The RTO Show "Let's talk Rent to Own"
Ever wondered how a $8.5 billion industry keeps millions of Americans lounging in style? Step into "The RTO Show Podcast" – where the mysterious world of Rent to Own furniture finally spills its secrets! Your host Pete Shau isn't just any industry veteran – he's spent 20 years in the trenches, collecting the kind of stories that'll make you laugh, gasp, and maybe even rethink everything you knew about that couch you're sitting on.
From wild customer tales to industry shake-ups that'll knock your rented socks off, Pete brings the seemingly mundane world of furniture financing to vibrant life. Warning: This isn't your typical business podcast – expect real talk, unexpected laughs, and "aha!" moments that'll have you looking at every lease agreement in a whole new light.
Whether you're an RTO pro who knows your depreciation schedules by heart, or you're just curious about how that fancy sectional ended up in your living room, Pete's got the inside scoop you never knew you needed. Tune in and discover why the furniture business is anything but boring!
The RTO Show "Let's talk Rent to Own"
Legend: Ken Butler on RTO's triumphs and tribulations
The journey from a small-time rental operation to transforming an entire industry doesn't happen by accident. Ken Butler, with nearly five decades of experience in rent-to-own, pulls back the curtain on how he helped grow Aaron's from a modest 12-store operation to over 2,000 locations nationwide.
Ken reveals the revolutionary thinking that changed how the entire industry operates. Moving from weekly to monthly payments, extending ownership timelines, creating distribution centers, and manufacturing their own furniture through Woodhaven – these weren't just business decisions, they were industry-altering innovations. Perhaps most fascinating is how Ken transformed the terminology from "rent-to-own" to "lease ownership," recognizing that consumers wanted the product but not the stigma.
The magic behind Ken's approach wasn't just operational brilliance but his focus on building genuine human connections. "This is a personal relationship business," he emphasizes throughout our conversation. From creating closing rooms for private customer discussions to implementing unique culture-building initiatives like the Lucky Dog mascot, Ken understood that success came from treating both employees and customers with respect.
What truly sets this conversation apart are Ken's candid reflections on leadership. He shares how he identified competitive people who could drive growth, empowered managers to make decisions, and created incentive programs that turned store managers into entrepreneurs. The Diamond Club recognizing million-dollar stores became a powerful motivator that transformed performance across the entire organization.
Whether you're a rental industry veteran, an aspiring entrepreneur, or simply fascinated by the inner workings of successful businesses, Ken's wisdom about time management, creating company culture, and maintaining work-life balance provides invaluable lessons you can apply immediately. What will you take from this legend's playbook?
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Hello and welcome to the RTO Show podcast, my name is Pete Chow and you guys know me, but you might not know my legend. Here we're going to do a brand new legend series and this is the start. We couldn't think of anybody else to start with better than Ken Butler. Now Ken Butler is a legend in the business. Been there 39, 40 years, ken has it been.
Speaker 2:Well, 40 years at Aaron's and now another nine years, eight years, with buddies.
Speaker 1:So two and a half times what I've been in the business, and we wanted to bring this to you because we know that there's so many things that you want to know about the RTO industry. This is just about where it started and really looking at making this a series, but we couldn't think of a better person to start with. So we're actually, after meeting the minds, we're here in Atlanta at Vox, so Vox Populi has sponsored the show. We are here in their offices having the best startup of the Legends series. Ken, how are you doing today?
Speaker 2:I'm doing great. We have the buddy stores, but more importantly to me is family. I've been married for 47 years longer than I was with even Aaron's. I have 14 grandkids and three children, and they are keeping me busy. They are all participating in sports sports and I can't be happier with my time. That's awesome. Family is really important and we always stress that when you're in the industry, because it's a hard job, it's a lot of hours and you can't lose sight of that one fact.
Speaker 1:Well, I can tell you right now. So, getting into this industry, my first five years probably the hardest thing I've ever done. It was like open to close, six days a week. It was just go, go, go, go go. But after a while you're right, you learn how to deal with that, you learn how to make this work for you the right way. And you've got to have that work-life balance because after a while your batteries run out.
Speaker 2:Right? Well, the key is time management and you know I used to do a lot of town hall meetings in the days with Aaron and I always preach time management. I am a time management freak and so I mean I'll tell you when I go get a cup of coffee, I put the cream in first for the coffee and so I don't have to stir. So I figure I save 10 seconds a day. If I have two cups cups of coffee, that's 20 seconds. Move that through a lifetime and I'm gonna live 10 years longer than you. But time management is so critical and, uh, there's a tendency to for managers to be a bouncing ball when they get inside these stores, when, like a pinball machine and they got moved one place to the next and so you got to have a plan. You got next and so you've got to have a plan. You've got to come in the morning, you've got to get stuff done, gsd and the more you can get done early, the more you're going to be sales-oriented throughout the entire day. So I like clearing.
Speaker 2:I like, even in my personal life, if I've got errands to run, get them done early, get them done, get them off your list, check the thing off. You can make checklists. You may have a hundred things that need to be done, but you have to weigh what's important and what's not. Oh, absolutely. But you've got to get them done and not sit around and procrastinate and maybe keep putting off and putting off. And I call that, in an office environment, a get around to it later basket. There's a basket to stack this time. That's the stuff you get around to it later. Well, guess what? It never. You never get it done and you've got to be on top of your game in this industry. You've got to, you've got to. You've got to work hard, but you've got to work smart.
Speaker 1:Well, absolutely, and that's part. That's part of everything that we were kind of trying to teach a lot of the managers in these last few years is that when you work, you're going to always work the same amount of hours, if not more. If you're not careful, you put your 60 or 70, whatever it is thing over and over and over again. That is huge and it makes such a big difference. Now, 39 years in the errands industry, 39 in the rental home industry at least under errands and then you did. How did that work out? So, after you retired as the CEO and you know, was it at 2013?
Speaker 2:It was 2013.
Speaker 1:Yeah, so what did you do since then? Because you said 39 years, and then plus what have you been up to?
Speaker 2:Well, I didn't retire. I left Aarons, so that's a different story altogether, and there were particular reasons why I did. But I couldn't get back in the industry right away. I love the industry, but I love business too, and so when I got in the industry, it was so good because you were able to get experience in a lot of different areas that you could take a career and go into other places.
Speaker 2:My wife owns two hair salons and I'm not cutting no hair. We own a couple gift stores and it's tiny little things that women like, and I get nervous even when I go in those stores. So I wanted to do something again in the family. As my two sons raced and their careers were kind of winding down, mine winded down too. So we decided to get into the golf cart business that we still have today and we have two stores. I'm not looking to build a huge thing out of it, but I want it to perform really well, and so we have done well.
Speaker 2:The first year the little store we bought, we tripled the revenue just on basic things I had learned from the industry. You know, the first thing you learn is if you don't have it, you can't sell it. You know you can't rent it, so you've got to have product, which we brought the product in. You better learn a little bit of something about the product that you're selling. Right, and we've done very, very well and have two stores. My one son runs a kind of a satellite location that does strictly sales and then we have a main location that my other son runs the service department, and I'm the old Walmart greeter. I'm just a doofus out front. I am not mechanically inclined. People ask me technical questions and I go. You need to talk to my sons. It fits them because they are mechanically inclined and we've got a great team that's been there a long time and we're having a lot of fun.
Speaker 2:Now, after my non-compete was up, I had a lot of people that had left errands after I left and they were calling me all the time and I tried to keep them there. I said you know, let me go back. You've got to take care of your family. Absolutely. Just because I'm gone don't mean anything. Your job in the field is still the same as it always was and control what you can control. Don't worry about things you can't control. Who cares about the politics? And I think so much. Even in society today, we worry about the media and all that, but you know what that? In society today, we worry about the media and all that, but you know what? That doesn't matter. Take care of the things you can take care of in life. So I would tell them that. But nonetheless, a lot of them had left and they would call me and say let's do something, let's do something.
Speaker 2:So, lo and behold, I said if y'all got a little money to invest, I'll put some money into it, because I wanted them to have some equity in the venture. And we got big quick. We bought I guess it was seven, eight, nine stores out of the gate down in Florida, south Georgia. And then we bought another little group out of Mississippi you probably didn't know this, no, I didn't. And then HomeSmart came up for sale.
Speaker 2:Homesmart was a weekly RTO concept that I started with Aaron's Right, because you reach a point in growth that you've got to look for the next horse to ride, so to speak. And we started HomeSmart got it up to about 80 stores. The new regime at Aarons didn't understand it and they'd just as soon get rid of it. So Brian and buddies acquired that company, of which about 58 of the stores all of a sudden got dumped in our lap. Well, we didn't really have the money to buy 58 stores it, it. It was a good vehicle to help people from errands and, but a bad vehicle when you don't have. You got it for nothing, basically, and now you're in debt for all these stores.
Speaker 2:So we eventually sold them off. I I wasn't looking into building an empire again with buddies and it was suddenly kind of going that way and and I just wanted to simplify life, and so we ended up settling on 10 buddy stores in the atlanta area and we sold off the texas stores, which you probably have some of them now in florida. We were in north carolina and virginia and I'm sure people out there are running those stores but, most importantly, a lot of the people that had come on board with us are still in those positions of running those stores and making a lot of money. So it worked out really good for everybody and I'm very happy and content to have our 10 Little Buddy stores who, by the way, we were just the company of the year.
Speaker 1:Yes, yes, I did see that. Well, you know, the crazy thing is so, even though there was a leaving at 39 years, you really haven't been that disconnected from it at all.
Speaker 2:Well, I'm not working it day to day anymore. My life I got good people. Paul DeWise runs our accounting. He's a CFO. Izzy Ismael is running the Atlantis stores. He's been with me for a very, very long time and I know they're in good hands. Our management team that runs the stores have a ton of experience. So I'm just a problem solver. You know if something comes up.
Speaker 1:Well, they're pulling from the experience that you've had for so many years, right? So one of the things that I always have to ask is, coming through these many years, seeing the many decades of rent to own, because you came in at a time when it was still infantile, right, we were on a manual system Correct right.
Speaker 2:We had ledger cards of our inventory. We had to check in like an old school library.
Speaker 1:I remember I was literally doing a collections course before and I started at 2000. And so I was telling him about cards and I said you know, I got to tell you a funny story, because the reason why we call it cards is because in the beginning it was a card. It was somebody who was actually literally it was an account that was passed to, that made it on a card and we had to clear those cards. And I said you're going to see it as agreements, it's going to be AOR and you probably don't understand what a card is.
Speaker 2:The good part of being in the card system was we had a metal tray and the folks that hadn't paid, which we called non-renewed. Some people may call it delinquent, but you could see what you had to work, yes, and you really like the visual of that tray getting down to little or nothing, and so that was our mission, which is to wipe that tray.
Speaker 1:And we worked it every day because we had to. It was a visual representation of what was your job, absolutely.
Speaker 2:We had little notes on the back and we put it in our own manuscript and we could understand the writing. Like LM left message, tt, talk to customer, ttc, things like that. But you worked it every day and you followed up. If you had a promise to pay Thursday, you'd go through your cards and bingo. It was Friday and they didn't come in. You're back on the phone and then you're back on the.
Speaker 1:so I was talking to the guys, I was letting them know that's where the cards came from. But you start in the 80s, correct, and you work your way up from a very normal position to getting to the COO, correct.
Speaker 2:The COO of Aaron's. Actually, I started in January of 1974. Oh, so it was in 74. Okay, I started Aaron's what was known then as Aaron's Rent to Own in 1987. That's what I understood. I was with our legacy company called Aaron Rents in 74, which it was a rent-to-rent deal and you had a balloon payment that nobody ever paid, so we'd have people paying forever. But the prices were very, very low, like our average ticket for a one-bedroom apartment was like $60 a month, so unheard of with our pricing today. But they were just using the product. It would come back, would refurbish it. If it was too bad to refurbish, we had a sales division that would send it to like a warehouse concept store called Aaron Sales. Different thing altogether mainly furniture, no appliances, had little portable clickable, no remote control TVs that were $25 a month.
