section. The initiative was poised to end this summer, but the local cohort doesn’t plan to stop meeting because of the relationships born from the program have led to new projects and partnerships. For one, it was through Forward Cities that Michael Fleming, executive director of St. Clair Superior Development Corp., met Deborah Hoover, CEO of the Burton D. Morgan Foundation. The result? A joint effort — backed by a $100,000 grant — to help inner-city kids learn about entrepreneurship. Surely JumpStart’s tweaked mission and the Forward Cities project aren’t the only programs that have resulted in cash infusions for diverse business ventures. But there could always be more. Northeast Ohio’s business community has made strides in recent years when it comes to diversity. As we applauded recently, with the addition of the new heads at Progressive and Eaton, three of the eight largest companies in the region, ranked by market cap, are led by a woman or a minority. However, Northeast Ohio’s success in terms of diversity shouldn’t only be based on rewarding those successful women and minorities already near the top of the corporate ladder, but by our willingness to support those who are eager to make that climb.
PUBLISHER AND EDITOR: Elizabeth McIntyre (emcintyre@crain.com)
CLEVELAND BUSINESS
MANAGING EDITOR: Scott Suttell (ssuttell@crain.com) SECTIONS EDITOR: Timothy Magaw (tmagaw@crain.com)
In the two years that I’ve been editor at Crain’s Cleveland Business, we’ve tried to visually spice up our printed pages. Business stories aren’t always easy to illustrate, but this is important work because compelling photographs and illustrations often are the welcome sign that invites readers into stories. There are certain stories that warrant a more magazine-type treatment with a full-page cover illustration or photograph. Stories like those that we’ve showcased include pieces on rebuilding Akron and Cleveland, efforts to embrace the Cuyahoga River and Lake Erie, and the emerging Northeast Ohio food scene. On July 4, we applied the marquee cover treatment for our RNC special section. It’s not every day that a national political convention comes to Cleveland. We commissioned Randy Palmer, a talented longtime illustrator for the Dayton Daily News, to set the visual tone. The cover, a handsomely drawn work, deElizabeth picted Donald Trump as a ringmaster, smilMcIntyre ing as three elephants (symbols of the Republican Party) performed around him, against a backdrop of Cleveland’s skyline. The headline read: “RNC in CLE: The Trump Circus comes to town.” Art, I realized after that issue of Crain’s hit readers’ mailboxes, is truly in the eye of the beholder. And words are open to interpretation. It appears that we unintentionally dismayed some of our readers. By last Wednesday, we had received about a dozen or so phone calls, emails and letters criticizing the illustration. Some said the cover was disrespectful and mocked the presumptive Republican nominee. Others expressed a view that the illustration showed an anti-Trump, pro-Hillary Clinton slant. As I write this, I’ve had a few days to sit back and reflect. I do still believe the illustration is visually appealing and I know that our intention was never to offend. Were we naïve to think the illustration wouldn’t be controversial? Yes. One caller asked whether anyone in the newsroom raised objections to the cover, and I could honestly say that no one had. Was the cover our attempt to make a political statement? No, it was not. We saw it as a reflection of one of the most unusual election cycles in recent history. Two outsider candidates — Donald Trump and Bernie Sanders — had tapped into an undercurrent of anger against politics as usual. Campaign events on both sides this year have had a more showman-like bent. Many have called this primary season a political circus. And for the Republicans, this volatile primary season culminates in Cleveland. Stalwart Republicans — such as the Bush family, John McCain, Mitt Romney and others — have decided to skip this year’s convention. Our own governor says he’ll be in town, but not inside The Q where the convention will be held. Trump is a showman, as he’s proven throughout his career and in his reality show “The Apprentice.” He’s a marketing master who knows the value of his brand and has effectively shown that by garnering ratings and votes. The RNC will be The Trump Show. That was the message we were trying to depict with our illustration. A showman unlike any we’ve seen will likely be selected as the nominee during what promises to be an RNC unlike any we’ve seen. While our intention was not to mock, still the illustration offended some of you. And to you we offer our sincere apology. And we offer this promise: We will cover the RNC, and all of the day-to-day business news so vital to our readers, with gusto and with balance. And I’d like to offer one more thing. Our thanks to you for reading Crain’s and reaching out to us with your feedback.
WRITE US: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing letters@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.
SOUND OFF: Send a Personal View for the opinion page to emcintyre@crain.com. Please include a telephone number for verification purposes.
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COME RUN WITH US & FIGHT OVARIAN CANCER
Letter to the editor
Next time, think of the animals Encouraging visits to the Cleveland Metroparks Zoo is as archaic as it is cruel. (“Ten new things to do in Cleveland through June 30”) No matter how hard some zoos try to make the environment as comfortable for the animals as possible, these spaces in no way compare to the natural habitat that the wildlife is meant to be in. Since Amur tigers travel up to 620 miles in their natural homes, one can imagine how much they struggle with a lack of space at even some of the best zoos. Animals who would normally avoid humans are forced to live constantly on view. They are unable to choose their own social groups and are often separated from their families. Captive animals demonstrate repetitive behaviors that are indicative of stress, including pacing, head bobbing, swaying from side to side, rocking, and sitting motionless.
Since most of us, including zoo keepers, only have knowledge of these wild animals from seeing them in captivity, it isn’t always easy to recognize these stress behaviors. Although zoos are considered to be educational recreation, people gain little understanding of wild animals and their natural behaviors through visiting these institutions. There have been several studies that prove this, for example an international study called “A Global Evaluation of Biodiversity Literacy in Zoo and Aquarium Visitors.” Zoos normalize suffering. In the future, I urge your publication to sponsor events that do not involve captive animals. Anna Sorokina Boston, Mass.
