Rent-to-Own

Complete issue of RTOHQ: The Magazine by APRO



Once Upon a ColorTyme by Kristen Card

RTO Custom Wheels and Performance Tires by Ed Winn III 

Rent-to-Own: Enter Stage Right by Tiffany Hamburger

GE Consumer and Industrial’s Paul Eichberger and Paula Allison by Neil Ferguson

Cover illustration by Brian Raszka (www.brianraszka.com)

Once Upon a ColorTyme
by Kristen Card

Once upon a time, there was a sleepy little town. One day, a kindly red-haired giant came to the town. He brought leadership, opportunity and prosperity, based on the integrity of his word and the faith of his handshake. People began to follow the giant. The giant let them be themselves and he took good care of them. The people closest to the giant felt like they had found a family, while others reveled in the good fortune the giant had brought to the little town. It all began in the self-dubbed Black-Eyed Pea Capital of the World— the small East Texas town of Athens, estimated population 10,000. And, fittingly, the locale—just like the favorite New Year’s dish— turned out to be full of good luck for many, particularly the many who belonged to a rent-to-own start-up called ColorTyme.

“It really began with [television retailer] Curtis Mathes,” recalls Wayne Atchison, who worked at ColorTyme from 1979 to 1990 and was the company’s vice president of development and franchising. “Curtis Mathes was headquartered in Athens, Texas, and Willie Talley was a sales manager for them. Well, the company had a great deal of excess black-and-white television sets they had to move, because color TV was becoming more available and affordable. Willie and his brother, Ernie Talley, had experimented with the rent-to-own concept in Kansas, so Curtis Mathes launched a rental division, named it ColorTyme Rent-to-Own and Willie embarked upon his ColorTyme career.” ColorTyme debuted in 1979 as a separate-store option available exclusively to Curtis Mathes dealers.

But within a year, Curtis Mathes decided against pursuing the rental side of the business. Talley gathered five friends who all put in a percentage, and together, they bought the company. “The other guys put up the money because Willie didn’t have any money,” chuckles Jim Thompson, who worked with ColorTyme from 1979 to 1990, and was the company’s vice president of purchasing and sales. “Willie had the ideas.” Possibly Talley’s biggest business idea—building up the ColorTyme system, eventually by franchising—came in 1982. It was a huge turning point for the company and a perfect fit for Willie Talley, the quintessential people person. “ColorTyme was started by a man who cared about people,” Thompson attests. “And he was going to do whatever he could to help his franchisees.” “All Willie cared about was the franchisees being successful,” says Mitch Fadel, who was ColorTyme’s CEO from 1992 to 2000 and today serves as the president and chief operating officer for ColorTyme’s parent company, Rent-A-Center.

“He cared a little about ColorTyme making money, but he understood that if the franchisees made money, then he’d be successful as a franchisor. He just woke up every morning thinking about what he could do to make the franchisees more successful and happier.” “Our philosophy was that we made money only if we grew the company and the only way to grow the company was to have successful franchisees,” Atchison confirms. “So I told Willie, ‘Look, if you will quadruple the training budget, then we can literally double the size of the company’—and Willie said, ‘OK.’ So we provided every type of training we could, at our expense, to help our franchisees develop their businesses, and it worked. We opened 14 locations in a single month.” Such hands-off management style was a trademark of Talley’s—one readily remembered and greatly appreciated by his staff. “Willie was an excellent manager because he hired good, professional people and he let them do what they knew how to do,” Atchison says.

“And honestly, we didn’t need any management. Everybody showed up and did their jobs like professionals. I could be as creative as I wanted to be, do whatever I wanted to do, make whatever decision I wanted to make, as long as I was willing to take responsibility for it.” Willie Talley, by all accounts, was much more than an exceptional businessman; he was an extraordinary man. He cut a larger-than-life figure that incited a fierce loyalty in his employees—and that bubbles to the surface without hesitation, even 30 years later. “Willie was a remarkable human being,” says Sandi Blackwell, who worked with ColorTyme from 1979 to 1997 and was the company’s franchise compliance officer for 15 years. “His word was his bond and his handshake was a deal. He was the strong, silent type—humble but well respected. He didn’t have much to say, but when he did, boy, everybody listened.” Quietly charismatic, Talley sported a full head of wavy auburn hair and could figure numbers in his head faster than a calculator, despite a lack of much formal education. He could also be trusting to a fault. “Willie was just a salt-of-the-earth, genuine person,” Thompson notes.

“He was naïve about many things. I think that’s what was so attractive about him to other people. We had to be careful of people trying to take advantage of him. We had to watch out for him as best we could, and everyone would. Everybody loved Willie—I’ve never known anyone who didn’t like Willie Talley. I mean, no one. Without a doubt, he always had everybody’s loyalties.” Talley loved horses almost as much as he loved people. He owned 110 race-ready quarterhorses and frequented races around the country—not necessarily winning, but loving every minute of it. “I remember walking into the office one extremely cold winter’s morning,” Blackwell says. “And my office was absolutely freezing. Several of us had space heaters we shared and moved around, but I couldn’t find one anywhere. A little later, Willie came in and, as he walked by my office, he stuck his head in and said, ‘I took your heater…out to the barn.’ Well, I laughed and said, ‘Now I know where I stand in the pecking order—just beneath the horses.’ He laughed with me, but I knew it didn’t mean I was going to get my heater back.” The working atmosphere at the Athens office was anything but cold during Color- Tyme’s early years. In fact, ColorTyme veterans consistently employ the same word to describe the feel of the workplace: family. “We were a family,” Atchison says.