Speaker 1:You know, the first time that I had heard your name it was probably about the end of 2000. I had started in January of 2000. So towards the end of the year 2000, I was working at Runner's Choice and so it was an Ernie Talley business and it was shirt and tie. We came in, we delivered, we sold, we delivered, we serviced, in shirt and tie. It was a whole different ballgame than I had ever been used to.
Speaker 1:I worked at a bank and one of the managers would come in and do the deposit every day and as part of his normal routine he got to know me, we got to know each other, just simple banter. And he pitched me to hire me and I was like I have no idea what rent to own is. I have no idea what you're talking about. He's like come on down. I mean, what's the worst that can happen? Right, you come on down. You don't like it, we call it day. You got a job and so I did and never looked back. I've been a rent to own since and you got addicted. I did, I did.
Speaker 1:It was completely different than anything that I had known. There was nothing like it that I had even heard of, because there were so many facets of it. There was the office side of it where you had to deal with the files, you had to deal with the calls, you had to do collections, but then there was the merchandising side right. So we had stuff that come back and we had to clean it, we had to put it on the sale all the way to ownership. Well, now I've got to deliver. I've got to learn how to deliver. I've got to learn how to wrap. I've got to learn how to set up in their home. I've got to learn how to do services. I mean, I was servicing washer and dryers. Before that I had no idea that there was a belt that went around the drum of a dryer. I had no idea no-transcript.
Speaker 1:So we were kind of brought up in a different time of account management and so I got so invested in it. It was completely different. And then one day Michael Drawn came down. He was the regional manager, he had the Southeast Division and Michael Jordan came down with our DM at the time and we just were talking and he had mentioned your name and you know it was a big thing because we had just did the.
Speaker 1:Maybe I got the year wrong because at that time we were just about to take over or acquire the whole. You know the Rent-A-Center thing, the Rent-A-Center deal, and it was around that time I believe you know he's telling me about what's going on and all that and we're like, yeah, it's going to change what we do, our store count is going to change and we're going to be in a whole different league. I think at that time we were almost 800, 900 stores going to a few thousand stores and you know other competitors that were getting to that point and a lot of rental-owned dealers. I didn't even know who they were. Now, when I go to Meeting of the Minds now I go to APRO now I see all the small dealers from all the states that I had no idea about. There was only two competitors that I knew of, and that was Rack and that was Aarons.
Speaker 1:That was it, and everything else kind of came second, and not that it wasn't important, we just didn't have those dealers out there. So I was in, I was in Highlands County in Florida and that was what we knew, and it was like we only have one, one company to beat. We need to be number one and we need to make sure that we keep errands out of the area. We've got to outsell it, we've got to outperform and, uh, and since then, growing up in the business and kind of meeting everybody and knowing everybody, I've actually seen a couple of your videos or videos that you've been in the inception of the rental order and how that kind of came about. But that's a story actually I wanted to hear firsthand, because the rental order was something that I think it seemed a little bit new and it was how you kind of created it, the way you did.
Speaker 2:Well, I'm not sure what you mean by order. So, like the rental application, oh, the rental app, yeah, yeah, we did call it an order for them, but a lot of. When we got into the industry, uh, rena center was already there. So aaron rents was limited on how many stores they could really do, because they really catered to winter visitors in Florida, people with temporary housing. They weren't after the rent-to-own customer. It was probably a little bit higher rate of customer than the typical rent-to-own.
Speaker 2:And so when I got into it, charlie stopped me in the hall one day and told me he wanted and I had tried to put a rent-to-own program in Aaron Rents and our accountants were going you can't do that. I heard more things you can't do and I'm a can-do person, and so Charlie asked me to start a rent tone company and I said, look, I'll do it, but your accountants aren't going to support it, to give me the support we need, because I already know that. And he said, no, you can set your own accounting completely, put a wall up, and it's going to be a completely separate entity from Aaron Rents. And that was like music to my ears. So my first mission getting into it I hate to say this. I went to Rent-A-Center. I knew a person, regional manager I won't say his name, name, but he's not there anymore and I spent two weeks with him in Kansas visiting stores, actually working Renner Center stores. I interviewed for jobs at Renner Center. I just wanted to hear what they had to say and, man, that was like a new fish in water or like a duck taken to water. I had pages and pages of notes and I remember going back to Charlie and said you're not going to believe this. So what I did discover, even with the smaller operators as well as the big operator at that time was running a center I think they had 600 stores was everybody was doing it the same. It was the same same multiples. You were marketing a product three or four times divided by 18 or 78 weeks. That's your price and that's the formula. And so it was just strange how nobody was setting themselves apart.
Speaker 2:I was from a collection side of collecting monthly. The rent zone industry was collecting weekly. Yes, and so I went. Now those same customers pay their apartment rent by the month. They get a utility bill by the month, but we don't think they can pay a TV by the month. I mean, come on, guys. And so if you take a lot of that effort of having to collect 4.3 times every single month, every single Monday, it's like deja vu over and over and come up with standardized due dates. Wouldn't that make it easier for the customer? And wouldn't that make it easier less stress on our department? And it did. And I think it brought a little bit better customer to the industry because, number one, we could offer a better price if you paid by the month.
Speaker 1:Well, it was one of those things, because back then it was the weekly by weekly model, that was it. I mean, we had some monthly customers but you but but Aaron's kind of came along and said we're going to do what we're doing, but in a way that will set us apart. And it's funny how just that alone really kind of set a difference between the normal, typical rental home that I grew up on and something that Aaron's was doing, because we knew it as it's a completely monthly model.
Speaker 2:We did some neat things. I don't know if you ever heard the term do the math.
Speaker 1:Yes.
Speaker 2:But we created that term before it went viral. I can promise you was that the dog with that was a lucky dog.
Speaker 2:That's another whole story, that's okay but the do the math started back in the early 90s because we wanted to do the math on rent-a-center. Whoever the other competitor was right and we would actually post their transaction costs opposed to ours. Now, of course, all their transactions back in that day were mostly 78 weeks. Mostly People weren't doing 12 months, they weren't doing 24 months. The other mousetrap we developed was you can own it in 12 months instead of 18. Okay, so our pricing could be very comparable by the month compared to your weekly rate, but you could own it much sooner and so you ended up with a lot more loyalty from your customer base. And now people are doing 36 months, which I think is insane because the odds of that consumer getting to ownership are slimming down.
Speaker 2:I had one of my technicians in the golf cart industry is moving out. He's an older guy but he's finally independent enough to move out. Wanted to go to one of our stores. He says, ken, that bedroom set is going to cost me $7,000. And I said what's the deal? He says 30 months. I said you can pay it off in 120 days. That's what you need to do.
Speaker 1:There's always the conundrum, because I agree with you when I see something at 30, that's pretty high, right? So the idea is you start at 78, a package will go to 24, depending on what you put in it, and you would like to get a little bit of that rate break when you go into that 30 months. It's always what led to that, and I know right now, and especially in the last couple of years, pricing has gone up after you get out of COVID. A lot of things have changed the way we bring it in has changed, where it's manufactured has changed, the shipping amount. Costs had gone through the roof, and so I think a lot of dealers were how are we going to get back to a price point that we believe our consumer can afford without taking it completely out of the bank, right?
Speaker 2:We leave it at $78. That's a false price point in the long game.
Speaker 1:Yes.
Speaker 2:Because what happens when we were 12 months at Aaron's, the average contract or agreement is what? Three and a half months, maybe four months? It hasn't changed.
Speaker 1:Okay. In all these years, I think it's still three and a half to four months, depending on when you do that guide.
Speaker 2:So if I'm discounting you to a 30-month deal, even a 24-month deal, and you keep it three and a half months, I'm getting much less money on that product than the 12-month deal that I got three and a half, four months out of. So I had, although lower prices, I'm getting more income and that's what people didn't realize With less effort because I'm collecting by the month. Today's market is phenomenal. It wasn't there when I was here and I like this. You can get the auto pay and I get it that a lot of the auto pays don't come through.
Speaker 2:But, it's about an 80% hit rate that they do come through. That's phenomenal. And you know, to me the art of the game is in your ability to collect. So you're collecting hard, you're collecting light. No, you know, if you're dictating down to a customer when you talk to them, you're probably not going to get the response. When you respect the customer, their person, their human being, absolutely All our customers are in distress. The whole market today, whether it be rent-owned customers or people with higher income, are distressed with the inflation rate. So they're not bad people, but you have to get on their level. You mentioned the tie thing. I grew up in the tie thing. I grew up in the tie deal. I hate wearing ties. I don't think I'll ever wear a tie again.
Speaker 2:I got 50 in my closet. I don't even know why I keep them, but one of my VPs I think it was Dave Degnan back in the time we went to a 7-Eleven store and got a soda pop or whatever while we were visiting stores and he said what I have realized. And when he said this to me, he was right. People talk to you differently in a tie versus a casual shirt Professional but casual shirt and I said you're right. I said so we're poisoning, positioning ourselves as big brother to a consumer who never wears ties, right. So we went to an apparel system and I think everybody in the industry is owning it.
Speaker 1:They did I actually have not seen it anywhere since.
Speaker 2:I think we may have changed all that.
Speaker 1:That was one of the things. When coming into this conversation, coming into the meeting, I was thinking you know, ken was a part of so many things that affected the industry, and that's part of why I wanted to do the Legends thing, because it's not just somebody who's been there, it's somebody who's worked for 30 years. Although we appreciate them, what did you do for the industry at that point in time? And, you know, coming out with these different things that made such waves in the industry, I remember there was no way that we were going to wear anything less than a shirt and tie. The only thing that they allowed us to get away with was maybe you could have the cut-off sleeve shirt when it was hot in the summertime, but you were going to wear your slacks and you were going to wear your shirt and that was it. And then I remember the model going to a polo and I was like, really, is that how we're going to do that?
Speaker 2:It's a room to go, is it? So why not, right? But?
Speaker 1:now I have the polo all the time, even as I wear my slacks, and I still do my thing, but it's a polo business now, and so all these changes came about with a lot of foresight of what you've done in the business.
Speaker 2:Right, we even had a. I see you've got a red on Friday. I see you've got a red on Friday.
Speaker 2:That goes back to something we did years ago after 9-1-1 is we had a red shirt Friday to honor our military veterans. Yes, and so it's culture. Everybody in our stores wore red on Friday. Then it went to white shirt Wednesday. But it's the most important thing in building any company. I don't care if it's rent-to-own we didn't call it rent-to-own, by the way. I can give you that story later but it's creating a culture, and a culture is something you can't touch and you can't replicate.
Speaker 2:So our culture, we did so many things. We threw out the book and did it different. Our language was different. If you saw one of our collection reports, a typical Rentone guy would say they are out of control. They used to maybe get our reports because we had high numbers, but we increased the number, counted against that store about how deep the non-renewal was. Makes sense, doesn't it? Over 30 is a lot more serious than somebody. That's five days, not See, I don't say past due, I say non-renewed. We created a culture of terminology. We actually did a whole meeting that, I think, kind of ignited our culture and it was called it.
Speaker 2:And what is it, you know? So you got me curious. What is it? Well, that's a good question. So you go to businesses I don't care what kind, whether it be a restaurant or a furniture store or a golf cart store If people ask you, well, how was Aaron's, how was your visit? What do you want them to say in the market? Man, they got it, they got it. Or they could go to a competitor and say, man, they ain't got it, right right. Well, if it is pretty big, you better figure out what it is.
Speaker 2:And so it was defining what Our program which makes us unique in the marketplace. So, with that cleanliness of the store, no-holes policy, dumpster the trucks being clean, lots of little things. And people always came up to us and said how do you manage 1,500, 2,000 stores? And it was built on a strong, very strong culture of what there were non-negotiables. You didn't have a choice. Well, right, right, there were non-negotiables. That was expected, yeah. And so when you had that, it made our people, it helped managers manage the store. I mean, we go back and we gave our managers what we call the big five and we even have done that at Buddy's.
Speaker 1:But it's the Super 6 now. We've added to it, we've made it better.
Speaker 2:And we've got the Ten Commandments. So the Ten Commandments are non-negotiable. The big five was telling you the most important things to do. You don't have to be the first up on every customer. You're the manager of the store. You've got a sales manager that's supposed to do that. You should be very in tune with what's going on in your store, correct? But you're going to meet every customer at some point in time and this is a whole transaction, from the time a customer walks in the door, how they're greeted. Questions you ask. And we're not trying create robots, we're. We're helping people learn how to sell. Selling is giving enough information that the customer can make an intelligent decision. You don't have to be the greatest salesperson, you have to be people, friendly, shake hands. I love shaking hands.
