MeritMatters - Southeast Michigan - Version 4, Issue 1

matters
volume 4, issue 1
®
Insights for business & life
Theater
of the
future
Emagine Entertainment
is redefining the
cinema experience
Paul Glantz,
Chairman,
Emagine
Entertainment
plus:
business apple Pay makes purchases more secure
strategy Swaps create predictable casH flow
TM
Get the expert attention and
advice you need to keep your
business moving forward.
FirstMerit Merchant Services
As Olivia’s business continues to grow, so does her need for advice from the local merchant
service experts at FirstMerit Bank. By knowing and understanding Olivia’s needs, their team
can better assist her with fraud and chargeback mitigation, as well as help her business stay
PCI compliant. And with access to a 24-hour support desk and online credit card transaction
information, Olivia’s business can enjoy many more years of forward momentum.
TO L E A R N MOR E, C O N T A C T :
David Lochner, President, FirstMerit Michigan,
at 248- 228-1620 or [email protected].
Follow the latest market trends
@firstmerit_mkt
firstmerit.com
Member FDIC
4767_FM15
>>>
firsT word
Providing perspective
w
hen it comes to managing
a business, the view from
the bridge continuously
changes. while keeping an eye on the
big picture, you need to pay attention
to many smaller details that can have a
huge effect on your success. This issue
of MeritMatters provides a number of
valuable perspectives on issues large
i’M pleased To reporT
ThaT MONEY Magazine
recenTly recognized
firsTMeriT as one
of The besT banks in
aMerica.
and small.
The federal reserve in december
credit cards, relying on an embedded
raised interest rates by .25 percent, the
electronic chip rather than the traditional
first time it increased rates since 2006.
magnetic stripe. our feature on page 11
with variable interest rates on loans
guides you through what’s changing.
tied to libor rates, it may make sense
providing a wider perspective, our
to look at interest rate swaps for loans
firstMerit private bank chief investment
of $1 million or more. These derivative
officer dan crawford looks at the
contracts can lock you into a fixed rate,
slowdown in global economic growth
eliminating the uncertainty of rising
and what it means for u.s. investments.
interest rates and allowing you to fix your
see page 20 for more.
interest expense for a defined period
of time. The article on page 13 provides
more information.
Things are changing rapidly on
bringing this back to the local level,
i’m pleased to report that Money
magazine recently recognized firstMerit
as one of the best banks in america,
the electronic payment and credit/
naming it the best regional bank in the
debit card fronts. firstMerit recently
Midwest. The information we offer in this
introduced apple pay to our online
latest issue of MeritMatters is a sampling
consumer and business banking
of the expertise we can bring to you and
customers. apple pay provides a
your business. Thanks for reading.
PaUL
GreiG
secure way to make a payment without
phoTo by Jesse kraMer
reaching for your wallet; see page 10
for more exciting details. on the card
side of things, october 2015 marked
the implementation date for new rules
around card liability that encourage the
adoption of eMV chip cards. eMV cards
are the next generation of debit and
paul greig
chairman, president and
chief executive officer
firstMerit corp.
MeritMatters® • 3
first word
>>>
matters
®
D avid
L oc h n er
S a n dy
P ie r c e
volume 4, issue 1
Publisher
Michael Marzec
Managing Editor
Todd Shryock
Contributing Editors
Erik Cassano, DAvid Searls,
Sue Ostrowski, Brooke N. Bates
Art Director
Stacy Vickroy
Project Manager
KAte Castrovince
Southeast Michigan
success stories
W
elcome to the latest issue of
MeritMatters. As we head into
a new year, Southeast Michigan-area businesses are thriving, and we
are excited to share with you the stories
of the organizations that are driving our
region’s growth.
In this issue, we speak with Paul Glantz
about how Emagine Entertainment has
consistently redefined the cinema experience with luxury, convenience and
platinum service. The company has set
the standard of innovation in the movie
marketplace, from stadium seating to VIP
theater membership that includes seat reservations and seat-side concession service.
We also talk with Don Frattaroli about
how the possibility of losing 92 percent of his sales as a manufacturer’s rep
prompted him to buy an automotive parts
manufacturing plant. The owner of Ultraform Industries shares the story of how he
ended up behind a desk in charge of a
business he never imagined owning.
And we speak with Denise Dalrymple,
regional CEO of Girl Scouts of
4 • MeritMatters®
Cover photo: tom mckenzie
If you would like to receive future
issues of MeritMatters®, email us at
[email protected].
Southeastern Michigan, about what the
organization is doing to positively impact
the future for girls and improve lives
throughout the region.
In addition, this issue offers advice
from FirstMerit bankers on how interest
rate swaps can create a predictable cash
flow for large commercial loans, and how
FirstMerit’s Apple Pay offers improved
security and convenience. We also look
at what the shift to EMV cards — credit
and debit cards with embedded chips —
means for retailers and their liability for
counterfeit transactions.
As you read this issue of MeritMatters,
we hope you take away something you
can use in your own business to keep your
organization moving ahead.
David Lochner
President
Michigan
FirstMerit Bank
Sandy Pierce
Chairman and CEO
Michigan
FirstMerit Bank
MeritMatters® is published by
SBN Interactive, 835 Sharon Drive,
Suite 200, Westlake, OH 44145,
(440) 250-7000.
MeritMatters® is solely intended for general
information purposes. It is not intended to
provide – nor should it be used in lieu of –
financial, accounting, legal or other professional advice. It does not constitute a
recommendation to buy or sell any security or
adopt any investment strategy. The publisher
assumes no liability for readers’ use of the
information contained herein. The information was obtained from sources believed
to be reliable, but such information is not
guaranteed as to its accuracy. Readers should
seek professional assistance with regard to
specific matters. All opinions expressed in
MeritMatters® are those of the authors or
sources and do not necessarily reflect the
views of FirstMerit Bank or FirstMerit Corp.
