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For most company buyers, taxes are a priority when negotiating a purchase price. However, if tax issues are neglected during the integration phase, the negative consequences can be serious. To improve the likelihood of a successful merger, it’s important to devote resources to intensive tax planning before — and after — your deal closes.

During deal negotiations, you and the seller will likely discuss issues such as deductibility of transaction costs and the amount of local, state and federal tax obligations the parties will owe upon signing the deal. Often, deal structures such as asset sales can benefit one party and have negative tax consequences for the other, so it’s common to wrangle over taxes at this stage, says Sean Muller, partner-in-charge of Houston Tax and Strategic Business Services at Weaver.

“With adequate planning, companies can be spared from costly tax-related surprises after the transaction closes and integration of the acquired business begins,” Muller says. “Tax management during integration can also help your company capture synergies more quickly and efficiently.” You may, for example, have based your purchase price on the assumption that you’ll achieve a certain percentage of cost reductions via post-merger synergies. However, if your tax projections are flawed or you fail to follow through on earlier tax assumptions, such synergies may not be realized.

Smart Business spoke with Muller about tax planning after the deal closes.

What is one of the most important tax-related tasks in a deal?

Integrating accounting departments is critical, and there’s no time to waste. The seller may have to file federal and state income tax returns or extensions either as a combined entity with the buyer or as a separate entity within a few months following the transaction’s close. Companies must also account for any short-term tax obligations arising from the acquisition.

To ensure the two departments integrate quickly and are ready to prepare the required tax documents, decide well in advance of closing which accounting personnel to retain. If different tax processing software or different accounting methods are used, choose between them as soon as feasible. Understand that, if your acquisition has been using a different accounting method, you’ll need to revise previous tax filings to align them with your own accounting system.

What are the major areas of concern for companies related to tax planning and operational synergies?

Before starting to integrate products, personnel and facilities, examine the tax implications of those actions. Major areas of concern include:

  • Supply chain integration. Combining the logistical operations of both companies may make fiscal sense on paper, but there could be tax consequences. Say, for example, that you’re planning to close your seller’s main warehouse and fold operations into your company’s existing warehouse facilities. What if the acquisition’s warehouse is domiciled in a more favorable tax locale than your warehouse?

  • Divestitures and sell-offs. Buyers often spin off unwanted divisions or products when they acquire a business, but from a tax standpoint such moves can be costly. For example, selling a segment could eliminate certain tax write-offs or protections. You also need to plan for the tax consequences of selling newly acquired assets.

  • Global implications. International acquisitions can be a tax minefield. Companies should keep in mind the kinds of new exposures the deal carries, such as value-added taxes. Also, consider how a foreign purchase may affect your company’s effective tax rate. Be sure your M&A advisory team includes people who are knowledgeable about the relevant tax laws.

  • Enterprise resource planning (ERP). If the two companies’ ERP systems aren’t merged and synchronized, data collection could slow or you could lose tax data. This could affect the accuracy and speed of the combined organization’s financial reporting.

When acquiring a company, your to-do list will be long, which means you can’t devote all of your time to the deal’s potential tax implications. However, the tax consequences of M&A decisions may be costly and could impact your company for years. So, if you don’t have the necessary tax expertise in-house, work with outside advisers that do.

Sean Muller is the partner-in-charge of Houston Tax and Strategic Business Services at Weaver. Reach him at (832) 320-3293 or sean.muller@weaver.com.

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Chris MacFarland was on his way to manage a startup when Royce Holland, chairman of Masergy, asked him to take a hard look at his company. Although the eight-year-old provider of networking services had reached nearly $100 million in revenue and survived both the nuclear telecom winter and dot-com crash, Masergy was stuck in that awkward adolescent stage just as the economy was slowing.

“Masergy’s board wanted me to consult for a year, offer advice and position the company for a possible sale,” MacFarland says. “After assessing the financials and current solution set, I thought it was possible to grow the business but the steps wouldn’t be easy.”

The telecom veteran and self-professed computer nerd, who taught himself structured programming languages as a child, found a company that from a macro standpoint was pretty good, but not great. Specifically, the staff was passionate about customer service but lacked the tools and systems to deliver, growth had stalled, the CEO had resigned and after bankrolling the company for the past eight years, the firm’s venture investors wanted liquidity.

“The top leaders needed to go, we needed a more collaborative environment and a change in ownership,” MacFarland says. “I was brutally honest in rendering my assessment because Masergy’s board trusted me to make the right call.”

Masergy’s board bought in. MacFarland became COO in 2008 and was promoted to CEO in 2010. Under his watch, the firm has matured from a rudderless organization to a major industry disrupter with revenues of $170 million for fiscal 2013, which ended in June.

Here’s how MacFarland pushed Masergy out of its mid-stage funk.


Build a healthy foundation

MacFarland initially planned to reposition Masergy during the recession, then satisfy investors’ need for liquidity by filing for an IPO as the economy rebounded. Given his goals and his assessment of Masergy’s issues, it’s not surprising that he started by replacing the company’s leadership team.

“There was a lot of infighting among our management team,” he says. “We needed leaders who could deal with investors and water the culture in order to get to the next level.”

MacFarland wanted to eliminate the fiefdoms that were hindering collaboration as part of a comprehensive effort to create what he calls a healthy company.

“You need trust between the leaders and departments to garner commitment for initiatives, core objectives, financial objectives or new product introductions,” he says. “And we didn’t have that. In fact, our environment had become so unhealthy it was stifling growth.”