Web Talk Re: Strong pace for law firm mergers The trend toward smaller firm acquisitions is interesting and could be recognition that large scale merger of equals are both harder to find and harder to execute. This also may be evidence that clients are not necessarily gravitating toward bigger but rather toward a balance between bench strength and flexibility. The recommendation that smaller firms follow a growth strategy is too much nail and hammer problem solving. A more effective route for smaller firms is to focus the firm’s service offering, streamline processes and find ways to deliver superior value. The belief that clients seek out the largest firms in order to consolidate their outside legal resources is just that — a belief bordering on folklore. — Eric Dewey
Re: Indians heating up Not trading away ANY starting pitching is the best decision we’ve made in years. The best ERA in the AL will carry you a long way. It’s going to be fun. — Donald Templeman
Re: New Public Square Just love the new square! However, I am completely disappointed in the water feature. It is such an dribble of water it is hard to see. It only goes up 12 to 30 inches and is a thin spray. I have seen these splash features in other cities and they are big powerful jets up to eight feet high and six inches in diameter, and are really impressive to watch. They spent so much time putting this fountain together for this pathetic squirt. What were they thinking? — James Shellenburger
Re: Employers and medical marijuana Employers everywhere need to remember that, since they are no longer extending any particular loyalty to employees, but simply “buying” some of their time until such time as they deem it no longer profitable, the employees have the same right to withhold loyalty from the other direction. They are simply selling some of their time — those few hours a day, nothing more, nothing less — to the highest bidder. When a higher bid comes along, expect the employee to make the most profitable decision, just as the employer would. Employers everywhere need to learn their place. Far too many workers have bought into the implicit idea that once hired by a company that company somehow owns them. — JohnB
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Progenitors of the Hingetown area, which rejuvenated West 29th Street north of Detroit Ave. in Ohio City with trendy shops and businesses, are on the move again. Through Hingetown LLC, videographer turned real estate developer Graham Veysey and his wife, Marika Shioiri Clark, have acquired the Schaefer Printing Co. building at 2817 Detroit Ave. with plans to convert its upper two floors to six apartments. Schaefer sold the building to Hingetown for $500,000 on June 22, according to Cuyahoga County land records. The printing company will remain as a tenant on the first floor, Veysey said in an interview. Thomas McNair, executive director of the Ohio City Inc. nonprofit local development corporation, said he considers the move significant for the area despite its small size. “(Veysey’s) initial plan for the property is small, but the purchase includes land for additional development,” McNair said. “The plan retains a business that has long been part of the community and adds more apartments to the transformation of lower Detroit as a residential area.”
Although the building’s first-floor was incorporated in a 1980s expansion with a brick-walled, glass-block contemporary structure for Schaefer, its upper floors retain their 1865vintage character with roundtopped windows and brick patterns. Veysey said the top floor has been unused for 50 years, and the second floor for 30. Plans call for restoring the building’s original exterior appearance on upper floors. Veysey does not plan to seek state or federal historic tax credits for the estimated $500,000 project, which will involve adding oneand two-bedroom suites. “It’s not a huge project,” Veysey said. “We like to be nimble. With the credits we couldn’t necessarily move as quickly as we do.” Among the occupants of the building will be Veysey and Shioiri Clark, who plan to move there from an apartment in the nearby Ohio City Firehouse, 1455 W. 25th St., which they bought in 2011 and converted to multitenant use. The project and others launched Hingetown connecting Ohio City and the Detroit-Shoreway Neighborhood, an incremental development that generated local and national buzz. Veysey said he’s looking forward to the new third-floor suite. “We won’t have to climb a ladder to go to bed,” he said of the firehouse livework space.
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The growing need for in-home care in Cleveland In Cleveland, the number of residents over the age of 65 was more than 12 percent of the total population as of 2014. At the same time, Cleveland Department of Public Health data finds the rate of heart disease in the population outpaces that of the state of Ohio as well as national levels. Other lingering ailments, including chronic lower respiratory diseases, stroke, unintentional injuries and Alzheimer’s disease, are prevalent in Cleveland’s aging population. People with these types of chronic conditions require ongoing treatment, and they regularly turn to hospital emergency rooms for care.
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Q&A - P. 15 | ADVISER - P. 16 | TAX TIPS - P. 17
Macie Tirpak, center, sells custom sand-etched glassware with a Cleveland motif made by her mother, Cindy Tirpak, right, at June 18 Cleveland Flea. (Peggy Turbett photos)
Cleveland’s maker movement continues to flourish
By MARK OPREA
Frekol and the Flea
don’s 35 vendors brought in, she estimated, roughly $50,000. The 185 vendors at her April flea this season took in more than $2 million. It’s why Sheldon birthed the term “Flea addiction.” “Before (April), I’d been all around but the Flea,” said Dan Gilreath, the vintage-dressed owner of District31, who sells homemade beard combs and rustic wooden knick knacks out of Fort Wayne, Ind. At the April date, his first, intrigued guests wandered up, sniffed bottles, held up his Cleveland-skyline bow-ties to their chests. “It’s worth the three-hour drive,” he said. “I wouldn’t miss this for the world.”