“A small family of professional people who loved to come to work. We cooked and ate in the office; we had parties. It was fun.” “We used to laugh and say if a cold front came through, then it was cause for celebration,” Blackwell adds. “We’d all bring in something for a chili lunch. It was family—and families might fuss at each other, but when push came to shove, we pulled together.” “We weren’t just co-workers; we were friends,” says Rhonda Davis, a ColorTyme employee of 27 years and the company’s current director of purchasing. “During the week, we worked together and on weekends we played together. It was very much a family environment. Everybody helped everybody and we all took care of each other. It wasn’t just a job; we were there working for the company. And we were totally loyal to Willie. Was he a pied piper? I don’t know. We just believed in him and in the business, and he took good care of us.”

While the ColorTyme staff created a sort of familial coziness at the office, their colleagues afield—ColorTyme’s franchisees— were living a much bigger, much bolder professional lifestyle. Many of the company’s initial franchisees were Athens locals who saw what a rare and lucrative opportunity ColorTyme presented for a tiny town in the Piney Woods of East Texas. “Working at the ColorTyme office was the best job in town. Period. And no one ever left—ever,” Thompson emphasizes. “But working as a ColorTyme franchisee was a roughand- ready kind of affair. It was a wild time, but many of the early guys turned out to be really good business people.” “They were a colorful bunch,” Davis says, carefully. “They lived fast and they lived hard. Barely any competition existed at all at the time, so they were all really successful—the money was definitely there. They’d roll into town with their diamond-studded Rolexes and Rolls Royces. It made quite the impression on a town like Athens, let me tell you.”

The people closest to the giant found new ways to spread the word about the good fortune he had delivered—and the giant’s circle of friends grew bigger and faster than ever. But alas, the ways of the world began to change, the giant began to grow weary and the circle began to weaken. One sad day, the kindly redhaired giant died. New leaders stepped in to help hold the circle together and the friends found that, by being there for each other, they kept the giant’s legacy alive. Unbridled growth—not to mention unbridled franchisees— were gradually reined in as ColorTyme began to find its way. People with plans and processes helped the company get a grip and grow up a little from its free-for-all first years. “Wayne Atchison was really an unsung hero of the early days,” Sandi Blackwell says. “He brought the first consistency and method to what had previously been a bit of madness. He put systems into place, he targeted the company’s future growth and he introduced training and support programs for the franchisees.”

This newfound structure served to harness and channel the energy of the franchisees, producing exponentially greater growth for the company and even greater success for those who were truly dedicated to the business. “The rent-to-own system is a system that works; it’s a profitable system,” Atchison says. “The franchisees who have had longevity with ColorTyme, they’re the ones who got a good foundation, built on it and continued to utilize it. They’ve grown as businessmen and, by staying with the system, believing in it and following it, the system—along with their hard work and perseverance— has worked for them and they’ve been successful. “Seeing the system work is one of my favorite things about this business,” he continues. “Seeing a person come into ColorTyme with a minimum amount of money and no experience whatsoever in rent-to-own and then one day getting the call that they’ve bought their first airplane— that’s satisfying.”

By the time ColorTyme turned ten in the late 1980s, the company had more than 500 stores nationwide and was poised to expand up to 3,000 locations. Then, things began to change. Talley—unknowingly ill and some say influenced by other sources—shifted ColorTyme’s direction from becoming a master franchisor to being more profit-driven. Franchise growth stalled, so that by the time Willie Talley died in 1995, ColorTyme was down to around 300 stores. Within a year after Talley’s death, ColorTyme was bought by Renters Choice and, two years later, when Renters Choice acquired Rent-A-Center and adopted that company’s name, ColorTyme became an independent, wholly owned subsidiary of the world’s largest rent-to-own concern. Meanwhile, a new breed of franchisee had emerged—more educated, more family-oriented, more community- centric and more business-savvy.

Gary Hughes, who in 2008, along with his wife Jutta, was awarded the ColorTyme Circle of Excellence—the company’s lifetime achievement award—is one such franchisee. Hughes opened up his first ColorTyme store in 1990, grew the franchise to 33 stores, sold 27 of them back to Rent-A-Center in 2005 and has expanded his business back up to 12 stores in Washington state, Hawaii, California and Idaho. Over the years, he has produced more than 100 television commercials (some used nationally by corporate), been a key sponsor for local Boys & Girls Clubs and helped fund the construction of a community college nursing training facility, which now bears his name. Cameras, contributions and kudos aside, Hughes says his favorite thing about his ColorTyme career has been all about the people.