Next, he weeded out underperformers and raised the bar for new hires by sourcing candidates who wanted to drive the bus instead of ride it. Paring the staff led to productivity gains and a 35 percent increase in profitability.

“Smaller firms need passionate ‘A’ players who will take the initiative,” MacFarland says.

 “The economy propelled us from 2005 to 2008 and during that time, people became somewhat inefficient and we ended up with a lot of ‘C’ players.

“Cultural fit and synergy are critical in a mid-market tech company like Masergy because we’re not IBM. We can’t drive the business through operational measures, we need passionate, capable people to carry the torch.”

At the same time, he established a new set of core values before setting his sights on improving the company’s technical platform.

“For example, one of our values is that everybody has to be engaged and involved,” MacFarland says. “If an employee sees something they don’t agree with or understand, instead of sitting back we want them to ask about it and offer up suggestions.”

Despite MacFarland’s best efforts, Masergy encountered significant head winds from 2008 to 2010. He ended up shelving the IPO and recapitalizing through another venture firm, ABRY Partners, in the summer of 2011. But upgrading Masergy’s staff, culture and leadership team has continued to pay dividends.

“Sure, I could lay out a vision but a CEO needs cohesive leadership and engaged people to carry it out,” MacFarland says.


Improve the customer experience

Competing against the likes of AT&T and Verizon isn’t easy. Industry leaders tend to offer a full portfolio of voice and data products, coupled with above-average service and support, wide global coverage and competitive pricing according to MacFarland.

“Our platform wasn’t stable which impacted customer satisfaction and hindered sales,” MacFarland says. “To make matters worse, our network admins and customer service staff couldn’t always see our customers’ screens which made it difficult to resolve their issues.”

Moreover, customers will defect if they don’t have a strong value proposition and a reliable global network, so MacFarland reset the bar by spending millions upgrading Masergy’s platform.

His team now has the ability to monitor the network in real time, while customers can run voice, video conferencing and applications while viewing the same interface from anywhere on the planet. And because the new structure is scalable, MacFarland says it can sustain Masergy’s growth to $500 million.

“Our 360-degree view of the customer is unique in the industry,” he says. “Plus, customers get to speak with a real person instead of an interactive voice response system or IVR when they call. And our customer service reps are experts at relating to prospects who aren’t technically savvy.”

While some of the values that MacFarland is credited with helping to instill at Masergy may seem rudimentary to outsiders, his mandate to treat customers and business partners equally is regarded as innovative in the networking services industry.

“Treating everyone equally is a fundamental shift in thinking for our industry,” he says. “It helps us build healthy relationships and a robust supply chain which is critical to sustaining growth.”

MacFarland isn’t solely relying on technology to improve the experience of Masergy’s customers. He’s using good old-fashioned feedback and metrics to track customer sentiment and improve their satisfaction. And he’s putting his money where his mouth is by offering customers SLAs and credits if the firm falls short of its promises while giving employees bonuses for improving their experience.

“We weren’t engaging in deep analytics because we lacked actionable data and metrics,” he says. “Being a global company we need to keep our fingers on our customers’ pulse and monitor how we’re viewed in the marketplace.”

He’s also using spot surveys to track customer reactions and the rise of Masergy’s Net Promoter Score (NPS), which measures the loyalty that exists between a provider and a consumer by asking if they would recommend the service to a colleague.

A positive NPS is good, and a score above 50 is excellent and regarded as a harbinger of profitable, sustainable growth. Masergy’s dreams of delivering exceptional service have been realized based on the firm’s most recent NPS of 59.3 percent.

“The first year we scored around 30, which is OK for our industry but not for a broader tech firm,” MacFarland says. “We need loyal customers to become a valuable partner and achieve our goal of competing on a bigger stage.”


Jump-start growth

After building a healthy foundation and improving the customer experience, MacFarland turned his attentions to Masergy’s lagging top line. Admittedly, sales was not one of MacFarland’s strong suits so he hired a new sales leader and charged him with reinvigorating the company’s base of channel partners and resellers.  

“As a technology firm, we rely on solution providers, systems integrators and telecom agents, as well as consultants and network and video equipment manufacturers to sell our solution,” he says. “Clearly, we needed new partners to jump-start growth.”

MacFarland’s sales guru reinvented the company’s sales methodology and rolled out new partner levels in 2011, offering Masergy’s top producers rewards and incentives for selling its WAN solutions. Gold and platinum partners receive higher commissions, spiffs and access to benefits such as customized joint-marketing strategies, co-marketing funds, special events and co-branded case studies.

As a result, Masergy saw its platinum partner base go from five to 12 over the past year, while its total number of partners rose to more than 100. In fact, some partners’ year-over-year sales grew roughly 30 to 40 percent, thanks to MacFarland’s well-timed entry into the cloud and cloud-based managed network services.  

To explain, MacFarland took advantage of Masergy’s recapitalization by acquiring Los Angeles-based Broadcore in July 2012.The move catapulted Masergy into cloud services and gave the firm a complementary presence in hosted PBX and UC services, a segment that is expected to achieve robust growth over the next few years.

“We’ve experienced double-digit revenue growth after recapitalizing,” MacFarland says. “And to sustain that we have to roll out a new product every other year.

“We’re not looking for a value play, it has to be a cultural fit and meet certain criteria. But given that we have significant market share within the networking services segment developing or acquiring new capabilities is the best way to sustain growth over the long haul.”

