Read Online Frenemies: The Epic Disruption of the Ad Business (and Everything Else) by Ken Auletta - Free Book Online Page B
Authors: Ken Auletta
Ads: Link
he sends reads ALL GOOD.
Michael was doing tax law for a firm; Ronnie was pregnant with the first of their three children. His salary was $1,500 per month, plus a percentage of any new business he brought in. He recruited twelve new clients the first month. “Being a rainmaker was easy for me,” he says. In 1977 he joined another firm, and a year later he and some friends opened their own law offices. Michael was restless. “He always wanted to be in business,” Ronnie says. “I think he felt that through some client somewhere something would happen. And it did.”
He became counsel to his law firm in 1986 when one of his clients, International Video Entertainment, at the time the largest independent home video company, distributor of such popular fare as G.I. Joe and The Transformers , enticed him to become president and COO. The company was run by Jose Menendez, one of the few individuals Kassan will not volunteer a kind word about. “He was very tough,” he says. “He had a chip on his shoulder the size of Cuba. And he used it always. ‘Good morning’ to him was adversarial.” Kassan helped engineer the sale of the company and left in 1987, two years before Menendez and his wife were famously murdered by their two aggrieved sons. He returned to his law firm, but still yearned to be a businessman.
Some years before, while attending a children’s birthday party at Harry’s Open Pit, the owner asked if he knew anything about franchise law because he wanted to franchise his rib restaurant. Michael said he did, and told him a first step with a franchise was to hire an accountant to prepare an audited financial statement for the state Division of Corporations. He put him in touch with an accountant, and some months later the accountant called Michael and said he was working with the owner of a Mexican chicken restaurant, El Pollo Loco, who wanted to franchise. Michael became both their lawyer and a believer. “I tasted the chicken in the guy’s garage and said, ‘This is unbelievable.’ It was healthy, nonfried fast food.” He recruited some of his law partners as fellow investors. He went to the American Heart Association and persuaded them, he says, “to put the heart-healthy logo on a fast-food restaurant. It had never been done.” The healthful and delicious Mexican chicken franchise would take off. Over the next fifteen years El Pollo Loco opened forty franchises, and Michael branched out by investing in Rally’s Hamburgers. He also continued as a law partner at his firm.
But he made a classic business mistake. The chicken franchise expanded too rapidly. “We took the concept to Las Vegas and we got our clock cleaned,” he says. They poured money into Vegas, and soon the business plunged from profit to loss. In California, the vastHispanic population might eat at El Pollo Loco three times per week; in Vegas, with a relatively minuscule Hispanic population, one visit per month was more common. To shore up the franchises in Vegas and prevent its bankruptcy, Kassan became more engaged. They borrowed more money from the banks, and without seeking board approval transferred monies from El Pollo Loco franchises in California, weakening them. He had shifted monies from healthy California chicken franchises, albeit not to enrich himself, but to fortify cash-starved Las Vegas franchises. On the books, Kassan did not camouflage this act, recording these as loans. Soon the business could not meet the bank loan payments. Kassan drained $150,000 from his own pocket to help make the payments. In January 1994, investor Joel Ladin, one of the four partners in the law firm and the best man at Michael and Ronnie’s wedding, confronted Kassan with evidence of the unauthorized withdrawals. After Kassan admitted that he withdrew the funds, he was terminated. The next month Ladin filed a formal complaint against Kassan to the police, charging him with embezzlement. Kassan quickly repaid the entire $240,000 he had
Michael was doing tax law for a firm; Ronnie was pregnant with the first of their three children. His salary was $1,500 per month, plus a percentage of any new business he brought in. He recruited twelve new clients the first month. “Being a rainmaker was easy for me,” he says. In 1977 he joined another firm, and a year later he and some friends opened their own law offices. Michael was restless. “He always wanted to be in business,” Ronnie says. “I think he felt that through some client somewhere something would happen. And it did.”
He became counsel to his law firm in 1986 when one of his clients, International Video Entertainment, at the time the largest independent home video company, distributor of such popular fare as G.I. Joe and The Transformers , enticed him to become president and COO. The company was run by Jose Menendez, one of the few individuals Kassan will not volunteer a kind word about. “He was very tough,” he says. “He had a chip on his shoulder the size of Cuba. And he used it always. ‘Good morning’ to him was adversarial.” Kassan helped engineer the sale of the company and left in 1987, two years before Menendez and his wife were famously murdered by their two aggrieved sons. He returned to his law firm, but still yearned to be a businessman.
Some years before, while attending a children’s birthday party at Harry’s Open Pit, the owner asked if he knew anything about franchise law because he wanted to franchise his rib restaurant. Michael said he did, and told him a first step with a franchise was to hire an accountant to prepare an audited financial statement for the state Division of Corporations. He put him in touch with an accountant, and some months later the accountant called Michael and said he was working with the owner of a Mexican chicken restaurant, El Pollo Loco, who wanted to franchise. Michael became both their lawyer and a believer. “I tasted the chicken in the guy’s garage and said, ‘This is unbelievable.’ It was healthy, nonfried fast food.” He recruited some of his law partners as fellow investors. He went to the American Heart Association and persuaded them, he says, “to put the heart-healthy logo on a fast-food restaurant. It had never been done.” The healthful and delicious Mexican chicken franchise would take off. Over the next fifteen years El Pollo Loco opened forty franchises, and Michael branched out by investing in Rally’s Hamburgers. He also continued as a law partner at his firm.
But he made a classic business mistake. The chicken franchise expanded too rapidly. “We took the concept to Las Vegas and we got our clock cleaned,” he says. They poured money into Vegas, and soon the business plunged from profit to loss. In California, the vastHispanic population might eat at El Pollo Loco three times per week; in Vegas, with a relatively minuscule Hispanic population, one visit per month was more common. To shore up the franchises in Vegas and prevent its bankruptcy, Kassan became more engaged. They borrowed more money from the banks, and without seeking board approval transferred monies from El Pollo Loco franchises in California, weakening them. He had shifted monies from healthy California chicken franchises, albeit not to enrich himself, but to fortify cash-starved Las Vegas franchises. On the books, Kassan did not camouflage this act, recording these as loans. Soon the business could not meet the bank loan payments. Kassan drained $150,000 from his own pocket to help make the payments. In January 1994, investor Joel Ladin, one of the four partners in the law firm and the best man at Michael and Ronnie’s wedding, confronted Kassan with evidence of the unauthorized withdrawals. After Kassan admitted that he withdrew the funds, he was terminated. The next month Ladin filed a formal complaint against Kassan to the police, charging him with embezzlement. Kassan quickly repaid the entire $240,000 he had