“I’m good at hiring, training, motivating and retaining high-quality people,” Hughes says. “So the best part for me is growing people; I’ve thoroughly enjoyed helping many people become owners or part-owners of their own business. And because ColorTyme franchisees can’t be in direct competition with each other—because we have controlled territories—we can open up and share ideas freely without fear that it will come back to bite us in the behind. In 1997, for example, I shared with my fellow franchisees that we had added financial services—we were the first rent-toown company to do that—and I was perfectly happy to share information about it with all the ColorTyme franchisees.” Recently, Mark Childers and his wife, Tracy, earned ColorTyme’s top annual honor, the Eagle Award, and were ranked as the company’s number-one franchise for revenue achievement.

Originally, Childers went to work for the company in 1985 as a summer delivery driver; he rose through the ranks to become the district manager of four stores before being hired over to the corporate side by Talley to serve as a field trainer. Childers eventually realized he wanted to become a franchisee and, in 1993, partnered with Gary Hughes until the sell-back of 27 of their stores to Rent-A-Center in 2005. After the sell-back, Childers chose to continue with Color- Tyme, opening up his first solo store the same year in Sunnyside, Washington. Today, the Childers own five franchises in Washington state and Alaska. “Starting out where I did—in the delivery truck, going to peoples’ homes—I got to see how this industry really helps people,” Childers says.

“There’s this misconception about our business, that we prey upon less fortunate people—and it’s just not true. From my perspective, we provide people with the means to enjoy things they simply couldn’t afford otherwise. So that has kept me in this industry almost 25 years. What’s kept me with this company so long is, hands down, the other franchisees who make up the ColorTyme community. Being able to draw upon the many, many success stories within ColorTyme continually inspires me. There are so many people I can call any time I’ve got a question or concern, so much business wisdom we can all tap into. It’s an invaluable resource.” James Stephens also began his rent-to-own career on a delivery truck, employed by Rent-A-Center in Natchitoches, Louisiana, just six years ago.

Stephens worked his way up to store manager status, then in late 2007, opened up his first ColorTyme store, in Shreveport. Recently, he was awarded the company’s New Franchisee of the Year for 2008. “Rent-to-own was really challenging for me at first,” Stephens confesses. “Growing a store is an art form—balancing sales with collections, managing my time and especially learning the back end of the business. I found ColorTyme University for Owners extremely beneficial and I also appreciate the flexibility the company gives us with our programs. Somebody in Washington, D.C., will run a store differently than someone with a rural East Texas store. ColorTyme gives us the freedom to do what’s best for our business in our own town.” “ColorTyme lets franchisees be entrepreneurs,” Hughes concurs.

“They don’t treat us like schoolchildren; they don’t micromanage like some other companies do. We can buy the type of furniture that fits best with our market and not the furniture some national purchasing manager says we have to have.” Lifetime-achiever Hughes says rent-to-own in general and ColorTyme in particular have been very good to him— he owns several race horses, his favorite pastime is world travel and he’s given back substantially to the communities that have supported his stores. Hughes says his best advice to newcomers such as Stephens is that the business can be just as good to anyone who comes to ColorTyme and works hard. “Go to work,” Hughes orders. “Being an owner is not a vacation. If you want to succeed, you had better be the store manager, be there 12 hours a day, six days a week. Once you get the business built up and it can support itself, then take some time off. Rent-to-own isn’t rocket science.

All you need are the basic abilities to run a business: understanding people, knowing how to market the merchandise and developing compensation programs to reward people for positive performance. What gets rewarded gets done.” Over the years, the circle of friends the giant had created grew larger and then smaller. People came and went, but the circle lived on, still bringing much satisfaction and wealth to many who came into it. Eventually, a new leader appeared. He brought new people with him, with new ideas about how to expand and improve the circle. But the new leader also reminded the people that the strength of the circle came from within them and from the connections between them. And as long as they remembered that, the circle would continue to strengthen and grow. For almost five years, ColorTyme president and chief executive officer Bob Bloom has been getting stuff done; yet the reward—simply put, more stores— remains somewhat elusive. Since receiving the ColorTyme reins in the summer of 2004, Bloom has overseen: Franchisee growth: 45 new franchisees have signed on—some opening multiple ColorTyme stores within their first year; New revenue sources: RimTyme Custom Wheels and Tires has 21 stand-alone stores in eight states, as well as several operations within ColorTyme stores; more than 40 ColorTyme stores offer payday loans; and the company intends to identify another new revenue source this year for its franchisees;

Robust financing program: ColorTyme is an SBA-preferred lender and offers a 401K franchising program, or traditional financing through Wells Fargo or Texas Capital;

Extended training opportunities: the company launched ColorTyme University for Owners, a four-day course covering people skills, situational leadership, financial management and marketing; a regional manager training program is also under development to debut later in the year;

Branding makeover : Color- Tyme has adopted new brands, both publicly—Your Hometown ColorTyme— and internally—People Helping People; the company also has premiered a new warmer, more retail-esque look and feel within its stores; and

A leadership  team revamp. “We’ve got a terrifically strong team here now,” Bloom asserts. “They’re intensely focused and very cohesive. I’m fascinated by watching them interact together, challenge and bounce ideas off of each other. This is a team I believe can grow us again.” Bloom says “again” because, truth be told, the number of ColorTyme stores nationwide has actually dropped during his tenure—today, 210 ColorTyme stores operate in 34 states.