Securities and Insurance products are:
Not FDIC insured. May lose value. No bank
guarantee. Not a deposit. Not insured by any
federal or state government agency.
matters
®
volume 4, issue 1
table of contents
14
Cover
Emagine Entertainment is redefining
the cinema experience
6
12
Personal Finance
Business Matters
How Don Frattaroli ended up owning
Ultraform Industries
Briefs .................................................................. 9
Events, highlights and attractions
Ask the Expert . ................................................10
Have you recently reviewed your
life insurance?
Ask the Expert . ................................................13
How a swap can create stability and
a predictable cash flow
Embrace Apple Pay to make your purchases
more secure
Investments ......................................................20
Ask the Expert . ................................................11
Community . .....................................................22
New EMV standards shift liability
The slowdown in global economic growth
Girl Scouts of Southeast Michigan
positively impacts lives
MeritMatters® • 5
business matters >>>
The accidental
manufacturer
Don Frattaroli was a manufacturer’s representative.
Then he decided to buy an automotive plant. Here’s why.
The transition
The purchase of the Romeo, Michigan-based company
was defensive, something he really hadn’t been looking
to do. Frattaroli had always enjoyed working largely for
and by himself, and after the purchase, he initially found
it difficult to transition to being the boss who needed to
be physically present at the plant, overseeing his company
and workforce. For a while, he tried to continue his work
as a manufacturer’s rep but soon found trying to do both
jobs was too time consuming. To give Ultraform Industries
the attention it needed, he surrendered his previous job,
and with it, the freedom and independence that some sales
positions offer.
“That was a little hard on me, every day having to go in
to one place,” he says.
But as he became more engaged in his new endeavor,
Frattaroli saw a great deal of unexplored opportunity within
the walls of his manufacturing company.
“It had a very good quality system, was always
nominated and chosen as a supplier of the year, but it was
a company that was at risk of becoming obsolete,” says
Frattaroli of those early days. “The former owner had a
great company, but I always felt that I could make it better.
And I did, by purchasing state-of-the-art equipment as it
became available.”
6 • MeritMatters®
“The former owner
had a great company,
but I always felt
that I could make it
better. And I did, by
purchasing state-ofthe-art equipment as it
became available.”
– Don Frattaroli, Owner,
Ultraform Industries
That was critical to his ongoing success. The company
badly needed process and machinery upgrades to maintain
its position in the marketplace.
“We modernized the equipment and added automation
so we could complete parts manufacture in one operation,
rather than several secondary operations,” he says. “You
always have to stay on top of new technology, because if
you don’t, you’re not going to be around.”
Those investments made the company leaner and more
competitive. And under Frattaroli’s leadership, Ultraform
Industries twice relocated to larger and more efficient
plants. The most recent move was eight years ago, into the
first production and office space built and owned by the
company’s president and sole owner.
Dark days, then a rebound
In 2008, Ultraform Industries faced the virtual collapse of
the automotive industry. Over the next few years, suppliers
to the big automakers were hit hard, and Frattaroli’s compacontinued on page 8
photos by tom mckenzie
D
on Frattaroli never intended to buy an automotive parts manufacturing plant. But
then Frattaroli, who three decades ago was a
successful manufacturer’s representative in the
auto industry, faced the loss of his biggest client, a metal
forming supplier.
The owner of his client, Ultraform Industries — a
metal-forming manufacturing company specializing in parts
and assemblies for the automotive industry — wanted to
retire and was selling the business. And if the new owner
had another manufacturer’s rep in mind, or moved to an inhouse sales team, Frattaroli stood to lose 92 percent of his
sales — and his income.
So in 1986, he bought the company.
By david searls
Don Frattaroli, Owner,
Ultraform Industries
MeritMatters® • 7
continued from page 6
ny was no exception. In the darkest days, he was forced to
lay off about 75 percent of his workforce.
“That hurt me personally because I was taking away
their livelihoods,” he says. “Only once before had I laid
off anyone, and that was only about six people for three
weeks in 1989.”
But he had no choice if Ultraform was going to stay
open. Many of his competitors went out of business
during those desperate times, and Frattaroli picked up
their customers — not that it initially did him much good.
“We had to sit on all of this new business for about
two years because our former competitors’ customers
had all of this unused inventory sitting on their floor that
they couldn’t use,” he says. “So they certainly didn’t need
us. They kept saying we should just hang in there, hang
in there, and finally the floodgates opened. We’ve been
working six days a week for the last four years.”
The company made its reputation as an automotive supplier of assemblies for safety-related equipment such as seatbelts and airbags. The automotive industry still accounts for
the bulk of its business, and customers include Toyota and
Autoliv, a maker of automotive safety systems. But Frattaroli
has expanded to include lighting and materials handling
clients, among others. Over the years, he’s added a number
of new capabilities, including metal stamping and CNC wire
banding. Ultraform Industries offers customers metal-forming services that include engineering, product prototyping,
welding, heat transferring and parts finishing.
“I never took a lot of money out of the business,” he says.
“I always wanted to reinvest in the company and grow it.”
8 • MeritMatters®
Bankers in the know
This constant upgrading of technology requires capital,
and Frattaroli relies on his solid relationship with FirstMerit
Bank to make things happen. In the short time he’s been a
FirstMerit client, he’s formed a very positive opinion of his
bankers. There’s a branch location near his plant, but the
relationship goes much deeper than convenience.
“They know their banking, and that’s key for me,” says
Frattaroli. “If I ask my loan officer a question about a type
of loan, such as where I might find a better interest rate,
they know the answer without any runaround. I’m very
pleased with them.”
He holds up his end of the bargain, as well.
“I pride myself in that never, in my 29 years in business,
have I ever missed a bank payment, even during the bad
times of ’08, ’09 and 2010,” he says.
Today, those difficult times seem a long way in the past.
Frattaroli employs a workforce of about 80, which includes
plant and office staff but no salespeople. That’s because
Frattaroli doesn’t have any, and that’s a strategic decision.
Perhaps as a shout-out to his abandoned career path, he
only uses independent manufacturers’ reps.
“Inside salespeople always know they’re going to get a
paycheck,” he says. “I like reps because the only way they’re
going to make money is by knocking on doors and earning
commissions.”