clbfreelancer@crain.com
At the first Cleveland Flea of the season, Stephanie Sheldon, in her blond pixie hair and TEAM FLEA T-Shirt, couldn’t stand still. That April, you could find the Flea CEO and founder scrambling sun-drenched around the Flea’s Tyler Village spot to prep DJs or administer board games, OK food truck spots, whip up Moscow Mules at the eponymous Flea Bar. And fortunately, too. One week before, the parking lot was covered in snow. Some days earlier, on April 15, Sheldon donned a black bomber jacket to speak in front of 80 locals — area lawyers, investors, the mayor of Lakewood — about the Cleveland maker revolution at a white-cloth luncheon at the prestigious Clifton Club. A quick-to-hit Sheldon riffed off 20 minutes of her philosophy backed by slideshows of before-and-after photos showing “how fleas change neighborhoods,” shared backstories on her five-person Indie Foundry team. At one point, an audience member asked Sheldon for her opinion on Etsy, the global online maker marketplace, in light of her rising Cleveland pop-up. “We actually exist because of the crash of those markets,” Sheldon said matter-of-factly. “Those are extremely saturated markets. You can’t really make a living off them.” And without any misstep, she fired off that afternoon’s maxim, among several others. “Honestly? Commerce is about connection,” she said. Heads noded in unison, people
A startup for startups
Theresa Morrow of Thread + Love sells dolls and other children’s goods at the Flea. clapped. In this moment, it’s clear Sheldon’s the undisputed queen of the maker revolution, if the movement ever needed a head. In an era of confluence between online and in-person sales, no city better represents this socalled crash than Cleveland. As of this summer, a handful of pop-up markets — from Sheldon’s
Flea to Night Market to the Cleveland Bazaar — are reaching high potentials for attendees and greenhorn makers never before anticipated, while reshaping perspectives on blighted neighborhoods none thought possible. Numerically speaking, three years ago, when the Flea debuted in its Tyler Village spot, Shel-
After the excitement created by the April flea settled, a 24-year-old local entrepreneur and maker-booster Trent Schulz took his e-commerce site Frekol out of its year-long beta testrun. Frekol — what Schulz dubbed a “super-localized Etsy” — arrives at a seemingly ideal time in Cleveland’s maker spike, and is yet to, at two months in, stymie any attendee counts at local markets. The idea is simple: hundreds of unearthed local crafters, from glass blasters to soap-bomb creators to cake artists, are without a collective online storefront, drowned among millions of like sellers on sites like Etsy and eBay — Craigslist even. Noticing makers lacked an exclusive site back in 2013, Schulz took it on himself to create the hub, where any person can have exposure on a local level. Three-hundredfifty strong, as of this July. SEE FLEA, PAGE 18
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SMALL BUSINESS
Forward Cities effort inspires teamwork By CHUCK SODER csoder@crain.com @ChuckSoder
Without the Forward Cities project, the St. Clair Superior Development Corp.’s bank account would be smaller than it is today. Two years ago, civic leaders from Cleveland and three other major cities began meeting regularly to share ideas and find new ways to help inner-city entrepreneurs. The Forward Cities initiative was scheduled to end this summer, but the local council does plan to continue getting together — even if they won’t be making any more group trips to Detroit, New Orleans and Durham, N.C. Plus, some of the ideas and relationships born from Forward Cities have led to new projects and partnerships here in Cleveland. For instance, it was through Forward Cities that Michael Fleming, executive director of St. Clair Superior Development Corp., met Deborah Hoover, CEO of the Burton D. Morgan Foundation. They soon realized that they could work together to help inner-city kids learn about entrepreneurship. As a result, the development corporation ended up applying for a grant from the foundation. It received the $100,000, two-year grant in February. That wouldn’t have happened if Fleming hadn’t met Hoover through Forward Cities. “We would not have been in the same room,” he said. The initiative brought together organizations from different parts of the economic development contin-
uum. Among the council’s 31 members are representatives from the city, lenders, colleges, workforce development groups and nonprofits that work with startups. Some of the organizations hadn’t worked together before, said Randy McShepard, who along with Hoover served as co-chair of the Cleveland council. “It was the first time we had the right mix of people around the table,” he said. The Cleveland Forward Cities council focused on four distressed “corridors” within the city. Here are a few things that have happened so far in those areas: La Villa Hispana, West 25th Street near Clark Avenue: For 30 years, residents in this area have talked about creating La Villa Hispana, which is Spanish for “The Hispanic Village.” Now they’re doing something about it. Forward Cities is helping: The Business of Good Foundation, which has a seat on the council, has committed to providing a $16,000 grant that will be used to create plans for a Hispanic marketplace called El Mercado. The marketplace, which would house about 20 small retailers, is a cornerstone of La Villa Hispana — a plan to turn the neighborhood into the “economic and cultural epicenter” of Cleveland’s Hispanic community, said Jenice Contreras, executive director of the Hispanic Business Center. Residents organizing La Villa Hispana also learned about a Detroitarea program called Retail Boot Camp through Forward Cities, said Contreras, who doesn’t sit on the
When Forward Cities participants visited town in June, Randy McShepard showed off the Rid-All Green Partnership urban farm. (Contributed photo) Forward Cities council but has communicated with the group. They plan to develop a simpler version of that program to help new retailers learn how to address issues like choosing a location, dealing with inventory and managing suppliers. Opportunity Corridor, East 79th Street: Thanks to Forward Cities, Marie Kittredge is now distributing a particularly large sheet of paper. It contains a graphic designed to help small businesses — especially those near the planned Opportunity Corridor boulevard — easily find organizations that can help them. And there’s a reason it’s 11 inches by 17 inches. “It’s big — you can’t ignore it,” said Kittredge, executive director of the Opportunity Corridor Partnership.
Kittredge didn’t come up with the idea. She spotted a similar graphic when Cleveland’s Forward Cities contingent visited Detroit. Through Forward Cities, she also helped organize a Lolly the Trolley tour that took local small business owners to four nearby organizations that provide business assistance. The project changed Kittredge’s mindset as well: She was mostly focused on workforce development issues before joining the council. Now she also thinks about how she can help nearby businesses take advantage of the development that will take place when the Opportunity Corridor is built. Food Corridor, East 55th Street: This corridor aims to build upon a few other initiatives going on in this
neighborhood — particularly Hub 55, a project that aims to turn a few old commercial buildings into a hub of healthy eating, while creating jobs for nearby residents. At the moment, it is home to Café 55, and the Goldhorn Brewery is slated to open there this month. Food is a good area to focus on, since it’s universal and the barriers to entry are low, according to Fleming, of the St. Clair Superior Development Corp. The Food Corridor committee plans to put together a group that will regularly meet to talk about what they can do to help specific food-related companies in the area. They got that idea from a committee member that works for BioEnterprise, which participates in similar meetings related to medical technology companies. East 105th Street, near University Circle: This corridor is new. Its committee met for the first time in December. But Freddy Collier Jr., director of the Cleveland City Planning Commission, said Forward Cities is helping inform Cleveland’s strategy for the area. The corridor committee aims to help companies in the neighborhood win business at institutions in University Circle. It also wants to help them attract customers who visit those institutions but avoid nearby neighborhoods, Collier said. “If we want to have vibrant neighborhoods, we’re going to have to tap into the talent that exists within our community,” he said.