Rent-A-Center head Mitch Fadel says that while the numbers might seem daunting to outsiders, on the inside, ColorTyme is definitely on the move. “Rent-A-Center has grown mainly through acquisitions and our growth strategy has been an easy exit strategy for franchisees when they want to retire and cash out on their investment in Color- Tyme,” Fadel explains. “The exit strategy is a tremendous positive when you’re recruiting new franchisees, but when you’re trying to grow the overall number of stores, it can work against you. As fast as ColorTyme grows—which has been about 10 new franchisees and 30 to 40 stores a year—it’s losing veterans and their stores because they’re utilizing our excellent—and often lucrative—exit strategy.

So even though the number of stores has stayed right around the 200-to-250 range for the past five years, the turnover has been significant.” Both Fadel and Bloom believe that this period of turnover is slowing down and readying to turn around—that most of the longtime franchisees likely to use the exit strategy have already done so and that fresh, new franchisees will continue to join ColorTyme and expand their businesses with the company for the next several decades. “ColorTyme’s value package for someone who wants to invest in a rent-to-own franchise is fabulous and far superior to anyone else,” Bloom declares unequivocally. “I expect us to continue to attract double-digit new franchisees every year, with the number accelerating each year.

Of course, this isn’t the best economic environment to grow in, but at the same time, rent-to-own is uniquely positioned for this economy. As we get five to 10 years out, I think we’ll be at 15 to 20 new franchisees a year, with each opening at least one store.” Additionally, Bloom says that while RimTyme is still ramping up as a business opportunity, he thinks its growth will take off in the next few years. And so the next chapter of the ColorTyme chronicles is still being written, confirmation that the company’s 30-year story-in-progress hasn’t always been fairy-tale fodder. But whether reviewing past chapters or imagining future ones, it’s clear that the cast of characters determines the outcome of each plot point—and the happiest ending to wish for is no ending at all. “It’s all about the people,” Fadel concludes. “Willie was a big part of the company’s success—he was as good as anyone I’ve ever seen at building relationships.
He wasn’t necessarily the best industry expert you ever sat and talked to, but he was the best at building relationships. I felt that I continued that during my time at ColorTyme and [now] Bob has that all-important relationship with the franchisees, like I feel Willie had. I believe the leadership at ColorTyme and especially the relationships built by Willie, myself and now Bob with the franchisees have been, and will continue to be, the core and the strength of the company.” “It’s a wonderful company,” Davis, ColorTyme’s 27-year veteran, effuses. “Our longevity speaks for itself; we’ve outlasted everybody. Our franchisees are the key—without them, we don’t have a company, we’ve got nothing. The people who are here, who have been here, stay with Color- Tyme through thick and thin because we believe in it. And if you’ve ever been connected with ColorTyme, you never lose that connection completely. I’m not sure why; there’s just something about it. It’s just how it is.”

RTO Custom Wheels and Performance Tires
by Ed Winn III

There is a new kind of rent-to-own dealership that is hitting the streets all over the country. These stores rent wheels and tires, of all things. Americans love their cars and they love them even more when those cars are sporting shiny new custom rims and sleek, low-profile performance tires, most often acquired from the relatively new-in-town wheel-and-tire rental stores. When pondering the current crop of cars on the road, you might subscribe to the axiom, “They don’t make ’em like they used to”—and you might be right. But a growing number of RTO dealers are bringing cool back and providing personality to cars, like in the good old days. In the 1950s and 1960s, the heyday for U.S. car manufacturers, Detroit retooled its assembly lines every year or so and came out with distinctive designs for their automobiles.

Often, people were known by the cars they drove and they traded them in for newer models frequently. Cars and personalities overlapped. Then gas prices shot from 25 cents a gallon to more than $1 per gallon overnight in the early 1970s; driving and car ownership changed. Cars got smaller. The federal government mandated new safety features and better gas mileage—and cars also got more expensive. Detroit retooled models less often, changing body styles every three to five years, and the changes were modest, less dramatic than in the past. Automobiles lost style in the interests of aerodynamics and good gas mileage. Car notes went from three-year to six- and seven-year terms and drivers had to keep their cars longer.

Eventually, the dictates of the marketplace caused all cars except those at the very high end to look like the Toyota Camry. Personalities and cars got disassociated because cars were all so bland. However, automobiles still represented freedom in America and much of the American ego was still bound up in the kind of car one drove. How, then, to distinguish one’s “ride”? By the late 1990s, the resolve was to “pimp it.” For many, it became the thing to do and even spawned a successful MTV program, Pimp My Ride, which first began airing in 2004. According to the Specialty Equipment Market Association (SEMA), sales of automobile after-market products doubled from 1996 ($18 billion) to 2006 ($36 billion), as car drivers sought to make an impression behind the wheel. A healthy chunk of the automotive after-market business—$2 billion in 1996 and $4.5 billion in 2006—was in custom wheels and performance tires.

One of the quickest and easiest ways to make a ride distinctive is to dress it up with fancy, often larger, shiny chrome wheels and, perforce, thinner performance tires. Until relatively recently, after-market wheels and tires were not marketed with much flair. When passenger tires wore out, car owners simply replaced them at one of the national chains—Sears, Firestone or Pep Boys, for example. These stores might have carried a handful of wheel choices, but only as an afterthought and most often more as a means of displaying the tires for sale than as a product for customers. There were never more than a half-dozen wheel styles lying around or nailed to a wall in the back of the store somewhere. The pitch was to sell good tires, ideally four at a time, not to replace the existing wheels with anything different, or God forbid, a different size. Auto-supply houses, catering to the weekend car-repair crowd, might have had a few custom wheels lying around, but no retail stores were focused on selling wheels as a targeted product.

