Southwest Airlines Operations - A Strategic Perspective
Background:
Southwest Airlines is the largest airline measured by number of passengers carried each year within the United States. It is also known as a ‘discount airline’ compared with its large rivals in the industry. Rollin King and Herb Kelleher founded Southwest Airlines on June 18, 1971. Its first flights were from Love Field in Dallas to Houston and San Antonio, short hops with no-frills service and a simple fare structure. The airline began with one simple strategy: “If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline.” This approach has been the key to Southwest’s success. Currently, Southwest serves about 60 cities (in 31 states) with 71 million total passengers carried (in 2004) and with a total operating revenue of $6.5 billion. Southwest is traded publicly under the symbol “LUV” on NYSE.
Facts:
* The first major airline to fly a single type of aircraft (Boeing 737s)
* The first major airline to offer ticketless travel system wide including a frequent flier program based on number of trips and not number of miles flown.
* The first airline to offer a profit-sharing program to its Employees (instituted in 1973).
* The first major airline to develop a Web site and offer online booking. In 2001, about 40 percent ($2.1 billion) of its passenger revenue was generated through online bookings at www.southwest.com. Southwest’s cost per booking via the Internet is about $1, compared to a cost per booking through travel agents of $6 to $8.
Key competitive advantages:
* Low Operational costs / High Operational Efficiency
* Award winning customer service
* Human Resource practices / Work culture
Operations Analysis – Competitive Dimensions:
Southwest clearly has a distinct advantage compared to other airlines in the industry by executing an effective and efficient operations strategy that forms an important pillar of its overall corporate strategy. Given below are some competitive dimensions that will be studied in this paper.
1. Operational Costs and Efficiency
2. Customer Service
3. Employee/Labor Relations
4. Technology
1. Operational Costs and Efficiency
After all, the airline industry overall is in shambles. But, how does Southwest Airlines stay profitable? Southwest Airlines has the lowest costs and strongest balance sheet in its industry, according to its chairman Kelleher. The two biggest operating costs for any airline are – labor costs (approx 40%) followed by fuel costs (approx 18%). Some other ways that Southwest is able to keep their operational costs low is - flying point-to-point routes, choosing secondary (smaller) airports, carrying consistent aircrafts, maintaining high aircraft utilization, encouraging e-ticketing etc.
Labor Costs
The labor costs for Southwest typically accounts for about 37% of its operating costs. Perhaps the most critical element of the successful low-fare airline business model is achieving significantly higher labor productivity. According to a recent HBS Case Study, southwest airlines is the “most heavily unionized” US airline (about 81% of its employees belong to an union) and its salary rates are considered to be at or above average compared to the US airline industry. The low-fare carrier labor advantage is in much more flexible work rules that allow cross-utilization of virtually all employees (except where disallowed by licensing and safety standards). Such cross-utilization and a long-standing culture of cooperation among labor groups translate into lower unit labor costs. At Southwest in 4th quarter 2000, total labor expense per available seat mile (ASM) was more than 25% below that of United and American, and 58% less than US Airways.
Carriers like Southwest have a tremendous cost advantage over network airlines simply because their workforce generates more output per employee. In a study in 2001, the productivity of Southwest employees was over 45% higher than at American and United, despite the substantially longer flight lengths and larger average aircraft size of these network carriers. Therefore by its relentless pursuit for lowest labor costs, Southwest is able to positively impact its bottom line revenues.
Fuel Costs
Fuel costs is the second-largest expense for airlines after labor and accounts for about 18 percent of the carrier’s operating costs. Airlines that want to prevent huge swings in operating expenses and bottom line profitability choose to hedge fuel prices. If airlines can control the cost of fuel, they can more accurately estimate budgets and forecast earnings. With growing competition and air travel becoming a commodity business, being competitive on price was key to any airline’s survival and success. It became hard to pass higher fuel costs on to passengers by raising ticket prices due to the highly competitive nature of the industry.
Southwest has been able to successfully implement its fuel hedging strategy to save on fuel expenses in a big way and has the largest hedging position among other carriers. In the second quarter of 2005, Southwest’s unit costs fell by 3.5% despite a 25% increase in jet fuel costs. During Fiscal year 2003, Southwest had much lower fuel expense (0.012 per ASM) compared to the other airlines with the exception of JetBlue as illustrated in exhibit 1 below. In 2005, 85 per cent of the airline’s fuel needs has been hedged at $26 per barrel. World oil prices in August 2005 reached $68 per barrel. In the second quarter of 2005 alone, Southwest achieved fuel savings of $196 million. The state of the industry also suggests that airlines that are hedged have a competitive advantage over the non-hedging airlines. Southwest announced in 2003 that it would add performance-enhancing Blended Winglets to its current and future fleet of Boeing 737-700’s. The visually distinctive Winglets will improve performance by extending the airplane’s range, saving fuel, lowering engine maintenance costs, and reducing takeoff noise.
Point-to-Point Service
Southwest operates its flight point-to-point service to maximize its operational efficiency and stay cost-effective. Most of its flights are short hauls averaging about 590 miles. It uses the strategy to keep its flights in the air more often and therefore achieve better capacity utilization.
Secondary Airports
Southwest flies to secondary/smaller airports in an effort to reduce travel delays and therefore provide excellent service to its customers. It has led the industry in on-time performance. Southwest has also been able to trim down its airport operations costs relatively better than its rival airlines.
Consistent aircrafts
At the heart of Southwest’s success is its single aircraft strategy: Its fleet consists exclusively of Boeing 737 jets. Having common fleet significantly simplifies scheduling, operations and flight maintenance. The training costs for pilots, ground crew and mechanics are lower, because there’s only a single aircraft to learn. Purchasing, provisioning, and other operations are also vastly simplified, thereby lowering costs. Consistent aircrafts also enables Southwest to utilize its pilot crew more efficiently.
E-Ticketing
The idea of ticketless travel was a major advantage to Southwest because it could lower its distribution costs. Southwest became electronic or ticketless back in the mid-1990s, and today they are about 90-95% ticketless. Customers who use credit cards are eligible for online transactions, and today Southwest.com bookings account for about 65% of total revenue. The CEO Gary Kelly thinks that this idea would grow further and that he wouldn’t be surprised if e-ticketing accounted for 75% of Southwest’s revenues by end of 2005. In the past, when there was a 10% travel agency commission paid, it used to cost about $8 a booking. But currently, Southwest is paying between 50 cents and $1 per booking for electronic transactions that translate to huge cost savings.