For a guy who says he knew nothing about sales coming into the job, MacFarland has been very successful in driving top line growth. Masergy has acquired numerous marquee customers such as Unisys Corp., Akamai Technologies, Dolby Laboratories Inc. and the Hallmark Channel. The firm is forecasting revenues of $170 million for 2013.

“Technology is a high stakes game,” he says. “It takes significant investments and efforts to succeed but you increase your chances by building a healthy, transparent company.”



  • Build a healthy foundation
  • Improve the customer experience
  • Jump-start growth


The MacFarland File:

Name: Chris MacFarland
Title: CEO
Company: Masergy Communications Inc.

Birthplace: Born in Hobbs, N.M.

Education: He studied computer science engineering at the University of Texas at Arlington.

What was your first job and what did you learn from it? I worked in a tire store changing tires and repairing flats when I was 16. The work was so hard that it encouraged me to pursue a career that would utilize my brains instead of my brawn.

What’s the best advice you’ve ever received? During my early days in the telecom industry I got to know Michael Russell, co-founder of American City Business Journals. He taught me that there’s strength in numbers. In other words, your company will go farther and grow more quickly by having a strong team rather than a handful of strong individuals.

Who do you admire in business? I tend to admire leaders in different industries for their strengths and accomplishments. For instance, I admire Bill Gates for being an extremely shrewd business person, his problem-solving skills and his remarkable philanthropic spirit. I admire Jamie Dixon for his ability to manage through the global banking crisis. And I admire Herb Kelleher for creating a dynamic brand and culture.

What’s your definition of business success? You’re successful when you achieve a profit without compromising your integrity. Although many tech companies were successful in the late 1990s, they engaged in questionable business practices and weren’t transparent. True success takes place on multiple levels.


Learn more about Masergy at:

Twitter: @MASERGY
LinkedIn: http://www.linkedin.com/company/masergy-communications
YouTube: http://www.youtube.com/masergy

How to reach: Masergy (866) 588-5885 or www.masergy.com

Enterprise risk management (ERM) has become a big buzzword in business the past few years. However, corporate governance and compliance, which is how business executives utilize ERM, is really a traditional management function.

“What’s new about it is that there’s market interest and significant value associated with an enterprise that has implemented true ERM,” says Alyssa Martin, a partner in Risk Advisory Services at Weaver.

When an investment company is looking at an enterprise’s value, a consortium of banks are considering giving a syndicated loan, or companies are weighing a merger or acquisition, an ERM program increases the company’s intrinsic value, illustrating the sophistication of its corporate governance. An organization can also use ERM to improve internal decision making, promoting and instilling risk awareness within its culture.

Smart Business spoke with Martin about integrating ERM into strategic, business and financial management processes.

How does ERM differ from other methods of assessing and managing risk?

Risk assessment was more widely implemented during the regulatory increase and Sarbanes-Oxley wave, but companies often assess risks at the process level in silos.

ERM looks at risk across the entity, casting a wide net, incorporating the results of the risk assessment with integration practices throughout the organization. The first step is to perform an entity level risk assessment identifying the most critical risk categories and related events that influence the organization’s success. Then, you drill these risk considerations down into processes and functions.

An ERM program considers the business goals, objectives and strategies at all times, following these steps to monitor and manage risk on an ongoing basis:

  • Identify, assess and prioritize business risk.
  • Analyze key risks and current capabilities.
  • Determine strategies and new capabilities.
  • Develop and execute action plans and establish metrics.
  • Measure, monitor and report risk management performance.
  • Aggregate results and integrate them with the decision-making process.

An organization identifies the risk categories and specific risk events that have the most material influence, which are not necessarily the most common, for current operations and strategic initiatives. So, a domestic company that wants to grow internationally is changing its business condition and risk influences, and in turn, the management of related risks.

One of the advantages of ERM is that business leaders can move from managing negative events that have occurred to managing key risk indicators, which allows you to get in front of identified critical activities. For example, if a retailer that does 60 percent of its sales on credit monitors key risk indicators, such as U.S. consumer credit ratings and credit interest rates, it can modify business practices or promotional tactics before a credit freeze trickles down. Instead of offering customers no interest for one year, the retailer can offer no interest for six months.

Are many companies already following ERM?

Absolutely. ERM practices such as building internal controls, joint venturing with business partners or identifying regulatory requirements are already occurring within management functions. But an ERM program helps bolt decision-making and business tactics together to create cohesiveness within an organization, where everything is based on the same risk profile and agreed-upon risk tolerances.

With that said, companies must align the ERM program with their existing goals and strategies. This alignment is crucial. It ensures that program activities are not just new tasks but rather different ways of executing the tasks that may or may not include additional elements.

Where do companies fall short with ERM?

The most common mistake is thinking that entity level, enterprise-wide risk assessment equals ERM. That’s only the first step. Companies must use what they’ve learned through the assessment to put management tactics and monitoring into place.

An entity level risk assessment also does not instill a risk-awareness culture. Risk must become part of a company’s operations and decision-making processes through business planning, product development and regulatory compliance.

As an example, when considering performance evaluations, managers need to ask: Did you consider risk when you made that decision? Did you incorporate more anticipatory business planning versus reactionary planning? Risk management must become a component of the executive management’s responsibilities while ERM is integrated across the organization.

Alyssa G. Martin, CPA, MBA, is a partner, Risk Advisory Services, at Weaver. Reach her at (972) 448-6975 or alyssa.martin@weaver.com.

