RTOHQ: The Magazine August - September 2008
 Complete issue of RTOHQ: The Magazine by APRO
A Tiger at the Goal Line by Neil Ferguson
Two Rent-to-Own Roads Diverged - The Industry's Titans by Ed Winn III
Rent-A-Center: Flexible and Flourishing by Kristen Card
Aaron Rents: Different by Design by Kristen Card
CM Jewelry Sparkles by Kristen Card
St. Louis Connections: APRO’s 2008 Rent-to-Own Convention and Buying Show recap and photos by Neil Ferguson & Murlin Evans
A Tiger at the Goal Line
by Neil Ferguson
APRO’s new president, Tiger John Cleek, has fostered a winning attitude for a very long time. Since 1973, he has projected the scores of his hometown college football team and, without exception, he’s forecasted the University of Missouri Tigers to win. Sometimes, the seasons have been bleak, but Cleek has never stopped thinking about winning. Cleek’s enthusiasm for Mizzou football is so fierce that it has given him his moniker—and he’s passed it on to his son, Tiger Jr., as well. This August, Cleek was elected president by the APRO Board of Directors at the Rent-to-Own Convention and Buying Show in St. Louis and, just as he’s always set his sites high for Mizzou football, he also wants to help APRO score a winning season.
He plans to do so with four plays: incorporate the “new guys,” keep the “old-timers” active, continue to nurture APRO’s grassroots approach in Washington and make the most of the association’s communications.
Firstdown :
“I want to give new members ownership in APRO,” Cleek says. “We can never have too much brainpower.” He notes that the APRO Board of Directors is a talented team with committees headed by top-notch talent. But Cleek wants to expand committee participation beyond members of the board and he’s pushing to enlist other association members—perhaps those new to APRO or those who haven’t considered participating before—to tackle industry issues on various committees: membership, communications, government relations, public relations and state associations, among others. If you’re thinking, “Well, maybe I want to get involved on an APRO committee,” visit the association’s Web site at www.rtohq.org/ apro-committees.html, where you’ll find a complete list of committees, contact information for the chairman of each committee, APRO members currently participating and how you, too, can get involved.
Seconddown :
Recognize those who have been longtime participants in the game. “We need to let our past board members and officers know that we haven’t forgotten them,” Cleek says. “There is a wealth of talent—people who have served APRO well over the years—who are still willing to help out.” He notes former President Gary McDougal as a shining example. McDougal retired from the industry four years ago, but subsequently was enlisted to nurture RTO’s legislative connections. To that end, McDougal helped forge a relationship between the rent-to-own industry and the Congressional Black Caucus, an alliance that has developed to the point where, this year, for the first time, APRO and a number of its member companies were a $50,000 sponsor of the CBC’s scholarship efforts. “Without the support of the CBC, our mission in Washington would fail,” Cleek says. “Gary McDougal opened that door.” Cleek also sites Kevin Quinn and Wayne Chambers as other APRO legends who continue to aid the industry. “Let’s not forget the knowledge and connections of the old-timers,” Cleek admonishes, adding, “I can call them that because I am one, too!”
Thirddown:
Grassroots. “The November 4 election is crucial to our country and to this industry,” Cleek says. “We’ve worked hard with Congressman William Lacy Clay on H.R. 1767 [the Consumer Rental Purchase Agreement Act]. All 99 of that bill’s co-sponsors are up for re-election this year and we need to make sure our friends remain in office.” Cleek is planning a state association conference call in late September to devise an action plan for the fall elections. The call to all state presidents will include an update from APRO’s lobbyists and key strategists. “We’ve learned over the past 15 to 20 years of grassroots efforts that a few people can make a big difference—and we want to have a big impact on the November 4 elections.”
Touchdown:
Spread the word. Cleek wants to use communications tools to help with the other three goals listed above: enlist the “new guys” via APRO’s daily e-newsletter, RTO Today, keep the “old-timers” in the loop by publishing the Legends e-newsletter to inform past board members of the association’s latest activities and, as always, lubricate the lines of legislative communication to keep the grassroots efforts healthy. Beyond that, he also envisions communication on an even broader scale. Cleek, APRO Executive Director Bill Keese and APRO’s Legal Counsel Ed Winn III have been invited by ColorTyme CEO Bob Bloom to offer a presentation at that company’s January meeting. Keese will talk about the benefits of APRO; Winn will give a preview of the 2009 Legislative Conference; and Cleek will talk about his lifeblood, state rental-dealer associations. “This presentation at the ColorTyme show gives us a great opportunity to spread the word about APRO,” Cleek says.
“It’s a great source for acquiring new members.” Cleek observes that communication within the rent-to-own industry has a unique slant: “Networking with fellow APRO members is more important than ever. Our members’ willingness to share ideas is beyond anything you’ll see in any other industry—and you can share those ideas without fear of retaliation.” What Cleek wants for APRO echoes themes to which he’s been committed for a long time. He’s lived his entire life in the heart of Missouri, Columbia (population: 100,000), and is an avid supporter of that community—and, of course, its football team. He’s a major donor to the University of Missouri’s Tiger Scholarship Fund and Extra-Point Club, supports the Central Missouri Food Bank, sponsors three Little League teams and has implemented Tiger John’s Family Land, a program where 50 disadvantaged youth are able to attend each Mizzou men’s basketball home game. In the wake of Hurricane Katrina, Cleek furnished 40 homes in central Missouri for displaced victims of that disaster.
