When Reuben Lima began working in film post-production, he realized storage equipment for digitized images of films was much too expensive. As head of his own post-production firm, he heard similar comments from colleagues at other companies. In an era when most films are edited on computer, and storage equipment is expensive and sometimes unreliable, Lima figured out a better way. “We’d been storing our own material with our own equipment, and it seemed like that’s something that we could do to help other filmmakers,” Lima said. So in 1999, Lima founded Archion Digital Storage Inc. in Burbank, where he began to create and distribute his film storage equipment to fellow film industry professionals. “We wanted to cater strictly to the film industry and address some of the questions that they face,” said Lima. Now two-year-old Archion (archive in Greek) has come up with an alternative to storing motion picture images digitally using banks of inexpensive hard disk drives linked together that sell for $20,000, or about half the price of existing systems. In November, Metro-Goldwyn-Mayer Inc. purchased four storage units with a combined 1.3 terabytes of storage space for its new comedy hit “Legally Blonde” and other new films: “Windtalkers,” “Rollerball” and “What’s the Worst That Could Happen.” For MGM’s “Legally Blonde,” Archion for the first time installed a remote monitoring device so that technicians in its Burbank facility could detect and repair any storage problems while editors in another location were working. The company has also sold units to Spyglass Entertainment for its feature film “Reign of Fire” and, just recently, another unit went to MGM for a Bruce Willis vehicle, “Hart’s War.” Archion has grown from four employees at start-up to about a dozen this year, with net income of about $100,000 on revenues of nearly $5 million last year, said company CFO Shane Wilhoite. “We’ve seen some slowing due to the economy, but there is strong demand,” Wilhoite said. “We expect to grow in revenue by about 35 percent over last year.” Just in the past 10 years, film editing has entered the digital age, creating the need for reliable and cost-effective digital storage of film images, Lima said. “Everyone is editing with Avid (digital editing machines) and you need the storage space to back that up if something goes wrong,” Lima said. The son of Cuban immigrants, Lima grew up in New York City where his parents owned a restaurant and he first became fascinated with the film industry. “I was a photographer for a while, but I really wanted to get involved in the film industry from the beginning,” said Lima, who moved to Los Angeles after graduating from high school. A business management graduate of Azusa Pacific University, Lima worked at a number of post-production companies before opening his own firm in 1990, Eagle Eye Digital Film Corp. The company, which he still operates, featured state-of-the-art film editing and computer-based optical effects equipment. “I saw this as a way to expand my interest and creativity in the medium,” Lima said. Archion’s workhorse, the 720 gigabyte Fibre Channel RAIDBay, can store up to the equivalent of 1 million feet of film, quickly making it the industry’s most sought-after storage system because of its cost and efficiency, said Eric Rigney, manager of digital picture editorial for SPS Postproduction in North Hollywood. “It’s very reliable. You can’t blame the system if something goes wrong,” he said. These groups of hard drives are called RAID, or Redundant Array of Inexpensive Disks, in which the video image can be stored in two drives at the same time so, if one drive fails during the editing process, a backup copy is left intact. “The second drive would then be repaired as the user continues to work,” Lima said. In the post-production stage, raw footage can be transferred to digital files that can be mixed with special effects, music and overdubs for a final version of a film or television show. “You could have hours of editing work down the drain if you don’t have a backup of the work. But (other systems are) expensive and some people can’t afford that,” Lima said. “That’s why storage has become so critical in this business.”

Between now and the end of September, depending on your Social Security number, the proverbial check is in the mail. Only this time it’s coming from the Federal government. Consequently, the San Fernando Valley Business Journal asks: What are you going to do with your tax rebate? George S. McQuade III Vice President/Co-founder MAYO Communications Canoga Park I don’t think President Bush’s rebate plan will stimulate the economy and encourage consumers to spend. If they’re like us at MAYO Communications, we’ll use our $600 rebate check to pay for time, travel, fax and phone bills accumulated for Tri-Chamber of Commerce, 4th of July CSUN event and the Armenian-American Chamber of Commerce Business Expo events. But I would rather use it for a vacation. Philip Lipp President Allwest Mortgage Company North Hollywood I will save the rebate and deposit it in the bank. In our business, some of our clients (first-time homebuyers) decided to save their rebate and use it for their down payment to purchase a new home. Stan Shor Vice President, Human Resources P.L. Porter Co. Woodland Hills I will deposit the $600 rebate check in a car account I have for the purchase of a new automobile. Cindy Goodfellow Manager The Aeroplex/Aerolease Group Van Nuys I would like to give it back to the community, specifically to City of Hope, Light Heart Foundation and 23rd Street Station. The extra money will then be applied to our Christmas party budget. Richard Katz Owner Richard Katz Consulting Sherman Oaks Pay my taxes. Dennie Marks President Contact 1 Inc. Tarzana Besides spending all of my rebate, I think that the tax rebate is not a proper tax reform. It will cause a deficit to our economy. Lisa Gelb Vice President, Leasing Gelb Enterprises/ RMG Properties Encino The week after I am supposed to receive my tax rebate, I will be on my honeymoon in Jamaica. This money could not have come at a better time. Kristina Ferrin Manager of Corporate Research J.D. Power & Associates Agoura Hills The rebate will be used for bills and the remaining will be applied for books at school.