Or, like Frattaroli, by buying a manufacturing plant. u
For more information about Ultraform Industries, call
(586) 752-4508 or visit http://ultraformindustries.com.
>>>
briefs
Detroit & Southeast Michigan
events, highlights and attractions
Monster Jam
Jan. 30, 2016 / 7 p.m.
$15 to $55
Ford Field, 2000 Brush St., Detroit
(313) 262-2000
http://www.detroitlions.com/
ford-field/monster-jam-2016.html
See Monster Jam trucks face off
in traditional bracket racing and a
freestyle competition in which trucks
show off their skills. Plymouth Ice Festival
top right photo: courtesy of Monster jam
Jan. 8-10, 2016
Friday 3 p.m. to 10 p.m.,
Saturday 10 a.m. to 10 p.m.,
Sunday 10 a.m. to 6 p.m.;
sculptures can be viewed
24 hours a day
Free
831 Penniman Ave., Plymouth
(248) 817-8836
http://plymouthicefestival.com
The largest free ice festival in
Michigan is dedicated to the art of
ice carving and features dueling
chainsaws, carving competitions,
cross-country skiing and festival
food.
North American
International Auto Show
Jan. 16-24, 2016
Saturday to Saturday,
9 a.m. to 10 p.m.; Jan. 24,
9 a.m. to 7 p.m.
Adults, $13; 65 and older,
and children 7 to 12 years old, $7;
children 6 and under, free
Cobo Center, One Washington Blvd., Detroit (248) 283-5173
http://naias.com/tickets/#public-show
Experience North America’s largest and most
prestigious automotive showcase. See more
than 500 vehicles on display, representing the
most innovative designs in the world.
Ferndale Blues & Music Festival
Jan. 23-31, 2016 / See website for schedule
Cover charges may apply
10 venues throughout downtown Ferndale and surrounding areas
(248) 330-2328
http://www.ferndalebluesfestival.org/
This annual festival has gained a reputation for showcasing an array
of notable blues, jazz and rock musicians, averaging more than 60
concerts over nine days.
MeritMatters® • 9
ask The experT >>>
apple pay™
Embrace this technology to make your purchases more secure
Jay
D o BK o WSKi
senior Vice
president, director
of e-commerce
JaSon
G enD i cS
senior Vice
president, director of
card services and
payment innovations
N
o retailer is 100 percent immune to a data breach,
but as a consumer, you can reduce the risk of your
data being compromised by using your Apple
device to make purchases.
With Apple Pay, you can link your iPhone 6, iPhone 6
Plus, iPad Air® 2, iPad mini™ 3 or Apple Watch to your
FirstMerit debit or credit card and use your device to pay,
removing the need to share your card number with retailers,
which store that information.
“We’re focusing on what the customer is looking for —
self-service, ease of use and mobile,” says Jay Dobkowski,
senior vice president, director of e-commerce at FirstMerit
Bank. “As mobile transactions continue to grow, this gives
people a tool to use to make easier and safer purchases.”
Once set up, you can authorize a payment using Apple
Pay on an iPhone by simply placing your finger on the
Touch ID, which is built into the phone’s home button. On
the Apple Watch, double-click the side button to make your
payment. Your fingerprint identifies you as the unique user
and allows Apple Pay to automatically charge your linked
bank account, says Jason Gendics, senior vice president,
director of card services and payment innovations at FirstMerit Bank.
An understandable concern of consumers making card
payments is data security. Apple Pay helps prevent point-ofsale fraud by blocking retailers from storing the user’s card
information.
“The transaction is tokenized, meaning you are getting
approval for that one and only transaction,” Gendics says.
“The store does not hold onto your card information, the
card number or the expiration date. So if there is a data
10 • MeritMatters®
breach, your information is not with the store to be taken.”
If you lose your phone, you can also feel secure knowing
that your linked credit or debit card number is safe.
“FirstMerit has that number. MasterCard has that number. But the information that passes to Apple is encrypted
in the translation back and forth, so Apple never has the
number,” Dobkowski says.
While not all merchants accept Apple Pay yet, major
retailers such as McDonald’s, Best Buy and Panera are
using the system, and Dobkowski and Gendics expect more
retailers to get on board as consumers rapidly adopt the
technology. The first day FirstMerit Bank made Apple Pay
available, more than 500 customers registered for it.
“Customers have become accustomed to using their
phones for everyday life,” Gendics says. “Instead of pulling
out a piece of plastic, they can use their phones — and a lot
of people are really enjoying the opportunity to choose the
channel by which they make a payment.”
FirstMerit is currently working toward the introduction
of Samsung Pay and Android Pay in the coming months. u
for more information, contact Jay dobkowski at
[email protected] or (330) 849-8863, or Jason
gendics at [email protected] or (330) 384-7032
Apple, the Apple logo, iPhone, and iPad are trademarks of Apple Inc.,
registered in the U.S. and other countries. Apple Pay, Touch ID, and
Apple Watch are trademarks of Apple Inc.
>>>
ask The experT
new eMV sTandards
shifT liabiliTy
T
hree letters (EMV*) represent a significant change as
it relates to the security of payments. As of Oct. 1,
a new set of standards for payment processing was
implemented in the United States. As a result, the counterfeit fraud liability, which has traditionally been assumed by
the card issuers, will now be the responsibility of the party
(merchant/acquirer) that does not enable EMV during
a fraudulent transaction. In other words, merchants not
accepting the new chip technology will become liable for
any losses resulting from use of a counterfeit payment card
at the point of sale.
“Businesses that accept card payments should speak with
their merchant service provider regarding the shift in liability
and what it means to their company,” says Michael Bodnar,
Senior Merchant Compliance Administrator, Merchant
Bankcard. When considering whether to adopt the EMV standards, a business should consider:
• The cost associated with the technology upgrade required
to become EMV compliant
• The potential risk and financial impact associated with not
implementing the required upgrade
“When making this decision, a business should keep in
mind the fact that many card issuers have been proactive by
issuing EMV cards. They want to protect their cardholders,
and they also have a vested interest in reducing their liability
for counterfeit transactions,” Bodnar says.