Speaker 2:My name is ken and you're pete, and then you use that name throughout the conversation. We would role play it over and over and over. Then what happens? When Pete wants to lease you notice, I didn't say rent to own, Correct when he wants to lease that sofa over here. Well, guess what? It's time to meet the manager. And this happens so many times that I used to go into competitors and I'd see them closing a deal on the frigging counter Personal information. So every one of our stores we created a closing room which we have at Buddy's.
Speaker 1:I think it's still today, I believe it's still like that today.
Speaker 2:Yeah, yeah, maybe the industry's adopted that, I don't know, but it's time to meet the manager and the manager's got critical points to make sure the customer understands. Now, today, what's so important and we do this at Buddy's is if the customer signs up for auto pay, we give them a discount on the term of the deal on the back end, so we reward them. If they sign up for a monthly deal, we give them a discount versus paying by the week. So we didn't have those tools back in the day.
Speaker 1:There was no ACH payments and auto payments.
Speaker 2:So this is a great time to make sure you understand how that works. If you choose not to do it, that's okay. Then you're telling me we're going to pay on time. Now, if you can't pay on time because I want you to own the product I mean that's our end goal To ownership, correct. So we're here to help you every way possible to get there. But if we find out that you can't pay it on time, you're paying five days late. I don't want your reinstatement fees. I don't.
Speaker 1:Now a lot of people may say I really need those to make a profit. But if you had everybody paying on time, maybe your model is a little bit different. Well, also, if you don't have that many cards or that many accounts that are going to a point where they're not renewed on time, you have that to do more sales. You can take care of your customers better and instead of incurring it on the fee end, you would incur it actually on the rental register end by selling the product, but it's a mental state too.
Speaker 2:If you're not under control on the back end, you're really leery of playing offense on the front end. So, playing a good defense, defense does win championships, yes, it does win championships, but it helps your mindset. Like you said, to play offense up front but it's getting the. Like you said, to play offense up front but it's getting the customers on a smart start and the manager of the stores in that big five is supposed to call that customer if they're one day late. Because me and you had that agreement. Right, you were going to pay me on time. And now here we go, first time. You sure you don't need to put you on that auto pay program.
Speaker 1:Well, that I mean that it needs you know. When you say it up front, you get your expectations out of the way. This is what you can expect out of me Nothing to be embarrassed about.
Speaker 1:Absolutely. I mean, every time you make the phone call to the store, we're going to answer it during open hours. If you have a service problem, you call the store. We're going to take care of that. On the flip side of that is we need your payments, of this amount of payments, to take care of this. If you want to do it in this timeframe, then you can, and if not, there are things that come along with that and we've set those expectations up early and the managers or the GMs or whoever you want to call.
Speaker 2:It's okay to have that conversation.
Speaker 1:It shouldn't hurt anybody's feelings.
Speaker 2:Look, I got an American Express card. I don't shop in stores anymore. If I need something, I go Google it and boom, boom, boom, I buy it and it's gone. But guess what? I can't buy a $10 item unless I present a credit card. So we're talking about a consumer that I'm getting ready to give you $1,500 worth of merchandise and I don't know nothing about you. Why shouldn't I ask for a debit? They all have debit cards, they get paid by debit cards and then. So why shouldn't I set that expectation Absolutely? You know, I don't think it's a big deal, and so with this particular week you're having a problem? Call me, I'll work with you. My goal is to get you to ownership and not put you in a bad situation. So your wife lost her job, whatnot? You don't have the money in the account. Call me, let's work something out, absolutely, and I won't pull this payment. We're going to come in and we're going to figure a way out to make you happy and to make me happy. Let me ask you a question 2013,.
Speaker 1:Whatever reason, you leave Aaron's and you start doing your own thing, but back then there was over 2,000 errands locations. We hadn't already opened our 2,000 store. Now, fast forward 10 years after that. It was close to about 1,300 locations. I think it was 1,293, or whatever the case is, in December December of 2023, I think is what it was there are rent-a-centers as well, because I broke my teeth on starting at the renter's choice and then going to rent-a-center. So my first seven years was at RAC and the same thing. They've broken a certain amount of set.
Speaker 1:2013 to 2015 was like the peak times and then now go forward 10 years. We've backed off. What do you think has caused that decline in the amount of stores that we had out there that were not as large as we used to be in the industry for these larger dealers? Now some of the smaller dealers have grown. So I don't want to say that, but you know, going from I remember there was a. There was a peak time where like rack was like we had opened these stores and then you know we have some in Puerto Rico and out of state, and then Aaron's was opening them in Canada and the 48 states underneath and it was just like this game and then all of a sudden we had a turnaround and we started declining in stores. What do you think changed a store count value to?
Speaker 2:a lesser amount Management, and I don't want to say me, but I was an instrument of that. I can't speak for Run of the Center, but I think at Aarons we lost culture and when you lose culture you lost everything. So what was important then became not important. We couldn't lose. We were built not to lose. We went through recessions. It was like we did quarterly conference calls. They were so easy because we were winning and Charlie had left the company and he put Ron Allen in the job. There's some reasons behind all that. But Ron Allen, if you look up and I hate to say something bad about somebody, but if you're listening screw you, ron Allen, because you screwed up a good deal. They have an award in the airline industry. He was a former CEO at Delta Airlines, the worst airline executive of the year. He was the first recipient and they continue to make that award and it's called the Ron Allen Award. Oh, no, recipient. And they continue to make that award and it's called the ron allen award. Oh no.
Speaker 2:Uh, ron could have come in, asked us a little bit about the business. He knew nothing about it, never asked me one time how how things going. He decided he was better in marketing than I was, and so he took that department over and I could see then this deal ain't going to last and it wasn't my place and I told my wife. I said, look, I'm miserable when I see his car in that drive when I come in it's just meeting after meeting, after meeting. Loved to have meetings. I wanted to show he's the boss, so I tried to travel as much as I could just to get away from here. You know it's about the stores, you dummy. You know it's about the frigging stores. And so there was a disregard to the franchise system. At that time the best franchise guy I have ever known the only one I have had was Todd Evans. He created our franchise program. He kind of disregarded the franchise.
Speaker 2:Our franchise program was killing it. Those guys gave me so much input as we developed our program and understand it wasn't me sitting in a tower thinking of ideas. I got everything from the field and, more importantly, franchisees who have their money on the line, know things and they're not afraid to speak out. So we created an AMT, aaron's Management Team, and we would meet with top franchisees. We'd rotate them because we wanted to hear from different people and they could come in the room they're not going to hurt my feelings at all and if they pointed out something that needed to be fixed, that was great. That was the best thing that could have happened out of it. Now, some of them had some crazy ideas and maybe some ideas that we had previously done, but we quit treating franchisees as partners and consequently I don't know how many franchise stores they have today, but it's more than half have gone. Greatest business in the world, business model and that's over with.
Speaker 2:And then they decided to reinvent the wheel. I noticed they had a race car Sunday. Bless their hearts. But it said Aaron's Rentone. We hadn't done that. We weren't in the rent-to-own business. Let me tell you my story behind why we went to the leasing concept. Think about this Our customers we had when we started it was called Aaron's Rent-to-Own. Yes, and that big old truck with Aaron's Rent-to-Own. Our customers were asking us they didn't want their neighbors to know they were doing a Rentown deal, absolutely.
Speaker 1:They didn't. You know, that was one of the reasons why we started the podcast to educate, because that has got that negative moniker.
Speaker 2:Yeah, and it goes back to roots from many, many years ago, roots from many, many years ago. But there were a lot of unethical things people have done, behaviors in stores that have hurt the reputation of the industry. Consequently, the rent-to-own name was tarnished. It isn't a bad name to me, but to our consumer. They're a little bit embarrassed that they had to do a rent-to-own deal. So we ended up morphing into just errands and that's what we branded the hell out of. And it said below it sells leasing. We don't care which one you do. So think about this. If you asked me what kind of car I drive, and I told you. And you asked me how I'm paying for it and I told you I'm doing a rent-to-own deal, what would you think about that? It does change somewhere Versus.
Speaker 2:I tell you, well, I'm just leasing my car. Well, guess what? Lots of people executives lease their cars. Oh yeah, absolutely. Leasing is socially acceptable. Rent-to-own's not, so who cares what you call it. Give the customer what they want. And that's what we did. And we branded the heck out of that name. We created a fund. We had to sell this concept.
Speaker 2:But I wanted to create a partners program with our key vendors. I remember the first time we did it. We had a handful of stores maybe 40, and we told them we were going to be big. I knew we could get up to at least 100 stores. I didn't see 2,000.
Speaker 2:But nonetheless, we knew in the industry if they had extra money to bet on certain companies. And we proved to them we were going to grow this thing. We had a different mousetrap, why? And we wanted 3% back for advertising and with that ad, you're going to be in our monthly flyer that we produce $25,000 a month. You're going to be in there, guaranteed, every single month. We're going to put your name in the stores. We're going to put your name on the trucks. It's going to be a great deal. So we walked away from that first meeting and we got $350,000 that we never thought we'd get Free money. Now we're small, that was a lot of money to us. Oh yeah, absolutely. When I left, that fund had grown to $33 million. We had every vendor wanting to participate and ended up with 12, 13, 14 vendors participating. They wanted in that ad vote that we ran 25,000 a month. Our ads would promote their products. They would be on the side of the race car.
Speaker 1:Well, so we're talking about the delivery cubes, right, that had the big signs on the side. And then also there was that running banner in the stores where they had their name in that metallic, they got all that. Yeah, that stayed up there, either in the stores where they had their name in that metallic, they got all that. Yeah, you know that. That stayed up there, either in the you know, in the electronics section or the appliance section or the bedding section. That ran all the way through that black with the metallic sign inside of whether it said you know all the great, you know it was like, it was like whirlpool and and all the, all the big brands.
Speaker 2:So the customer, we had all named brand products and one.
Speaker 2:But the whirlpools of the world and whoever else was participating in RCA loved it. They absolutely loved it and they were happy to do that. Did it hurt our negotiating power? No, let me tell you why. We started distribution centers at the same time and I went to the vendors and said Look, I'm not buying six TVs that you're drop shipping. I'm buying a full tractor, trailer load and it's going to one DC, one PO. You're going to be paid promptly. I got to have better pricing.
Speaker 2:So part of getting the customer better value is getting better prices on the product. And when we did the DCs we were able to negotiate better pricing because we did have to market back up to the stores to deliver for free. Our franchises got the benefit of that too. They paid the same price that we did. But our goal for the distribution centers was to break even. It's not a profit center Correct, just to cover the overhead with a little markup we had and the discounts we could get. Our end user price was still better than what anybody else was getting. But a manager could order from that dc every monday and have whatever he wanted product mix that week. He knew his day was thursday. He had to get his order in on monday. He didn't have to think five weeks out, six weeks weeks out.
Speaker 1:I tell you, I remember I had a store I'm not going to say which store, but I ran a store that was directly next to an errands and every Friday their truck would show up first. I mean it was not, you could almost set your watch to it. Yeah, they were clockwork.
Speaker 1:Every single week. They were pulling stuff off the truck. Every single I was like man. That is just crazy. They were pulling stuff off the truck. Every single one was like man. That is just crazy. It's just clockwork and they'd be pulling stuff off the truck. So, getting the DCs, these distribution centers, set up and getting it in great way to get that type of pricing when did Woodhaven come in? Where did that concept come from to really give that value from within?
Speaker 2:Woodhaven existed when I came on board in 1974. Believe it or not, we only had 12 rent-to-rent stores. But Charlie Loudermilk had wanted to build a product that was built for rental, that he couldn't get at a high point just for a retail product. So he put some extra cushioning in, he put a lot more hardwoods into the product and he did it for his little 12 stores. It was called McTavish Industries. It wasn't in Coolidge at that time, but Woodhaven is the name of his plantation in south Georgia, no kidding, and the factory was probably three miles from his Quail plantation.
