Larry and Cindy Law.

When Larry Law asked his wife Cindy to accompany him on an Atlanta trip to investigate opening an Aaron’s location, she immediately questioned his judgment. After all, Law had just retired after selling his wholesale lumber business and could have chosen to do anything – or nothing. But Law’s interest in the Aaron’s concept was piqued by an ad he read in a business journal.



"I remembered reading in a separate article how Aaron’s was held up as a good example for the rental industry. They had bigger stores, different merchandise, and now they were looking for franchisees in this area of the country. They had no presence in Washington. The closest stores were in Portland, Oregon," recalled Law.



During their visit to Atlanta, the Law’s were impressed enough by founder Charlie Loudermilk to buy a franchise which the couple opened in Bremerton, Washington.



"It was 1999 when we opened. Bremerton is a big military town with a large naval shipyard and large nuclear submarine bases. We felt this was the best location for the first store in the market."



But the first store didn’t ramp up quite the way Law had hoped.



"I did everything wrong. I thought I had a better mousetrap and as a result we started out very slowly. Back in 1999, Aaron’s was still learning the franchisor program themselves so we sort of went through that process together."



But Law says that after 15 or 16 months, several employees, and a couple of marketing adjustments later, things began to turn the corner.



"We were the first store in this area. We could have been called Fred’s, it wouldn’t have mattered. We had absolutely no name recognition. So we started to do a lot more promoting, knocking on doors. We learned our customers did not read the paper, but they do read their mail so we switched our marketing to reach them better. Plus, I had to change managers twice early on. Finally, I just went to our closest competitor and hired their manager away. He knew the business, the marketplace and most important, the customers knew him."

Law fosters an environment of personal growth among his staff, and holds a monthly P&L meeting to make sure that everyone understands the economic ramifications of their daily business decisions.

That manager is still with Law seven years later, and is currently running one of Law’s most successful locations. Being able to not only hire the right people, but also retain them, has been a hallmark of the success of Law’s Hayes Financial Corporation, dba Aaron’s Sales & Lease Ownership. Law currently employs 47 full-time associates.



"Our success is definitely due to our people. Our employees will tell you they work at Aaron’s, but they work for Hayes Financial Corporation. We’ve worked hard to build a culture where employees know they are appreciated. They are empowered. There’s never been a mistake made that we can’t correct. There’s no decision that we can’t live through. If it’s wrong, we’ll fix it down the road."



Law fosters an environment of personal growth among his staff, and holds a monthly P&L meeting to make sure that everyone understands the economic ramifications of their daily business decisions.



"It’s important for them to know that each store is a profit center and I’m very proud of how well they’ve learned to read their P&L’s. I’ll bet that any one of our store managers could go out and teach a class on reading a P&L or a balance sheet."



While Law is generous with praise for his staff, particularly for Vice President Matt Holmes, he is equally generous with his pocketbook.



"Each quarter, 25% of our pre-tax profit is split among all employees – not just our managers. I’ve had other franchisees tell me I’m nuts, but it’s the way I keep good employees. Our compensation program definitely goes above what corporate recommends. We have many employees who came to us for a job to get them to Saturday night. Those same employees now have a career with us."



Law says his company’s profit sharing program equates to an extra $15,000 to more than $20,000 per year for store managers alone. And the opportunity to share in profits regardless of store size is spread evenly among all locations.



"Our managers’ base salary is derived from a matrix tied to the store’s monthly revenues plus revenue growth. So a smaller store may have a smaller base but higher net profits than a larger store. So that manager’s percent of profit sharing to gross income can be higher, as well."



Law’s five stores are located within about a 15-20 minute drive from one another, making it possible to visit them all frequently.



"Yesterday I went to all five stores and made it home by 3:30. When we were selecting sites I tried to locate them so that if you drew circles five miles around each one on a map they would come close, but not touch. That way the stores don’t cannibalize one another, but they are still close enough to transfer merchandise. We’re always balancing inventory among our stores."



Law’s largest store is in Tacoma, Washington with 1,153 customers. A second Tacoma location – Law’s most profitable at a small-for-him 6,600 square feet - has 915 customers. The original Bremerton store has 1,034 customers and Auburn counts 892. A fifth location, opened in February of 2006 in Kent, already has more than 900 customers.



"Our average income per customer will vary by store, but our goal is to capture between $160 to $165 per month, per customer."