Making The swiTch
It’s clear that the migration to EMV is highly advantageous for merchants and the U.S. payments infrastructure
as a whole, though the adoption to accept these transactions is not mandatory. The expense of upgrading the
required technology in order for a company to become
EMV compliant should be thought of as a cost of doing
business. It’s a way to better protect against fraudulent and
counterfeit transactions, which, as previously mentioned,
can be more costly than the price of the new technology.
“Bear in mind, in many cases, the process can be as simple as purchasing EMV-capable terminals and a company is
good to go. Others may be working with a third-party vendor and could face the challenge of needing their program
upgraded or certified. A company then becomes reliant on
the vendor to accomplish that task,” says Bodnar.
Either way, change is never easy, but in the wake of
increasing counterfeit card fraud and numerous significant
data breaches, this new technology will better protect each
“card issuers wanT To proTecT
Their cardholders and They
also haVe a VesTed inTeresT in
reducing Their liabiliTy for
counTerfeiT TransacTions.”
– miChael Bodnar, senior merChant ComPlianCe
administrator, merChant BanKCard
of us as consumers and reduce the costs associated with
counterfeit activity.
why eMV is More secure
Unfortunately, cards with a magnetic stripe on the back are
susceptible to counterfeit fraud. EMV cards, also known as
“smart cards,” are equipped with a chip that provides more
sophisticated authentication than the magnetic stripe. This
new chip technology will reduce the use of stolen credit card
data. If data is compromised, a counterfeit card would be
unusable without the presence of the EMV card’s unique
elements. Think of it as if the card has a full operating computer system embedded in it. And with the chip being nearly
tamper-proof, the information contained and generated by the
chip is virtually impossible to duplicate.
“This shift in liability is intended to encourage card issuers
and merchants to adopt a more secure environment by
improving security at the point of sale by including technology which makes them resistant to counterfeiting,” says Tim
Romick, vice president, Merchant Bankcard Risk Operations
Manager at FirstMerit Bank. u
for more information, contact Michael bodnar at
[email protected]
*EMV stands for Europay, Mastercard and Visa – a global standard for cards equipped
with computer chips and the technology used to authenticate chip-card transactions.
MeritMatters® • 11
personal finance
>>>
who is driVing?
Have you recently reviewed your life insurance?
W
e have all heard
recently about
advancements
in computer technology
that make a driverless car a
potential reality. While most
of us can imagine this is possible, it raises images about
the potential risks created by
a lack of human control and
intervention in the face of an
impending crash. While the
future of the driverless car is
yet to be determined, we all
understand our innate need
greg a.
to control the circumstances
Mcdermott,
of our daily lives, whether it
exclusive advisor
is the safety of our families,
to firstMerit
the preservation of our assets
insurance group
or the fulfillment of our
financial futures.
When I meet with business owners and successful individuals, I often ask the following questions. If you experienced a long-term trend of declining interest rates and
investment market volatility, would you:
• Review your current lending arrangements for possible
refinancing opportunities?
• Review your retirement plan assumptions?
• Review your investment portfolios for proper risk tolerance and asset allocation?
• Review the performance of your life insurance programs?
The answers are invariably the same. Everyone absolutely says yes to the first three questions and then pauses and
admits they have not reviewed their life insurance programs.
They typically do not understand that life insurance policies
are impacted by changes in interest and dividend rates,
market returns and credit quality, just like their retirement
and investment portfolios. Yet all too often, the agents who
initially designed and sold their insurance programs do
not regularly review and communicate the impact of these
changes on policy performance over time.
Is your insurance program driverless?
Most life insurance policies are designed based upon a
set of assumptions, including the death benefit amount, interest, dividend or investment rate of return, and premium
payment period, to name a few. In addition, the insurance
company controls the internal expenses of the contracts,
such as monthly mortality costs, which can change over
12 • MeritMatters®
time. These design assumptions, and others, are then used
to create an illustration of future performance, as if those
performance metrics will remain constant over the insured’s
lifetime, even beyond age 100.
Policy owners generally think that if they pay the illustrated premium, the policy benefits are on track. We know
that over the last 30 years, interest and dividend crediting
rates on permanent insurance policies have declined by 4
to 5 percent. We are often engaged by a prospective client’s
counsel or tax advisers to review policies that we subsequently find are at risk of lapsing without value, well before
the insured’s life expectancy. Even more recent guaranteed
death benefit products can be materially impacted by the
timeliness of premium payments.
Whether your insurance coverage was acquired by the
company for buy/sell or key man purposes, or it was acquired individually for family protection and estate planning
needs, it needs to be reviewed on a regular basis to ensure
that it meets its designed purpose. The complexity of life
insurance products has increased materially over time, and
it is unreasonable to assume that any policy owner can effectively monitor program performance without the assistance
of a professional insurance adviser.
Someone needs to be driving. u
Greg A. McDermott is a registered representative of ValMark Securities, Inc.
and not an employee of FirstMerit Bank, N.A. or any of its affiliates. Securities
and insurance products are offered through ValMark Securities, Inc., member
FINRA, SIPC 130 Springside Drive, Suite 300, Akron, Ohio 44333-2431, phone
(800) 765-2501. Securities and insurance products are not insured by the
FDIC, are not deposits or obligations of FirstMerit Bank, N.A., or any of its
affiliates, are not guaranteed by FirstMerit Bank, N.A. or any of its affiliates,
and are subject to investment risk, including possible loss of principal invested.
ValMark Securities, Inc. is not affiliated with FirstMerit Bank, N.A.
>>>
ask The experT
proTecTing your raTe
How a swap can create stability and a predictable cash flow
LaUra
reDi n G er
senior Vice
president
DoLF
rÖeLL
executive director
of b&f capital
Markets inc.
I
f you’re a commercial entity borrowing a variable rate
loan, it may be a good idea to consider an interest rate
swap, a contract that allows you to fix your interest rate
in a market where future rates are unpredictable.