Cleek, who operates nine stores in eight central Missouri communities, is something of a celebrity in that part of the state, due to his charitable contributions and the plentiful television advertising that features him, his son (and business partner) Tiger Jr. and, twice a year, his grandchildren—the fourth generation of Cleeks in the business. Cleek worked for his father—whose given name was Clifton Elmo, but everyone knew him as “Missouri Mo”—in the family’s mostly retail store until tragedy struck in 1973, when Elmo died in a plane crash returning from a Missouri vs. Iowa State football game. His father meant the world to Cleek; he was Tiger’s mentor and inspiration. In addition to the business acumen he acquired from Elmo, Cleek also inherited his father’s love of football. He attended Mizzou games with his dad regularly starting in 1958 and, over the past 50 years, he’s missed only three home games.
Cleek’s father so loved the sport that, on game days, the store was closed for the duration of the game. Elmo also publicized his predictions for each game with the precision of the most avid sports enthusiast. His weekly prescient passion was deemed “Missouri Mo Says…” Upon his father’s passing, Tiger picked up the tradition and continues it to this day with his “Tiger John Says...” column, which runs in the local newspaper and is posted on Cleek’s Lease or Own storefront window. Good season or bad, Cleek always predicts a Tigers victory. He’s predicting a winning season for APRO, as well. Membership in the association is the highest it’s been in a decade and the new president hopes to energize all who care about the rent-to-own industry. He’s definitely a team player.
Two Rent-to-Own Roads Diverged - The Industry's Titans
by Ed Winn III
The two giants of rent-to-own, Aaron’s Sales and Lease Ownership and Rent-A-Center, have both cut huge swaths through the RTO forest and one would be hard-pressed to choose which of their paths to follow if one were seeking a formidable business model and profits. Both paths are heavily traveled; both companies are multi-billion-dollar conglomerates that have each served millions of customers. Both offer heady success stories of entrepreneurial daring and far-sighted business vision. After all, a lot of smart and resourceful people have divined the business possibilities of rent-to-own; only these two companies have executed on their particular visions to dwarf all other competitors.
Today, Rent-A-Center has some 3,500 stores; Aaron’s has some 1,500. The next largest competitor does not yet have 100 stores. These two behemoths control as much as two-thirds of the rentto- own market by any measure: store count, revenues, BOR or customer count. The particulars of these two public companies are readily available in their annual reports. While these two companies are both in the rental business, they have, indeed, taken different paths. Both have been renting things for a long time. Aaron’s has been in the rental business since 1955; Rent-A-Center since 1973. Aaron’s has followed one charismatic leader for more than 50 years, R. Charles Loudermilk. Rent-A-Center has had a number of powerful and accomplished leaders over its history, beginning with Tom Devlin in the 1970s. Devlin sold his company to Thorn EMI, a British conglomerate.
Ernie Talley and Mark Speese started a rental company in the late 1980s, Vista, later to become Renter’s Choice, and that company later bought Rent- A-Center back from the Brits. Notable leaders in those companies over the years include Devlin, Talley, Speese and Bud Gates. Detailed histories of these two companies have been chronicled elsewhere (visit www.fundinguniverse.com/ company-histories). Each has enjoyed scintillating highs and suffered debilitating lows over the decades. They arrived at their respective summits in the rent-to-own industry by very different routes. Rent-A-Center grew in large part by acquisitions. Looking back, Rent-A-Center was the chief consolidator of a fragmented industry during the ’80s and ’90s. In less than four years, for example, Rent-A-Center purchased 910 RTO stores in 43 separate transactions (1995: 207 stores, 1996: 408 stores, 1997: 81 stores and 1998: 219 stores).
And while it has been quick to take advantage of attractive acquisition opportunities itself, Aaron’s, on the other hand, has grown mainly through opening company stores and franchising. Aaron’s has aggressively marketed its franchise program through a variety of avenues, including bold earnings claims ads in The Wall Street Journal. Rent-A-Center has a franchising arm, ColorTyme (a wholly owned subsidiary) and that has contributed to the Rent-A-Center store count. ColorTyme franchisees are more independent than Aaron’s franchisees and ColorTyme is less integrated into the Rent-A-Center system; it was, after all, independently owned and operated as a franchise system from the 1970s until 1996, when Rent-A-Center acquired the chain. Different roads to success Rent-A-Center’s rent-to-own business is the traditional one, originated by the Talley brothers in Wichita, Kansas, back in the 1960s.