Technology industry officials are lobbying legislators hard as they consider Senate Bill 11, which could force companies to make proprietary information public in the course of certain legal proceedings. The measure, authored by state Sen. Martha Escutia (D-Montebello), is at the heart of a growing controversy that has brought many corporate heavyweights to Sacramento in recent weeks to lobby against SB 11. Supporters of the bill say it will help keep companies from hiding behind a wall of confidentiality in such product defect cases as that involving Firestone tires. Detractors say the bill, which could compel defendants to make a great deal of information public at the request of a plaintiff in a lawsuit, could allow companies to use the legal process as “fishing expeditions” to gather information about their competitors. Valley firms like Luminent Inc., Interlink Inc., Conexant Systems Inc., and Diodes Inc. have joined with the American Electronics Association in an attempt to defeat the measure. Likewise, Cisco Systems Inc. CEO John Chambers and Sun Microsystems Inc. CEO Scott McNealy have sent emissaries to Sacramento to lobby lawmakers as they ready to debate the bill this week in what could be a make-or-break scenario in front of the Senate Judiciary Committee. William R. Spivey, CEO of Chatsworth-based fiber optics maker Luminent, said he fears the measure could force companies like his to make their trade secrets public. “Luminent imposes strict standards to ensure the confidentiality of its trade secrets and proprietary information (But) all these safeguards would be rendered null and void if one of our competitors gained access to our confidential information,” he said. “For instance, our organizational chart in the hands of a competitor would allow them to raid any one of our key departments, possibly rendering us incapable of moving forward with our business.” The bill requires companies to make a great deal of their information public at the request of a plaintiff in a lawsuit. Such information could include typically confidential information like marketing strategies and even details of pending patents. Under SB 11, any legal claim charging injury, wrongful death or financial loss supposedly due to a defective product or service would void a confidentiality agreement. It would also require a company to show cause why a judge should allow a so-called “protective order” to bar business information from becoming public. And, for instance, if a former employee files a lawsuit charging his one-time employee with job discrimination, that employee would be allowed to divulge manufacturing secrets pertaining to his claim, even if he or she had signed a confidentiality agreement not to discuss those matters. But it would also make public any company information relating to out-of-court settlements, despite previously arranged secrecy agreements. “My concerns are that any company can bring about a lawsuit against my company and, because of the vagueness of the measure, my company would be at grave risk to show its proprietary information,” said E. Michael Thoben III, CEO of Camarillo-based computer mouse-maker Interlink. Escutia says the measure does not endanger a company’s intellectual property, but instead helps protect the public in safety issues. Across-the-board disclosure would help the public determine the potential public health risks of products or services. But Teresa Casazza, vice president of state public policy for the American Electronics Association, said a mere ac cusation of wrongdoing could trigger access to intellectual property and other sensitive company information. “The bill was originally meant to protect the public from the Firestone-like disasters, but it’s gone way beyond that,” she said. Thoben, also chairman of the Los Angeles-Santa Barbara Council of AEA, said the legislation is a “knee-jerk” reaction to the Firestone tire recall and subsequent lawsuits involving defective tires that caused more than 100 fatal accidents in the U.S. last year. Thoben said the fact that plaintiffs in those suits have had trouble getting Firestone to provide information on its tires sparked the current measure. Casazza said the bill, though perhaps noble in intention, creates a standard of “guilty until proven innocent” for the high-tech firms she represents that are involved in litigation. “There is no requirement to show that a person or company has caused any harm or even that harm is likely to occur,” she said. “It gives the judge discretion that they didn’t have before.” Industry efforts to reduce the chance of publicizing trade secrets were rejected by Escutia and her colleagues. The bill is now headed to the Senate Judiciary Committee for a hearing tentatively scheduled for Aug. 9. Gene Wong, chief counsel for the committee, said the bill faces pressure from both sides of the issue and that its passage is far from certain. “There is a lot of pressure from the consumer side to pass a law,” he said. “We should be looking at it neutrally. Certainly, the industry has some basis for concern that some of their information would not be protected, but a lot of that is gone from the bill,” Wong said. He added that while legislators rejected some changes requested by industry, they agreed to make it easier for companies to request a protective order to keep information from becoming public. Wong admitted that certain information like strategic plans may not be considered privileged and not be protected. “We’re interested in the product defect and nothing else. It has to be information about a product defect, and not every business plan is going to be under disclosure,” Wong said. But Mark Albertson, senior vice president of the American Electronics Association, said no information is certain to remain confidential under the measure. “Any industry concerned about protecting its intellectual properties should be really concerned about this legislature,” he said. Phil Lichtenberger, executive vice president of telecommunications equipment maker, Holl Technologies Inc. in Camarillo, said he fears the legislation could have a damaging effect on his company. “This business is built on intellectual property. You can’t live without it,” said Lichtenberger. While business interests have lined up against the measure, supporters have recruited some heavyweights to push the bill, including state Attorney General Bill Lockyer, the Sierra Club, the California Newspaper Publishers Association and the Consumer Attorneys Association of California. Tod Bedrosian, a senior legislative representative with Sierra Club, said SB 11 is in the best interest of the public and the environment. “The bill sends a clear message to corporations that they cannot buy a legal cloak of silence when it comes to public safety,” he said. Elisa Odabashian, a Sacramento-based senior policy analyst with Consumers Union, publisher of Consumer Reports magazine, said SB 11 is being unfairly maligned by industry. “Lives could be saved and much suffering could be averted if corporations were not allowed to use secrecy orders in court settlements to hide information about product defects,” she said. Odabashian said the legislation would serve as a deterrent to companies who aim to hide damaging information about faulty or hazardous products or services.