Speaker 1:Just for anybody who doesn't know, woodhaven was Aaron's own furniture company. They built for Aaron's only. So whatever you got out of Woodhaven was and it might represent or look like some other models, but the truth is all the models were unique to that Aaron's business and they can order that, have it built and come to the store.
Speaker 2:American made, too American made.
Speaker 1:Absolutely, and it was all kept within that banner, and I mean, that was something else that nobody had done.
Speaker 2:Well, it was a tool we already had when we got in the industry, which was great. The problem was long ago is the product being manufactured was not very stylish. It was very boxy and he could put a green cover on it or a blue cover or a pink cover, whatever he wanted to do, but it didn't have a lot of style. And remember that thing I can't Right, the guy that ran it at that time was a lot of I can'ts. I can build you box products. So we'd go to the market and I told Charlie. I said he's got every tool available. He can add some flair. So we would buy product.
Speaker 2:And we told the people long term we want to buy your product other outside manufacturers. This was even when I was in Rent. To Rent I said but if we like it, we're going to probably send it to our factory and we're going to knock it off and make it better for rental as long as you're happy with that concept. But we were very transparent about it up front. We said this is what we're going to do and they agreed to do it. They're going to get a lot of business. I'm going to come back to you at the next market with the next hot thing you got. So we're going to stay current, we're going to put these products in the store, but if they don't move, we won't go any further with it.
Speaker 1:Well, that's the great thing too, is because you can determine what is being made. You can determine well, my hot sellers, I can make more of that or less of that, or if we can switch. You're not waiting for the market to give you that opportunity. You have the opportunity yourself.
Speaker 2:Right opportunity yourself, right. So we found out he could make that product. And then I remember Charlie, back in the day before DCs, he wanted a manager to be able to get the product within a week. And I remember I was at that meeting and the guy I'm not going to call his name, I don't think he's alive anymore but he said, well, we can't do that. Charlie said, well, let's just see if we can figure out a way to do it. Of course he did figure it out. So you know, I hate people when they say I don't hate people. I hate the term, you hate the mindset. We can't do it. You can do anything you put your dang mind to.
Speaker 2:I mean we put people on the moon for crying out loud. So come on, but there's a cost, and so you've got to weigh the cost versus the reward.
Speaker 1:Correct. So how does it go? Because I didn't know that it was that far back. I thought it was something, a concept that had been created later.
Speaker 2:Well we, changed the name of it to Woodhaven because we thought it was a lot cooler name than McTavish Furniture Industries, and so we did that. After we got into it and it became kind of known, we made labels that weren't made before and had some descriptions of why this product's really good and did a lot of training on that product with our people that it was better. It was better, it was better built.
Speaker 1:Yeah. So I guess the main question I have is you start with this McTavish. It's covering 12 locations. How many locations at the end did it cover? I mean, you're not just scaling errands, you have to scale your production company.
Speaker 2:We got more than one factory now, or had we had a factory out in Phoenix? How was?
Speaker 1:that scaling, though. How did that go about? Because I mean, you're not only growing the rent or the lease to own the rental on site, but now you also have to understand how to make it.
Speaker 2:I don't know. It was crazy. It's one step at a time. I never looked. I'm telling you it was really funny. When we first started and I knew Rent-A-Center had 600 stores I didn't know how many we could add, but I went to Charlie. I had figured out when we had 12 or 13, I had 78 markets. I knew we could 78 places I could put a store.
Speaker 1:That's a lot.
Speaker 2:And so I went in and said Charlie, I know we can get to 78 to 80 stores, that's what. But you know, that's where my mind was. And then, after we got into Atlanta, we knew we had one in the north and one in the south and one in the east and one in the west. Well, we need one there, and in between we need one there. And next thing, you know, we built it one block at a time and you had 40 stores in Atlanta that were successful.
Speaker 2:You know an old college coach of mine I wasn't a great football player, I was very average, by the way but when I was a freshman year he said oh, you guys have been recruited. You were great players in high school, yada, yada, yada, but that don't mean nothing. You know, y'all can come in here and play like this and you're not going to get very far, but when you can put everything together you're going to be strong. So the more stores we could flood into a market around a distribution center that would be very, very efficient the more cost-effective it's going to be Extremely efficient correct and then the more advertising I can put in that market.
Speaker 2:I mean, everything worked. You know you're supposed to be number one or number two. Number three in the industry ain't going to cut it, I don't care what industry you're in. So we weren't going to be number one or number two, number three in the industry, they ain't going to cut it, I don't care what industry you're in. So we weren't going to be number three. Right, we were going to be number one or number two and we always in our brain felt like we were number one. And I think we were. I think we had the best mousetrap. We didn't miss numbers. You know I'm not tooting my own horn, you've got to understand this. We had a superior team and everybody bought into it.
Speaker 2:Now you mentioned Aarons was your competitor. We didn't think of competition. You know who. Our competition was Ourselves and we put out reports. If you were a store manager, you knew where you stood in every category. 2,000 stores down, that's a lot. We put it out every single month and we did break them down to major league, minor league, super league. We had maybe five revenue categories of stores. So they knew that the smaller stores, our smaller stores, were $60,000. I mean, we had stores doing over $300,000, which is unheard of. A lot of that's attributed it goes back to this. What happened? Our managers had the ability to make a lot of money, a lot of money. We paid them on revenue and profit and we re-evaluated it every quarter. They got some pretty handsome bonuses out of it. If they kept driving revenue up, their base pay went up and their bonuses went up. If you took revenue back, there was a consequence. Now we're not going to hit you the first time, but you can't go back. There's no going back when you hit that ceiling you need to stay there.
Speaker 2:And let me tell you something, and it's a mindset we created a diamond club, the first million-dollar store, million-dollar-a-year store. This was early on and we had a handful of those that were doing over a million. I'm talking maybe we got 100 stores in the system. They came to me and said what's next, ken? What's next? One of these meetings where I met with people and I'd bring them in top performers, and they said you know, we feel like in our system we've reached the top of this mountain, but you hadn't. I said you can always do better. They said exactly, but what's the next deal? So I said we've got a one diamond, let's make it a two diamond. No, I didn't say it, it was their idea. Why don't you have a two diamond? Okay, there won't be many of you in it, you know like three. So we had the next manager's meeting. I think there were four or five stores that met $2 million a year and we serenaded them. We made them look like heroes, gave them new rings and all kinds of crazy stuff, but they were the kings.
Speaker 2:You know, in Queens when I left, with 2,000 stores, we had 300 or 400 of the company stores doing over $2 million. We had 300 or 400 of the company's stores doing over $2 million. We had three diamonds, we had four diamonds and had a five-diamond store doing $5 million a year. They took that incentive program out. Oh my gosh, let me tell you, circuit City made the same mistake years ago. Circuit City was rocking man, yes, and they did two fatal things. They had this space for washers and dryers, white goods, whole corner of the store and they're the accountants. That's where the bean counters will screw you up if you're not careful. And the margins on the appliances wasn't as good as the margins on the little things off throughout the store. So guess what?
Speaker 1:they did.
Speaker 2:There were margins, it was profitable. They killed it. That whole corner of the store you walked in it was empty. So automatically revenue is going to go down. Maybe margins got a little bit better, but that margin was already there. This was added income for those stores. Already there, this was added income for those stores. Then they got smart and said, well, we got to cut expenses and they cut out their highest paid salespeople, their best salespeople. They decided we can do better without you and pay everybody less.
Speaker 2:Within a year they were gone. I mean dumb decisions, and so I hate to say it, but errands through this course of time. Wanted to get rid of these guys making $150,000, $200,000, $250,000 a year. Well, guess what You're going to get rid of? What they did and accomplished, Correct?
Speaker 1:Correct what goes one, goes the other.
Speaker 2:And so it wasn't important anymore there to become a $2 million, $3 million store when they threw that out. The reason why we had so many stores was the effort of that little group that wanted to get a bigger deal. And then it followed suit that everybody strived to be up there. They lost that, they lost the compensation program and they lost the drive for those managers to want to do more. Why try? And then I think the collections have gotten horrible. I mean, I'm hearing numbers 6%, 7%. Right, hell, we were never over 2%.
Speaker 2:They took the decision-making into some algorithm and took it out of the store's hands. This e-commerce thing mentally drove them and they were automatically approved through this other thing and they had to take this business. They put some crazy products in phones you don't think we tried phones before? Are you kidding me? And so all that resulted in the lost revenues. It's a combination of lots of things, but we built a system that all connected together. And so when you start dismantling the right front, change the tire pressure on that tire and you change the carburation on this and you change the motor a little bit and you downsize, your car ain't going to run like it used to. So it's not running.
Speaker 2:They decentralized their stores and went to centralized collections. Are you crazy? They decided to have big super stores. Duh, you don't think we did that. So what they did was they put a premium on new inventory and all the consumers saw in this new store, gen X or whatever the hell they call it, was new product and they gave away pretty much the used product in the back room.
Speaker 2:You make your money in the industry on recycling, on pre-lease product, yeah, and the more time you spend on that product to make it like new, the customer will reward you with a higher value. It's so simple, you know. I've seen competitors' companies and that's why we created what we call a certification zone that you walk into brand X or brand Y and you see all the flaws on the product and they're still trying to get a premium. Our customers pay a premium for their product. It better look damn good, right, and it's amazing what a steam cleaner to do. It's amazing what touch-up markers to do and really spending a little extra elbow grease on the product. The customer is going to reward you with value every time. It makes so much sense it does every time it makes so much sense?
Speaker 1:It does, I mean. So do you think that the idea of the margins, the idea of business, interrupted what was going on in the early? Well, after the 10s, you know, 2012, 2013, 2014,. And the idea of, well, let's stream it, let's make it more efficient, let's figure out how to dial this into a certain manageable algorithm, kind of set way from everything that had started before into we got great margins, but maybe not in the right ways, and that kind of set decline in the stores.
Speaker 2:Sure, and really the manager. I don't know the inner workings, but this is all I hear from outside that the manager lost the job of being a manager. When I'm not making the decisions and I'm not responsible for my credit, wow, Some independent guy, little guy, works in the corner. I don't know who the LA works for, but you lose that competitiveness. The reports I'm telling you about, Well, the relationship too. I mean because the relationship is just not built. It's that person trying to save your store.
Speaker 1:Absolutely.
Speaker 2:You make me responsible for the volume of my store, but yet you want this clown back in the back I'm sure they're not clowns this person that I'm not accountable for to collect for me. Are you kidding me? This is a personal relationship business 100%, it's shaking your hand. Yes, absolutely, first name when you come in, whether it be once a month or every week. It's Pete, you're the man. Yeah, Having some fun, baby, you know, make it fun.
Speaker 1:How are the kids? How did you make it out? I know that you guys said that you had that family gathering last week.
Speaker 1:Yeah, because part of what we wanted to always say things that happen in this industry that we felt needed to be said and we needed to be able to somebody to stop, play and repeat, and that's why we started the podcast to really get that knowledge out there is that this is a relationship business. Despite what's out there in the world and despite what you can look up on YouTube and TikTok and whatever you see, that's not our goal. That was never the goal. The user, the consumer, to get to an opportunity of ownership is the number one goal that we have Now. How do we get there? Of course there's advertisement. Of course there's showrooms. Of course there's deliver. Of course there's other things involved. Then there's collections. How do we get? What do we get? Do we have DCs to bring down the pricing? Do we order in bulk? What is it? Is it a special order?
Speaker 2:It's a lot of that combination, but the root of it all does come down to that personal relationship. And you know, too many times our industry has turnover and that really hurts the store because the consumer loses trust. They finally trusted you and now they wake up and you're promoted or gone. I was in one of our franchise markets years ago and they had. I mean, we had great locations, small town but big enough for two stores. We had one on the east and one on the west main street, beautiful locations, best locations you could possibly have.
Speaker 2:And we had flown in on a private airport and got a little cab driver, um, and of course we got our errands stuff on and I asked, asked the cab driver, it was a gal and I said hey, where would you get a TV in this market? And she hesitated to answer the question. She said I know y'all are with errands. She said but do you want me to tell you the truth? I said yes, ma'am, I do. She said I go to Rent-A-Center. There's a little guy by the name of Mark and I drive by your locations every day. They look beautiful. I've never walked in this store, but little Mark at Rent-A-Center has been there a long time and you know what? I trust him and that's why I do business with him.