Tom Devlin worked for Ernie Talley and adopted the original version of rent-to-own with only slight modifications in product quality and customer service. Eighty percent or more of Rent-A-Center customers pay weekly, with rent-to-own terms of 78 to 104 weeks. Store size runs, ideally, around 4,500 square feet and store revenues average $70,000–$80,000 per month, managed by five to six employees per store. The Rent-A-Center business model is the very definition of rent-to-own. When the business is described by friend or foe alike, the description is, most often, how Rent-A-Center runs its business. The Aaron’s model was not developed until 1989. Before then, Aaron’s focused on the rent-to-rent business—residential and office furniture primarily—but the undeniable success of the rent-to-own concept pushed Aaron’s inexorably in that direction.
Aaron’s may be in the rent-to-own business from a strictly legal point of view, but from a marketing point of view—which is how it presents itself to the public—it is in the sales-and-lease-ownership business. For decades, the rent-to-own industry struggled to differentiate itself from retail, refuting the claims of consumer advocates that there was really no difference and that RTO should be regulated just like retail. Aaron’s developed and began to exploit its lease-ownership concept when the rentto- own versus retail legal battle had largely been won. The rent-to-own industry had persuaded regulators, at the state level anyway, that RTO and retail were fundamentally distinct ways of doing business and that RTO needed to be regulated differently from retail—and thereafter it was.
The safe legal harbor that the industry so painstakingly dug for itself, state by state, all during the 1980s and early 1990s created a new environment for the industry, allowing Aaron’s to come out with a program that rubbed right up against retail notions and gave its rent-to-own business a different look and feel. Aaron’s stores are larger than traditional RTO stores—9,000 square feet or so. Average monthly revenues regularly run into six figures with five to six employees per store. The reason that Aaron’s stores can generate more revenues with the same number of employees is that 80 percent of the Aaron’s business is monthly. Weekly or monthly? Chuck Sims, founder of Remco and one of rent-toown’s pioneers, championed collecting payments from customers monthly—having tried both weekly and monthly plans. He argued that if you only have one-quarter as many encounters with the customer each month that involve getting your payment, then you have one-quarter as many chances for something to go awry with the relationship. You can expand to bigger stores and you have an easier business to run.
The traditional rent-to-own philosophy concerning payments has always been that the transaction appeals most strongly to customers who are credit-constrained for one reason or another. They may be too new to the market to have established credit. They may have ruined their credit through improvident life choices or bad luck. They may have used up all of their available credit on other purchases. Some customers do not manage their finances responsibly and the sentiment was that, if certain customers were unable to come up with $100 to make a monthly payment, the industry would accommodate them by its willingness to accept $25 every week— figuring that is an amount customers can come up with, since that is how they are getting paid. The industry responded to customer demand for weekly payments and today collects $4 billion to $5 billion per year in weekly payments. The Aaron’s philosophy is this: since people have to pay some bills by the month, no matter what—rent, utilities, and the like—they can be persuaded to make monthly rental payments for their televisions and furniture.
The difference in store traffic, among other things, between weekly and monthly businesses is huge. In a store with 500 customers, it is the difference between having employees collect and process 500 payments versus 2,150 payments. The carpets wear out more quickly in a weekly store. So do the collectors. While some people can be persuaded to pay monthly, not everybody can—thus, the continued staying power of the weekly business that still makes up two-thirds or more of the rent-to-own industry, overall. Aaron’s has also tinkered with the RTO term, showcasing its “12-to-own” program, which rippled through the industry that historically had only offered 18-month or 24-month deals for 30 years. Competitive fire Make no mistake, these two companies are vigorous competitors. Each has to take into account the success of the other when developing longrange strategic plans. They have occasionally butted heads over advertising claims and other issues.
However, that competition has surely made these two companies better and the industry as a whole has also benefited. Competition makes for innovation and even the more traditional Rent-A-Center keeps improving on the weekly business model to challenge that segment of the industry. Both companies are beginning to diversify. Rent-A-Center is adding payday loans to some of its rent-to-own stores and Aaron’s has opened a fledgling chain of wheel-and-tire rental stores called Rimco. It may be the size and shape of the rent-toown industry itself that is allowing both of these giants to grab and hold such significant shares of their markets. They are both very good at what they do. If the next 10 years in any way parallel the past 10 years, both Rent-A-Center and Aaron’s are poised to become modern American success stories, even beyond the levels that they enjoy today.
Rent-A-Center: Flexible and Flourishing
by Kristen Card
Rent-A-Center has been all about flexibility from the get-go. Even the company’s rather complex history illustrates its ability to not just survive, but thrive in the face of continual changes in ownership and leadership—and some gigantic growth spurts. See whether you can keep up: The Rent-A-Center brand name was originally launched in 1973 in Wichita, Kansas, by Tom Devlin, who sold the business to British conglomerate Thorn EMI in 1987. Just a year earlier, in 1986, Mark Speese left his job with the original Rent-A-Center to launch his own rent-to-own venture, Vista Rent-To- Own. Three years later, in 1989, Ernie Talley bought a controlling interest in Vista.
