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FAST LANE -
November 2000
The 5th U.S. Circuit Court of Appeals overturned a previous judgment and ruled that Louisville pizza giant Papa John’s doesn’t have to abandon its “Better Ingredients, Better Pizza” slogan, nor pay $468,000 in damages to Pizza Hut. And just like in their ads, both companies claimed victory in the outcome. The court did find the Papa John’s ads misleading, but one of the three appeals judges, E. Grady Jolly, wrote that the ads weren’t necessarily fooling any consumers in and of themselves. “Just because people get the message which company executives want them to get does not mean they relied on that message to choose their pizza,” he wrote. Papa John’s took a pretax charge against earnings of $6.1 million in 1999 to reflect a portion of what it would cost to change the slogan should the appeal be unsuccessful. Now, after traversing the semantic mine field of advertising “puffery” in that battle, Papa John’s has entered another fray involving another thin line – that between trade secrets and general business knowledge. Claiming violation of trademark and fair competition laws, the company has sued the 11-store Pizza Magia chain. Pizza Magia was founded in Lexington by Bradley Hamilton (a former Papa John’s employee) and then sold to current president and CEO Dan Holland, a former president of Papa John’s who left in 1995. Papa John’s also charges that Hamilton and Kevin Stiff, a franchisee, violated non-compete clauses after leaving Papa John’s. Among the trademark claims Papa John’s has made are its thick and wide crust, toppings under the cheese and free garlic sauce. Holland told Business First in May that the only similarity between the two restaurants is that both deliver. Recently he sold one of his Hoops restaurants to a small independent competitor – the Louisville Pizza Company – in order to better concentrate his efforts on his own fledgling pie chain. Papa John’s outnumbers the smaller company by 2,462 restaurants, as well as operating eight company-owned and 205 franchised Perfect Pizza shops in the United Kingdom. At the company’s annual meeting in May, president Blaine Hurst anticipated growing earnings by 25 percent over each of the next two years, and leaders guessed that the world market could support as many as 6,400 stores. Pizza Magia was aiming for 125 stores initially, but has raised enough capital to pursue up to 150 stores by the end of next year. At the same time Papa John’s is claiming infringement on its thick crust, it’s debuting a new thin crust pizza in a national advertising campaign. “Many customers don’t know we offer a thin crust pizza. We thought it was time to tell them,” said company CEO and founder John Schnatter. Curiously, at the stockholders meeting earlier this year, Schnatter identified the thin crust of Donatos pizza (based in Columbus) as a market differentiator: “It’s a different animal than Papa John’s,” he told the Courier-Journal. LEXINGTON Because of gas rationing during World War II, many Kentucky horse breeders couldn’t afford to transport their yearlings to the big sale in Saratoga (launched by Hal Price Headley and Fasig-Tipton in 1916), so they decided to start up an auction right at Keeneland. Good idea. After breaking its all-time record for yearling sales receipts (set last year) in the first five days of its 13-day September sale, Keeneland merely loosened the reins and held on for the ride as the momentum of a healthy market lasted all the way to the finish line. Included in the final tally were 13 yearlings that sold online for over half a million dollars. Here’s how the totalized numbers came up:
By the way, the average yearling price for that first auction in 1943 was $5,231. EASTERN
KENTUCKY Eastern Kentucky University and Kentucky Highlands Investment Corporation are sponsoring the New Ventures Initiative Business Plan Competition, offering seed fund prizes to the top three entrepreneurs willing to submit their ideas and locate their businesses in the Empowerment Zone of Clinton, Jackson and Wayne counties. The plans must be submitted by Jan. 15, and finalists will then make presentations to judges and venture capitalists at The Center for Rural Development in Somerset. In other CRD news, the center received a $500,000 grant from the Kentucky-happy U.S. Economic Development Administration to promote and market tourism along the region’s highway corridors, which CRD executive director Hilda Legg called the Kentucky Highlands and Lakes National Heritage Area. That same federal agency recently awarded more than $791,000 to Owsley County, the City of Booneville and the Booneville/Owsley County Industrial Authority to provide water service to the Lone Oak Industrial Park. The EDA is largely funded by appropriations legislation written by U.S. Rep. Hal Rogers. STATE According to the newly released “State of the South” report issued by Chapel Hill, N.C.-based nonprofit research firm MDC Inc., Kentucky gained 543,000 jobs between 1978 and 1997. While that seems like a healthy growth rate (33 percent), it lagged behind the South as a whole and the nation (42.6 percent) over that same period. What’s more, the state’s population grew only 8.2 percent over that time, while the nation’s increased 20.5 percent. But it’s not all about lagging behind. The state was led by strong job growth rates in Louisville and Lexington – 31.4 percent and 54.4 percent, respectively. While job losses in the Commonwealth basically mirrored national trends (military, apparel, etc.), job growth in the motor vehicle/transportation equipment sector grew by an impressive 132 percent while the nation as a whole lost 8.3 percent of those high-paying jobs. Health services and business services jobs in Kentucky grew 119.9 percent and 280.9 percent respectively which also outpaced the nation as a whole. The Commonwealth’s air transportation sector exploded by 1,438 percent. (Can you say “hub”?). And as the economy has diversified, so has the ownership of its businesses. Only about 100 foreign-owned enterprises operated in the Kentucky in 1978; today it’s more than 700, employing nearly 90,000 workers. In fact, one in five Kentuckians employed in manufacturing (which added more than 28,000 jobs) works for a foreign-owned firm – the highest such ratio anywhere in the South. LOUISVILLE High-speed Internet and WAN service provider Darwin Networks has successfully completed what it calls the single-largest venture capital package in Kentucky’s history – a $91 million second round of financing. The company raised $29 million in its first go-round in August, 1999. What Darwin CEO Jon Spector calls a “very