Speaker 2:Well, we proceeded. After we got to the store, we got somebody to take us to the rental center and the rental center store was kind of in the middle but it was off the beaten path. If you rated their location on a scale of one to five, it was a one. We had the golden tickets, but it really doesn't matter. It's about building that relationship with that customer and we hadn't had that opportunity to get that customer because they are loyal, not they're loyal to Rent-A-Center, they're loyal to the people, they're loyal to the people.
Speaker 1:That is huge and that's something that I've, you know, throughout the years. I mean I've tried to manage train teach show and that's the thing I mean. You always want brand recognition, you want your brand to be on top, but they don't make the relationships with the brand, they make the relationship with the people in your store. And then the brand comes in and the brand comes into play. And the thing is, if you're looking for longevity, if you're looking for somebody who was going to stay with you for a long time, it could say rent-a-sitter, it could say Aaron's on the front door, it could say Joe's rent to own. But the truth is, did I get what I wanted from you? Are you taking care of me? And when I have a problem, can I call you and have a regular conversation? You're not beating me down and I'm not beating you down, but we look at each other as people and say this is my dilemma how can we help each other get through it Right?
Speaker 2:And that's why I went back to you. You don't compete with the competitor, you compete with yourself, and so there's enough room for everybody in my opinion. If you're running a good, solid business, because everybody gets traffic in the doors, what do you do with it when they come in to earn that customer's business? And you know, since I've been with buddies, it's funny. I used to think all the competitors were shaking in their boots. Let them shake was one of our terms. They weren't. You know, at the end of the day we existed, but we're existing as a competitor of Aaron's. I never heard anything about Aaron's, but I don't think they have the same mousetrap anymore that they had. They got nothing to boast about other than I'm not really sure I think that's where they've kind of lost.
Speaker 1:Yeah, it's different than it used to be. For sure, there are some changes in the rent-to-own mindset and the rent-to-own industry altogether. Talking about when you left in 2013 and then coming through here and you changing through the brands and you're now an owner of a different company. What do you think of some of the things that have changed in the last 10 years that have really kind of changed a business? Because we, you know, I remember 2013, 2014,. It's not the same as it is today and you know, I know, that it goes in about a decade increments. Right, there are some changes that happen over and over.
Speaker 1:There's evolution, evolution, correct, but I know that from the 2013-2014 era to the 2023-2024 era, the biggest thing, of course, that changed everything was towards the end of the pandemic really changed the mindset of some consumers. At the end of that consumer-based change, we also have a generational change, because once everybody was set at home and they were kind of set in their own spots, the baby boomers are different shopping beasts than the Gen Xers. Well, so am I.
Speaker 2:Right, so are you.
Speaker 1:And then now we have the millennials are getting a little older and they are completely different from the Gen Z that are coming through and they do like 80% to 90% of their purchases through their mobile device, and so it's a huge difference. What have you seen? What are these changes that have happened that you have seen in the last decade or so that you think have really changed the industry?
Speaker 2:Well, you've got to recognize that. I am sure foot traffic in the stores is much less than it used to be, but in general customer service in this country has gotten terrible I mean awful. You ever try to call Verizon or you ever try to call DirecTV. I can go one after another and you end up with recordings. Put me on hold. It goes here. I'm on the phone for four hours. It's terrible.
Speaker 2:It's hard to talk to a real person in most businesses. God, we've got a huge advantage there. But we've got to recognize you've got to work that phone and that computer. And when you get an inquiry over the Internet in their golf cart business, same way I don't get the walk-in traffic. People are lazy. I wish they'd come in the store I could show them more, but they'll buy over the phone, with me sending pictures and taking the time to do it. But you've got to recognize that that's the most important thing.
Speaker 2:Going in is a customer who inquires. If you don't get with them ASAP, you don't get the business. Now I know buddies and errands and run a center all have e-commerce and they're downloading stuff to you that they could theoretically buy. I don't think that's what the customer really wants. I still think that lead that comes in needs you to pick up the phone and talk with that customer and tell them what they've picked out. If you've got something that may be better, then you can suggest that. Don't just let it be. Well, I picked the picture, that's what I want. Boom, boom, boom. You know it goes back. We said this is a personal relationship business. It ain't a personal relationship if it's all done on e-commerce. You've lost that. Yes, so, and that's really important to recognize, it can't be a personal relationship business if we don't make it one. So any of those inquiries require touch, in my opinion.
Speaker 1:You A human touch, a human factor.
Speaker 2:Human factor. No extensions to go through, no way. Thanking you for the business follow-up call when it's delivered. Again, you can still do the close over the phone. You remember what I told you about a close? Well, that's kind of become obsolete if more business is being done over the phone, I got it. But the manager can still go in and go through his ritual, absolutely, you know. All that can still get done. So that's a big one. I do think there's been a significant change and our industry has hurt itself in that write-offs are higher than they were. They are. I just look at the public companies when they were public.
Speaker 1:I was going to say if you look at the public companies, you can see that trend has hit everybody.
Speaker 2:The guys in the retail stores build in like a 10% charge-off. That's not good for the industry because customers are getting wiser, so they know who will come after them and who won't come after them. But again they will work with you if you tell them all your programs. We've got so many tools that are available to our people and people. I know competitors used to laugh it up. We had a toolbox. I can make good on this deal Now. Customers abuse extensions and what, but you know what. Passers abuse extensions and what, but you know what. If I can keep them on the books, I can get them to pay and I make the deal favorable to me. Why not do one?
Speaker 1:Well, it's a give and take because right, you are right it has gotten to a different situation, whether it be because things are more expensive and they can't afford it, or because they've been in, you know, now it's become generational, we're hitting 40, 50 years of rent to own and maybe they know that their parents have done something and they kind of pass that down. No matter how you get to that end thing, the main profit, the main profit for the consumer and the company, is to get to ownership, end ownership. So let's find a way to get it there. Let's find a way to get there Because, at the end of the day, I don't want to have to keep on chasing you. I don't want there to be an issue of you having that merchandise and you're always looking over your shoulder and you're trying to figure out if there's a legal issue or not a legal issue.
Speaker 2:So what do you do with why they can't make the payments on time?
Speaker 1:They don't know.
Speaker 2:Jimmy had to buy tennis shoes or the grocery bill was $20 higher and the gas bill was $10. They don't know why. They just know it's tight. Again, I've got to have customer participation with me, but I can do not just a pass in free time as kind of a delay of the game sometime. You're just going to be back in the same boat next month. But let's find if we can do something that's meaningful for the customer. Look, you've got 12 months to go. We used to say, look, I'll add 50% more terms, so your 12 months becomes 18 or whatever the deal is, and I'll discount you 25%. Now, that's a win for me and it's a win for you. With that, taking your payment from $100 a month, 25 a week, down to $19, is that something that would be good for you? Or let's look at your agreement. Is there something you could just live without? You don't have to pick it all up, right, right. But again, working with the customer, having a good, letting the customer see I'm on your side. We're going to win together and I think that's got to be conveyed to them.
Speaker 2:But many times, the way we treat them, they run from us and that's what causes write-offs. If we're the bad guy you think they're going to answer that call from buddies? Probably not. And then we all knock on the doors and they don't answer. You know, reason is always great, but it started with that closing room and how we managed the customer when they came in in the past that we can be like the little gal I was talking about. We can be trusted. I don't really want your merchandise back. I really don't. I will take it back if I have to because I can make more money that way. But you see what I'm saying.
Speaker 1:I really want you to become the owner, Absolutely Getting them to ownership and getting them to understand it. I mean, collections never starts at the back end. If you start your collections in the back and you have failed. Your collection starts in a closing room or when you're closing that agreement, so to speak. And the follow-up call Well, always.
Speaker 2:Always. So what happens with the follow-up call is so important. That's part of the big fact. The follow-up call's got to be the manager, and so I get an opportunity to find out how my driver was. It's a follow-up to make sure you're happy. He set everything up. He explained how it works. You're happy with the product. Yes, sir, just want to remind you, your next due date's coming up this whenever it is. So we're all good there. Right, again, it's very important?
Speaker 1:Well, because you start going down the list of things that have changed and then that was going to be the follow-up is the fundamentals haven't changed.
Speaker 2:Well, look how much football's changed, but has blocking and tackling not changed. I mean, the game has changed.
Speaker 1:Still fundamentals. The fundamentals are there and I think sometimes we lose the forest for the trees. It's changed, changed or it's manipulated, it's grown, it's evolved.
Speaker 2:That don't give me any excuse not to do the basics.
Speaker 1:Right. But then you go back and you go. Well, I mean, if you're closing the agreement the right way, if you're making sure the customer's not getting in over their head not just for them, for you too, because it's nice.
Speaker 2:You're not doing yourself right and a manager manages risk, so he's got a risk assessment.
Speaker 2:I mean, sometimes you don't give them what they want, but they're in there. You know. You just got back a green couch yesterday, sofa, love seat combo. Whatever, my risk is minimal. You've got a pretty on-the-fence customer and they're wanting a $200-a-week deal. I could get them in this and save them money and minimize my risk and if they want something later, prove to me they can pay on a timely basis. The store is yours but you know that is our responsibility and that e-commerce, all that crap. You can't replace that with a good head. But you take collections away from a manager. He'll never make that offer to a customer.
Speaker 1:Part of the whole idea is, I think, the empowerment. You have to empower your GMs to know They've got to act like they own the store. Right, and that thought of ownership I'm going to be responsible for the P&L, the G&L, all my guys and all my product. At the end of the day, no matter what happens, take it away and you get what you got.
Speaker 2:You've got a $2.2 billion company that just got sold for $300 million. Think about that.
Speaker 1:That was going to be one of my thoughts. At one point in time it was publicly traded, it was worth a lot, and then they buy it back for $10.10 a share or somewhere they're close to and take it back to private. When that happened, I know that you weren't a part of that. How?
Speaker 2:did that make you feel? When you see that happen, it was sad, but you saw it coming. I mean, look, they put educated leaders in with nice degrees over people from the industry and when you don't have that knowledge of the customer, that you don't have that knowledge of your managers, you're running it from an ivory tire. And this business cannot be run from an ivory tire and leaders need to know what the people are going through every day. I know I managed a store for three and a half years, so I managed a region for three and a half four years. I've done it all and I've done it all successfully. Like you said, my first year that I ran a store it was terrible. I mean the pinball and the pinball machine had no direction. Did I run a store? It was terrible. I mean I was the pinball and the pinball machine had no direction.
Speaker 2:Charlie was going to have a meeting and he said get your P&L. I didn't even know what a P&L was. They remember sending me something with a bunch of numbers and they said well, you better know those numbers when you go to the meeting. I was wondering what this was. They sent my regional manager that I had would come into my store at six o'clock at night because it was close to where he lived, and go to a back office, kick his feet on the desk and call his girlfriends up and walk out. Man, I am so tired I'm doing sort looks good and walk out the door.
Speaker 2:And I've learned how to be a good regional manager by what not to do. I built a lot of lists on don'ts these are don'ts and this and I passed them along to people. You know you want to make a difference. You know we're in a job as we move up the ladder. It's not about what we do anymore, it's about helping people accomplish what they want to accomplish. And we've got the knowledge and the wisdom to pass it forward and move it forward. And always, if I didn't get anything out of life, you know I did the manager thing and I got it. I was pretty good at it.
Speaker 2:I wasn't very good my first year. I didn't get fired, so that was a victory in itself. But I learned on what not to do and I certainly made enough screw ups. But every time I screw up I said okay, I didn't handle that situation right. I know what would I do the next time. We didn't have books. We didn't have manuals. Nobody taught me what to do.
Speaker 2:When I started with the company, I was given a desk. I thought that was pretty cool. Now I'm 20 years old, 21 years old, and my manager is a gal, gives me a metal tray and said here, these are your delinquents, just call them. Call them. I didn't know what a delinquent was. I thought juvenile delinquent. Do I need to call the police? What am I doing here? So I figured it out.
