No Little Achievement Poquito Mas, one of the first in the ‘Fresh-Mex’ restaurant market, finally takes its proven concept into the world of franchising By JEFF WEISS Contributing Reporter Reclining on the white beaches of Cabo San Lucas 30 years ago, staring tranquilly at the ocean while devouring a soft taco sold by one of the many taco carts that abound throughout Baja California, Kevin McCarney, owner and founder of Poquito Mas, likely never imagined that what he was eating would turn out to be his life’s work. However, now the Burbank-based entrepreneur controls eight restaurants and is now franchising his brand of fresh-mex throughout Southern California. Not everyone knows it, but the Valley is ground zero in the war for the hearts and stomachs of Southern California’s legions of Mexican food lovers. Baja Fresh is currently owned by Wendy’s International, but it originally began in 1990 as a small Mexican restaurant in Newbury Park. Sharky’s Mexican Grill started in 1992 in Sherman Oaks. But while Baja Fresh has more than 290 locations and Sharky’s has approximately 15, Poquito Mas predates their existence, having been founded in a tiny Studio City storefront in 1984. Inspired by his trips to Baja where he quickly fell in love with the local cuisine, McCarney found it natural for Mexican food to be his initial business venture. Having been in the restaurant business for 12 years before opening his first restaurant, McCarney had significant amounts of experience but little capital. Yet with only $2,500 to invest in the business, he opened up his store on a shoestring budget, doing most of the construction himself with the aid of some of his friends who happened to be contractors. Do-it-yourself “I did most of the grunt work, the digging and everything. My brother did the plumbing because he was a plumber. I did the painting. My friend Joe and I did the tile. We built everything from scratch,” McCarney said. “It wasn’t by choice, we had no money. I had only $2,500 to my name and that’s all I used to start the restaurant. For the first couple months I was the only employee. It was just me behind the counter.” The basic idea for the restaurant was to serve Baja style tacos to the Southern California masses and improve the quality of Mexican food that was being served at the time. “I decided to open up a Mexican restaurant that was different from the other stores out there. This was 1984. The concept was to take everything that people were complaining about Mexican food at the time and turn it into a positive,” McCarney said. “The main complaint that I had been hearing was ‘where’s the chicken in the chicken tostada, why is everything melted together.’ We decided to change it to where there was chicken in every bite. We wanted to present it well, so that people could see what they were getting.” Twenty years later, there are eight locations scattered throughout the greater Los Angeles area, six of which McCarney owns, with the Warner Bros. studio lot and Woodland Hills locations Poquito Mas’ first two franchise outposts. Longtime employee Edgar Escalante was the third employee to join Poquito Mas and after nearly 20 years of service became the recipient of the first Poquito Mas franchise, opening up his store in Woodland Hills. “It was a incredible concept that nobody had then. It was very different from most Mexican restaurants,” Escalante said. “I started working for Kevin at the bottom and climbed up the ranks and finally the American dream came through for me. My restaurant has been successful from the first day we opened the doors. We’ve stayed loyal to the concept of fresh food.” McCarney’s strategy for expansion has been to go slowly. “We’ve grown as a company, we could have 500 restaurants but we want to keep the quality of the food,” McCarney said. “We have a good relationship with our customers, they’re very loyal to us and we’re very loyal to them. I know a lot of people are raising their prices, but we’re going to hold ours as long as we can. We’re not bottom line driven, but we believe in getting to the bottom line through great service and great food. We don’t believe in gimmicky advertising, we don’t even have an advertising budget.” While Baja Fresh and Sharky’s quickly leaped onto the franchising bandwagon, McCarney decided to franchise after already having been in business for two decades. “We have a different take on things than most people. A lot of people say that we are an uncompensated development arm for the taco industry. I think that the reality is that we care what we do. We aren’t greedy.” The right people He added: “We aren’t looking for people who have been in accounting their entire life and now they want to open a restaurant. That’s not our ideal person. The people we’re talking to right now have three to five stores of a different concept and they have an infrastructure in place. We don’t want to teach people the restaurant business, it’s much too difficult to do. But we are definitely looking forward to teaching people the taco business.” But succeeding in the taco business isn’t easy. Besides the aforementioned Valley companies, Rubio’s Fresh Mexican Grill and La Salsa also crowd the scene, not to mention the dozens of Taco Bells and Del Tacos in the area. In particular, Baja Fresh launched the first salvos in what has the potential to be a bloody battle for burrito supremacy. But Poquito Mas CFO Jeff Arnold alleged that his competitor has crossed the line. “One of Baja Fresh’s regional operators came in during our lunch rush and began handing out his business card to each of our employees in the Woodland Hills store, claiming that they could make more if they left and went to Baja Fresh. The industry is known for being aggressive in terms of recruiting but it was way beyond acceptable,” Arnold said. “I called Baja’s CFO who is a friend of mine and he said that they would stop this practice but one month later, the same regional operator popped up at our Universal City Store and did the same thing.” Baja Fresh officials did not return phone calls for comment. McCarney feels that Poquito Mas stakes its claim to the taco throne through an unparalleled freshness and an extremely stable corporate infrastructure. SPOTLIGHT: Poquito Mas Year Founded: 1984 Employees in 1984: 1 Employees in 2004: 168 Revenues in 1984: $400,000 Revenues in 2004: $11 million (projected) Goal: To expand to create opportunities for employees and to grow into areas where the restaurant’s concept is appreciated. Also, plan to grow much faster than in the past. Driving Force: Strategic partnerships, sifting through to find the right partners.