2. Employee and Labor Relations
Southwest has been highly regarded for its innovative management style. It maintains a relentless focus on high-performance relationships and its people-management practices have been the key to its unparalleled success in the airline industry.
Mission Statement
To Our Employees “We are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer.”
The Southwest mission statement shows that the company has a strong commitment to its employees. The company affords the same respect to its employees that is provided to its customers. The Southwest mission statement is unique in that it recognizes the importance of its employees within the broader business strategy, which emphasizes superb customer service and operational efficiency. The employees reciprocate the respect, loyalty and trust that Southwest demonstrates. Southwest employees are known for their loyalty, dedication, attitude and innovation. The employees are the distinguishing factor between Southwest and the rest of the airline industry.
Hiring
Southwest hiring policy is unique not only within the airline industry, but also more broadly, and revolves around finding people with the right attitude that will thrive in the Southwest culture. Extensive procedures are employed to hire for positive attitude and dedication. Those who do not posses those qualities are weeded out. Colleen Barrett, a non-operational officer at Southwest, states that
“Hiring is critical, because you cannot institutionalize behavior. Instead, you must identify those people who already practice the behaviors you are looking for. Then you can allow Employees to be themselves and make decisions about Customer service based on common sense and their natural inclinations.” 1
Recruiting and interviewing at Southwest is a two-step process. The first step is a group interview, conducted by employees, where communication skills of potential candidates are evaluated. The next steps in this process are one on one interview, where the candidates’ attitudes and orientation toward serving others are evaluated. These hiring criteria apply to all job functions since all Employees at Southwest play a customer service role. A critical part of Southwest operational strategy is that every job at Southwest is a customer service position, whether it directly applies to the customer or whether it is internal.
The table below shows that even though Southwest is the most heavily unionized airline, at approximately 80%, that contract negotiations between the unions and Southwest are much shorter in duration than of the other major carriers. This shows the quality of relationship that Southwest has with its employees and with the unions that represent them.
Culture
Southwest was created as a different kind of company and from its beginnings a unique culture was nurtured. In 1990 Colleen Barrett formed the Southwest Culture Committee. This is unique within the industry and among all large companies. The committee also has a mission statement:
“This group’s goal is to help create the Southwest spirit and culture where needed; to enrich it and make it better where it already exists; and to liven it up in places where it might be “floundering”. In short, this group’s goal is to do “whatever it takes” to create, enhance, and enrich the special Southwest spirit and culture that has made this such a wonderful Company/Family.”
It is this unique approach to company values that has created a culture that differentiates itself from others. Southwest’s culture is the reason why it is successful.
3. Customer Service
The Mission of Southwest Airlines The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.
Approach
Herb Kelleher, founder of Southwest, has been quoted as saying that “We’re in the Customer service business; we just happen to provide airline transportation”.2 Award winning customer service is a distinguishing characteristic of Southwest and it is referred to internally as “Positively Outrageous Service”. It means that from the top to bottom everyone does whatever he or she can to satisfy the customer. This includes Herb Kelleher, who has been known for helping out baggage handlers on Thanksgiving. It is through emphasizing the customer and employee that Southwest is able to differentiate itself from others in the airline industry. On a more technical level, each employee or group within Southwest has his or her own customer. This means that every employee ‘serves’ in one way or another despite not being directly involved with the passenger. The mechanic’s customer is the pilot and the caterer’s is the flight attendant.
Results
It can be said that the “Positively Outrageous Service” that is unique to Southwest “is not the result of a department, or a program, or a mandate from management. It is not secondary to the product; it is the product.” This approach creates the conditions where Employees are more likely to treat customers in ways that distinguish the company from others. There are numerous accounts of passengers who have received exceptional treatment from Southwest employees.
The question that needs to be answered is how Southwest’s customer service is different and why? Is it common for customers of other airlines to rave about their special service? The answer is that it is not. While Southwest does not have a monopoly on people who are kind and who are willing to go above and beyond to satisfy a customer, such behavior is nurtured at Southwest to a much greater extent.
It can then be concluded that the customer service that is inherent to Southwest is a part of its culture. This culture is supported through employee encouragement to do the extra to satisfy the customer. This approach inspires people who would ordinarily only on occasion go out of their way to help someone, to become consistent performers that offer exceptional service all the time. Southwest employees are what differentiate its customer service from the other airlines.
4. Technology
Southwest utilizes technology in many ways to fulfill its business objectives and maintain its efficient operations. According to its CEO, technology equals productivity. Launched in 1996, ticketless travel was first introduced by Southwest. On May 1st 2000, Southwest Airlines introduces “SWABIZ,” a portal that assists company travel managers in booking and tracking trips made through its web site www.southwest.com. There are many new technology initiatives being undertaken currently and some are in the pipeline.
Bar codes in Boarding Passes
Southwest Airlines has invested $12 million during the past three years to standardize corporate and terminal operations on about 10,000 Dell OptiPlex desktop and Latitude notebook computers according to its company executives. Southwest wanted to replace its well known, brightly colored plastic boarding passes with an electronic system with bar-code paper boarding passes. So it installed about 350 touch screen ticket readers powered by Dell OptiPlex desktops. The bar code gives Southwest more information to automatically reconcile the number of boarding passes with the number of passengers that actually board the plane.
Although the technology will help Southwest Airlines remain efficient by consolidating passenger information for the company’s 3,000 daily flights, there were concerns it could lengthen the time to get travelers on board. However it was found that scanning each bar code on the boarding passes didn’t increase or shorten boarding schedules, but it did take minutes from administrative processes, such as looking up customer records. The new paper bar code system is giving Southwest ticket agents the ability to match a customer record within having to scroll through and log into multiple software screens. The process is much more automated. Once the bar code on the boarding pass is scanned at the terminal gate it checks off the person from the passenger list in real time.
The old process was manual that involved finding the information, scrolling through several software screens from reservations to check-in to boarding. The bar code hardware to scan the boarding passes has been deployed. The company is in the process of replacing customer service back-office equipment at airports including at its headquarters in Dallas.
Software Upgrades
Software applications, such as those used by clerks to check in passengers, are being replaced. Southwest Airlines’ internally written “Airport Application Suite” is expected to rollout next year as the company transitions from green screens to Window-based user interface. Similar to Wal-Mart Stores Inc., Southwest Airlines believes in developing in-house the software that runs its operations. The company uses very little off-the-shelf software. There are between 75 and 100 projects in the works each year supported by approximately 900 IT employees.