Speaker 2:They had a card, the headphone numbers. Oh, look on, here we, they owe us money. Okay, I said, lynn, do you want me to call and collect money? Is that what you're wanting? Yes, just call and make a note on the back. Okay, then the phone rings and everybody's looking at me. Like, well, you're not going to answer the phone. Okay, I'm learning my job. I'm calling these cards. And now you want me to answer the phone? Okay, I got it. I've never answered it before, but I'm learning. And next thing, you know, the buzzer in the front door rings and everybody's looking at me. Here, I mean here.
Speaker 2:We had clipboards. Our motto back then was leased by the piece. And you went and greeted a customer and said I'm glad you're here, we lease everything by the piece. This was a time management thing. How far we've come. This was 1974. We'd hand the clipboard it was a great concept to the customer with a pen, and so you just walk around. When you see something you like, write the code down, bring it over here and I'll just total it up for you. And we did business that way.
Speaker 1:That's a different model than it is today.
Speaker 2:Oh yeah, it was a total. You're the customer service. Bring it to the counter. I'll put it in my calculator. This is the total. I'll write a manual agreement and we're good to go Crazy, but it has changed a lot.
Speaker 1:Something that Aaron's also did, different than any of the companies that I've worked for, is that it was a by the piece because, regardless of where I have been, a four-piece dining or I should say five-piece dining is the table and the four chairs. Or when you talk about a living room set, it was a sofa and a love. When you're talking about a three-piece table set, it was a cocktail table with two ends, or lamps came in twice, but all the employees that I've ever talked to on errands it was a piece model. You can have just one piece, you can have all the pieces.
Speaker 2:So if you were short a piece, you were short a piece, so that's a write-off Pretty simple they go in and all the chairs are broke, we throw them in the dumpster and I've got a table left. I've devalued the chairs. If I want to buy some more chairs I can do that. But it was an inventory management system and we didn't. You know, you have to count it BOR, Right, but some of that's what's the whole unit I guess, is the way. But we just came from the school that everything had a code on it and if you're missing the chest when you go to return a product, maybe they want to buy the chest. I don't know.
Speaker 1:Well, that was one of the advantages of also having Woodhaven was to be able to say I can get the pieces that I need to either refurbish or replace chairs, cushions, whatever the case is, and make it that easy.
Speaker 2:But with all the people we dealt with, how you set it up to purchase from them when you got a little power in what you're doing will set you up for that for the future. So it was very important for us with any vendor, even with or without Woodhaven, that we had those relationships. It's funny you mentioned the inner workings for a washer and dryer earlier. You know stupid me. I remember just piling up washers waiting for some mobile repair guy to come repair them and he charged out. We should have been in the mobile repair business. I'll tell you that he charged a lot and I had a manager that went to youtube and just kind of figured it out like you said you did, and it was like the light bulb went off on me.
Speaker 2:A we're repairing it immediately. I can do this in a customer's home. It didn't cost me a washer that I got to be short now until this one's repaired and then got to go back and I'm probably going to damage theirs when I do it. So the more of that type of thinking we need in this industry and duh, me had never even thought about it because I'm not mechanically inclined, but a lot of people are and I've heard people say you can do about anything with YouTube Boy. That's a big one right there. Well, we call it YouTube University.
Speaker 1:I went to YouTube University and figured this out.
Speaker 2:But I don't think a lot of people in the industry understand that. And so if you don't take anything away from anything I've said today, man, go to YouTube, Learn how to repair your appliances. There are common parts that need to be stocked. Our guys put all that out and do it yourself. This is a deep you don't need to hire. There's no rocket science in what we're doing with repair. If you can't do it, then obviously it needs to go. But boy, you're talking about customer satisfaction. You know you go get it repaired. Half the time it's a frigging vent and the dryer's clogged up. Right now, Instead, it's easier for us to take the call and say, well, okay, I'll bring a loaner out and bring it back to the store.
Speaker 1:You're tying up two dryers in your inventory. I don't think something that isn't talked about is how much loaners can affect you if you have too many out there. I mean you're getting one income for two pieces that are being utilized or used.
Speaker 2:It's a lot. It is a lot.
Speaker 1:So when you come from such, you're talking about 74. We're talking about all the differences that have happened Disco Disco era and all the differences that have happened between now and then Disco Disco ever. And you know all the differences that have happened between now and then. When you first started you said you were in your early 20s. Who is somebody or a group of people that you can say helped influence you, guide you, mentor you at that point in time that helped you get to where you got?
Speaker 2:That's a great question. There were a lot of people and I was very influential. I was like a sponge and I encourage everybody to find different people, but I was very fortunate. Charlie had a president of Aaron Rents when I joined and he left the company because he had an affair with my manager. Oh no, oh no, and that's how I got promoted to become a manager. He hired a guy to be a VP by the name of Pat Pearson, who came out of First National Bank or somewhere, but he was big in the banking industry and he was relocating his family to Atlanta and I was single at the time and he wanted to learn the business in my store, which was great. I needed it. I'm telling you I was a sponge, but Pat would staying in a hotel, would always take me out to drinks after work and I'd just ask question after question. This was after that meeting I had gone to about the P&L, didn't even know what it was, so I wanted to know how the company worked, and so it was during the time I was able to do that to his family and then he moved into the home office. I learned a lot from him from a mechanical management standpoint. Later on.
Speaker 2:A guy by the name of Tony Hodge came in the system as the national sales manager. Me and Tony got along just like that. He brought new ideas. Remember the clipboards? Yes, he came, it was so obvious. But when you're in that culture, that's what everybody did. And he came in. How about we keep the clipboards? How about we walk the country? We just walk with them. Right, I went. That's a pretty good idea. I didn't know better, I just did what I was told to do. So he was very instrumental in me getting my marketing brain which our company at that point in time was very good from a management standpoint, very poor in sales.
Speaker 2:And then later I was asked to open up. Well, I had got promoted to become a regional manager in Washington DC. I was up there for about three or four years. I got transferred to Dallas and my job was to manage the Dallas market but opened the West Coast and opened New Orleans. Managed the Dallas market but opened the West Coast and opened New Orleans.
Speaker 2:And the guy we hired in the West Coast was a longtime competitor to Charlie Ladermill. His name was Rusty Hampton. Rusty ran a company called Grand Tree Furniture Runnels. They were the dominant player on the West Coast. We were becoming dominant on the East and they had gone. I don't know what happened, but Rusty had left and he decided he wanted to come to work for us.
Speaker 2:So rusty worked for me, which was kind of cool, but, man, I learned, learned a lot. Now rusty wasn't much of an operator but he's the ultimate sales guy and he helped me to develop a sales manual, some strategic things in the store to help us from a sales perspective. And so getting that sales input from Tony and Rusty was really, really significant for me because I was in a controlled environment. Before that. It was like put the wings on me and let's fly. Controlled environment before that it was like put the wings on me and let's fly. And I think at that point that's when my career really took off, that I was doing new things instead of old things. Even though the 70s and it seems very basic right now it was revolutionary in our organization at that time. So it helped me fly high and I think some other people started to adopt that.
Speaker 2:We didn't have any manuals. We didn't have nothing written down. It was pretty archaic. When we started Rent to Own Aaron, rents was still manual. I was able to contract a computer software company me and my team to computerize us, and it was a disaster, but we finally got through that and hired a guy that created our own program. Ten years after all that, aaron Rentsch was still on the old archaic system, you know. Remember we got to be separate, and so I don't think they got computerized until after Y2K Is that crazy? So there's some old school stuff about the history of Aaron's and we kind of broke all the mold on that. And Charlie, let me do that and I was kind of shocked on some of the things he led us to do. I kept him in tune. I didn't want him to ever be surprised because we were doing some things that were not done before in the old legacy.
Speaker 1:But that's how you grow. I mean, that's how you evolve I'd used that earlier is evolving from what we are to what we want to be.
Speaker 2:And he let us experiment. And so we tried. I mean, we went to these meetings and tried I would go experiment in 10 stores, 15 stores, because we had enough volume of stores that we had the ability to identify a project and put it in the stores. And people loved it in the stores and if it worked we'd move it forward. If it didn't, nobody ever knew about it.
Speaker 1:We let it die in the mine. It's okay. That's a bad idea. So is it fair to say there's a handful of people throughout the years that have played different roles that have really helped you get there.
Speaker 2:I think everybody that's ever been successful has had people that have had big influence. Those three people were very important to me and some very formative years of me and I think I became kind of a combination of all three of them. So one was very strategically strong in operations and I I was an animal in operations, but then you throw in two master sales people that I'm like a freaking machine now and, uh, I think that had a huge influence. Now you mentioned other people in my life and maybe situations, but one thing I always found you've got to be competitive to be successful in anything you do, and so, looking to hire people, I always ask what did you do in high school? What did you do? Are you competitive? Oh yeah, I played on the volleyball team. Ask what did you do in high school? What did you do? Are you competitive? Oh yeah, I played on the volleyball team. Whatever you did, if you were on some type of team. I think that's important because it takes teamwork to win number one, but being from a competitive environment and nothing against people in the band, but generally speaking, people in the band aren't competitive. They're just all singing to the same music Cohesive, but not competitive. So I've gone around to regional managers and asked them about their background. What did you do in high school With 15 of us in a room and every single one of them played some type of competitive sport? Now these are people that were successful as store managers and they've been bumped up and you're looking for a common denominator Different stories. Some of them college educated, some of them dropped out, some of them got married early. But that root came from a very competitive background, not any particular sport.
Speaker 2:I lettered in seven sports in high school and was a master of none. But I did them all. I participated, but I got good in football. But I didn't recognize that until my senior year. I was average, and when I say average, I wasn't bad, I wasn't good, I was. But my senior year I realized that everything's coming to an end. I always wanted to go to the next level of play. I said I'm not going anywhere, I'm just a Joe Blow average. I don't even know if I'm going to start, but I dedicated myself to that year of getting myself in super shape. I did everything I could to be the best I could be and I became captain of the football team and it went both ways, my senior year. It wouldn't have happened if I hadn't committed myself. But what it gave me a foundation on and my daddy taught me this a long time ago you can do anything you set your mind to, and I realized that that's the first big accomplishment thing I had dedicated myself to in my life. And I did it. And so I knew, whatever it is I'm going to do I don't know what it is I ended up screwing my back up, so I'm not going to do manual labor. I've got to find something I can get my hands on.
Speaker 2:And it's funny, the first job, real job I had, uh was with a company called magic market. You ever hear of them? It was a munford company. They were convenience stores like 7-elevens and, uh, I was going to be a district manager. And so they out of the gate. I got three stores I mean out of the gate. And you're hiring all these kids to run these stores and they're open all the time and they don't show up to work. So guess who's working all the time? Me?
Speaker 2:Well, they were going to get me up to seven stores and on Christmas Day they had a meeting, and that's the first time I really met all the district managers. They had a meeting and that's the first time I really met all the district managers and there was like a badge of courage over how many days in a row they had worked. I'm talking not days, years. Some of them had worked three, four years without a day off and they were proud of it. And I'm going to myself, wow, out of it. And I'm going to myself, wow. I said I'm a pretty freaking hard worker, but I'm not. I'm not giving you my life. And ironically, I had made the application at aaron's and they call me and man.
Speaker 2:When I got that job I found out they were closed on sunday. We closed at seven o'clock at night. I went cakewalk. So, in comparison, right, yeah, and other people would say, oh, that's a horrible job to me. I'm not working in a mall till nine o'clock cakewalk, and so I always tried to find people from that type, similar background, but one of one, a lot of those people had told me the Pat Pearsons who I met, the operational guy you always need to hire people better than you. And a lot of managers don't get it. They want to hire people that they can control and they don't understand you hire people better than you. They're going to lift you up Right. And a feather in your cap long term is how many people can you get promoted out of your store? And that's the way you get promoted up that you can develop people coming in. So you know, I'm a kid, I'm 31 years old, running a frigging store. Most of the people I hired were 30, 33. We were a veteran crew with a green manager who was finding his way, but they performed and that was my job, even at the store level to help them be successful at what they did and put some fun.