Car owners who were after high-end, high-quality wheels had to go to the car magazines or the Internet to find what they wanted. They had to make a significant purchase decision based on a tiny picture in a magazine or on a Web site. Then, when the product arrived via UPS, there was the hassle of finding someone to install them. Custom wheels might never have taken off like they have but for some visionary rent-to-own entrepreneurs who saw the opportunity for a new product niche and launched RTO businesses specializing in wheels and tires in the early part of this decade. Rent-to-own dealers married their unique rental/ownership transaction with an under-marketed product category and built a new industry seemingly overnight. In 2003, the Association of Progressive Rental Organizations could locate only 15 rent-to-own wheel-and-tire stores nationwide.

Today, there are nearly 200 such businesses up and running. Early on, rent-to-own entrepreneurs experimented with wheel-and-tire kiosks in traditional RTO stores, but the consensus today is that the product is so specialized that it needs its own space, employees and installation facilities—and that is the direction in which the business is moving. With the emergence of RTO wheel-and-tire stores, now, for the first time, car owners have a place where they can shop for fancy wheels and tires in their local market. Since its development within the industry, these rent-to-own stores have had computers where a customer can view a picture of his car (down to the year, model and color), scroll through different on-screen wheel-and-tire configurations as they would look on that car, and then finesse the configuration to get a precisely desired look.

Often the store will have the product on hand for immediate installation or can get the wheels and tires shipped in a day or two. Incredibly, SEMA reports that more than 25 percent of new car buyers are swapping out their factory-installed wheels with custom wheels, evidence that the personalizing trend in automobiles is significant. Growth in rent-to-own wheel-and-tire stores has been nothing short of phenomenal and seems to be holding steady even during the current economic downturn. Rent-to-own stores have raised the bar for marketing custom wheels and tires and retail buyers are learning that the best availability for these products is in RTO stores.

Rent-to-own transactions may make up only half of a dealer’s revenues— the other half coming from cash customers who want the selection that they can only find in RTO stores. A large rent-toown showroom, for example, may have 250 different wheels on display; a medium-size RTO showroom will have half that number. That contrasts with retail tire stores that may have only a dozen or fewer styles in stock. The retail automotive aftermarket is slow to catch on to the trend of specializing in custom wheels and, until it does, rent-to-own dealers intend to take full advantage of their leadership in the business segment. One chain, Rent-n-Roll, is changing its name in new markets to RNR Custom Wheels and Performance Tires so that it can continue to attract its rent-to-own customer base and also draw in more of the retail trade.

Custom wheels do not come cheap and if the customer is changing the size of the wheels, which is most often the point of the exercise in stylization, there will have to be new tires in the deal, as well. A set of four wheels and tires can run from $2,000 to $5,000— and even higher for really big wheels. Logically, one might suppose that most of the wheeland- tire business comes from testosterone-drenched young males, ages 18 to 25. This demographic constitutes a fair percentage of the market, but the customer base is far broader than that. Women make up a third or more of the buyers and renters for custom wheels. Some might be getting the wheels as presents for boyfriends and husbands, but many are “tricking out” their own rides, opting for wheels that better suit their personality.

One issue confronting the business is keeping customers on the books. Once a customer has acquired that dream set of wheels and tires, it may be years before that car gets traded in or the customer comes back for a different set of rims. RTO wheel-and-tire dealers are looking at other automotive accessories to keep customers coming back to the store—custom grills, GPS devices, window tinting, car stereos and regular passenger tires are all being tested, all for sale or rent. But the focus in all rent-to-own custom-wheel-and-tire stores is on the wheels and it is that product, in its ever-increasing variety, that drives customers to the stores in the first place. Traditional rent-to-own dealers might wonder how the wheels dealers get their stuff back when a customer defaults.

It has happened that a customer’s car gets left up on blocks, shorn of the dealer’s merchandise by the collection crew—it can be done in less than 15 minutes—but such events are rare. Most customers need their cars and know that if they do not make their wheel payments, they run the risk of not having a drivable vehicle. Most of the time, customers who cannot keep up with their rental payments bring their cars back into the store and have their old wheels and tires put back on so that they can at least continue to drive. Collections in the wheel-and-tire business have not proven to be any more problematic than in the traditional rent-to-own business. There is some “hide and seek” to be sure, but not so much that it is affecting the growth of the business.

When custom wheels and/or tires come back to the store, they are cleaned up and put back in inventory at discounted rates, just like used televisions, appliances and furniture. One detail unique to the wheel-and-tire business is that often, there is a lien on the car, giving the lien-holder the right to repossess the vehicle if the customer defaults on the car note. If that happened, the bank or the car lot would be getting a windfall if the law allowed it to keep the new custom wheels and tires—add-ons that increase the value of the vehicle by hundreds, sometimes thousands, of dollars—that were not on the car when the loan was made. But, in fact, the law recognizes the rights of the rent-to-own dealer to recover his merchandise, even from the bank or car lot that has repossessed a car.