Insights Accounting is brought to you by Weaver

Friday, 03 January 2014 02:25

Weighing in on health care reform: Dallas

Written by

The Patient Protection and Affordable Care Act, often called the Affordable Care Act represents some of the most far-reaching government overhaul of the U.S. healthcare system since 1965 when Medicare and Medicaid came into being. It will be phased in over time, but a number of changes have been delayed and won’t be in effect until 2015.

The act focuses on increasing the rate of health insurance coverage for American and reducing health care costs. Here’s what some area businesses have on their minds about health care reform as the time nears for the full impact of the ACA: 

Andres Ruzo
Chairman and CEO
Link America 

How is your company preparing for changes associated with health care reform? 

The PPACA is so large and complicated that we are depending on our insurance broker to keep us informed.

The first step he’s recommended we take is to change our annual renewal date from April 1, 2014 to Dec. 1, 2013. We had to make a bold move recently to try to manage the unknown... This allows us a 11-month runway to really strategize next steps in the midst of a massive overhaul, and focus on effectively maximizing coverage and minimizing cost for the stakeholders.  Bottom line: We are very concerned that the cost will go up and the employees will get less benefits.  

This move will buy us time before having to embark on the PPACA journey and will also save us $20,000-plus in 2014. 

Have to studied or instituted wellness programs to contain health care costs for your employees? 

We have a program in place to help our employees that smoke kick the habit. The company is paying for the tools (patches, etc.) and is offering an incentive to those that are successful. 

What other things are you doing specifically to contain health care costs for your employees? 

We are looking into providing a space and the equipment onsite so that employees can exercise before or after work or during lunch periods. 

Do you foresee having employees pay a larger share of company-offered health care coverage? 

From the numbers we’re seeing in the costs caused by the PPACA, it’s a definite possibility but one we hope to avoid.

Dave Michelson
President and CEO
National Interstate

How is your company preparing for changes associated with health care reform? 

National Interstate typically reviews all our benefit programs on an annual basis. The enactment of health care reform has not materially changed that process; it has simply added another layer of compliance-related items that we must be mindful of.  Our primary goal of providing benefit programs to meet the needs of our employees and their families remains unchanged. 

Have to studied or instituted wellness programs to contain health care costs for your employees? 

Over the last several years, National Interstate has implemented a variety of wellness programs primarily in response to our employees including initiatives such as an onsite flu shot clinic, monthly newsletter, health fairs including screenings and wellness vendors, as well as lunch and learn speakers. There is no question employees have greater access to information and resources promoting healthy lifestyles than ever before. For an employer, it can often be difficult to quantify the results of individual employees reaching their health goal. It may simply mean that employee was able to attend a son or daughter’s soccer game. Those kinds of results are important in addition to focusing on healthcare cost containment. 

What other things are you doing specifically to contain health care costs for your employees? 

We believe educating employees about the plan they participate in is a key factor in containing health care costs. Most medical plans have discounts and incentives already built into the plan design, yet many times employees don’t fully utilize these features. We work in conjunction with our health care provider to disseminate information to employees so they can make informed health care decisions. 

Do you foresee having employees pay a larger share of company-offered health care coverage?

It is impossible to predict what the future holds in terms of health care costs. What we do know is if our employees collectively work as a team, we have the best chance of minimizing health care costs for our organization. While we make health care choices as individuals, the impact of those choices from a rate perspective is felt amongst the group participating in the plan.

Anthony McBride
Principal, human resources
Edward Jones

How is your company preparing for changes associated with health care reform? 

We have been making changes to eligibility and benefit levels as required by the regulations since the passage of the Affordable Care Act. We have made required modifications to our group medical plan to ensure that it meets the guidelines for 2014. We will continue to closely monitoring the regulations so that we are prepared to meet future requirements of the law.

Have you studied or instituted wellness programs to contain health care costs for your employees? 

We have had a wellness program in place for several years, and anticipate it will help contain cost increases in the future by motivating our plan members to be aware of and gradually improve their health over time.

Due to health care reform what other things are you doing specifically to contain health care costs for your employees? 

By 2009, we had moved to a consumer-driven health plan model. Our plan includes some pharmacy and medical treatment programs that help direct members to lower cost, higher quality sources of care. Soon we’ll introduce online cost/quality transparency tools to help raise awareness of the disparate cost spread that can exist even within an approved provider network. 

Do you foresee having employees pay a larger share of company-offered health care coverage? 

While we do not plan to shift a greater proportion of the cost to associates in 2014, the overall costs for health care continue to rise. In this regard, we have added a surcharge to cover spouses who have their own employer-based coverage available. We cannot speculate on what may happen in the future because the health care landscape is undergoing so much fluctuation.


Tim Taft learned the art of feeding a crowd at an early age — he was one of 11 kids. His family dining adventures led to a career in the restaurant industry, where he started as a pot washer at a local steakhouse and went on to become the president and COO of Texas-based Whataburger and the CEO of such notable chains as Grandy’s, Souper Salad and Pizza Inn.

Given Taft’s track record, it’s not surprising that Carrols Restaurant Group recruited the retired gentleman rancher when it decided to expand in 2011. Carrols wanted to focus on its 570 Burger King restaurants by bifurcating Pollo Tropical and Taco Cabana to form Fiesta Restaurant Group.