Here’s what followed: 1993: Acquisition and merger of 84-store Renters Choice, which became the new company name; 1995: $25-million going-public fundraiser and the acquisitions of 72-store Crown Leasing and 135-store Pro Rental; 1996: Acquisitions of 320-store Color- Tyme and 88 other stores through 20 separate transactions, as well as the opening of 13 new stores; 1997: Acquisitions of 71 stores through 18 separate transactions and the opening of 10 new stores; 1998: Quantum leap made possible by the acquisitions of 176-store west coast Central Rents and the 1,400-store Rent-A-Center chain Thorn had been developing for more than a decade.
The business adopted the Rent-A-Center name and became the largest rent-to-own chain in the industry. In 1999, Speese semi-retired from his position as president and chief operating officer of the company, staying connected to Rent-A-Center as a board member and shareholder only; Mitch Fadel took the reins as company president. Six months later, Speese returned to work part-time as vice chairman; 18 months later, he re-semi-retired. But when Talley chose to really retire due to health issues in late 2001, Speese accepted the more-than-full-time job of board chairman and chief executive officer, with Fadel continuing to serve as president and chief operating officer. Today, Rent-A-Center’s leadership and ownership have settled into a successful groove. With Speese and Fadel still at the helm, the company is America’s biggest rentto- own chain, with more than 3,050 stores located in every U.S. state, Washington, D.C., Puerto Rico and Canada.
And the one key component that has been completely consistent since the company’s inception is still its defining characteristic: its business model. Considered by most within the industry to be the quintessential rent-to-own archetype, Rent-A-Center’s business model is straightforward. “It is the model most followed in RTO,” explains Fadel. “We offer flexible payment plans—either weekly, semimonthly or monthly—for high-quality furniture, electronics, computers and appliances. There are no down payments or deposit, no obligation, no credit hassles and no extra charges for delivery or service. All the options are with the customer: they can buy it for a competitive price through our 90-dayssame- as-cash program; they can exercise an early-purchase option anytime after that; or they can simply fulfill their contract and own the merchandise that way. It’s a quick and easy way to get the things you want, with lots of options for the customer as the basis of the program.” This flexibility for customers is what both Fadel and Speese see as one of the main differences between Rent-A-Center and industry rival Aaron’s Sales and Lease Ownership.
“They don’t have as much payment flexibility,” Fadel says. “Our weekly and monthly prices are very competitive with theirs, though the term may be a little longer on brand-new product at RAC. Over the life of the agreement, you might pay a little more at RAC, but your options are much greater.” “I think the biggest differences between [Rent-A-Center and Aaron’s] are the flexibility of our payment plans, the size of our stores—their footprint is about twice the size of ours—and, to some extent, our consumer base,” Speese adds. “Because we offer the weekly pay option, by default we’re attracting a little different type of customer. We’ve got a lot of overlap of customers and locations, but I think Aaron’s is pursuing a higher-end consumer.
I’d say the upper 30 percent of our customer base is their lower 30 percent.” Flexibility makes an undeniable difference for franchisees, too, according to Bob Bloom, president and CEO of ColorTyme Rent-to-Own, Rent-A-Center’s franchise arm. Today, there are 215 ColorTyme stores nationwide, with another eight expected to debut by year’s end. They’re owned by 77 franchisees; 51 of them have no more than two stores. “ColorTyme is the entryway for one- to twostore operators to realize their dream of building 15 to 20 stores,” Bloom says. “We let them have all the benefits of having a large corporation behind them—with Rent-A-Center’s purchasing power, product service and financial guarantees—while keeping the entrepreneurial spirit. We do all we can to let franchisees operate within the brand’s framework, while giving them the independence to be locally owned and operated. ColorTyme exists to help small-businesspeople realize their dreams.”
Bloom says operating under the Color- Tyme name, rather than the Rent-A-Center banner, gives franchisees more freedom, beginning with store location. New franchisees’ selection of where to set up shop is limited by only the 215 other ColorTyme stores; they’re welcome to build in the same service area as a Rent-A-Center and frequently do. While ColorTyme franchisees can leverage Rent- A-Center’s billion-dollar purchasing power, they’re also free to carry merchandise unique to their own stores and to set their own pricing. And ColorTyme franchisees can also use as much or as little of ColorTyme’s corporate marketing support as they like. “Our Web site is an excellent example of the flexibility we provide our franchisees,” Bloom continues.
“If you go to www.Color- Tyme.com, you’re encouraged to enter your ZIP code to find the store closest to you, then you can click through to that store’s individual site. Each piece of merchandise that store carries is right there with the weekly price, as well as its own marketing materials. We pay for the development and maintenance of the Web site, which requires a level of sophistication the average small-business owner can’t accomplish on his own. Our franchisees enjoy the independence and flexibility we offer each individual; it’s why we call it ‘Your Hometown ColorTyme.’” Preserving the mom-and-pop feeling of a neighborhood store by nurturing the connection between company and community is another integral element in Rent-A-Center’s identity.