RFID
Radio frequency identification technology, a favorable alternative to bar-coding for luggage identification, is also on Southwest’s radar. It plans to test RFID technology sometime in 2006. Even though, Southwest is playing a little catch-up with other airlines such as Air Tran, Alaska and Champion Airlines, in many cases they are able leapfrog to more sophisticated applications easily having waited longer.
Challenges:
Southwest has emerged very successful, despite the most troubled times in the airline market. However, it faces new challenges in the face of increasing competition from other low fare airlines such as JetBlue, ATA airlines, America West.
Reserved Seating
Due to increasing security guidelines since September 2001, Southwest would need to prepare for assigned (reserved) seating to track its in-flight passengers. This change will involve large technology investments and may impact its gate operations negatively since the current way of unassigned seating has helped in quick gate turnarounds.
Passenger Demand
The keep-it-simple philosophy has served Southwest well. But as its own business grows and grows more complex, with plans to purchase dozens of new aircraft and an expected upsurge in passenger traffic to about 80 million boarding’s a year, the simplicity strategy that has been reflected in the airline’s IT philosophy is evolving. The CIO Tom Nealon says that “It’s time to adapt our business processes for efficiency. As our airline scales for us to provide the same kind of high-touch customer service, we have to automate a lot of things we’ve been able to do without technology previously. The challenge is doing that without conceding the customer touch.” Southwest is also aggressively pursuing customer relationship management (CRM) techniques and has applications to get insight into customer’s wants and dislikes. According to an interview with its CEO Gary Keller, Southwest has its focus on improving in two areas - customer’s airport experience and in-flight experience.
In-Flight Entertainment
In an overall effort to improve customer’s in-flight experience, in-flight entertainment is something that Southwest is currently evaluating and which JetBlue has been very successful at already because of its introduction in its long-haul flights. In comparison, Southwest has 415 airplanes to consider and that represents an investment decision at a whole new dimension. Additionally, Southwest has to consider how things may fit into their environment. At this point, 60% of its service is still very short haul. Southwest needs to be mindful of the fact that a certain approach that has been successful for its competitor may not be necessarily work to its advantage.
Franchising as a Vehicle for Economic Empowerment
WHAT IS FRANCHISING?
The simplest definition for franchising is: “A method of doing business whereby a franchisor licenses trademarks, systems and methods of doing business to a franchisee in exchange for a recurring ongoing consideration i.e. a royalty fee or a franchise management fee”.
Franchising is a form of a business by which the owner (franchisor) of a product, service, or method obtains distribution through affiliated dealers (franchisees). A franchisor is expected to offer assistance in organising, training, merchandising, marketing, and giving direction in return for a consideration.
Franchising usually involves a contractual arrangement between a franchisor (a manufacturer, a wholesaler, or a service sponsor) and a retail franchisee, which allows the franchisee to conduct a given form of business under an established name and according to a given pattern of business.
DOES FRANCHISING IMPLY THAT YOU ARE SELF-EMPLOYED?
In some respects, NO. You still have to answer to someone else and follow his or her direction. You don’t really own the business; you own the assets you’ve purchased in order to establish the business. If you consider that you are in business for yourself, but not by yourself, then YES…you are self employed.
FRANCHISING IS THE FASTEST GROWING BUSINESS ECONOMIC MODEL
Globally, franchising is the most popular and the fastest growing business economic model. It assembles business relationships that allow people to share brand identification, a proven method of doing business and a successful marketing and distribution system. When most people think of a franchise, they think fast food. Franchising, however, long ago grew beyond the burger and fried-chicken shops. Today franchise concepts span over 70 different product and service sectors, including such businesses as auto-repair shops, children’s art centers, fitness clubs, law & consulting practices, and many home based businesses. The franchising business model has turned into a major economic engine globally and it is one that’s providing increasing opportunities for companies and individual entrepreneurs alike.
For South Africa, and for Africa as whole, franchising is a perfect vehicle for the economic empowerment of the historically disadvantaged sectors of the population. This brings with it the need for the establishment of more franchises. That is, franchising businesses that are established, that has a unique offering and where the method of doing business has been tried, tested and perfected. Apart from empowering companies and individuals, there should be a particular focus on identifying labour intensive businesses that have the potential to make a significant and positive impact on employment creation as well as those businesses that have a product or service offering for export markets with the ultimate objective of booming local economies.
THE ADVANTAGES OF FRANCHISING
1. An investment is usually made into a proven business.
2. A faster start up, developing a customer base quicker, and experiencing profitability quicker are key attractions.
3. There is a known quantifiable proven formula.
4. Owner transition and training is available, and there is full control of strategic direction and ability to thoroughly review past records and company history.
5. The biggest advantage of franchising appears to be the reduction of risk you will be taking for your investment.
6. You also usually get better deals on supplies because the franchise company can purchase goods and supplies in bulk for the entire chain, and then pass that savings on to you and the other franchise units.
7. Customers are dealing with a “known” rather than an “unknown.”
THE DISADVANTAGES OF FRANCHISING
1. Some franchises can be very expensive. Franchisors expect you to follow their operations manuals to the letter. No flexibility on your part.
2. Buying a franchise is like marrying someone you haven’t known for long.
3. The relative security offered by franchisors may be exaggerated. Some franchisors are in for a quick buck.
4. Franchising as a pyramid scheme. Some companies try to make money by just collecting franchise fees, and won’t spend the time or money necessary to help their existing franchisees succeed.
5. Overcharging for supplies. Some franchisers may require you to buy supplies exclusively from them at inflated prices.
6. Fees for unnecessary training.
7. Misleading sales presentations. Some franchisors over-promise the moon in their pitches to prospective franchisees
BUSINESS OWNERS: IS YOUR BUSINESS FRANCHISE READY?
An appropriate first step in the decision to franchise is an examination of the question of whether or not a business concept is actually “franchisable.” Any organization seriously considering franchising should undertake this analysis before implementing a franchise strategy. While it is impossible to determine the franchisability of a business concept without a significant amount of analysis, most franchise experts are guided by the following criteria to assess the readiness of a company for franchising and the likelihood that it will achieve success as a franchisor.
1. Credibility: To sell franchises, a company must first be credible in the eyes of its prospective franchisees. Large organisation size, number of outlets, years in operation, strength of management are key credibility factors.