Equally impressive as Law’s store volume, is just how much of that income is paid on credit – and not debit – cards. When asked for an estimate, Law stated that between 30% and 40% of all payments were made on credit and another 5 – 10% on debit. But when he randomly checked the reports for the previous day’s deposits from two stores, one location collected $5,000 with $200 paid on debit cards and $1,600 on credit cards. A second location collected $4,000, with $138 paid on debit cards and a whopping $3,200 – or 80% - was paid with credit.



"We definitely get customers who have the ability to buy with credit. Our selection is broad, and our prices are good. Our customers are not just credit-challenged. The demographics around our stores vary. One location has a 3 mile radius with a median income of $35,000-40,000 and another is closer to the $65,000 range. These customers have different wants and needs. They might dream about an LCD TV, or a surround sound system, and they find out with us they can afford it. We are one way of making their dreams come true."



Electronics represent Law’s largest category as a percent of revenue, with more than 50% of every dollar collected going toward a home electronics item. An additional 15% goes toward computers.



"Our volume of electronics will increase throughout 3rd quarter, and certainly into 4th quarter. And computers are a marvelous category for us. We do a strong business with Dell, some HP and Compaq. We can hardly keep them in stock."



Law says furniture represents another 25% of his business, with living room, dining room and bedroom suites all strong items. Appliances are the smallest percentage of his business, and the category is made up predominately of laundry pairs.



"It’s harder for us to be competitive with appliances. We have to take a much lesser turn on those. Furniture is easily the highest margin product we have. Our product mix really doesn’t change by season. And we purchase everything but mattresses through the Aaron’s fulfillment center."

During their visit to Atlanta, the Law’s were impressed enough by founder Charlie Loudermilk to buy a franchise which the couple opened in Bremerton, Washington.

Law’s stores follow the Aaron’s business model of a larger showroom, which requires more merchandise to maintain. So what does it take to keep Law’s displays looking full?



"Our smallest store, at 6,600 square feet, takes a minimum of 12 complete living room vignettes. But the other stores require at least 16 – 18 complete living room groups. We’ll keep 8 to 10 different LCD televisions on a display wall, with at least another two to four in freestanding displays throughout the store. We’ll try to have five refrigerators, including a nice side-by-side and a stainless steel model. And we’ll have a minimum of six washer/dryer pairs for customers to choose from."



Law says the economic slowdown experienced in certain businesses has only slightly affected his stores.



"We were as busy as we’ve ever been this past summer, but it was tougher to collect. It’s been harder for our customers – and most people – to come up with discretionary income and our products are usually seen as discretionary. Certainly the price of fuel has played a role. But our economy up here is pretty strong and there’s a lot of movement in the summer. We’re also seeing more affluent customers in our stores. That could be an industry-wide movement, or it could be the unique Aaron’s business model. I can say that I see more rental companies, both mom-and-pop and larger chains, improving their appearance. Aaron’s has really stepped up their store design program from a bright circus-type theme to a much more sophisticated interior."



Law says the fact that the rental business constantly changes means his business goals are in flux, as well. Typically, he is adjusting them upward.



"Our goal is to increase net new business, so we deduct the business lost through paid outs and returns each month before we come up with a final figure. The goal is to grow $1500 per store, per month in net new business and as much as $5000 per store, per month during our busiest season. Right now, we’re anywhere from 35% of our goal to more than 300% of our goal in one location."



Law says his most popular promotions are the monthly parties his stores hold for their best customers.



"We’ll call or mail invitations to lists of our current, paid out and returned customers inviting them for a special event. We cater a nice party and we’ll give away gifts – as much as $400 - $500 per store. Sometimes we’ll have tickets to professional sporting events, or gift certificates to restaurants, or picnic baskets stocked with supplies. Once, I got a call from our Vice President Matt Holmes. He was trying to visit a store where they were holding one of our parties. There were about 60 people in the store and he couldn’t even get into the parking lot, it was so full. We might only get an extra ten agreements out of these events, but it’s not about that. It’s about generating good customer relationships."



Law says he often refers to advice received from Aaron’s Founder Charlie Loudermilk.



"Charlie likes to say that as franchisees, we’re all Chiefs of our own business, but we still have to act like Indians. I mean, here we are in this funny little corner of the country and we’ve shown that there is a market for this concept anywhere. Treat people right, give them good product at fair terms and the customers will find you."

___

RTO Magazine is the leading rent to own industry print publication.