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Q & A: Ashley Sova Co-founder, CLEBaby Ashley Sova knew she couldn’t go back to work as a cancer researcher at Case Western Reserve University when she knew so many Clevelanders were missing out on an important service that, she said, transformed her second birth experience. That’s why she and a partner founded CLEBaby — a full-service pregnancy, birth, and parenting agency that hosts events, childbirth education classes and, perhaps most importantly, provides doula services. CLEBaby addresses parenthood as a continuum rather than a single event. The support is tailored to meet clients where they’re at in parenthood and connects them with the resources that best fit their needs. An example? This fall, CLEBaby is planning “Babies & Brews” exclusively for dads at a brewery. Learning how to change a diaper and swaddle, she said, isn’t so terrible when you’ve got a beer in one hand, right? — Timothy Magaw Where did you get the idea to start CLEbaby? I have two toddlers and had completely different birth experiences with each of them. My first birth was relatively traumatic and left me feeling helpless, guilt-ridden and ultimately dissatisfied. For my second birth, I hired a wellrespected local doula to support my husband and I, and it was a beautiful, positive experience. I believe she was the difference. My doula was working toward retirement and decided to handpick a group of former clients that she thought would make great doulas and train them, passing on the expansive local knowledge and birth wisdom she’d gained with 17 years in the business. At her training, I met my current business partner, Gina Crist, and we quickly realized we had a very similar vision for our business. We recognized the invaluable services of a doula, and knew that those services would be the foundation of CLEbaby. What is a doula exactly? There are two types of doulas: birth doulas and postpartum doulas. Birth doulas support
families during pregnancy, birth, and the immediate postpartum period. And postpartum doulas support families after their baby’s birth during those first few months postpartum. When someone asks me what I do, I often refer back to a fantastic blog written by a colleague. It expands on the definition used by many doulas (“we provide physical, emotional, and informational support to families throughout pregnancy, birth, and the postpartum period”) with more tangible examples. As birth doulas, we listen to your fears and validate your emotions, answer questions and connect you to resources throughout your pregnancy and beyond, help you create your birth plan, know the ins-and-outs of the local hospitals, join you once you need us during labor regardless of time of day. As postpartum doulas, we allow moms to focus on physically and emotionally recovering from birth, we help and educate on newborn care, we work overnight so that parents can get sleep, plan and prepare nutritious meals, perform light housekeeping and bring a sense of calm to a household.
What’s the advantage to work with you rather than, say, just go to classes at a local hospital? Hospital-taught classes do have their place, and it’s always nice to schedule a tour and get the lay of the land for peace of mind before the big day. One benefit of our childbirth education classes is that we customize them to address the topics that are significant to that specific set of parents. And if they aren’t sure where to begin, and many parents understandably aren’t, we help them explore a range of topics so that they get a thorough and fun education on all things pregnancy, labor and birth, and baby. In addition, classes are taught in the privacy of our clients’ homes. That way our parents feel comfortable asking questions they may not feel comfortable asking in front of a group. Let’s be honest, childbirth is an intimate event featuring a woman in her most vulnerable — yes, amazing, too — state. What could take this company to the next level? Continuing to get our message out about what doulas are and
how they can truly change families’ lives. Pregnancy, birth, and early parenthood are some of the most difficult times, but with the right help, it can truly be enjoyed rather than just survived. If more Clevelanders recognize the value of doulas, utilize their services, and spread the word, then we’re on the right track. What’s the advantage to independent doulas to working with you? From a professional perspective, it’s exciting for them to be part of a team of like-minded, ambitious women, making a career doing something they love. And from a practical perspective, our agency model of support is really appealing. Our birth doulas share on-call time for births, meaning they don’t have to put their lives on hold because they have a client who could go into labor at any time. I know solo doulas who have more demanding on-call time than the neurosurgeons at the Cleveland Clinic. Our model is sustainable long-term and benefits our clients and our doulas. In addition, as independent doulas they don’t have to focus on the back end of business.
SAVE THE DATE
What’s one piece of advice you would offer to expectant parents, particularly those who are both still working? For parents expecting their first baby: Enjoy the remainder of your time as a family of two, and take a babymoon if you can swing it. When people caution you that babies change everything they’re downplaying it. And your partnership is no exception. Having kids changes your relationship in a million ways, some for the worse (the stress, lack of sleep, the cost of childcare) and some for the much, much better (the intensity and amazement of childbirth, watching your baby reach milestones together). And regardless of whether one or both parents are working, don’t be afraid to ask for help. I know it’s surprising, but parenthood isn’t all glitz and glamour. If you’re overwhelmed, drowning in self-pity, haven’t slept in a week, etc., figure out the best person for the job and ask them for help. There is no shame in that, and even the most seemingly puttogether parents have been there.
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Marketing buzzwords like contextual marketing, integrated marketing, freemiums, native advertising, retargeting, SoLoMo, and UGC are the latest craze. Why is integrated marketing a buzzword for 2016 and a must do for your business? You probably remember the “old� definition of integrated marketing. It was about promoting a consistent look and feel across media types. It was about using multiple channels such as TV, print, radio and outdoor to market your goods. And, it was the job of the marketing department to make it all happen. Hello integrated marketing 2.0. Integrated marketing continues to be an approach to creating a unified and seamless experience for consumers to interact with a brand or company. When executed well, it melds all aspects of marketing, including advertising, public relations, direct marketing, social media, sales promotion and brand ambassadorship. It’s still a process to ensure that all messaging and communications strategies are consistent across channels and importantly, built around the customer. But today, integrated marketing involves more. Great integrated marketing campaigns integrate your messages and your customers’ messages. Smart integrated marketing campaigns are no longer the sole responsibility of the marketing department. Every department houses ambassadors that play an important role in telling your story. Snickers, for example, has knocked it out of the ballpark with the company’s “You’re not you when you’re hungry� campaign. At its core, the cam-
Laura Sheridan is president of Viva La Brand, a Clevelandbased brand and marketing strategy and ad agency search firm. paign is built around an authentic consumer insight — many of us aren’t ourselves when we’re hungry. Launched in 2010, it’s still fresh and engaging. The campaign includes TV, print, social media, video, online ads, websites and hunger-inspired products sold on eBay. They even changed their packaging. Now you can buy a Snickers Hunger Bar with one of 21 different monikers including Goofball, Drama Mama, Princess, Curmudgeon and Cranky. The packaging encourages people to share photos of their bars and stories using the hash tag #EatASnickers and points them to a meme generator — SnickersMeme.com where they can create images related to their type of hunger symptom and share them with friends across social networks. Snickers’ brand managers understand it’s about engaging fans with a powerful consumer insight and then providing them with new, fun ways to involve their friends and family. Don’t have the budget or resources to execute a Snickers-esque integrated marketing campaign? Few companies do. What can you do to implement an effective integrated marketing campaign?