2. Differentiation: In addition to credibility, a franchise organisation must be adequately differentiated from its franchised competitors. This can come in the form of a differentiated product or service, a reduced investment cost, a unique marketing strategy, or different target markets.
3. Transferability of knowledge: The next criterion is the ability to teach a system to others. To franchise, a business must generally be able to thoroughly educate a prospective franchisee in a relatively short period of time.
4. Adaptability: Next, measure how well a concept can be adapted from one market to the next. Some concepts do not adapt well over large geographic areas because of regional variations in consumer tastes or preferences.
5. Refined and successful prototype operations: A refined prototype is necessary to demonstrate that the system is proven, and is generally instrumental in the training of franchisees. The prototype also acts as a testing ground for new products, new services, marketing techniques, merchandising, and operational efficiencies.
6. Documented systems: All successful businesses have systems. But in order to be franchisable, these systems must be documented in a manner that communicates them effectively to franchisees.
7. Affordability: Affordability merely reflects a prospective franchisee’s ability to pay for the franchise in question. This criterion is as much a reflection of the prospective franchisee as it is of the actual cost of opening a franchise.
8. Return on Investment: This is the real acid test. A franchised business must, of course, be profitable. But more than that, a franchised business must allow enough profit after a royalty for the franchisees to earn an adequate return on their investment of time and money.
9. Market trends and conditions: While not an indicator of franchisability as much as general indicators of the success of any business; these trends are key to long-term planning. Is the market growing or consolidating? How will that affect your business in the future? What impact will the Internet have? Will the franchisee’s products and services remain relevant in the years ahead? What are other franchised and non-franchised competitors doing? And how will the competitive environment affect your franchisee’s likelihood of long-term success.
10. Capital: While franchising is a low-cost means of expanding a business, it is not a “no cost” means of expansion. A franchisor needs the capital and resources to implement a franchise program. The resources required to initially implement a franchise program will vary depending on the scope of the expansion plan. If a company is looking to sell one or two franchised units, the necessary legal documentation may be completed at low costs. For franchisors targeting aggressive expansion, however, start-up costs can run into Hundreds of Thousands and more.
11. Commitment to relationships: Successful franchisors focus on building long-term relationships with their franchisees that are mutually rewarding. Unfortunately, not all franchise organizations understand the link that exists between relationships and profits. Strong franchisee relationships enable the franchisor to sell franchises more effectively, introduce needed changes into the system more easily, and motivate franchisees and their managers to provide a consistent level of products and services to their customers.
12. Strength of management: Finally, the single most important aspect contributing to the success of any franchise program is the strength of its management. More often than not, new franchisors will try to take everything on themselves. In addition to absorbing several new jobs for which the franchisor has little to no time, the franchisor needs to exhibit expertise in fields in which he or she may have little or no experience: franchise marketing, lead handling, franchise sales, ad fund management, training, and multi-unit operations management.
ENTREPRENEURS: HOW TO SELECT THE RIGHT FRANCHISE
Buying a franchise can be a daunting task. With thousands of franchises in over 70 different industries available worldwide, finding the best franchise can be like finding a needle in a haystack. Moreover, the best franchise for your neighbour might be a disaster in the waiting for you. How do you invest in the right franchise?
1. Why?: First, you must ask yourself certain questions and be very objective. Why do you want to own a franchise? If it’s to get rich or to get on easy street and not have to work, then franchising will probably not meet your expectations. If you are like many people who have the dream of owning your own business (but not being on your own), being your own boss and having control of your life, then franchising may be for you.
2. Strengths: Be realistic and fully understand your strengths and weaknesses. Invest your strengths into the right type of franchise. Don’t explore every franchise opportunity. Select only those you believe co-incides with your strengths
3. Research: Compile a list of the franchises that interest you. Go through their websites and set up meetings with the franchise manager/director.
4. Disclosure Document: Study the franchise disclosure document or prospectus. Here you want to see strong financial history, experienced people in key positions, and a company that has been in business for 3 years or more, the longer the better, has a large number of outlets and has few closed or bought back.
5. Franchise Agreement: Closely examine the franchise agreement. This is the contract between you and the company. Franchise agreements are always biased in favor of the franchisor, that’s just the way it is. This can be good and bad. The company can be unfair in it’s dealings with you and the franchise agreement may allow this, on the other hand you should want a strong franchisor.
6. References: Call as many franchisees as possible. Call at least 10. Find out how they are doing. The key question is “Would you buy this franchise again?”
7. Visits: Visit personally as many operating units as possible. At least three. Often the owner or manager will be more forthcoming in person than over the phone.
8. Verify Financial Information: If everything still looks good, then contact the sales rep and get as much definitive sales information as possible. Most franchisors will not make earnings claims but they will provide information with which you may extrapolate gross sales.
9. Advisors: If everything still looks good then go for it. If you are unsure, speak to qualified advisors.
THE FIVE REASONS FRANCHISES FAIL
Generally, on a global level, 30% of small independent businesses fail within the first year, with less than 20% going beyond year 5. Franchises, on the other hand, are significantly more successful. Less than 5% of franchises fail. The reason(s) for failure could be a number of factors, most of which could have been prevented by due diligence during the early phase. The following are the main reasons franchises fail:
1. The Idea. Whether you are franchising your own company or buying into a franchise system, how the concept is received by the community is critical. While burgers seem to have universal appeal, not all food chains meet with majority approval. Also, if your business model is complicated you are in for a struggle. You want to create an operational standard that can be taught to and replicated by any businessperson. A company may be successful when run by the entrepreneur who dreamed up the concept, however, if the business model or prototype is not easily duplicated the chances for success are not so optimistic.
2. Bad Location. Ask seasoned franchisees to name one of the most important keys to a successful franchise and undoubtedly they will say, “Location, location, location.” Even with a well-branded name, if you are off the beaten path, inconveniently located or in an isolated area the opportunity to be as lucrative as possible diminishes.
3. Poor Marketing/Advertising. Many well-established and reputable franchisors have marketing and advertising funds into which franchisees contribute monetarily. Chains like McDonald’s and Subway have national campaigns, while other types of franchises may advertise on a local level. Some franchise concepts require a lot of legwork on behalf of the franchisee. Depending on the business you chose, you may have to solicit your own clients, as in technical and computer support franchises. If you are considering a concept that requires outside sales skills and you lack them, you may want to rethink your choice.
4. Competition. There are approximately 160,000 franchises in operation in the US. That means a lot of competition. If your market already is saturated with a concept you may want to consider something that still is popular but not yet tapped out. Medical spas and restaurants offering healthy choices are gaining ground among the public but there is abundant room on the business owner side.