Speaker 2:Man, you're with these people a lot of time. Got to have fun. Man, it's a fun job, job, let's have some fun. Those people come in the door, need me. I need them to survive, so that's the best way I can end. It is through all these things. You don't have to be serious all the time. You have to be regimented and consistent, but let's have a little fun. We're're competing baby. I've already called my Decatur store. I know they've only got two out. Today I already got four. I'm going to kick their. That's the way my brain is.
Speaker 1:So if you were to say, over the last 50 years, now that you've been doing rent-to-own, you've been in this type.
Speaker 2:Yeah, I started at nine years old, so I'm only 59.
Speaker 1:All right, all right. Yeah, I started at nine years old, so I'm only 59. All right, all right. But doing this over the last 50 years and seeing the progressions and the evolutions and the changes, the people that have helped you, the different people that have helped you not just one person, but two people, three people, the influences that you've taken in time and time, if you were to say these are like the three key ingredients that I threw into my pie to make it to where I got to be, what would those be? You said have fun, not be serious, not take it, but make sure that you do the job and have fun doing it. You've mentioned the evolution being able to find what somebody said maybe couldn't be done but needs to be done and we're going to find that way, and kind of trailblazing different ideas throughout all of this. Are those three, or do you have a three that you say? This is Ken Butler's three things that I would tell you.
Speaker 2:I could tell you that, but I don't know how. I think you've got to be competitive and you've got to be ambitious. I know, as we built errands, that we had a mousetrap that was a winner. But and we had me who was very good at running 30 stores how was it going to be if I had 100 stores? How would I perform if we had 200? And so that evolution of who I was was going to have to change, because I was smart enough to realize if I can't run a 200-store chain, 300-store, 1,000-store, guess what? They're going to find somebody that can. That's the way business works. Absolutely so if I just keep doing's the way business works. Absolutely so, if I just keep doing things the way I used to do, it don't change infrastructure, like you had mentioned earlier. But it doesn't have to change overnight. It's a plan, maybe not even written in my brain, but I knew I had to evolve Things I really was good at early.
Speaker 2:I liked buying merchandise. I liked going to the market. I liked doing all the marketing. I liked putting my hand on every bill. I liked opening stores and going and putting signs up and cleaning bathrooms and getting that store open. I wasn't going to be able to continue to do any of those things. That was my job at one time and that completely got thrown out the window when, how? Just a step at a time, just slowly moving responsibilities to other people who are highly qualified to do it, was important. So you've got to be smart enough to grow, and I'd say that to anybody whether you're running a store, you're running all these big stores we had that were $300,000 a month and four, five, five diamond. You run those stores different than you run a $60,000 store oh, absolutely.
Speaker 2:And the hardest thing for a manager to do is okay. So how are you going to run it? What are you going to do when you get to 100,000? Are you going to have the same little crew? No, you know.
Speaker 2:So if you go backwards, you kind of got to back into things sometimes. Like I told people, you guys are going like this is a big deal to run a 400,000-hour store. Wait a minute. You know what you've got to do to maintain a $400,000 store. You can equate that how many deliveries I have to have a month, how many returns I have to have a month, how many trucks do I need to do that with? You can back into that program pretty quick. Yeah, you can create the formula for that. Yeah, it's not rocket science. So somewhere during this course, if you want to become a $300,000, you've got to go backwards to 200,000 and go back to 100,000, and you're at 60,000. So this is what you need to look like at 100,000. This is what you need to look like at 150,000. And by the inches, ascension, by the yard, is hard.
Speaker 2:I've always said that it's not rocket science if you kind of put common sense to everything, but you do have to. It's funny. I never thought about 2,000 stores. I do remember hiring Todd Evans about the franchise and he said I'll have more stores than you will. Cocky little son again, I love Todd. But so there was an inter-competition with me and Todd on who could get the most stores open and we ended up two to one. We had 1,300 company stores and 700 franchise stores when we left. That's changed down to whatever it is.
Speaker 1:It doesn't matter. I think it's 1,000 stores and right near to almost 300 franchise stores, 298 or something like that.
Speaker 2:You had franchisees paying you 6% a month of their revenues. All you had to do was keep them happy. We had the best franchise program. Our theory was to under-promise and over-deliver, and I remember when Todd started he said I got these prospects coming in from the airport. Can I run a limousine and go pick them up? I said no. I said they need to understand. It isn't about I'm not selling you a franchise. I'm awarding you a franchise and I'm going to be your partner. You're going to get more value with us. The distribution system and the national advertising alone was worth every nickel that they got, and so Well, you know, we said that we would go back to it.
Speaker 1:We talked about doing the math, and I remember that. I remember the commercials, I remember the slogan.
Speaker 2:How about nobody beats Aaron's? Yeah, that was a subculture of ours. When we looked at each other we'd go nobody nobody, nobody.
Speaker 1:And then the lucky dog came out. Yep, how did that transpire, yeah?
Speaker 2:How did that transpire? That's a good story. We, you know McDonald's has Ronald McDonald, and so I wanted to create a mascot of something we were into the racing and a lot of sports events we were doing and children migrate to these Harry the Hawk and all the other mascots people have. So I felt like we needed something as well, and so we came up with a bunch of stupid ideas. And I wasn't there. I just, you know, I had marketing and they'd go meet with them and go it's not hitting a button with me and I was at a race with our guy who was our racing marketing director and we were watching the race and in NASCAR racing at that time they had introduced a thing called the lucky dog and if you get a lap down and you're the first car lap down on a caution, you get your lap back. They call it the lucky dog. And I thought out loud at that moment that I heard it and I wasn't thinking lucky dog. I said God, oh, one of the hot dog companies really ought to, oscar Mayer, ought to jump all over that thing and call it the Oscar Mayer lucky dog. Well, the next morning I don't know what hit me. It was like something from god, passed it down and it said our customers are the lucky dog because they're just heinz 57 people every day, hard-working people, whatever their situation. But when they come to aaron's they're going to get things they never dreamed of. That's what we had the dream machine, the aaron's dream machine race, and the Lucky Dog just fit. So I went to Mark and said I see, this Lucky Dog, he's just a happy-go-lucky guy. He walks like this and everybody loves him. But he's a Lucky Dog because he came to Aaron's and he's already pre-approved.
Speaker 2:So we created the Lucky Dog and I'm telling you out of the events he was more popular than Santa Claus. We put him on the side of the trucks. We had Lucky Dog stuffed animals we gave out and we had lots of Lucky Dog costumes. So they were all over the country that different people could fit into them. They were hot. We even had fans built into it.
Speaker 2:Right, right, we offered it to our franchisees at a price. I forgot what the price was. He was always at the events. He was always there with us. I think it was a pretty big success. Our inter-racing program was a pretty big success. Michael Walter, who we partnered with at the very beginning said you're too chicken to get out because every year that we've been a partnership y'all have grown. I said you're right, I can't attribute it to racing, but that's one of the ingredients that we branded our name Aaron's into something that people knew what we did and got rid of the rent to own, got rid of the sales and lease ownership. It was a subtitle, but we wanted it to be known as Aaron's Really short, really simple, and I think it worked pretty damn good.
Speaker 1:I think it did too. Actually, sometimes I think the names are a little bit too much. It should be quick and off the tongue. In some places you just want to go to and I always try to advertise it as a. If you're thinking of other places when you're talking about this one product, there's too many places. If I'm thinking I need something, the first thing I should think of is this, and if I can get into that point of that person's mind, well, you can get just about everything here. You know you're talking about furniture and electronics and appliances and computers and all that. If I can just make it so that they're only thinking about one place to get that at, we've succeeded. So out of all this and all the things that you've done and all the vast knowledge that you have, all the great things that you were able to accomplish without a clipboard in front of you to say this is how you do it or….
Speaker 2:This is how we do it. This is how we do it. So you said that it thing again it. So you said that it thing again.
Speaker 1:It You're right, I did it.
Speaker 2:If you don't know what it is, you better define it.
Speaker 1:I will say that what is something that you would leave to everybody?
Speaker 2:If you don't know what it is, you better leave it. You better figure it out, because to me, whether culture can be defined within a company or it can be defined in your store, but you've got to have it. So either you've got it or you don't have it. But think about that customer experience. What is it all about? I don't care if it's coming over the Internet. Talk with the customer. Take advantage of the things we all have advantages of in our industry. People call in the phone. There's a person that's going to answer the phone. That don't happen with most businesses these days. Go call those, see who answers the phone.
Speaker 1:Oh geez.
Speaker 2:It don't happen. So customer contact is paramount. But then what happens with the customer contact? Is it a good contact or a bad contact? So you better get doggone good at it. You know, I hear a simple thing all the time, and I think Chick-fil-A does a great job in customer service, by the way, but their deal is my pleasure. Right now I'll say thank you. There are people in this old world, particularly more young kids, that will say, oh, no problem, no problem. What do you mean? It would have been a problem if you didn't say no problem, it's my pleasure.
Speaker 2:It's definitions of terms that are positive terms. It's not collections, it's not delinquent, it's not some of those bad terms, they're alternative terms that sound much, much better. But you have to work at the arc. You know it's kind of like I'm not a good golfer, but I understand people that are. You know you shoot 100 and they get better and they're shooting a 90 and now they're shooting an 85. It gets tougher to improve your game, but you have to start somewhere. On a scale of relating it to golf, I was shooting a 150 my first year. Now my second year, I cut my game down to 100 because I learned from it.
Speaker 2:And by my third year I was shooting in the low 80s and 70s, and by the fourth year I was pro. So I think you've got to improve. Everybody can do something better today than they did yesterday, but you do. Goals are really, really important and I don't care who you tell them to If they're internal, just write them down somewhere. What do you want to be when you grow up? Do you want to be running that store? And that's fine.
Speaker 2:I got people that I don't know how they do it. I give them so much respect because when my three or four years were done running the store, I was in my brain, was ready to move up. But there are some people that got the mental capacity. They don't necessarily make good regional managers either, but that's what they like to do. They're good in the stores. The worst case you can get is when you get promoted and you get a briefcase and some people think it's supposed to get easier. Uh-uh, you're not going to last very long in that new position. You got put in this position because now you've expanded your horizon and you're responsible for the whole horizon. So if you want to sit back and come back and sit on a desk, close the door and call your girlfriends or whoever, I can tell you your deal is not going to last a long time. You know, somebody else is going to figure it out. It's better to have one less person than one more person than you should have.
Speaker 1:I can prove that Well, I think at Rent to Own it's always been that way. Yeah, I think at Rent to Own is, you know, if you had one more, you just see things just not get done, and it was always crazy like that. But if you had one more, you just see things just not get done, and it was always crazy like that. But if you had one short person, you'd imagine how much gets done in that same time frame. Or if you have a couple hours overtime, or whatever the case is, it doesn't amount to a full position and it never did.
Speaker 2:I said, if you give me a good driver and give me a good, well, back in the day we had a bookkeeper, I can run the store.
Speaker 2:Back in the day we had a bookkeeper, I can run the store. And the manager, trainees, assistant managers, whatever sales manager, they're just extras, they're temporaries anyway, because either they're going to get promoted or they're going to be gone. It's a temporary position unless they want to be a lifetime customer service manager, and I've seen people that were great what we call them cams. They want to be a lifetime customer service manager and I've seen people that were great what we call them cams who were terrible managers, just like I've seen great managers become terrible regionals, and so I respect that and we'll certainly have a place for you. But at some point everybody can't be permanent because you're going to clog up my system to open stores. I don't want to have too big of a bench that people are impatient, but I've got to have a bench ready as we grow that we can grow with people in the store, and you have to make tough decisions sometimes.
Speaker 1:So going into the end of this, going into the last leg. For the people who have been in this business a long time, for the people who haven't been in this business a long time, for the people who haven't been in this business a long time. What is the state of the union as far as rent-to-own goes right now? How do you see it in comparison to what it's been and where do you see it going? Where are we headed right now as an industry? I think that's a great question.
Speaker 2:I think, yeah, god it's.
Speaker 1:the retailers have rent-to-own correct 90% of your I was at Lowe's the other day and they had a sheet. I was with my wife and it said hey, you can get a deep freezer, you can get a washer and dryer set. And I forgot what the other one was. It could have been a stove or whatever the case is, but we have these available to you for these low rental rates or these low monthly prices. And it wasn't considered credit and I was like, oh my goodness, no, it's crazy.