When revenues plummeted early this year at chipmaker Conexant Systems Inc., workers at the company’s Newbury Park plant braced for layoffs. But the ax never quite fell. Instead, the plant was idled for a week in January, an unpalatable alternative to letting workers go completely. The tech industry’s bust had finally hit Conexant which struggles, like other Valley tech firms, to adjust to an atmosphere in which bottom lines continue to head south. While many tech companies are laying off workers by the hundreds, some Valley firms are looking elsewhere to bolster their value and bottom line. Simi Valley-based Celetron International Ltd. began digging deeper into its Asian markets, particularly China, where it hopes to bolster sales of its electronic components. Westlake Village-based Franklin Telecommunications Corp. also avoided layoffs of its 44-employee staff by doing something it never thought it would do: agree to license its Internet telephony equipment. Company CEO and Chairman Frank Peters said Franklin has long been against licensing its equipment for fear that competitors would copy and issue their own knockoff versions. “We felt it could hurt our technological advantage,” Peters said. Franklin was among the first to get into the Internet telephone service in 1997 when it began offering its Voice Over Internet Protocol service to U.S. troops in Bosnia. The service allowed soldiers to contact their families via an Internet connection that was linked to a so-called mobile earth station transmitter which in turn linked up to communications satellites. The company, however, has been hit hard by the tech downturn, having lost $6 million in the nine months ending March 31. But companies like Conexant, Celetron and Franklin may be the exceptions to an old rule. Lee Branst, an analyst with Caracal Communications in Los Angeles, said most tech firms have little choice but to cut back on their workforce. “You have to reduce your costs and layoffs are the biggest way to do that,” he said. Chatsworth’s fiber optics manufacturer, Luminent Inc., for instance, last month announced plans to lay off about a third of its 1,800 employees, as the company struggled with declining revenues. For the quarter ending June 30, Luminent lost $66 million on revenues of $41.1 million, compared to a $22.4 million loss on $48.2 million for the same period last year. About half of the $66 million loss was due to a one-time charge for the cost of layoffs and restructuring. In May, Camarillo-based Vitesse Semiconductor Corp. said it would eliminate nearly 150 jobs to reduce costs. The company also agreed to reduce the salaries of its management staff by 10 to 25 percent. But it wasn’t enough. The company, whose core semiconductor business has taken a beating, tried to push further into the broadband and telecommunications business by acquiring Versatile Optical Networks Inc. in June. But the move into fiber optics isn’t likely to improve Vitesse’s bottom line any time soon as the telecom industry continues to nosedive, Branst said. “The telecom sector is as bad as I’ve seen and there’s no sign that it’s going to improve,” said Eric Chen, an analyst for J.P. Morgan Securities. Chen, like many analysts, said the sector’s rapid growth and sudden collapse has startled even veteran observers. Runaway spending by telecom firms eager for equipment to build fast growing local broadband networks and business data systems fed growth in the industry in the late 1990s, Chen said. But when the overall economy began heading south, the telecom spending stopped just as quickly. Companies like Lucent and Alcatel were flooded with surplus equipment. Lucent, which had laid off 19,000 people at the beginning of the year, added another 15,000 to the layoff list last month. “The dot-com meltdown is nothing compared to this,” said Branst. While Conexant’s plant idlings kept its 450 Newbury Park workers on the job, it didn’t stop the company from laying off another 450 employees at its other facilities. “Our employees are very important to us and we try to be very conscientious when it comes to them,” said Gwen Carlson, a spokeswoman for the company. “But layoffs are always a last option.” The idea of idling the Newbury Park plant for a week was as much a technical as it was an economic decision, Carlson said. “A wafer fabrication facility has to be run 24-7 and you can’t slow it down for shifts,” she said. “There are many different steps in the process and it involves time-consuming processes that can’t be slowed midway through.” Still, Carlson said, the company realized that an idling would be more cost-effective than laying off its workers, thus impacting productivity and efficiency. The idling of the plant three times during the year, along with the scheduled layoffs, would save the company $375 million this year, Carlson said. Job cuts, however, will continue to be the norm, said Caracal’s Branst. “Nobody’s talking about a recovery,” he said. “They’re waiting for things to bottom out and it hasn’t happened yet.”