“The theory was that the two brands were worth more on their own, since some people don’t want to invest in Latin restaurants, while others don’t want to invest in burgers,” says Taft, who serves as Fiesta’s president and CEO. “In addition, Carrols’ board thought that a dedicated management team would bring focus and a fresh perspective.”

The challenge was that Pollo Tropical, which offers Caribbean-inspired fare, wasn’t known outside of Florida and folks outside of Texas hadn’t heard of Taco Cabana. Worse yet, Pollo Tropical’s five under-performing stores represented the brand’s lone foray into the Northeast. Still, after visiting nearly 50 restaurants, the affable Taft willingly traded his branding iron for a spatula and hasn’t looked back.

Under his direction, Fiesta’s stock price has risen from $12 to a high of $40 per share since the spinoff in May 2012, making it one of the fastest-growing restaurant stocks in the country. Revenues increased 9.4 percent in the third quarter of 2013 to $140.9 million, compared to $128.8 million in the prior year period. And the newly formed group has opened 34 domestic and 15 international restaurants, with dozens more planned.  

Here’s a look at the key ingredients in Taft’s recipe for growth.   

Assess strengths and weaknesses

The revenue numbers for Taco Cabana and Pollo Tropical convinced Taft to join the fiesta.

“The revenue was off the charts,” he says. “No matter what else I found during my due diligence, I knew that they had to be doing something right.”


Taco Cabana restaurants were averaging $1.6 million in annual revenue, while Pollo Tropical stores were averaging $2.3 million. To give you some perspective, Wall Street darling Chipotle averages about $2.1 million per store.

Another selling point was the fact that fast casual restaurants have seen client traffic soar by an average of 6 percent over the last three years. When Taft observed a broad range of customers dining at the restaurants he was convinced that he could drive sales through both new and existing stores.

“There were guys in white starched shirts eating next to construction workers,” Taft says. “The customers were ethnically diverse which told me that both brands have unlimited appeal.”

Results from the recent quarter seem to confirm Taft’s initial hypothesis. Same store sales at Pollo Tropical increased 6.4 percent while Taco Cabana stores posted an increase of 1.1 percent.

But viewing the restaurants through the eyes of the customer also exposed a few problems. While the food was good, the dishes varied by location. Taft discovered that someone named Connie originally developed Taco Cabana’s recipes, but the exact formula was a mystery because the recipes weren’t written down.

The look and feel of Pollo’s décor didn’t support the brand and some of Taco Cabana’s restaurants hadn’t been updated in years. There were no standard processes for food preparation or delivery and the staff didn’t always greet customers when they entered the restaurant. And outside focus groups thought Pollo Tropical served Mexican cuisine. Unless Pollo’s brand was clearly defined, expanding to Texas could potentially erode Taco Cabana’s market share.

“You need to develop a strong brand and transferable concept before you expand,” Taft says. “My first goal was to develop a prototype and fix what we had.” 

Build a prototype

Taft used the results of his SWOT assessment to position Pollo Tropical and Taco Cabana for growth.

He started by relocating Fiesta’s headquarters from New York to Dallas and hiring a management team.

“In my mind, Dallas-Fort Worth made sense because there are so many restaurants headquartered in this area,” he says. “We needed to build a management team from scratch, and there are a lot of experienced professionals in the area.”

Next, he gave aging Taco Cabana stores a facelift and completely overhauled the Pollo Tropical brand.

“We didn’t want Pollo to be perceived as Mexican,” he says. “So we changed the design and décor of the restaurants and our promotions to reflect a Caribbean feel.”

He appeased shareholders by executing strategies to increase sales and productivity. For instance, he invested millions in new kitchen designs and equipment and set his sights on improving customer satisfaction by installing his trademark five points of focus system and retraining the staff.

“Our operating philosophy is predicated on five points of focus, which include great food, cleanliness, hospitality, order consistency and accuracy, as well as well-maintained facilities.” he says. “If we execute on these restaurant basics, we can positively impact the guest experience, and improve their frequency and loyalty.”

To that end, he upgraded Fiesta’s POS system to speed-up the ordering process, improve accuracy and help stores fulfill customized requests. He added Web-based technology so customers can order online and request a specific pick-up time. And he recertified the chefs to make sure everyone uses the same recipe to prepare rice and beans.

“Goodness knows how many orders we got wrong because we had a high tolerance for errors,” he says. “We’ve cut the amount of mistakes in half, but we still have a ways to go.”

Finally, Taft focused his management team on expansion by closing Pollo’s struggling New Jersey stores.

“Operating a restaurant isn’t rocket science, but you need to consistently meet customers’ expectations and have a strong brand identity,” Taft says. “You can’t have everyone heading in a different direction, you need clear operational standards carried out by passionate, like-minded employees.” 

Expand strategically

Although Taft plans to move Taco Cabana east, Pollo Tropical west and fill in the areas in between, his target demographic, site selection and expansion strategies have evolved over the last two years based on the results of extensive research.


“We originally thought that Pollo Cabana was a Latin-centric brand, but our consultants told us to quit breathing our own fumes,” he says. “They advised us to target a more general audience by locating new stores in upscale centers that cater to big box retailers.”

Given the eye-opening data and the competitive landscape for Mexican cuisine, Taft decided to backfill Texas with new Taco Cabana restaurants in the near term and use Pollo Tropical as Fiesta’s primary expansion vehicle for the foreseeable future.

“Our development team has completed value-engineering our Pollo Tropical prototype,” he says.