“Many commercial loans are booked at a variable
interest rate,” says Laura Redinger, senior vice president at
FirstMerit Bank. “When you borrow money at a variable
rate, that rate will adjust as the market changes. A derivative contract allows you to turn the variable rate into a
fixed rate, which helps control your expenses when interest
rates rise. Especially in today’s environment, where we
suspect rates will be rising, it is a valuable tool for highly
rate-sensitive borrowers.”
A swap helps protect not only the borrower but the
lending institution, says Dolf Röell, executive director of
B&F Capital Markets Inc., which partners with FirstMerit
on swaps.
Offering only floating (variable) rate loans allows the
bank to more efficiently manage its balance sheet.
how iT works
When a swap contract is entered into, the borrower agrees
to pay the lending institution a certain rate each month;
for example, the Libor rate plus a spread of 2.75 percent,
creating a fixed rate of 4.58 for five years and protecting the
borrower from rising interest rates. Röell says this protects
against a wide swing in rates that could affect the borrower’s
earnings and provides stability and a predictable cash flow.
“Most economic cycles are seven to 11 years, and if
clients recognize that we’re nearing that point where we’re
going to see interest rates rise, failing to hedge now if the
loan is going out five years or more could negatively impact
cash flow,” he says. “In five to 10 years, the odds of seeing
fixed rates at the rate they are today are close to zero.”
Redinger says that, especially for businesses with limited
monthly cash flow, a rate change can be devastating if it
suddenly has to use more of its monthly income to pay
interest expense.
“A derivative contract locks in the rate so that doesn’t
happen,” she says. “The interest rate derivative is usually
closed at the same time you close the loan. It’s basically an
insurance contract. Even though you pay a little more today,
it ensures you don’t have to pay even greater rates in the
future. Some clients may be hesitant to pull the trigger because rates continue to stay so low. But the Federal Reserve
in December raised rates .25 percent, and further increases
are expected to follow.” u
for more information, contact laura redinger at
[email protected]
MeritMatters® • 13
Paul Glantz,
Chairman,
Emagine
Entertainment
14 • MeritMatters®
the
movie theater
of the
future
How Emagine Entertainment is
redefining the cinema experience
with luxury, convenience and
platinum service
photos by tom mckenzie
By Brooke N. Bates
P
aul Glantz made his movie theater debut in 1989,
when he partnered with a fellow CPA to buy a
small, one-screen theater called Clarkston Cinema.
Although they considered it a “hobby business” at
the time, they took it seriously — borrowing $75,000 from
a bank, charging $50,000 on their credit card and attending
industry conventions to learn more about the business. >>
MeritMatters® • 15
By 1996, they were ready to build their
own theater and secured $450,000 in angel
investment, $228,000 in savings, an SBA
loan and a senior bank loan. They hired a
consultant and an architect to draw business
plans and blueprints for a six-screen theater
in Birch Run, Michigan. And because they
wanted their new cinema to stand out, they
sought the advice of a prominent industry
consultant at ShowEast, the convention of
the National Association of Theatre Owners in Atlantic City.
He recommended stadium seating, a
tiered design in which each row is elevated
to give moviegoers a better view. Armed
with that advice, Glantz and his partner returned to Michigan and revised their plans.
On May 23, 1997, they opened Cinema
Hollywood as the first theater in Michigan
with all-stadium seating.
That marked the birth of Emagine Entertainment, setting a standard of innovation in the movie marketplace.
“We were innovators from the very
beginning, in an industry that had seen very
little change,” says Glantz, co-founder and
chairman. “There were some improvements
in sound, but essentially, the movie-going
experience was not materially different
from 1935 to 1995. The advent of stadium
seating was a real paradigm shift for the entire industry. Today, it’s all about providing
our guests with an exemplary experience,
and that means comfort, convenience and
impeccable service.”
Emagine may have been on the forefront
of stadium seating, but filling those seats
proved more challenging, as other events
and technologies competed for attention.
On a Saturday night two weeks after
Cinema Hollywood opened, the theater sat
empty while Michiganders packed into bars
to watch the Detroit Red Wings win their
first Stanley Cup in 42 years.
“You could shoot a cannon through the
place and not hit anyone because everybody
16 • MeritMatters®
had their eyes on hockey,” Glantz says.
“I literally cried going home that night,
because I had personally guaranteed $3.5
million worth of debt. I had no assets independent of the venue itself, so if the venue
failed, it would bankrupt me. That night
I decided that if guests wanted to watch
hockey, then by golly, we would show them
hockey.”
The following year, Glantz rented a
digital projector to show the Red Wing playoff series in one of Cinema Hollywood’s
auditoriums. He also acquired several oneday licenses to sell beer and wine, with the
proceeds benefiting charity. Crowds filled
the auditorium to watch the 1998 playoffs,
prompting Glantz to install digital projectors to show films and alternate content.
As the industry’s pace of change accelerated through advancing technologies and
increasing competition, Emagine solidified its reputation for innovation. Cinema
Hollywood was one of only two theaters in
Michigan to show “Star Wars Episode 2:
Attack of the Clones” digitally when it was
released in 2002. Emagine led the industry
with another first when it converted entirely
to digital in the winter of 2005.
Growing an empire
Cinema Hollywood struggled through its
first year in operation. Then, in December 1997, James Cameron released his
record-setting epic “Titanic.” It became
the first film to surpass $1 billion at the box
office, initially grossing more than $1.84
billion worldwide. Thanks to the film’s unprecedented ticket sales, Cinema Hollywood
met its financial projections in January
1998, enabling the theater to expand to 10
screens by 1999.
Guided by the goal of enhancing the
movie-going experience, Emagine Entertainment began expanding throughout
Southeast Michigan. It grew steadily,
opening Clio Square Cinema and Emagine
Theatres of Novi, Canton, Woodhaven,
Rochester Hills, Royal Oak and Macomb.
And it has continually raised the industry’s
standards of service and convenience with
amenities such as valet parking, gourmet
concessions and even bowling at the Royal
Oak location. But Glantz says the recent development of the company’s ninth theater,
Emagine Palladium in Birmingham, will
“reinvent the movie-going experience.”