Tip #1: Start with a powerful consumer insight. Smart strategy always starts with your target audience. Who are they demographically and psychographically? Building a campaign without input from consumers is a waste of time. Tip #2: Let your customers pick the media channels. Create your media plan based on your customer’s media habits instead of what you’ve always done. Be ruthless in culling. It’s better to heavy up on effective channels than try to be everywhere all the time. Tip #3: Recycle content. Once you know what content is important to your customer, repackage it for each media type. Experts now say it takes more than five impressions for consumers to recognize a brand or specific marketing message. Tip #4: Marketing is a team sport. Involve all internal and external partners such as your graphic designer, videographer, etc., in the development and implementation of the campaign. Equip your brand ambassadors with the tools to be part of the storytelling. Tip #5: Measure and refine. Consider every marketing initiative a test and measure results. What worked yesterday may not work today. Integrated marketing campaigns are key to maximizing the impact of your marketing spend. Embrace what it takes to connect with consumers and tell your story. Upgrade to integrated marketing 2.0.
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Tax Tips: Carl Grassi
New rules affect tax partnerships It has been over eight months since the new partnership audit rules became law. These rules allow the Internal Revenue Service in most cases to audit the partnership (or limited liability company) and collect any resulting tax due from the partnership directly. This is in stark contrast to the current rules which require the IRS to collect any deficiency from the individual partners. Some partnerships can decide to elect out of these new rules, more or less maintaining the status quo of the current rules which do not allow for a partnership-level assessment. Although not effective until 2018, many partnerships (and LLCs taxed as partnerships) have been adding language to their partnership and operating agreements to take the new rules into account. Usually this language addresses whether the partnership will elect out of the new audit rules. While a partnership may decide not to specifically address the issue of whether it is the partnership or the partners that are assessed, every partnership needs to address the issue of the partnership representative. Partners often give little thought as to who will serve as the tax matters partner (TMP). The TMP is only relevant in TEFRA unified audit proceedings, and individual partners have the right to participate in these proceedings. Since the authority of the TMP is limited under current law, the ramifications of naming a TMP do not typically get much attention.
Carl Grassi is president of McDonald Hopkins LLC.
Under the new audit rules, the tax code provides that the role of the TMP is replaced by a “partnership representative” who has almost complete authority to act on behalf of the partnership (and therefore effectively the partners) when dealing with the IRS. This authority includes the ability to bind the partnership and the partners in audits and other proceedings, including settlement authority and decisions on procedural issues such as whether to proceed to litigation. Unlike a TMP, the partnership representative does not need to be a partner of the partnership. If a partnership does not designate a partnership representative, the IRS “may select any person as the Partnership Representative.” This change in the role of the former TMP is significant and is an issue that every partnership agreement and operating agreement will want to address. Because of the significant authority granted to the partnership representative, a partnership agreement should address the partnership representative’s status, authority and the limitations imposed on the exercise of this authority. Provisions sim-
ilar to those limiting the authority of a manager, for instance, will in most cases be appropriate with respect to the partnership representative. The provisions, for example, could require that some percentage of the partners must agree to certain actions to be taken by the partnership representative. Provisions should also be included to set forth how a partnership representative is elected and removed, and how a replacement partnership representative is chosen. It is important to remember that “opting out” of the new audit rules impacts how the additional tax is paid; it does not mean the partnership is opting out of the rules applicable to the partnership representative. Since it is possible that a partnership representative would have a conflict of interest in acting on behalf of the partnership, consideration should also be given to imposing some level of fiduciary duty on the partnership representative or at least provide for the possible replacement of the partnership representative if it appears that there is a conflict of interest. Because of the significance of the change to the role of the tax matters partner, owners of businesses operating as partnerships or LLCs are strongly encouraged to review their current partnership or LLC operating agreements and to decide whether and how to restrict the authority of the new partnership representative role created by the recent tax legislation.