The telecommunications pipeline has dried up. Even the largest players are swimming in red ink and layoffs. Yet in a market that is arguably among the most depressed in the tech sector, Internet Machines, a one-and-a-half-year-old company in Agoura Hills working on a high-speed semiconductor, managed to secure $41 million in equity capital last month. How they did it goes to the heart of what’s happening not only in the technology sector but in the financing environment as well. “This is really next-generation stuff,” said Brian Marshall, senior semiconductor analyst at JP Morgan H & Q; in San Francisco. “This is going to be a ramp from zero because the market doesn’t exist now. So when it takes off, it will be significant growth.” Internet Machines received $40 million in July from Exar Corp., a Fremont, Calif.-based designer and marketer of communications infrastructure solutions, and $1 million from Banc of America Securities. The investment was made on a pre-money valuation (the amount at which the business was valued before the equity investment) of $209 million, 19 percent more than the $175 million it was worth prior to its last funding round in July 2000. Companies seeking funding hope for the highest valuation possible because the greater the value assigned, the smaller the stake they must give up for the financing. But the way the company is valued is a reflection of the way its business is seen by the marketplace. “They are pre-revenue, but there’s a lot of excitement around the company,” said Marshall. “Exar invested $40 million for a 16-percent stake. It’s a rich valuation, so it’s higher than most, but these types of companies command a premium.” The semiconductor Internet Machines has in development is only just becoming available on the market. When it does, much like what happens in the PC market when higher speed versions supplant older models, it will be cheaper and more cost-effective for telecommunications companies to use Internet Machines’ OC-192c than earlier connectivity solutions. “It’s basically a new market, and what typically drives purchases is the economies of scale,” said Chris Hoogenboom, president and CEO of Internet Machines. “To buy 10 gigabytes worth of bandwidth costs less than to buy one gigabyte. It makes more sense to buy the higher speed interface.” Unlike the Internet, which is undergoing a fundamental change as companies redefine the potential of e-commerce, most believe what has happened to depress the telecommunications industry is temporary. Rather than shy away from the semiconductor category, equity investors are looking for companies positioned to take advantage of the turnaround when it happens. “While the word is that it’s so difficult to get funding and the sky is falling, that’s just not the case,” said Dave Lavinsky, president of Growthink, a Los Angeles consultancy which has just released a report on funding for the second quarter. “We’re at the same level we were at in 1999, which were better than ’98 levels, which were better than ’97 and so on for 20 years.” Among the deals revealed in the Growthink report are 14 semiconductor companies in the greater Southern California area that raised a combined $150 million in the most recent three-month period. “You look at the semiconductor space and the market is so enormous that, if you really have an advantage, the implications could be multi-billion dollars,” Lavinsky said. That doesn’t mean getting the money is easy. While it took only a few weeks to secure its last round of funding, Hoogenboom said that this latest round took months, not just to identify potential investors but to convince them that the company’s future was sound. “The fundamental difference is last year it was a sellers’ market and this year it’s a buyer’s market,” said Hoogenboom. “Last year people were frequently either doing very minimal checks or none at all. In this year’s market, we’re seeing far greater due diligence efforts being put in. It meant we had to be very patient with potential investors. We had to make sure we articulated very clearly what our value proposition was.” Exar looked at companies for nine months before deciding on a short list of three firms that included Internet Machines, said Susan Hardman, vice president of corporate marketing at Exar. Its ultimate decision was based not only on the way it viewed Internet Machines’ prospects, but also on how the company’s product could advance Exar’s business. “With the expertise we have and the product portfolio we’re developing, we believe we could drive this company to be a $300 million company,” said Hardman of Exar, which reported sales of $113 million in its most recent fiscal year. “We think that’s good but not great. We’ve been looking for opportunities to drive the company with revenues north of $500 million.” Exar considered an acquisition, but in the current marketplace, with profits depressed, such a move would have taken a big bite out of its bottom line. And like a lot of investors in today’s market, the company believed that the current telecom troubles will be short-lived. “It is a challenging year for semiconductors,” Hardman said. “Our revenue year to year is certainly going to be down over last year, but we think it’s important to focus on two things. One is our R & D; spending, and the other is looking at longer-term futures and making these investments.”

Six tax-reform ordinances signed last month by Los Angeles Mayor James Hahn are supposed to make the San Fernando Valley and Los Angeles a lot more business-friendly. But some say there is nothing friendly about one ordinance that establishes a whistle-blower program offering cash rewards to those who rat out business owners who haven’t paid their taxes. The reforms were formulated by the Business Tax Advisory Committee (BTAC), formed by former Mayor Richard Riordan and co-chaired by Mel Kohn, a partner with the Encino accounting firm of Kirsch Kohn & Bridge LLP and co-chairman of the group, and approved by the Los Angeles City Council. Although the measures signed by Hahn are generally lauded as significant steps toward simplifying the city’s business tax system, some say asking businesses to drop a dime on their competitors is going too far. Under the whistle-blower program, informants would get 10 percent of the total amount of back taxes, interest and penalties that the city manages to collect as the result of their information. “I don’t like that. People trying to be policemen and inform on others would make mistakes,” said Ricky Gelb of Gelb Enterprises. “I could go out every weekend to the swap meets, for example, and make a list of people who are operating illegally, but that’s not the way to collect back taxes. It’s