FAMILY BUSINESS Hands-On Experience the Best Strategy for Succession By JEFF WEISS Contributing Reporter Kristin Gangi Saroukhanioff and her brother Paul Anthony Gangi got involved in the family business in completely different ways. While her brother starting out working in the Gangi Studios warehouse during scorching Valley summers, Kristin did not join the company until her phone rang one night while she was away at college. On the other end, her father Paul H. Gangi spoke: “I just fired the office manager. I need you to come here and reorganize the company.” Initially taken aback, Gangi Saroukhanioff eventually switched around her collegiate schedule, taking classes twice a week and working at the company the other three workdays in order to get the family business into proper shape. Many years later, the business which specializes in the printing of four color process and line art graphics, point of purchase displays and bus transit/shelter advertising, is in a state of transition as the two siblings gradually take the reins of the business from their father. “My dad is beyond being ready to retire, although he says he’s going to stick around for a few more years. This transition has been going on for five years now. My dad has always done management and selling, so my brother and I assumed the responsibilities that we were naturally predisposed to. I have no desire to sell and my brother has no desire to manage,” Gangi Saroukhanioff said. “I currently manage the entire company and my brother manages sales. My dad worked with each of us one on one to properly ensure that succession went smoothly and we took our own twists to it to make it the way it worked best.” As one would expect, the best way to ease the changing of the guard at a family business is preparing well in advance and making sure that the relative taking over the business has had substantial hands-on training. “We went to a lot of meetings. We still have a monthly family business meeting at home where we go over what’s happening financially, legally, what’s going with production, who’s doing what roles. Because my brother and I have been here so long it’s a natural progression,” Gangi Saroukhanioff said. Sardo family experience The interior design business is practically second nature to the Sardo family, owner of P. Sardo Interiors. Originally founded by Italian immigrant Antonio Sardo 50 years ago, Alex Sardo (currently an apprentice at the company) represents the fifth generation of Sardos to go into the trade. The company which produces custom made furniture, reupholsters furniture and does window treatments was passed on from Antonio to Phillip Sardo and his wife Virginia, who currently run the business and are making preparations to pass on the business to their son Tony. “My son has been working in our business forever. Since he was young, he would come to the business with me, have lunch here at the business and consequently he now knows every single angle of the business,” Virginia Sardo said. “Gradually, he learned little by little and he knows just about every portion of the business so that he can take over any field of it. The same thing is happening with my grandson (Alex Sardo). He’s 19 and showing interest in the business and he’s starting off on the ground floor in an apprenticeship and delivering errands and getting into the actual innards of the business.” Virginia Sardo maintained that the two most important things to make sure that the business will be in good hands are being certain that your children are interested in the business and that they have the same ideals that have propelled the businesses success for its duration. “Try to keep them interested in it, let them know all parts of the business. All of my children were brought up in the business and it becomes apparent where they are going to go,” Virginia Sardo said. “Everybody wants to eat, we had a business already built and at their fingertips and what better than to hand you an ongoing business. My husband took over the business from his father to make it grow. He was in the business from a young age and expanded it and took over. He’s very business minded it and is really a part of him like it’s a part of my children.” According to Dennis Jaffe, one of the founding members of the Aspen Family Business Institute, succession is not nearly as simple as tabbing a successor directly before the company president retires. “You don’t necessarily need a clone of the previous leader but rather you need to select a leader who can lead the business into the environment it faces in the future. The successor needs to be collaborative and able to work with the different stakeholders in the family,” Jaffe said. “Often there is not one person that becomes the leader but a team of people. There has been a growing trend of family leadership rather than just having one leader. Succession is not an event it’s a process. It should start many years before the baton is past. It involves clear expectations and the development of leader candidates, involving them with non family people in the business. It should have many steps which culminate in orderly succession.”