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“Unless you’re this super, super niche product, you’re going to be one of thousands of people trying to get attention from a global marketplace,� said Schulz, sitting in a coffee shop on East Fourth Street. “But at a local level, really, no matter how big it gets, you still have the opportunity to get real exposure. That’s, to me, the huge difference.� A fresh-dressed, friend-to-all from the Cleveland area, Schulz’s Frekol idea (named after the “unique� inflection of skin dots on our face) hit him shortly after graduating from Miami University. Eager to stretch further than his career as a financial adviser, Schulz took flight to hot downtown areas ripe with pop-up vendors and artists, to survey them in full about their operation — where they made their product, where they sold and to whom. He made dozens of cold calls, emails. He rented a booth at Night Market. In sum, Schulz’s hypothesis was proven true: Cleveland makers could be better organized. Which begs the question: If I can buy this driftwood sign or passionfruit tea online, what’s the point of lugging myself to an actual market? Wake up, get in your car, find parking — nope, no longer necessary. Frekol, in essence, could have the potential to make the physical flea obsolete, although that’s not Schulz’s mission. “If you were to buy local today, where would you do it?� he said. “You get up on a Saturday. You go to a farmer’s market. Or the Bazaar — wherever. That’s the common way to buy local. The thing is that not everybody’s going to do that. Not everybody’s going to get up on a Saturday to go out and shop.�
Maker might over latent blight “So, what do you all think of when you think of East 55th and St. Clair?� Sheldon asked her crowd at the Clifton. She clicked, a sight familiar to a local showed up: one of dilapidated brick warehouses, signless exauto shops across from BP gas stations. One woman in the audience shuddered audibly. “Did someone just say, ‘Oh my god’?� Sheldon said, and people laugh. She changed slides. A market appeared, a sea of people. “This is what East 55th and St. Clair is,� she corrected. “It’s a vibrant market in the parking lot of an old Slovenian restaurant.� Hmms and ahhs come from the crowd. “Yep, that’s my job. To change our perception.� Though Cleveland’s not singular in transforming blight into might, the need for a draw to pull folks to undesirable areas is strong. Since 2007, the city has spent millions to demolish distressed structures — mostly residential. A sizable percentage of this includes Midtown, where Cleveland’s Asiatown has been situated since 1860, and where 39% of the city’s Asian population currently lives. It’s also the main location of two of Cleveland’s most reputable popups, and the two-year home of Night Market, the after-hours equivalent of the Flea or Bazaar, where over 120 vendors sell everything from ham sui gok to mango bubble tea to pint glasses chiseled with the shape of Ohio. There’s pop-up yoga, marching red dragons. The only thing Night Market seems to be lacking is enough ATMs (they’ve upped it to
Peggy Turbett for Crain’s two since 2015) to supplement the cash circulating among its tents. In line with Flea stats, Night Market saw three times this June as many attendees compared to its previous year debut. “It tells me this wasn’t a one-hit wonder,� Brendan Trewella, one of Night Market’s founders, said some days after. “It’s a happy surprise for all of us. That Asiatown is coming back.� In like philosophy of Sheldon, Trewella’s Asia-themed monthly rides with an underlying motive to repopulate underlooked blocks while simultaneously propagating small-business incubation. Newcomers get tent space per gratis. Restaurateurs unfamiliar with the pop-up process, Trewella guides them in website creation, logo and sign design, newfangled credit-card devices. It’s this collaborative revelry why Trewella’s vendor app quota capped off in less than 24 hours after he opened submissions. Sheldon’s waiting list, too, for her Flea list is backlogged with dozens. Want tent space? Better luck in 2017. Though Frekol may seem like the substitute for unlucky makers without physical real estate, both Schulz and the stars of Cleveland’s maker scene seem to be on the same page as the city rides through its market season. So, a battle for local commerce? Not so much. “I’m not a huge believer in that type of competition,� Trewella said. “I think if somebody wants to purchase something from one of these markets online, and don’t want to have a one-on-one interaction, then they’re probably not going to come to the event anyway.� In the same vein, Schulz agreed. “I view this more as a partnership than a competition,� he said. “We know how difficult it is to get a market share in this maker world. Actually, we’re all in this together.� Sitting on a stool behind a wall of stacked customized glass at Trewella’s June market, where thousands of Clevelanders (and a hardto-spot Tom Hanks) of all ages and stripes came out, was Cindy Tirpak, the affable founder of Blastmaster. A veteran of the maker scene — a “family,� she said — Tirpak packed up shop with decent sales for a early-summer shindig, like many that night, after shaking hands and conversing with the some of the thousands in attendance. And for those that she couldn’t meet? For Tirpak, it’s no worry. There’s always the future. “You see,� Tirpak said. “That’s why I have my Frekol site on my business card.�
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U. Akron tackles rust’s corrosive effects By RACHEL ABBEY MCCAFFERTY rmccafferty@crain.com @ramccafferty
Rust: It’s unsightly, dangerous and expensive. And the University of Akron wants to be known as an expert in it. Late last month, the school held an open house for government organizations, local companies and regional schools to showcase the newly builtout labs in the Engineering Research Center it has created to do that work. The open house was designed to show off the facility so that representatives from industry, government and academia might be inspired to bring their questions about corrosion to the center. After all, as Mike Giannone, assistant director of admissions and recruiting for chemical and biomolecular engineering, said, he’s hoping people come to see Akron “as the place to find the solutions to those issues.” The expanded center gives the corrosion program greater lab capabilities, Giannone said. Before, the program had an academic focus, but the expanded center offers a broader chance for collaboration. There are labs where professors and students can test samples under extreme temperatures, high pressures or a strong salt solution, as well as labs that allow researchers to create simulations of corrosion on materials and to examine corrosion on the microscopic level. Rust is more than an unsightly annoyance. It’s also a safety issue, said Diana Munoz-Salgado, a graduate student in corrosion engineering and chemical and biomolecular engineering. She studies crevice corrosion, like that between nuts and bolts. Corrosion can occur inside the connection, which makes it difficult to spot. It’s not always easy for people to see corrosion, Munoz-Salgado said, but it’s always there. If undetected, it can lead to oil and gas leaks or to situations like the contaminated water in Flint, Mich. “We need to understand it and fight it before something terrible happens,” she said. It’s also a financial concern. Annually, corrosion costs the United States about $400 billion, Giannone said. It affects everything from infrastructure to ships to helicopters. “So it’s a major problem,” he said. But the work the university has put into solving that problem has been slow going — and in recent years, fraught with controversy. Akron’s first big push into the corrosion space was in 2006, when it began to develop a bachelor’s degree in corrosion engineering, which the university calls the first of its kind. The first students began taking classes in 2010 and graduated in 2015. Also in 2010, the university established the National Center for Education and Research on Corrosion and Materials Performance (NCERCAMP), which focuses on applicable corrosion research for government and industry. Giannone said NCERCAMP is currently part of the university, but it is aiming to become a self-sustaining center. In 2011, the university began construction on the Engineering Research Center. Rex Ramsier, principal investigator for NCERCAMP and interim senior vice president and provost for the university, said in an emailed statement that the construction of the building took only a year, but it took three and a half to four years to build out and equip the labs.
One reason was that corrosion engineering faculty had to be hired before their labs could be created. Most of these labs were complete by spring 2016, though the center still uses lab space in other buildings, as well. During this time, NCERCAMP’s former executive director, Susan M. Louscher, filed a lawsuit alleging the former dean of the college of engineering, who has since stepped down from that role, was opposed to her and to the program. The lawsuit said he made defamatory statements against her and caused her emotional distress. It also alleged that, as of March 2015, when the lawsuit was filed, there were about $11 million in grants that needed to be spent before a June 2016 deadline.