5. Unrealistic Expectations. New franchisees are notorious for having very high expectations for their businesses. It may take 2-3 years before you see a profit and if you don’t plan for that you may sink before you have a chance to swim.
A word to the wise: If you don’t like people you should not buy a franchise. If you want to make it you have to put in long hours and work with all kinds of personalities. It’s an undeniable fact that some people are more difficult to interact with than others. As a business owner you need to be able to interact well with people from all walks of life. The ability to manage employees also is essential to the success of your business.
Navy Seal Special Operations Warriors, Dead For Nothing
Petty Officer 2nd Class Marc Alan Lee was one of the world’s most highly skilled unconventional warriors - a U.S. Navy seal. But on the morning of August 2, the 28-year-old Oregon native was detached to a conventional U.S. Army force tasked with hunting-down guerrillas in a Ramadi neighborhood where four U.S. Marines had been killed the previous week.
When a firefight erupted between the Americans (and an accompanying Iraqi force) and a band of guerrillas, one seal was wounded, shot in the cheek by an enemy sniper. In the ensuing hour-long fight, stretching over several city blocks, another seal was struck in the shoulder.
Lee, who positioned himself between the two men, provided covering fire as they were evacuated. But he was later killed by a blast of machinegun fire. Lee was the first seal to die in Iraq. His actions during the fight have been reported as “heroic,” and he has been posthumously awarded the Silver Star to go along with his Bronze Star medal (with Combat V), Purple Heart, and a Combat Action Ribbon. But some members of the Naval Special Warfare community are telling me he did not have to die, with one officer contending, “They’re burning up seal.” The problem lies in the manner in which seals and other special operators are being deployed and for what kinds of missions.
“Special Operations warriors are not dispensable assets,” says Reserve seal Commander Mark Divine, who has been to Iraq several times and was tasked with evaluating the performance of a new Marine Corps special operations force during its developmental stages in 2004. “It will take two years to replace Lee with another combat-ready seal.”
The seal community is undermanned as it is, and it is the Navy’s number-one recruiting priority.” Divine’s concerns are based on the fact that the U.S. Defense Department is looking to boost its numbers of special operators, currently totaling about 40,000, by 15 percent over the next four years. SEALs, less than 2,500 men, must increase by about 20 percent, and without reducing standards.
The Global War on Terror - with all of its backdoors and shadows and high-tech, asymmetrical, rapidly changing battle spaces - has placed an enormous demand on U.S. special-warfare units. After all, these are the guys tasked with operating in the darkest environs. Consequently, taking a smart, committed young man with an athletic bent (Lee himself was a star soccer player in high school) and transforming him into a Navy SEAL is neither cheap - about $350,000 a copy - nor easy. Most seal hopefuls are unable to pass the entry physical fitness test. And most that do pass the PFT simply don’t have what it takes to become a seal.
The attrition rate is extremely high for seals: A staggering 80 percent fail to complete the hellish six-months of Basic Underwater Demolition/seal training (BUD/S). Those who do survive BUD/S must again prove themselves in an equally demanding post-graduate period with an active SEAL Team before officially becoming seals.
Special-operations teams like SEALs - including the super-secret Naval Special Warfare Development Group (formerly seal Team Six) - the Army’s special-operations forces (from Rangers to Green Berets to Delta), Air Force special-tactics teams, and the Marine Corps’ Force Recon and the brand-new Marine Corps Special Operations Command (MARSOC) teams, are responsible for conducting special missions, including counterterrorism, hostage rescues, prisoner snatches, foreign military training, special reconnaissance, sabotage, direct action, and the targeting of enemy leaders, among other highly sensitive operations.
And many of those operations - though unknown thus never reported - have tremendous strategic relevance. “In the context of Iraq, SEALs, who comprise a fraction of the Navy’s total force, are trained to handle those kinds of missions,” Divine tells National Review Online. “Every man is a critical asset in the war on terror. So to squander a life in support of a general cordon and search operation is just wrong.”
Divine says he first witnessed such misuse of SEALs back in 2004.”The conventional commanders would send a formal or informal request to the JSOTF [Joint Special Operations Task Force] for some sniper team support, and if the guys [special operators] were not employed they would usually say, ‘okay,’” Divine says. “The [seal] Team guys did not mind because they wanted action.
“But a 24-year-old’s motivation, and then the sound battlefield judgment on the part of the special-operations force leaders are two different things altogether. SEALs will always run toward the sound of the guns. It’s up to the leaders to protect them so that they can perform the high-value missions the taxpayers put them through training for.” Former SEAL John Chalus, who had one combat tour in Vietnam and whose two sons would later serve in the Navy (one of whom was a seal), tells NRO, ” seals should not be combined with regular units unless the regular unit is used to support the special operation.”
Conventional units often provide security for special operators, setting up a perimeter around the operation and “keeping the bad guys at bay,” says Chalus. And of course, special operators often conduct reconnaissance and gather intelligence for conventional operations. Richard Marcinko, the founder and first commander of seal Team Six, as well as the best-selling author of the Rogue Warrior book series, compares employing SEALs in a conventional capacity to “driving a Ferrari across the desert like a dune-buggy.”
It is a “waste of training,” Marcinko tells NRO. “The conventional force commanders use them for conventional missions for two primary reasons. First, they know they have a mature warrior [in a SEAL]. He’s been to a lot of schools, and he’s not some 19-year-old kid with limited training. Second, using SEALs or other highly trained Spec Ops guys protects whoever is in charge of the conventional operation. It’s kind of a political cover you’re thing to say, ‘hey, I sent in the teams that wouldn’t embarrass me.’”
Conventional commanders know SEALs will almost always kill or capture any bad guys encountered. Commanders also have an appreciation for the war-fighting skills special operators like SEALs might impart to conventional soldiers and sailors. And the SEALs themselves are always willing to pitch in on missions outside of their traditional roles. “Particularly the young kids who have just come out of BUD/S,” says Marcinko. “They’ve never been in combat, and they want to test what they’re made of.”
Some seals have told me that actual operations seem not nearly as tough as their training. But unlike a gun battle, almost no one dies in training, even training as high-speed and dangerous as that of the seals. A former U.S. Marine infantry leader, W. Thomas Smith Jr. writes about military issues and has covered conflict in the Balkans and on the West Bank. He is the author of five books, and his articles appear in a variety of publications.