Dept. of Commerce Setting Up Valley Site By SLAV KANDYBA Staff Reporter Starting next month, the U.S. Department of Commerce will for the first time have a Valley presence at Pierce College. When the International Trade Center at the community college officially launches operations sometime next month, Valley businesses that are interested in exporting their goods overseas will be able to contact a federal representative. That person will be able to provide contacts and help put the business in touch with foreign companies. “We’ll try to help small businesses in the San Fernando Valley expand their markets overseas,” said Tony Ceballos, a trade specialist in the West Los Angeles office of the Commerce Department’s Commercial Service. Ceballos will be traveling to the Valley to hold office hours several times a week at Pierce, he said. The ITC opening comes at a time when California is regaining its export strength. According to government figures released last week, the state’s exports jumped 25 percent in the first quarter of this year compared to 2003. Shipments to China increased by more than 70 percent. The Commercial Service, a branch of the Commerce Department that helps U.S. firms do business overseas, is currently working out a memorandum of understanding with Pierce. When it’s signed that should happen in early June its services will be available for Valley businesses. “We already have a small pool of clients that we have recruited,” Ceballos said. One such company is Sherman Oaks-based BizHelp, a three-employee firm that represents U.S. companies looking to enter foreign markets. Its president, Stepan Baghdassarian, said he has worked with Ceballos over the last two years, and says the relationship has been “helpful” for his business. “He is providing us with leads in foreign countries,” Baghdassarian said. Baghdassarian gave an example of how the relationship works. There is a great demand for pet food in Brazil, he recently found out. He turned to Ceballos to find several U.S. companies interested in exporting their pet food overseas. Ceballos, in turn, helped BizHelp find pet food manufacturers to work with. The International Trade Center at Pierce, which is facilitating the Commercial Service’s presence by providing office space at the college, is led by Bert Sanchez. Sanchez, a business professor, was awarded a $300,000 grant in 2003 by the U.S. Department of Education to establish the ITC. With the funds, he has hired a program manager and is planning seminars that he hopes will attract small and medium-sized businesses interested in entering foreign markets. Uniting exporters The idea, Sanchez said, is to bring together the Valley’s “fragmented” exporters. To do that, he is organizing a series of seminars at Pierce, which will take place throughout the year. After the seminars, individual businesses will be able to sit down either with Sanchez or the manager and get advice, contacts and referrals, depending on the particular business’ level of preparedness to export. “If the business is export-ready, we’re going to turn them over to the U.S. Commercial Service,” Sanchez said. With a number of sponsors, including the Economic Alliance of the San Fernando Valley, Sanchez hosted the first seminar last week. It featured trade representatives from three of the newest members of the European Union: Hungary, Poland and the Czech Republic. Sanchez said the new additions to EU are often overlooked by U.S. businesses, because most of the focus is on China, the “400-pound gorilla.” As a former IBM employee who has frequently traveled to China, Sanchez said businesses are “missing the boat” if they focus entirely on that country and not on the more penetrable markets, such as Poland. He said the new EU member presents a strong market with its population of 40 million. “From Hungary, American business can reach (everyone) from local to high-margin, profitable” companies, said Odon Kiraly, a trade commissioner at Hungary’s consulate in L.A. Opening opportunities BizHelp’s Baghdassarian said he sees benefit in having the Commercial Service in the Valley. “I think it will open up opportunities for businesses in the Valley who don’t take advantage of this service because of proximity or because they don’t know about it,” he said. David French, president of David French & Associates, an El Segundo-based strategy firm, has worked with the Commercial Service for about five years. It is best suited for small business interested in exporting their products, he said. “It’s a resource for them to gather information and then to meet certain contacts in those markets,” French said. The owner of the 60-employee firm added that at only a few hundred dollars, the Commercial Service is a bargain. It provides market research data and contacts and can help with obtaining loans through the Small Business Administration. And sometimes it goes the extra mile: “They actually set up meetings and dinners for business when they go overseas,” French said. “When a client wanted to expand into a foreign market (they) can tap into their network, ask for a lawyer, or other professional references (and) they may be the only references in that country.”