“Our business is very much about relationships,” Speese says. “Retail is extremely transactional; you might go into the store and buy an appliance maybe once a decade. But especially with our weekly payment plan, we see the same customers over and over again, and we develop relationships with them. As corporate citizens, we have a responsibility to give back to the communities who give us their business.” Rent-A-Center is deeply involved with five national non-profits: America’s Second Harvest, Big Brothers Big Sisters of America, Boys and Girls Clubs of America, Junior Achievement and the Make a Difference Scholarship. Rent-A-Center is also currently auditioning a new giving program, Random Acts of Caring (using the company monogram RAC), in which the company performs a sizeable yet anonymous good deed. For example, during Nurses’ Week, Rent-A-Center retrofitted the whole nurses’ lounge at a Harlem hospital.
ColorTyme supports its own national nonprofit, Kids Across America, while urging franchisees to find a need they can help meet within their locations’ communities, too. This concentration on community connection through charitable contribution is a significant strength for Rent-A-Center and ColorTyme, Bloom notes. And, he adds, bring on the competition. A couple of the company’s latest innovations and paths of growth are wheel-and-tire rent-to-own via RimTyme—stand-alone stores under the ColorTyme umbrella—and payday loan services. Almost 40 ColorTymes have payday loan services up and running within their stores. “Payday loans are a good product,” Bloom says.
“It gives our franchisees another revenue stream and lets them serve the same communities and the same customers, while further helping the cash- and credit-constrained consumer.” Expanding their offerings toward financial services—including short-term loans, check-cashing, money transfers and other conveniences—is one way Speese and Fadel are also seeking to extend Rent-A-Center’s reach. “We’ve got about 325 financial services kiosks already in stores, with another 100 expected to be operational by year’s end,” Fadel forecasts. “As for continuing growth, according to our estimates, we can open up about another 500 U.S. stores before we hit full market penetration here in the states. We’re considering growing our Canadian presence and we’re analyzing the markets elsewhere, but in the meantime, we’ll continue to open 25 to 50 new stores a year here in the U.S. “People see us as a giant,” Fadel adds, “but we’re not a sleeping giant. We’re as excited about the industry and its future as we’ve ever been.”
Aaron Rents: Different by Design
By Kristen Card
It was August in St. Louis and Aaron Rents Chairman R. Charles Loudermilk stood before almost 500 of his professional colleagues to receive the industry’s greatest honor, the Association of Progressive Rental Organizations’ 2008 Lifetime Achievement Award. Having begun his rental career 53 years ago with an answering machine and 300 folding chairs, Loudermilk definitely qualifies for the “lifetime” part. And having built a $1.4-billion rent-to-own empire with more than 1,550 stores in 48 states and Canada that have served over a million customers, he’s got the “achievement” part pretty well covered, too. Loudermilk’s leadership has, without a doubt, been instrumental in the unique direction Aaron’s has developed since its 1955 inception.
If Aaron’s follows the beat of a different drummer, then that drummer is Charlie Loudermilk—and he plays a heck of a rhythm. He took his one-man rent-to-rent operation from party and health-care rentals to an extremely successful office rentals business, which went public in 1982. Five years later, as the rent-to-own industry began to blossom, Loudermilk thought Aaron’s should give it a go. “Charlie asked me to launch this new concept and I figured he was trying to get rid of me,” remembers now-Chief Operating Officer Ken Butler, who has been with Aaron’s since 1974. “Charlie told us just to copy Rent-A-Center at first, so we developed a comparable program with a weekly payment schedule. As we tested the market, we found everybody in rent-to-own was doing it the same way, which shocked me. So we opened up a store and we were like 12 other RTO stores up and down the street, with the customers just going from one to the next, with little to no loyalty.”
To both Butler and Loudermilk, it seemed that diverging from the accepted model might yield better results. They began to transform the paradigm, beginning with the payment schedule. “I came from monthly-pay rental roots,” Butler notes. “Customers were paying all of their other bills by the month, but had to pay for their TV by the week? It just made no sense, so we switched to a monthly program. But the biggest change happened a few years later. Charlie came to me and said, ‘Why don’t we try to do something with a 12-month program, rather than 18 or 24 months?’ Well, we experimented with it in a few stores and every one of them, within six months, began to airlift—our deliveries were more, our returns were less and it was a payment plan customers really loved. We called it ‘Twelve-To-Own.’ ” And so Aaron Rents began to separate from the traditional rent-to-own model and, in many ways, has been distinguishing and distancing itself, its products and services from the rest of the industry ever since. Among the main motivators for differentiating Aaron’s within the marketplace has been less-than-glowing public perception of the industry in the past.
“When I first encountered the rentalpurchase concept, I said, ‘This is the wave of the future,’” Loudermilk remembers. “‘People who don’t have credit still need a refrigerator; they’re going to get it somewhere and I think we can do that. But we have to do it legitimately, so all of us can sleep at night knowing we have helped people, rather than duped them out of all the money we can grab.’” “We had customers who asked us to park our trucks down the street so the neighbors couldn’t see them; they were embarrassed to have people think they were renting-to-own,” Butler affirms. “For whatever reason, it’s still more socially acceptable to lease something than to rent-to-own it. So in our company culture, we try not to even say the word ‘rent.’ We changed the name of our rental-purchase division to Aaron’s Sales and Lease Ownership and no one asked us to hide our trucks from the neighbors anymore. We moved away from the traditional model and tried to focus on what was fair to the customer and a fair deal for Aaron’s—it’s our responsibility to find a way to make money in-between.”