“So we plan to accelerate new openings over the next several years as we backfill Florida, increase our penetration into Georgia and Tennessee and build a scalable footprint in Texas.”

Expanding Pollo gives Fiesta the opportunity to leverage its dynamic, family-oriented culture that Taft says is the impetus behind the brand’s phenomenal success.

“Many early employees defected from Cuba, came ashore in Key West and have been with Pollo for more than 20 years,” he says. “What’s challenging about managing growth is retaining the things that have made a company successful while leaving behind the things that have caused you to stumble in the past.

 “We want to make sure that Pollo doesn’t lose its el corazón, which is Spanish for heart.”

With that in mind, Taft’s team has taken steps to nurture the passion of Pollo employees for the brand’s culture and cuisine. For instance, Pollo employees have a shot at promotions or the opportunity to transfer to a newly opened store. Historically, more than 45 percent of Pollo’s field managers have started as hourly team members.

“A good number of Pollo’s general managers came up through the ranks and we want to continue that practice because it helps to maintain the culture,” Taft says. “For many employees, this is the only job they’ve ever had and running a $2 million operation is humbling.”

To further support Pollo’s family-oriented culture, Fiesta recently launched a 501(c)(3) called the Fiesta Family Foundation. The employee-funded nonprofit provides financial assistance to employees and their families who are affected by an emergency or personal hardship.

“One of our brands is 35 years old and the other is 25 years old,” Taft says. “But because we’ve formed a new company and hired a new management team, in many respects it feels like a startup. My job is to respect the past while pushing Fiesta into the future.” 

How to reach: Fiesta Restaurant Group (972) 702-9300 or www.frgi.com


Assess your company’s strengths and weaknesses.
Build a prototype to establish a brand.
Honor the past while expanding strategically.

The Taft File

Name: Timothy P. Taft
Title: President and CEO
Company: Fiesta Restaurant Group

Birthplace: Vermillion, S.D., raised in Tampa, Fla.
Education: He studied business at the University of Texas, Austin. 

What was your first job and what did you learn from it?

I washed pots and pans in a local steakhouse for a $1.90 an hour. I leaned what a difficult business this is and how hard it is to get it right. But there’s something about the camaraderie and everyone working hard toward a single goal that gets into your blood. I have a great deal of respect for anyone who succeeds in the restaurant industry where you’re literally as good as your last meal.

What’s the best business advice you’ve ever received?

Someone once told me that information is not power. Selfless leaders who share information and give others credit are ultimately more successful.

Who do you admire most in business and why?

Bill Prather, the former CEO of Hardee’s and executive vice president and head of worldwide operations for Burger King, because he listens well and acts boldly. It’s hard to find people who do both of those things well. 

What’s your definition of business success?

I tend to agree with Herman Cain who refers to success as a journey and not a destination. When you’re opening more restaurants than you’re closing, selling more meals and hiring new people, you’re headed in the right direction. But you can’t be satisfied because there’s always someone out there looking to steal your piece of the pie.

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The communication between independent auditors and audit committee members of public companies will change in 2014 with Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 16.
The PCAOB’s standard is effective for audits of fiscal years beginning after Dec. 15, 2012.

“There’s an emphasis on two-way communication and the timeliness of communication,” says Dale Jensen, partner-in-charge of the Public Company Audit Practice at Weaver. “These requirements should only help the audit committee better understand the audit process and the results.”

Smart Business spoke with Jensen about PCAOB Auditing Standard No. 16’s implementation and how it changes auditor responsibilities.

How will communication between auditors and audit committees change?

Generally, the standard seeks to create more effective and timely two-way communication between the auditor and audit committee, including sharing what discussions have occurred between the auditor and management during the audit. It standardizes what is communicated and when.

Part of the standard addresses the appointment and retention of auditors — general information relevant to the planning of the audit. Committee members need to understand what auditors will discuss with management prior to the auditor retention. Many public companies won’t see a change here if they are following best practices. But some concepts have been expanded, such as requiring auditors to ask the committee if they are aware of any matters relevant to the audit, including knowledge of possible law violations.

The standard also discusses the audit’s results. Auditors already were disclosing many of the required items, such as significant and critical accounting estimates, and significant and unusual transactions. Now, the auditor must also communicate:

  • Difficult or contentious matters about which they consulted with management.
  • Matters that resulted in a going concern consideration, how the matter was alleviated, and the effects on the financial statements and audit opinion.
  • Any departures from the standard report.

The auditor also must share the results with the audit committee before issuing an opinion on the financial statements. This provides committee members with the opportunity to gain an understanding and address questions with the auditors prior to the issuance of the opinion and Form 10-K filings with the Securities and Exchange Commission.

Does the standard specify what type of communication is required?

Some things must be in writing, such as engaging an auditor, but, overall, communication can be written or verbal.

Auditors can communicate the required items solely in writing. However, verbal communication can help committee members truly understand the nuances of what’s being reported. For example, auditors may share audit results over a conference call or at an in-person meeting. This opens up the dialog and creates an opportunity for the audit committee to ask questions to gain a better understanding of the audit process, specific findings, etc. The key here is to allow adequate time for the auditors and audit committee members to have these discussions and to work through any issues or questions that arise.

How much impact will the standard have?

Overall, the impact of this standard will be positive because it’s enhancing two-way communication between auditors and audit committees about matters of importance to the audit and the financial statements. How much impact it has will really depend on the company, what its issues are and how information has typically been communicated to the audit committee in the past.