Tax Reform Panel Could See Life Beyond June 30 By SLAV KANDYBA Staff Reporter The citizen’s committee that spearheaded the efforts to reform business taxes in Los Angeles could get a second lease on life, if City Councilman Tony Cardenas has his way. Cardenas at presstime introduced a resolution to extend the term of the Business Tax Advisory Committee beyond June 30, when the committee was to have been disbanded. “The Business Tax Advisory Committee has been pivotal in giving the business community a bigger voice,” Cardenas said. Originally created in 1999 by then-mayor Richard Riordan, the Business Tax Advisory Committee was scheduled to meet for the last time in June. It was due to disband after that. The committee has recommended a plan that would lower taxes by 15 percent over the next five years an average 3 percent decrease per year and increase efforts to catch scofflaws via improved audits. Although their work is essentially done, members of BTAC welcomed the idea that the City Council would want them to stay assembled. “We didn’t take a vote but the general consensus was that we fulfilled our job,” said Mel Kohn, BTAC president. “But regardless of fulfilling that, because it’s a political process, it’s important that we’re there because we’re the closest to it.” At its May 20 meeting, BTAC approved a final report recommending ways to increase tax revenue for the City of Los Angeles. The report encourages the city to hire an outside consultant to implement the changes, but does not make a recommendation about whom to hire.

CardService International Lays Off 84 After Merger By SLAV KANDYBA Staff Reporter CardService International, a Moorpark-based credit card payment services company, has laid off 84 employees about 20 percent of its workforce, a company spokesperson said. The layoffs occurred in April as a result of the firm’s acquisition by Colorado-based First Data Corp. in 2002. The lost jobs were at the company’s call center operations in Moorpark, which were consolidated with First Data’s Maryland operations. “There was a lot of redundancy,” said Samantha Smith, a spokesperson for CardService. “In order to merge the company successfully those things needed to be in the same place.” CardService International was established in 1988 and processes more than $12 billion in electronic transactions annually. It has a worldwide customer base of 200,000 merchants, 295 independently owned sales offices and 3,000 sales representatives. The firm provides advanced risk management and customer service in more than 140 languages and dialects. When CardService issued a layoffs notice to the state and local economic development agencies, it didn’t come as a total surprise to Moorpark city officials. “We knew there was some consolidation about a year ago,” said Julie Hernandez, a senior analyst for economic development with the City of Moorpark. “When the first wave of consolidation happened, there was a lot of movement.” When the 84 employees were notified, the Ventura County Economic Development department’s Rapid Response Team contacted CardService to provide outplacement services for affected employees. A resume and interviewing workshop was held at the company. CardService has plans to offset some of the job losses by the end of July, when about 40 positions will become available as result of the relocation of the payments system of Concord EFS Inc., which was acquired by First Data in February, Smith said. As far as the City of Moorpark is concerned, job cuts at CardService are not part of any trend in the city, Hernandez said. In fact, it’s the opposite. “Our companies here seem to be growing and doing well,” Hernandez said. She added companies are contacting her office inquiring about doing business in the city.

Warner Center Street Closure for Transit Hub Criticized By SLAV KANDYBA Staff Reporter The closure of Owensmouth Avenue between Oxnard and Erwin streets by the city Department of Transportation is drawing fire from the Woodland Hills-Warner Center Neighborhood Council. All lanes of the street were closed May 15 as workers began building the Warner Center transit hub, a $4 million project of the L.A. Department of Transportation. The street will remain closed through November 17, said Helene Jacobs, project manager for LADOT. “Most of the board members don’t like what the city decided to do,” said Gordon Murley, vice chair of the neighborhood council and president of the Woodland Hills Homeowners Association. “One of the problems they have is that they greatly constricted traffic on Erwin and Owensmouth.” But Jacobs said LADOT addressed concerns by providing detours via Canoga Avenue and Topanga Canyon Boulevard. “The closure there of course inconveniences people,” she said. “We’ve had many conversations with the neighborhood council and basically we’ve provided for detours in order to get this project built.” The transit hub will serve as the terminus for the Metro Orange Line busway that will traverse the Valley floor as well as other bus routes. The $4 million price tag is being paid by federal funds, the city and state money.