Today, rival Rent-A-Center sustains as the epitome of the traditional rent-to- own business model, while Aaron Rents stands in strong contrast—a difference that’s most apparent within three areas. One: Aaron’s offers primarily monthly payments, rather than weekly; two: Aaron’s has much larger stores (8,000–10,000 square feet vs. 4,000-5,000 square feet) and therefore, a much larger product selection; and three: Aaron’s provides customers with a lowest-price guarantee. “We own nine manufacturing facilities under MacTavish Furniture Industries, making about one-half of our furniture, plus mattresses and home accessories for us,” Loudermilk says. “We also have 19 distribution centers, delivering merchandise quickly to our stores. So running one of our stores is easier—you’ve got only one collection a month, rather than four, and readily available inventory.”
The numbers tell the story: while Rent- A-Center has about double the number of stores as Aaron’s, Aaron’s total net income for last year was $80 million, while Rent-ACenter netted $76 million total. Numbers also make a difference when it comes to the two giants’ franchise programs. Aaron Rents’ Vice President of Franchising Todd Evans adopts a rather philosophical attitude about Aaron’s competition in ColorTyme Rent-to-Own, Rent-A-Center’s franchising arm, but notes that when it comes to the bottom line, Aaron’s stores are simpler and more profitable to run. “The ColorTyme business model is a good model. It works; it’s profitable,” Evans says. “Aaron’s business model is just a different successful model. The best analogy is McDonald’s—when you go into a McDonald’s, you don’t know whether it’s a company store or a franchise; there should be no discernible difference. That’s the mark of a good franchise.
Consumer expectations are consistently fulfilled. Because ColorTyme is its own brand, they might offer a little more flexibility for franchisees in their system than we do in ours. But their average store nets about half of the net revenue of our average store.” Another difference between the pair of programs is what type of businesspeople they pursue to become franchisees. While almost half of ColorTyme franchisees own only one or two stores, Aaron’s courts higher net-worth individuals with the drive to deliver the “Aaron’s six-pack”—six stores, initially. Again, the data’s in the digits: Aaron’s, which began franchising in 1992, currently has almost 500 franchises, with another 285 slated to be up and running within the next three years; ColorTyme, acquired by Rent-ACenter in 1996 with 320 stores, now has 215, with eight more expected by year’s end. As many within the rent-to-own industry search for new products and services with which to build their business, Loudermilk largely dismisses the need for diversification. Aaron Rents’ innovation within the industry is already evident, he says—witness the company’s retail/rental-hybrid business model, manufacturing arm and an astutely lucrative relationship with NASCAR racing. “Frankly,” he says, “we’re busy enough with what we’re doing that we don’t need to continually get into something else.”
The company is sampling the wheelsand- tires lease-purchase business through its Rimco stores. Currently, there are 30 company stores and eight franchises open, with another 10 franchises committed to opening over the next few years. That’s a dainty dewdrop in the behemoth bucket that is Aaron Rents. According to Loudermilk, 2008 might look like a slow-growth year for the company; but, he says, it’s all part of the company’s growth/profit cycle. “Last year, we set a goal of opening up 300 stores, which we met,” notes Loudermilk. “But by the end of it, we had outgrown our management and our ability to run some stores profitably. So at the beginning of this year, I made the decision for us to slow down and concentrate on profit. We’re doing it and it’s paying off.
Next year, we’ll focus on new store openings again and cycle around.” Butler believes sustaining substantial growth is definitely possible, not just for Aaron’s, but for the rent-to-own industry overall—as long as it continues to work as a whole toward improving its public image. “I see more and more operators trying to emulate what Aaron’s has done, some maybe doing it better,” acknowledges Butler. “If we create competition to make each other better, then that’s good. And if you shop the competition across the country today, it looks 10 times better than it did 15 years ago and we like to think Aaron’s had something to do with that. “If we, as an industry, do a good job, then I believe our market is fully 50 percent of the American population,” he asserts.
“I believe there are many more people out there to serve who right now won’t come into an RTO store for a variety of reasons. The more attractive we can make our proposition, the more we can extend the market and the more we may be able to prosper.” As Aaron Rents looks forward to a future of continuing success, the obvious question still comes up: With their trailblazing pragmatist of a leader now 81 years old, what will life after Charlie look like at Aaron’s? The answer is as straightforward as the man himself. “My son [Robert Charles Loudermilk Jr., nicknamed Robin] is now our CEO,” Charlie Sr. says. “I’m shifting pieces of the business over to him and we’ve got one of the best, most wellestablished management teams in the country. We’re making a smooth transition. But the doc says I’m in good shape for the shape I’m in; I’ve got no interest in retiring.”
CM Jewelry Sparkles
By Kristen Card
Robby Tyson and John Blair make an unlikely pair of business partners. Tyson is a career jewelry guy with a slow Southern drawl and a talent for turning ideas into realities. Blair is a fast-talking former Marine with an executive background and a talent for teaching others how to sell. They share one essential quality: decades of experience in rent-to-own. Together, they’re leading the industry’s largest jewelry supplier. Atlanta-based Classic Models Jewelry Manufacturing, or CM Jewelry (www.cmjmfg.com), currently services more than 1,000 rent-toown stores nationwide and Tyson and Blair are aggressively expanding the company. “We’re a single source to meet all your jewelry needs,” company President Tyson says.