Ramsier said in his statement that the university does not comment on pending litigation. He did not directly answer a question asking about the amount of unspent money alleged in the lawsuit but did say that, as of now, almost all of the funds had been spent. Less than $300,000 was encumbered to finish some final work. Overall, the Department of Defense had invested $15 million in the center’s building and equipment, he said in the statement. The university also gave $14.5 million for the construction, plus another $2.9 million to get the labs to the researchers’ specifications.Louscher’s counsel, Laura Mills of Mills, Mills, Fiely & Lucas LLC in Canton, said Louscher has since left the university. A trial date is set for June 2017.
University of Akron Corrosion Engineering students Chris Znosko and Paul Krell measure pit depth on a corroded pipeline. (UA/NCERCAMP)
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Crain’s People on the Move promotional feature showcases Northeast Ohio job changes, promotions and board appointments. Guaranteed placement in print, online and in a weekly e-newsletter can be purchased at www.crainscleveland.com/peopleonthemove. TECHNOLOGY
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Business of Life BY DAN SHINGLER
L
ee Janik III wasn’t trying to build a successful company – he just wanted to make a better fly rod. He did both. The Parma native was one of the nation’s top fly casters before he went into business — one of the four or five best in the nation and able to flick a line out 150 feet with just a couple nods of a 9-foot rod. “That was in the early 2000s, from about 1999 to 2004,” Janik said. In his last years as a competitive caster, Janik didn’t even have to buy his own gear. He had an endorsement from one of the largest and best-known rod makers in the world, which supplied him with any rod from the catalog on request. The trouble was, after a while, Janik wanted something different — and something he could not get from his big backer, which was focused on the mass production of tens of thousands of rods a year. So he built one himself. Now, a fly rod is not just a stick with a fancy cork handle; far from it. They are made from increasingly sophisticated materials, like graphite and carbon fiber, to exacting tolerances. Each rod has its own length, weight and, perhaps most importantly, its own shape and taper, which gives it its unique characteristic. It also has to be finished by professionals, who expertly tie line guides and other hardware and give it a seamless and smooth appearance. Janik spends countless hours perfecting the taper of his rods. Its art meets science, and, in the end, what’s produced is something he says is more than a manufactured product. “It has a soul,” he says, looking over one of his recent creations, with the same enthusiasm one might expect from a 10-year-old kid. Admittedly, that first rod was not a beauty. “I’ve still got it upstairs,” Janik says. “It’s horrible looking.” But, it was an ugly rod with a great personality. And when Janik lent it to a fishing friend in Florida, he had trouble getting it back. “I said, ‘Hey, I need that rod back’ and he said, ‘Oh, I lent it to my buddy, another fishing guide,’” Janik recalled. That guide, who had been won over by Janik’s creation, lent it to another guide. That guide, in turn, showed it off to another professional fisherman, who also insisted on borrowing it. “I had to track down three or four guys to get my rod back and when I finally found it, the guy who had it was a pretty well-known fisherman,” Janik said. All of the guides and fishermen who had borrowed Janik’s rod had one question for him: “Where can I get one?” he recalls. So, in 2012, Clutch Fly Rods was born in Port Clinton. Working with just a few local people, who often learned how to make a rod for the first time from Janik, Clutch made about 100 rods that first year. Last year, it made 750 rods and this year it will make 1,500, with orders still piling up, Janik said. Janik said he’s talking to a big-box retailer about possibly carrying some of his less-expensive rods, which range in price from $400 to about $900. If the two can come to terms, he might have to expand. As it is, he’s already planning to expand into the Carolinas — a natural fit, since some of Janik’s rods are best known among saltwater fishermen. In the meantime, Janik’s having a blast making rods, meeting more and more fisherman and making a living doing something he loves. “It just runs down my arm and connects to my heart,” he says, showing off one of his recent creations.
Clutch Fly Rods are made of sophisticated materials like graphite or carbon fiber, plus a little bit more. They “have a soul,” says Lee Janik III.
Catching his dream
Clutch Fly Rods founder Lee Janik III casts one of his fly rods in Port Erie. (Dan Shingler photos)
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BUSINESS OF LIFE
Source Lunch Chris Thompson might not be a celebrity, but he’s well known in local public policy circles. He’s also pretty well known among the fly fishermen who prowl the rivers of Northeast Ohio for steelhead trout, but more on that later. For the past nine years, Thompson has been director of regional engagement for the Fund for Our Economic Future, which coordinates with a broad swath of the region’s chambers of commerce and economic development entities. Before that, he was a public relations professional and, even earlier, a valued member of this newspaper’s editorial staff. Now, Thompson is setting out on his own, as a consultant to local governments and other entities, with a focus on helping them to foster and implement collaborative efforts. As of July 1, he’s working as CEO of his new firm in Strongsville, Regional Physics. — Dan Shingler
How long have you lived in Northeast Ohio? I moved here in 1991, so I’ve been here a quarter of a century. Where did you grow up? Who says I grew up? OK, where are you from? I was born in San Francisco, but in the late-1960s my father realized that Silicon Valley would never amount to much, so we moved. I grew up in the Milwaukee area. … I spent most of my childhood in the Milwaukee area. So, you’re busy these days. What will you be doing now that you’ll be an independent consultant? I’ll be helping people to catalyze collaborative efforts around civic needs. … I wanted to focus more on helping leaders design effective collaborations. Of all the work I’ve done at the Fund, that’s the work I’ve enjoyed the most. It’s the work that is the most challenging, and it applies across all sorts of different systems in our community. Why leave the Fund for Our Economic Future after nine years? The fund focuses on the complex systems around economic development. There are other complex systems in our community that need to be changed — public health, senior citizen issues, infant mortality issues — things that the lessons I learned at the fund can apply to.
Chris Thompson
Leaving on good terms? (Laughs) Yes, they’re hiring me to do this work. The fund will be my first client, and I’ll be focusing on Akron.
you have to. Collaboration for its own sake is a waste of time. If you can achieve the results you want, without collaborating, that’s great.
What type of clients do you expect to have? Somebody who wants to bring change to the system. … It can be any leader who wants to catalyze change in a system that’s beyond
Where will your business be located? At my home, in Strongsville.