The company began opening several
theaters under its own name, starting with
Emagine Novi in 2002. To secure sufficient capital during this critical expansion
period, Glantz forged relationships with
new lenders and investment partners. The
predecessor of FirstMerit Bank provided
the senior financing for Emagine Canton,
which opened in 2004. That complemented
$1.25 million of capital contributed by Jon
Goldstein and his family — who would, like
FirstMerit, be pivotal to Emagine’s future
growth.
Goldstein, a fellow cinephile who owns
five movie theaters of his own, shared
Glantz’s vision for the future of cinema.
“I decided that if guests wanted
to watch hockey, then by golly,
we would show them hockey.”
– Paul Glantz, Chairman,
Emagine Entertainment
He repeatedly partnered with Emagine
— sometimes as an investor, in the case of
Canton and Royal Oak (which opened in
2011), and other times as a more intimate
operational partner, as in Woodhaven and
Rochester Hills (which opened in 2010).
Then, in 2014, the two found another
opportunity to work together. A local developer bought the old Palladium Building
in Birmingham, with plans to renovate the
mixed-use space that housed two levels of
retail and two levels of movie theater auditoriums. With its location in Birmingham,
nearly equidistant between Emagine Royal
Oak and Goldstein’s Maple Theater in
Bloomfield Township, the Palladium was the
perfect location for Goldstein and Glantz to
introduce their newest theater concept.
They worked together with the developer, A.F. Jonna Development and Management Co., to optimize the 140,000-squarefoot space. With 12 screens and 2,500 seats
MeritMatters® • 17
“if you’re known
to contribute
to society, then
people feel
better about
spending their
hard-earned
money with you.”
– Paul Glantz, Chairman,
Emagine Entertainment
between the second and third floors, the
old movie theater’s expansive size presented
some issues.
“Having a movie theater on two stories
makes labor costs higher because you have
to staff both floors, and it’s more difficult
to oversee your staff when they’re on two
different levels,” Glantz says. “Candidly,
there was more capacity there than what’s
really necessary in the marketplace today,
particularly in this neighborhood.”
Intent on doing more with less, Glantz
and Goldstein envisioned a smaller, more exclusive cinema. Inspired by the membership
business model used by country clubs, gyms
and Costco, they began brainstorming.
“Real estate has gotten to the point where
occupancy costs and operating costs have
gotten so crazy that it’s very difficult to go
into a new project because the numbers
18 • MeritMatters®
don’t pencil out,” Goldstein says. “We talked
about different business models, and we said,
‘Wouldn’t it be nice if everyone who came to
the theater was a member, who paid us a fee
upfront to offset a portion of those costs?’ We
thought the Palladium would be the perfect
location to test this out.”
Jonna converted the basement retail
space into underground parking and added
several rooftop residential units. While the
first floor remained slated for retail and
restaurants, the developer split the high-ceilinged second floor into two separate levels
of office space. The movie theater stayed
on the third floor (which became the fourth
floor) and downsized to just five screens,
with limited seating capacity of about 550,
featuring luxury leather recliners.
“I believe that the industry is evolving back
to its roots, as what I would characterize as
neighborhood retail,” Glantz says. “If we can
place nice movie theaters in smaller buildings
in close proximity to lots of neighbors, then
we can just focus on serving that little neighborhood well, and we can do a great job.”
Enhancing the
cinema experience
Emagine Macomb, which opened in
December 2014, was a precursor to this
concept, with just nine screens and 1,040
seats. With about half that capacity, Emagine Palladium had to more narrowly focus
on the local neighborhood’s needs. To better
understand what customers wanted, Glantz
and Goldstein tested their members-only
concept in focus groups.
“We learned that there are certain people who like exclusivity, and we learned that
there are lots of people who don’t,” Goldstein says. “We also learned what people
value, and the things that people mentioned,
across the board, were convenience and
experience.”
Of course, as owners, Glantz and
Goldstein enjoyed a VIP experience at the
cinema, which altered their definition of
convenience. But why couldn’t customers
enjoy the same?
“I love going to our theaters because
it’s so convenient,” Goldstein says. “When
I walk in, they know me so well that they
have my favorite snacks ready at the concession stand. I know where my seat is because
I booked it online. The whole process of
going to the movies is hassle free. ‘What
if we could give that experience — the
owner’s experience — to our customers?’ I
asked Paul. ‘How do we do that?’”
Emagine created the Platinum Membership program to recreate that experience for
customers, selling a limited number of 1,000
inaugural annual memberships for $350.
Platinum Members enjoy reserved seating
with priority access to tickets — which
become available to the general public four
hours before showtime. Members also access
perks like discounts on concessions and exclusive dining reservations at Ironwood Grill,
the restaurant Emagine operates at select
locations, including this one.
“Being assured of a great seat for a
popular film on a Friday or Saturday night
seemed to constitute a real value proposition for our guests, so that is the backbone
of the program,” Glantz says. “The benefit
of designated seating is that you can get
there late and you know your seat is open.
It takes a lot of the stress and anxiety out of
the experience, compared to feeling like you
have to get in line early to get a good seat.
Movie-going is about a couple hours of
escapism, a break from reality, and so you
want to arrive relaxed.”
A mobile app is under development to
further enhance the experience. Slated to
launch in the first quarter of 2016, Emagine’s app will let Platinum Members order
tickets, as well as concessions for in-seat
service.
“We’re trying to take it one step further,
to the point where people can order everything they need on their phone,” Goldstein
says. “We’ll know when they get into the
building and we can deliver what they want,
right to their seats. They never even have to
take their wallet out of their pocket. We’re
working toward the complete hassle-free
movie experience.”
Giving back
to Michigan
A native Michigander, Glantz is committed
to supporting his home state. As a Pure
Michigan company, Emagine continues to
reinvest locally, creating more than 1,000
jobs, supporting Michigan-based organizations and charities, and even offering
Michigan-made beers on tap.