“We go into your store and set up a complete, turnkey jewelry department. And we’re a true manufacturer; we specialize in creating classic models, award jewelry and custom pieces.” Tyson has done everything in the jewelry business, from diamond sorting and grading to sales and marketing. He launched CM Jewelry last year with sisters Susan McKinnon and Sherron Shaw of ABS Artistic Jewelry, with whom he had a working history; the women now do CM’s design and manufacturing. Blair, the firm’s vice president, spent a total of 25-plus years as an executive with Broyhill Furniture Rentals and as executive director of TRIB Group, the country’s largest rent-to-own buying cooperative. He and Tyson met while Blair was with TRIB Group and Tyson was vice president of sales and marketing with jewelry manufacturer and supplier Jerry Bogo Co. They find their jewelry expertise and rent-to-own experience make a valuable combination.
“We understand jewelry is an add-on product in the RTO industry,” Blair says. “But it’s also extremely profitable merchandise, because no matter how long it may be in your case or how long it’s rented out, it doesn’t depreciate. It also requires no additional personnel, not much showroom space and no delivery charge.” Additionally, CM Jewelry has a return-for-credit policy—75 percent of original value for the first year and 65 percent the second year—for items that have been rented or sized. The dealer can return the piece and put the credit toward the purchase of another piece of jewelry—the only product in the industry dealers can return for credit. As jewelry’s popularity as a rent-to-own product develops, Blair and Tyson believe CM Jewelry programs are exceptionally effective due to their unique understanding of their customers, their customization of programs and products and the ease and support they provide to dealers. “We offer live and non-live programs,” Tyson explains.
“A store can launch a non-live program for less than $1,000. We conduct demographic studies around the store’s location, so we can make sure we’ve got the right product mix for that store. And the dealer chooses what the showcase looks like.” “We provide all the sales training you need,” Blair adds. “We help store personnel understand the importance of making sure the jewelry display is clean, neat and professional— but that they must take items out and put them on the customer, so that they can see it; that’s 90 percent of your sale, done. Dealers who put themselves fully behind the product and are successful can add up to 12 percent to their revenue.” “We do our best to make everything as easy as possible for the dealers,” Blair continues.
“Initial sizing and refurbishing are free; we furnish FedEx labels and boxes, so they can send products for resizing or service; we provide point-ofpurchase and other promotional materials; we custom-tag each piece with their information; and we give stores a comprehensive binder containing all the info they need to know about our company, the products and the pricing. Additionally, we offer a stock-balance program, so it’s simple for the dealers to swap out pieces not moving in their stores.” The jewelry business is jumping and Blair and Tyson say the best part is being part of the rent-to-own realm. “John and I are passionate about rent-to-own,” Tyson says. “I love the people—they’re genuine, they’re nice, they’re fun. We’ve got a lot of friends in this business and working with them is great.” “We’re here to support the RTO industry,” Blair concurs. “It’s come a long way since I got involved in it in 1984, and whatever changes, we want to be included in it. It’s good for the consumer and it’s good for us.”
St. Louis Connections: APRO’s 2008 Rent-to-Own Convention and Buying Show
Recap and photos by Neil Ferguson & Murlin Evans
It was an APRO Convention and Buying Show filled with surprises: U.S. Ambassador Andrew Young secretly flew in from Atlanta to honor his longtime friend, and this year’s Lifetime Achievement recipient, Charlie Loudermilk; former APRO President Darrell Tissot travelled from Ohio to surprise his son Mike with the President’s Award of Excellence; the Buying Show saw record-breaking purchases—in a year that’s seen a considerable economic downturn; the cocktail party at St. Louis’ City Museum had surprises around every corner (some were surprised they didn’t get lost in there forever!); and Benefit Marketing’s Susan Matthews was pleasantly caught off-guard when her name was announced as Vendor of the Year—thus her delightfully startled expression on the facing page. What wasn’t a surprise at this year’s big event was this: we learned, we networked, we dined well, many of us bought some inventory—and all of us laughed. It was a blast; no surprise there. APRO’s Convention and Buying Show has long been considered the must-attend happening of the year. Here are some highlights for those who attended; and for those who did not, an enticement to mark next year’s show on the calendar now.
APRO 2008: HIGHLIGHTS:
U.S. Representative William Lacy Clay—lead sponsor of H.R. 1767, the Consumer Rental Purchase Agreement Act—addressed attendees during the general session. “One of the things I am most proud of is our success in advancing the vital interest of the rent-to-own industry,” said Clay, who represents St. Louis and surrounding areas in Congress. “Your decades of hard work are paying off. I’ll always do my best to protect what really matters to you.” He reported that he is working with Representative Barney Frank, chairman of the House Financial Services Committee, on 1767, which now boasts 99 co-sponsors from both sides of the aisle. “The rent-toown transaction is the most commonly used consumer transaction that lacks definition,” Clay said. “It will become even more important in the population during this economic downturn.” Clay also participated in the Joe Eason/Tom Kitchens Golf Tournament, held at Quail Creek, where he and his teammates Larry Carrico, Dwight Dumler and Gary Romine, did well as fifth-place team.