misguided.” Gelb suggested, as an alternative, the city use its own resources and let its fingers do the walking. “The city folks should just get out and use the white pages and the yellow pages and go through and make sure that those advertisers are registered,” he said. “That’s a good place to start.” But Antoinette Christovale, the city’s finance director, whose office is overseeing the implementation of the ordinances, defended the plan. “It’s important to remember that it’s the members of the Business Tax Advisory Committee who recommended these ordinances, not our department,” said Christovale. “There are many business owners out there who are paying their share of business taxes (that) aren’t very happy with those who don’t. So we support it.” Christovale’s office estimates that roughly one-third of the city’s businesses do not comply with the laws, although she did not know how much money the city loses as a result. The city estimates it could reap as much as $20 million through the program and an additional $4 million annually. Christovale said the city collected $348 million in business taxes during the past fiscal year. Gelb also suggested city, county and state agencies should be exchanging information on business owners, particularly independent contractors and home-based businesses, to track down the tax scofflaws. In fact, said Christovale, the city is working on a plan to coordinate with other agencies, including a strategy to exchange data with the state Employment Development Department. She added that a measure introduced in the legislature by state Assemblyman Gil Cedillo of Los Angeles calls for the sharing of data between the city and the state Franchise Tax Board. Another ordinance adopted establishes a three-month tax amnesty program. Between Oct. 1 and Dec. 31 of this year, those who come forward would not have to pay penalties, just the back taxes owed plus interest. Gelb said three months is simply not enough time to get the word out for a program of that kind. He suggested the period be extended to six months. “Big company owners are going to hear about this, but it’s the small mom-and-pop shops who won’t be as plugged in, don’t read every headline in the newspaper, and those are the individuals we are talking about in many cases,” said Gelb. But Christovale said the amnesty program would be well publicized in the media, on the city’s Web site and cable TV, and through mailers from the state Franchise Tax Board. “And,” she said, “we don’t want to give people too much of a window because they tend to forget.” The city last offered a business tax amnesty program in 1995 when it collected close to $20 million, the figure it’s using to guess at how much it would get from a similar amnesty now. “I certainly don’t think it’s our intent to offer very many (amnesties), so I think it’s important that they take advantage of the opportunity while it’s here,” said Christovale. Another ordinance passed by the council will benefit larger corporations, in particular, by exempting intra-company financial transfers. Until now, businesses were taxed on revenues received and taxed again when the money was transferred to another division of the company. “This is a big step, particularly for the larger corporations,” said Kohn. Kohn said his colleagues on the panel had hoped to see the law changed that allows the city to tax businesses on net earnings, instead of gross receipts. The current system, most business owners agree, is unfair because gross receipts don’t reflect real earnings. “That’s a big one for us,” said Gelb, “but every time you bring that up they say it’s unconstitutional.” Christovale said the city is, indeed, prohibited from taxing net revenues because they are considered income, and the state Franchise Tax Board already taxes income. “If the state constitution would allow us to do it, we would tax on net sales, not gross sales, but our hands are tied,” she said. Christovale said she expects BTAC members to continue to lobby for changes to that aspect of the system, but it will likely be an uphill battle. The other three ordinances: – Establish a tax settlement bureau for fast-tracking the resolution of tax claims. – Hold administrative review hearings before a one-member review officer, as opposed to a three-member Board of Review panel now. – Lower interest rates on outstanding balances and make them equal to the amount awarded a taxpayer for overpayment. The current interest rate charged for non-payment is 15 percent while refunds for overpayment are 7 percent. From now on, those will both be tied to the current federal short-term rate plus 3 percent, which would put both rates at roughly 7 percent today. Hahn, who signed the measure at the office of the Economic Alliance of the San Fernando Valley in Van Nuys, said additional reforms are being considered. Those include extending the business tax exemption period for new businesses from one year to two and reducing the number of tax rate categories from 68 down to about 10. And, said Kohn, the panel will recommend the elimination of taxes on so-called “pass-through” revenues.

Leighton Hull Title: President & CEO, Golden West Foods Corp. Education: B.S., Indiana University; graduate work at School of Finance and Harvard School of Business Most Admired Person: Besides family, Bill Cosby Career-turning Point: “Since I was 8 years old, I’ve wanted to own my own business.” Leighton hull discusses denny’s and diversity Denny’s and its parent company, Advantica Restaurant Group Inc., are happy today with what they call their Diversity Initiatives. The company that operates two massive restaurant chains besides Denny’s (Coco’s and Carrows) was recently ranked No. 1 on Fortune magazine’s list of America’s 50 Best Companies for Minorities for the third year in a row. Today, 39 percent of Denny’s 354 stores are owned by members of minority groups. Twenty-three ownership groups controlled by blacks own 66 Denny’s restaurants. That wasn’t always the case. In 1993, six black U.S. Secret Service agents successfully sued what was then called Flagstar Companies Inc. because of discrimination they had experienced at a Denny’s restaurant in Annapolis, Md. The court case opened the door to hundreds of complaints of racism in the restaurants and scores of lawsuits that led to the chain being referred to by many as a “posterchild for racism.” It also led to great changes in the company. Among them was a fair share agreement with the NAACP that established specific numerical targets regarding franchising, purchasing, employment and board participation. Fred Rasheed, who was head of the NAACP’s economic development division and negotiated the agreement, called an old friend, Leighton Hull, in 