Article 2A of the Uniform Commercial Code, which has been enacted in every state since 1993, allows a dealer to recover his property without any obligation to replace the property taken. If the bank refuses to relinquish the wheels to the dealer, the bank is liable to the dealer for the fair-market value of the wheels and tires. Since the rent-to-own industry began, dealers have been quick to discover and develop new business segments as they came along. Stores that were originally just in the TV-rental business added appliances, then furniture, then jewelry (although the industry did pass up the CB-radio craze back in the day.) This latest foray into the custom-wheel-and tire business is proof that the entrepreneurial spirit in rent-to-own is alive and well and ever open to new opportunities as they arise.

Rent-to-Own: Enter Stage Right
by Tiffany Hamburger

Even in the current economic climate, Seattle based Quality Rentals is busy putting some pretty sweet icing on an already substantial rent-to-own cake. Thanks to a successful sideline business in home staging, the company looks forward to additional revenue each month, as well as the satisfaction of expanding the company and rent-to-own beyond the typical consumer. But if the term “home staging” gives you stage fright, relax. While Quality Rentals’ owner Kevin Quinn acknowledges that it’s not for everyone, rent-to- own dealers around the country only need perform some research to determine if they have an untapped niche waiting in the wings. Developed by Barb Schwarz in the 1970s, home staging* is the practice of using accessories and home furnishings— especially living, dining and bedroom furniture—to maximize the appeal of a piece of real estate. Schwarz, a former real estate agent with a background in theater, began by asking her clients to allow her to “set the scene.”

“One day, I asked a lady, ‘Do you like the theater?’,” Schwarz says. “And she replied, ‘I love the theater, but what does that have to do with selling my house?’” Schwarz explained to her that real estate and theater have a lot in common: each house is like a play, the buyers are the audience and it’s either a sell-out or a flop. “So I said to her, ‘I’d like to be your director and your set is your house.’” As Schwarz explains, most buyers cannot visualize their own belongings in a space, especially if it’s cluttered with personal belongings or left completely vacant. “No matter what it is, whether it’s a home, apartment or condo, it becomes a product,” she says. “When it is vacant, people cannot imagine the vacant space—and we want the person mentally to move in. When you set the scene, people come in and visualize how the space can be used and they can imagine living there.”

Schwarz has a motto to reinforce this point: “Buyers only know what they see, not the way it’s going to be.” In order to aid the buyers with the process of mentally moving in before they buy, stagers create warm, welcoming arrangements with well-chosen pieces of furniture, artwork and accessories. However, Schwarz cautions, it’s not the same as decorating. “Decorating is more about personalizing, about the decorator’s taste. Staging depersonalizes,” she says. “It’s not about the stager or the item, it’s about the space.” Staging opportunities for rent-to-own dealers arise from the need that stagers have for furnishings. Indeed, initially it was stagers who sought out Kevin Quinn’s Quality Rentals instead of the other way around.

A group of stagers had been working with rent-to-rent companies, but discovered that the rent-to-own structure gave them a distinct advantage. “Most rent-to-rent companies want a minimum of three months on a rental,” Quinn says. “In rentto- own, we’re used to renting items for a week, two weeks, whatever. With stagers, we’re a one-month minimum.” By satisfying his staging customers, business spread by word of mouth and pretty soon Quality Rentals had a bustling sideline business. Devin Quinn, a store manager for Quality Rentals and Kevin’s nephew, agrees that making one stager very happy can really pay off: “One of our biggest clients—who, over the past two years, has paid us almost $102,000 on her own—came to us [having dealt with another] rent-to-own organization for months; she was just disgusted with how they kept falling through.” He adds that most stagers are expert networkers, which can help expand your business.

“If you make one of them profitable and successful, [other stagers] are going to model her business and say, ‘Hey, I want to come deal with you, too.’” Beyond the attractive rental terms, stagers are looking for a particular aesthetic, which poses a unique challenge to rent-to-own dealers trying to break into the staging market. “You have to understand that stagers do not want your rental return rent-to-own furniture,” Kevin says. “If you’re not willing to change some of your purchasing to cater to that business, you probably shouldn’t think about getting into it.” Schwarz confirms that stagers’ needs are not the needs of the typical rent-to-own customer. In her experience, rentto- own dealers sometimes try renting out-of-date items or furnishings that are worn or damaged. However, she does offer guidance about what to look for: “The Pottery Barn look is a really good one that crosses all styles and prices. Just pick up a Pottery Barn catalog [www.potterybarn.com] and you can’t lose by investing in something like that.” Devin laughs when asked about the “Pottery Barn look.” “That’s a classic statement. It’s the low-back furniture, the square arms. A modern, streamlined look.”