Discovering the Wide-Range Possibilities of Operations Management
While a multitude of executive positions are found in the business world, without the employees in the operations management industry - the efficiency and effectiveness of business operations would cease to exist. The responsibility of overseeing the growth and processing of goods and services lands on the shoulders of operations management, often found in large companies with the same sort of activities seen on a smaller scale as well. Job opportunities are seen in a variety of areas, including retail, wholesale goods, and manufacturing. To learn more, consider some of the jobs listed below that fit this particular field:
Risk and Claims Management Coordinator
What can five years of experience in risk assessment and management; insurance coverage and claims; and workman’s comp claims get you in the work world - a position as a Risk and Claims Management Coordinator. With a salary typically found between $35,000 to $45,000 per year, it pays to display exceptional communication skills (both oral and written), which come in handy with the many levels of personnel, management, and other groups you may come in contact with. A minimum of a two-year associate’s degree is required with computer skills in Word, Excel, and Outlook. An interviewer will also look for skills in operational risk analysis, risk management, and project risk assessment.
Computer Operations Manager
The planning, directing, and management of the day-to-day operations of a computer operations department become the responsibility of a Computer Operations Manager. The establishment of department policies and procedures is also connected to this job, as well as the responsibility of operating mainframe and peripheral information system equipment. These managers also create schedules concerning the usage of each piece of equipment on the job, which may require an associate’s degree in a related area. At least eight years of experience in the field is needed, as it is not uncommon to manage a group of computer operators while on the job. A typical salary for this position is seen between $57,469 and $116,984.
Construction Management Director
The daily activities of a construction company becomes the duty of a Construction Management Director, who is in charge of the supervision of all employees working on a particular construction assignment, including administrative personnel, construction and project managers, and staff in the field. This position also assumes the role as primary customer contact. A bachelor’s degree with at least ten years of experience in the field is expected, where a candidate should showcase a familiarity with an array of field concepts, practices, and procedures. Top management often looks to the director for updates and guidance. A yearly salary for this career choice is between $73,808 and $150,281.
Operations Supervisor
As an Operations Supervisor, the supervision of daily activities within an operations unit will center on operational polices and procedures. They are in charge of handling the decision-making regarding workflow and scheduling. With a high school diploma (or its equivalent), one can apply for this position when they have racked up three to five years of experience in the field or in a related area. An Operations Unit Manager usually oversees his or her progress. It is not uncommon to see this position pay between $30,458 and $49,568 on a yearly basis.
Investment Operations Management Manager
An Investment Operations Management Manager becomes an important part of the investment management group attached to a particular company. They are put in charge of daily management duties, as they review investment strategies, seek out new opportunities, and recommend changes in investment operations in order to make significant improvements in profit. A bachelor’s degree in area of expertise and at least seven years of experience in the field is required. When considering this career choice, make sure you are aware that a variety of tasks and the leadership of others is vital to your success. An average yearly salary is seen between $74,783 and $125,303.
Diving Operations Manager
This type of operations manager is expected to watch over various employees, such as the Project Managers, Facilities and Equipment Manager, and Vessel Manager of a particular company. When working for a commercial diving business, they ensure that offshore projects have enough people working with enough equipment. They assess the performance level of the job to make sure client expectations are being met. Client relations are also a key component to their job description. Depending where the company is based, diving experience in a certain region is often required. Usually, the salary for this job position is negotiable depending on experience.
Tip on Conducting an Operations Management Job Search
When looking for decent employment in this, you should seek out companies with a reputation for being one of the largest providers of a specialized product or service, such as Aerotek, which is known for supplying North America with solid, specialized personnel and management services to the Department of Energy, utilities business, engineering and consulting firms, as well as the commercial nuclear industry.
Agreements in Franchising and Confidential Operations Manual And Specifications
How important is it to have the confidential operations manual in a franchise company? Indeed, it always amazed me how many franchise companies would start out without ever having written their confidential operations manual. They may have had 20 years experience in a small business model, identical to the one they wish to franchise, however they had never written to manual.
I recommend “E-Myth” By Gerber and perhaps this will address some of what I am trying to say. The consistency and integrity of a franchise system and its brand-name rely on a duplicatable method of doing business. The confidential operations manual and it’s specifications must be followed consistently by each franchise outlet. In fact, this issue is so important that I have copied the clause in my franchise company’s franchise agreement, which addresses this issue;
3.7 Confidential Operations Manual And Specifications
For Initial And On-Going Equipment, Inventory And Supplies Our industry is highly competitive. Continuous efforts to maintain, update and improve the System are essential. The developments Franchisor will make for the benefit of the System as a whole are contemplated throughout the term of this Agreement. The continuous development of the System in this manner is an important and beneficial aspect of the relationship Franchisee wants to have with Franchisor. Franchisor agrees to provide Franchisee with one password to access the loaned copy of The Car Wash Guys Confidential Operations Manual once Franchisee has paid to Franchisor the Initial Fee, in full. The Confidential Operations Manual contains the System, including specifications, standards, operating procedures, accounting and bookkeeping methods, marketing ideas, inventory requirements and control techniques, wash unit plans and specifications, equipment and sign requirements, public relations and other rules that Franchisor may prescribe from time to time. The Confidential Operations Manual is and will remain confidential and Franchisor’s exclusive property. Franchisee will not disclose, copy or duplicate any part of the Confidential Operations Manual for any reason.
Franchisor develops minimum requirements for wash products, chemicals, merchandise, inventory, supplies, stationary, business forms, advertising, decor, wash unit plans and specifications, materials, equipment and signs, among other things. These requirements are outlined in the Confidential Operations Manual. Franchisee will purchase all wash products and inventory items specified in the Confidential Operations Manual. Franchisor may amend the Confidential Operations Manual, including changes, which may affect minimum requirements for the franchise operations. Franchisee will strictly adhere to the requirements of the Confidential Operations Manual as Franchisor amends it from time to time. Franchisee will implement immediately all changes at Franchisee’s cost, unless Franchisor otherwise specifies. Franchisor reasonably may restrict Franchisee from producing, stocking, and selling certain items and goods, from time to time, as specified in the Confidential Operations Manual.
Franchisee may purchase some wash equipment, inventory, and supply items from Franchisor, if offered, at Franchisor’s then current prices. If Franchisee desires to purchase any items from Franchisor, payment arrangements must be made when Franchisee places their order. The items Franchisor may offer include among other things equipment, merchandise and supplies that bear the Service Marks. Franchisee must purchase all wash products, supplies, chemicals and inventory items from Franchisor, if offered, or suppliers Franchisor approves from time to time.