When Jay Leno visited Detroit to
perform a few free shows for unemployed
residents during the depth of the recession,
Glantz got an idea. For one week, he offered
Michigan Movie Magic, an opportunity for
unemployed people to come, no questions
asked, and enjoy a first-run feature film with
soda and popcorn for every member of
their family, at no cost.
“It was so heart wrenching to see the
feedback. I’ve still got the emails,” Glantz
says. “A small gift for people who are
down on their luck is so greatly appreciated. That’s why we support philanthropic
endeavors in every community in which we
do business. Our value system says we can’t
just take from society; we have to give back
to those in need.”
Emagine often hosts charity preview
parties when a new theater opens, and Palladium’s opening festivities exemplified that
commitment. The theater sold tickets to two
“Dinner and a Movie” nights leading up
to the grand opening gala on Oct. 1, with
100 percent of the proceeds for all events
benefiting four local children’s charities.
The company achieved its goal of raising
$100,000 for the cause.
“That’s not enlightened self-interest;
that’s true philanthropy,” Glantz says. “But
there is an element of enlightened self-interest in all of this, because if you’re known to
contribute to society, then people feel better
about spending their hard-earned money
with you. We believe in giving back because
it’s simply good business.” u
Contact Emagine Entertainment at www.
emagine-entertainment.com.
MeritMatters® • 19
inVesTMenTs >>>
The slowdown in global
econoMic growTh
“boTh econoMisTs and
inVesTors are concerned
ThaT china’s growTh is
deceleraTing rapidly.”
– dan CrawFord, ChieF investment oFFiCer
Firstmerit PrivateBanK
We have been hearing recently a lot more about the
slowdown in global economic growth. What does
this mean?
It does appear as though global economic growth is slowing.
We are witnessing a significant decline in emerging markets’
economic growth. In our opinion, this slowdown should not
result in a global recession any time soon. However, it does
mean slower, yet more sustainable global economic growth
going forward than we have experienced in the past.
Can you put this in perspective for us? Emerging
markets are developing countries with high economic
growth but whose economies are still considered underdeveloped from a regulatory point of view. From 2000 to
2010, emerging markets were the primary driver of global
GDP growth. According to Cornerstone Macro, emerging
markets’ nominal GDP growth averaged 8 percent from
2000 to 2007 versus developed markets’ nominal GDP
growth of 4 percent, i.e., double the pace. During the
global financial crisis from 2007 to 2009, emerging markets’
nominal GDP growth slowed to 4 percent, while developed
markets’ nominal GDP growth declined 3 percent, which
20 • MeritMatters®
Why? What has changed? Emerging markets are in the
process of unwinding their excesses, e.g., credit and investment. Too much debt accumulation is weighing on both
demand and inflation, thus limiting the stimulative powers
of the ultra-easy monetary policies of the major central
banks. Emerging markets’ private debt growth both during
and after the financial crisis grew rapidly in an effort to help
boost growth. As a result, emerging market private debt as a
percentage of GDP increased significantly.
In addition, emerging market corporate and household
debt levels have increased, with corporate debt growing at
a faster pace and now representing 83 percent of nominal
GDP, an all-time high. High levels of corporate debt can
be a major economic headwind, given that companies drive
economic activity through hiring and spending.
How does China fit into this scenario? China is
considered an emerging market and is currently a bit of an
enigma. For years, China experienced annual GDP growth
in excess of 10 percent. Now, both economists and investors
are concerned that China’s growth is decelerating rapidly.
The difficulty is deciphering the speed and magnitude of
phoTo by Jesse kraMer
dan crawford,
chief investment officer,
firstMerit privatebank
helped prevent an even larger global recession.
In real terms, after adjusting for inflation, emerging markets posted an impressive 6 percent average annual GDP
growth rate versus 2 percent for the developed markets, thus
contributing the lion’s share to global real GDP growth,
which averaged 4.5 percent annually over that time period.
Unfortunately, it will be difficult to match those averages
over the next several years.
>>>
inVesTMenTs
the decline of the world’s second-largest economy. Accurate
and reliable Chinese economic data are not easily obtained.
Economists must rely on government-provided economic
data, which must be accepted with a grain of salt.
The Chinese government states that its economy is growing at 7 percent. However, most agree that the economy is
growing at a slower rate. Is it much slower, say, at a rate of 2
percent, which would qualify as a hard landing (a significant drop in GDP growth)? Or is it more likely 5 percent,
which would be considered a soft landing, and therefore,
less disruptive? The jury is still out, and the situation merits
monitoring. Clearly, a soft landing is preferable to a hard
landing, as it would have a less negative impact on global
economic growth.
What caused Chinese economic growth to slow?
During the financial crisis, the Chinese government injected
a tremendous amount of liquidity into the economy. The
majority of the stimulus was invested in real estate and
infrastructure (highways, airports, factories and shopping
complexes). This resulted in a real estate bubble and excess
capacity throughout the manufacturing sector. China now
finds itself trying to transition from an investment-driven
economy (currently 46 percent of GDP) to a consumer- and
services-driven economy (currently 38 percent of GDP). As
a point of reference, consumer spending and investment
represent approximately 70 percent and 17 percent of U.S.
GDP, respectively. The transition, which has a long way to
go, thus far has been slow and minimally successful.
China faces several severe headwinds, including excess
inventories and capacity, labor unrest, pollution, corruption,
net capital outflows and currency devaluation. But as China
transitions from a closed and controlled economy to a more
open one, there will be successes and challenges throughout
the process.
What are the global ramifications of the Chinese
slowdown? Other than exporting deflation to the rest of
the world, the real risk is that China experiences a hard
landing and spreads its weakness throughout the Pacific
Rim, the Eurozone and potentially the U.S., leading to a
global recession. The Pacific Rim economies have already
been negatively impacted by the slowdown in China.
However, we believe the odds of a global recession are
relatively small.
What does all this mean? It means that the global
economy will likely experience subpar growth for the next
several years, with neither a boom nor a bust occurring.