Local Firms Grabbing Piece of Wi-Fi By SLAV KANDYBA Staff Reporter As wireless high-speed Internet technology booms, several Valley companies are grabbing a piece of the action. Wi-Fi, short for Wireless Fidelity, is the fast-spreading technology that’s driving wireless today. “Hot spots,” or areas where Internet users can bring their laptop or personal digital assistants to connect to the Internet wirelessly, are popping up seemingly everywhere. Most Starbucks coffee shops have them, as do an increasing number of malls, universities and businesses. Although it’s a developing technology, Wi-Fi has already made a big enough splash for local firms and entrepreneurs to take notice. David Bleeden, owner and president of Wildcat Communications Group based in Agoura Hills, is in the process of starting a line of Wi-Fi accessories in response to increasing demand. He has a number of Web sites that sell cell phone and Wi-Fi accessories; Wildcat is also trying to build a brand name around Wi-Fi accessories and other telecommunications devices. Bleeden said sales have doubled for Wi-Fi accessories on his Web sites in the first quarter and he projects his company is at “a run rate to double this year,” he said. Wi-Fi is also driving business for Nomadix Inc., a Westlake Village company that manufactures software that powers Wi-Fi hot spots. Called the Nomadix Service Engine, the software is sold to carriers, service providers, wireless Internet service providers and others. The company is focused on the public-access market. The company’s latest coup in Wi-Fi came in the form of a contract to install its software into 500 hot spots in Athens, Greece, for the 2004 Olympic Games. “It’s a good-sized project, and one that we’ve been focused on,” said Mike Gilly, vice president of worldwide sales at Nomadix. Looking at locations Gilly said Nomadix would install its Wi-Fi equipment in 150 traditional hot spot locations such as outdoor restaurants and parks, and 350 in hotels, including lobbies and individual guest rooms. He added Nomadix was in talks with a major Southern California-based hotel chain to install Wi-Fi at its franchises. Wi-Fi has multiple uses, and it’s still at an early stage of development in the United States, while in Europe it is utilized more, Gilly said. A more “open environment” and “aggregated networks” are giving the technology more widespread use there, said. “There are a lot of things going on there that are on the cusp of happening here,” Gilly said, explaining that the dot-com bubble that burst several years ago has made U.S. tech investors cautious. Another company getting involved in Wi-Fi is a Woodland Hills startup called Aiirmesh Communications. The company installed a Wi-Fi network in the City of Cerritos, which did not have high-speed Internet because carriers weren’t interested in laying cable to the city because it was too costly. Now, Aiirmesh is in the mix and may be getting more business from other cities some in the Valley. “We got several discussions with local cities,” said CEO Stan Hirschman.

Smokey Robinson Gets Valley Help on New Food Line By JEFF WEISS Contributing Reporter When most people think of Smokey Robinson they don’t think of seafood gumbo. Not yet at least. However, if the Motown superstar has as much success in the frozen food business as he has had during his 45-year singing career, the author of such songs as “Tears of a Clown,” “My Girl,” and “Shop Around” will be doing great in his new endeavor. Glendale-based Smokey Robinson Foods has already debuted its first product, Smokey Robinson’s Seafood Gumbo in the Chicago market and is slated to make its California debut in the Southern California market during the week of June 1. Albertson’s and Safeway have already contracted with the company to sell the gumbo and according to company officials, several other market chains have already inquired about adding the product to their inventory. “The project was brought to me by [actor] Leon Isaac Kennedy and what interested me more than the food was that part of the proceeds will go to teaching minority children entrepreneurship skills,” Robinson said. “We started with something that I love as well. I’m a gumbo connoisseur and we worked on the recipe for about a year and a half to produce a first class A-1 gumbo. The thing is gumbo takes all night or all day to make and this is already prepared for you in the frozen foods section and it’s microwavable and you get a top notch gumbo that’s low in sodium and cholesterol.” Robinson played an active role in the development of the recipe, having input until he felt the gumbo’s taste perfectly suited his tastes. The musician has licensed his name to the company for its food products and is an active shareholder in the corporation. The company has already begun boxing the second and third products that will hit stores: red beans and rice and jambalaya. It also plans to have a health food line in supermarkets across the United States by the end of the year. Manufactured in Vernon, the gumbo is expected to retail for $3.59. Brain is CEO Jeff Brain, a Valley activist most noted for his work with ValleyVOTE during the Valley secession movement, has been tabbed to be Smokey Robinson Foods’ chief executive officer. “I have worked in business consulting for many years and when I was asked to be a member of the team I found it to be a great opportunity. There really aren’t any other products like this and that’s why Smokey is breaking new ground bringing Southern cuisine to the broader market,” Brain said. “There