1995. Hull, owner of two McDonald’s franchises in Lynwood, was unhappy with McDonald’s anyway and believed he saw an opportunity with Denny’s. (At the time, there was one black franchise owner in the system.) Today, Hull, as owner of Golden West Foods Corp. with $20 million in annual revenues, owns 14 Denny’s restaurants with nine more in development in California, Hawaii and Indiana. Operating from a flagship restaurant on Sepulveda Boulevard in Sherman Oaks, Golden West is the largest black-owned franchise operator in the Denny’s system. Hull spoke with Business Journal editor Michael Hart about why he decided to do business with Denny’s and about what it takes for an entrepreneur to work successfully in a sometimes rigid franchise system. Question: Given the environment and negative publicity surrounding Denny’s in the early 1990s, why did it seem like an attractive franchise for you to invest in? Answer: When I met with Jim Adamson, the chairman of the (Advantica) board, and looked into his background, I determined he seemed to be a fair guy and a smart guy, number one. Smart guys realize that, in order to get on top and stay on top, they have to use all the talent and resources they can muster and get their hands on. I knew his smartness transcended racism and he would go to work to turn this company around. He did turn it around. It was my belief that these guys were ready to clean up their act and I turned out to be right. And I did what I could along the way to help them, so it turned out to be a good marriage. Q: Besides your personal interaction with the chairman of the board, what led you to believe Denny’s was not a “posterchild for racism”? A: I never believed it was the whole company, and it wasn’t. It was a few characters out there that were misbehaving. When I went down there to (corporate headquarters in) South Carolina and talked to people, they seemed like decent folks. I didn’t have the sense they condoned the actions of the people who were misbehaving in some of the stores. Q: Have you experienced racism during your time as a Denny’s franchiser? A: No. I made it clear I wanted my stores to be in markets where there would be opportunities. I wasn’t going to be pigeonholed in any particular kind of environment. In the old days, sometimes franchisers would earmark minority franchisees for minority areas. I made it clear that wherever the good markets were was where I wanted to operate. So I have stores in Kona, Hawaii as well as Watts as well as Sherman Oaks. I’m not locked in only in Watts. Q: How and why did you become a franchise operator in the first place? A: Franchising was not something I was interested in as a young person. I wanted to create my own franchise, a hamburger chain or my own car-fix-it place, whatever. But as you get older and the meter runs, you see that maybe reinventing the wheel is not the way to go. I was a management consultant at one time. I organized deals for people, assisted with site analysis and developed loan packages. A fellow came to me wanting to open a franchise business for a firm he had worked 15 years for. I took his case and was able to successfully get him the funding. That franchiser (Goodyear Tires) was so impressed with the package that they offered me a franchise. After this company offered me one, I thought, why not put in applications at others just to see what would happen? I contacted all the other major franchises and I received a favorable nod from most. I put my application into McDonald’s last because I’d heard they were hard to get into; it turned out not to be the case. Q: What happened with McDonald’s? A: I operated two McDonald’s stores for over 10 years. Then in the early 1990s, McDonald’s was really building a lot of stores. When you have a lot of stores, it can affect sales of existing stores. So, I thought it was time to seek some other opportunities where stores might be more spread out, where the impact was less. Q: The diversity issues aside, why Denny’s? A: Looking at the quick-service market, I saw a proliferation in the arena: the McDonalds and the Burger Kings and the Carl’s Jr.’s and the Wendys and the Taco Bells. The list is endless. Family dining, on the other hand, was not nearly as saturated. Given households have two working people and children, families would be seeking an outside source for a wholesome family meal. Thus family dining, I thought, would come into its own. So I called the biggest, which is Denny’s, the largest family dining company in the country. Q: How can an entrepreneur operate successfully, and happily, in a franchise world? A: Franchising is a way to be in business for yourself but not by yourself. (Denny’s) products are great products and they’ve got a great system, but to implement those good products and execute their good system requires effort and talent. My job is to seek out and develop and motivate talent. You can figure out how to cook an egg or a good hamburger and do it in a reasonable amount of time, but you need people who can execute a good plan. That’s really the challenge. The talent required to execute is a job done every single day and that’s the tough challenge I enjoy. In a restaurant environment, each customer is concerned with the service they receive. Not the good job you did yesterday or the hot food you served this morning, but they’re concerned about their bacon, their steak, their cup of coffee. The challenge for us is to deliver that great experience every time. Q: How has the restaurant business changed over the years you’ve been in it? A: It’s becoming more automated. The quality of food products has improved dramatically. The ability of suppliers to get large quantities of food to the back door has improved. The quality of kitchen equipment has improved. Customers expect higher quality than they did in the past. There are more restaurant players. Competition is heavier and it requires all of us to move closer and closer to excellence. It requires us to provide the best food at the best price in a cleaner environment. Customers expect a good steak whether it’s $50 at a fancy restaurant or $7 or $8 at Denny’s. I don’t think that was the case before. Q: What is your greatest challenge as a franchise operator? A: Developing people who care and are astute enough to understand the people they’re working with and understand what customers want and then being able to fill those needs. Not to mention operational needs like equipment and food and service. Q: What does it take to be a restaurant manager? A: The real pros are far and few between. There is a real competition for talent these days. A good restaurant manager is sought out by lots of people. It takes a certain mentality to effectively manage people.