But after several years as lead contact for his store’s staging accounts, he offers advice before investing in a line of furniture that may not cross over to the typical rent-to-own customer: Don’t go it alone. “The key to being successful—if you’re going to attempt to boost your revenues by $20,000 or $30,000 a month in the staging market—is to try to find that stager who wants to rent, who is looking for the best option,” he says. “Convince them that you’re that [type of business] and then sit them down and ask, ‘What kind of stuff do you need? What are you looking for?’ That’s what we did and it spoke worlds to these women”—and it is a female-dominated business— “because sometimes they get shunned [by rent-to-own]. We came to them and said, ‘Tell us what you need to be more successful in your business.’ We opened up our book and watched them pick stuff out.” Kevin, a 28-year rent-to-own industry veteran, has encouraged his nephew and is enjoying the staging success. In fact, his company even helped stage the home of Seattle Mariners baseball star Ichiro Suzuki. However, he knows where his bread is buttered and wants intrigued RTO dealers to remember their foundation.

“The biggest pitfall for a rent-to-own dealer is to try to be everything to every stager— you can’t do that,” Kevin says. “The challenge of moving previously rented or numerously rented staging furniture into your rent-to-own stores and then selling it or putting it on another rental term is a pretty difficult cross-over. We get it done, but you have to make it very palatable price-wise for the rent-to-own customer to want that product.” Of course, the realities of today’s real estate market have not spared the staging industry. “The staging business will follow the cycle of real estate,” Kevin says. While he admits that business from staging has fallen off lately, he adds: “I still think that the future is bright. I think it’s good for both sides. I think strong stagers who are in the business and have been in the business will survive and will have plenty of business to supply to rent-to-own companies.” But he offers a strongly worded caveat to anyone who thinks staging will be the ticket out of the economic downturn. The revenues for Quinn’s staging business, he says, amount to 3 percent to 4 percent of total revenue for the company. “Remember, rent-to-own is your lifeblood,” he says.

“Don’t think that staging is going to replace a major part of your RTO business that possibly you’ve lost over the years. That’s not going to happen.” Let’s say you’ve considered the caveats and are still aspiring to enter the staging business. How on earth do you get started? The Quinns have plenty of practical advice. Devin suggests first determining if you’re even in a staging market: “Are there active stagers in your area? If there are, where are they doing business? You’ve got to determine if you have the potential to grow the business.” Kevin agrees, but adds that, particularly in this economy, it is wise to go after the more experienced stagers. “Find stagers in your market who have been doing business for more than three years,” he says. “And then service them like you’ve never serviced anyone before.”

So where can you find these experienced stagers? Devin suggests starting with an Internet search, including the terms “staging” and your business location on sites such as Google and the real-estate network Activerain.com. “It’ll take you 30 minutes to see if you have any [stagers] in your area,” he says. “Just call them and ask a couple of questions; you can’t count on them finding you.” As a key developer of staging, Schwarz has created a professional certification program and an international association to support the profession. Another way to find an accredited staging professional (ASP) is to locate the closest regional ASP chapter of the International Association of Home Staging Professionals at www.iahsp.com.

You can also perform a search at www.stagedhomes.com. Devin also advocates getting to know the real estate agents in your area, since many agents are also stagers. While some stagers own their own furniture, he says that most agents he’s met want nothing to do with owning and are eager to rent all the furniture they need. Scrimping on storing and delivery are not an option, Kevin says. The furniture has to be pristine and the delivery has to be on time and professional, emphasizing, “Always put your best foot forward in a stager’s home.” Common themes emerge when talking to the Quinns about this business: It’s not for everyone. It takes a high level of professionalism and attention to detail. It demands extra space and manpower. It can be risky.

Of course, sometimes risk comes with unexpected rewards. “The other advantage to this business [is that] some people who come into the home—or the sellers who come into the home—want to know if they can buy that furniture and want to know where it was acquired,” Kevin says. “It is an opportunity to expand the company and the name of rent-to-own.” He admits that this isn’t a huge revenue source, “but it’s business I never would have had, because they never would have come into my store.” While there are economic and logistical challenges for rent-to-own in staging, Devin relishes the ride. “In my first couple of months after getting involved in the staging industry, it was so new to us and we didn’t really know what to expect,” he says.

“Truthfully, we didn’t know why no one had figured out this market. Why was it so untapped? Why are people not all over this right now? We did our research and we did our calling around to a lot of local rent-to-own companies and they said it was a very labor-intensive job, very tough, very needy, really demanding of your time and your crew.” He pauses and takes a breath. “And that’s true—but at a certain point, when you start getting it right, it becomes the most beautiful icing on the cake.”

GE Consumer and Industrial’s Paul Eichberger and Paula Allison
by Neil Ferguson

General Electric’s appliances have kept food frozen, cold, warm, hot and boiling for more than a century. They’ve helped households wash and dry clothes and dishes for generations and, since rent-to-own’s inception, GE products have been on RTO delivery trucks. GE has been an APRO associate member since the association was founded in 1980. In short, the company is no “Johnny come lately”—nor are two of its key rent-to-own representatives, Paul and Paula. Paul Eichberger started at GE in 1988 and has worked for the rental sales division in Louisville, Kentucky, for the past 15 years. Paula Allison celebrates her 26th anniversary with the company this month and has worked with Paul to accommodate the rentto- own industry for well over a decade.