Dale Jensen, CPA, CFE, is partner-in-charge of the Public Company Audit Practice at Weaver. Reach him at (800) 332-7952 or dale.jensen@weaver.com.

Insights Accounting is brought to you by Weaver

Friday, 22 November 2013 01:29

Mastering Anxiety: What keeps you awake at night?

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If you were to assemble some of the world’s outstanding business leaders in one place and ask them their secret to sleeping well at night amid the pressures of running a successful business, you might think you’d collect the best tips to handling anxiety in the business world.

The truth is that top business leaders often don’t have a secret to reveal — they rely on the strength and confidence they’ve developed over the years.

At the EY World Entrepreneur Of The Year conference, held earlier this year in Monaco, EY Entrepreneur Of The Year country winners assembled to compete for the World Entrepreneur Of The Year title.

We took the opportunity to collect the thoughts of the world’s most accomplished entrepreneurs — innovators, futurists, turnaround specialists and problem solvers — about dealing with worries. ●


“There’s nothing that keeps me up at night. I sleep very well. The challenge we have as a company is to keep delivering the culture we have created and expand it, keep evolving at the speed our customers expect us to evolve and keep creating value for them as we have for the past 10 years.”

Martin Migoya
Entrepreneur Of The Year 2012 Argentina


“The main thing is to make sure that we are always looking for new, creative ideas that keep our business updated with new technology and creativity. The other thing is making sure we are working faster than before.”

Lorenzo Barrera Segovia
founder and CEO
Banco Base
ntrepreneur Of The Year 2012 Mexico 


“Business has its highs and lows, because let’s face it, it’s not easy. It has its challenges. They asked Steve Jobs what was the most important thing in business and he said, ‘Passion.’ If you don’t have passion you would give up when things get difficult. We have so much passion and love for what we do that it becomes a part of our life.”

Hamdi Ulukaya
founder, president and CEO
Chobani Inc.
Entrepreneur Of The Year 2012 United States
2013 World Entrepreneur Of The Year


“What if the stock market crashes? What if there is some unknown thing that happens? What if there’s another 9/11 type of situation? Companies need to carry on, but maybe they don’t need to do events. Maybe they cut back on entertainment and speakers. The worry is what happens if something happens that I can’t control.”

Corey Shapoff
President and founder
SME Entertainment Group


“We are in recovering times. I feel very positive about the economy in general, but I’m still very worried about Europe. And while we are recovering, it’s still choppy and choppy times are times when there are more needs out there.”


Jim Turley
Retired global chairman and CEO


"I guess there is a point in my life where I thought it is all about me, and I am going to be the guy that guides everything and controls everything. What I have learned is that the best thing that I have done for our business is learn to let go and learn to get people who are better equipped to manage specific areas, do their thing and not get in the way."

Dr. Alan Ulsifer
CEO, president and chair
Entrepreneur Of The Year 2012 Canada 


“Nothing keeps me awake at night becase my work is solid.

My father married at 60 and my mother was 23. They had four children. Then he died, and we quickly had to start thinking about what to do. There was no money — nothing. We had to leave the little town we lived in because of violence there. Thanks to that, I am where I am right now because I still could be on the streets of my village selling tobacco. There is no wrong that can do good. That's what I have to teach people.”

Mario Hernandez
founder and president
Entrepreneur Of The Year 2012 Colombia

Thursday, 21 November 2013 15:21

Why you can’t treat social media like a road trip

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The idea of driving aimlessly seems glamorous in movies and songs. In reality, few of us get in a car without knowing how to reach our destination. We’ve created smartphone apps, GPS devices and satellite mapping to make our trips as efficient as possible and to avoid what we know to be an inconvenient, expensive outcome — getting lost.

I bring up this idea because many companies using social media have inadvertently become lost drivers. They start using social platforms with the goal of reaching some number of likes, retweets or shares, but as they embark on their social media strategies, many experience a disconnect between the content they post, blog and tweet and their progress on measurable business goals. These companies are driving without a roadmap; they just don’t know it.

Sound familiar? If social media isn’t working for you, your social media approaches may be missing a fundamental component: an effective content strategy. Here are three ways a solid content strategy will enhance your company’s social media success.


A like is just a like
All social media engagement is not created equally. To be successful, the social media activity that you generate needs to support your marketing goals — whether you want to improve employee engagement, boost customer conversions or build interest in a new product.
Creating a content strategy before you engage in social media will help your business clarify the specific marketing goals you want to achieve through content, as well as what messages you need to communicate to reach those goals. This process will ensure you get the right likes, shares and retweets from social interactions.


Social is a vehicle
Social media is a vehicle for sharing compelling content with your audience, and it doesn’t work if you don’t know what issues, topics and trends your audience finds compelling. Part of developing a content strategy involves learning how those you are trying to reach want to be talked to. Where do they go for information? How much time do they spend online? What kind of content are they looking for from your industry?
By getting to know the interests and pain points of your audience (customers, employees, shareholders, etc.), you can develop tactics to reach your online audience more effectively, saving you time and enhancing your company’s social influence.


Relevant content is meaningful
Kings of social content don’t become that way by luck. They use strategic tactics to connect with their audience through the right channels at the right times. More importantly, they make these connections meaningful and memorable by posting and sharing strategic, relevant content that their audiences desire.
When you deliver social content that your audience members find valuable or interesting, they’ll reward you by sharing your content, engaging with your business and, ideally, helping to promote your reputation as a thought leader in your business or industry. A content strategy allows you to do that by providing a roadmap for what kinds of informative, helpful, educational or creative content you need to make meaningful interactions.