Hector V. Barreto may not be the first Small Business Administration chief from California, but he’s probably the one best known in the San Fernando Valley. Up from the trenches himself as the owner and president of Glendale-based Barreto Insurance and Financial Services, Barreto has rubbed shoulders with many of the area’s local entrepreneurs and business leaders in his roles with various chambers and political groups and as founder of the Latin Business Association. He also happened to be co-chairman of now-President Bush’s election campaign in California. After being confirmed by the U.S. Senate late last month, Barreto says he will be doing many of the same things he did as a small business activist locally, albeit on a larger scale. But Barreto also concedes he is not merely trading in the freeway for the Beltway. The SBA is charged with advocacy, policy and programs for 25 million small businesses nationwide, focusing on everything from taxation to health care. He will likely be working with a smaller budget than the SBA has had in the past President Bush has proposed a cut in the agency’s budget, down from $857.6 million in fiscal 2001 to an as-yet-undetermined figure likely to fall around $773.5 million when it is approved in coming weeks. And Barreto will likely have to address criticism that the agency has not served all the nation’s small businesses equally. Barreto, who has sold his $3-million business and begun house-hunting in Washington, D.C, spoke to Business Journal senior reporter Shelly Garcia about the challenges that lie ahead. Question: Does the tremendous growth in minority businesses in recent years mean that, as head of the SBA, you’ll need to approach the job differently than your predecessors? Answer: I don’t know that it makes me approach business in a different way. Small business issues cut across all communities. Small business owners are interested in increasing revenues, creating jobs; those goals are pretty universal. The fact that I’ve been a small business owner, I know what it’s like to struggle to meet payroll, to not have markets available and work very hard to penetrate and develop new networks, to continually improve your skill set, and I know about the struggles to identify talent. Those are the issues small business people deal with every single day. Q: How do you think you can use your personal experience in your new role? A: The SBA is not a place that small business is going to come to to solve all its challenges. But it is a place where business can find an advocate, where we can advocate on issues that are important to small business owners. The questions that I’m getting are in regard to taxation and regulation and health care. Those are areas where the SBA can work on solutions and advocate for their interests. Q: Do you think what you’ve seen here in California reflects the nation at large, or is there something about the business community in this area that is distinctive? A: A lot of the trends we see in California in terms of growth and size and businesses being created, I think those are forerunners. A lot of the innovation and trends we see do have their genesis in California. When I first moved to California, the figure was 80,000 Hispanic businesses. Fourteen years later, it’s 450,000 Hispanic-owned businesses. There’s a lot of intertwining elements to that, not only the growth but the industries. We have high tech, computer companies, construction, services. You name it, we have it. I think you may see more of a diversity in terms of the business segment and growth rates. I think we’ll see those things replicated throughout the country. Q: Are there certain sectors where you see particular opportunities for small business? A: One of the areas I think is of interest to small business is this whole area of international trade. Ninety-seven percent of all international trade is done by small businesses, yet they only represent 31 percent of the value of that trade. So I think there’s an opportunity, especially in California. We have an international trade office. The president is now seeking trade promotional authority to negotiate trade agreements south of Mexico, so there’s opportunities there, and we want to be helpful to small businesses interested in pursuing those opportunities. Q: How much of a challenge do the proposed budget cuts present? A: We understand that the whole budget process is a very important process. Our constituency groups and small businesses should have a voice. I’m very confident we’re going to have the resources we need to do the job we’re charged to do. Q: The SBA has been criticized for addressing only a small percentage of the small businesses out there. Do you see that as an issue of inclusiveness or a matter of relevance? Has the agency kept up with the changes in the business community? A: I think it’s important for the SBA to continually be changing to reflect the business community. Not every business is going to access a program of the SBA. They may not be ready to get a loan or compete for a large government contract, but the SBA can still be a powerful advocate for them on issues that are important. I think we also need to be creative and think outside the box and use technology to affect small business. Q: How can technology be better utilized to assist the effort? A: One of the areas is the great amount of information we’re communicating through the Internet. A lot of businesses may not have the opportunity to go into a local SBA office, but they can log onto the Web site. This is just one example of a way people can retrieve information, download forms and a whole host of information. We also can use technology internally to make sure we’re getting more output from our programs. We want to make sure we’re modernizing the agency and keeping pace with the changes occurring in the business community. Q: To what extent do you think you’ll be able to maintain the hands-on approach you’ve had with the L.A. business community in your new capacity? A: I think one of the things I need to do is make sure I stay very connected to our business community. We’re planning on doing a lot of traveling, getting out and seeing the businesses, meeting with business groups. We don’t plan on being removed and detached from the business community. We have a lot of seasoned veterans. We’ll be bringing in some new folks as well. Q: Is there anyone we might be familiar with here in California who you plan to bring to Washington? A: You’re going to have to stay tuned.