Speaker 2:Lowe's even has golf carts now. So you've got big box retailers doing what we do on a local basis. But what happens if the product breaks? Lowe's going to take care of it. You're going to call Lowe's, you're going to call me or you're going to call some company out of Lord only knows where. Right, some company out of Lord only knows where.
Speaker 2:So I see that as a problem, but I always like to think of anything as an opportunity and not a problem. There's some things good happening. There's some things that make competition a little higher, but the big picture altogether, you've got to be on your game, man. You cannot afford to have cracks in your deal. And so those managers and I see it with the ones we have who are on their game, dotting their eyes, crossing their t's, running the store the way it should be run and it's not working 80 hours a week, I mean, come on, you don't have to do that. It's kind of like catching a wave. If you can get in front of that wave and ride it, I will outperform you working 45, 50 hours a week than anything you can do 80. I know that I'm not talking about you.
Speaker 1:No, of course not.
Speaker 2:I'm talking about somebody beside the room. I think you've got to really be on your game. You can't look like a cheesy operation. You've got to do the maintenance things every day, every morning, get ready for business. You've got to be on your game with this customer relationship. There's no customer relationship with a big box retailer. Once they sell it to you, you're never going to see them again. So you're dealing with somebody that's probably just going to email you all the time and good luck trying to call them, so it's not a place you can go back to to get more product.
Speaker 2:Our stores should have what they want when they need it and it's today and they offer great value. It's not just about renting things when they're new. It's that thing of making the used look good. Otherwise your store looks like crap. If you've got nothing but used, that's telling me A you're doing a poor job of recycling your inventory. You might be picking up returning too many customers. That needs to be managed too. We knew the formula on what a store should return each month. If you were 500 customers, it was X. If it was 600, it was Y If we saw somebody that was overkilling. That they're going too hard.
Speaker 1:Their collections are getting to be. It's being run through collections and not necessarily having the right conversations and creating the right. That's not good either.
Speaker 2:So all of a sudden, you're going backwards like a freight train. You don't even know it because you can't do enough deliveries to offset those returns. So it's a mathematical equation. You got to understand. Understand the math. Uh, you're, and and I was always even back in the day you'd laugh at and I just had a store. I did my own frigging grass. I knew my numbers like the back after I realized what the numbers were. But it was a key performance indicator. They call it key. I don't know. There's an acronym for it. I don't even know what the hell it is.
Speaker 1:It depends on what company, but they're all the same, right KPIs yeah.
Speaker 2:Is that what they get? I don't even call them KPIs, but key things to make my business successful and I knew those numbers like the back of my hand. It's crazy. I was in this room meeting with all our buddies, managers, and I was talking about owning your numbers and I said okay, you see them come out. I remember things by writing them down and I'll go back in history at aaron's from the first day we started. I put the revenue, how many stores, what was our profit? And month. I put april, late 1987, may 19, and so I I studied that I had a map in the United States that I put a pin every time we opened the store. I mean I was looking for a bigger pin for a distribution center. It's all a master. It was a master plan that I didn't even know I was doing. I was just doing it every day. But when I left I've got the whole history wrapped up in that sum of what we did every single month.
Speaker 2:I used to laugh at our CFO. I said so how much revenue did we do in 1991? What was profit? Oh, I don't know. I said see this yellow piece of paper. How about 1994? Can you pull it out of your computer that quick.
Speaker 2:No, I took ownership to my numbers and so if you're going to make numbers, you've got to know what your numbers are. But, more importantly, you've got to know what you're beating from last year, Because we're measured on our success. If we're just in there fighting, doing the best we can do, but I don't know what I've got to beat, Then how are you going to win the game? So as I became a regional, the history became really important because I could look at months. I had dips in revenue right. So July everybody had a tough time in July. I'd go look and say, well damn, we lost 20 customers last July. What about if we break even? That's like gaining 20 customers. Oh yeah, absolutely. So that would be our goal. A lot of people, they're like robots and no, no, no, you've got to gain 20. Well, you can't do that every month. That's not even realistic. Maybe even a loss of five this month is realistic If you can just lose five and not 20,. I just gained 15 customers over the previous year.
Speaker 1:And your year over year is going to be better, because now those 15 are paying you through July, august, september, right? So the game is every month.
Speaker 2:But if you have a good day you might have a good week. You have a good week, you have another good week. You have a good month week. You have a good week. You have another good week, you have a good month. And so the game is calculated daily. Did you win today? Did you play the game today or did you give up because you had five payouts come in the door this morning? So what it's not over with. We know what we got to make up.
Speaker 2:How many of those did we convert back to a customer? Are we going to? I know we talked to them. You're going to call them next week. I mean, you've got the information to generate business in your store. Let's say you've got 400 customers.
Speaker 2:How many personal references do you have on those cards? Some people have five, some companies do three, some may do two, whatever it is, but you've got more references than you've got customers double and triple. And if you get one referral in, you know you contact Joni. Is it okay if I call you buddy? I'll give them a discount and get you a discount. We do all have friend referral programs. How much do we use that in the future?
Speaker 2:So you know the manager of the store is the straw that stirs the drink. The manager in the store controls the temperature in the store. The manager in the store controls the attitude of the people in the store. The people in the store control the attitude of the customer walking in the store. 90%, 90% of what we do is attitude. It goes back to my attitude. It happened to me when I was in high school. It's a belief that I can do it. It's knowing I can do it. And so what have you accomplished in your life? If it's just one thing, that's great. Hang on it. Let's go baby. But you got to have that attitude every single day. It's a lot. That's where you get the fun at. If I'm happy, you're happy, customers are happy. Guess what? We're winning?
Speaker 1:We're winning, we're winning, we're winning. And you know, it's just been a great conversation to really kind of talk about the things, the people that have helped you get there, the mindset that it takes. You know to be always evolving. Don't let something stop you If somebody says no or can't. Don't allow that. Define the it. You know, have fun at work but make sure that it's competitive and on edge. You know, making sure that we never forget about the relationship, always be innovating, you know, and make sure that at the end of the day we have something to come home to.
Speaker 1:We didn't do everything at work and then leave it all at work and then we, you know, you have to have something at home to come home to and kind of separate those things and then that way you can put your all into your every day to day and make sure that you're doing the best that you can. You know, knowing your numbers and knowing where they come from, owning those numbers and being able to say you know what. This is what made that. Maybe it wasn't a great day today, but we'll make it a great day tomorrow, learning from our mistakes and kind of pushing forward, all these things that you talk about. It just reminds me a lot of what I've learned in the last 20 or so years and how these things have gone Never quit learning.
Speaker 2:I heard something on the radio this morning that I thought kind of hit me at home. I listen to sports talk radio. I'm into sports, I do love sports, and one of the guys who's on the evening show had a massive heart attack. Oh no, he had the widow killer and he was in surgery yesterday. It's a pretty humbling experience. He's going to survive. But they were talking about wow, he just missed it. But he said I've never heard anybody on their deathbed talk about I wish I worked more or I wish I made more. So think about that in your life. I know we get consumed by it sometimes, but at the end of the game it comes down to your family, doesn't it? Absolutely Well.
Speaker 1:I tell you what I'm a little bit more of a game. It comes down to your family, doesn't it? Absolutely. Well, I tell you what I'm a little bit more of a podcast guy when I listen to things, but I think all the messages are the same. My wife is here with me today and it's one of those humbling experiences that we get to be together through some of these things, because you're right when it comes down to the end of it. I don't think anybody's going to say I should have worked 75 hours.
Speaker 2:I only worked 40 hours, 45 hours, I should have made it 80. I should have made it more.
Speaker 1:I should have done this more and I think you go to. I should have been home more. I should have seen my family more. I should have involved them more. I should have been more involved in what they were doing, and those things really matter.
Speaker 2:I always found a way to do that and I even coached my daughter's softball, my son's football teams. But as you moved up the ladder I could dictate my work schedule. And so even today, you know, I've got grandsons and daughters all in activities. But I plan ahead, I keep a calendar and I know when they're playing and I tell X that, hey look, I'm leaving this one day at 4 o'clock and I leave that day. The store's going to be fine, it's going to be all right, it's going to be okay. It doesn't have to have me there every minute.
Speaker 1:So as we come into the end, any last words of wisdom you would give somebody who's hearing this. Let's say, I'm checking out the RTO Show podcast for the first time I've been in rent to own just a little bit. If there's anything that I'm going to take out of everything that we've said in these last couple hours, what would you say that would be?
Speaker 2:Don't miss this. I said there ain't one thing. I wish it was that simple and I can't tell you. There's one thing I mean just take control of your destiny. You're in control. If you're in the industry, I don't care if you're a CSR. Whatever job you have, you are responsible. You can take control, you can set goals and you can become anything you set your mind to become. Become anything you set your mind to become. Most importantly, really, it's not going to happen overnight. When I was young, I did have goals as a manager. I knew I could be a regional, but it didn't bother me when I didn't get the call. And let me tell you why. That's one less person I had to compete with. If I didn't get the call this time, okay, I don't have to worry about that person next time.
Speaker 1:And I always looked at my career when I was in the 20s and 30s I'm planning on.
Speaker 2:I like working, I mean I really do. When you said retire, I'm never going to retire, I'm going to slide into my grave, because I really enjoy getting up and having something meaningful to do every day. So I looked at my career at 25 years old. I got 45, 50 more years. Why am I going to get bent out of shape if something happens now? And it wasn't always golden. There were lots of crossroads that happened for me. I was not undefeated. I got knocked down. I skinned my knees up, but I got back up every time. I learned from it, knew what I wasn. I got knocked down. I skinned my knees up, but I got back up every time. I learned from it, knew what I wasn't going to do the next time.
Speaker 2:You're going to have losses here. If you don't have any losses, you're not taking any risks to begin with, right. But I guess the most important thing with all that being said because there are some secrets is don't lie, don't steal, don't cheat, and I think those are very, very important. And I've seen it done a lot in our industry fabricating numbers that aren't real numbers. You're going to get caught. You don't think your boss knows every trick in the book. Believe me, I could tell you some stories. I know all the tricks. And so don't just if you had a bad day, it's a bad day, it's okay. You don't have to hold five returns because you want to make sure it shows that you gained two when you really didn't. You're just, you're not. You're not presenting what it is. We can't help you if you don't come clean with what numbers you're doing. So it's not the end of come clean with what numbers you're doing. It's not the end of the world.
Speaker 2:When you're a manager out there, you think sometimes this situation only happened to me. Why is it always me? You don't think that all happened to every one of us. Are you kidding me? They're in a situation. Well, I guess there's always a new one. But that's what managers have regional managers for is to get help. So if you don't know how to handle a situation, it's okay to pick up the phone. Yes, that's why you have a regional manager. He's been there, done that. He's done a lot more than situational awareness and what you're going through. We can help you through these deals. Don't try to brush them under the rug, though. That just don't work, and we all don't like surprises anyway.
Speaker 1:Oh, I tell the guys all the time, just call me, I do not want to find out any other way, right? Doesn't make you a bad person.
Speaker 2:We've all been there, we have. I've gone home at night'm going, because you take things personal sometimes it's not the end of the world, but we'll figure it out, we'll move forward. And that's keep knocking baby, keep hitting that rock. We're going to get through absolutely well, guys.
Speaker 1:We appreciate you sticking out this long. I've had nothing but a great conversation with ken. I'm so glad that he's here. The number one legends that we're going to have on the podcast, but not the only one. If you guys want more, please feel free to subscribe. We are on Facebook, instagram, linkedin and YouTube. You're going to see us there. Don't forget to subscribe to YouTube If you want to call the show. If you want to reach out to us, don't forget it's Pete Pete at TheRTOShowPodcastcom. If you have anything for me or Ken, please feel free to reach out. That's the best way to get a direct line. I will reach out. You guys have enough. We might even do a part two just to make sure that we get everything answered. We do appreciate you taking out your time. We love being with you, ken. It's been an absolute pleasure.
Speaker 2:Wish I could see who all is on the list.
Speaker 1:Well, I tell you what. We'll revisit that soon so that you know Again. If you guys need anything, please reach out. But I will tell you, as always, keep your reflections low to get your sales high. Have a great one.