The RTO All-Industry Roundtable featured a wide range of discussions: community involvement, industry trends, legislative issues and APRO’s 2009 Convention and Buying Show co-location with AVB BrandSource’s Convention and Buying Fair, to name a few. The majority of the 300 participants were independent owners with three to 12 stores and had been in business more than 20 years. Check APRO’s E-Communities at www.rtohq.org to download a PDF of all the topics discussed and the responses recorded.
APRO hosted a spectacular gathering at St. Louis’ City Museum during the Convention. The building itself is a work of art, built from objects “found” within the city’s borders. It was easy to get lost while networking, playing, dancing and exploring within the 600,000-square-foot facility, which was formerly the International Shoe Co.
Buoyed by exclusive specials and the highest attendance in two years, rent-to-own dealers purchased more than $19 million worth of products over the two-day APRO Buying Show. The total, which exceeds last year’s record-setter by almost $1 million, was achieved despite cutting a day off the annual buying show.
Rental Advertising Excellence Awards recipients were announced at the convention and the winning entries were on display in the exhibit hall during the buying show. RAE Awards represent the finest rent-toown advertising and marketing over the past year. For a complete list of winners, visit www.rtohq.org.
Bill Tennison of Heartland Furniture and Appliance in Doniphan, Missouri, was named APRO’s 2008 RTO Employee of the Year. The 2008 RTO Customer of the Year went to Kimberly Royal, a loyal patron at Mike Tissot’s Rent-2-Own store in Ironton, Ohio. The first APRO Scholarship was awarded to Penny Wyatt, who works for Gary Romine’s Show-Me Rent-to-Own in Farmington, Missouri.
Comedian Ross Shafer gave a light-hearted, yet thought-provoking keynote address during the general session. Using an impressive array of videos and visuals, he urged the gathering to take motivational “gurus” with a grain of salt, observing that each individual is the real expert regarding his or her life. For those who want to dig deeper into Shafer’s unique approach to motivation, he offers several free publications available for downloading from his Web site, www.rossshafer.com.
APRO’s 2006–08 President Larry Carrico passed the gavel to another Missouri rental dealer, Tiger John Cleek, at the conclusion of the APRO Convention and Buying Show. For more on the Board of Directors and Executive Committee elections held in St. Louis during the show, see page 5.
Rent-to-own trailblazer and philanthropist Charles Loudermilk, founder of Atlanta-based Aaron Rents, received the Lifetime Achievement Award during APRO’s 2008 Awards Banquet. Loudermilk was presented the award by longtime friend and distinguished guest Andrew Young, the renowned civil rights leader, former Atlanta mayor and the first African-American U.S. ambassador to the United Nations.
“A good churchman works as hard as he can to make as much money as he can to give it away as fast as he can,” Young said in his tribute to Loudermilk. “I think Charlie and his family emulate that.” Young noted the numerous charitable and community causes championed by his friend. Loudermilk has donated millions of dollars to charitable endeavors and educational institutions. “I don’t believe anyone but Coca-Cola has given more money away than Charlie Loudermilk,” Young said.
Young praised not only Loudermilk’s early efforts to work cooperatively with Atlanta’s emerging black business community, but the rent-to-own transaction as well, crediting it as key in bridging the gap between rich and poor. “The rent-to-own industry really plays a valuable part in our country,” Young said.
“You make it possible for poor people to rent and own the American way of life. It’s a testimony that we have made free enterprise and democracy not only work for the rich and middle class, but for poor people as well. Thank you for your industry.” “When you’re honored by your colleagues and people in your industry, it means the most because they know you the best,” Loudermilk said.
“APRO has helped make our industry a very good and ethical industry and that’s what we’re all working for.” Mike Tissot of Countryside Rentals in Ohio was honored with the President’s Award of Excellence, which was presented to him by his father, Darrell, a former APRO president and himself a recipient of the award in 2000. Mike Tissot was cited for his RTO workshops, dedication to legislative efforts and pursuit in making the Midwest Expo one of the most successful regional trade shows in the country.
The Rental Dealer of the Year honor went to Chris Bolin of Bolin Rental Purchase in Tennessee; he has been instrumental in strengthening rental dealer associations in Tennessee and Kentucky. Susan Matthews of Benefit Marketing Solutions was named Vendor of the Year for her avid support of the industry; read a profile of Matthews and her company in the June-July issue of this magazine. The Heritage Award went to Jeff Lebakken for his continued dedication to rent-to-own in Wisconsin.
Herman Bodewes was awarded APRO’s first-ever State Lobbyist of the Year for his work with Illinois rental dealers. The New York State Rental Dealers Association was named APRO’s 2008 Association of the Year. For more on the 2008 award recipients, please visit www.rtohq.org.
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