E-commerce Sherman Oaks-based B3 Corp., a leading e-business solutions provider appointed Alex Godelman as Executive Director of Information Technology-Infrastructure. Godelman will manage the company’s e-commerce transaction processing and Web store hosting systems, communication networks and corporate MIS activities. Prior, he was the Senior Director of Technology Infrastructure and Change Management at WHN.com and Director of the Information Technology Division of the Otis organization. Sherman Oaks-based B3 Corp., a leading e-business solutions provider appointed Susanne Stover as Executive Director of Finance and Controller. She will direct financial planning and accounting functions for the company. Prior, Stover was the Director of Finance and Controller at BizBuyer.com and Controller of the Licensing Division at The Walt Disney Company. Stover began her career at Ernst & Young, LLP and served as a Supervising Senior Auditor at KPMG Peat Marwick, LLP. Entertainment Tom Fitzgerald was promoted to executive vice president and senior creative executive for Walt Disney Imagineering. He will take a role in the daily creative leadership of Walt Disney Imagineering and Theme Park Productions. Some of his work includes films produced for Disney’s California Adventure. Among them are “Golden Dreams,” “Seasons of the Vine,” “Soarin’ Over California” and Star Tours at Disneyland. Gary Sproule was appointed vice president of finance and chief financial officer at Disney Interactive. In his new role, he will oversee the worldwide finance functions for Disney Interactive, including strategic planning, controllership, operations, administration and information technology. Immediately before joining Disney Interactive, he was chief financial officer and chief operating officer for Whatshotnow.com. Before that, Sproule was chief financial officer for both Magnet Interactive Communications and Electek Group. Sproule has also spent a number of years at UNOCAL as chief operating officer where he managed worldwide daily operations and had full P & L; responsibility on annual sales of $2.8 billion. ABC Cable Networks Group’s Disney Channel has created a new management team for the network. Rich Ross, general manager of Disney Channel, has identified the following team members: Gary Marsh, executive vice president, original programming and production; Andrea Taylor, senior vice president, marketing; and Jill Casagrande, senior vice president, programming. Marsh will oversee the development and production of Disney’s slate of original programming including Disney Channel Original Movies, Playhouse Disney and Zoog Disney. Previously, Marsh was an executive director, programming for Columbia Pictures Television. Marsh has named Susette Hsiung as senior vice president of production, Nancy Kanter as vice president of original programming for Playhouse Disney and Adam Bonnett as vice president of original programming for the Zoog Disney series. Michael Healy will continue to serve as vice president, original movies. Taylor will articulate Disney Channel’s brand vision and develop the overall marketing strategy for the company. Previously, Taylor was senior vice president for TNT. Casagrande is responsible for scheduling and strategic planning of all programming for Disney Channel, Toon Disney and Soapnet. Finance Nancy Wheeler was appointed first vice chairwoman of the 27,000-member California Society of Certified Public Accountants (CalCPA). Wheeler has been a member of the CalCPA board of directors since 1993 and past president of the CalCPA Los Angeles chapter. In the past, she has been selected as Woman Businessperson of the Year by the Los Angeles Chapter of the American Women’s Society of CPAs. Technology Augustus Abruzzese was appointed controller for Pacific Coast Cabling. In this newly created position, Abruzzese will direct and oversee all financial activities including contracts, forecasting, budgeting, auditing and asset management. Most recently, he served as vice president of corporate finance at College Enterprises Inc./iCollege.com. Ross Mayfield was appointed chief information officer and vice president of information systems for Luminent Inc. Recently, Mayfield served as a justice information specialist for SEARCH, an organization funded by the U.S. Department of Justice where he trained workers and developed government information systems, including two State Supreme Courts and the Federal Reserve Bank. Previously, Mayfield has served as CIO for Enterprise Systems and taught management information systems and technology management at Pepperdine University. Real Estate John Grossman was appointed manager of business development at Millie and Severson Inc., a general contractor located in Los Alamitos. He will manage all aspects of new business development. Grossman is a graduate of UCLA with 24 years experience in the real estate, finance and construction industries. Westlake Village-based NAI Capital Commercial recently appointed Howe Foster as the new vice president of the company. Foster will focus on office and investment sales and leasing in the Conejo Valley. Previously, he held senior managerial positions with both Grubb & Ellis and DAUM Commercial Real Estate in Ventura County and Los Angeles.

Robert J. Goodman knew things had to change when orders for his Woodland Hills-based packing and shipping company Box Brothers Corp., which he started in 1985, began streaming in over the Internet faster than he could say duct tape. As customer demand for bicoastal service grew, it became clear that, to keep a tighter lid on operations without having to revert to the services of a middleman, the company would have to set up offices on the East Coast. Goodman had been using outside help to fill the gap on coast-to-coast shipments, but that threatened to chip away at the reputation he felt he had developed for quality customer service. So, in January he opened up a 3,000-square-foot warehouse in New Jersey as the company’s first East Coast location. Goodman spoke to reporter Jacqueline Fox recently about how he’s managed to balance the desire for growth with the need for service and quality control. “We opened up a warehouse (in Hackensack, N.J.) to facilitate our freight businesses from one coast to the other because a lot of our customers are corporate customers, and their (colleagues) are on either coast at any given time. So they just wouldn’t accept that we weren’t set up there. “It was a little difficult to keep up with because we are a predominantly West Coast operation. And meanwhile our orders were growing. A lot of them were coming over the Internet, but we were losing a lot of time and we were losing money in shipping. “What we are doing now is renting trailers and sending full trailers back and forth from one coast to the other. Before we were simply taking up partial space inside trailers that were transporting goods for other companies at the same time. So now our people on the other end do the unloading and delivery from there, which puts us in control of the shipment from start to finish. “But we now are looking at the bigger picture again because we are outgrowing our location already in just six months. That was the difficult part and we’ve learned from it. But finding a location, knowing where to go we didn’t really know what to anticipate. Now our challenge is to find a new location that will satisfy our needs and costs as well as our future growth. And, we have now made enough capital to further expand to Chicago by the end of the third quarter or the beginning of the fourth quarter, which will give us a presence in the Midwest.”