distinguished and sophisticated group” of 16 investors includes ground-floor backers Chrysalis Ventures, Iceberg Ventures and Mayfair Capital of Louisville, as well as such high-profile companies as Fremont Group of San Francisco, PNC Investment Corp. and Paul Allen’s Vulcan Ventures. “This sends a message that an outstanding company with a good idea and a solid business plan can attract major funding to Louisville,” said Greater Louisville Inc. President and CEO Steve Higdon. “Darwin Networks is one of the brightest stars of our New Economy.” The company immediately changed from a vertical market organizational structure to a geography-driven model, with multi-functional offices in its 12 core cities across the country. Since the year began, employment grew from 175 to 600 nationwide and Darwin now has service agreements with more than 1,500 locations in such various sectors as office, retail and industrial; housing complexes; hotels and public Internet access kiosks. In other Louisville high-tech news, Service Net, which experienced 280 percent-plus growth since its 1996 inception, announced an agreement to market, underwrite and administer service contracts for Multiple Zone International, a Washington-based reseller of more than 100,000 computer and electronic products and services. The company joins other Service Net reseller customers like giants IdeaMall, PC Connection and MicroWarehouse. The University of Louisville and bCatalyst have launched another venture, the “Big Idea Expedition.” The search is on in Kentucky, Indiana and Ohio for a technology-based business idea that could garner up to $1 million of backing from incubator bCatalyst. Plans were due in mid-October, and the winner will be announced Dec. 20. Even those that aren’t chosen are expected to receive meaningful attention from the area’s other high-profile venture capital firms. STATE As if on cue from the aforementioned “State of the South” report, the 15-member Innovation Commission held its first quarterly meeting in September. The commission (members are listed on p. 34) is part of the overall Kentucky Innovation Act, passed last spring in an effort to wean Kentucky from its old economy and help it prosper in the new one. A yet-to-be-named Commissioner of the New Economy will preside over two $20 million funds designated for grants and loans to high-tech companies. The act calls for a $12 million fund to back research for the benefit of Kentucky business at state universities. LEXINGTON At the recent Southern Governors’ Conference, new chairman Paul Patton emphasized the need for more intensive university-backed research and development to get the South up to par in the new economy. A recent announcement by KCTCS illustrates just that type of initiative – the selection of a location for its South Central Regional Postsecondary Education Center in Clinton County. The past two General Assemblies have authorized $8.5 million toward the project, which will include such programs and features as electronics technology, mechanical systems technology, fluid power technology, computer applications and a business and industry lab. Another new kid on the block – the James F. Hardymon Building at the University of Kentucky and its Alliance for Networking Excellence – is also making strides toward the new economy by hoping to function as an on-campus incubator of sorts. Not only will students and professors work with real companies like Lexington’s ArchVision, but they’ll also observe their studies in action at the campus computer networking center located in the same building. Meanwhile, the fund raising part of the mission is off and running. UK launched its campaign in September, shooting for a total of more than $550 million, half of which has already been raised. According to the UK Development Office, a third of the total raised will go toward faculty support and 15.3 percent toward academic programs, with support for students garnering 13.5 percent and facilities receiving 11.8 percent. Western Kentucky University’s “Investing in the Spirit” campaign has passed the $50 million mark in its drive to reach $78 million. STATE Beginning just before Thanksgiving, Blue Grass Airport will offer three daily 50-minute flights to Memphis, courtesy of Northwest Airlines affiliate Express Airlines I. “We welcome Northwest’s investment in the Lexington community,” said airport executive director Michael Gobb. But that’s no comfort to Owensboro residents, who are waiting to see if the U.S. Department of Transportation will approve Northwest Airlink’s application to pull out of that airport. That would leave Covington, Louisville, Paducah and Lexington as the only Kentucky cities with commercial flights. As The Paducah Sun recounted, Owensboro is going down the same path trod by Murray, Hopkinsville, and Bowling Green in the past 25 years, as commuter airlines consolidate with fewer cities served and bigger planes. Paducah appears to be on the upswing however, having dramatically reversed ridership trends in the past five years. STATE Heading
the list of happy beneficiaries of Kentucky Economic
Development Finance Authority tax credits was Bruss North
American Inc., a subsidiary of a Germany-based company,
which will build a $32.65 million plant in Russell
Springs that makes various types of gaskets and rings for
several major auto manufacturers. The facility will
employ 95 people at the outset, and the project will
receive $18.35 million in credits.
STATE According to the Kentucky Agricultural Statistics Service, good growing conditions have resulted in the following crop forecasts: 256.3 million pounds of burley tobacco, down 33 percent from 1999, though up three percent from August forecasts (production was forecast at 411.7 million pounds for the eight-state burley belt, down 26 percent from last year); 166.4 million bushels of corn, up 34 percent from the drought-induced crop of 1999; 38.9 million bushels of soybeans, up 61 percent from 1999. National soybean production is expected to reach a new record of 2.90 billion bushels, up 10 percent from last year. FRANKLIN U.S. Tobacco Manufacturing will build a $35 million, 250,000 s.-f. factory here, expected to employ 35 people when it’s complete in five years. The company, which operates a 220-employee operation in Hopkinsville, buys nearly half of all the dark tobacco produced in the United States. In 1999, Kentucky produced about 28 million pounds of dark fired and dark air-cured tobacco and early crop estimates for this year total around 33 million pounds. The dark varieties, used for various types of chewing tobacco and snuff, don’t face the sharp decline in sales afflicting the burley market. STATE |