Many economists and central banks now estimate that the
4.5 percent annual global growth enjoyed from 2000 to
2010 will be replaced with 3 to 3.5 percent growth until the
excesses accumulated over the past five years are unwound
and the structural problems are addressed.
Easy money has boosted excess supply by allowing weak
companies to stay in business. The oil and gas industry in
the U.S. is a great example. Artificially low interest rates and
ample liquidity allowed many exploration and production
companies to borrow money on favorable terms and continue to produce natural gas and oil at a time when demand
and prices dropped. Without easy money, these companies
would have been forced to close their doors in this uneconomical environment. Eventually, this imbalance will work
its way out, but not before more pain and bankruptcies
unfold in this industry.
Slower global growth has a negative connotation and
sounds bearish for U.S. stocks. However, because we believe
that slower global growth is sustainable without a boom or
bust cycle, the likelihood of the secular bull market in stocks
increases. We know that bear markets are caused by recessions. Recessions occur under the following conditions:
• An inverted yield curve
• Declining corporate profitability
• A surge in commodity prices or inflation
None of these conditions currently exists. Therefore, a
bear market in U.S. equities should not come to fruition.
However, due to the fluid nature and connectedness of
global economies, we continue to closely monitor global
growth. u
MeritMatters® • 21
community >>>
Leading through service
Girl Scouts of Southeast Michigan embraces its core mission
of positively impacting lives
22 • MeritMatters®
“It’s our first joint project with the Boy Scouts in a
very long time,” Dalrymple says. “Our troops spent
the week of Nov. 7 to 14 distributing empty bags to
neighbors and friends for the purpose of collecting and
donating canned and dried food items for distribution
to those in need.”
Whether the focus is local or global, FirstMerit
Bank supports the Girl Scouts in its efforts. Each year,
FirstMerit provides financial backing for two to 10 Gold
Award College Scholarships. FirstMerit also provides
courtesy banking services to Girl Scout troops throughout the region and administers a trust that benefits the
Girl Scouts.
“We are very grateful for the support FirstMerit gives
us,” Dalrymple says. “They recognize the good we’re
doing for our girls, and for the community at large, and
their support, in all its forms, allows us to keep producing girls of courage, confidence and character who are
ready to become the leaders of tomorrow.” u
For more information, visit www.gssem.org.
photos courtesy girl scouts of southeast michigan
N
early everyone knows a current or former Girl
Scout. Maybe you were a Girl Scout growing
up. Maybe you have a daughter, granddaughter
or niece who is involved. Maybe you volunteer. Maybe
you’re a troop leader.
And if any of the last three are true, maybe you’re
a man.
The aim of Girl Scouts has always been inclusion
for anyone who wants to positively impact the future
for girls and improve lives throughout their region and
beyond. For almost a century, that’s exactly what Girl
Scouts of Southeastern Michigan has been doing.
“The first chartered troop in Southeastern Michigan
formed in 1922 in Detroit,” says Denise Dalrymple,
the regional organization’s CEO. “We now cover 5,500
square miles and 2,500 troops involving about 25,000
girls and 10,000 adult volunteers and supervisors. And
yes, that does include men in various capacities.”
Community service is woven into every level of
participation in Girl Scouts — even Daisy Scouts, ages 5
and 6, are taught the importance of community service.
As girls matriculate through the ranks, from Daisies to
Brownies, Juniors, Cadettes, Seniors and Ambassadors,
their community service projects increase in size and
scope, allowing participants to develop critical leadership skills.
“We’ve had some of our older girls do some pretty
remarkable things,” Dalrymple says. “One of our girls
set up a suicide prevention group at her high school.
Our 2015 Young Woman of Distinction is Natalie
Apollinari, and for her Gold Award project, she brought
together her church, teachers, friends and the Knights
of Columbus to collect and donate school supplies
to a church parish in Ghana. We’ve had some of our
girls spearhead some very important projects with
wide-ranging impact, well beyond Michigan.”
But impacting the lives of area residents remains
a primary focus. This fall, Girl Scouts of Southeastern
Michigan is partnering with area Boy Scout troops for
a joint initiative, “Scouting for Food.” The project benefits Gleaners Community Food Bank of Southeastern
Michigan.
Partnership
Melissa
*
I have a mission. Every day I come to work focused on serving
members of my community. My Client Advisor from FirstMerit’s
Charitable Advisory Group understands this—imparting financial
expertise and partnering with me so that I can continue to focus on
my mission. Because when the business side of our organization
is well cared for, I can better care for those in need.
TO L E A R N MOR E A B O U T
F I R S T M E R I T P R I VA T E B A N K ,
C O N T A C T : Ken Duetsch II, Senior Vice President,
at 248-430-1255 or [email protected].
Follow the latest market trends
@firstmerit_mkt
*Melissa reflects a composite of clients with whom we’ve worked; she does not represent any one person.
Non-deposit trust products are not insured by the FDIC; are not deposits or obligations of FirstMerit Bank, N.A, or any of its affiliates; are not
guaranteed by FirstMerit Bank, N.A or any of its affiliates; and are subject to investment risk, including possible loss of principal invested.
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For Jeff, managing personal and business finances on his own was challenging. But with the support of his FirstMerit
Bank team of advisors, he was able to use their Treasury Management services to optimize his cash flow, Retirement
Planning services* to benefit his employees, and Succession Planning services to ensure his company’s future.
So now, Jeff has the support he needs to reach his maximum potential — both personally and professionally.
TO L E A R N MOR E, C O N T A C T :
David Lochner, President,
FirstMerit Michigan, Commercial Banking,
at 248-228-1620 or [email protected].
Ken Duetsch II, Senior Vice President, PrivateBank,
at 248-430-1255 or [email protected].
Member FDIC
Deposit and loan products are offered through FirstMerit Bank, N.A. Loans are subject to credit approval.
*Non-deposit trust products are not insured by the FDIC, are not deposits or other obligations of FirstMerit Bank, N.A. or any of its affiliates,
are not guaranteed by FirstMerit Bank or any of its affiliates, and are subject to investment risks, including possible loss of the principal invested.
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