Franchisor will not be liable to Franchisee if Franchisor is unable to deliver equipment, inventory, chemicals or supply items to Franchisee because of any loss, damage, or delay caused by strikes, riots, fire, insurrection, war, elements, embargoes, national or local holidays, failure of carriers, inability to obtain transportation facilities, forces majeuer, acts of God or of the public enemy, or any other cause beyond Franchisor’s control.
Franchisee must purchase all equipment, chemicals, products, supplies and materials required for the operation of the Franchise from manufacturers, vendors, suppliers or distributors approved by Franchisor. All specifications that Franchisor requires of Franchisee and lists of approved vendors and suppliers will be included in the Confidential Operations Manual and the Franchisee Forum intranet system. Franchisor will use their best judgment to set and modify specifications in order to maintain the integrity and quality of the franchise system.
Additional car wash trucks/units and related equipment must be purchased through Franchisor, if offered, or from a list of approved vendors. Franchisee understands that the prices of such equipment bought from Franchisor may be raised or lowered by Franchisor from time to time due to increases or decreases in prices by Franchisor’s vendors. Franchisee further understands that items Franchisee buys from vendors might also change in price.
Upon advance written request, Franchisee may request Franchisor approval to obtain equipment, chemicals, products, supplies or materials from sources that Franchisor has not previously approved.
Franchisor requests that Franchisee seek out manufacturers, vendors, suppliers and distributors in their Marketing Area to continually expand the approved vendors and products available to franchisees systemwide. Franchisor additionally requests that Franchisee seek out new services, concepts, technologies, materials and methods from their Marketing Area that can be introduced to continually update, improve and expand the System and keep all franchisees system wide on the leading edge.
Franchisor may require Franchisee to give Franchisor sufficient information, photographs, MSDS sheets, drawings, samples, and other data to allow Franchisor to determine whether the items from these other sources meet Franchisor specifications and standards, as established from time to time. These specifications and standards will relate to quality, texture, composition, absorbency, strength, finish and appearance, and the suppliers’ capacity and facility to supply Franchisee’s needs in the quantities, at the times, and with the reliability necessary for efficient operation. Franchisor may require that samples from any supplier be delivered to a designated independent testing laboratory for testing prior to approval and use. Franchisee will reimburse Franchisor for the actual cost of the tests. Franchisor will license any supplier, that can meet or exceed Franchisor quality control and confidential formula requirements and standards, for a reasonable license fee, to produce and deliver products to Franchisee but to no other person.
Franchisor confidential manufacturing requirements, equipment, designs, systems and formulas will be disclosed to potential suppliers only after Franchisor has received reasonable evidence that the proposed supplier is trustworthy and reputable; has the capacity to consistently adhere to Franchisor standards, requirements and testing procedures; will maintain the confidentiality of the designs, systems and formulas; and will adequately supply Franchisee’s reasonable needs. Franchisor will not unreasonably withhold approval of a supplier Franchisee proposes. Franchisor will notify Franchisee in writing of the approval or disapproval of any supplier Franchisee proposes.
From time to time Franchisor or their agents may inspect any approved manufacturer’s, supplier’s or distributor’s facilities and products to assure proper production, processing, packaging, storing, and transportation. Permission for inspection will be a condition of Franchisor’s continued approval of any manufacturer, supplier or distributor. Should Franchisor determine from any inspection that a manufacturer, supplier or distributor fails to meet Franchisor’s specifications and standards, Franchisor will give written notice describing this failure to Franchisee and to the manufacturer, supplier or distributor, together with a notice that unless the failure or deficiency is corrected within thirty (30) days, the manufacturer, supplier or distributor will no longer be approved.
All initial transactions with vendors must be negotiated by Franchisee prior to the opening of the Franchised Business. Franchisee must purchase the required items through Franchisor’s approved vendors and sources, have taken receipt of, installed in Franchisee’s mobile car wash truck/unit and have fully operational all required items within one hundred thirty-five (135) calendar days of signing the Franchise Agreement. Franchisee will find all specifications for the initial equipment in the Confidential Operations Manual and the Franchisee Forum intranet system. If Franchisee does not have all required equipment ready within one hundred thirty-five (135) calendar days due to circumstances beyond Franchisee’s control, Franchisee agrees to borrow a loaner unit to start the Franchised Business if one is available and Franchisor offers it to Franchisee.
Transport Phenomena and Unit Operations: A Combined Approach
The idea of integrating transport phenomena and unit operations is a laudable one, inasmuch as these subjects are not mutually exclusive, as is too often assumed, but are indeed continuous and complimentary. This book addresses a broad range of topics within the general areas of fluid mechanics, heat transfer, mass transfer, staged operations and mechanical separations. It is aimed at the uninitiated student, and includes an impressive array of problems at the end of each of the fourteen chapters, as well as a large number of worked examples. However, the expectation that one book of moderate length can do adequate justice to such a broad range of topics is a bit overoptimistic. Due to the extensive breadth of coverage, the depth is quite limited, to the extent that developments, derivations and explanations of the origin and significance of many of the relations presented tend to be cursory or superficial and even, in some cases, misleading. There are also a number of errors or misprints that, hopefully, will be corrected in subsequent printings.
The “transport” components of the book (i.e., transport coefficients and the microscopic conservation equations for molecular transport) comprise a relatively small part of the book, which is probably in suitable proportion to the fraction of practical systems amenable to analysis by these methods. The vast majority of the book is devoted to more-or-less classical unit-operations subjects. These
include: incompressible flow in conduits; packed beds; mixing; conduction, convection, boiling, condensing and radiation heat transfer; heat exchangers; diffusion and convective mass transfer; equilibrium staged operations, including binary distillation (with a brief discussion of multicomponent distillation), packed absorption and extraction columns and leaching; filtration; centrifugation; sedimentation; and cyclone separations.
The material is mostly classic and the methods simplified based on graphical or empirical tools. Some of the material is current, but some is also outdated, with better or more accurate methods being available. For the beginning student or the non-chemical engineer, this book does provide a good introduction to a wide range of chemical engineering related topics, but should not be construed as the most complete or current treatment of the subjects covered.
Onex expected to bid for ACE unit
Onex Corp, a Canadian leveraged buy-out company, is reportedly planning to make a bid for the maintenance unit of ACE Aviation Holdings Inc.