really is no mass production distribution of soul food. We’re getting calls from restaurants across the country, we’ve even gotten military people interested in carrying the food, Smokey Robinson is an incredible individual who is well liked by all segments of society.” Glen Fulton, director of supplier diversity for Albertson’s, also sees great potential in the brand. “We see this product as an item that isn’t just a diversity item, it’s an item that has national potential. We are rolling this product out every month to a different division within the company and we are hoping that all of the divisions will be fully locked in on this by the end of the year,” Fulton said. “We rolled it out to a lot of fanfare in Chicago and are bringing it to Southern California at the beginning on June. We’re looking to continue the momentum.” A member of the Songwriters Hall of Fame, The Rock and Roll Hall of Fame, the Vocal Group Hall of Fame and honored by the National Academy of Record Arts and Sciences as a “Grammy Living Legend,” Chatsworth resident Robinson has certainly had a story book musical career and early indications point towards his continued success in this much different venture. “We started in the Chicago area in the Albertson’s chain and they have about 300 stores in that area and we’ve already sold out 10 times. When I went to Chicago to promote it, it had been in the stores for two days and there were even return customers,” Robinson said. “The proof is in the pudding, people might buy it out of curiosity because my name’s on it but they will love the gumbo. Of course, the ultimate goal is for the gumbo to become huge but also I really want the opportunity to give back to the community.” Celebrity hurdles As sanguine as the company’s projections are, celebrity-endorsed products have met with mixed results over the years. For every Paul Newman line of lemonade and salad dressing there has been a Bing Crosby’s Ice Cream. Francis Ford Coppola might have succeeded in his forays into the wine business but Phyllis Diller’s line of chili flopped. Bob McMath, consultant to the food industry, placed Robinson’s odds of success at 50/50. “In order for a celebrity product to succeed you need a lot of money behind it to promote it. I’m not aware of any pressing need for a new Cajun line but there’s always the curiosity factor with something new but it’s a question of the long term viability and I would say that’s where the real problems come in,” McMath said. “When you take somebody’s name it doesn’t make any difference nowadays, someone needs to know how to get it out and keep it in the stores. You have an awful lot of potential problems, if a celebrity gets caught with drugs or in a brothel it can fail overnight. It’s a very big risk, that’s why a lot of celebrities eventually stop doing it. I’d say that it’s a 50/50 chance, soup and gumbo products usually aren’t considered growing parts of the industry. You have to realize that 80-94 percent of new products fail anyways. It’s an awfully competitive world and it’s very expensive to get things going and be successful.”

Drawn to the Business Mark Taylor, head of Nickelodeon Animation Studios, says the creative atmosphere at the Burbank-based facility has made the Viacom unit a leader in the industry with such children’s favorites as SpongeBob SquarePants and Dora the Explorer By SLAV KANDYBA Staff Reporter Mark Taylor has the job any kid would envy only he is an adult, with an MBA from UCLA to boot. As general manager of Burbank-based Nickelodeon Animation Studios, Taylor oversees daily operations of the hand-drawn animation house that has produced such kid favorites as SpongeBob SquarePants, Dora the Explorer, Fairly Odd Parents and a host of others. The ideas for the shows and initial drawings are created at the studio, while most of the drawings are done overseas. The studio’s facilities were designed to foster creativity. On premises is a large outdoor area with a ping-pong table where employees can relax. There is a snack shop complete with a cappuccino machine and freshly restocked bagels every morning in the lobby. All are designed to create the kind of environment where employees most of them creative types can do their job. Perhaps the environment has had something to do with the studio’s success. The animation house, owned by Viacom, has consistently produced hit shows, and has plans to increase the number of cartoons it develops. Also, there are plans to add more employees. Q: Did you ever think you would wind up heading an animation studio? A: When I was in junior high school, myself and a couple of other kids started our own radio station that’s what I was going to go into. When I got to Northridge, I thought I was going to be a Radio-TV major but that didn’t work out. I found geography it was an arbitrary pick because I wanted to graduate from college. I went into the restaurant business, had my own restaurant when I was in my late 20s early 30s. Then, I decided I wanted to get into business, so I started as a bookkeeper, worked my way up to controller and then VP of finance for a toy development company. Then, going further, I realized I wanted to get my MBA. That led to a more well-rounded business background and I think better prepared me for a job with Nickelodeon, where I don’t only oversee production, I oversee HR, facilities and other parts. Q: When did you come to Nickelodeon? A: I came aboard in May 1997. I had been at Sony for a year, when this job became available. I worked at Sony’s animation division as VP of