“Because Paula and I have worked for so long in rent-to-own, we know many of the rental dealers on a personal as well as business basis,” Paul says. “Even many dealers who do not currently buy GE products.” It’s the kind of vendor/dealer relationship that is nurtured over time, yet these two GE reps initially didn’t visualize such enduring careers with the hometown business giant and its rent-toown division. When Paula was first prompted by her manager to consider working with GE’s rent-to-own customers, she almost declined because she didn’t know much at all about the RTO industry and wasn’t sure she wanted to switch gears to the rental niche. “But now I’m so glad I didn’t decline the offer,” Paula says. “I’m very fond of this group of customers—I’m growing old with them!”

Paul and Paula are among the thousands who toil at Appliance Park in Louisville, home to GE’s Consumer and Industrial headquarters. Paul likes to point out that—as Louisville natives—both Paula and he are in the minority among those in sales and marketing at GE; most began life somewhere else. For Paul and Paula, roots and stability have been the thread of life. Paula lives in a home a mere three blocks from the one in which she was raised and now, along with her husband Mike, she is raising two girls, Kaelin, 18, and Sydney, 14.

Paula’s parents live next door. Paul has a son, Michael (age 19), at nearby Georgetown College in Georgetown, Kentucky. While GE has a legacy stretching back to the days and numerous inventions of Thomas Edison, the company doesn’t rest on its impressive longevity, nor does it stop seeking new ways to keep things hot, cold, frozen or clean. While the GE logo is blue, the company’s appliances are decidedly green—with GE developing an ever-widening array of more energy-efficient and eco-friendly products under the company’s banner of “Ecomagination.” It’s a direction that makes Paul and Paula proud. “We have a very strong brand, the only factory service network and a world-class logistics operation,” Paul says. And how do they stay competitive in these tough economic times?

“It’s important that we emphasize GE’s strengths,” he says, “one of which is our customer service. It is important to handle customers’ issues in a timely fashion. Problems will arise, no matter which brand you carry. The key is how you handle those problems. We always strive to let our customers and their customer know that we care.” Paul enhances GE’s customer-service strategies with his own personalized credo: “Effort and attitude [are] a few of the things that we, as individuals, have in our own control.” So, in spite of current economic concerns, his efforts remain diligent and his attitude upbeat—and he lauds the work ethic and cheerful nature of his rent-to-own sales partner, too. “Paula is the face of GE for the rent-to-own industry,” Paul says.

Paula works directly with the independent dealers while Paul manages the Aaron’s account and is overall team leader. He organizes GE’s product displays and processes for the buying group shows, as well. “Paul and I have worked together long enough so that we both know what each of us needs to do to accomplish our goals,” Paula says. “Paul is a good friend and a great business partner. He has become a strong advocate for the rent-to-own industry and he truly cares about the business— we both do! It might sound somewhat flippant, but we get ’er done!” Paula attributes her customer-service approach to “what I have learned specifically from my rent-to-own customers and the RTO industry in general. Working in rent-to-own has enriched my life,” she says. “I have never worked with a group of individuals more dedicated to— and focused on—customer service. It is the core of every rent-to-own business and I aspire to provide my customers with the same excellent service that RTO dealers give their customers.” The relationships she’s forged with rent-to-own dealers through the years inspires Paula to grow and maintain a positive attitude.

She cites longtime RTO businessman and former Furniture and Appliances Now co-owner Fred Pearson as a model for positive thinking. “Whenever you’d speak to Fred and ask him how he was doing, he’d always tell you, ‘I’m having some of my best days.’ Fred never failed to give the same response with the same enthusiasm, no matter what was happening around him. He’s given me faith in myself and helps me to remember how fortunate I am every day.” Paula and Paul’s good fortunes stem, in part, from working for a hometown enterprise that, like them, knows how to get ’er done. The first product came off the line at GE’s Appliance Park in 1953 and now the sprawling complex manufactures refrigerators, freezers, ranges, dishwashers, washing machines, dryers, microwave ovens and room air conditioners— more than 10 million appliances a year. Appliance Park is like a small city, with its own Zip code, volunteer fire department, EMS, power plant and police department.

Within the 140-acre grounds, there are more than 20 miles of railroad track and 12 miles of paved road. Manufacturing space occupies 5.5 million square feet and office space takes up an additional 600,000 square feet. GE’s product warehouse— one of the largest in the world— occupies 47 acres, large enough to hold 650,000 appliances ready for shipping. Along with such grand manufacturing capabilities comes an equally impressive national customer-support operation, based elsewhere in Louisville. It includes a vast network of field sales managers, state-of-the-art distribution and order processing, and GE’s Answer Center, which offers product information and answers to repair questions to 3 million callers a year. Within this massive operation, Paul and Paula tend to the concerns of rental dealers from coast to coast. When not in the office at Appliance Park, traveling to rent-to-own buying shows or visiting an Aaron’s account, Paul strives to perfect his golf game; as a child, he aspired to be a professional athlete.

Paula is an avid movie watcher—Ed Harris, Meryl Streep and Funny Girl are cinematic favorites. However, both concede that their work keeps them plenty busy and allows little time for leisurely pursuits. That’s fine with them, though, because they like GE, the products they sell and the rent-to-own dealers to whom they sell them. While Appliance Park is an omnipresent force in Louisville, neither Paul nor Paula grew up with the dream of working there; it just worked out that way—to their benefit and the benefit of rent-to-own dealers, too.