“I’m hoping the business allows me some flexibility for family — and fishing. Anybody who knows me knows that’s true.” their control, anybody who wants to bring change to a system. But it’s usually not a group of companies. It’s usually someone working in the civic space. How do people find collaborative efforts difficult? Most people are only trained in organizational leadership. … In a collaborative setting, there is no org chart. My job is to help leaders to recognize that, and then help them learn to adapt. Sounds like you think there should be more collaboration. We should all be collaborating more? You should not collaborate unless
Do you plan to hire much staff? No. I’m not really doing it because I want to start a business. … My intent is to help people catalyze change, not to hire people. How about a work-life balance? Will this give you any of that? I’m delusional enough to think that I’ll have more flexibility and so far I’m designing it so that it will. … I’m hoping the business allows me some flexibility for family — and fishing. Anybody who knows me knows that’s true. Is home a busy place with kids? I have two grown kids who are out of the house. … But I’m a grandparent. There’s a grandkid and another one coming in October. OK, enough shop talk, we’ll ask about your other passion: What’s the difference between a steelhead and a rainbow trout? The steelhead and rainbow are the same fish. One just goes into a lake or an ocean. They’re genetically identical, and some steelhead become rainbow. Their offspring become resident fish.
CONSULTANT
FIVE THINGS: TO DO
Fishing. And not just fishing, fly fishing
PLACE TO GO
Anywhere that trout hang out. … I don’t even like trout that much. I just like the places that trout hang out.
RESTAURANTS
This place (Nepali Kitchen in Akron). But I like anything ethnic, as long as it’s not a chain and has some spice.
BEST ADVICE
Well, my wife, Anne, says, “The best advice I ever got was from my motherin-law. She told me to never learn to clean fish.”
BEST PLACES TO GO ON VACATION
Travel to see the family. My family has always lived in interesting places. My mother is still in Guatemala.
LUNCH SPOT Nepali Kitchen 399 E. Cuyahoga Falls Ave., Akron 330-631-1112
The meal Pad Thai, lamb curry, soft drinks.
The vibe
On an almost abandoned corner in Akron’s North Hill neighborhood, Nepali Kitchen has become a favorite of neighborhood residents, as well as some of Akron’s more influential policymakers and civic leaders. It serves dishes with a Nepali and Southeast Asian flair and isn’t afraid to add some heat if customers ask for it. Heat is measured on a scale of one to five. Don’t say “five” unless you’re brave and prepared.
The bill $23.22 + tip
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GOLF
get there was by walking right through the middle of the venue.” On June 19, when the Cavaliers clinched Cleveland’s first major sports championship in almost 52 years, StoneWater had a watch party. A “Sandlot” showing, complete with bounce houses, face painting and balloon artists, was scheduled for July 3. StoneWater hopes to further tap into the Aberdeen Estates, with more than 700 high-end estates that surround the golf course, for business, and get more involved with the surrounding communities, Neidus said. “You try to create an atmosphere where it’s fun, they enjoy it, they see their friends, there’s a camaraderie,” said Neidus, who, along with Calabrese, made a combined investment approaching seven figures. Salemi, who is as frank as any local golf course operator when it comes to the struggles facing the industry, wouldn’t disclose the amount of his latest sizable investment at Boulder Creek. His pitch,
CONTINUED FROM PAGE 1 The “destruction phase” started in January. By the grand reopening June 12, the club had been transformed. The bar and restaurant area is much more open, with captivating views of the course. The events business —which is directed by Whitney and aided by her sister, Lindsey, who returned to Northeast Ohio after serving as the marketing and events manager for Dow Jones in New York — hosts anything from weddings to outdoor movie nights. “We knew we had to do some major renovations because it just doesn’t work,” said Stuart Neidus, who is now StoneWater’s managing partner and chief decision-maker. “To get from the locker room over here (to the new Rustic Grill), if you had a wedding going on, you were part of the wedding because the only way to
however, is clear: “I like to say with our new addition, I don’t think you’re going to play a better golf course. It’s one of the nicest public golf courses in Ohio.” The new grill room and bar, plus an outdoor patio, total 2,500 square feet. Salemi said business is up for the year, but disagrees with the PGA’s belief that it’s possible to get more young people involved in the sport. “You’re not going to turn it around with these kids,” he said. “It’s too hard, it’s too long (to play), it costs too much money. And they’re coming out of college in debt up to their eyeballs.” Instead, Boulder Creek is catering to serious golfers, whom Salemi believes “would rather pay 10 or 15 bucks more a round for a course that’s better than a lot of the country clubs.” Boulder Creek doesn’t use GolfNow and other online services to fill its tee times. Those sites, Salemi said, “destroy your customer database, they get all your people going to GolfNow to book your times and sell
REAL ESTATE
your times for half of what you do.” StoneWater has a similar philosophy. “The goal is to enhance the brand of the entire place,” Neidus said. “You won’t see us doing online golf sites for cheap rates. That’s just not what we do.” Rather, the two facilities use email and other messaging services to alert their customers of deals. And once they get them through the door a few times, they hope the golf course is the strongest selling point. Hanlin, who also partners with Calabrese on Little Mountain in Painesville and Cumberland Trail in Pataskala (20 miles east of Columbus), said the golf biz was really good in June. But as is often the case in Northeast Ohio, courses were still trying to catch up from a rough spring. “We’re kind of recovering from that right now,” Hanlin said. Golf Datatech, which compiles statistics from courses all over the country, said the number of rounds played nationally was up 1.8% year-
over-year as of the end of May. In the Cleveland market, rounds have increased 12.4%, though May showed only a slight uptick (1%). However, that follows a grim 2015 in which the number of golfers age 6 and up who played at least one round dropped 600,000, to 24.1 million, according to the National Golf Foundation. The group said 177 courses closed in 2015, continuing a decade-long trend. Hanlin, who is more involved in the day-to-day operations of Little Mountain, a public course, than he is at StoneWater, is well aware of the trends. He still believes the investments will pay off. “We thought golf would bring people in the door, but I think the reality of it is we have to do more these days, because you have to include families and you have to get kids to be around the facility,” he said. “They’re doing a good job (at StoneWater), and I think we’re just seeing the tip of the iceberg.”
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