As a recent Huffington Post article put it, the golden rule of the web is clear: “To know us better is to sell us better.” Ultimately, being successful in the social media space means taking the time to map out what success looks like. In this sense, a solid content strategy is not only an important component of any social media strategy, it’s the key to driving the results your business wants.


Michael Marzec is chief strategy officer of Smart Business and SBN Interactive. Reach him at mmarzec@sbnonline.com or (440) 250-7078.

When Albert “Chainsaw Al” Dunlap was the CEO at Sunbeam in the late ’90s, he had a reputation for ruthlessness. Besides massively downsizing the company, he was also known to intimidate everyone around him and resort to yelling and fist pounding.

While extreme, Dunlap’s behavior is an example of the type of “dictator” leadership that used to be fairly common in the C-suite. Rules were rules, there were no exceptions for anything and people were just a line item on a budget. Need to cut thousands of jobs? Don’t think twice about it.

On the other end of the spectrum is the Christ-like leader. This leader focuses more on building people up rather than tearing them down. This type of leader understands that there are rules, but sometimes to do the right thing, the rules need to be broken. For example, during the economic downturn, some Christ-like leaders went well beyond what was called for to make sure laid-off employees were taken care of.

They made sure they had the use of office resources to look for a new job and did everything they could to lessen the hardships. They weren’t required to do this; it was just the right thing to do. They saw employees as human, not just numbers on a spreadsheet.

Does it cost money to take the more humane route with your leadership? Yes and no. From a short-term, bottom-line perspective, it probably does cost a few more dollars to help people through a hardship. But long term, it can pay dividends. By treating people with respect and doing the right thing, it helps eliminate animosity toward you and your company from both the ex-employees and current ones. Maybe there are some good employees who you wanted to keep, but couldn’t afford. By showing compassion, when the economy turned around, they were far more likely to consider coming back than if they had just been shown the door with little regard to their well-being.

And what happens when these ex-employees end up in key positions in companies that could be customers? Do you think an ex-employee who you mistreated is going to buy anything from you or recommend your company to someone? It’s a small world, and what goes around often comes around, so it’s always best to treat people as best you can.

You can lead like a dictator and still get results. But do the ends justify the means? Will you conquer all, only to find yourself alone with no friends, the equivalent of Ebenezer Scrooge in “A Christmas Carol?” Or will you have an epiphany and realize there’s a better way to do things?

During this holiday season, think about your leadership style and the long-term effect it has on people’s lives. If this exercise makes you uncomfortable, then maybe it’s time to change how you lead. ●

What would it take for a company to succeed if its leader could effectively do only one of the following: innovate, instigate or administrate? We all know that an innovator is the one who sees things that aren’t and asks why not? The instigator sees things that are and asks why? The administrator doesn’t necessarily ask profound questions but, instead, is dogged about crossing the “t’s,” dotting the “i’s” and making sure that whatever is supposed to happen happens.

Ideally, a top leader combines all three traits while being charismatic, intellectual, pragmatic and able to make decisions faster than a speeding bullet. Although some of us might fantasize that we are Superman or Superwoman, with a sense of exaggerated omnipotence, the bubble usually bursts when we’re confronted simultaneously with multiple situations that require the versatility of a Swiss army knife.

Business leaders come in all shapes and sizes with various skill sets and styles that are invaluable, depending on the priorities of a company at any given point in time.

Every business needs an innovator to differentiate the company. Without a unique something or other, there isn’t a compelling reason to exist. Once those special products or services that distinguish the business from others are discovered and in place, it takes an instigator to continuously re-examine and challenge every aspect of the business that leads to continued improvements, both functionally and economically. It also takes an administrator — someone who can keep all the balls in the air, ensuring that everyone in the organization is in sync and delivering the finished products as promised to keep customers coming back.

As politicians and pundits of all types have pounded into our heads in recent years, “It takes a village to raise a child.” All who practice the art and science of business have learned that, instead of a village, it takes a diverse team working together to make one plus one equal three.

On the ideal team, each member possesses different strengths, contributing to the greater good. The exceptional leader is best when he or she is an effective chef who knows how to mix the different skills together to create a winning recipe.

In many companies, however, leaders tend to surround themselves with clones who share similar abilities, interests and backgrounds. As an example, a manufacturer may have a management team comprised solely of engineers, or a marketing organization could have salespeople who came up through the ranks calling all the shots.

If everyone in an organization comes from the same mold, what tends to happen is, figuratively, one lies and the others swear to it. This builds to a crescendo of complacency and perpetual mediocrity.

There is a better way. Good leaders surround themselves with others who complement their capabilities, and savvy leaders select those with dramatically different backgrounds who will challenge their thinking because they’re not carbon copies of the boss. This opens new horizons, forges breakthroughs and leads to optimal daily performance.

Strange bedfellows can stimulate, nudge and keep each other moving toward the previously unexplored.

To have a sustainable and effective organization, you can’t have one type without all the others. While everyone on the team may not always agree, each player must always be committed to making the whole greater than the sum of the parts.

The single most important skill of the leader who has to pull all the pieces and parts together is to have the versatility of that Swiss army knife — selecting the precise tool to accomplish the objective at hand. ●


Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, published by John Wiley & Sons, is now available. Reach him with comments at mfeuer@max-wellness.com.

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