production. Q: What’s your average day like? A: I come here at 7:15 a.m. I start off the day with answering e-mails and conversations with New York (where Viacom’s headquarters are). Another thing is the financial side. A lot of what I have to do is juggle numbers, look at financials and analyze spreadsheets. Q: What challenges have you had in this position? A: I learned how to pace myself it’s a long race, animation takes a long time. It’s about people, it’s about respect, you give respect you get respect. It’s just a true art form. Q: What are your top shows right now? A: SpongeBob SquarePants, Dora the Explorer and Fairly Odd Parents. Then, we’ve also got Striperella for Spike TV, which has done well. Jimmy Neutron is another top show. Q: How long does it take for a show to be produced and how much does it cost? A: To make 13 episodes takes about 18 months. As far as costs, we’re as competitive as everyone else. Q: How is the studio surviving as a hand-drawn animation house in the age of CG (computer-generated) animation? A: We apply (the CG process) to help in our work. In editing stations, we do use some CG special effects, but we’re not a CG house. We let the property dictate the process; we don’t do as others seem to have done which is give away one for another. It gives Nick the opportunity to continue to offer breakthrough creative ideas in children’s programming. We look at what the creative vision is and then use technology to enhance it. Q: Where do you see Nickelodeon continuing to grow? A: There are too many good ideas out there and certainly Nickelodeon is aware animation-oriented programs are related to their success. Everything that we really put up in the studio has been a top-rated show, top 10 or the top 25. Also, from a retail perspective, our shows have been a great success. The future is certainly very bright. We’re starting more pilots. Q: What is your competition? A: Our competition is any other broadcasters that have children’s animation. Those are the competitors. I think the process that we use to determine what productions we’re going to move forward and the process that we use to do productions is what makes us unique. We really love to create different shows. We give our creators enough leeway and guidance to be successful. There’s a wonderful match between the creativity that the great brains bring and the guidance that the studio and the network bring. Q: What makes the studio stand apart and be a leader? A: Respect goes a long way in making everyone feel valued at the studio. When people feel valued and they are talented , which everyone is at the studio , then the results will lead to making No. 1 shows. The people at the studio make Nick an amazing place to work at. The talent, the desire to want to do the best job leaves a positive charge in the air everyday. I love coming to work knowing that I am surrounded by great and talented people. Q: Has Nickelodeon Animation Studios been profitable for Viacom? A: Nickelodeon has been the top cable outlet for the past six years so, as a broadcaster, I would imagine it is profitable. But I’m not privy to that information (because it’s handled in New York). Q: What is actually done here at this studio and what’s outsourced? A: We do pre-production. The actual overseas studio does all of the drawings that encompass that 11 or 12 minutes of animation. That studio could be in Korea and Japan. We’ve been using overseas studios for 12 to 15 years. SNAPSHOT: Mark Taylor Title: Vice President/General Manager, Nickelodeon Animation Studios Born: December 26, 1950 Education: Bachelor of Arts in Geography, California State University Northridge, 1973; MBA, UCLA, 1992 Career Turning Point: Leaving the restaurant business to work as a bookkeeper at an animation studio Personal: Divorced, son Matthew Most Admired Person: John Wooden

Costs Jeopardize Growth of Housing By SHELLY GARCIA Senior Reporter L.A. Family Housing has been building affordable housing for more than 20 years, but last month, David Grunwald, CEO of the not-for-profit company, had to do something he’s never had to do before go back to the well to get more financing on a project he had bid out just months before. “After we closed on the funding, our contractor came back and said costs are going up 20 percent, and we have to come up with an additional $700,000 to $800,000 in construction costs,” Grunwald said. “It was a 20 percent increase from December until April.” The same storm that caught Grunwald unaware as he planned a 30-unit, low-income apartment complex in Van Nuys is kicking up throughout the development community. The cost of construction materials from lumber to steel and reinforcing bar has soared anywhere from 20 percent to 60 percent in just months. Along with the cost of land, which is escalating at the same feverish pace as the price of single family homes, and the prospect of a spike in interest rates, the San Fernando Valley along with the rest of Los Angeles could be hit right where it lives, literally. “Increases like this can actually affect a project,” said Todd Shaw, president of PCS Development, which has built a number of luxury apartment communities in the Valley. “These aren’t numbers that can just be absorbed into your pro forma. These are real big increases that eat into if not eat away at your project.” The increases, which Engineering News-Record, a construction industry trade magazine, recently called “the most severe cost crisis in living memory,” are problem enough for those who build luxury apartments, but worse still, they