Onex would like to privatise the unit, according to Canadian newspaper the Globe and Mail.
The newspaper, citing investment bankers and sources close to ACE’s Air Canada, said Onex was likely to participate in the auction. ACE had reportedly abandoned the idea of an initial public offering (IPO) for the unit because revenues of the maintenance operations are too variable.
Analysts expect the sale to fetch as much as CAD900m.
In addition it has been suggested that Onex may be a potential bidder for Australia’s Qantas Airways, together with private equity partners in Australia and the United States.
Little Community Has Large Anti-Gang Unit
The suburban Sacramento community of Elk Grove is playing a key role in fighting gangs that have created havoc in Central California.
Elk Grove’s attraction as a community of new and affordable housing has brought a population boom, which city officials claim has made it the fastest growing municipality in Califoma with a population of more than 130,000 including 60,000 youths.
Along with the bright new homes and families has come a gang problem that is also new to a formerly sleepy agricultural community that was incorporated only six years ago.
With the drug and property crime rate and youth gang activity growing rapidly-police have identified 226 gangs with at least 6,000 members-the Elk Grove Police Department now has the largest anti-gang unit in Sacramento County with two sergeants and 14 detectives.
To guide the unit, Police Chief Robert Simmons has adopted a strategic plan for the department that has provisions for outreach programs to prevent gang and drug crimes as support for enforcement.
Simmons created a Street Crimes Unit that focuses on gang, drug and vice crimes and recently formed a canine unit.
The Street Crimes Unit is the central repository for gathering and maintaining all gang intelligence collected from officers throughout the department and for utilizing this information in investigations, and crime prevention.
The Street Crimes Unit is also responsible for tracking and investigating all gang-related crimes in the City of Elk Grove.
The unit is responsible for validating gangs, gang members and their associates to strengthen evidence for prosecutors.
Besides operations of the unit, the chief has proposed or put into effect other programs such as helping youths remove gang tattoos and counseling youths between the ages of 12 and 21 on ways to disassociate themselves from gang membership.
In addition to the police efforts, the Elk Grove Unified School District has launched a series of seminars for parents, students and teachers in response to youth violence.
Educators became more cooperative with police following an incident in which a group of gang members attacked a coach and several players after a game and the murder of a teenager in January that remains unsolved, but appears to be gang-related.
Unit Will be First in Air Guard To Provide ‘Air Base in a Box’
A Kentucky Air National Guard unit will soon be the first Air Guard outfit specifically designed to swiftly set up and run an emergency airfield.
The 123rd Contingency Response Group (CRG) will carry on its planes everything necessary to operate in a remote location, including all the personnel and equipment needed to control air traffic, load and unload aircraft and provide security and housing.
Calling it an “air base in a box,” officials announced creation of the unique unit Nov. 28 during a ceremony at the Kentucky Air Guard Base in Louisville.
“You will be the ‘light on’ in great times of need,” Gov. Ernie Fletcher told those in attendance.
The CRG will be able to respond within 400 miles of Kentucky-including the East Coast and Gulf Coast and beyond St. Louis-within two hours, said Maj. Gen. Donald C. Storm, the state’s adjutant general.
The unit is expected to be operational in June for the start of the next hurricane season, will also be available for overseas operations, he said.
It will partner with the 615th Contingency Response Wing at Travis Air Force Base, Calif., which the Air Force activated in 2005.
Kentucky Air Guardsmen said the mission fits their skill set.
“One of the drawing cards to bring this mission to our particular unit is that all the specialties that are required for a CRG already reside within the 123rd Airlift Wing,” said Col. Mark Kraus, 123rd Airlift Wing commander.
“It will be an easy transition for us to just roll folks from within the wing over to this group to basically provide this capability in a very short period of time,” he said.
The wing boasts the only Air Guard’s special tactics squadron containing combat control and pararescue. It also has airmen experienced in expeditionary command and control and medical operations.
Community Bank unit to acquire Texas company
The employee-benefits unit of DeWitt-based Community Bank System, Inc. (NYSE: CBU) plans to bolster its staff and expand its business lines with the acquisition of a Texas company.
The Utica-based subsidiary, Benefit Plans Administrative Services, Inc. (BPAS); will close on its purchase of Hand Benefits & Trust, Inc. of Houston sometime in the second quarter of this year. BPAS is an employeebenefits consulting and administration co company with clients throughout the country.
It currently employs 100, and the addition of the 50 employees from Hand Benefits was one of the main reasons for the deal, says Barry Kublin, president of BPAS. Hand Benefits provides employee-benefit-plan administration and trust services.
“have had double-digit growth for nine consecutive years,” Kublin says. “We needed Houston just to support our organic growth here. We have 300 clients just in Puerto Rico.”
BPAS has clients, which include Fortune 500 companies, in 32 states. The firms did not release financial terms of the transaction.
BPAS is retaining all of Hand Benefits’ employees.
Having a presence in the Southern part of the country will help BPAS’ business there, Kublin says. In addition to Utica, the firm has an office in Pittsburgh. Hand Benefits’ Houston office will remain open.
“[Clients] prefer localized consulting services,” he says. “That doesn’t mean you have to be in their backyard, but somebody in Oklahoma would probably prefer to have someone in Texas they can talk to.”
Hand Benefits also brings new two lines of business to BPAS. The firm will now offer flexible-spending accounts and collective-investment-fund services, a type of mutual-fund administration.
In 1939, the late Thomas Hand founded Hand Benefits & Trust, Inc. after working in the pension industry. His son William Hand succeeded him in 1966.
Today, W. David Hand is president and CEO and Stephen Hand is senior vice president.
Neither could be reached for comment on the deal, but in a letter posted on the company’s Web site, David Hand said the company will operate under the same name and that both he and Stephen Hand will continue to lead the firm.
“We are looking forward to being able to provide our customers with more advanced technology and services once our acquisition is complete,” David Hand wrote in the letter. “In addition to their strong capital commitment, BPAS is a leader in product development and will provide us with the tools we need to greatly enhance our 401(k) offering, and defined-benefit plan Web technology.
Community Bank’s employee-benefits administration and consulting operation is its fastest growing financial-services business: It accounts for 60 percent of Community Bank’s total financial-services revenue, according to the bank.
Employee-benefits work generated $13.2 million in revenue at the bank in 2006, compared with $11.2 million in 2005. The acquisition of Hand Benefits will give BPAS annual revenue of more than $20 million.