stand to derail a number of efforts to build affordable housing at a time when the city is facing a shortage of critical proportion. “I think the inclusionary zoning issue is almost a red herring,” said Grunwald. “The issue is the real cost to develop any housing is just skyrocketing in Southern California. Just to say you’re going to do inclusionary zoning without addressing the cost increase makes no sense at all.” For months now, city officials have been crafting an inclusionary zoning ordinance in order to bolster the stock of affordable housing. As it stands now, the ordinance would require 12 percent of the units in new apartment or condominium complexes or single-family tracts for households with incomes that fall below median levels. Incentives requested Developers say the ordinance won’t fly without substantial incentives, more than are written into the current proposal. “If you had to do a project with 12 percent of units for 50 percent of the area median income, you wouldn’t be doing a lot of business in L.A.,” Lawrence A. Scott, vice president of development at AvalonBay Communities said flatly. “The L.A. County median income is $55,000. That would mean a two bedroom rents for $700 month.” Scott is one of a group of developers that has just asked for and received a 90-day grace period before the ordinance goes up for a vote so that they and others have time to present their views to city officials. But if the task of designing a model to add to the affordable housing stock was challenging before, it will likely be a veritable struggle now. Not-for-profits are locked into subsidy guidelines from federal and state funding sources that don’t take into account rising costs to build a development. Since rental rates for these types of developments are predetermined as well, there is no provision to cover rising costs. “If the tax credit allocation committee has a cap and the city housing trust fund has a cap but the costs are increasing, then you have a gap that nobody is addressing,” said Neelura Bell, program director for Local Initiative Support Corp. Los Angeles, a group that offers financial and technical assistance to a variety of not-for-profit developers. In the past six months, land costs have risen by 10 percent to 20 percent. With land costs rising by 10 percent to 20 percent in the past six months alone, Bell said lenders recently turned down an affordable housing developer’s request. There just was no way to fund the additional cost of the project given the projected revenue stream. “You can only pay so much,” she said. “If all the affordable housing developers get priced out because they can’t compete for the land, then it doesn’t matter if you say you’ve got a housing trust fund.” Luxury woes Even market rate developers could be affected if the surge in prices does not subside. Along with rising materials costs, a complex that could be built for about $150,000 a unit a year ago, now can run to $250,000 a unit or more. New developments have always targeted the top end of the market because of the cost of new construction, but as more luxury apartments have come on line, some areas have become overbuilt. And with vacancy rates running near to double digits for luxury units in some Valley neighborhoods, even market rate developers say they won’t be able to pass along the added costs. Instead they are giving away free rent and seeking ways to shave costs. “One of the things we’re doing right now, is we’re going to be taking out the cranes from the contract work,” said Craig Jones, president of JSM Construction Inc., which is building about 400 high-end units in North Hollywood. “That we’ll either price separately with another contractor or we might directly hire a crane subcontractor, (eliminating the middleman) so we can help reduce some of the cost.” Jones opted to include a few below-market rate units in his North Hollywood projects order to take advantage of some density bonuses back when he was planning the projects. Now, with the price hikes, which Jones says extends to the whole gamut of contracting work, from concrete to plumbing, he may have to absorb some of the increases and, if the prices don’t return to lower levels, he may not be as willing to add an affordable component to future projects. “It’s going to make us hesitate to do any others,” he said. City officials say they hope to find a solution that keeps developers even despite inclusionary housing requirements. “That’s why the incentive package that the city will be offering has to be worked out,” said Tony Perez, spokesman for Los Angeles City Councilman Ed Reyes, who heads up the city’s Planning and Land Use Committee (PLUM). “Developers have been at the table. I’m not saying that the costs haven’t gone up. I’m just saying there needs to be a balance. The fact is over 60 percent of the people in L.A. are renters. What about them?” But incentives, which generally involve allowing developers to build more units and require fewer parking spaces than current guidelines stipulate, have never been popular with those who already reside in the community. And if those packages have to be expanded in order to accommodate relentlessly escalating costs, the communities are not likely to stand idly by. Some council members, Perez said, have already indicated they will vote against an inclusionary housing ordinance, fearful of alienating their constituents. “It’s going to be an issue for the community,” Perez said. “It’s going to have to be an educational effort. I know it’s not going to be an easy sell.”